As Asian Labor Costs Rise, Manufacturers Embrace Reshoring and Robots

With manufacturers in China investing heavily in automation, this transformation may mean that robots push people there and in other developing economies out of manufacturing jobs before they’ve had a chance to reap the benefits of industrialization. The cost consideration driving the robot revolution is that manufacturing employees in China and other Asian manufacturing powerhouses have begun to demand higher wages, disrupting the cheap-labor model that helped fueled the Asian economic boom of the past quarter century.

Another consequence of those rising labor costs is that American and European manufacturers are shifting production from people-powered Asian factories to robot-powered ones closer to home, Kathy Chu and Ellen Emmerentze Jervell report for the Wall Street Journal:

Adidas’s 50,000 square-foot factory, in the Bavarian town of Ansbach, will rely on robots and customized automation to produce 500,000 pairs of athletic shoes a year—well below 1% of Adidas’s total annual production of 300 million pairs—when full production starts in 2017. Adidas says manufacturing in Germany will help improve the quality of its shoes, cut the time it takes to bring products to market and slash warehouse costs. …

The move to manufacture closer to customers is becoming more popular with companies facing rising labor and transportation costs—coupled with worker shortages—in much of the developing world. In addition, consumers want new styles of shoes and unique electronics and they want them quickly—forcing global brands to rethink how they make their goods.

Nike Inc. said it has begun working with contract manufacturer Flex on technology that will allow it to make shoes closer to its major markets.Apple Inc. has expanded production of its Mac computers in the U.S. And the world’s third-largest contract manufacturer, St. Petersburg, Fla.-based Jabil Circuit Inc., says it is turning to automation to prepare for a future where factories are smaller and closer to customers.

The point about “customized automation” is worth noting: Customization is one aspect of manufacturing in which humans still have an edge over robots. While that advantage wasn’t expected to last forever, it may be disappearing faster than expected. Another key takeaway here is that US politicians or business leaders who think “reshoring” will bring back the glory days of American manufacturing may have another thing coming: Yes, factories seem to be coming back, but these aren’t your grandfather’s factories, and the jobs they create will likely be lower in number and different in kind from those that contributed to the rise of the American middle class in the mid-20th century.