February 2020
www.nzmanufacturer.co.nz
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COMMENT Finding the right direction in times of great change.
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COMPANY PROFILE Connection Technologies Limited – the next 20 years.
23 CLIMATE CHANGE What’s not to disrupt.
Transform manufacturing from Offshoring to Rightshoring in three easy steps CAD Software for clever designers and smart manufacturers
-Pavaavo Kakela After two decades of offshore productions in low-cost countries, manufacturers are now struggling with the rapidly growing salaries and counter-effects of cheap production.
New 2020 version due for release next month
The question that industries are asking today is: do we continue offshoring or should we consider reshoring? The right answer, according to Paavo Kakela, the CEO of EID Robotics, who provides modular micro-factory systems, is that manufacturers should transform their operations to rightshoring. In this article, he explains the three steps you need to establish a profitable rightshoring model – a business case, strategy, and technology! In the 1990s, the US manufacturers were sold by the lower cost of Asian labour. This is how the global offshoring boom started in Asia. In the millennium, offshoring peaked, and it maintained this growth trend until 2010 – the year when the US domestic manufacturing employment rates reached the all-time lows.
Offshoring Troubles How times have changed. Since then, manufacturing salaries in Asia have risen dramatically, and manufacturers have experienced the flip side of cheap overseas production: these include low quality, high duties and taxes, expensive freight costs, bloated inventories, and long lead times. China’s 2017 National Intelligence Law, which requires Chinese companies to contribute to national intelligence, has made intellectual property thefts a nightmare. Environmental and social issues are causing substantial damage to manufacturers’ reputations. Lastly, the rise of protectionist policies and continuous global uncertainty has turned the tide for offshoring – it simply doesn’t guarantee profits anymore.
Brilliant, Affordable, Easy to learn, Easy to use. Rapid advancements in automation technologies, robotics, and predictive analytics have propelled reshoring, since 2010 to become a more prominent alternative for offshoring. According to pro-reshoring industry coalition, Reshoring Initiative, for the first time since 1970, reshoring generated more manufacturing jobs in 2016 in the US, than what was offshored overseas. In 2017, a record number of 170,000 manufacturing jobs were announced in the US. A year later, a total of 145,000 jobs were announced by 1,389 companies.
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Benefits of Reshoring The benefits of reshoring sound great. How can you, as manufacturer resist these perks: tax incentives, higher quality, shorter lead times, smaller inventories,
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