May 17, 2017

May 2017 eNewsletter

Automation is key to more U.S. jobs
There has been much speculation recently as to the ability of U.S. manufacturing to create jobs – particularly in view of increased automation displacing workers. The Reshoring Initiative recognizes the automation trend and that returning jobs will be, on average, higher skilled and fewer than when the work was lost to offshore. So, how should companies and policy makers plan for increased automation and what will be the impact on jobs? To help find some answers, let’s review what we know.
  1. The impact of automation on jobs is exaggerated thus far. For the last two decades automation has replaced fewer jobs than were lost to offshoring.
  2. Productivity is actually growing slowly. Productivity growth has been low for the last 10 years, averaging only 1.7%, which is 60% below the average of the preceding 17 years. We attribute much of the slowdown to decreased capital investment as a result of offshoring.
  3. The U.S. must invest in automation in order to retain and reshore jobs and innovate. Other countries (especially China) are investing heavily in automation, so we either automate or we lose more to offshore automation than we would to domestic automation. Despite the fact that automation will continue to eliminate some low and mid-skill jobs, it decreases cost and restores competitive advantage, making more reshoring possible. More reshoring and less offshoring means more manufacturing jobs.
  4. Automation helps developed countries more than developing countries. Automation reduces the labor hours required to produce goods and shifts the mix toward higher skilled workers. Compared to China, the wage gap is smaller at higher skill levels. Additionally, automation can actually be more costly in China because machinery is subject to their Value Added Tax.
  5. Balancing the trade deficit can bring jobs back faster than automation can take them away. Balancing the trade deficit will bring back 3.3 to 4.6 million manufacturing jobs at the current level of U.S. productivity. That’s about 30% of our current manufacturing workforce.
  6. Conclusion: Automation is not a problem. It is an important part of the solution. Companies should stay focused on creating flexible, sustainable business models, making decisions and selling based on total cost analysis and on using automation to close remaining total cost gaps.
For a compelling perspective on data, job loss and barriers to U.S. productivity, see “The Real Challenge for US Industry - Automation is hardly the main worry in US manufacturing Employment.”

In the News
Reshoring Initiative 2016 Data Report - The Tide Has Turned
Reshoring plus FDI were up over 10% in 2016, tying the 2014 record. 2016 is also the first year to record positive net job gain in decades. The full report details the breakdown of the trends by industry, region and reasons.
National Reshoring Awards
The Reshoring Initiative, in conjunction with the Precision Metalforming Association, announced the National Reshoring Awards for successful reshoring of parts or tooling. There will be one award given for buyers and one award for suppliers, e.g. contract manufacturers. By definition, if a company produces for its own use or for sale to a customer company, a product that had previously been supplied from offshore, then the company has reshored. Companies do not have to be members of PMA to participate. See entry form for more details. Applications must be submitted by August 1, 2017. The awards will be presented in Milwaukee, WI on September 28, 2017 at Sourcing Solutions™.
Walmart’s Open Call for U.S. products
Registration for companies interested in pitching U.S. goods is open until May 18th. The event will be held on June 28th 2017. Find out more here.

Social Media Coverage
Wall Street Journal: Reshoring Aims to Benefit U.S. Cities

Chief Executive: Is Reshoring the New Cost-Cutting Tool in Management’s Arsenal?

Assembly Mag: A Deeper Dive into Total Cost of Ownership: Part 2

Calls to Action
  1. The Initiative will work with Return One Million Jobs (ROMJ), an organization created to raise $20 million to bring one million manufacturing jobs to the U.S. from offshore. The funds will be committed to a data analytics program to help companies quantify the advantages of sourcing domestically. The program will include the use of the Reshoring Initiative’s TCO (Total Cost of Ownership) Estimator. Please contact ROMJ to participate.
  2. Write your senators, sign this bipartisan bill: House Resolution 37: Eliminate The U.S. Trade Deficit!

Recent and Upcoming Events

Reshoring Initiative

At the Strategic Forum for Innovative Manufacturing in Montreal on April 7, Harry was a keynote speaker and participated in a panel with the provincial Premier, Philippe Couillard. Quebec is focused on reshoring, including an Import Substitution project being developed by Deloitte. Harry presented on what Quebec has to do to reshore more and how Canada, U.S. and Mexico can cooperate to reshore millions of jobs from Asia and minimize poaching from each other. We anticipate helping Investissement Quebec drive reshoring.
AFS Commits to Reshoring

The American Foundry Society, a long-time Initiative sponsor, has committed to reshoring as one of two paths to industry growth. The Initiative is actively participating in this effort. We intend to make foundries a model for other industries.
Select Upcoming Events

May 17: Lean Frontiers - webinar

June 7: Home Furnishings Manufacturing Solutions Expo – Atlanta, GA

June 18-20: SelectUSA – Washington DC
Harry will be attending and available at the BLS (Biggins Lacy Shapiro) exhibit on the 19th 4:30 to 6pm and on the 20th 1-2pm.

Visit Upcoming Presentations for a complete schedule of events.

Thanks to our readers, our sponsors, and all the companies that are using TCO.
Harry Moser,
Founder & President
(847) 726-2975
Millar Kelley,
Newsletter Editor & Research Analyst
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