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5 Ways to Cut Reshoring Costs via Automation

Louis Columbus
By Louis Columbus Principal, DELMIAWORKS
Real-time shop data provides visibility into scrap rates by machine and how much can be recycled to reduce inventory costs. (Provided by DelmiaWorks)

Supply chain delays and unpredictability are leading many manufacturers to reconsider reshoring and nearshoring as a way to gain greater cost and inventory control, shrink transportation times and costs, and reduce supply chain risks. And while manufacturing labor costs show little sign of easing, efficiencies and productivity gains provided by automation are helping to offset those expenses.

Nearshoring and reshoring can provide several strategic benefits. Deloitte’s Future of Freight Report found that 62% of American manufacturers have begun shifting from suppliers in Asia to those in closer-proximity markets to reduce transportation costs and improve time to market. Other motivators include the ability to alleviate geopolitical risks and the high costs of tariffs, improve quality control and gain greater agility to respond to changing customer and market demands.

Data informing workers on the shop floor comes from a combination of machinery and software, such as MES, ERP, supply chain management, warehouse management and logistics. (Provided by DelmiaWorks)

On the flip side, manufacturing labor costs remain high in the wake of recent inflationary pressures. In addition, reshoring and nearshoring may require investments in equipment and technology.

For manufacturers with enterprise resource planning (ERP) and manufacturing execution system (MES) solutions in place, automation can help tip the scales in favor of reshoring and nearshoring by helping to cut labor costs while increasing productivity and providing greater visibility and control across shop floors. There are five areas where manufacturers can maximize the benefits of reshoring/nearshoring by using ERP, MES and other systems to leverage real-time data and drive automation:

1) Optimize inventory management. Nearshore facilities typically rely on trucking and rail transportation, making it cost effective to handle smaller shipments, reduce on-hand inventory and support just-in-time manufacturing. Manufacturers can gain accurate, up-to-date insights into inventory by capturing real-time data from the shop floor in MES software and automatically updating the ERP system’s inventory management. By understanding the rate of production, quantity of material used and the amount of scrap available for reuse, manufacturers can maintain the right level of inventory to support customers while minimizing overhead.

2) Maximize productivity. Real-time data captured by MES software can prove invaluable for gaining an immediate end-to-end view of shop operations. As a result, manufacturers can identify bottlenecks across nearshore production operations and quickly make informed decisions that will increase efficiency and cost savings. Some companies also are leveraging real-time data and MES software to drive lights-out or near-lights-out production runs. In one example, a U.S.-based manufacturer has added lights-out shifts in Mexico, minimizing staff demands while maximizing productivity.


Providing intuitive workcenter dashboards and real-time scheduling screens on shop floors, manufacturing technicians have better visibility into each upcoming order and can get molds and tools ready ahead of schedule. (Provided by AMA Plastics)

3) Increase speed and consistency. Manufacturers can help operators start production runs quickly—and ensure consistency across local and nearshore operations—by having an intuitive touchscreen user interface at every workcenter that ties back to the MES and ERP software. Ideally, the touchscreen interface only presents operators with the information and processes needed to do specific jobs. Access to real-time monitoring data also helps operators identify potential issues before they become serious problems, and helps shop floor managers make production planning adjustments as necessary.

4) Align costs with customer pricing. Nearshoring reduces the gap between the time materials are purchased and when finished goods are delivered to customers, but there is still the challenge of adjusting pricing to align with changing raw material costs. When an ERP system uses real-time cost data to automatically update customer pricing, manufacturers can more effectively maintain margins and justify their cost structure with customers. Automation also significantly reduces the demands on employees—one manufacturer cut the time to update individualized customer pricing from 40 hours over two weeks to just two hours.

5) Strengthen collaborations. Supply chain integration across platforms and applications provides continual updates on product quality at the network and supplier/contract manufacturer level to facilitate operational efficiency and greater knowledge sharing. Real-time data in combination with technologies such as ERP, supply chain management, customer relationship management and analytics can help manufacturers and their partners collaborate and ultimately orchestrate efforts to adapt to changes in real time—without impacting quality.

Automation is a proven strategy for reducing labor costs and increasing shop floor productivity, making nearshoring and reshoring a profitable alternative to offshoring. By relying on real-time data to automate their business in these five areas, manufacturers can create more resilient, cost-effective and customer-focused onshore or nearshore operations.

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