What a difference five years make.
For over half a century, the United States was the world's leading manufacturer. That all changed in 2010 when China overtook the U.S. with the help of inexpensive labor.
But the tide appears to be shifting back in America's favor. Bloomberg reports that Chinese and U.S. manufacturing costs are largely equal now; 96¢ for every dollar spent at home. That's before considering the price of transporting goods halfway around the world, a costly and time‑consuming proposition that's prompted a growing number of producers to re‑embrace domestic manufacturing.
What's more, one European manufacturer recently found success after opening a plant in North Carolina. The company did this to be closer to the customer, reduce supply chain headaches and resolve problems in a timely manner (as opposed to the months Chinese manufacturing often takes).
Of course, new price‑leaders such as Indonesia, India and Mexico hope to change the economic calculus. And mass exodus from China will not happen overnight (if at all). But as companies bet on new manufacturing plants for the next 25 years, here's what U.S. manufacturing can do to win the world's business once more, according to Ramji Mani, Cognizant's Business Consulting's Assistant Vice President of Supply Chain.
Highlight the automated advantage.
To offset lower labor costs in the East, the U.S. has always and must continue to invest in and promote its advanced manufacturing technology that levels the cost playing field. Despite America's skills shortage, this goes for machines and conveyors as much as software and the country's "can do" mentality. To realize this, one leading consumer products manufacturer with whom we work is replacing its legacy systems with workflow planning, touch interfaces and cloud‑based systems such as Salesforce.com. Doing so is said to have improved employee job satisfaction, order accuracy, time‑to‑market, sales and even enabled remote operation of factory lines from mobile devices.
Improve waste management.
In addition to low‑cost labor, a more relaxed regulatory environment is one of the biggest cost advantages of manufacturing in China, which the country pays for with elevated air and water toxins. To beat the East, U.S. manufacturing can further reduce exorbitant compliance expenses with more cost‑efficient industrial and water waste management, something leading manufacturers are embracing at plants across the nation. Doing so requires consistent water treatment and waste control across multiple plants, as well as better machines and proactive maintenance.
Ensure consistent value.
Inconsistent product quality is one of the biggest challenges of global manufacturing. When that happens, consumers sour on brand. Which is why consistency across multiple plants (including those from different countries) is such a hot topic right now. Repeatable processes is undeniably the answer. But so are rapid sample inspections, integrated cloud data from multiple machines and plants and better human/machine interfaces, including the ability to start and stop production from a phone or iPad. A large Detroit‑based car makers that has launched a program for common platform for car, people, technology to help consolidate and become a global leader once more with the help of one platform factories, identical cars in all markets and cloud‑based systems for everything it does.
Increase manufacturing visibility.
The more global something becomes, the more complex it gets. The more complex something gets, the more often Murphy's Law occurs. So it is with global manufacturing. To reduce errors, U.S. manufacturing must build a more visible network of machines, operators, plants and processes across brand and boundary lines. Doing so will enable manufacturers to better manage all production recipes with increased accuracy, while answer questions such as: How do I know what component is at which stage in the cycle? How do I tell my customer when and where the product will arrive? And who was responsible for such astounding (or shoddy) work?
Retain (don't just recruit) talent.
To overcome the manufacturing skills shortage, the U.S. is rightly investing in STEM fields (science, technology, engineering and mathematics). But it'll take more than awareness programs to improve job satisfaction and retain top talent. Manufacturers will need to shed their reputation for having dirty, hot or cold workplaces. They'll need to use culture perks, work‑from‑home policies and the aforementioned remote‑machine technology to excite and encourage talent. And they'll need to move HR to software‑as‑a‑service environments such as Workday instead of on‑premise legacy systems to better empower modern employees. More than anything, doing the above will help manufacturers create an environment that people will not only want to join, but stay on with.
Whatever you do, don't do what one Florida chemical company did recently, Mani exhorts. After concluding the cost of U.S. compliance was too great to bear, said manufacturer moved operations to China. Although the changed afforded nominal savings, it slowed the company's operations and frustrated customers, resulting in reduced market share.
For more information, read our full whitepaper The Future of U.S. Manufacturing: A Change Manifesto or visit Cognizant's manufacturing practice.