This past week's State of the Union Address included a topic that is front of mind to the manufacturing industry: revitalizing onshore manufacturing for a beleaguered U.S. manufacturing industry. This echoes a theme we've been speaking about lately at IDC Manufacturing Insights, involving some early signs of manufacturers returning to the U.S.
In his speech, President Obama called for a national network of manufacturing innovation institutes, and made reference to a pilot institute launched in August 2012 in Youngstown, Ohio as part of the Administration's "We Can't Wait" efforts. The pilot institute was funded from $45 million of existing resources from the Departments of Defense, Energy, and Commerce and the National Science Foundation. It focuses on additive manufacturing, namely 3-D printing, which has potential to significantly impact how things are made.
The President envisions as many as fifteen similar institutes that will be part of a National Network for Manufacturing Innovation (NNMI) and cover a broad array of technologies and applications, in an effort to make the U.S. "a magnet for new jobs in manufacturing." During the State of the Union address, President Obama referred to the manufacturing industry's creation of more than 500,000 jobs in the last three years, and lauded companies like Ford, Apple, and Caterpillar making efforts to bring jobs back to the U.S. The NNMI will require approval by Congress for a $1 billion one-time investment, and will be a public-private collaboration aimed at encouraging further competition and investment in American manufacturing. Among the goals of the regional institutes would be efforts to develop better education and training strategies as well as improving supply chain management methodologies.
These ambitious efforts being proposed at the highest levels of government highlight the sense of urgency that exists for domestic manufacturing to find footing as one of the ways to spur recovery from the Great Recession. Here at IDC Manufacturing Insights, we've been talking about manufacturers' earlier response to globalization with the offshoring of U.S. manufacturing in an effort to find low-cost labor. My colleague Simon Ellis makes reference to "profitable proximity sourcing," whereby manufacturers need to consider a host of other costs associated with locating manufacturing across the world from the customer. Adding in costs like poor customer service levels and reduced responsiveness to market dynamics can end up tipping the labor cost savings to the losing side of the balance for traditional 'low-cost country sourcing'. This equation is part of the argument for bringing manufacturing back to the U.S.
However, a wrinkle in the plan has arisen during the country's years of absence from being a center for manufacturing innovation. Suddenly, putting the labor costs aside, the U.S. is facing a skills and infrastructure shortage that is necessary for a revitalization of manufacturing on U.S. soil. Indeed, in various survey that IDC Manufacturing Insights has conducted over the past few years we have seen an interesting change in the view of 'impediments to re-shoring' from principally 'the U.S. is not cost competitive' to 'the U.S. lacks the necessary skills and infratructure'.
As part of our IDC Insights Worldwide Industry 2013 Top 10 Predictions, we posit that people will be at the center of the manufacturing factory of the future. The "laborer" of today will become the "knowledge worker" of tomorrow. This will be necessary for the factory to become the "house of productivity" and requires a workforce that is properly skilled, technologically savvy, and trained for their new role. When the U.S. stepped out of the manufacturing market over a decade ago, the continued development in the skills and resources necessary for competitive manufacturing went away as well.
The other side of building the "house of productivity" that we refer to at IDC Manufacturing Insights involves instrumenting the manufacturing infrastructure with the "smart factory" technologies that will move them into the present reality for manufacturing. Technology provides a significant opportunity for manufacturers to improve agility and responsiveness to the market using applications that drive smarter supply chains, better sourcing and logistics, and increased efficiencies across work centers.
It is the combination of the two - technology and skilled workers - that will spur a resurgence of U.S. manufacturing in today's global markets. Clearly, this is not an overnight success story, and it will require diligent effort by private manufacturers, continued support by the government, and willingness for involved parties to look beyond "labor costs" toward understanding how to optimize global manufacturing to satisfy this dynamic market.