#73 – Inside Our Industry – Ally-Shoring: An Answer to The Manufacturing Labor Crisis
Posted on | Inside Our Industry
We first shared information about ally-shoring in our June 15, 2021 Inside Our Industry. The following Forbes article excerpts share how ally-shoring may help with the manufacturing labor shortage.
Ally-Shoring: An Answer to The Manufacturing Labor Crisis
Kate Vitasek, Contributor, Leadership Strategy, Oct 30, 2021
Record high shipping backlogs are making international news. As organizations rethink their supply chain strategy amidst a global crisis, boardroom discussions are centering on shifting manufacturing in-house or closer to home.
Ally-shoring recently got a boost from the White House to help rectify the supply chain issues and workforce shortages that have emerged as a result of the pandemic.
But these issues are nothing new. Manufacturing labor shortages have been a growing problem for several years, fueled by an aging workforce. One-fourth of manufacturing workers are 55 or older. Combine that with the reality that millennials, for the most part, are not interested in manufacturing jobs, and an already strained supply chain approaches its flash point. At the same time, the demand for manufactured goods is skyrocketing. Something must be done to address this disparity. As many as 2.1 million manufacturing jobs will go unfilled through 2030, according to a study published by Deloitte and The Manufacturing Institute. The report warns that the worker shortage will hurt revenue, production, and could ultimately cost the US economy up upwards of $1 trillion by 2030.
Nearshoring to Mexico has been around for a long time. In fact, it got a kickstart in the 1960’s with a concept known as Maquiladoras, in which US-based manufacturing companies opened plants located in the border towns of northern Mexico.
Since then, US companies, including P&G, Honeywell, Johnson & Johnson, Ford, Nissan, Toyota, LG, Whirlpool, and other big names have been manufacturing in Mexico for years.
The primary reason? Mexico’s low operating costs, abundant labor force, and close proximity to US and Canadian markets.
Yet, setting up manufacturing operations in Mexico is a highly complex and sometimes overwhelming process. Among the challenges are location; workforce availability; reliable local expertise; unions; ever-changing regulatory compliance; and legal, tax, and business ramifications.
Partnering with a shelter services company simplifies the process of ally-shoring. Shelter services companies are growing in popularity with medium- and small-sized manufacturers who can open a satellite location in Mexico quickly and efficiently by collaborating with enterprises designed to address their needs.
Dave Vrioni, President and Chief Operating Officer of Eastek International explained why Eastek recently chose to expand to Mexico. Quoted in an IndustryToday article, Vrioni said, “For my company and many others, China manufacturing looks less competitive than it once did. Labor, freight, rent, tariff, and compliance costs have all gone up, some significantly. Intellectual property concerns have yet to be resolved.”
The Bottom Line – Manufacturing in Mexico is on the rise for a reason. With unprecedented demand and an insufficient domestic workforce, ally-shoring in Mexico is an attractive solution for manufacturing companies.