For decades, decisions about manufacturing location were heavily influenced by labor availability and labor costs. While those considerations remain important, they are no longer the primary determining factor for many manufacturers.

Today, localized manufacturing is increasingly a decision of organizational capability, no longer one driven by labor constraints.

The organizations successfully producing closer to customers are leveraging a new combination of workforce strategies, operational models and manufacturing technologies that make localized production more practical than ever before.

Automation, advanced software and connected systems have transformed the factory floor into a safer, cleaner and more technologically enabled workplace. The pace of change has been rapid. Modern manufacturing facilities look different than they did even a decade ago, and roles that were once repetitive and physically demanding now require specialized decision-making and knowledge. Human expertise is essential, but technology amplifies what skilled workers can achieve. 

This evolution has an important implication. The new realities of manufacturing expand the available talent pool. Manufacturing roles are more accessible and attractive to a broader range of workers when the work itself is more engaging and skill-oriented.

The question is no longer simply, “Where can we find enough labor?” Increasingly, it’s “How do we design work so that people and technology can operate together effectively, anywhere?”

Rewriting the Economics of Distance

While the nature of work is changing on the factory floor, the economics of moving goods are shifting just as dramatically.

Historically, global manufacturing networks depended on relatively stable and predictable transportation costs. Low and consistent shipping costs made the model viable even when goods were made far from end markets.

That stability no longer holds. Freight costs today are more volatile, thanks to disruption from geopolitical events, shifting trade dynamics and fluctuations in oil prices. This introduces a new kind of risk into global supply chains: Distance is now a volatile financial and operational variable.

Proximity is one solution to consider. Producing goods closer to customers can help manufacturers reduce exposure to transportation volatility, improve responsiveness and better align supply with demand. What was once considered a premium strategy may now be viewed as a lever for resilience and responsiveness.

Localizing manufacturing operations, in this sense, is more about managing risk and improving agility in an environment where certainty is harder to come by.

If the first shift expands where manufacturers can operate, and the second increases the value of proximity, the third makes localized manufacturing operationally viable.

Advances in artificial intelligence, software-defined automation and robotics allow manufacturers to design production environments that can adapt quickly to changing conditions. 

AI Turns Data Into Action

Manufacturers have generated enormous amounts of data through painstakingly optimized “digital silos,” or operations that have been digitized without connecting to the larger operation, but data alone doesn’t improve performance.

Augmenting operations with AI helps operators identify bottlenecks, anticipate maintenance needs and accelerate decision-making in real time. Machine learning for data analysis can surface insights faster and help operators focus on decisions that matter, rather than manually reviewing every variable across the production process. The result is responsive operations that maintain productivity amid changing demand and supply chain conditions.

Where AI elevates the operational performance of digital silos, software-defined automation connects operations throughout the enterprise. Conceptually, it’s a modernization effort across the enterprise, and the backbone of the next era of manufacturing. By connecting digital silos, manufacturers can adapt to change more easily, scale faster and perform more safely.

Digital twins and simulation technologies, for example, allow manufacturers to test scenarios, model production changes and evaluate outcomes before implementing them on the factory floor — all without expensive downtime. Teams can identify potential issues earlier, reduce implementation risk and perform changeovers while maintaining productivity.

The ability to plan, test and adapt digitally across the enterprise gives teams confidence when introducing new processes, responding to the the the market, or even expanding production geographically closer to the end user.

Robotics Expand What’s Possible

Autonomy comes to life through connected machines. Manufacturers can optimize end-to-end material movement in the micro, like warehouse operations, or in the macro by evaluating entire supply chains.

Autonomous mobile robots can move materials throughout facilities with greater flexibility than traditional infrastructure, and independent cart technology enables highly adaptable production flows, while increasingly intelligent drives and sensors provide the data inputs necessary to coordinate complex production.

Together, these technologies help manufacturers operate efficiently across the enterprise.

The manufacturers making progress are building the workforce strategies, digital foundations and operational flexibility required to produce efficiently wherever opportunity exists.

There’s a real argument to be made that leaders no longer need to choose between producing closer to their customers and operating efficiently. Modern technology allows them to pursue both.

Localized manufacturing won’t be the right strategy for every organization, but the reasons not to pursue it are ripe for reconsideration.

Evolutions in the composition of the workforce and volatility of the supply chain have increased the value of production proximity. Taken alongside the strides of modern manufacturing technology, manufacturing leaders have new levels of flexibility and responsiveness at their fingertips.

The future of manufacturing may be defined less by where production happens and more by an organization's ability to adapt, scale and respond wherever it does.

Bob Buttermore is senior vice president and chief supply chain officer at Rockwell Automation.