Use total cost to justify automation for reshoring

Video: Companies may be considering moving manufacturing abroad or reshoring manufacturing to produce closer to demand. Either way, ensuring that automation and other benefits and costs are factored in is critical to getting the numbers correct. Many companies may have missed criteria in their calculations, said Harry C. Moser, founder and president, Reshoring Initiative. Moser spoke at the January A3 business meeting and the 21st Annual Robotics Industry Forum.

02/19/2014


Harry C. Moser, founder and president, Reshoring Initiative, touts manufacturing automation as an important way to improve local economic health, innovation, and competitiveness in global markets. He spoke at the January A3, AIA, MCA, and RIA business meeManufacturers should analyze total costs to justify use of automation for reshoring manufacturing closer to demand, according to Harry C. Moser, founder and president, Reshoring Initiative. The default logic often is to produce products close to where they’re consumed, but specific criteria can help objectively decide where manufacturing should be located to be most profitable.

Other terms for reshoring include localization, nearshoring, and offshoring. In the video clip shown, Moser explains key reshoring concepts. Moser spoke at the 21st Annual Robotics Industry Forum, in January, also the annual business meeting for the Association for Advancing Automation (A3), Robotic Industries Association (RIA), Automated Imaging Association (AIA–Advancing Vision + Imaging), and Motion Control Association (MCA). A3 is the umbrella organization for AIA, MCA, and RIA.

Moser said:

Manufacturing profits depend on wide range of criteria. Measure the right things, says Harry C. Moser, founder and president, Reshoring Initiative, as he talks with Mark T. Hoske in a short video at the January A3, AIA, MCA, and RIA business meetings. Cou- Some manufacturers have left the U.S. and other locations because companies didn’t do the math properly. Calculations need to go beyond purchase price variance and landed cost, which can ignore 20% or more of the total costs of products manufactured offshore. Other factors include innovation benefits and intellectual property (IP) risks, logistic calculations, training, indexed unit labor costs, currency, and productivity differences.

- By about 2015 average costs will converge between manufacturing in China and in the U.S., according to Boston Consulting Group, which cites many industries where advantages of onshore manufacturing now can exceed offshore.

- The industry-led Reshoring Initiative provides free total cost of ownership (TCO) software for use by manufacturing companies and suppliers. The organization provides more than 800 reshoring examples and a template for submitting information.

- Sometimes when considering manufacturing locations, it’s not an “all here or there” mind-set. For very labor intensive manufacturing, it may be advantageous to produce half in the U.S. and half in Mexico. It’s better to be half of the winning team rather than all of an offshore losing team.

- Reshoring Initiative also provides motivation for skilled manufacturing careers. If unemployed graduates with degrees unrelated to science, technology, engineering, and math (STEM) had understood the need for their expertise in manufacturing, they might have chosen a better career. Manufacturing recruiting, high U.S. standard of living, innovation and global competitiveness, and reshoring are inter-related.

- 21% of large companies are engaged in reshoring initiatives, twice the rate for 2012.

- Reshorers include more than 500 companies, including GE, Apple, Motorola, Ford, Caterpillar, Whirlpool, Scovill, Ace Manufacturing, Intel, GW Plastics, and others. For many, automation is the key to U.S. manufacturing productivity and cost-effectiveness.

- GE chose to reshore manufacturing of water heaters and other appliances to Louisville, Ky. The effort, which created 1300 jobs and involved $800 million in investments, redesigned products and reduced total cost of production by 20% over the same item made in China.

- When reshoring manufacturing of electrical equipment, appliances, and related components, less warranty and rework often result.

- The 2012 U.S. budget specifies the need to consider TCO when considering manufacturing locations.

- Companies can justify domestic investments in manufacturing, process improvements, automation, and training to improve quality, time to market, and profits.

- Reshoring Initiative offers tools for selling and training and helps show that automation saves jobs.

- U.S. Labor Department has been lobbied to change (and has changed) some language to show that education and training, not just education, can increase income. Apprenticeships, certifications, and training pay off.

- The image of manufacturing is improving, which helps with workforce recruitment of skilled talent.

- Reshoring Initiative is a non-profit organization with 38 sponsors, helping to create a safer and sounder economy.

- Mark T. Hoske, content manager CFE Media, Control Engineering and Plant Engineering, mhoske@cfemedia.com

ONLINE

Find related information and other tools for manufacturers at:

http://nist.gov/mep/reshoring.cfm   

www.manufacturing.gov

www.reshorenow.org



Top Plant
The Top Plant program honors outstanding manufacturing facilities in North America.
Product of the Year
The Product of the Year program recognizes products newly released in the manufacturing industries.
System Integrator of the Year
Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
June 2018
2018 Lubrication Guide, Motor and maintenance management, Control system migration
May 2018
Electrical standards, robots and Lean manufacturing, and how an aluminum packaging plant is helping community growth.
April 2018
2017 Product of the Year winners, retrofitting a press, IMTS and Hannover Messe preview, natural refrigerants, testing steam traps
June 2018
Machine learning, produced water benefits, programming cavity pumps
April 2018
ROVs, rigs, and the real time; wellsite valve manifolds; AI on a chip; analytics use for pipelines
February 2018
Focus on power systems, process safety, electrical and power systems, edge computing in the oil & gas industry
Spring 2018
Burners for heat-treating furnaces, CHP, dryers, gas humidification, and more
April 2018
Implementing a DCS, stepper motors, intelligent motion control, remote monitoring of irrigation systems
February 2018
Setting internal automation standards

Annual Salary Survey

After two years of economic concerns, manufacturing leaders once again have homed in on the single biggest issue facing their operations:

It's the workers—or more specifically, the lack of workers.

The 2017 Plant Engineering Salary Survey looks at not just what plant managers make, but what they think. As they look across their plants today, plant managers say they don’t have the operational depth to take on the new technologies and new challenges of global manufacturing.

Read more: 2017 Salary Survey

The Maintenance and Reliability Coach's blog
Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
One Voice for Manufacturing
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Maintenance and Reliability Professionals Blog
The Society for Maintenance and Reliability Professionals an organization devoted...
Machine Safety
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
Research Analyst Blog
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Marshall on Maintenance
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
Lachance on CMMS
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
Electrical Safety Update
This digital report explains how plant engineers need to take greater care when it comes to electrical safety incidents on the plant floor.
Maintenance & Safety
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
IIoT: Machines, Equipment, & Asset Management
Articles in this digital report highlight technologies that enable Industrial Internet of Things, IIoT-related products and strategies.
Randy Steele
Maintenance Manager; California Oils Corp.
Matthew J. Woo, PE, RCDD, LEED AP BD+C
Associate, Electrical Engineering; Wood Harbinger
Randy Oliver
Control Systems Engineer; Robert Bosch Corp.
Data Centers: Impacts of Climate and Cooling Technology
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
Safety First: Arc Flash 101
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
Critical Power: Hospital Electrical Systems
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me