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Key Take Away: American Reshoring Has Never Been More Robust and Will Create Opportunities for Machine Shops
Reshoring Continues at Record Pace in 2022
In 2010, US manufacturing companies reshored 6,000 jobs. Those 6,000 jobs don’t even amount to a rounding error relative to the total number of manufacturing jobs in America.
COVID-19 and the subsequent supply chain disruptions dramatically changed the pace of reshoring. Companies quickly realized that the benefits of low-wage labor no longer trumped everything else.
In 2021, US manufacturing companies brought more than 265,000 manufacturing jobs back to America. Right where they belong.
In 2022, the pace has quickened. As of August 2022, the pace of manufacturing jobs returning to America is roughly 355,000. And that number could increase.
Is reshoring the right thing to do?
Absolutely!
When the Russians invaded Ukraine, the price of oil skyrocketed. The shock of oil prices did two things. First, it showed the wisdom in bringing those jobs back to America. The cost of transportation was already inflated by supply chain disruptions.
While the skyrocketing oil prices showed the wisdom in reshoring jobs, it also quickened the pace of reshoring those jobs. And it likely has increased the number of jobs returning to America.
Reshoring is the right thing to do. But, it won’t be easy.
Why? There are more than 500,000 reasons why it won’t be easy.
Currently, America has over 500,000 unfilled manufacturing jobs. If you look at the ratio of open jobs to unemployed people, if everyone on unemployment had a job tomorrow, more than 40% of the open jobs would still be unfilled. And that doesn’t include the additional jobs that have yet to come back from overseas.
While reshoring those jobs is absolutely the right thing to do, there will be some pain associated with returning those jobs.
With so many unfilled jobs, there will be continued pressure on wage inflation. That upward wage pressure will continue for some time.
There is an even more significant pain point than just inflated wages.
Right now, more than 80% of American manufacturers say they can’t meet existing demand because they don’t have enough people doing the work needed to produce the products that will meet existing demand.
What is the impact of our current situation of not having enough people? More than 80% of manufacturing companies in America will have difficulty reaching their top-line revenue goals because of the labor shortage.
If you can’t meet existing product demand, how can you expect to grow top-line revenue? Where is the growth going to come from?
It is simply not there.
Those numbers came from a recent study by Deloitte.
Those statistics are alarming. But there are numbers that are even worse.
Over the next seven years, the revenue losses from the labor shortage will hit American manufacturing to the tune of over one trillion dollars. No, that is NOT a typo. That is one trillion dollars.
The saddest part of that revenue loss is that it doesn’t have to be that way. Since the revenue shortfall is due to a labor shortage, you don’t have to participate fully in the labor shortage.
You can get a robot to tend your CNC machine. Then, take that machine operator, help them upskill, and have them do something else in your company. That robot can have a domino effect on your staffing.
The robot does so much more than tend that CNC machine. Having the robot in place helps you quote jobs faster and more accurately. These days, the first quote back often wins the work. You can quote faster because you have much better control over your costs.
Speaking of costs, that robot will never ask for overtime or a raise. Once you’ve paid for the robot, everything after that is nearly free.
You can also quickly respond to last-minute customer requests. Imagine a job order coming in Friday afternoon and delivering the parts on Monday without paying overtime. Or without paying any labor costs.
Once the CNC machine is set up, your machinist spends 3- or 4-minutes programming the robot. Once the raw parts are loaded on the parts table, push the green button, and walk away. The work will happen with the lights on or the lights off.
You can walk in Monday morning and see everything was done.
Having that robot in place gives you real control over your operation. You control the costs. You control the pace of production. All of that eliminates uncertainty. That gives you the security that you wouldn’t otherwise have.
You also gain control over your margins.
Think about this. Right now, by paying a human machine operator, you are paying for a robot, but you aren’t getting the performance.
Yes, you invest a little more money upfront. But the backend returns are amazing. Our robots should run anywhere between 75,000 hours to 100,000 hours before a maintenance call would be required.
Divide either of those numbers by 2080 (40 hours a week for 52 weeks), and you’ll start to get a sense of how long that robot will last. That 75,000 to 100,000 hours before maintenance is just that. Once maintenance has been done, you are ready to go again.
Think about what you are paying your human CNC operator. Add to that wage inflation, plus the inflation in benefits. Add the total increased wages and benefits over time, and you quickly realize how much more expensive it is to have that human tending your CNC machine.
We even built out a little calculator to help you come to those costs. We can send it to you if you like. Email your request to info@robojob-USA.com, and we’ll send you a copy. We built it in Excel, so it is very easy to use.
Is reshoring the right thing to do? Absolutely! There will be some impact, so the sooner you future-proof your machine shop, the better off you’ll be.