In this column we’re going to take a look at how manufacturers are closing the cost-gap with automation and reshoring profitably while improving operational excellence.

There’s a tremendous opportunity to bring back hundreds of billions of dollars in manufacturing work and create millions of new jobs. The metalcasting industry is poised for a generational opportunity with the global market projected to reach $225 billion in 2030.

Across a broad range of products, approximately 20%–30% of what is currently being imported could be produced or sourced locally with equal or even greater profitability. Even higher percentages and more significant opportunities are available through the integration of automation and smart technologies to enhance casting precision and efficiency. 

Offset Higher Wages

The American Foundry Society’s yearly surveys show that more than 90% of foundries make annual capital investments in their plants. AFS has encouraged foundries to automate where it makes sense. New automation technologies that overcome labor shortages and offset higher U.S. wages are helping to close the labor-cost gap and reshore more manufacturing to the United States. Reshoring backed by automation helps to offset higher U.S. wages. It pays to update, modernize, and automate for competitiveness as we reshore.

Alleviate Workforce Shortages 

Recruiting and retaining quality talent is key to reshoring because the workforce skills shortage is a top operational challenge for manufacturers. The use of automation makes manufacturing careers more attractive to younger generations and shifts outdated misperceptions.

Younger workers view automation and new technologies as job security enhancements that supplement their capabilities, not as job replacement threats. A tech-savvy workplace can create a culture that attracts and engages millennial and Gen Z employees, enhancing workforce recruitment and retention efforts. Because of the manufacturing skills shortage, automating is not just a way to cut costs, it is necessary to maintain or increase output.

Integrating Automation Into a Reshoring Project

Total Cost of Ownership (TCO) is the best metric to use for comparative analysis. The Reshoring Initiative’s TCO Estimator is a free online tool that helps companies account for all relevant factors to compare the true total cost of domestic and offshore sourcing and siting. Using this information, companies can better evaluate sourcing, identify alternatives, and even make a case when selling against offshore competitors.

Integrating automation into a reshoring project can help companies bridge or completely close the cost-gap between offshore and domestic sourcing. Automation’s primary effect is on labor cost, but the offshore source also has advantages in overhead and materials. A two-year payback on automation is unlikely based on price if the offshore FOB price is 25% lower. But if the TCO is only 5% lower and you calculate payback on TCO, the U.S. has a much better chance to justify a short payback on automation.

Smart Manufacturing

A growing demand for complex and lightweight components, large-scale metal castings, and energy-efficient, environmentally-conscious casting processes is being incentivized by the Bipartisan Infrastructure Law and Inflation Reduction Act. “Smart” technologies are addressing some of manufactures’ most critical challenges.

A Deloitte study finds 93% of companies believe AI adoption will be pivotal in driving growth and innovation in manufacturing. Integrating new technologies can enable predictive maintenance, real-time monitoring, data-driven decision-making, and supply chain optimization. AI and machine learning models can identify casting defects, enabling real-time adjustments. 

AFS CEO Doug Kurkul writes, “AFS Corporate Member companies specialize in helping foundries leverage the power of smart manufacturing. Often, the advice is to start small and advance from there. Relatively modest initial investments can sometimes make a world of difference in understanding data and optimizing foundry operations.”

Are You Thinking About Reshoring?

Manufacturing is navigating a generational change; automation can support your company in overcoming challenges to achieve successful reshoring. When new processes, technologies, and strategies are factored into a reshoring project, companies can amplify resiliency benefits and reduce or even eliminate the offshore cost gap. For help, contact me at 847-867-1144 or email me at harry.moser@reshorenow.org.