Reshoring Manufacturing to America: The Role of AI, Automation, and Digital Labor

adminDecember 21, 2023

Reshoring manufacturing to the United States This has been an important trend in recent years due to geopolitical tensions, supply chain disruptions, proximity to customers and markets, ecosystem synergies, and the need for positive impacts on the domestic economy. However, reshoring poses several challenges, primarily human resources, technology, and economic issues.

AI, automation, and digital labor can help address these challenges. For organizations willing to take these challenges head on and become innovative optimizers from the start, this is also an opportunity to skip manufacturing innovations a generation ahead and adopt technologies that will help them gain a competitive advantage from the start.

Below are specific recommendations and examples from IBM for companies considering reshoring manufacturing.

manpower issues

One of the major obstacles to reshoring is access to skilled manufacturing talent. According to a report from the Manufacturing Institute, five out of 10 skilled worker vacancies in U.S. manufacturing currently remain vacant due to the skills gap crisis. Reshoring production requires workers with not only the technical skills to operate computer-controlled equipment, but also soft skills such as problem solving.

To address these challenges, companies can use digital labor to complement their traditional workforce by automating repetitive, risky, or complex tasks. For example, collaborative robots (cobots) can work alongside human workers to perform tasks that require precision or dexterity, freeing the human workers to focus on higher-value tasks. Additionally, AI-based tools can help identify skills gaps and deliver customized training programs to employees with different skills.

AI and machine learning are estimated to contribute to a 37% increase in labor productivity by 2025, according to a study cited by Deloitte. Additionally, a study by the World Economic Forum shows that automation and a new division of labor will be introduced by 2025. Humans and machines will destroy 85 million jobs, but will also create 97 million new roles, underscoring the need for workers to acquire new skills.

technical challenges

Reshoring production creates process and infrastructure challenges. While manufacturing overseas provides lower switching costs between products and longer production periods, reshoring requires greater flexibility and agility in production systems.

Digital labor can make processes more adaptable. Digital twin technology creates a virtual representation of a physical asset to simulate changes, allowing companies to test and optimize production processes before implementation. Machine learning algorithms can continuously optimize operations to improve efficiency and reduce waste.

According to a report from the International Federation of Robotics, the total number of service robots sold for professional use in 2022 will increase by 48% to 158,000 units. Implementing these technologies requires upfront investment, but overall results in more efficient and cost-effective production. This could help U.S. manufacturers catch up on critical EV components like batteries, which are currently dominated by Chinese companies.

financial problem

Reshoring eliminates the supply chain risk of offshore production, but the economics must still make sense. Boston Consulting Group estimates that reshoring can add 10 to 30 percent more costs than offshoring. A Forrester report found that companies that implement automation can reduce operating costs by 25 to 50 percent. Automating tasks through digital workers also lowers overall labor costs compared to (comparatively) low-wage countries like China.

Companies must balance short-term implementation costs with long-term cost savings and strategic benefits. Businesses that invest in digital technologies can reduce costs and achieve revenue growth. Moreover, a study by the National Bureau of Economic Research found that while automation can lead to short-term job replacement, it can also lead to long-term job growth.

case study

Below we look at two case studies – the semiconductor industry and EV battery manufacturing – to show how digital labor can help solve the problem of reshoring manufacturing to the United States.

Case Study 1: Semiconductor

The semiconductor industry provides a relevant example of reshoring challenges and applicable solutions. Semiconductors are essential components for important industries such as computers and communications, but supply chain disruption threatens the global economy.

Today’s semiconductor supply chain is global and complex, with design, equipment manufacturing, manufacturing, and assembly taking place across multiple countries. The U.S. share of manufacturing has declined from 37% in 1990 to 12% today. To meet capacity for critical applications, the United States will need to add approximately 18 to 20 new semiconductor manufacturing plants (“fabs”), which would require 70 to 90,000 new jobs. This is a 50% increase over the current workforce. However, while many semiconductor manufacturing roles are decreasing due to automation, engineering roles are increasing. This requires upskilling and retraining of the existing workforce.

Digital technologies can help solve workforce challenges in the semiconductor industry. AI-based tools can identify skills gaps and deliver customized training programs to employees with different skills. Digital twin technology can simulate and optimize production processes, reducing the need for physical prototypes and accelerating new product development. Collaborative robots can work alongside human workers to perform repetitive tasks, freeing the human workers to focus on higher-value tasks.

Implementing digital technologies requires upfront investment, but can lead to more efficient and cost-effective production overall. Reshoring semiconductor manufacturing to the United States reduces supply chain risk, improves proximity to customers and markets, and creates an ecosystem of suppliers and innovation. It can also help bridge the skilled workforce gap by creating new job opportunities and upskilling the existing workforce.

In conclusion, the semiconductor industry provides a powerful example of how digital labor can help solve the problem of reshoring manufacturing to the United States. By leveraging digital technologies, companies can overcome people, technology, and economic challenges and gain strategic advantage.

Case Study 2: EV Battery Manufacturing

EV battery manufacturing in the United States presents unique challenges in terms of personnel, technology, and economics. However, as with semiconductor manufacturing before, these challenges can be addressed through the adoption of AI, automation, and digital labor.

The global EV battery supply chain is primarily centered in Asia. The United States must increase domestic battery manufacturing capacity to meet its ambitious EV goals. This will require significant infrastructure expansion and workforce training. Automation solves workforce problems by taking over repetitive tasks and freeing up people to do more complex tasks. A digital twin simulates the battery production process, allowing it to be tested and optimized before actual implementation. Implementing these technologies requires significant initial investment. But automation leads to more efficient and cost-effective production, allowing American manufacturers to compete globally. It can also contribute to reducing battery pack costs, a major component of the overall EV cost.

EV battery manufacturing located in the U.S. can also provide strategic advantages. This can help secure supply chains, reduce dependence on foreign suppliers, foster innovation, contribute to job growth and bridge skills gaps.

conclusion

The challenges associated with reshoring manufacturing to the United States are solvable. People, technology, and economic challenges can be addressed through the adoption of AI, automation, and digital labor. Additionally, this is a once-in-a-lifetime opportunity for manufacturers as they “greenfield” their way back to the United States. Consider adopting these fundamental characteristics that set reshoring leaders and companies apart: