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Will Inshoring Create More Manufacturing Jobs in 2012?

Posted By Paul Tate, December 22, 2011 at 8:50 AM, in Category: Next-Generation Leadership and the Changing Workforce

“Asia has stolen our manufacturing jobs!” Sound familiar? It’s the kind of lingering lament you still hear at some Western manufacturing events - from Milan to Michigan, from Maine to Manchester.

So will the currently popular reverse trend of inshoring – bringing production back closer to home across the developed economies of the US and Europe – solve the missing manufacturing jobs problem? Probably not as much as many people think. And does the West even have enough of the right people to fill those new inshored manufacturing roles anyway?

Inshoring, or reshoring as it’s sometimes called, is certainly considered to be a 2012 megatrend in manufacturing. A recent industry poll by Cook Associates revealed that a substantial 85% of the 3,000 manufacturing executives surveyed among small and mid-sized companies expect some form of factory work to come back to the US from overseas in the near future. {(Caterpillar is already planning some high-profile inshoring moves) Caterpillar Reshores Japanese Production Back Home: Part Of A Trend?} to bring production closer to their main US market. And they aren’t the only ones.

An interesting article in The Atlantic magazine yesterday also pointed out that rising wages in China, and the quality and logistical problems inherent in far flung global operations, are helping a move back to the US and major European countries to make increasing business sense when building products destined for local markets.

But does that mean lots more manufacturing jobs too? One of the most interesting statistics to emerge in the early months of 2011 was that {(China had marginally overtaken the US as the largest manufacturing economy) Is China Now The World’s Top Manufacturer? What About Productivity?} in the world for the first time in history – by value at least. China’s estimated manufacturing output, according to market researchers IHS Global Insight, reached $1.995 trillion compared to total US manufacturing output of $1.952 trillion in 2010.

But underlying these figures is the fact that it took over 100 million Chinese workers to create that amount of manufacturing value  – compared to just 11.5 million workers in the US. That’s a massive imbalance in productivity. The West’s manufacturing  industry, it seems, is operating around 10 times more productively than its Chinese counterparts.

Why? Because the explosive application of lean production techniques, extensive factory level automation, and new technologies that are streamlining essential business processes and customer interactions, have changed the rules of manufacturing forever.

If production does move back from East to West big time soon, it may certainly help western GDP, company revenues, probably profits, and maybe even national pride, but to think it will sweep away mass unemployment seems overly ambitious.

Firstly, fewer people will be required to build the same volume of things because the West’s productivity tools make the whole process of production easier. That’s why they are there. Secondly, the skills needed to run these new, highly productive plants will be much more high-level and geared around the management of advanced technologies and processes, rather than hands-on human effort. And thirdly, many products of the future may even be digitally ‘printed’ rather than traditionally tooled as new manufacturing technologies develop anyway.

Maybe it’s not so much about reshoring, as it is about rebalancing manufacturing for the future. No one ‘stole’ manufacturing jobs anyway. In reality, the rapid growth of Asian manufacturing was predominantly fuelled by western companies seeking cheaper production options so they could sell their products at lower prices in world markets, including their own. Reshoring is based on the same competitive cost strategy – but this time in geographical reverse.

If manufacturing does come home in the next few years, there will certainly be more manufacturing job opportunities in western economies – as many as two million in the US alone, according to some estimates. But those jobs will be different and there may not be as many, or for as long, as some expect.

The biggest danger here is that unless western economies focus more on education and training to fill the current manufacturing skills gap in the West’s technologically advanced plants, this new inshoring shift may even create more of a skills problem for the industry in the future.

As the world’s manufacturing industry prepares for another year of shifting global change, perhaps the real challenge for the year ahead is not about the extent of corporate reshoring – but about re-educating a workforce that will be capable of grasping the new opportunities it may bring.

What’s your view? Will inshoring become a major trend in 2012? Will it create significantly more manufacturing jobs in western economies? Could it make the current manufacturing skills gap even worse?

Written by Paul Tate

Paul Tate is Research Director and Executive Editor with Frost & Sullivan's Manufacturing Leadership Council. He also directs the Manufacturing Leadership Council's Board of Governors, the Council's annual Critical Issues Agenda, and the Manufacturing Leadership Research Panel. Follow us on Twitter: @MfgExecutive


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