This month I’ve been writing on advanced manufacturing and the advance of manufacturing. In the course of research, I have revisited the World Economic Forum’s report, “The Future of Manufacturing: Opportunities to Drive Economic Growth,” one of the decade’s seminal studies on the sector. The report focuses on a development we’ve all been living through—the globalization of the manufacturing ecosystem—that during the past several decades “has driven more change and impacted the prosperity of more companies, nations, and people than at any time since the dawn of the Industrial Revolution.”
In a country where manufacturing jobs have diminished over the last 30 years, we sometimes forget the ongoing transformative economic power that comes with manufacturing’s success. Enabling the genuine globalization of manufacturing has been the development of complex, highly nuanced global supply networks that allow companies to interact in sourcing, design, and manufacturing processes from anywhere on the globe to meet customer needs in established and emerging markets. This has resulted in what the Forum’s report calls “the flattening of the world,” something that has been catalyzed by the activities of multinational manufacturers. As noted below, you can see the process is far from finished:
With the seeds planted by these multinationals, and the opportunity to serve these new markets, powerful new competitors are growing every day. This will profoundly reshape manufacturing supply chains over the coming several decades. But this reshaping will also be influenced by complex macroeconomic and geopolitical challenges, including exposure to currency volatility, sovereign debt pressures, and emerging protectionist policies of many countries to gain access to emerging and prosperous new markets. All these factors are driving more localized manufacturing supply chains.
The report identifies six key trends that will define manufacturing and manufacturing competition during the next decades:
- The infrastructure necessary to enable manufacturing to flourish and contribute to job growth will grow in importance and sophistication and be challenging for countries to develop and maintain.
- Competition between nations to attract foreign direct investment will increase dramatically, raising the stakes for countries and complicating the decision processes for companies.
- Growing materials resources competition and scarcity will fundamentally alter country and company resources strategies and competition, and serve as a catalyst to significant materials sciences breakthroughs.
- Affordable, clean energy strategies and effective energy policies will be top priorities for manufacturers and policy-makers, and serve as important differentiators of highly competitive countries and companies.
- The ability to innovate, at an accelerated pace, will be the most important capability differentiating the success of countries and companies.
- Talented human capital will be the most critical resource differentiating the prosperity of countries and companies.
Those who influence American manufacturing will have to deal with these trends. Areas like energy and innovation are leading industries in American Manufacturing giving us a good position to compete globally. Moreover, while we tend to focus on American manufacturing investment in other economies, the rise of foreign investment (i.e., by Germany, Japan, and China) in the American manufacturing economy has been a factor in the sector’s domestic revival.
Perhaps the two most challenging points relate to infrastructure and human capital, something not lost in a subsequent discussion among thought leaders hosted by the Aspen Institute’s Manufacturing and Society in the 21st Century Program and the Emirates-Aspen Partnership. Among the key points for driving growth in advanced manufacturing in America were the development of infrastructure for regional manufacturing hubs and STEM education:
- Forward thinking investment in the infrastructure required by advanced manufacturing plants (water, electricity, and natural gas, as well as roads and airports) will go a long way toward encouraging the development of regional hubs for advanced manufacturing. The opportunity for high-tech plants to share in the established infrastructure of high-technology parks with other like-minded firms is a big incentive for capital investment. If you build it, they will come.
- To maintain its technological edge on the global stage, the United States will need sustained and long-term investment in STEM (Science, Technology, Engineering, Mathematics) education to encourage the youth of today and tomorrow to pursue the engineering, science, and computer science-driven careers that will be needed to fill jobs in America’s manufacturing sector. The long-term timeframe must also be met with immediate STEM-career training initiatives to prepare workers to take the job openings in this field that currently sit unfilled. Attracting students to these fields and to careers in manufacturing also requires a more positive image of the sector and better collaboration between industry and educators.
If advanced manufacturing is to fulfill its promise at home, we must hope that policymakers and business leaders are paying attention to such advice. How do you think they’re doing so far?