To Revive U.S. Manufacturing, Invest in Technology
The call to bring manufacturing back from overseas has been heard a lot in the last few decades, but mostly from politicians and other public officials. Business leaders have taken a more pragmatic stance, recognizing that manufacturers and their customers would choose the locations that made the most financial sense. For years that meant countries with the lowest labor costs.
COVID-19 might just change the equation. The disruptions that rippled through the economy following early lockdowns in China sent suppliers and purchasers of industrial goods scrambling to reassess their reliance on far-flung supply chains.
That doesn’t mean companies will reflexively start shifting production back to the U.S. en masse. Even in a post-COVID world, businesses will seek the most efficient, effective way to get parts and products made. Still, the disruption brought on by the pandemic presents American manufacturers with a once-in-a-generation opportunity.
To seize it, and to regain their global competitive advantage, they must invest in and deploy automation and robotics that will enable them to produce everything from auto parts to cellphone screens cheaper, faster and better than factories in China and elsewhere.
The technology won’t replace workers. They’ll be needed to operate and maintain the sophisticated machinery involved, the kind of technology that can transform and revive our manufacturing sector. We call this Industry 4.0.
Closing the Gap with Innovation
A focus on technology is critical because, even after several years of rising wages, Chinese workers’ pay remains much lower than their U.S. counterparts. And workers in many other countries can still do factory work for even less.
We can overcome that disparity through innovation. If we invest in technologies such as robotics, Internet of Things and 3-D printing, we can automate shop floors to speed production, spark new product development and create new high-skilled factory jobs. We can also produce competitively priced goods that enable our manufacturers to grow by taking market share from rivals overseas.
Unfortunately, far too few small and mid-sized companies in our industrial heartland have taken the first steps toward automation. In a February survey by our organization, 94 percent of manufacturers in Northeast Ohio said they were actively innovating — but more than 60 percent said they weren’t using or just starting using automation. Half said they didn’t plan to increase automation spending.
Many of those factory leaders don’t understand the technology, or how their shop floors or market strategies could benefit from automation. Others see the potential but don’t have the funds to invest, or see the investments as too risky, or fear the lag between investing and seeing a return would destroy their balance sheets.
Manufacturers who have made the leap to Industry 4.0 can attest that none of those things is true. Jack Schron, president of Jergens, Inc. in Cleveland, has invested in a host of robotics that have made his production more efficient, helped him expand and diversify product lines – and led him to hire more workers, both to operate the technology and to sell and promote his new products.
A Critical Step Toward the Reshoring Era
While various combinations of flawed perceptions, lack of knowledge, lack of funding and aversion to risk prevent many factory owners and leaders from investing in technology China is moving ahead. The country is now the world’s largest and fastest-growing market for industrial robotics, according to the International Federation of Robotics. The mental image of Chinese sweatshops is no longer accurate (though other countries still use those methods). Google “manufacturing process” and you’ll see highly automated, high-tech manufacturing facilities in China.
Perhaps the Covid-19 crisis will provide the motivation we in the United States need to fully embrace innovation, advance toward Industry 4.0 and overtake overseas rivals in the innovation race. Or perhaps American manufacturers will embrace Industry 4.0 for simple business reasons – those who do are undoubtedly more profitable.
Investment in technology is a critical step toward a new, sustainable era of US manufacturing. It will simultaneously, and far from incidentally, create better-paying, safer, more stable jobs in the parts of our country hit hardest by the deindustrialization in the last four decades.
The time is now for US manufacturing leaders to embrace technology, make the leap into Industry 4.0 and spark an American factory revival.
Dr. Ethan Karp is an expert in transforming companies and communities. As president and CEO of the non-profit consulting group MAGNET, he has helped hundreds of manufacturing companies grow through technology, innovation, and talent.
Photo credit: iStock.com/Jirsak