With everything going on, I think we can all agree that we are living in unprecedented times, and that our society is transforming. In particular, issues around Health, the Economy, and Equality have captured our attention like never before. Current events are already having a profound influence on the decisions we will be making in the next days, months, and years.
It has become evident that we are facing some tough, systemic problems with no easy solutions. I want to share my thoughts on these topics, in hopes that we can all aspire to a future that’s better than today.
Over the last two decades, I witnessed the offshoring of manufacturing: the move from developed nations to cost-effective countries to maximize profits. It was painful to see factories relocate from the West to the East, but over time, I grew to appreciate something unexpected: that manufacturing had served to uplift generations from hardship.
I thought to myself: manufacturing is an equalizer!
We see the rise of protectionism across the globe. It’s early to say if these sentiments are right or wrong, but I do believe that bringing manufacturing back to the United States can heal some of the problems we face today.
To successfully re-shore manufacturing and sustain it over an extended period, we will need a new production system built on modern technology. There is an impression that technology increases productivity, but in reality, technology enables people, and people improve productivity.
The future of manufacturing work should center around the human, and technology should augment the human ability to do more.
Because digital transformation and software will be the foundation for this new production system, US is well-positioned to lead this transition.
Due to the complexity of the current supply chain, companies cannot afford to re-shore immediately, and I am not suggesting they do. I believe a balanced approach where regional manufacturing happens in stages, over time, and based on the value chain. Companies will need to look into their product SKUs, supply chain footprint, digital transformation readiness, and manufacturing technologies to understand what, when, and how to re-shore. Leaders should have an open mind and leverage global talent to normalize impact and reduce risk.
An approach to re-shoring is multi-faceted:
- Select high margin, mature, and long lead-time products / SKUs.
- Map the current supply chain and build a dual-sourcing strategy, with a local second source where possible.
- Prepare for digital transformation from shop floor to top floor.
- Do not re-shore and automate at the same time. Understand and plan for automation; automation takes time and capital.
- Train your current workforce to go digital and energize millennials and gen z to enter manufacturing. Over the next decade, 4.6 million jobs will be needed in manufacturing, yet 2.4 million are expected to go unfilled due to the skills gap.*
- Incentives: Leverage local/federal government incentives.
- Plan for the transition.
A robust, re-imagined production system has the potential to improve:
- Health: Our ability to respond quickly to health crises, e.g. produce personal protective equipment (PPE) and vaccines for COVID-19.
- Economy: Job creation; e.g. bring unemployment down from ~14%. For every $1.00 spent in manufacturing, another $2.74 is added to the economy.*
- Equality: The path to income equality for underserved communities through opportunity.
It’s time for the investment community to recognize manufacturing as an equalizer, embrace it as such, and accelerate the transformation. Though doing so may cause a short-term dip to profits, the long-term social and financial benefits far outweigh the costs.
Clip Automation is a startup that is changing the product manufacturing landscape. Founded by former Apple engineers, Clip aspires to revolutionize the future of manufacturing work. We believe technology-enabled manufacturing will lead us to a future that’s better than today.
– Sriny Sundararajan
Contributors: Rajeev Bhalla, Lesley Freeman @ Clip Automation