Wednesday, September 25, 2013

Forget onshoring or offshoring, “roboshoring” may be the thing of the future

The McKinsey article from this week’s reading tells us that although the production of high-tech goods has steadily moved from US to Asia, many companies are now considering moving the production to, or closer to, the US. In an article with a similar view, The Economist mentions the increasing use of advanced manufacturing techniques like 3-D printing that require much less labor. With further developments and wider adoption, these will certainly become cost efficient in the future.

The Economist also talks about increasing use of robots in factories, and that these robots cost the same in the US and in China. Baxter is a robot developed in the US which can be configured by an unskilled worker and can operate right next to real people. It costs only $22,000 – much less than the annual salary for a skilled worker. This may make the production costs equal, and the major cost to be considered will be only for the shipping of finished goods. Companies have made large investments overseas, and with shared production there and in the US, they can explore opportunities to market products in China and India, which have shown increased demand due to developing economies.

Moving the production from closer to US may save costs in the short term, but it is not unreasonable to consider that increased use of technology in factories will result much lower costs in long term for manufacturing companies. The Economist points out that though it will result in fewer manufacturing jobs, the associated supply chains may generate many new opportunities.

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