Keeping Europe Competitive: Bring Back the Factories

Talk about bringing back manufacturing to the US has been on the lips of many people for some time now. But, the buzz is contagious and has traveled overseas to European shores.

In an effort to keep Europe competitive, discussions about shifting manufacturing and supply chain operations back to the continent is gaining momentum.

Just recently, in fact, the UK government announced that it would put up £100 million to support reshoring efforts back to that country. While there’s a clear incentive to create and safeguard UK jobs, the news was also slanted heavily on strengthening domestic supply chain operations and bringing back manufacturing that previously moved abroad. “A strong manufacturing sector is vital to a balanced economic recovery, and I want to ensure that Britain’s supply chains are up to the task of supporting the sector in the long term,” UK Business Secretary Vince Cable said in a statement.

Talk like this isn’t just happening in the UK. It’s happening in high European government circles, too.

In March, the European Parliamentary Research Service (EPRS) issued a briefing on the topic of reshoring manufacturing back to Europe and the importance placed on the total landed cost of running global manufacturing and supply chain activities. The EPRS paper notes various European Commission reports, including “A Stronger European Industry for Growth and Economic Recovery” and “For a European Industrial Renaissance,” that speak to the task of reversing manufacturing’s declining share of European GDP and increasing it from 15 percent to above 20 percent after 2020 — where it was 15 years ago.

But, the EPRS also is quick to point out, “though reshoring may occur it most probably will not result in a return to the previous position, employing large numbers in manufacturing and a large export base.”

Besides high cost of labor compared to other regions, part of the problem preventing a true manufacturing renaissance may lie in Europe’s complex regulatory structure, notes the Financial Times. Citing research from the CBI employers’ groups, it appears that companies would consider bringing back parts of their business to the UK and other parts of Europe if the EU was “reformed to become more competitive” and if business regulations related to manufacturing and customer services operations were reduced.

Even so, that’s not stopping government agencies and companies from pushing ahead and experimenting with concepts like smart factories.

Smart manufacturing is officially on Europe’s digital agenda and an area targeted on the region’s 2020 growth initiatives. The aim is what you would expect to find on a government proposal: To strengthen the EU’s competitive advantages in terms of ICT skills, R&D capability, industrial output, and infrastructure while offering incentives for growth and differentiation.

But companies like Siemens are taking the message to heart and are experimenting with smart factory concepts where highly flexible plants run on software, sensor, and Internet connectivity and turn big data into wells of useful information, according to this FT story.

However reshoring shakes out, the face of manufacturing is changing and not likely to come back in the same way it left.

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