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The Shape of Things to Come

The future state of manufacturing is envisioned as a highly efficient, high-tech engine of mass customization. But competitive advantage will flow only to those companies that master the use of advanced technologies and orchestrate change well.
   
By David R. Brousell

In 2017, the Manufacturing Leadership Council published “Vision 2030: The Factory of the Future”,an attempt to paint a picture of what manufacturing might look like in the years ahead based on trends that were underway as part of the Fourth Industrial Revolution.

Beginning with this issue of the Journal, the MLC picks up on this work in order to see what is new, what has changed, and what has remained the same since the work was conducted more than three years ago. We will also use various other MLC venues and formats next year to update and refine our vision about the future of manufacturing.

The Vision 2030 effort consisted of extensive research into industry databases and published reports, interviews with MLC members, and a two-day workshop with technology experts, academics, and members of MLC’s Board of Governors. The result was the development of a framework consisting of broad economic, social, and technology “mega-trends” affecting manufacturing as well as manufacturing-specific themes flowing from the broad trends.

Among the mega-trends identified at the time were: economic and social trends such as globalization and urbanization; smart approaches to innovation and sustainability; business model advances based on smart products and data analytics; and what Vision 2030 called “ambient intelligence”, including cloud-based solutions, digital platforms and applications, machine learning, and the Internet of Things.

The manufacturing-specific themes identified were Intelligent Design, enabling mass customization of products as well as production closer to the point of consumption; the Services Revolution, which predicted the rise of as-a-service business models based on technologies such as IoT and 3D printing; the Platform Revolution, in which data will be used to improve designs as well as anticipate consumer preferences; and Human-to-Machine Convergence, which discussed the need for human capital transformation as a result of the new skills and competencies required with digital manufacturing.

The Trends Continue to Unfold 

In large part, the megatrends and themes MLC identified continue to this day and will continue to play out in the years ahead. What has changed since the 2017 report is greater emphasis today on the digital disciplines necessary for manufacturers to succeed with digital transformation.

In particular, there is a heightened need for manufacturers to achieve what the MLC now calls “digital acumen” in their leadership ranks and digital literacy in their workforces; mastery over the collection, organization, and analysis of data; and the need to understand the potential of advanced technologies to create new business models, products, and services. Many manufacturers are still in the early stages of developing competencies in these areas.

Over the next 10 years, the underlying technical infrastructure of computing and communications will continue to get stronger.

What was not foreseen at the time Vision 2030 was crafted was that a global pandemic would erupt in 2020, killing hundreds of thousands of people and severely damaging economies worldwide. But the good news, according to MLC surveys taken in the wake of the pandemic, is that a significant number of manufacturing companies plan to accelerate their adoption of the digital model as a direct result of the pandemic in order to have the flexibility and agility necessary to cope with disruption.

If indeed the inflection point reached this year is sustained over time, the manufacturing industry will accelerate its journey to a future state that will bear unprecedented levels of efficiency, productivity, and innovation, the result of which will change the rules of competition in the global manufacturing industryy

“New technologies are demanding higher skill levels, raising the capital intensity of production, elevating the importance of innovation ecosystems, and requiring strong digital infrastructure and readiness for manufacturers to be competitive,” said a Brookings Institution report published in March. “Countries that currently possess or are actively investing in the skills, capital, and infrastructure of the future are the ones that will dominate global manufacturing in the years ahead.”

Based on MLC’s 2017 research and what we have learned since, the general outlines of what future factories will look like are coming more clearly into view. Future factories will be high-tech, software-driven engines of customized mass production. They will be more automated, more connected and integrated, and more information-intensive than ever before. They will be organized for greater speed, flexibility, and productivity and efficiency.

The people who work in them will have advanced skills and technical competency with the ability able to work cross-functionally across the connected enterprise. Routine, repetitive work will become the province of intelligent machines. And leaders will have digital acumen – the ability to understand the potential of advanced technologies to not only achieve incremental improvements in efficiency and cost effectiveness but also to change business models and create new opportunities.

The underlying trends compelling these changes appear to be inexorable. As we have seen over several decades, manufacturing prowess – its ability to be efficient, productive, and fast-moving – has been increasingly linked to adoption of both operational technologies used on the plant floor as well as information technologies used to manage many aspects of the enterprise, two technology streams that have been converging for more than 20 years.

The Technical Infrastructure 

Over the next 10 years, the underlying technical infrastructure of computing and communication networks is expected to become more powerful. The infrastructure includes platforms that enable business and operational automation, and the data collection and analysis necessary to make decisions on everything from demand forecasting to inventory levels.

 

“Future factories will be more automated, more connected and integrated, and more infomration-intensive than every before.”

 

 

Microprocessors, the foundation of computing power, are expected to continue to increase in power based on Moore’s Law, which holds that the number of transistors that can be placed on a chip doubles every 18 months. Price/performance improvements follow the law. For example, in 1970, a chip with 2,000 transistors cost $1,000 to build. Today, that same chip would cost $0.02 to build.

Power improvements follow a similar curve. In 1970, the Intel 4004 chip contained about 1,000 transistors. Today, the Samsung V-NAND flash memory chip contains two trillion devices.

Similarly, as more people and physical objects become networked, the power and potential of networks continue to increase based on Metcalfe’s Law, which holds that a network’s value is proportional to the square of the number of nodes in a network. As manufacturing networks both inside the manufacturing enterprise and outside in a company’s business ecosystem continue to expand, the possibilities for greater information and business-changing insights from it become exponentially larger.

More powerful and inexpensive electronics, coupled with advancements in software, drive improvements in computing power, resulting in advances such as nano-computing and quantum computing. Over the next 10 years, continued advancements will enable manufacturers to process an even larger quantity of data from operations, supply chains, customers, and partners as companies move toward artificial intelligence-based systems and into a pervasively connected business ecosystem.

On the shop floor, more and more automation of routine and even semi-sophisticated tasks will occur as robotics systems become more capable, as equipment maintenance becomes more predictive through better analysis of sensor-generated data, and the overall manufacturing process is improved through digitization.

The improving computing and communications capabilities are facilitating a shift to mass customization, making it possible to satisfy individual needs in everything from transportation to medicine. Pervasive connectivity is generating vast new quantities of information about every functional aspect of the manufacturing enterprise, the products and parts that are made, and the customers these products are sold to. As a result, we can envision extensive digital threads spanning from design to end-customer usage, an information loop that will enable manufacturers to continuously improve increasingly intelligent products.

The advances will also enable manufacturers to move from reacting to problems with machines and other equipment on the plant floor and elsewhere to predicting those issues through data- and analytics-based insights, driving far greater operational efficiency and improvements in uptime.

Organizationally, extensive process digitization will enable manufacturers to shift from what has largely been functional automation of processes, which has historically created siloes of information, to cross-functional integration of people, processes, and systems. Accompanying this is a shift from command-and-control organizational structures to flatter, more collaborative models of organizing work and people, with decisions made at the lowest level possible. As digitization continues, its effect in changing how manufacturing companies are structured will be felt throughout the organizational layers that currently make up how many companies are structured, in particular middle management.

A Heterogeneous Industry

As a result of these trends, manufacturers will benefit from insights into how manufacturing processes and manufactured products can be improved, how unmet customer needs can be addressed, and how new business models and opportunities can be identified.

But the vision of manufacturing as a highly agile and flexible operation powered by data-driven insights will not play out in identical fashion in every sector that makes up the diverse manufacturing industry. Sectors such as aerospace and defense will continue to require huge centralized factories and extended supply chains to produce their large products. On the other side of the spectrum, consumer product goods companies will be increasingly focused on providing local production capabilities to serve their markets.

One of the most important keys to competitive success will be how well manu-
facturers use digital tools.

 

But regardless of sector, the common threads are evident. In the decade ahead and beyond, factories and plants will be distinguished by a now evolving set of technological, organizational, and leadership characteristics that will set them apart from facilities of the past.

The extent and depth of change underway will be profound. The day is coming when human beings will work routinely alongside machines that can learn, think, and act. The convergence between people and intelligent machines now underway will be as revolutionary as the advent of mass production techniques a century ago. Quantum leaps in productivity and efficiency will result. But one of the key challenges over the next 10 years will be for industry to proactively redefine the relationship between humans and machines and understand the impact of this evolving relationship on how production is conducted, on the composition of the manufacturing workforce, and on work itself.

Overall, future factory models will change dramatically as manufacturers ride the wave of mass customization. Depending on industry sector and type of product produced, manufacturers will design their factory footprints in myriad ways, from micro factories positioned to serve local markets to mega factories designed to make the largest and most complex products. The thing they all will have in common, though, is the ability to operate with a far greater level of operational intelligence and flexibility as a result of the new technologies now available.

And just where will the growth opportunities be for manufacturers as we head toward 2030?

Population and Economic Directions 

Let’s look at this question through the lens of population and economic trends.

The world’s population is expected to grow to about 8.5 billion people by 2030, from 7.8 billion this year. In the United States, the population is projected to increase 7.4% to 359.4 million in the next 10 years, compared with 334.5 million today.

But the U.S. and other western countries will not be the areas where population growth will be the strongest. According to studies by the United Nations, Africa, currently at 1.3 billion people, is expected to more than triple its population by the end of the century.

On the global economic front, studies done before the COVID-19 pandemic also indicate a shift in growth patterns.

A 2017 study by consultancy PwC projects that the world economy could more than double in size by 2050, far outstripping population growth due to technology-driven productivity improvements. But emerging markets, PwC said, could grow twice as fast as advanced economies, on average.

“MxD recognizes that the number of roles — 247 — by itself can be intimidating.”

 

As a result, six of the seven largest economies of the world are projected to be what PwC calls “emerging economies” by 2050, led by China, India, and Indonesia. In this scenario, the U.S. would drop to third place, from second place; Japan would drop to eighth place, from fourth; Germany would drop to ninth place, from fifth; and the United Kingdom would be in 10th place. France and Italy would leave the top 10 list entirely. Taking Europe as a whole, PwC said that the EU27’s share of world GDP could fall below 10% by 2050.

Like any business, manufacturing companies are similar to biological organisms; they either grow or they wither and die. A key question based on population and economic trends, particularly for global manufacturing companies, is: where should factory and plant investments be made in the next 10 years to capitalize on these growth trends?

Keys to Success 

As manufacturers ponder these questions, the winds of technological change will continue to blow, reshaping conceptions of how factories and plants will operate and even how manufacturers define success in the digital age.

The art and science of devising digital metrics as well as return on investment models may also require redefinition. As a Deloitte report published in April said: “The rise of advanced manufacturing technologies appears to be redefining traditional methods for measuring production, inventory, and other traditional performance metrics.”

Moreover, realizing the future state of manufacturing will not be easy, inexpensive, or without missteps or even failure.

Manufacturers will have to carefully adopt a vast array of new technologies, ranging from artificial intelligence, to augmented reality systems, to 3D printing machines. They will have to plan investments in plants and equipment wisely based on understanding changing markets, consumer expectations, political sentiments, and emerging growth markets. They will have to understand the roles, skills, and competencies they need to succeed with the digital model and adjust their workforces accordingly. And they will have to be willing to experiment to see the possibilities in the new digital age and from time to time accept failure on their journey forward. For many, massive cultural and organizational change is on their doorsteps.

One of the most important keys to competitive success for manufacturers, who will be operating in an industry where over the next 10 years widespread adoption of advanced technologies will be the equivalent of having a college degree, is how well they actually use the digital tools that are available to all. That’s an equation that will require significant efforts in learning and training; change management, including culture change; and orchestration by leadership. Competitive advantage will flow to the companies that master these challenges.

But as we said in 2017, perhaps the most important requirement for success will be trust, the confidence that pervasive connectivity will not result in theft, interruptions, or damage, and that decision-critical information is indeed true, accurate, and secure. Moreover, workers will need to trust that their companies will help them make the transition to the digital way of doing things, and nations will need to trust that the shift to more automation, often in response to global trends such as the pandemic, will not create unacceptable societal disruptions.

Throughout the ages, trust has been perhaps the one truly indispensable ingredient for business. It will be no different for manufacturers in 2030.  

Figure 1: The Road to 2030: Key Megatrends to Watch 

World Population: By 2030, the world’s population is expected to be 8.5 billion people, up from 7.8 billion today. Africa will see the strongest growth rate.

Global Economy: PwC estimates the global economy could double in size by 2050, with China, India, and Indonesia leading the way.

Globalization: Will nationalistic political winds continue to blow through western democracies?

Environmental: Manufacturers will continue to emphasize circular economy ideas. The incoming Biden Administration may rejoin the Paris climate agreement.

Consumer Expectations: Personalization, the online experience, and rapid delivery will continue to drive changes in production, supply chain, and logistics models.

Cybersecurity: Information security will continue to rise in importance. Manufacturers will need to weave cybersecurity into their cultures much like they did with physical safety.

Figure 2: The Road to 2030: Key 4.0 Disciplines 

  • Keep the technology infrastructure modernized. Cloud adoption will increase.
  • Maintain lean disciplines as a foundation for digital.
  • Rethink processes in parallel with tech and automation investments.
  • Break down silos, cross-functionally integrate, and build common operating platforms for plants and factories.
  • Develop digital acumen in leadership teams.
  • Become data-driven and develop mastery in how data is analyzed and used in decision-making processes.
  • Diversify the workforce, including bringing in people from non-manufacturing sectors.
  • Maintain a willingness to take risks.
  • Disrupt your market before you are disrupted.

1 Sath Rao, “Digital Innovation: Scaling for the Fast and Furious Future,” Manufacturing Leadership Journal, April 2020, https://www.manufacturingleadershipcouncil.com/2020/04/10/digital-innovation-scaling-for-the-fast-and-furious-future/
2 Jared Spataro, “2 Years of Digital Transformation in 2 Months,” Microsoft 365 (blog), April 30, 2020, accessed August 10, 2020, https://www.microsoft.com/en-us/microsoft-365/blog/2020/04/30/2-years-digital-transformation-2-months/
3 Sath Rao, “The Case of the Missing Insights,” Manufacturing Leadership Journal, October 2019, https://www.manufacturingleadershipcouncil.com/2019/10/04/the-case-of-the-missing-insights/
4 Knut Alicke, Richa Gupta and Vera Trautwein, “Resetting Supply Chains for the Next Normal,” McKinsey & Company, July 21, 2020, https://www.mckinsey.com/business-functions/operations/our-insights/resetting-supply-chains-for-the-next-normal
5 Joglekar N., Parker G., and Srai J. S., “Winning the Race for Survival: How Advanced Manufacturing Technologies Are Driving Business-Model Innovation,” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3604242
6 Sath Rao, “Digital Innovation.”
7 Fleming Shi, “Threat Spotlight: Coronavirus-Related Phishing,” Barracuda, March 20, 2020, https://blog.barracuda.com/2020/03/26/threat-spotlight-coronavirus-related-phishing/
8 Edward Barriball, Katy George, Ignacio Marcos and Philipp Radtke, “Jump-Starting Resilient and Reimagined Operations,” McKinsey, May 11, 2020, https://www.mckinsey.com/business-functions/operations/our-insights/jump-starting-resilient-and-reimagined-operations
9 Sath Rao, “The Case of the Missing Insights.”
10 David Uberti, “How BMW Used Pandemic Plant Stoppages to Boost Artificial Intelligence,” The Wall Street Journal, July 28, 2020, https://www.wsj.com/articles/how-bmw-used-pandemic-plant-stoppages-to-boost-artificial-intelligence-11595939400?mod=djemAIPro
11 Rajesh Devnani and Justin Bean, “Health and Safety of Workers,” Hitachi, https://social-innovation.hitachi/en-us/think-ahead/manufacturing/health-and-safety-of-workers/
12 Chris Walton, “3 Ways Starbucks Will Emerge from COVID-19 Stronger Than Before,” Forbes, April 3, 2020, https://www.forbes.com/siteschristopherwalton/2020/04/03/3-ways-starbucks-will-emerge-from-covid-19-stronger-than-before/#1d89d6641844

 

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