At the turn of the century, many companies looking for production cost savings turned their eyes to China, eager to take advantage of the low wages, plentiful workforce, and cheap cost of mass production. In the intervening years, many companies have learned the additional costs of doing business in China, and have opted to return some or all of their production efforts to the United States.

Chinese labor costs have risen considerably over the past decade, jumping 10 percent a year between 2000 and 2005 and 19 percent a year from 2005 to 2010, according to figures from The Economist.

But it is not just what’s going on in China that’s driving the reshoring movement. As ThomasNet News Machining Journal noted earlier this year, automation and robots are making domestic production a much more attractive prospect for many companies looking to preserve their bottom line. At AeroCon 2013, Scott Melton, director of America West for Fanuc, told the crowd that automation can help improve production quality at lower or comparable costs to overseas production.

“Productivity improvements through innovative tech can be a solution to the threat of low-cost labor,” he said.
U.S. manufacturers have traditionally vied with low-cost foreign manufacturers on the basis of quality, but the latest generation of manufacturing technology, which includes not only robots and automation but advancements in precision machine tools, is creating efficiency benefits and allowing companies to compete on cost.

“Baxter, a new generation of robot made by Rethink Robotics, an American firm, costs $22,000 apiece and is so safe and simple that it can be taught by an unskilled worker and operate right next to real people,” noted The Economist.
Indeed, the recent introduction of low-cost, collaborative robots like Baxter has driven a broader adoption of automation in the United States. Harry Moser, founder of the not-for-profit Reshoring Initiative, cited Baxter as a leading example of innovative technology that’s allowing domestic companies to go back to domestic production.

You Might Like: What Are the True Costs of Offshoring? on Industry Market Trends.

Moser stressed that another important driver of the reshoring trend is companies doing more specialized manufacturing to stay competitive. “Advanced manufacturing is just-in-time, quick setup, the ability to produce small qualities with average costs approaching those of high volume [production],” he said. These processes, which embrace techniques such as lean production and Kanban, help companies remain competitive with China and other domestic firms by driving down excess costs.

High-tech machine tools are playing a very important role in this.
One of the most important benefits of state-of-the-art machine tools is greater quality of the finished product. This can manifest in various ways. Certain applications, such as those in aerospace, biomedical, or defense, can require incredibly tight tolerance design and execution in order to satisfy industry standards. Many offshore production facilities cannot machine parts to these tolerances for want of appropriately trained CNC personnel or specialized machine tools.

However, precision demands are no longer limited to specialist industries. Jeffrey Perra, sales and applications engineer of Moore Nanotechnology Systems, a manufacturerer of ultra-precision machine tool systems, cited a breadth of industries looking to contract out precision machining work. “[The] main markets are aerospace and defense, commercial, medical, ophthalmic, telecommunication, and research,” he told ThomasNet News Machining Journal. “But we also serve a wide range of commercial industries,” he added, noting consumer electronics, lighting, automotive, and general contract manufacturing clients interested in ultra-precision machining.

Additionally, there is growth in the use of advanced, multifunction machine tools, which perform operations traditionally separated between various machines and operators. Suppliers are rolling out manufacturing technology devoted to performing most operations on one machine with multi-machining centers. The cost of one advanced machine replacing several single-function machine tools can be favorable.

Five-axis machines, like multifunction machines, have become standard in machine shops. These machines, which began in the aerospace and defense manufacturing industries, show how trickle-down technology can greatly impact broader domestic manufacturing.

“Five-axis machining generally does the part completely, as opposed to changing a part between machining,” Moser said. Using machine tools that can reposition tooling around a workpiece saves time. “The setup [can be] very high-cost if you have all this moving around. By having advanced manufacturing, in which the setup cost is minimized, you further differentiate the ability to deliver just-in-time.”

“Our e-monitoring software regulates the manufacturing process,” Gisbert Ledvon, director of business development at GF AgieCharmilles, told Manufacturing Today. “It tracks and records as it cuts, giving customers a full report of the finished product, including insight into any trouble areas, especially in EDM applications.”
Moser, a retired president at GF AgieCharmilles, cited his former company as an example of a supplier that’s providing machining technology that functions with the broader production chain. Electric discharge machining (EDM) machine tools produced by the company have advanced analytics to create a clearer picture of operations for managers and machine tool operators.

This type of technology plays into what Moser sees as the main competitive edge for American machining. Moser endorses a holistic view behind the reshoring movement, using the total cost of ownership methodology. The Reshoring Initiative hosts the Total Cost of Ownership (TCO) Estimator, a web-based app that can help companies determine the complete cost of their enterprise by analyzing costs and revenues against risk factors related to offshoring.

By analyzing the complete picture, from machine tool technology to advanced manufacturing processes, companies can better evaluate their business on offshoring versus reshoring models.

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