Will “botsourcing” bring manufacturing back to the US

An article in the Harvard Business Review Blog Network (http://blogs.hbr.org/) titled “Robots are starting to make offshoring less attractive” describes how use of automation and robots is increasing the attractiveness of US manufacturing. Foxconn’s decision to build iphones in Pennsylvania, Tesla’s plans to make batteries in the US and Amazon’s use of robots for order picking coupled with significant hiring are described as sample impacts. Will the trend, described as botsourcing, increase the outsourcing of IT while increasing the insourcing of manufacturing i.e., should the bot controller be necessarily located close to the bot user ? What impact will this ability to separate the controls from the job execution have on the nature of training required for manufacturing employees ? Is manufacturing and service productivity the real determinant of long run growth in the economy, as suggested in the article ?

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18 Responses to Will “botsourcing” bring manufacturing back to the US

  1. Brian Pawlowski says:

    I live twenty minutes or so from Elkhart, Indiana. The city is known as the RV capital of the world and its economy rises and falls based on how that industry is performing. I’ve toured many of the factories there and spoken with executives that run RV production and RV supply companies. And I’ve asked them a version of the question this blog post gets at: how are robotics and AI helping or hurting you? Like the article suggests, many of them answer that they are able to increase production and revenues through the introduction of robots in their manufacturing spaces. They all note that they believe this trend will only continue. But there is one important caveat. While bots certainly can help lower costs and make manufacturing more affordable in the US much of that depends on the education and skill levels of local workers to understand and oversee the work of the bots. As one of your prompts suggests, the idea of workforce training is critical here. The Brookings Institution released a report this year on areas of the country with industries susceptible to automation and Elkhart is, literally, at the top of the list. ( https://www.brookings.edu/wp-content/uploads/2019/01/2019.01_BrookingsMetro_Automation-AI_Report_Muro-Maxim-Whiton-FINAL-version.pdf ) The key for places like Elkhart (and there are others in Indiana that rank highly, like Kokomo) is to have a workforce capable of absorbing and performing the new jobs that come with increased levels of automation. Otherwise, you could see a situation where local manufacturing facilities are being run by offsite (or outsourced) workers who have he requisite skill sets to ensure the bots are doing their work correct. So in a worse case scenario a local economy could be hit with rapidly increasing levels of automation and have a low skill worker base incapable of taking the new jobs that come with increased automation. The trend described in the article may hold, but for it to be sustainable and beneficial to the workers whose jobs they replaces increasing education and workforce training will be key.

    • Brandon Thesing says:

      Brian does a really nice job pin pointing they key to the ability to fulfill the jobs needed with increased level of automation. There is no question the TYPE of job will change, and the characteristics and skills needed to operate will drastically change over the next 5-10 years. How will the workforce in specific areas adapt, learn and take on this increased level of automation. So in regards to location of bot sourcing, I think readily available, higher skill level workers will be the driving factors.

      What impact will this ability to separate the controls from the job execution have on the nature of training required for manufacturing employees ?
      – It will radically change what will be needed, rather than focusing on the task itself, it will shift towards. What does it take to maintain, repair and manage automation, Kyle makes a good point that sure robots function 24/7 without breaks, but can just as easily break down at midnight as they could at noon. “Technology done well doesn’t just replace workers, but makes them more productive”

      Automation allows for a more consistent repeatable procedure hopefully resulting in a higher quality work, less errors and a more consistent product.

      Is manufacturing and service productivity the real determinant of long run growth in the economy, as suggested in the article ?
      I think it absolutely plays a big role, the line “A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” speaks to what automation and technologies biggest role may be. Rather than eliminating our workforce its empowering them for higher productivity and growth.

  2. Shibashish Sen says:

    I really enjoyed this article’s juxtapositioning of botsourcing with outsourcing. On one hand companies have been resorting to outsourcing manufacturing to countries like China owing to the availability of cheap labor, this article sheds light on how the advent of new technology may reverse the affect. Two companies quoted in this article from 2014 have since embraced automation in full flow in manufacturing- Tesla and Amazon. Amazon in recent years has become a blueprint for retail companies in terms of implementation of robotics and automation, not only in the manufacturing side but in the Warehouse Management, Transportation management, Yard management that has driven its competitors like Macy’s, Kohl’s, Walmart etc. to aggressively follow suite. Being in retail and working on WMS, I found Amazon’s acquisition of Kiva systems in 2012 quite interesting. What I find even more interesting is that Amazon has scaled up so quickly since then and implemented these across their distribution centers. However, with respect to the article’s title, I don’t think robots can replace offshoring so soon. Robotics has certainly created a big rise in the demand for High-skilled workers who are hands-on with this technology in the US. With others retail biggies following suite, this demand is likely to increase over the next decade. But the implementation and maintenance of such technology also comes at a price. Since, the High skilled job market is a niche market, companies like Amazon and Tesla would have to shell out big packages to attract job seekers. Manufacturing however, would still yield more profit from offshoring, in my opinion, as low labor costs would still be a talking point among the company think tanks. Overall, Robots will make Pick, Pack, Ship from the DCs look good with decreasing shipping times, but manufacturing sector is unlikely to change soon.

  3. Chris Salkeld says:

    The robot controller does not necessarily need to be with the robot. Controls of that sort are not necessarily “doing the work”. The controllers just tell the robot what to do. There would, however, need to be someone onsite to make sure the robot is working properly and someone to repair it.
    Then the training aspect comes into play. What if the robot quits working in the middle of the night or on the weekend? The person in the manufacturing plant can call someone to check on the robot and they might get a response. They might not.
    The good thing about being a controls person is that they can be available to troubleshoot many robots in many different parts of the world. They are very productive. The bad part about having a controls person onsite is that they may not have much to do every day and would be relatively unproductive. It would be nice to have someone there available in the middle of the night or on the weekends that knows that particular robot, but it may not be worth the cost.
    Having robots can make a plant more productive. A robot will work 24/7 and not need a break. A robot should, over time, save the company money and ultimately make money.

    • Kyle Hummel says:

      Chris,
      I agree with you, I think that when people imagine these factories with robotics that the robots just constantly work all the time and need no assistance. In reality, they are like any other piece of equipment that breaks down, has errors, needs maintenance, and sometimes need almost constant supervision. There will always need to be valuable people overseeing what the robot is doing, and be able to fix problems when they arise. Tesla thought otherwise with overly ambitious automation on the Model 3 line, and found out quickly that maybe automating every single job might not be the best solution.

  4. Matt Larabee says:

    This article was an interesting read and is something I believe a lot of manufacturing companies are dealing with right now. On one hand we have several companies that outsource a majority of work because the labor prices in other countries is significantly less. For years there has been talk about bringing the jobs back to the US. With botsourcing, a think the main argument against it is that it is going to take over jobs that the humans are currently doing and force them out of work. This may be the case in some circumstances but not all. The flip side to that is that although some jobs are being taken, others are being created in the companies that are now responsible to produce these bots. Eventually, the work force coming up is going to need certain skills and education levels that are needed in these fields. We have learned through the book, “The Goal,” that the purpose of a company is to make money, and to Chris’ point, bots can run 24/7 365 without needing a break, and therefore can out produce any human doing the same job. When it comes to having a controller, again to Chris’ point, they might not have much to do when everything is running seamlessly, but what is the cost to the company if something does go wrong? Would you prefer to have someone on staff that can handle that immediately or could the job of the controller be outsourced as well? When I worked for a small local bank in Reno, NV we had a machine we called ARCA. ARCA was a cash handling machine that took cash deposits and spit out cash when a customer was cashing a check or what not. For us, this machine was a god send because on those paycheck Friday’s we were able to process customers checks 3 times faster than if we relied on a human to do it, and with absolutely no error in cash counting. The machine required maintenance once every 6 months which took it down for about 4 hrs for that one day. This maintenance was outsourced to the company that makes the machine, along with any time it was malfunctioning we called up the service tech guy and he was there within a day if not the same day. This clearly is on a smaller scale but was extremely beneficial to us as a bank to not waste time or money by having someone “in house” for those rare occasions. this quote from the article sums it up, “Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” I think Botsourcing will help improve a companies productivity, but there are areas when implementing them that companies should be cautious of. As far as it’s impact on other countries, it’s sometimes harsh to say, but we need to take care of our own before worrying about others. If it hurts other countries by us pulling out and moving towards bots and newer technology then so be it. As Darwin said, its not the strongest that survives, but the the one who is most capable of adapting to the changing environment who will survive.

  5. James Berki says:

    This article is very interesting article and I do believe that Robots could buffer the US manufacturing industry. The manufacturing industry has been in decline in the US for the last 20+ years due to cheap labor costs in other parts of the world. As American technology continues to develop and evolve, robots will help to keep costs lower and prevent manufactures from shipping jobs over seas. A negative of robot manufacturing technology is that they typically replace jobs once performed by workers. However, this will be slightly mitigated by the technology / mechanic jobs created once these machines are installed. These machines are another piece of equipment in the factory and while they will speed up throughput, they will need to be periodically serviced/programmed. Manufacturing employees will need more technical training from companies to ensure they have the skills needed to program/fix these robots. Local employees should be equipped to handle these machines and service should not come from offsite.

  6. Kevin Boodhoo says:

    After reading the goal, it brought up how everyone though that the robot was great as it improved efficiencies. Based on that measure of statistics, it was doing great. But overall, was it making a difference. With breaking down how the robots were being used, and seeing what problems were happening, just having the robot was not the solution to the plants problems. Which leads me to wonder how can manufacture and service productivity be the real determinant on long term economical growth? What is the definition of productivity and how does that relate to economical growth?
    On the note of having the robots here, does help American manufacturers compete with the previous trend of outsourcing manufacturing to countries with lower labor costs. It also i feel eventually start causing the trend of outsourcing IT to decrease actually. Coming from a company that handles outsourcing contracts, more and more companies have been doing so for more of there infrastructure due to 1. lack of resources. 2 Lack of technological expertise. But having robots that can help lower costs, it may bring more of a need to having in-house specialists, especially those who are able to be on site and fix issues 24/7. I have witnessed companies that brought in new technology, and hired people dedicated to that, due to control, as well as to minimize downtime. The theory was that these machines would replace X amount of workers, which then could have them hire an extra IT staff to support these machines.

  7. Diane Vojtas says:

    In the referenced article, the author states the following perfectly “Technology done well doesn’t just replace workers, but makes them more productive”. While machines might replace some workers, if a business is growing, additional hiring will occur, with jobs that require a slightly different skill set. Technology coupled with people to oversee the work is the right combination for handling growth. Advancements in technology can be used to prevent injuries, reduce wear and tear on humans, and increased efficiencies can be gained, however productivity is not the key to long term growth. Sales and revenue producing activities are the key to growth.
    Using robotic to handle production is only small piece of the end-to-end process. It takes skilled humans to create the right set up, time frame, and uses for the technology. The use of robotics will require worker to be up trained to deal with the servicing, set up, and maintenance of the machines. The reliability of technology is important to the quality of the overall product and is ultimately controlled by people.
    At the end of the day businesses, employ people because they are making money. Creating a process that is reliable and consistent to meet the needs of the people who pay the bills is the name of the game. Botsourcing seems to be a viable alternative to overseas production, but it is not a magic bullet for growth.

  8. Mai Komatsu says:

    My understanding of manufacturing and warehouse robots is that they are equipped with computer vision, sensors, machine learning and navigation that allows autonomous operation for most tasks. These are mainly repetitive, heavy lifting or dangerous tasks that free workers to perform more specialized and less routine jobs, which in turn demands higher training and skill levels. Controllers are not necessarily required, but workers with equipment maintenance, engineering and programming skills are. Reshoring can certainly strengthen the U.S. economy generating investments and jobs as described in the article for Foxconn, Tesla and Amazon. Botsourcing is an effective way to reduce product costs in the long run as in the case of Sutherland Global Services where offshoring IT results in 20 to 40% cost reduction, but automation software coupled with U.S. based employees results in 70% cost reduction.

  9. Omoruyi Usuanlele. says:

    The trend in digitization and automation is sweeping through the world and impacting all sectors and industries. The associated gains in efficiencies and increased or improved productivity cannot be overemphasized as machines and robots are being utilized to perform repetitive tasks and free the workforce to focus on improving process and innovate.
    The challenges that this poses especially in certain job segments is that there is a reduction in the number of workers needed on the floor. We are seeing this in manufacturing as pointed out in the article, in Contact Center operations with improved voice-recognition and Text-to-Speech technologies and many other sectors.
    Will this increase the number of manufacturing jobs coming back to the United States? Very likely, however, there is a shift in the associated skills for these jobs and there is a need for more training to operate these robots. Do the operators need to be closer to the physical location of the robots? No, as there have been tremendous growth in IOT which allows for machines to be managed and controlled over IP networks.
    How these trends affect the economic growth of the country are still being observed and documented, but I perceive that it has been positive considering that we are experiencing an upturn currently.
    On the flip side, I don’t subscribe to the notion that the outsourcing of IT jobs is as a result of automation, automation is actually reducing the outsourcing of IT jobs as many of those tasks are being done locally.

  10. Brian Cronin says:

    I do believe that the robots and the developments in technology will allow the US to be more competitive for manufacturing jobs. Producing items oversees makes sense to take advantage of lower wages and ultimately lower cost to produce. However there are costs like shipping and tariffs that could be avoided if produced in the US. I think that the US worker requires higher wages than other manufacturing companies. If lower skill work is being done by robots and it can be proven that the robots are producing at costs similar to oversees, then shipping and taxes can be avoided ultimately making it better to manufacture in the US. The article suggested that the more advanced, higher-paid jobs would be created if manufacturing was done in the US. I agree with that but any time you have a manufacturing plant, there are a whole host of lower skill jobs that would be created as well. Not everything can be replaced by robots so there would be low skill assembly jobs. Building maintenance, janitors, security guards, etc. would all be required as well.
    I don’t believe that we have to show cost improvements over foreign manufacturing to bring the business to the US. Even if it is close, US manufacturing should be the preference. Production in the US supports the overall economy, keeps people to work and drives people for more education. I also think from a branding perspective, “Made in America” brings about brand loyalty and increases demand. That is another factor that must be considered into the making money equation.

  11. Vikash P says:

    In 2019 we have the advantage of checking the data for the manufacturing sector out since the article was published in 2014, to see if the premise of the article came out to be true. Bureau of Labor statistics shows that total manufacturing sector productivity and costs have gone down 0.6 percent since 2014.

    Over a 10 year period, between 2008 – 2018 Number of manufacturing jobs in the USA have gone down from 9% to 7.9% and are projected to be below 7.1 % by 2028 ( Source – https://www.bls.gov/emp/tables/employment-by-major-industry-sector.htm).

    On the other side the outsourcing market for manufacturing specifically has seen some challenges in its growth rate. Focus on automation and quality rather than mere cheap labor has been attributed for the slowness in outsourcing and greater pace in near shoring or onshoring efforts by US based manufacturers. Rather than seeking out the lowest-cost delivery markets, buyers instead are spending more on automation, cloud services and other digital technologies to transform their businesses for greater efficiency and faster growth.

    According to a survey from AlixPartners, 37% of manufacturers would prefer to locate in the United States—the same amount that would prefer Mexico, and a figure much higher than 2011 when it was only 19%. It’s easier to reach the large North American market if the company is in the United States.

    Unfortunately, growth won’t translate into an increase in U.S. manufacturing jobs. The reason lies in productivity improvements, including the increased use of computers, robotics, and other efficient processes. The new jobs that are created require sophisticated computer-related skills to manage the robots.

    Even though the robots get installed on shore their maintenance and upkeep still can and will happen from across the oceans as the IT services industry gears up for the new challenge and the new form of service. This will specially impact the uneducated factory worker who will simply be unable to scale up to the new heights of computer literacy, that will start becoming mandatory for any factory worker’s survival as the robots become more ubiquitous.

    Together with a strong dollar and an artificially week Yuan , hardcore Chinese manufacturing will continue to challenge this notion of botsourcing as a viable alternative to bring manufacturing home.

    The key aspects of long-run growth include growth of productivity, demographic changes, and labor force participation. While robots will undoubtedly enhance productivity, only time will tell if the reduced labor force participation gets handled by the demography changes and other factors, to lead to an overall growth.

  12. Claudia Morato Guimaraes says:

    Automation is a process in continuous improvement and increase. Since the blog was written for the first time (2014), Amazon launched its first grocery store with no cashier!!! While it replaced one type of work, it demands high skilled people to monitor and fix the system in case it has any problem. The automation not only requires skilled technicians but also requires a good system/network especially in cases that robots can be controlled outside of the company. Not necessarily it will cause an increase in IT outsourcing – in some cases, the company will need specialized IT dedicated to manage the robots and integrate into the company network.
    Depending on if the manufacturer, it is possible to substitute human work for automation/robots and this can increase production in the US together with specific job positions.
    In “The Goal” book, the problem is that the robots were introduced in the company with the wrong objective and without a strategy and focus. Only when the plant manager received a threat to close the plant, they started to analyze and see what was wrong with the plant. Companies like TESLA, Amazon, in general, have great accountability of the manufacture with plans and strategies in place to achieve their objectives.
    I also fo believe it will take time for the automation to overcome the low costs due to slavery work relationships in China and other countries. However, it will be interesting to see the industry dynamic.

  13. Sravan P. says:

    This is really a thought provoking topic. I really like all the thoughts shared by my fellow cohort above. Would like to share some additional but related thoughts.

    From the Harvard, one thing stands out “47 percent of American jobs are susceptible to robots and automation within the next seven to 10 years”. So, I see good and bad in this. Of course most of the jobs that are in reference here are the jobs that are currently being fulfilled overseas as the article notes, in India and China and other Asian countries. So, what I want to comment on is the cheap labor reference. The labor in the Asian countries is cheap, but that i relative. Because, most Asian countries currency is weaker in comparison to US Dollar, so, the cheap labor is a perception, however, the actual workers that cater to US jobs are paid well.
    Now coming back to the 47 percent jobs impact, these jobs which are currently being fulfilled overseas have a great opportunity to be brought back. And that 47% or most of it can be fulfilled by a US worker. Where there may be an issue though is the level of education and the expertise that is needed to train a worker to manage the robots. Part of the reason why jobs are outsourced or skilled labor is imported is the lack of needed skill in the US. So, it is imperative that such skilled labor force has to increase for bot controlling otherwise, many of these jobs will continue to reside overseas.

  14. Ben Hooley says:

    It feels as though the botsourcing is a temporary fix to bring jobs back to the US from cheaper labor markets. The same technological improvements that make automation possible are also making remote analysis of the automation possible, although probably lagging slightly. I look at the electric utility industry as an example. In the 1990’s microprocessor relays started to replace electromechanical relays in the industry. The microprocessor relays have the ability to track and monitor data of the transmission and distribution electric system without the need for manual human analysis and tracking. Today, engineers can remotely connect to relays through various security firewalls and can analyze system faults and disturbances from hundreds of miles away and without leaving their office desks. This analysis can pinpoint locations where faults on the system occurred and can give coordinates to actual crews on where to fix the system as well as to tell them what happened. This didn’t occur immediately after the advent of the microprocessor relays but was a result of technology improving in parallel with the technology of the relays. I can foresee a similar situation occurring with the automation of manufacturing. The initial few years of automation will see high tech jobs come back to the US because skilled labor must be present along with the machines to fix problems. However, as technology improves this “oversight” could also be outsourced to cheaper, foreign high-skilled labor.

  15. Rachel Austin says:

    I have to agree with the majority when it comes to the controller not needing to be close to the bot. Ben made a very valid point that there is now ways to access computers and microprocessors remotely. However, to have someone local would be ideal as I have close friends who work in IT here in the US and have to be on call 24/7 to support not only work in the states, but also overseas. The 24/7 on call schedule can be very draining and the likelihood of burnout is very high. I’m not sure that with the increase of bot-sourcing would necessarily require IT to be outsourced. As Brian C. and Matt mentioned, bringing the manufacturing back to the US is always ideal for the US economy especially with the trillions of debt we don’t seem to be taking care of. It would help to promote continued education especially in specialized trades vs. the traditional university route. That way there are the skilled workers needed to support the maintenance and constant need for improvement. As the book, The Goal, pointed out, you can implement robots to hopefully increase efficiencies, but if you don’t set up your processes to utilize them and make your company the most productive, you won’t reap the benefits and that can be obviously extremely costly to an organization. People would still be needed to ensure best practices and processes are implemented to make best use out of the bots.

  16. Emerson Bersaghi says:

    There is no question around the labor cost in USA being much higher versus China. Even is a Chines worker has lower productivity when compared to USA, producing in China tends to be less expensive than producing in the USA. Only the cases where you have large products and where the impact of Shipping costs make a huge difference in the total cost is where the balance shifts favorable to producing in the USA.

    So, adding Robots seems to be a good idea to compensate for the labor costs in the USA. However, after reading the Goal, it is clear that it is not enough to add the robots without balancing the whole manufacturing process and avoiding over-production.

    If these factors are taking into account, yes, I do believe there is space for manufacturing in the USA by increasing throughput per worker through automation and higher productivity rates.

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