Even before the start of 2020, a trend toward nearshoring to North America was emerging. Now, in the midst of the COVID-19 pandemic, we predict companies will not only continue this trend – they will also adjust their entire supply chains toward more geographically spread production. With supply chains dispersing, two key outcomes are likely:
- The appetite for more advanced technology on the shop floor will grow as manufacturers look for ways to connect their business while increasing productivity.
- We will see more and more demand for workers who are skilled in using this smart manufacturing technology to help drive the business forward.
If the pandemic made one thing clear, it was this: Relying on one country to produce the world’s supply of medical equipment, medication or other goods puts everyone at risk for production disruptions or shortages.
By spotlighting this risk, COVID-19 effectively accelerated the trend toward nearshoring, which we initially saw in 2019 when companies began to decrease their reliance on Asian countries by moving production to other regions. This shift was validated by the Kearney Reshoring Index, which found that for the first time in five consecutive years, that U.S. domestic manufacturing “commanded a significantly greater share versus the 14 Asian low-cost countries (LCCs),” with China, in particular, experiencing a greater decline in activity.
In addition to nearshoring, manufacturers are also looking to minimize their risk by diversifying production locations. If one region suffers a natural disaster or problem, another can pick up production in the meantime. During the start of the COVID-19 pandemic, some companies that produced parts exclusively in China had no other option than to fly chartered planes overseas in order to ship their goods. When crisis hits, the ability to redistribute production or quickly ship parts becomes essential to keeping a business thriving.
Nearshoring Will Spike Manufacturing Jobs
An added benefit of nearshoring manufacturing to North America is the enormous potential it creates for investment in tools and technology to drive increased efficiencies and productivity. To accomplish these objectives, many manufacturers are turning to the promise of smart manufacturing technology. But, to realize that promise, they need workers who are adept at using this advanced technology.
Currently, 53 percent of smart manufacturing jobs are vacant, according to the most recent Deloitte and The Manufacturing Institute skills gap and future of work study. As manufacturers look to the future, they’ll have to think beyond operators on the line, CNC operators and welders. Industry 4.0 and the smart manufacturing movement will require that manufacturing workers be capable of using smart technology on the shop floor.
The Plex State of Manufacturing Technology Report, which showcases insights from more than 200 manufacturers, found that 77 percent of respondents are either implementing or planning to implement smart manufacturing solutions. The survey also showed that companies are prioritizing technology and new production technology, which means they need a workforce that can drive the business forward with data-driven decision making based on advancements in IT/OT convergence and industrial IoT.
The convergence of the physical with digital technology – also known as the Fourth Industrial Revolution – is defining the skills required of the next generation. Access to key data and information enables companies to respond to challenges with more agility and be more adaptable to change in real-time. But they can’t do that unless its workers know how to collect, synthesize and analyze this information.
Nearshoring and the availability of smart technology, combined with a skilled workforce capable of using it, have the power to kick the smart manufacturing movement into overdrive in the years ahead. Industry 4.0 might be realized more quickly than we anticipated.
One reason for this is the accessibility of smart manufacturing technology, which is now within the reach of more manufacturers than ever before. Cloud MES, ERP, supply chain management, Industrial IoT and analytics solutions are available to connect people, systems, machines and supply chains, which gives manufacturers the ability to lead with precision, efficiency and agility in an ever-changing market. When applied strategically and executed solidly, technology is a defining factor in successfully overcoming industry and internal challenges to meet business objectives.
While COVID-19 has certainly added to the existing challenges faced by the manufacturing industry, it might also serve as the positive catalyst for dramatic change required to realize the promise of smart manufacturing. The next few years of manufacturing will undoubtedly be transformative ones.
Bill Berutti has more than two decades of experience leading global, high-growth cloud and enterprise software businesses. Before joining Plex, Berutti served as the president of a $1.5 billion division of multi-cloud management software firm BMC Software. Prior to BMC, he spent 17 years at PTC delivering solutions to manufacturers.