July 26, 2013 Planning for the Future

Volume 16 | Issue 6

While manufacturing continues to collect its breath from its quick resurgence– particularly in developed nations that deserted it not too lo

A flood of formidable challenges, from tough economics to mounting market complexity, is driving a profound rethinking among industrialists about how manufacturing is done today – and how it should be done in the years to come, according to a report.

The aforementioned analysis, according to recently released detailed analysis, called “Business Strategy: The Journey toward the People-Intensive Factory of the Future,” underscores how managers and employees – and the flexibility and strategic decision-making capabilities they provide – will be at the center of all factories from here on out.

In fact, half of respondents have a formal process already in place to design future production plants, says Pierfrancesco Manenti, Practice Director of Operations Technology Strategies and Head of IDC Manufacturing Insights, which conducted the survey of more than 80 manufacturing company executives.

“The manufacturing industry is back onstage in developed countries worldwide,” he says. “Governments, media, manufacturers themselves, and their people are all changing their mindset with a stronger focus on production. We are about to witness a new generation of manufacturing enterprises where operational processes on the plant floor — at the very heart of the enterprise — are considered the centerpiece of this transformation.”

Cause and Effect
Before detailing how factories are likely to be run in the coming years, Manenti first explains in a telephone interview with Industry Today why manufacturers, now back on their feet after years of being tripped up by outsourcing and a down-in-the-dumps global economy, are brainstorming for future enhancements and production.

“Things in manufacturing are rapidly changing. In the past 15 years, manufacturing and production have been a bit neglected in the Western World, passed over and deemed not a good industry to invest in for most advanced economies,” he says. “It was no longer considered a relevant industry, and production was regarded as only good for low-cost countries.”

As a result of this ill-advised decision, he explains, manufacturers have seen their profitability challenged and their capacity to expand into new markets greatly endangered. Still, this challenging marketplace, other than being a threat, is also resulting in a positive turnaround for the industry as a whole, he adds. A number of developed countries – Germany comes to mind – have showed over the course of the last decade that they were better able to withstand economic turbulence in part because they refused to throw in the towel on manufacturing.

“Governments around the world now better understand that an economy based on services alone cannot survive in the long run,” he says. “Manufacturers themselves are going back to basics and putting a renewed premium on production knowledge driven by the need to protect and enhance their technology. They realize now that the direct involvement in production operations fosters innovation and improves customer service.”

Rising labor costs in a number of well-known foreign manufacturing nations, Manenti says, have also helped convince manufacturers to bring back off-shored jobs. Labor costs in China, for example, have reportedly increased year-over-year by almost 20 percent, according to published reports. Mexico saw increases in labor costs, too, though not as drastically as China did, with a year-over-year average of roughly 5 percent. In the US, on the other hand, labor costs have risen year-over-year by a mere 3 percent.

These factors, plus the growth of transportation costs – a consequence of oil price developments and the need to produce closer to clients for better flexibility and service, Manenti says, are greatly favoring manufacturing insourcing initiatives in several developed economies.

There, too, is the recent development of new, state-of-the-art automation technology, which noticeably increases productivity and requires fewer workers – though the ones who remain are required to be supremely skilled, which many are not. Manenti says this has moved the focus from ensuring low labor costs to finding much-needed skilled workers.

A Glimpse of the Blueprint
While it remains somewhat blurry as to what precisely these futuristic plants will look like physically, or what current or future automated technologies they will shelter, it is evident that the blueprint for how these factories will be organized is already in the works.

According to Manenti, his organization’s carefully crafted survey revealed that more than half of respondents – 56 percent, to be precise – believe that future facilities will be measured according to its production capability and flexibility, in addition to its efficiency and production capacity.

Likewise, over the next five years, approximately 10 percent of Western enterprises will transition from make-to-stock to make-to-individual production. At the same time, just under half of responding manufacturers – 47 percent – say these factories will produce modular platforms centrally while using local small factories, suppliers, and distributors to tailor final products for local demand.

And about 63.6 percent of respondents expect their production processes to be largely or completely digitized in the next five years, results from the study suggest. More than 26 percent of manufacturers plan to invest over 25 percent of their total ICT budget for plant-floor IT.

More critical than anything else, perhaps, is how manufacturers intend to also have to “achieve” the global plant floor. That means “harmonizing, supervising and coordinating execution activities” across the company’s and suppliers’ networks of manufacturing operations. Consequently, finding skilled workers who are calculated decision-makers and detailed analytical thinkers will be a prevailing critical need in the years ahead, Manenti says. Effective factory management will be equally important.

“When we make references to labor, we don’t mean labor in the traditional sense,” he says. “It’s not really about labor. It’s about having qualified, knowledgeable workers. The reason why the factories of the future will be people-oriented is because people provide a much-needed level of flexibility in the production and decision-making process.”

That is, of course, good news. There will be jobs in manufacturing – plenty of them, it appears. But these positions will require a wide range of analytical talents and diagnostic talents few of us are capable of right now. That must change. We’ll have to acquire these must-have abilities in a jiffy, Manenti says, because soon these so-called factories of the future will be the factories of the present, and it’ll be up to us – not machines – to keep the manufacturing’s domestic revival strong and healthy, through good economic climates and bad.

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