Fundamentals: Manufacturing Innovation

Aug. 3, 2009
Over the past century, manufacturing has driven America’s growth and provided the world with some of the best products ever created.

Manufacturing is a primary wealth-producing sector and is historically responsible for this country’s relatively high standard of living compared to other countries.

The current recession has stimulated a review of the fundamentals. It’s being recognized that major parts of the economy—government, banking, insurance, health care, consumer services—use physical wealth, but do not create it. Financial services now comprise 45 percent of earnings of companies on the S&P 500 index, up from 10 percent a quarter-century earlier.

General Electric, the fifth-largest company in America, has apparently learned that lesson; its shares have lost some 58 percent of their value over the past year, largely the result of falling profit at GE Capital, its finance unit that generated 50 percent of its profits before the downturn. GE Chairman and Chief Executive Officer Jeffrey Immelt has stated, “Real engineering was traded for financial engineering. In the end, our businesses, our government and many local leaders lost sight of what makes a nation great: a passion for innovation.” Immelt is now restructuring GE so it will count on finance for just 30 percent of its profit, down from half before the downturn.

Immelt publicly admits that, like many U.S. companies, GE has turned too many core technological functions over to outside contractors and foreign operations. He insists that the United States should now aim for manufacturing jobs to be at least 20 percent of total employment, about twice what it is now.

Coincidentally, Harvard Business Review (July/August 2009) makes the same case about the importance of manufacturing. It warns that the erosion of the U.S. manufacturing base is seriously undermining the country’s ability to innovate. We cannot succeed by letting other countries manufacture the products we supposedly invent; sooner or later, they’ll “invent” their own products, and we’ll be left behind.

A lot of attention is now focused on restoring the ability to develop and manufacture high-technology products in America. Reversing the decline in competitiveness requires two drastic changes:

•  Corporate management must stop the focus on short-term profits and target new growth through new product innovation.
•  Government must support scientific research and promote broad collaboration with business and academia to tackle big problems.

The accelerating pace of technological innovation is setting the stage for a new set of worldwide manufacturing transformations. Advances in information technology, nanotechnology, biotechnology and other arenas are creating opportunities for economic, social and environmental benefits. Realizing these benefits will require advanced manufacturing capabilities that will result only from focused manufacturing innovation.

Changes coming

The Society of Manufacturing Engineers (SME) has an initiative that identifies emerging technologies that are making a positive impact on manufacturing, and provides an educational framework for manufacturers to keep up-to-date on the industry’s latest and greatest innovations. SME’s Manufacturing Enterprise Council collaboratively selected five “innovations that could change the way you manufacture”:

•  Direct Digital Manufacturing (DDM): Use of additive fabrication processes; manufacturing components layer by layer, direct from 3D digital data, without machining, molding or casting.
•  Ultra capacitors: Electrochemical capacitors that have an unusually high energy density and provide significantly more storage power, with unparalleled life span.
•  Self-Assembling Nanotechnology: Manufacturing at the microscopic level.
•  Intelligent Device Integration (IDI): Monitoring, managing and servicing of intelligent devices over the Internet.
•  Integrated 3D Simulation and Modeling: Desktop supercomputers will revolutionize simulation and modeling, acting through microscope, telescope and time-machine operations to manage, view and tool a complete manufacturing system.

Perhaps a fortuitous result of the current recessionary environment is that manufacturing decline is being recognized and addressed.

Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. You can e-mail him at: [email protected]. Or review his prognostications and predictions on his Web site: www.jimpinto.com.

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