Manufacturing is Coming Home

With the current environment of supply chain uncertainty and price inflation, we’re seeing huge interest in reshoring where businesses bringing all or some aspect of their manufacturing back home.

The combination of increased capabilities and reduced costs of automation is changing the business case for offshore versus onshore models. When offshoring became popular 20 years ago, labor rates overseas were significantly lower than they are now. With the current and ongoing pandemic-induced industry disruption, it’s time to reassess the model.

Improving time to market

Smart factories enable businesses to future-proof their operations to maintain the quality and timeliness their customers expect. Reshoring is not simply a defensive move, but a way of creating highly differentiated products quickly and cost-effectively for competitive advantage.

It’s not sustainable for manufacturers to continue absorbing costs while juggling shipping delays, and they can’t expect the end consumer to pay the increased costs either. Manufacturers have no choice but to adapt and innovate.

Smart factories for competitive advantage

Some of the current problems can be solved by reshoring manufacturing into smart factories where automation and advanced technologies provide most of the labor component. Higher factory lease rates onshore might be more than offset by lower transportation costs.

Local manufacturing builds operational resilience. The wider costs of delays are simply too high – backed up orders, missed delivery dates, reputational damage, loss of business and stress on the team means businesses need to act quickly to protect their market share and expand it.

In-house or local contract manufacturing gives more control over production times and cost. Smart factories provide greater agility and scalability for volume fluctuations and configuration, as well as significant improvements in productivity without sacrificing quality.

Automation for flexibility and control

The accessibility of automation and associated technologies is driving rapid adoption by manufacturers. The Industrial Internet of Things (IIoT), 5G and industrial software are all key enablers to implement smart manufacturing. Assembly lines that are highly digitized and automated can produce smaller quantities efficiently and have the ability to create highly customized products in the most cost-effective way. 

The demand for customized options is already well established and automation allows products to be configured on the fly. While traditional lines can take hours to convert, converting an automated line can take just minutes. For example, we have machines that can automatically change the tooling, with no manual intervention. Furthermore, robotic welding can change to suit different products with a far higher quality weld than a human could make.

Engineers at Facteon were involved in developing flexible production in the 1990s where multiple permutations of a product can be made on the same production line. In what is sometimes known as ‘batches of one’, the line is reconfigured between every product. Originally, data from the production line was fed directly to the office in real time. Since then, Facteon has developed that process with software tools, using cloud computing to make data accessible via mobile devices to the whole team.

A key benefit of automation is the real-time quality control that manufacturers get from the multiple sensors in the equipment that measure production parameters. The sensors reduce cost as teams can measure as they go, minimizing or removing failures. Likewise, teams can track measurements drifting before they cause any real problems. Automated quality control is one of the features that enables reshoring to take place in the most cost effective way.

Developing industry clusters

As the apex manufacturers moved offshore in the 2000s, local clusters dissolved. These can be rebuilt and also take advantage of factory automation to make manufacturing onshore economically feasible again. The proximity of specialist parts and component manufacturers is an excellent way for apex manufacturers to gain flexibility without having to invest in all the technology equipment in-house.

Additionally, with the current supply chain delays, iterative prototyping is almost impossible. Reshoring re-enables greater speed to market. Samples and prototypes are more accessible, and collaboration is deeper with local suppliers. Teams can meet in person to develop ideas and approve design, quality and finish in a fraction of the time needed when working with an offshore partner. These local partnerships create further competitive advantage through product innovation and quick response to new trends.

Bringing it all together

The increased capabilities and reduced costs of automation provoke a rethink of the business case between onshore and offshore manufacturing. Early adapters will carve out a significant competitive advantage. A robust local supply chain enables manufacturers to get back to serving and delighting their customers while growing market share from a place of confidence and certainty.

Find out more:

Speak with one of our team to find out whether your business will benefit from factory automation. Contact Facteon via our contact page.

 

Andrew Pass

Andrew Pass

Purchasing & Logistics Manager

Andrew manages Facteon's purchasing and logistics operations across New Zealand and China. Having worked internationally, Andrew has experience managing procurement operations in a variety of industries. Andrew holds a Bachelor of Science from Staffordshire University and a Graduate Diploma in Business from University of Auckland.