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2012-11-27 05:59:58
Big forces are reshaping the world of manufacturing
Nov 24th 2012 | NEW YORK | from the print edition
YOU can carry your own head in your hand, enthuses Bre Pettis, inviting
customers to try out a three-dimensional photo booth that will scan their head
and then print a miniature plastic version of it as a solid object. This is
useful, no doubt, for those about to audition for the role of Zaphod Beeblebrox
in The Hitchhiker s Guide to the Galaxy .
Mr Pettis, the founder of MakerBot, a maker of low-cost 3D printers, spoke at
the opening of his firm s first retail store on November 20th in New York. It
will sell desktop MakerBots, which make things out of plastic, for just $2,200.
It is still early days, but MakerBots and machines like them are empowering
people to make the things they want, rather than buy them from factories, says
Mr Pettis.
Certainly 3D printing is hot. Some firms are already using the technology,
which is also known as additive manufacturing because it involves building up
material layer by layer. It can be used to make such things as prototype cars,
hearing aids, customised dolls and medical implants. On the same day that Mr
Pettis opened his store, GE announced it had bought for an undisclosed sum
Morris Technologies, a Cincinnati firm that uses industrial 3D printers (which
cost $500,000 or more) to print objects for engineers. Morris will be printing
metal parts for a new GE jet engine.
Yet 3D printing is just one of many production technologies and trends which
are transforming the way companies will be able to make things in the future.
The old rules of manufacturing, such as you must seek economies of scale and
you must reduce unit-labour costs , are being cast aside. New machines can
print every item differently. More flexible robots are getting cheaper and
better at doing all the boring and dirty stuff.
Add to that another 1.8 billion consumers who will join the global marketplace
in the next 15 years and Manufacturing the Future , a new report by the
McKinsey Global Institute, has good cause to be optimistic. Demand will grow
not only for basic goods (which are typically made in developing countries) but
also for the costly, innovative gadgets and high-tech products that rich
countries make. McKinsey reckons that rich countries will keep making such
products better than anyone else.
Developing countries will continue to increase their share of global
production. Measured by nominal value added, by 2010 China had surpassed Japan
to become the second-largest manufacturing nation, after America. A decade
earlier it was in fourth place. In the same period, Brazil jumped from 12th to
6th and India from 14th to 10th. Britain slipped from 5th to 9th.
As countries get richer, manufacturing tends to account for a smaller share of
their GDP. The point at which this decline starts varies (the share usually
peaks at 20-35%), as does the rate of decline. In the 15 largest manufacturing
economies, manufacturing s share of GDP ranges from 33% in China to 10% in
Britain (see chart).
Rich countries relative position may be slipping, but their absolute
manufacturing output is rising quite fast. What has fallen is the number of
workers needed on the factory floor. Even though some manufacturing is
returning to America and Europe from places where it had been offshored, such
as China, this trend will not recreate all the factory jobs that once existed.
The term manufacturing nowadays describes a whole range of activities.
McKinsey divides it into five categories. The biggest, accounting for 34% of
the $10.5 trillion total worldwide manufacturing value-added in 2010, it calls
global innovation for local markets . This includes industries such as
chemicals, machinery and carmaking, where constant innovation is essential and
high transport costs for heavy goods make it sensible to produce these things
close to customers.
The next-biggest, at 28%, is regional processing , which includes industries
such as fabricated metals, food and publishing. For obvious reasons, cakes are
baked locally: not just because they go stale quickly but also because local
tastes vary. Energy and resource-intensive commodities , such as wood, paper
and petrol, account for 22%; Innovative global technologies (chips, computers
and medical products) are 9%; and labour-intensive tradeables (textiles,
clothes and toys) 7%. These last two categories have typically been offshored
by rich countries and probably will be for some time.
In the other areas where rich countries compete, there is a dark cloud
building. McKinsey sees a fast-growing shortage of people with the skills
manufacturers require, particularly as ageing baby-boomers retire. That is why
American firms such as Dow and DuPont keep clamouring for better education in
science, technology, engineering and mathematics. Yet the rich world still
leads in high-tech industries. In 2010 it ran a $726 billion surplus in goods
such as cars, chemicals, drugs and machinery, but it had a $342 billion trade
deficit in labour-intensive tradeables.
It s all a blur, really
McKinsey sheds new light on another old saw: is manufacturing superior to
services? It is becoming ever harder to tell the two apart, as many
manufacturing jobs blur with service jobs. At American manufacturers , 34% of
jobs are service-like, rising to 55% in the global-innovative-technology
sector. If one counts the workers in supporting services and those who provide
raw materials, total American manufacturing employment was 17.2m in 2010,
rather than the official 11.5m. Remove all service-like jobs and it drops to
7.3m.
In the future, McKinsey predicts there will be more jobs for robots. Since 1990
the cost of automation has fallen relative to labour by 40-50% in the rich
world, it says. The rise of the machines will continue in rich countries, and
they will make inroads into developing ones. Wages in emerging markets are
soaring. One Chinese manufacturer is talking of hiring 1m robots. Still, robots
need people to build, program and maintain them. Humans have no cause to hold
their heads in their hands.
from the print edition | Business