After decades of U.S. companies moving production to China for cheap labor and fewer regulations, some are finally starting to return. The pandemic has exposed the high risk factor of making everything in China and businesses are starting to catch onto the value of American-made. Putting U.S. manufacturing back on the board will take time, effort, and the adoption of complex technology like “smart factories”.
The smart factory is defined as a factory where production processes and operations are combined with digital technology, smart computing and big data to create a more interconnected system for companies that focus on manufacturing and supply chain management. China recently began adopting the technology along with European countries like Germany. Meanwhile, the U.S. is trying to develop the technology while still working on bringing back critical supply chains.
It’s no secret that Chinese production is much cheaper than the cost of American manufacturing–about 1/6 that of U.S. labor. However, U.S. manufacturing is 8 times more productive than China–this actually makes it cheaper to keep production in America. On top of that, if U.S. companies adopt smart factory technology, American manufacturing will be even more efficient than its Chinese competitors. However, the only way for the U.S. to beat China in manufacturing would be to adopt an easily accessible supplier network similar to China’s. Without it, the U.S. will still be forced to depend on its top competitor.
Supply Chain Reshoring
Reshoring supply chains–especially in critical areas like pharmaceuticals and raw earths–is an essential step in regrowing our manufacturing sector. While Covid-19 has caused distress all over the globe, one positive outcome from the pandemic is that U.S. companies are realizing the importance of keeping production in the U.S.
Since the virus first spread throughout China in December, supply chains all over the globe have felt disruptive effects because of their reliance on China for essential materials. Now, as companies and government officials race to reshore supply chains, U.S. manufacturing is looking more hopeful than ever.
The Industrial Internet of Things
Along with reshoring critical supply chains, the Fourth Industrial Revolution will allow for amazing technology like the smart factory to integrate into our manufacturing sector. The Fourth Industrial Revolution includes artificial intelligence, IoT, and 5G, and other technology that makes our lives easier. In the case of manufacturing, the industry requires a wide network that is capable of tracking supply chains and daily operations–this is when the Industrial Internet comes in.
The Industrial Internet (IIoT) converges machines and intelligence data to make sure factories run smoothly with lower operating costs and higher reliability. Other major benefits include reduced waste and maintenance costs, energy savings, increased workforce productivity, and a higher output of innovative services and products.
Simply stated, IIoT will be the powering tool for smart factories. It will be the network that runs AI machines and keeps track of data so that human workers can interact efficiently with computers in the workplace.
A number of organizations have estimated the impact of IIoT to be in the trillions. A report by General Electric describes how the network “brings together the advances of two transformative revolutions: the myriad machines, facilities, fleets and networks that arose from the Industrial Revolution, and the more recent powerful advances in computing, information and communication systems brought to the fore by the Internet Revolution.”
“This is today,” GE CEO Jedd Immelt added. “This is not about any future. The industry is moving forward.”
China has held its place as the top manufacturing superpower for years due to low wages and safety regulations. Once the U.S. has the capacity for a domestic supply chain and smart technology like IIoT, they will finally be able to surpass the manufacturing superpower once again.