Over the past 20 years globalisation has dramatically changed the face of manufacturing. The rise of offshoring opportunities enabled developed world manufacturers to use low-cost labour countries – notably China – as a workshop.
Labour arbitrage looked like an easy way to gain operational cost reduction and cut total supply chain costs. As a result, the world’s most developed countries lost a significant share of their manufacturing jobs, particularly those dull, repetitive jobs that couldn’t be efficiently automated.
Today, with rising labour costs in many emerging economies, the development of a number of game-changing plant-floor technologies and a marketplace that is fundamentally different than it was 20 years ago, many companies are revisiting their manufacturing strategies. Our survey data confirms that manufacturing industry is entering a new period of renaissance, with more than 80% of respondents saying that manufacturing is very important to their countries’ economic competitiveness.
Today, consumers are in the driving seat: they have great choice and can dictate to manufacturers what products they really want. While manufacturers champion productivity, many consumers are interested in speed and customisation – not just cost.
This mismatch between demand and supply is the most critical challenge in manufacturing industry today. Making products when the customer wants them, while also making them profitably, is no easy task.
Many companies find themselves in a situation where they are managing a network of offshored factories with long lead times, insufficient visibility and too little ease of manoeuvre to flexibly adapt to a rapidly changing marketplace. This formidable marketplace change is driving the industry towards a phase of profound rethinking, whose consequences will define the third industrial revolution.
The third industrial revolutionLike all revolutions, the future of manufacturing will be disruptive. Along the way, manufacturers are rediscovering the importance of making things in house. But the third industrial revolution won’t see the return of “old-style” manufacturing based on low-wage, low-skilled labour and mass production.
The emergence of several game-changing technologies – from collaborative robotics to the internet of things, and from big data analytics to additive manufacturing and 3D printing – will make the plant floor more efficient and raise the role of factory workers from mundane task operators to knowledge-based decision makers.
The manufacturing plant floor will once again become a cool place to work and will attract a younger generation of talented workers who are proud to be making goods. The game will be about creating higher levels of agility, responsiveness and innovation, with the fundamental support of technology and people’s skills.
Knowledge workers will be at the centre of the factory of the future as they provide the level of flexibility that is required to fulfil customer demands for highly personalised products. On the journey to the third industrial revolution, manufacturers will have to implement a number of changes in their manufacturing strategies that can be summarised in a shift from capacity to capability.
From efficiency to fulfilmentManufacturers of the future will have to move away from today’s exclusive focus on efficiency towards a closer attention to customer fulfilment needs. Efficiency will still be important in the future, of course, but meeting customer needs with higher levels of flexibility will be much more so.
Making factories agile and responsive will be the quintessential capability. This shift will require the adoption of principles such as proximity to demand, postponement of variability and centres of excellence, as well as a massive change in mindset.
Supporting agility and responsiveness there are also two fundamental capabilities:
- Digital factory. As the digital economy is revolutionising every aspect of life and business, so the factory of the future will be digitally infused, providing tightly interconnected information and production flows.
- Knowledge workers. People’s knowledge and their ability to learn quickly and adapt to new technologies will represent the essential source of competitiveness for future manufacturers.
These issues are explored in a new SCM World report, The Future of Manufacturing: Maximum Flexibility at Competitive Prices, along with case studies and examples from companies such as ABB, Flextronics, GoPro, Harley-Davidson, HP, Lego and Zara. The report is based on a survey jointly run by SCM World and the not-for-profit industry association MESA International.
The survey results will be discussed in a webinar available from 19 November, where I will be joined by Ann Lundy, Vice President, Global Supply Chain Strategy at Mattel, and Mike Dennison, President of the Consumer Technologies Group at Flextronics, who will share their thoughts on the future of manufacturing.