Dennis McRae, senior director of consumer and industrial products with West Monroe, explains why it has become "very feasible" for manufacturers to shift operations from China and other parts of Asia back to the U.S.
There’s talk of Intel bringing silicon chip manufacturing back to the U.S. Some might consider that an unlikely scenario, given the longtime practice of offshore production for that particular component, but McRae views it as “very feasible.”
The biggest driver for offshoring manufacturing over the past 25 years has been cost. Companies were driven to locate production in countries with cheap labor, most notably China. But with advances in industrial processes, especially automation and manufacturing technology, it has become increasingly possible to relocate at least some manufacturing domestically. “As we start to drive toward these new capabilities of being able to make an entire product within a region,” says McRae, “in my opinion it’s the technology that is going to enable it. In fact, it’s going to make it inevitable.”
The coronavirus pandemic, trade wars and rising cost of Chinese labor have all combined to make manufacturing in the U.S. more attractive. But technology is sealing the deal. 3D printing eliminates the need for many expensive processes and allows companies to be much more flexible in terms of the products they make. The amount of working capital that needs to be tied up in production will be reduced dramatically.
That doesn’t mean that the full contingent of old-style manufacturing jobs will return to the U.S. Domestic factories are likely to feature highly sophisticated technology that minimizes, if not eliminates, the need for humans on the production line. But McCrae believes that new, higher-paid jobs will emerge for humans, who will always be needed to support even the most advanced systems.
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