Take Back Manufacturing

In my recent book Take Back Manufacturing: An Imperative for Western Economies, I explain how the globalized manufacturing approach, with long supply chains supported by liberalized free trade agreements, has caused the “hollowing out” of our local manufacturing.

I describe how we are now moving toward a universal acceptance at the political level that reshoring manufacturing is a national imperative that is economically desirable to achieve shorter, safer, cleaner, more controlled, more reliable, more secure, and more productive local supply chains that will support a recovery of our national prosperity in a much more sustainable fashion.

Shorter supply chains (not long global ones) utilizing LEAN manufacturing principles with new manufacturing technology adoption are the keys to reshoring.

So, the political ask, with maybe some economic inducement and encouragement, will be for our business leaders to get on with it.

Here are the things these leaders need to remember as they look at the business options for future reshoring:

Run the Numbers

First, they will need to understand and be comfortable with the economics of any source change. Onshore versus offshore landed costs need to be reviewed, compared, and indexed looking forward into the future.

It’s clear that, depending on the product, the shipping footprint of long supply chains and the associated costs of transportation and other border/trade activities is much more expensive than we realized.

Certainly, increasing interest rates operating on weeks of inventory in long supply chains that must cross many borders, versus only days of inventory for local supply chains, increases the cost difference in favour of shorter supply chains.

Also, the additional transport packaging and associated docking effort that may be needed if shipping is across a sea or through many transit points can be minimized if the supply chain is local.

Another consideration is the cost of packaging disposal to stage or repack for the end customer may be eliminated.

The additional costs in the form of the bulk storage space that may be needed to hold the transit inventory when sea containers arrive and must be unpacked and redeployed into a business can be eliminated.

Many business risks are associated with long supply chains, including inventory obsolescence and product shrinkage, as well as the potential of delivery delays that need to be factored into the cost savings of going local.

Supporting a long-distance supply chain in a different time zone and culture also may incur an added support cost delta that can be avoided. 

Also, the risk of IP exposure and theft by operating in a foreign economy is always a solid consideration. 

For these reasons, shorter and more localized supply chains are now typically are less expensive than long supply chains, but it will always depend on many factors, so it is prudent to seek help from experts in building a validated cost structure.

Experts have developed reshoring cost models that can assist a business in getting real and accurate numbers and include all the many cost factors, so they gain confidence when making the sourcing decisions.

Process Improvements

When a business increases local capacity and perhaps starts spending capital, it’s important to make sure there is a clear grip on LEAN principles, so the business team does not automate or tolerate waste in the new processes and operating structures.

This means a whole organization and workforce that is perhaps re-educated and trained on LEAN concepts.

Optimizing New Product Quality

When designing new products, the business must ensure that the new product introduction design process uses Six Sigma and Design For Manufacturability principles to ensure a high degree of compatibility between the product and the process of manufacturing so that its inherently defect-free and highly productive.

New Technologies

Although it is anticipated that in most cases the future cost of long supply chains will tend to outweigh any low-cost labour advantage gained offshore, it’s still advantageous to minimize local labour content with new automation technologies and systems.

Not only will this reduce costs, but it avoids recruiting and training labour that probably is going to be in short supply in the local economy as we experience growth in reshoring manufacturing. And, of course, it further helps reduce any sensitivity to local versus low-cost labour difference.

Future products destined for local manufacturing may not be the exact same products that were offshored. Inevitably, there will be new technology in both the products and the manufacturing processes that may demand new facilities, equipment capital, knowledge, skills, and systems. And these must be fully integrated using an Industry 4.0 strategy.

The real purpose of Industry 4.0 or Digital Transformation is to move the whole business process to a cyber-physical state so that human interaction and effort in managing and undertaking the business process is eliminated or minimized.

This Industry 4.0 strategy requires that the business follows a well-planned road map that involves partnering with business systems and process equipment providers to develop a specific Industry 4.0 Evolution plan.

This must also be front ended with a LEAN transformation journey to ensure waste is eliminated and not part of the final solution.

Partner With Local Supply Chain

A business will need to look at the local supply chains down to the raw material level to fully understand how the local clusters of supply capability can be rebuilt, even if this means significant partnering or investing by government and business in such relationships.

As said, it’s important to look at the business supplier’s own supply chain, and, if needed, the chain feeding it to help ensure the whole end-to-end supply chain is localized as much as practical for optimum short-cycle delivery and lowest inventory.

This will help the whole business supply chain reach optimum cost and delivery performance.

Re-learning for the workforce

One of the issues to be addressed by government, the manufacturing leadership and especially the educational institutions, is the level of knowledge, skill, and experience within the western workforce for manufacturing.

This used to be a competitive strength, but is now a growing weakness, as the baby boomer generation retires. Immigration has not assisted, as most are from third world countries low on manufacturing expertise.

It will require the installation of an Integrated Industrial Learning System that provides a balance between education, training, and experience, to improve the capability of the workforce.

This must support both school leavers and those already in the workforce and generate a strong maker culture.

Support and Funding

It will be necessary to significantly improve the support capability of organizations that provide local technical support and financial funding support to business. The businesses will not have the time or energy to reinvent the wheel, plus, if they are entitled to assisted support and funding this needs to be delivered with far less bureaucracy than in the past.

 Political Distractions

The Take Back Manufacturing book takes a hard look at all aspects of what we need to do differently to recover our Manufacturing sectors and gain back our prosperity, and how we must rethink our political policies, economics, immigration, investment in technology, our educational systems, as well as our social institutions and its priorities.

But the biggest impediment next to the significant lack of political will and focus, is the wrong approach to managing climate change being driven by the UN orchestrated IPCC.

So far, we have allowed the political driven misappropriation of science to generate a false consensus that in turn has created a view that we have a climate emergency.

This is generating panic and wrong-headed policies and actions across our western societies.

It is breeding a religious fanaticism that is being boosted by an increasing woke attitude that does nothing to assist our citizens, and certainly does not support future prosperity and national sustainability.

I talk about this issue in my book, and its clear that the scientific community needs to assist by rethinking its participation in this debacle.

Immediately they must start a much more open peer review process that recognizes the rank polarization of conclusions within the scientific community.

This requires significant dialogue between the conflicting scientific camps to construct agreed action plans for further scientific analysis and conclusions. In other words, to use the terminology. …the science is NOT settled…. It needs far more work.

This is just far too important a policy journey (it will affect our whole civilization) for it to be managed without more effort from the actions recommended above.

It may mean that future climate change policy action must NOT be focused on the Net-Zero goals, but far more limited toward adaption than any form of mitigation. As any action taken on a crisis that is not real would be irresponsible and may generate far worse conditions and outcomes…. hence a far safer approach ……. no mitigation…. only as needed adaption.

Everyone I have talked with agrees that the climate is changing and that we must continue to study it… but many doubt its an emergency that needs a change in our national policies outside of an adaptive approach ….

Its clear from the failed efforts at mitigation so far that we have a duty to “get it right” as the mitigation efforts will be dire and for most of us far worse than the so-called climate emergency.

The other political distractions are associated with national governments being railroaded into other global-centric goals set by the United Nations and the World Economic Forum.

These include….

The World Trade Organizations, multilateral trade rules that have disadvantaged the western economies and are now thankfully being overridden in many cases.

The SDG- Sustainability goals, and the ESG- Financial Investment goals are mainly not in the best interests of the western world’s future prosperity and will require prudent and limited involvement by our national governments.

The other distraction is western governments preoccupation with woke thinking and worrying far too much about “who we are rather than how we are doing”

We all hope that this current political derangement in the western world is better managed going forward, so we better focus on the correct priorities to gain back our prosperity, which is the key to harmony in a modern society.

Next Steps

I did not call my book “Welcome Back Manufacturing” because it certainly needs to be “taken back.” And, yes, it will take significant resolution, focus, prioritization, and planning, with the need for a supreme effort by everyone, but it’s worth it for our future prosperity.

 More in the TBM book at:  www.takebackmanufacturingnigelsouthway.com

Nigel Southway is an author, consultant, educator, manufacturing engineer and operations leader, and is past chair of the Society of Manufacturing Engineers in Toronto Canada.