Manufacturing Automation: Debunking the Myths – Part 2: Offshoring

manufacturing automationFor nearly two decades, the manufacturing industry has been taking a hit. A 30% decline in employment has eroded American optimism about their continuing job prospects, and now the new threat of manufacturing automation is looming as the next terrible evolution in this previously robust industry … or is it?

If you’re ready for the facts about how automation stands to change the economy and our American workforce for the better, this three-part series will help. In our last article, we talked about how automation stands to benefit the economy and the real numbers behind the “job-stealing” myth. Read on to learn the truth about offshoring in part two of Manufacturing Automation: Debunking the Myths.

Fact: Offshoring Is Taking Jobs … But Not in the Way You Think

If last week’s article made you suspect that our manufacturing jobs are being shipped overseas, you’re right. But the prevailing myth is that American companies are to blame for the outsourcing issue. The real problem is the strength of the dollar and the export cost of our products, versus the cost of imported goods. In other words, we need to take a good, hard look at our own habits.

The Problem Isn’t in Our Work Habits, It’s in Our Spending Habits

It’s only natural that, as consumers, we want to scoop up the best deals, but these days the best deals aren’t American-made products, they’re imports. Pop quiz: If you go to the store to buy a television and you have three similar TVs with similar functionality, but they’re priced differently, which one will you buy? Of course you’ll buy the least expensive one. That makes the most sense.

But in terms of the economy, the TV that you buy matters. Most imported products are cheaper than domestic products because the American dollar is a strong currency. Sure, we complain a lot about the cost of the dollar versus the cost of the Euro or the Pound, because those currency exchanges make it hard for us to vacation in Europe. However, it’s actually quite affordable for us to vacation in many places in Asia, Africa, and South America. In general, everything in those places just costs less.

Globalization May Be Hurting American Industry

Because the average cost of living is lower in Asia, it costs less (in American dollars) for Asian companies to pay their workers well. It makes sense: if a house and a beer are 1/3 the price in Beijing as they are in the U.S., then a full-time manufacturing job in Beijing can pay 1/3 the salary that we would make. And if their overhead costs are 1/3 of ours, overseas companies can sell their product for 1/3 the price that an American company would have to charge.

Unfortunately, there’s no reciprocation in these numbers. The low currency rates in other countries means they can profit off of what we see as low prices, but it also means that when we sell them something we’ve manufactured in our country, our prices seem astronomical to them.

To sum up: We can’t profitably export to other nations, and we can’t sell in the U.S. because imports are usually cheaper than domestic products. What are we to do? Find out in next week’s installment of this three-part series.

Learn More About Manufacturing Automation

If you’d like to see the real numbers behind manufacturing automation ROI in companies and industries like yours, Scanco can help.

Since 1989, we’ve been providing tools and solutions that help manufacturers and distributors do their jobs better and faster, so they can increase their sales and grow their businesses. We’re happy to lend a hand toward your business growth as well—for free!

Contact Scanco online to schedule your free consultation and learn more about how automation tools for Sage 100, Sage 500, or Acumatica can help your business reach new heights.