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Change: The new normal in manufacturing

Change: The new normal in manufacturing

Joe Morgan, president of Square Deal Machining Inc., a custom fabricator in Marathon, N.Y., often has customers’ total landed costs on the mind. It’s what drives him and his staff to continually improve and invest in technology (most recently, a tube cutting laser).

As he told me earlier this year, “If the difference in shipping costs is $3,000 between working with us or a competitor in Mexico, and they can save $10,000 by moving parts to Mexico, we’re in trouble. That’s why we need to figure out how to reduce our labor costs and offer something better to our customer.”

Foreign competitors have access to the same or similar automation that the U.S. does. So even if direct labor costs are in fact a small piece of overall cost, the difference in costs can make a big difference between whether a job stays or moves offshore. The trick is to get that total landed costs down, and U.S. fabricators and other manufacturers are doing this by responding quickly.

The global economy is a complicated, often cutthroat game that, according to one recent study from Ball State University, has made many jobs much more vulnerable. The study, How Vulnerable Are American Communities to Automation, Trade, and Urbanization, breaks down how different communities are affected by automation and offshoring. The results about automation are what one would expect: Low skilled, repetitive tasks are more at risk of being automated than higher skill, high-variety, higher paid work.

It’s one reason that education has been so important. In metal fabrication, skilled personnel not only need to know the intricacies of sheet metal cutting, bending, and welding, but they also need to continually think of better ways to get the job done (that is, lean and continuous improvement), so that products flow smoothly from one step to the next.

But as the study explains, the offshoring issue gets complicated. Risk of offshoring spreads across various industries and various jobs that require various levels of education. Look at the study’s charts, and you’ll see a clear correlation between education, income, and automation. The higher your income and the more education you have, the less likely your job will be automated. And there is a correlation between education and offshoring; the more people who have a bachelor’s degree or more in a certain area, the less vulnerable that area is to offshoring, but not dramatically so. As the researchers put it, “Job loss risk to offshoring is spread across income and education, while automation risk is concentrated among low-wage, low-skilled workers.”

This isn’t surprising. After all, one country or locale can’t “own” a certain piece of automated technology. Sure, a shop in Chicago can invest in an automated laser cutting cell, a press brake with automated tool change, and a welding robot. But a fabricator in Mexico can do the same, should it make business sense to do so.

Similarly, U.S. workers can “think lean” and respond quickly to customer demands, but there’s no reason to think workers in Mexico or elsewhere can’t do the same.

Is geography a competitive advantage? After all, you can email part drawings to the customer, but you can’t email finished parts. Of course, faraway competition still may open up plants next door.

This is perhaps why the new normal in manufacturing (and all of business) is change. No longer can companies sit back and serve the same customer base the same way year after year. It one reason that continuous improvement has become the new normal. If a fabricator isn’t changing and improving, the competition is bound to catch up.

About the Author
The Fabricator

Tim Heston

Senior Editor

2135 Point Blvd

Elgin, IL 60123

815-381-1314

Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.