Posted By Chris Chiappinelli, November 17, 2010 at 5:10 AM, in Category: ML Council
By: Mike Gregory
The traditional definition of manufacturing is one we are all familiar with. It simply describes taking a raw substance and transforming it into finished products. Yet this definition is as simplistic as it is dated. To many, it reinforces the perception of manufacturing as a relic, an old-style production line: outdated, unglamorous, and unappealing. The reality is that manufacturing is among the most exciting economic sectors we have. It combines scientific and technical challenges with managerial innovation and huge social and economic relevance. It offers the potential to marshal research capabilities in ways that can make a serious difference.
Manufacturing is dynamic — and global. In the West, it is rising to meet challenges from the BRIC (Brazil, Russia, India, and China) nations, and in the developing world, it’s becoming a major driver of economic parity and raising living standards for all. I believe that by combating the outdated image, we can start to attract the talented individuals needed to grow the sector for the future.
Part of the problem when we talk about manufacturing is that we are not vocal enough with this message. We should be highlighting the importance of industrial innovation in the rebranding of manufacturing. We should look more closely at the process by which companies adapt, evolve, and reconfigure to pursue new or higher-value opportunities. We should also highlight the role academia and industry can play in this endeavor to foster greater recognition and understanding both within and outside the industry.
Major changes have been taking place in the structure of global industry in recent years, suggesting the need for a much broader view of manufacturing than the traditional focus on simply making a product in a factory.
We increasingly need to consider all the stages of the manufacturing cycle, or “value chain,” from the initial idea for a product or service, through design, production, distribution and sales, and finally disposal at the end of its useful life. This means understanding markets and technologies through product and process design to operations, distribution, services, and sustainability.
In the past, most companies tried to do all these things. Increasingly, with globalization and the development of complex new technologies, these activities have been spread across multiple companies and countries. Today, many successful companies are finding ways to capture value at different stages of the cycle — picking the activities that play to their strengths and working with other companies across the manufacturing value chain.
A good example is GKN, a manufacturer of high-quality, high-margin automotive components. The company focuses on the production stage of the cycle. It has set up factories all around the world, choosing locations close to major assemblers. Its expertise lies in sophisticated engineering, highly efficient factories, and strong networks.
There is a new breed of companies, often referred to as hybrid organizations, that combine their manufacturing heritage with fresh, novel approaches to delivering value. These can be described broadly as virtual and service-based manufacturers.
Virtual manufacturers concentrate on particular activities involved in creating a product or service. They share functions across several companies, with many activities taking place around the globe.
One example is ARM, an international integrated circuit design company. It designs the chips that go into more than 80% of the world’s mobile phones and PDAs. The company has no factories of its own. It leaves production to specialist businesses capable of making the major investments needed to build semiconductor production capacity. However, production knowledge is still vital for its design capability, and the company stays close to its production partners.
Another virtual manufacturer is Plastic Logic, which specializes in the research and development stage of the value chain. The company has developed a process for printing electronics onto thin plastic, a development that has the potential to create a new industry by radically changing the economics of production. The company launched its first commercial product last year.
Similarly, Apple (despite some setbacks) has made a virtue of its “designed in California, built in China” ethos. It has transformed itself from the simple computer company it was in the mid-1970s to the highly innovative technology business it is today.
These companies have found that it makes practical business sense to develop the intellectual property associated with their products, and then to offshore production to facilities in the Far East, South East Asia, or India.
A second group of companies, which began as purely production-based manufacturers, has transitioned into services-oriented organizations. Xerox is a classic example. Having started as a producer of copiers and printing presses, it moved into digital technologies and has pioneered service-based business models. It now provides business improvement, re-manufacturing, and business consulting services.
As these examples show, manufacturing has started to embrace this notion of industrial innovation, developing activities and business functions that impact clearly on one or more stages of the value chain. More broadly, they are innovators, both in terms of technologies and management process, and they demonstrably impact the industrial system.
We can see the potential these business models might have in changing perceptions of manufacturing. Companies such as Apple, ARM, and Xerox are far removed from traditional images of dark, satanic mills. These successful, international businesses suggest that global manufacturing is about much more than making things in different parts the world. Networking all the activities in the value chain is emerging as a key capability.
Industrial innovation can be used to counter the argument that the developed world doesn’t make things anymore and thus manufacturing’s relevance has declined.
There’s been much talk in Europe and the United States about the need to develop manufacturing to drive the economy out of recession. British economist Ruth Lea, former head of Intel Andy Grove, and Harvard academics Josh Lerner and Dani Rodrik have expounded on this idea. A common thread in their arguments is the need to retain the core manufacturing capabilities of the developed nations, leveraging available skills and resources, but also to focus on potential opportunities within emerging industries.
What we are talking about here is how wealth, or value, creating networks of activity arise and how can we assist that process.
Why Is this Important?
Most people view innovation in terms of the process of turning R&D into new products or services, but innovation is not a linear process. In manufacturing, R&D can make significant contributions all along the value chain. Indeed, I would argue that the much-discussed failure to capitalize on the research base in some Western countries is partly a result of the failure to understand this.
In recent years, developed nations have improved their competitiveness in terms of scientific achievement and the entrepreneurial environment, but often there has been a failure to convert early development into global business success. The United States and clean tech have lost ground to the Chinese, and plastic electronics in the United Kingdom is only now becoming commercially viable, yet it cannot be described as a global enterprise.
The ability to transform new ideas into businesses and support emerging industries relies on our ability to spot opportunities. For example, lasers can trace their heritage back to Einstein in 1917, with the first working laser developed in the late 1950s. But only now are we beginning to see the true potential of the technology for manufacturing.
We can see reasonably clearly when industries have emerged, but how do we spot one before it emerges? These are questions we need to answer if we are going to help create a new world-leading industry that will generate jobs, retain a skills base not available in BRIC nations, and make manufacturing an appealing profession for the brightest minds.
There have been some efforts in this direction. The U.K.’s Engineering and Physical Sciences Research Council, for example, has funded one emerging industries program. Its aim is to understand how everything must come together to create an industry. This work is helping to develop special “emergence maps,” visual aids that help to chart key interactions that impact the trajectory of emerging industries. If we can learn to recognize these patterns, we may be able to hasten development of new industries that could have significant, positive implications for our economies.
Understanding how ideas and opportunities can be transformed into products and services is not a short-term game. If we are to maximize the economic potential of ideas generated in our economies, we need to make the most of emerging industries. Our future prosperity may depend on it.
The Need for Industrial Architects
So where does academia fit into this picture? Understanding how industries emerge requires knowledge of economics, geopolitics, culture, finance, markets, products, and manufacturing — a multi-disciplinary challenge.
We are well-placed to tackle questions of this kind, but we need to bring the necessary expertise together with the “architects” who can stitch it all together — a new kind of academic/industrial collaboration. Research into manufacturing has traditionally been highly fragmented, and for good reason. If we define manufacturing as physical production, then the problems are largely, though not exclusively, technical, and the proper domain of engineers and scientists.
Given that our knowledge in those domains is reasonably robust, it is the systems where we should now focus our interest. By “systems” I mean the complete range of activities from understanding markets and technologies through product and process design to operations, distribution, and services.
And we should focus not just on the local production and factory systems, where Japan has so clearly shown us the way, but also on the global engineering, production, and service systems. It is in understanding the structure and dynamics of these global “value networks” that the major challenges now lie. This will allow companies and, indeed, countries to understand how best to deploy their resources to create value.
And only by changing the perception of manufacturing will we find the people able to do this work. They are unlikely to be found in the ranks of those with a single discipline, for they will struggle with the language of other disciplines. They are unlikely to be people with a purely theoretical knowledge of how industrial systems work, for they will struggle to recognize the subtle knowledge that underpins much industrial endeavor. And they are unlikely to be the highly specialized practitioners, for they will lack the range of prior knowledge that will be required.
The New Generation
So we will need a new generation of researchers and industrialists, whom I have termed “industrial architects.”
There is now wide recognition that many problems are best addressed by multiple disciplines working in concert, and that some of the greatest intellectual and practical excitement lies at the intersection of disciplines.
We need to engage new generations in industrial innovation and the opportunities it offers to contribute at every level of society — not least in providing the means for a materially sustainable world. The knowledge and expertise required to conceive, create, distribute, and service products is precisely the knowledge and expertise necessary to develop resource-efficient products and services, and indeed the specialized equipment and processes to clean and recycle materials.
I believe these serious societal challenges are likely to prove inspiring for some of the most able in the emerging generations and will help us to gain a new view of the importance of manufacturing in the modern world.
Mike Gregory is head of the University of Cambridge Institute for Manufacturing (IfM) and the Manufacturing and Management Division of the University’s Engineering Department. He chairs the U.K. Manufacturing Professors Forum and is a member of the U.K. government’s Ministerial Advisory Group on Manufacturing.
Written by Chris Chiappinelli
Chris Chiappinelli is the online research manager for Manufacturing Leadership. He covers enterprise software, sustainability, economic trends, workforce issues, and emerging technologies.