Is Smart Manufacturing Really the Answer?

The Differential Between Labor Cost in India or China and the United States and Europe Is Still There Now, but Soon It Will Be Gone

Walt BoyesBy Walt Boyes, Editor in Chief

At WBF's North American Conference in May, Jim Porter, retired vice president and chief engineer at DuPont, gave a keynote speech focused on the activities of the Smart Manufacturing Leadership Coalition (SMLC), of which I'm also a member. SMLC is one of several groups trying to develop a consistent rubric that will allow more integrated, more intelligent manufacturing processes to be created and used by United States (and other) companies. The goal is to make manufacturing more adaptable and, at least for some of the members, make manufacturing in the United States more economical, so there will be less off-shoring than in the past.

At the SMLC meeting last fall, somebody from one of the U. S. government departments noted that this was supposed to make our manufacturing more competitive on the world's stage. A global manufacturer of specialty chemicals in attendance raised his hand and said, "So what you're saying is that I can apply this stuff to my plants in the United States, but not to my plants in Europe or South America or Asia? I don't think so."

Globalization of manufacturing is a fact. Global companies with fewer ties to a "home country" are a fact. So why does SMLC think it can make manufacturing in the developed countries competitive with that in the developing world?

Actually, there are several reasons. Some of them have a very short shelf life, though.

One current reality is that for several reasons, the tide of outsourcing and off-shoring is beginning to turn, and in some cases turn very rapidly. The prime movers are education, cost and logistics. A prominent CEO in Silicon Valley told me, "I have a team in India. I have a team in the Bay Area. The team in India has to re-work an R&D project several times to get it right. That team costs about 75% less than the team in the Bay Area, but the Bay Area team will only need at most twice. So I get it done at about the same cost and many times faster in the United States."

This was not his philosophy 10 years ago.  Currently, the development of trained, experienced and self-motivated creative engineers in India and China lags behind the developed world—but for a limited time only. They will catch up quickly.

The second prime mover is cost. The differential between labor cost in India or China and the United States and Europe is diminishing. It is still there now, but soon, it will cost the same to engineer or build something anywhere.

The third prime mover is logistics. As we saw with the just-in-time supply chains of the Japanese auto manufacturers after this spring's earthquake and tsunami, these chains are frangible; that is, easily broken. It is much easier to manage a supply chain that is closer to the customers. Since global manufacturers have plants everywhere, they can, and most are, build locally to global standards.

Several years ago I visited the Dodge gear plant (now part of Baldor/ABB). I was walking the plant with the plant manager and nearly fell over when he told me that his cost of manufacture was essentially the same as his sister plant in China. Huh? Yes, he said, the difference is the agility of both the plant systems and the plant workers.

That result can be achieved at every plant in the United States and the developed world. The SMLC is devoting itself to seeing to that. As competitiveness becomes ubiquitous, whether you are in Manhattan or Katmandu, the prime movers for success will be agility and creativity in new product development and manufacturing. That's where automation comes in. We can help integrate the entire supply chain, and there's nobody else but us who can.