How many times in life, when in the middle of a fundamental shift in the world around us, are we given choices about how to proceed? For US manufacturers, this is one of those moments, where they can choose to be leaders or laggards.
In the 1980’s, faced with rising competition from new market players, an economy in recovery, and increasing energy costs, U.S. manufacturers embraced global outsourcing of production to stay competitive. In the absence of national leadership that would level the playing field against low-cost sourcing countries, what followed was the mass exodus of middle-class jobs, fragmented supply chains and a drain on the knowledge base. Decades later, wages have stagnated in the US, while rising in other regions. And US manufacturers have lost the expertise in how to build products that kept them on top for more than a century.
Today, the US is recognizing that a vibrant manufacturing sector is essential to a strong economy. So too, do other countries. In May 2015, the Chinese government launched an ambitious vision to transform Chinese manufacturing from the world’s source of low-cost labor to the leader in innovation and quality. Made in China 2025 marks the start of a new race to lead in manufacturing and an opportunity for US manufacturers to grab the pole position.
The Race to Lead is On
There are certainly plenty of naysayers who pooh-pooh China’s ability to make Made in China 2025 a reality. Just wait and see they say, it will fail and they’ve got plenty of points to defend their position. Not so fast. There are also plenty of reasons why Made in China 2025 could succeed and why US manufacturers need to recognize this as the wake-up call it is. First, Made in China 2025 is tied to the 100th anniversary of the Cultural Revolution, making this about proving a point. Second, when the Chinese government goes all in, it can turn things around. Consider high-speed trains: following a literal train wreck, the country set out to fix the issues and it did; today, China is the largest exporter of these trains. Finally, China won’t be starting from ground zero on this initiative – it’s learned at the feet of the best–US and Europe—what world-class manufacturing operations look like.
Earlier this year, the Boston Consulting Group released a study that found that the cost to manufacture in the US is only 5 percent higher than it is in China. The advantage is driven widely by innovation in energy extraction, and is expected to remain in place for 15 years. That’s a pretty long horizon in which U.S. manufacturers can make the kinds of choices that will allow them to live brighter futures. And it’s not just the future of their companies and their shareholders that we’re talking about. At stake is the future of the middle class in America. A manufacturing-based economy is what drives a decent standard of living for many, if not most Americans.
First Mover Advantage Requires that We Move, Now.
The future of manufacturing’s power to transform economies lies in continuous product innovation and the ability to respond quickly to shifts in everything from competitive pressure and consumer demand to global business conditions. The factory of the future will be built on the integration of information technology, advanced manufacturing technologies and a fundamental re-imagining of the future of work. Today, it’s not economical or practical to automate 90 percent of tasks of in manufacturing. Still, those tasks – highly repetitive, routine and requiring little cognitive engagement – have to be completed and humans are used to fill the gap. In the factories of the future, robots fulfill those tasks, and people will focus on work that engages creativity to accelerate innovation. Whoever figures out first how to execute the new vision of automation will have significant advantage over those who wait until someone else figures out how it works.
Now is the time to get started on the journey toward an integrated workforce. There’s no roadmap for the market we’re in today – we’ve got to chart our own course. In these conditions, risk is a given, but so too are rewards. Leaders will know how they will compete, understand the risks and move ahead wisely, and quickly. Accelerating the discovery takes a few smart rules:
- First, throw out everything you think you know about automation. In traditional automation, the operation is built around the robots and the robots are built to solve a specific problem. No more. Multi-purpose robots work anywhere and on more than one task.
- Second, find a task or two and use them as a vehicle to learn. Low hanging fruit are tasks that are dangerous for humans or highly repetitive tasks such as packing boxes or testing. At $25,000 for a smart, collaborative robot, you’ll get back your investment in less than a year, and more importantly, the robot will contribute value for many more years.
- Third, define how you will measure success. What is the value you are looking to achieve with these early implementations? Is it time to volume, the ability to respond to market and product changes, higher levels of quality, reduce the scale required to achieve profitability? Identifying what you want to achieve, and the milestones along the way will ensure that everyone is working toward a share goal.
They say that history repeats itself. I’m confident that US manufacturers will seize the moment and accelerate the work that’s been started on building the factories of the future, right here, right now. Where are you finding the opportunities to capitalize on this new reality? Share your thoughts with me @jim_lawton.
Originally published on Forbes.