The offshoring trend in U.S. manufacturing has been the topic of news reports, international politics, and heated debates for decades. Societal shifts and the rise of advanced manufacturing are poised to bring about the end of offshoring. As developing nations have grown in wealth and the digitization of all aspects of manufacturing, or Industry 4.0, is taking hold across a range of sectors, the cost advantages of offshoring for U.S. manufacturers are diminishing. These factors, as well as the recent political climate, have inspired domestic companies to move production back to the U.S. And, as the world enters the “new normal” business climate, the COVID-19 crisis will dramatically accelerate this trend.
But how will the return to manufacturing — including the factory job and the factory itself — take shape? And what are the implications of these changes?
The Workforce
While these shifts may not add to the number of manufacturing jobs in the U.S., they will fundamentally change the nature of those jobs, replacing hands-on labor with a need for technical skills and expertise. These changes, which have been taking place incrementally for years, are expected to accelerate dramatically in the coming decade — and they will lead to an increased demand in a challenging labor market.
Though the popular perception of manufacturing jobs often revolves around job loss and the narrative of factory closures and Rust Belt towns, manufacturers across the U.S. often struggle to hire and attract new talent. This is due to a number of factors, including a retiring generation of workers who are leaving a void; a lack of well-trained, educated candidates for jobs that require more skill and technical knowledge than manufacturing jobs of the past; and a societal bias against factory work.
That perception problem may be the most stubborn obstacle manufacturers face in attracting a modern workforce. Factory work has long been popular shorthand for production line work with repetitive, boring tasks and oppressive management. Manufacturing jobs are considered unreliable with frequent layoffs. The workplace itself is thought of as dark, dirty, and dangerous. For young, college-educated workers, factory jobs might not fit the image of the upwardly mobile career track they have been trained to expect.
Manufacturers have battled this perception problem with hefty benefits packages and higher pay — on average 20% more in salaries for similarly experienced workers. They have also invested in recruitment, fostering partnerships with prestigious universities and in-house training programs, yet they remain unable to fill open positions.
As onshoring of manufacturing continues to grow, and the market for increasingly skilled labor remains fiercely competitive, these staff shortages will escalate.
Technology
As companies move their production to the higher-cost U.S. labor market, they will need to increase workforce productivity. This pressure will exacerbate another issue manufacturers are struggling with — integrating the tools and processes of Industry 4.0 into their businesses.
Like most technological advances, the march of digitized industrial processes is inescapable. Across all manufacturing sectors, businesses are applying a wide variety of digital technologies to business functions — from research and development to supply chain, production, warehousing, distribution, and customer service.
Processing power and data storage have become more affordable over the last decade, driving the implementation of these systems forward and making it easier to incorporate them into a wide range of settings.
Both Gartner and KPMG have forecast significant growth in the application of a range of advanced technologies, from 3D printing (additive manufacturing), augmented reality, and wearables to advanced robotics, artificial intelligence, digital twinning, cybersecurity, and blockchain. The combined effect of these expanding technological capabilities will be a fundamental reconfiguration of manufacturing work and the production environment.
That change, while evolutionary, has begun to pick up speed.
“It is the fusion of these technologies, AI, big data, IoT, bioinformatics, and their interaction across the physical, digital, and biological domains that make the Fourth Industrial Revolution fundamentally different from previous revolutions, diffusing faster and more broadly than any of the previous revolutions," said Klaus Schwab, head of the World Economic Forum.