Reshoring Buoys Optimism

This article is a Special Report on the State of the Profession 2012

That a difference a few years make. Back in 2009, it was all doom and gloom for American manufacturers. But, today, all signs indicate that the United States is in the early stages of a manufacturing renaissance.

Reshoring activity has steadily increased in recent months as manufacturers shift production from China, Mexico and other traditionally low-wage countries. Both large and small companies in a wide variety of industries have added, or are planning to add, U.S. production after assessing the total costs and risks involved in offshoring.

For instance, ET Water Systems LLC, a maker of irrigation controls, recently relocated its assembly line from Dalian, China, to San Jose, CA, to improve quality and yield. AmFor Electronics Inc., an electronics manufacturing services company, cites delivery responsiveness, ease of design revisions and implementation of lean manufacturing practices as reasons for reshoring wire harness production from China and Mexico to Portland, OR.

Other manufacturers, including General Electric, Master Lock, NCR and Otis Elevator, have jumped on the reshoring bandwagon. Even some consumer electronics firms are getting in on the action.

When television manufacturing moved offshore 30 years ago, most observers never thought it would return. But, a start-up company called Element Electronics recently began mass-producing 46-inch and 50-inch flat-screen televisions at a factory in Canton, MI.

The 17th annual ASSEMBLY State of the Profession survey captured some of the recent uptick in reshoring activity. For instance, 19 percent of respondents claim that their company has brought jobs back to the states from overseas. And, 16 percent expect their companies to reshore assembly operations during the next 12 months.

A recent study conducted by the Boston Consulting Group Inc. (BCG) confirms this trend. According to BCG, more than a third of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to bring back production to the United States from China or are considering it.

The top factors cited as driving future decisions on production locations are labor costs (57 percent), product quality (41 percent), ease of doing business (29 percent) and proximity to customers (28 percent). In addition, 92 percent of respondents believe that labor costs in China “will continue to escalate,” and 70 percent claim that “sourcing in China is more costly than it looks on paper.”

The return of U.S. manufacturing may be one reason why assembly professionals are the happiest they’ve been since ASSEMBLY started tracking that attribute in the mid-1990s. Almost one-half (49 percent) of respondents say they are “highly satisfied” with their jobs today. That’s 7 percentage points higher than in 2011 and 14 percentage points higher than in 2010.

The 2012 State of the Profession survey was conducted in March, as the manufacturing sector continued to pace the U.S. economy. According to the Federal Reserve Bank, industrial production grew at more than a 10 percent annual rate in the first quarter of 2012.

“Machinery and equipment demand is driving growth in the manufacturing sector,” says Daniel Meckstroth, chief economist at the Manufacturers Alliance/MAPI. “The prolonged recession caused firms to postpone investment and reduce capacity. Now that economic growth has continued for more than two-and-a-half years, the need for machinery and equipment replacementhas built up to the point where the pent-up demand is being released.”

While the housing market remains shaky, the U.S. auto industry is driving the manufacturing sector. Many assembly plants are operating 24 hours a day for the first time in more than three years. The automotive industry expects to run at 81 percent capacity in 2012 vs. 49 percent in 2009. To meet pent-up demand, Chrysler, Ford and General Motors have added third shifts at some assembly plants and cancelled or curtailed traditional summer shutdowns.

The average age of cars that consumers are trading in today is six years old, which is the oldest since 2007. Auto sales are expected to run above 14.4 million vehicles this year, which is a 12.5 percent increase over 2011 and a 26 percent increase over the dark days of 2009.

Talent Shortage

As the manufacturing sector continues its dramatic turnaround, there’s a growing demand for talent. More than half (53 percent) of respondents claim that the number of people employed at their plant has increased during the past year. That’s 16 percentage points higher than 2011 and a whopping 40 percentage points higher than 2009.

Assemblers in the fabricated metal products industry report the biggest demand (63 percent), followed by the electrical equipment and appliance industry (63 percent). The computer and electronic products industry (25 percent) has hired the fewest number of assemblers in the past 12 months.

The fabricated metal products industry, which includes manufacturers of ammunition, doors,  firearms, hand tools, hinges, springs, valves and windows, expects to commit the most resources toward improving assembly operations during the next 12 months. Indeed, 60 percent of assemblers in that category will be investing in their plants, followed by contract manufacturers (59 percent), electrical equipment and appliance manufacturers (53 percent), machinery manufacturers (51 percent) and transportation equipment manufacturers (50 percent).

Manufacturers in the computer and electronics industry (28 percent) are the least likely to commit resources to their assembly operations during the next 12 months.

As manufacturers ramp up their lines, the transportation sector (63 percent) expects to have the hardest time finding qualified assemblers. On the other hand, only 30 percent of assemblers in the electrical equipment and appliance industry predict they’ll experience a staffing shortage.

Mid-sized manufacturers (companies with 250 to 500 employees) have hired the most assemblers in the past year (62 percent), followed by large manufacturers (companies with 1,000 employees or more) at 54 percent and small manufacturers (companies with less than 50 employees) at 44 percent.

Large manufacturers (67 percent) also expect to have the hardest time finding skilled workers in the near future, followed by mid-sized manufacturers (56 percent) and small manufacturers (39 percent).

The Manufacturing Institute claims that 82 percent of American manufacturers are experiencing moderate to severe shortages of qualified workers. And, 69 percent of manufacturers expect the shortage to worsen in the next three to five years.

“While manufacturing is leading the economic recovery in the United States, it’s been complicated because fewer workers are qualified to replace retiring baby boomers, who are retiring with vast amounts of knowledge and experience,” says Paul Borawski, CEO of the American Society for Quality. His organization recently joined forces with the Manufacturing Institute to address the issue and train the next generation of skilled workers.

According to a recent study conducted by the Society for Human Resource Management, two-thirds of manufacturers report finding skilled workers for specific openings. The positions most difficult to fill were high-skilled technicians (89 percent) and engineers (88 percent).

The top skills gaps in manufacturing were critical thinking and problem solving (59 percent), teamwork (45 percent), leadership (42 percent) and written communication (39 percent). Manufacturers are experiencing the following knowledge gaps among job applicants: mathematics (60 percent), writing in English (40 percent) and reading comprehension (40 percent).

Compensation Holds Steady

The typical State of the Profession survey respondent is 52 years old, has 25 years of experience and earns $87,383. However, there are exceptions at both the high and low ends of the scale. For instance, 20 percent of respondents take home less than $60,000 per year, while 33 percent earn more than $90,000.

Assemblers are feeling the effects of the rapidly improving economy. More than half (56 percent) of respondents received a pay increase over the last 12 months. Only 8 percent experienced a decrease in salary. The typical raise ranged from 3 percent to 5 percent.

Almost half (47 percent) of ASSEMBLY’s respondents received a cash bonus during the last 12 months. Extra compensation was typically based on overall company and plant performance, in addition to implementing cost reduction programs, launching new products and meeting deadlines for new projects.

Fifty-seven percent of assemblers who work for companies that manufacture cars, trucks, aircraft, locomotives and other transportation equipment received a cash bonus during the past year. By comparison, only 39 percent of assemblers who work in the in the machinery manufacturing industry received bonuses.

Fifty-five percent of State of the Profession respondents expect to receive a salary increase at their next review. Assemblers in the plastics and rubber products industry, which includes manufacturers of hoses, pipes, fittings and plumbing fixtures, feel most confident about receiving an increase in the near future. Indeed, 81 percent of those individuals say they expect a raise.

But, assembly professionals in the computer and electronic products industry, which includes manufacturers of antennas, audiovisual equipment, laboratory instruments, loudspeakers and process control instruments, are less optimistic. Only 46 percent expect a raise during the next 12 months.

Assemblers who work for larger manufacturers (1,000 or more employees) are more likely to receive a bonus than those employed by companies with less than 100 employees.

Several factors determine compensation, such as age, education, location and industry. Industry experience is the biggest factor that determines pay rates. Individuals with less than 10 years of experience in the assembly field (11 percent of respondents) earn less than industry veterans with more than 15 years of experience (83 percent of respondents).

Assembly professionals tend to be loyal employees who stay with the same company for long periods of time. In fact, 51 percent of respondents have worked at the same firm for more than 10 years, while 13 percent have been with their present employer for less than two years.

While that trend has held steady the past few years, the pendulum may soon begin swinging the other way. According to a recent study conducted by MetLife Inc., employee loyalty is at a seven-year low. One-third of employees in all industries plan to leave their job by the end of this year.

Geography Lesson

Many people don’t like studying geography in school, but it has a dramatic effect on compensation. That’s why 45 percent of college graduates move out of their birth states by age 30 vs. only 27 percent of high school graduates.

Traditionally, State of the Profession salaries vary from region to region. Those fluctuations are usually determined by the local cost of living. The South (Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia), which is home to 25 percent of respondents, boasts the highest salaries for the first time since ASSEMBLY began tracking the statistic 17 years ago.

For instance, 33 percent of assemblers in the South make more than $100,000 a year. By comparison, only 3 percent of assembly professionals in the West (Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming) earn six-figure salaries.

But, those individuals can boast that they work fewer hours per week than their counterparts. They work an average of 46 hours a week vs. 50 hours for assemblers in the South.

Only 13 percent of respondents in the South expect to work more hours during the next 12 months vs. 34 percent in the Midwest (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin). However, 70 percent of assemblers in the South expect a raise in the near future vs. only 48 percent in the Midwest.

Of course, money doesn’t always buy happiness. Assembly professionals in the Northeast (Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont) tend to be more satisfied than their peers in other parts of the country, even though they have the second lowest average salaries. Fifty-eight percent claim to be “extremely satisfied” vs. 47 percent of assemblers in the West.

One reason for that extra bit of happiness in the Northeast may be due to future investment in assembly operations. More than half (53 percent) of respondents expect their companies to improve operations during the next three years vs. only 40 percent in the West. In addition, 44 percent of respondents in the Northeast claim that their company has increased staff size during the past year, compared to 32 percent of assemblers in the West.

Enrico Moretti, a professor of economics at the University of California Berkeley and author of a recently published book entitled The New Geography of Jobs(Houghton Mifflin Harcourt) believes that an unprecedented redistribution of jobs, population and wealth is under way in the United States.

“America’s new economic map shows growing differences, not just between people but especially between communities,” claims Moretti.

“At the other extreme are cities once dominated by traditional manufacturing, which are declining rapidly, losing jobs and residents,” adds Moretti. “In the middle are a number of cities that could go either way.

“The three Americas have been growing apart at an accelerating rate,” warns Moretti. “This divergence is one the most important recent developments in the United States and is causing growing geographic disparities in all aspects of our lives, from health and longevity to family stability and political engagement.”

Size Makes a Difference

Salary and job satisfaction in the assembly profession are usually influenced by the size of a manufacturer. For instance, assemblers who work in companies with more than 1,000 employees tend to be well compensated. Indeed, 72 percent of assemblers at those companies earn more than $80,000. On the other hand, only 42 percent of assemblers at small manufacturers (companies with less than 50 employees) earn more than $80,000.

Assembly professionals who work in larger companies also claim to be a happier (56 percent) than people who work for small firms (46 percent).

Assemblers in the fabricated metal products industry earn higher salaries than their peers in other industries. For instance, they earn 18 percent more than the national average of $87,383.

Assembly professionals in the contract manufacturing industry also boast higher-than-average compensation. However, respondents who work for electrical equipment and appliance manufacturers earn 15 percent less than the national average. Assembly professionals in the computer and electronic products industry earn salaries that closely match the national average.

Manufacturing engineers (57 percent of respondents) rank slightly ahead of design engineers (10 percent of respondents) when it comes to compensation. According to the 2012 State of the Profession survey, manufacturing engineers earn an average of $75,942 vs. $70,365 for design engineers. However, design engineers have been working two more hours per week than their colleagues.

Age is another key factor that affects compensation. For instance, assembly professionals who are more than 60 years old (20 percent of respondents) typically earn the highest salaries. They average $120,633 vs. assemblers who are under 40 (11 percent of respondents), who earn an average of $73,418.

Salaries also fluctuate dramatically based on type and level of education. For example, assembly professionals with just a bachelor’s degree (39 percent of respondents) earn an average of $92,355. However, assemblers armed with a master’s degree (21 percent of respondents) earn $106,618.

Obtaining a master’s in business administration (MBA) is one way to ensure a higher salary. The ASSEMBLY survey discovered that MBAs (15 percent of respondents) make an average of $14,196 more per year than non-MBAs. However, MBAs work three more hours per week than non-MBAs.

More Time at Work

As the economy picked up steam, assemblers worked an average of 49 hours a week in 2011 vs. 47 hours in 2010. In fact, 81 percent of 2012 State of the Profession respondents work more than 40 hours a week. Assembly professionals in the plastics and rubber products industry work the longest weeks (55 hours), followed by machinery manufacturers (51 hours) and computer and electronic product manufacturers (50 hours). Assemblers in the electrical equipment and appliance industry have the shortest work weeks (45 hours).

Unfortunately, there’s no end in sight for long work weeks. One-quarter (24 percent) of assemblers claim that their average workweek will increase during the next 12 months. More than one-third (42 percent) of assembly professionals who work in the machinery manufacturing industry expect to work more hours during the next 12 months vs. only 10 percent of assemblers in the electrical equipment and appliance industry.

More than one-third (34 percent) of assemblers in the Midwest, which is home to the rebounding auto industry, expect to work more hours a week during the year ahead. On the other hand, only 13 percent of assemblers in the South expect to work longer hours.

Assembly professionals who work for small manufacturers plan to spend more time at work than their counterparts in larger companies. Almost one-third (30 percent) of respondents who work for manufacturers with less than 50 employees expect to work more hours per week in the next 12 months. However, only 12 percent of assemblers who work for companies with more than 1,000 employees foresee longer work weeks ahead.

The majority (63 percent) of respondents claim that they are doing the same amount of work-related travel today vs. one year ago. Only 17 percent of assemblers say they are doing more travel. Those individuals are more likely to be design engineers (30 percent) rather than manufacturing engineers (10 percent).

Fifty 50 percent of respondents claim that time constraints will affect their ability to do their jobs during the next 12 months. Time constraints will pose the biggest challenge to assemblers who work in large companies and the plastics and rubber products industry, the transportation equipment industry and the fabricated metal products industry.

Many assemblers will spend more time trying to improve manufacturing flexibility. Indeed, two-thirds (66 percent) of respondents believe that flexible assembly systems will contribute to their companies’ overall competitive advantage during the next 12 months.

More than three-fourths (82 percent) of assembly professionals in the fabricated metal products industry claim they will be focusing on flexibility, followed by electrical equipment and appliance manufacturers (68 percent) and computer and electronic products manufacturers (66 percent).

When different versions of similar products are designed to be assembled in the same sequence, they can be built in the same plant. This maximizes efficiency and allows manufacturers to respond quickly to changing customer preferences.

During the past decade, the auto industry invested heavily in flexible equipment and production processes. For instance, Chrysler’s Belvidere, IL, plant now builds the Dodge Dart compact sedan on the same assembly line as the Jeep Compass and Jeep Patriot sport utility vehicles. And, Ford’s Michigan Assembly Plant in Wayne, MI, produces all-electric and hybrid versions of the Ford Focus on the same line that builds traditional internal combustion engine versions of the compact sedan.

“In today’s era of permanent volatility, manufacturers need agile operating models to surpass the competition,” says Richard Bergmann, managing director for manufacturing at Accenture. “[Our recent] survey indicates that North American companies have bold plans to improve their flexibility.

“An adaptable, cost-efficient global manufacturing network not only improves financial performance, but can help respond to fast-changing market demands and maintain the high levels of customer satisfaction that underpin long-term growth,” adds Bergmann.

Satisfaction Not Guaranteed

Most State of the Profession respondents claim to be satisfied with their jobs, but a closer look at the data reveals some variations. For example, design engineers are happier than manufacturing engineers. Indeed, 48 percent of design engineers claim to be “highly satisfied” vs. 40 percent of manufacturing engineers.

Overall, 73 percent of assemblers who claim to be “highly satisfied” with their jobs earn more than $80,000 a year, while 42 percent of assemblers who are “not satisfied” earn less than $80,000. Not surprisingly, individuals who are “not satisfied” typically do not receive cash bonuses and provide little or no input on budgeting new assembly equipment.

The happiest assemblers work in the computer and electronic product industry, where 67 percent of respondents claim to be “highly satisfied” with their jobs. Other industries with highly satisfied employees include fabricated metal products (60 percent) and electrical equipment and appliance manufacturing (50 percent). In contrast, only 12 percent of assemblers in the plastics and rubber products industry are “highly satisfied.”

Job satisfaction is defined in different ways by different people. But, the top three reasons cited by assemblers are: “My job is challenging,” “I enjoy my work” and “Constant changes keep things interesting.”

“Lean manufacturing has allowed me to develop new methods to increase throughput and show management that I have other skills,” says a manufacturing engineer in the transportation equipment industry.

“My company is growing,” adds a design engineer in the electrical equipment and appliance industry. “There are new opportunities to learn and lead. I feel like I matter to my company.”

“I have a good working relationship with top management, sales and production,” says a plant manager in the fabricated metal products industry. “Small company size allows me to get involved in all aspects of the operation.”

However, some respondents are less satisfied with their jobs. Common complaints from assemblers include low compensation, poor leadership, instability and lack of resources.

“My rating would be higher if I wasn’t pulled into supporting many nonengineering tasks,” says a manufacturing engineer in the machinery industry.

“My company has downsized and my role has changed to include responsibilities that are outside of my area of interest,” laments a design engineer at a computer and electronic products manufacturer.

“We have cut and cut, so we must work with less staff to create more of a return on sales,” notes a manufacturing manager in the plastics and rubber products industry. “That affects the work day, morale and productivity of the remaining staff.”

“Much of my frustration is caused by road-blocking managers who have been here too long,” says manufacturing engineer in the fabricated metal products industry. “They do not understand new concepts, such as lean manufacturing, but claim to.”

Almost two-thirds (65 percent) of assemblers are under pressure to lower production costs, but it depends on the size of their company. For instance, only 28 percent of assemblers who work for smaller manufacturers (companies with less than 50 employees) are worried about production costs vs. 67 percent of assemblers who work for large manufacturers (companies with 1,000 or more employees).

Respondents in the fabricated metal products (86 percent) and computer and electronics industry (82 percent) are under more pressure to lower production costs than their peers in other industries

Assembly professionals in the transportation equipment sector (38 percent) are less concerned about lowering production costs. They are much more concerned about issues such as maintaining quality and finding skilled workers.

The transportation equipment industry is also bullish about investing in more capital equipment. Other industries that expect to commit more resources to new production equipment in the near future include fabricated metal products (60 percent), electrical equipment and appliance manufacturers (53 percent) and machinery manufacturers (51 percent).

Going Green

Manufacturers are engaged in a wide variety of sustainable initiatives, such as recycling, wind turbines, energy-efficient lighting, landfill gas and solar panels. Almost half (48 percent) of State of the Profession respondents claim that their assembly plant has implemented some sort of green manufacturing program. That’s the highest number since ASSEMBLY began tracking this topic four years ago.

Green manufacturing activity is quite common in the transportation equipment industry, where 57 percent of assemblers work in plants that have implemented environmental programs.

For instance, Volkswagen’s new assembly plant in Chattanooga, TN, harvests rainwater  to supplement 653,000 gallons of water per year used for gray water, reducing the overall water usage onsite. The paint shop uses a dry-scrubber system to collect paint overspray, unlike traditional shops that use water. The powder is collected and sent to a local company where it is used to make concrete.

In addition, the dry scrubber system makes it possible to recycle 85 percent of the air in the spay booths. Due to this air recycling, the dry-scrubber system saves 42 percent of the power and 85 of the heating energy for conditioning the air inside the spray booths.

Volvo Trucks’ New River Valley (NRV) assembly plant in Dublin, VA, recently became the first facility in the United States to be certified to the ISO 5000, a new international framework for organizations to implement an energy management system. Green technologies, such as solar water heaters and infrared heaters, helped drive energy reductions at the 30-year-old factory.
“All layers of our organization are dedicated to implementing new ways to reduce energy,” says Lars Blomberg, general manager of the NRV assembly plant. “Reducing energy while improving efficiency has helped us remain very competitive during a time when some companies are moving their manufacturing operations to lower cost environments.”

Assemblers in the fabricated metal products (48 percent), computer and electronic products (45 percent), electrical equipment and appliance manufacturing (43 percent) and machinery manufacturing (43 percent) industries are also actively engaged in green programs.

Large manufacturers (companies with 1,000 or more employees) are more likely to be involved with green initiatives. For example, 83 percent of assemblers in that category have implemented sustainability programs during the last 12 months. On the other hand, only 27 percent of small manufacturers (companies with fewer than 50 employees) have gone green.

Survey Methodology

ASSEMBLY magazine would like to thank all the respondents who participated in its 17th annual State of the Profession survey. The survey was conducted online in March 2012 by BNP Media’s Market Research Division. It was sent to more than 9,000 randomly selected subscribers with an e-mail address.

The charts and tables in this report highlight the major data gleaned from the survey responses. On some of the questions, the response rate does not equal 100 percent due to rounding or surveys that contained one or more unanswered questions. In cases where multiple responses were allowed, the total may exceed 100 percent.      

Special thanks to Andrea Littles for her assistance with online survey design, distribution and tabulation.

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