Advanced Computing in the Age of AI | Tuesday, May 21, 2024

Will COVID Revive Regional Manufacturing? 

The vulnerabilities of global supply chains exposed by the pandemic have reignited calls for reconstituting regional production capabilities with the ultimate goal of “reshoring” manufacturing—mainly from China.

Those efforts are gaining momentum as investors, perhaps willing to assume greater risks associated with the vagaries of scaled-up and -down production, eye a sort of go-between opportunity: digital integrators who help producers implement industrial Internet of Things and “manufacturing execution systems.”

The latter refers to digital platforms used to track the transformation of materials into products. Purveyors of those services don’t actually make stuff. Instead, they help manufacturers finetune manufacturing operations to maximize efficiency, equipment utilization and—most important—return on what has proven a risky investment in domestic production.

Indeed, the ability to quickly scale production up and down is seen as one advantage western manufacturers possess over China’s manufacturing power houses.

Among the risks of reshoring is fluctuating demand. A production line might be set up to meet peak demand, then demand fades and equipment is idled. In the past, many U.S. manufacturers learned that lesson the hard way, eventually shutting down operations as demand evaporated and selling equipment to Chinese manufacturers.

Observers note that the pandemic might provide sufficient shock to global supply chains to motivate investors and other technology acquirers. The hope is they will begin to take the long view, plowing “patient capital” into long-term efforts aimed at restoring North American and other regional manufacturing hubs.

Investing in next-generation manufacturing may be a good way to lose money, but supply analysts note that advanced production technologies ranging from manufacturing execution systems to 3D manufacturing confer key advantages to North American and European producers.

“If properly utilized, such technologies can give the U.S. a sustained dual advantage,” Dan Breznitz, co-director of the Innovation Policy Lab in the Munk School of the University of Toronto, noted in a recent manifesto advocating a western manufacturing renaissance.

Dan Breznitz

“The reason,” Breznitz continued, “is emerging production technologies allow for the development and manufacture of new products that cannot be produced using older technologies. Thus, American companies can develop and produce domestically products as much as a decade ahead of global competitors.”

As the pandemic drags on, signs are emerging that investors are willing to take at least an interim step, targeting integration service providers who help manufacturers get up and running. For example, the professional services giant Accenture (NYSE: ACN) announced this week it is acquiring Callisto Integration, an Ontario-based digital manufacturing services company.

Accenture said the acquisition would help bolster its Industry X.0 practice aimed at nothing less than reinventing “a new era of industry.” The deal gives the business consultant Callisto’s industrial IoT, manufacturing execution and shop-floor control technologies.

“Digital technologies are fundamentally transforming the factory floor,” said Accenture managing director Craig McNeil. “The combination of our Industry X.0 capabilities with Callisto’s digital manufacturing expertise can help our clients make their production processes more efficient and flexible.”

The hope is that offering digital manufacturing services will also allow North American producers to compete on a global scale, ultimately ensuring the “sustainability of their plant operations,” McNeil added.

Other manufacturing services vendors report an uptick in business and increased hiring as the COVID-19 exposes vulnerabilities in global supply chains. “We're already seeing the reshoring and diversification efforts of domestic manufacturing,” said Dan Carr, director of new business acquisitions at Thomas Network, a New York-based provider of industrial services.

For example, the company has ramped up its COVID-19 services to connect manufacturers of ventilators, N95 masks and other hospital equipment with state and federal procurement officials. “We’re seeing record sourcing activity as industry has begun to pivot towards a U.S. industrial resurgence,” Carr said.

An industrial comeback is fraught with obstacles. But advocates such as Dan Breznitz assert the time to act is now. “The task in front of us is difficult and will take years to bear fruit,” the global supply chain expert wrote. “However, the pandemic gives us one last chance to secure prosperity for the future generations of Americans, as well as ensuring that the next crises will not find us so vulnerable.”

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).