Ever since a bunch of sharp MBAs armed with their spreadsheets determined that deep cuts in direct labor costs could be gained through chasing low wage geographies, a reaction set in to convince companies and the US government that shipping jobs overseas was bad economics and bad for the economy.
A chunk of my responsibilities for several years in a manufacturing firm was analyzing and recommending ways to cut costs. I didn’t have responsibilities on the growing revenue side of the equation; rather I was charged with helping boost profitability through cutting direct costs. By the way, back then cutting labor cost wasn’t worth the effort.
I have had conversations for several years with The Reshoring Initiative. A 50-year manufacturing industry veteran and retired President of GF AgieCharmilles, Harry Moser founded the Reshoring Initiative to move lost jobs back to the U.S. For his efforts with the Reshoring Initiative, he was named to Industry Week magazine’s Manufacturing Hall of Fame in 2010..
The Reshoring Initiative’s 2018 Reshoring Report contains data on U.S. reshoring and foreign direct investment (FDI) by companies that have shifted production or sourcing from offshore to the United States. The report includes cumulative data from 2010 through 2018, as well as projections for 2019. The numbers demonstrate that reshoring and FDI are major contributing factors to the country’s rebounding manufacturing sector.
“We publish this data annually to show companies that their peers are successfully reshoring and that they should reevaluate their sourcing and siting decisions,” said Harry Moser, founder and president of the Reshoring Initiative. “With 5 million manufacturing jobs still offshore, as measured by our $800 billion/year goods trade deficit, there is potential for much more growth. We call on the administration and Congress to enact policy changes to make the United States competitive again. Our Competitiveness Toolkit is available to help quantify the impact of policy alternatives, including a stronger skilled workforce, continued corporate tax and regulatory reductions as well as a lower U.S. dollar.”
In 2018 the number of companies reporting new reshoring and foreign direct investment (FDI) was up 38% from 2017. The combined reshoring and related FDI announcements totaled over 145,000 jobs. Including upward revisions of 36,000 jobs in prior years, the total number of manufacturing jobs brought to the United States from offshore is over 757,000 since the manufacturing employment low of 2010.
Allowing for a two-year lag from announcement to hire, the cumulative announcements since 2010 have driven 31% of the total increase in U.S. manufacturing jobs during that period and 3.3% of total end-of-2018 manufacturing employment of 12.8 million.
The Reshoring Initiative largely attributes the increases to greater U.S. competitiveness due to corporate tax and regulatory cuts. Similar to the previous few years, FDI continued to exceed reshoring in terms of total jobs added, but reshoring has closed most of the gap since 2015.
Although China topped Germany for the greatest number of FDI jobs announced since 2010, China announced 12% fewer in 2018 than in 2017. I’m betting that 2019 will see a greater decline given the current trade war unless something works out.
Quality, freight cost, and total cost make up the top offshore drivers of the trend.
Proximity to market, government incentives, supply chain optimization, higher productivity, skilled workforce, and brand image/made in USA serve as the top domestic drivers.
Reshoring has been increasing at a similar rate as FDI, indicating that U.S. headquartered companies are starting to understand the U.S. production benefit that foreign companies have seen for the last few years.
I’m still reflecting on Trillion Dollar Coach plus three weekends of youth sports. Most executives don’t even have coaches, even though they could really use one. The variety of coaching skill and ability at the youth sports level is staggering. So many coaches need coaching at that level. That’s the role of the leadership of a good club. Often doesn’t happen.
What makes for a good coach.
Begin with empathy and trustworthiness. If the coach lacks these character traits, then anything further is hopeless.
A coach must have a set of knowledge and values. Good coaches have experience, but they are seldom the greatest. They are the ones who have been there but had to reflect on their development and experiences. They’ve studied the game and know the skill sets required for success.
A coach is observant. This ability means a coach can see each player or client, their strengths, and their weaknesses. They can pick out the next skill each player/client needs to develop to succeed at this level in order to progress.
A coach can teach skills. Of course, the player/client must be teachable. It is a two-way interaction.
A coach can devise practice for student to repeat until learned. This is the same idea for a 9-year-old beginner or a 29-year-old pro. Knowing you need to move slightly to the left more or knowing how to field a ground ball does nothing without the drill to make the skill part of “muscle memory.”
A coach provides appropriate feedback. This makes practice more valuable and helps adjust skills to the situation.
The end result consists of increased confidence and character development.
Think of the coaches that you’ve had. Think of the impact of the good coaches on your development. Then the bad ones where you learned nothing. Or, perhaps the bad teaching or negative comments set you back years.
Become a good coach. You do that by practice, of course. That means finding a young person who is coachable. Start slowly. Build rapport. Then try with another. Make yourself valuable to your organization and find your own fulfillment by bringing along the next generation. Works for engineers, managers, executives, whomever.
Go make a difference.
Today’s big enterprise IT news concerns Hewlett Packard Enterprise (HPE) and Cray entering into a definitive agreement under which HPE will acquire Cray for $35.00 per share in cash, in a transaction valued at approximately $1.3 billion, net of cash.
This is another example of technology industry consolidation. We’re seeing it with instrumentation, control, and automation companies. Enterprise IT is rapidly going that way. Both HPE and Dell Technologies have been scarfing up companies either matured and not growing or in need of capital to survive.
Signs of maturing industries mean one kind of shock waves for employment within them. But also this usually means preparing room in the market for new companies with disruptive new technologies and business models. It’s possible that we’re about to see a leap in quantum computing out of all this.
What does this mean for industrial users? We are seeing already companies like HPE moving their powerful compute platforms to the edge. With every advancement, we’ll see additional compute power bringing databases, analytics, AI, video and other applications to more remote installations.
Some additional details from the press release:
“Answers to some of society’s most pressing challenges are buried in massive amounts of data,” said Antonio Neri, President and CEO, HPE. “Only by processing and analyzing this data will we be able to unlock the answers to critical challenges across medicine, climate change, space and more. Cray is a global technology leader in supercomputing and shares our deep commitment to innovation. By combining our world-class teams and technology, we will have the opportunity to drive the next generation of high performance computing and play an important part in advancing the way people live and work.”
The Explosion of Data is Driving Strong HPC Growth
The explosion of data from artificial intelligence, machine learning, and big data analytics and evolving customer needs for data-intensive workloads are driving a significant expansion in HPC.
Over the next three years the HPC segment of the market and associated storage and services is expected to grow from approximately $28 billion in 2018 to approximately $35 billion in 2021, a compound annual growth rate of approximately 9 percent. Exascale is a growing segment of overall HPC opportunities and more than $4 billion of Exascale opportunities are expected to be awarded over the next five years.
“This is an amazing opportunity to bring together Cray’s leading-edge technology and HPE’s wide reach and deep product portfolio, providing customers of all sizes with integrated solutions and unique supercomputing technology to address the full spectrum of their data-intensive needs,” said Peter Ungaro, President and CEO of Cray. “HPE and Cray share a commitment to customer-centric innovation and a vision to create the global leader for the future of high performance computing and AI. On behalf of the Cray Board of Directors, we are pleased to have reached an agreement that we believe maximizes value and are excited for the opportunities that this unique combination will create for both our employees and our customers.”
High performance computing is a key component of HPE’s vision and growth strategy and the company currently offers world-class HPC solutions, including HPE Apollo and SGI, to customers worldwide. This portfolio will be further strengthened by leveraging Cray’s foundational technologies and adding complementary solutions. The combined company will also reach a broader set of end markets, offering enterprise, academic and government customers a broad range of solutions and deep expertise to solve their most complex problems. Together, HPE and Cray will have enhanced opportunities for growth and the integrated platform, scale and resources to lead the Exascale era of high performance computing.
Humans get strange ideas in their minds that cannot be shaken by facts and truth. Such as any new idea for improving efficiency, effectiveness, and profitability of manufacturing will cost people their jobs.
It is part of popular mythology that automation puts people out of work. This idea is so prevalent that even MIT economics professors run math to try to prove it. (See previous post.)
Then I interviewed Bob Argyle, co-founder and CCO of Leading2Lean, who mentioned “People say Lean cuts jobs, but it actually saves jobs.”
Leading2Lean is a Lean-based company that has developed an implementation software that engages plant floor workers and changes the way they approach their jobs by delivering real-time actionable IoT data and methods that reveal the root causes of production bottlenecks. This allows everyone to problem-solve and create a sustainable culture of continuous improvement.
I related to Argyle that when I put together the first issue of Automation World back in early 2003 I wanted to interview a Lean expert. The gentleman asked why I would interview him since automation was antithetical to Lean. I told him that I thought there was a place where each could use the other. Hence, the Leading2Lean software.
Argyle gave me the history of his Lean journey beginning at AutoLiv, a supplier of air bags to the auto industry. The customer sent a “sensei” to teach Lean methodology–also known as the Toyota Production System. Responding to my automation comment, Argyle said, “Sensei never said computers are bad, but he taught us to improve the process before adding computers. Use automation to reduce process waste.”
Just what I was taught in my first computer applications class in 1977. Know your process first, then improve the process, then add digitalization.
Use data to capture critical data, Argyle told me. And use automation appropriately for the right thing to do in the particular process. Use it to remove waste, and for safety, quality, and efficiency.
We had to cut the interview, but they offered some specific customer stories that detail the benefits of the integration of computers and Lean.
I am often asked about what industrial digital transformation really means and about technologies such as cloud, edge, AR/VR, and so forth. This press release from AVEVA promised to answer much of that—until I sat down to parse it and figure out what to write. After editing out close to half of the document which was laced with buzz words—revolutionary, innovative, digital transformation, (BINGO), I think I have boiled it down to its essence. The essence is actually pretty good and didn’t need all the fluff to build it up. (I go here, because in my old age, I’m tired of fluff. Why not just tell us what you have? It’s probably pretty good!)
First, the cloud. AVEVA Connect, a cloud-based digital transformation hub, enables customers to seamlessly access AVEVA’s software portfolio, enabling digitalization of design, build, operations, and maintenance processes across a wide range of industries. Over the past year, AVEVA Connect has launched eight new cloud-enabled offers, more than 75 updates to its digital services including the launch of cloud Operator Training Solution (OTS), visualization, and condition management capabilities, and grown to support over 5,500 daily users.
Second, the AR/VR and OTS. Total OLEUM has implemented AVEVA’s cloud- based operator training systems. No real details were added by the PR people regarding benefits, but they worked in the words, revolutionary, innovative, benefitted. Evidently Total is happy with the training results. When I’m asked about AR/VR (augmented reality and virtual reality), my response is that it’s great for training.
Third is not a technology but a pricing plan. AVEVA’s new subscription program, AVEVA Flex, includes “advanced HMI visualization, operations control and information management, manufacturing execution, and asset performance capabilities. With subscription-based, feature-rich software tiers, AVEVA Flex offers a broad range of flexibility in the purchase, design, and utilization of industrial software solutions.” What this sounds like to me is a repackaging of Wonderware’s pricing modal to bring it in line with the latest industry trends. Without knowing pricing details, it sounds like the company is on the right track.
Among the first to take up the new AVEVA Flex subscription program, Giovanni Borinelli – General Manager from Italian Steelmaker NLMK Verona, said: “For us to compete in today’s volatile market, we need a trusted partner who can help us master our digital transformation. The technical and commercial flexibility that AVEVA Flex provides is fundamental to that change and will help us remain agile and successful into the future.”