Moving manufacturing operations overseas is not the only route to remaining competitive. By focusing on innovation and recognizing that automation and robotics are often more cost-effective and profitable alternatives, North American manufacturing companies can achieve cost-savings while improving quality and control

As North American manufacturers face ever-growing challenges to remain competitive in the global marketplace, they frequently look to overseas sources as a way to cut costs. Although the appeal of low-cost labor may lead a company to implement this course, and it sometimes makes sense, there are numerous other factors to consider. Among them are factory efficiency, inventory requirements, the strength of the U.S. labor force, government support and stability, supply chain strength, and intellectual property protection.

China has become one of the strongest outsourcing locations, but maintaining high product quality can be more difficult when manufacturing there or in other low-wage countries. Moving production offshore adds the risk of currency fluctuations, longer lead times, shipping delays, and loss of control of both the manufacturing process and intellectual property. Counterfeiting is another serious problem, with a $3 billion annual cost to the U.S. automotive parts industry alone. A report by The Boston Consulting Group further points out that lead time, delivery performance and product quality varies widely. According to the report, one U.S. company outsourcing in China received quotes for some parts that varied by as much as 80 percent, compared with variations of two to five percent from United States sources. The U.S. Embassy in Beijing also says that companies investing in the Chinese market underestimate the market situation and fail to perform risk assessment or seek council, as doing business in China may often pose a greater risk. In fact, some investors have fallen into bad business deals, resulting in lost investments.

Automate and Save Your Factory

Outsourcing is seldom an all-or-nothing proposition. According to The Boston Consulting Group, it makes sense to outsource some products or manufacturing processes, including those that require extensive hand labor. However, highly automated manufacturing processes, products that need a final finishing step and heavy products in which labor savings cannot compete for the freight penalty are better located in the home country.

Before abandoning existing plants and shipping manufacturing overseas, a company should consider applying innovation and product enhancing technologies such as automation. This can negate the advantages of low-wage countries. Some manufacturers, in attempting to keep their factories open, express concern that investing in automation could displace workers. However, manufacturers that do not innovate and embrace automation leave themselves open to losing their entire manufacturing site, or even their company, to outsourcing.

The same kind of dilemma played out successfully in the agricultural economy of the last century and in the U.S. steel industry. In 1900, agricultural workers constituted more than 38 percent of employment, compared with about two percent today. Yet, we produce more of the world’s food. Likewise, the number of workers employed by the U.S. steel industry dropped by 74 percent, from 289,000 to 74,000, while output increased by 36 percent, from 75 million tons to 102 million tons.

Automation can directly impact quality and efficiency, increase control and improve viability. Because one robot can perform the work of three to five people, direct labor costs are reduced. This is doubly important because, over the next three decades, 76 million baby boomers will retire, and only 46 million new workers will be available to replace them. Despite this shortage, the demand for labor will continue, and automation provides a solution. An automated facility is designed to manufacture the highest quality products and allow manufacturers to optimize current capital and labor resources. With automation, manufacturers can maintain control of their operations, strengthen North American manufacturing leadership and retain jobs, with significant cost improvements. Of all forms of automation, robotic automation proves to be the most flexible and offers more opportunities for companies to maintain profitability in operations of all sizes.

Efficiency data indicates that automation, robotics and other lean manufacturing operations can enable North American operations to be cost-competitive with countries like China.

As quality and efficiency in production are essential to survival, the focus has already shifted to lean manufacturing and the Six Sigma process. Although many of the other initiatives proposed to improve this country’s manufacturing competitiveness will take years to accomplish, companies can maintain or improve their competitive position by moving ahead now with automation and other lean manufacturing operations.

“Robotics And Automation Can Save Your Factory”, Written by Rick Schneider
President & CEO FANUC Robotics Americas, Inc. Rochester Hills, Michigan