Next-Shoring: New Frontier For Manufacturing?


John Paul Williams | EBN Online

The speed of manufacturing is accelerating, requiring a combo of nearshoring and unified communications.

The manufacturing industry is changing how it operates. In many ways, it’s not unlike changes we’ve seen before.

Manufacturers have always focused on being close to suppliers and customers. To accomplish this, and to produce enough inexpensive products to meet global demand, companies have moved around the world to reach larger markets and obtain more raw materials and affordable labor.

US manufacturers have traveled offshore to China and India and near-shore to Canada and Mexico. When energy and costs shifted, they would re-shore.

The change we’re seeing now is yet another way to bring supply and demand closer. It’s called next-shoring, a concept named in 2014 by a team of McKinsey analysts. Next-shoring focuses on the physical proximity to emerging markets, innovation, talent, and customers.

But here’s the key difference between next-shoring and industry changes of the past: Next-shoring transcends geography. Manufacturers aren’t moving operations to other countries; they’re reinventing their entire ecosystems. Through the use of technology, manufacturers can be close to innovation centers or their customers without moving their main operations.

At the heart of this reinvention is collaboration technology, which, through audio, video, and content sharing tools from vendors including Cisco and Polycom are breaking down geographic borders to let creativity, research, development, and customer interaction happen from anywhere. (Full disclosure: I’m employed with Polycom.) Shaun Mundy, group IT director at engineering consulting firm Buro Happold says video collaboration has become central to how the firm works. Every day, engineers make crucial decisions sooner by sharing complex designs, models, and structural analyses over video, and by conducting design reviews in real-time.

These tools are dissolving borders of communication that often exist from great distances, allowing for stronger communication with remote operations where regional demand is strong. The manufacturing industry will see some of these same advantages from offshoring operations as well.

The new world of manufacturing

Next-shoring offers a way to stay competitive in the new manufacturing market. Today’s manufacturing economy is driven by perpetual innovation. Established business practices become yesterday’s news overnight as new consumer appetites and technologies emerge. R&D happens at breakneck speeds and time-to-market is quick.

The speed of the development and sales cycles leave manufacturers no time to react to trends. Rather, companies need to make sure they have the tools to stay on the cutting edge, sensing trends before they hit, working closely with partners and employees to analyze, brainstorm, prototype, test, and go to market.

Also critical to the new manufacturing landscape are emerging markets. In the coming years, they will offer double-digit growth opportunities, a customer

base of affluent buyers, and governments willing to incentivize production. According to McKinsey’s “Next-shoring: A CEO’s Guide,” by 2025, 66 percent of global demand will come from emerging markets.

With next-shoring, manufacturers can recruit and retain talent and establish an influential presence in emerging markets. But what exactly does this collaboration technology look like? Here’s what manufacturers need to next-shore effectively.

Putting collaboration technology to work

Manufacturers have three areas of technology investment to focus on as they next-shore: innovation hubs, digitized operations, and talent development. With the right technology in place to support these three functions, companies will be able to collaborate internally and with external partners and customers to boost sales and build relationships.

First, innovation hubs centralize supply chains, processes, and intelligence by combining voice, video, audio, and content sharing functions that help provide feedback across groups. These technology centers may exist physically in office spaces, production floors, and laboratories, but perhaps most importantly they live on all devices.

Cross-functionality means collaboration is always possible; it’s mobile, it’s flexible, and it connects any and all key players from wherever they are. Centralizing collaboration both physically and virtually helps centralize brainstorming, customer input, design customization, and big data analysis on product and sales performance. Innovation can happen with no geographic barriers.

Next, digitized operations link R&D to production. As technologies like robotics, sensors, and 3D modeling speed up product design, they also take the emphasis off labor capacity and move it to knowledge capacity. Manufacturers need to think less about building big enough labor forces and more about access to expert insight from around the world.

Collaboration technology can link cross-functional teams and subject matter experts from wherever they’re based, streamlining design and production. Digitized operations also allow product groups to realign priorities when customer expectations change. Technology has made customer feedback more obtainable through online and video chat sessions.

Finally, success in the new manufacturing market depends on recruiting the right talent. Next-shoring uses collaboration technology to help companies to reach the best minds around the globe. Video and audio access to talent prevents workers from having to relocate and lets companies accommodate diverse work styles. Helpful collaboration technologies include predesigned live and virtual training models that make onboarding new employees quick and thorough.

As the baby boomer generation retires and companies look to a shrinking pool of young people interested in manufacturing, hiring and retaining diverse and far-flung talent must be a priority.