Automation Plus Innovation Wins

Manufacturing—the transformation of materials into products—has not been a primary source of prosperity in the United States or almost any other advanced economy for the last two generations.

But for many automation companies, it has vital strategic importance.

Productivity improvements through automation have caused the percentage of people employed in manufacturing in the United States to decline steadily since the 1960s, from 25 percent then, to less than 10 percent today. Even China is losing manufacturing jobs. Between 1995 and 2002, China lost 15 million manufacturing jobs, compared with just 2 million in the United States.

Discussing manufacturing strategies in the first decade of the new century is somewhat like discussing agricultural strategies at the start of the last century. Farming employed some 35 percent in the United States at that time, and now employs less than 2 percent, generating a surplus of food and agricultural products. Most of this came through automation—giant tractors, harvester combines and the like.

To follow this time-shifted parallel a bit further, at the turn of this new century, U.S. agriculture is all about high-tech, bio-tech and info-tech. Also, there’s increasing vertical integration of production, processing and distribution at all levels within the global agricultural system. One wonders how much of that is prescient for manufacturing in this century.

Many companies are adopting new strategies for manufacturing, which involves taking their competitiveness onto new planes. A whole array of initiatives has been introduced, collectively labeled “new wave manufacturing.”

In this new era, manufacturing strategy can be defined as a set of coordinated objectives applied to manufacturing functions and aimed at securing sustainable advantage. Issues generally addressed include: manufacturing capacity, production facilities, technology advances, vertical integration, quality, production planning/materials control, organization and personnel.

A key part of a manufacturing strategy is whether products will continue to be produced at traditional manufacturing sites, or if the cost/benefits offered make it worthwhile to move manufacturing offshore. The respected Boston Consulting Group, among others, has suggested that not considering an offshore strategy is tantamount to giving up on major cost advantages. But even so, the initial rush to offshore manufacturing has given way to a more cautious approach; many companies are taking into account the practical and logistical difficulties and the overall financial implications (beyond just raw labor costs) of setting up and operating facilities in remote countries.

The key overall objective remains for U.S. manufacturing companies to develop strategies to compete with low-priced competitors in domestic and global markets. What can smaller U.S companies do when their large domestic customers are moving production and assembly operations offshore to take advantage of seemingly irresistible cost advantages?

Beyond price

The answer is to identify customer values that offer advantages beyond just price. Key competitive advantages include fast delivery of non-standard and semi-customized items. Manufacturing strategies and production technologies (programmable automation, advanced robotics and the like) must be utilized to increase manufacturing flexibility, with the capability to respond quickly and cost effectively to demands for product variations and truly customized requirements.

To achieve sustainable advantage, manufacturing efficiency must be coupled with innovative new products. Many successful automation companies have gone from producing and selling widgets to providing more complex services that address usage and total equipment life cycles. Smart products can be designed to capture operating information that increases the customer’s productivity, and then uses that information to adapt products and services to improve the customer’s performance even further. With products that interact across open platforms and provide new savings opportunities, the solutions are often more valuable to the customer than the product itself.

Jim Pinto is an industry analyst and commentator, writer, technology entrepreneur, investor and futurist. You can email him at: jim@jimpinto.com. Read extracts from his new book, “Pinto’s Points,” at: www.jimpinto.com/writings/points.html

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