AUTOMATION IS ESSENTIAL FOR SUCCESSFUL RESHORING: Calculating the real cost of domestic manufacturing
By: John Preston, Director of Customer Excellence, Wes-Tech Automation Solutions
Historically, the biggest driver for manufacturers to use overseas suppliers has been the lower cost per part, where the U.S. has been unable to compete. However, the reality is that international tariffs, geopolitical unrest and other supply chain disruptions hurt the bottom line, sometimes adding 20 to 30% more to the total cost of ownership (TCO).
To accurately evaluate the feasibility of onshoring and reshoring, manufacturers are realizing the importance of calculating the financial impact of TCO, not just looking at per-part prices. The United States can achieve a competitive TCO compared to Asian suppliers through the adoption of advanced automation. In fact, today’s industrial automation advancements and digital technologies have made U.S.-based manufacturing a more realistic and cost-saving option than ever before.
Here are 5 ways that automation impacts TCO, which justifies the move reshoring and onshoring:
1. Higher throughput
Shops that invest in automation can produce more parts and assemblies, allowing the possibility to run more shifts and even lights-out operations. This results in a lower price-per-part cost over time and lower delivery costs. The average return on investment for a new automation system is 12 to 18 months strictly based on the additional profit generated by higher production.
2. Faster lead times
Overseas supply chains have inherent risks, which became painfully apparent during the global pandemic. Political unrest and war in Asia and Europe create great uncertainty on whether shipments will arrive on time. Port worker strikes and route blockages in shipping canals add further potential for delays. Plus, domestic production reduces delivery times to a level that ocean delivery of offshore products cannot match. This gives manufacturers the freedom to choose just-in-time production and delivery without the cost of high inventory levels. Customers will see an advantage to faster lead times and be more likely to choose highly responsive suppliers to prevent delays in their own operations.
3. Consistent quality
Automation works accurately and continuously, providing a reliable and repeatable product without variation. Products are made at a higher quality level than those that are exposed to human error or low quality standards. With consistent quality, there’s less waste and fewer time-consuming re-dos, resulting in cost savings. In the event of a quality problem, those issues can be identified and corrected quickly without the delay of waiting for overseas delivery. In turn, manufacturers may reduce their warranty costs.
4. Protection against labor shortages
In a world of skilled labor scarcity and higher competition for quality workers, automation reduces the reliance on people to get work done. In fact, workers who are reallocated to more engaging jobs as automation operators at a technologically advanced shop are more likely to stay at the company, so there are fewer production delays and less time and cost spent for new hire recruitment.
5. Better safety
Automation can take on the dirty, repetitive and physical jobs so people can focus on more profit-generating work that requires thinking and decision making. Work involving heavy lifting, twisting and bending repeatedly has a high risk of causing injuries, which leads to higher injury claim costs and downtime while injured workers recover.Case Study: Tool Maker Finds Better Quality and Costs at Home
A major tool manufacturer decided to produce a new family of products at a new U.S. plant instead of producing in a current facility in China. Wes-Tech designed an automated, multi-function squaring and welding machine with automated tool changeover. The new flexible system handled changeovers in 90 seconds instead of the one to two hours of expensive downtime needed for older systems. The system produced consistent parts, rewarding the manufacturer with lower costs from better quality products and less waste. By keeping its manufacturing costs down, the company validated its decision to keep manufacturing in the U.S. instead of moving it to China.Automation ROI
When determining the feasibility of investing in automation systems, ROI is often a key deal-breaker. By considering TCO and potential sales growth, automation may pay for itself in 12 to 24 months. Even in high-mix/low-volume production, once considered to be an expensive option for manufacturing, is now feasible because automation lends itself to more flexibility and quick changeovers. Calculating TCO TCO takes into account all costs and risks to accurately compare U.S. and offshore sources. In many cases, the U.S. option is equal to or more favorable than the overseas option. The Reshoring Initiative offers a free online TCO Estimator that considers a manufacturers unique data to evaluate 30 cost factors.Choosing the right automation
When considering a new investment in automation, find an experienced system integrator that's willing to help you evaluate your options. For example, Wes-Tech Automation Solutions offers free consulting and engineering services, such as:Special Offer
Contact Wes-Tech to learn more about whether automation can justify onshoring or reshoring. The first two companies proposing automation to enable reshoring that respond to this offer will each receive a free Project ROI analysis from Wes-Tech and two hours of training and advice from Reshoring Initiative to evaluate a project’s TCO. -end-John Preston – Director of Customer Excellence
John has 30 years of experience with the robotic automation integration industry in the pharmaceutical and medical device sectors, including owning and operating his own automation company for nearly 8 years. At Wes-Tech, John is responsible for continuous improvement, internal alignment and customer success. He coordinates across numerous touchpoints inside the organization to ensure deadlines are honored, teams are aligned and customers get what they want. LinkedIn Profile: https://www.linkedin.com/in/john-preston-7aa53b25/