BREAKING THE CHAIN – Why American businesses are bringing production back home

The saying goes: “When America sneezes, the world catches a cold”.

So, when 70% of businesses tell us they are looking at reshoring or nearshoring their production, we should pay attention. That’s a startling finding in a survey of U.S. business leaders that we conducted recently at ABB[1] but it’s not difficult to see why this is happening.

The U.S. is the birthplace of the automated production line, and one of the largest global markets for robotic automation today.?But it is undergoing a transformation – a 21st century revolution – driven by supply chain disruption and labor shortages.

The labor shortages in U.S. industry are acute: according to the American Welding Society, the U.S. will face a shortage of 400,000 welders by 2024 – that’s just one skilled profession among many.?

But it’s just one of several far-reaching, global megatrends that we see driving transformation.??

For example, the explosion of e-commerce has intensified demand for more product choice and personalization in what we buy, and how we receive it. According to the most recent data, 1 in 4 Americans have bought personalized products online.

And this revolution in consumer behavior is happening against the backdrop of huge uncertainty and global supply chain disruption. Who would have thought that 2022 would be a time of greater trade uncertainty than the global pandemic of 2020?

In the first half of this year, the manufacturing power of China has been months in lockdown, while the country tries to achieve zero Covid. And Russia - the world’s second largest oil producer and largest wheat exporter – has invaded Ukraine, also a top ten wheat and grain exporter.

?Aside from the tragic humanitarian consequences, this is disrupting global supply chains for food, oil and energy and creating inflationary pressures across the world.

?Added to that, environmental pressures are influencing every decision companies need to take and the demand to cut emissions and produce more sustainability is ever-increasing.?

[1] ABB survey of 1,610 executives in the U.S. and Europe, June 2022

ABB's 'Storage and Retrieval System' is used in in-house logistics centers to store, organize and distribute products from food to pharmaceuticals.

A tipping point

This perfect storm of factors is creating a tipping point for many manufacturers in the U.S.

70% of businesses we surveyed said they had experienced supply chain disruption in the past 12 months, with over half (55%) claiming this had impacted their profitability.

And of the 70% considering changes to their operations, 37% plan to bring production back home, while 33% are looking to nearshore and shift their operations to a closer location.?

?At a national level, we are also seeing significant changes in policy, towards shortening supply chains and bringing production back to the U.S. The U.S. government is poised to invest billions of dollars to support the development of a domestic semiconductor fabrication industry.?And a further 1.2 trillion dollars investment in national infrastructure.

?At the same time, there is a significant new demand for automation.

In our survey, 62% of US-based businesses surveyed plan to invest in robotics and automation in the next three years and 43% will use automation and robotics specifically to build back supply chain resilience.

According to the Association for Advancing Automation (A3), the number of industrial robots sold in North America set a new record in 2021: 28% higher than 2020, and 14% higher than the previous record in 2017. And this growth is expected to continue at a rate of 11.4% annually through 2029.

Much of this demand is from new sectors – with automation adopted by companies and sectors that previously hadn’t considered it.?Non-automotive orders now represent 58% of the North American total.

This is changing the face of industry in the U.S.?According to the IFR, in 2020, robot density here rose to 255 units, per 10,000 employees, placing the country seventh in the world – ahead of China.?

?Bridging the skills gap

This role of automation and robotics in enabling re-shoring or near-shoring operations in the U.S. depends on bridging the skills gap in robotics, by better educating and upskilling workers.

Robotics and automation are job creators, requiring new ways of working with new skillsets. Investment in education, vocational training, and apprenticeship programs is vital to create safer, higher-paying jobs for American workers.

The move towards re-shoring production presents an enormous opportunity for the U.S. in terms of economic growth, global competitiveness and foreign investment, but the automation necessary requires training the workforce of the future.

I spoke recently on precisely this topic at the SelectUSA Investment Summit, in Washington DC, alongside U.S. government and business leaders.

The U.S. is very well placed to provide this.?As the largest tech market in the world, the U.S. start-up culture is at the heart of advances in artificial intelligence, machine learning and digitalization - all essential in accelerating innovation and training, to take U.S. industry and workers to new heights.

?ABB itself is a large employer, having invested over $14 billion in the U.S. since 2010, with nearly 20,000 employees, across 40 manufacturing & assembly locations.

Our commitment to training and development ranges from donating our products and solutions to schools, universities and technical colleges – Princeton and Yale, among others – through to creating the first Youth Apprenticeship Program for advanced manufacturing, in Fort Smith, Arkansas.

ABB Robotics works directly with universities and colleges to train the workforce of the future in robotics technology.?

Developing this pipeline of talent will help address the skills gaps that U.S. businesses need now and for the future.?And this is perhaps more important now, than ever, as we enter a new American industrial revolution.

?The big impact of major trends that we are now seeing, requires a big response, to make the most of the enormous opportunity that awaits the United States.

Are you considering automation to optimize your supply chain? Connect with an ABB Robotics expert