Manufacturing
The third industrial
revolution
The digitization of manufacturing will
transform the way goods are made—and
change the politics of jobs too
THE ECONOMIST, Apr 21st 2012 | from the print edition
THE first industrial revolution began in Britain in the late 18th
century, with the mechanization of the textile industry. Tasks
previously done laboriously by hand in hundreds of weavers’ cottages
were brought together in a single cotton mill, and the factory was
born. The second industrial revolution came in the early 20th
century, when Henry Ford mastered the moving assembly line and
ushered in the age of mass production. The first two industrial
revolutions made people richer and more urban. Now a third
revolution is under way. Manufacturing is going digital. As this
week’s special report argues, this could change not just business, but
much else besides.
A number of remarkable technologies are converging: clever
software, novel materials, more dexterous robots, new processes
(notably three-dimensional printing) and a whole range of web-based
services. The factory of the past was based on cranking out zillions of
identical products: Ford famously said that car-buyers could have any
color they liked, as long as it was black. But the cost of producing
much smaller batches of a wider variety, with each product tailored
precisely to each customer’s whims, is falling. The factory of the
future will focus on mass customization—and may look more like
those weavers’ cottages than Ford’s assembly line.
Towards a third dimension
The old way of making things involved taking lots of parts and
screwing or welding them together. Now a product can be designed
on a computer and “printed” on a 3D printer, which creates a solid
object by building up successive layers of material. The digital design
can be tweaked with a few mouse clicks. The 3D printer can run
unattended, and can make many things which are too complex for a
traditional factory to handle. In time, these amazing machines may
be able to make almost anything, anywhere—from your garage to an
African village.
The applications of 3D printing are especially mind-boggling. Already,
hearing aids and high-tech parts of military jets are being printed in
customized shapes. The geography of supply chains will change. An
engineer working in the middle of a desert who finds he lacks a
certain tool no longer has to have it delivered from the nearest city.
He can simply download the design and print it. The days when
projects ground to a halt for want of a piece of kit, or when
customers complained that they could no longer find spare parts for
things they had bought, will one day seem quaint.
Other changes are nearly as momentous. New materials are lighter,
stronger and more durable than the old ones. Carbon fiber is
replacing steel and aluminum in products ranging from airplanes to
mountain bikes. New techniques let engineers shape objects at a tiny
scale. Nanotechnology is giving products enhanced features, such as
bandages that help heal cuts, engines that run more efficiently and
crockery that cleans more easily. Genetically engineered viruses are
being developed to make items such as batteries. And with the
internet allowing ever more designers to collaborate on new
products, the barriers to entry are falling. Ford needed heaps of
capital to build his colossal River Rouge factory; his modern
equivalent can start with little besides a laptop and a hunger to
invent.
Like all revolutions, this one will be disruptive. Digital technology has
already rocked the media and retailing industries, just as cotton mills
crushed hand looms and the Model T put farriers out of work. Many
people will look at the factories of the future and shudder. They will
not be full of grimy machines manned by men in oily overalls. Many
will be squeaky clean—and almost deserted. Some carmakers already
produce twice as many vehicles per employee as they did only a
decade or so ago. Most jobs will not be on the factory floor but in the
offices nearby, which will be full of designers, engineers, IT
specialists, logistics experts, marketing staff and other professionals.
The manufacturing jobs of the future will require more skills. Many
dull, repetitive tasks will become obsolete: you no longer need
riveters when a product has no rivets.
The revolution will affect not only how things are made, but where.
Factories used to move to low-wage countries to curb labor costs. But
labor costs are growing less and less important: a $499 first-
generation iPad included only about $33 of manufacturing labor, of
which the final assembly in China accounted for just $8. Offshore
production is increasingly moving back to rich countries not because
Chinese wages are rising, but because companies now want to be
closer to their customers so that they can respond more quickly to
changes in demand. And some products are so sophisticated that it
helps to have the people who design them and the people who make
them in the same place. The Boston Consulting Group reckons that in
areas such as transport, computers, fabricated metals and
machinery, 10-30% of the goods that America now imports from
China could be made at home by 2020, boosting American output by
$20 billion-55 billion a year.
The shock of the new
Consumers will have little difficulty adapting to the new age of better
products, swiftly delivered. Governments, however, may find it
harder. Their instinct is to protect industries and companies that
already exist, not the upstarts that would destroy them. They shower
old factories with subsidies and bully bosses who want to move
production abroad. They spend billions backing the new technologies
which they, in their wisdom, think will prevail. And they cling to a
romantic belief that manufacturing is superior to services, let alone
finance.
None of this makes sense. The lines between manufacturing and
services are blurring. Rolls-Royce no longer sells jet engines; it sells
the hours that each engine is actually thrusting an airplane through
the sky. Governments have always been lousy at picking winners,
and they are likely to become more so, as legions of entrepreneurs
and tinkerers swap designs on line, turn them into products at home
and, market them globally from a garage. As the revolution rages,
governments should stick to the basics: better schools for a skilled
workforce, clear rules and a level playing field for enterprises of all
kinds: revolutionaries will take care of everything else.
Manufacturing Future
As manufacturing goes digital, it will change out of all recognition.
Some of the business of making things will return to rich countries
THE ECONOMIST, Apr 21st 2012 | from the print edition
OUTSIDE THE SPRAWLING Frankfurt Messe, home of innumerable German
trade fairs, stands the “Hammering Man”, a 21-metre kinetic statue that
steadily raises and lowers its arm to bash a piece of metal with a hammer.
Jonathan Borofsky, the artist who built it, says it is a celebration of the worker
using his mind and hands to create the world we live in. That is a familiar
story. But now the tools are changing in a number of remarkable ways that will
transform the future of manufacturing.
One of those big trade fairs held in Frankfurt is EuroMold, which shows
machines for making prototypes of products, the tools needed to put those
things into production and all manner of other manufacturing kit. Old-school
engineers worked with lathes, drills, stamping presses and molding machines.
These still exist, but EuroMold exhibits no oily machinery tended by men in
overalls. Hall after hall is full of squeaky-clean American, Asian and European
machine tools, all highly automated. Most of their operators, men and women,
sit in front of computer screens. Nowhere will you find a hammer.
And at the most recent EuroMold fair, last November, another group of
machines was on display: three-dimensional (3D) printers. Instead of bashing,
bending and cutting material the way it always has been, 3D printers build
things by depositing material, layer by layer. That is why the process is more
properly described as additive manufacturing. An American firm, 3D Systems,
used one of its 3D printers to print a hammer for your correspondent, complete
with a natty wood-effect handle and a metallized head.
This is what manufacturing will be like in the future. Ask a factory today to
make you a single hammer to your own design and you will be presented with
a bill for thousands of dollars. The makers would have to produce a mould,
cast the head, machine it to a suitable finish, turn a wooden handle and then
assemble the parts. To do that for one hammer would be prohibitively
expensive. If you are producing thousands of hammers, each one of them will
be much cheaper, thanks to economies of scale. For a 3D printer, though,
economies of scale matter much less. Its software can be endlessly tweaked
and it can make just about anything. The cost of setting up the machine is the
same whether it makes one thing or as many things as can fit inside the
machine; like a two-dimensional office printer that pushes out one letter or
many different ones until the ink cartridge and paper need replacing, it will
keep going, at about the same cost for each item.
Additive manufacturing is not yet good enough to make a car or an iPhone, but
it is already being used to make specialist parts for cars and customized covers
for iPhones. Although it is still a relatively young technology, most people
probably already own something that was made with the help of a 3D printer.
It might be a pair of shoes, printed in solid form as a design prototype before
being produced in bulk. It could be a hearing aid, individually tailored to the
shape of the user’s ear. Or it could be a piece of jewellery cast from a mould
made by a 3D printer or produced directly using a growing number of printable
materials.
But additive manufacturing is only one of a number of breakthroughs leading
to the factory of the future, and conventional production equipment is
becoming smarter and more flexible, too. Volkswagen has a new production
strategy called Modularer Querbaukasten, or MQB. By standardizing the
parameters of certain components, such as the mounting points of engines,
the German carmaker hopes to be able to produce all its models on the same
production line. The process is being introduced this year, but will gather pace
as new models are launched over the next decade. Eventually it should allow
its factories in America, Europe and China to produce locally whatever vehicle
each market requires.
They don’t make them like that any more
Factories are becoming vastly more efficient, thanks to automated milling
machines that can swap their own tools, cut in multiple directions and “feel” if
something is going wrong, together with robots equipped with vision and other
sensing systems. Nissan’s British factory in Sunderland, opened in 1986, is
now one of the most productive in Europe. In 1999 it built 271,157 cars with
4,594 people. Last year it made 480,485 vehicles—more than any other car
factory in Britain, ever—with just 5,462 people.
“You can’t make some of this modern stuff using old manual tools,” says Colin
Smith, director of engineering and technology for Rolls-Royce, a British
company that makes jet engines and other power systems. “The days of huge
factories full of lots of people are not there anymore.”
As the number of people directly employed in making things declines, the cost
of labor as a proportion of the total cost of production will diminish too. This
will encourage makers to move some of the work back to rich countries, not
least because new manufacturing techniques make it cheaper and faster to
respond to changing local tastes.
The materials being used to make things are changing as well. Carbon-fiber
composites, for instance, are replacing steel and aluminum in products ranging
from mountain bikes to airliners. And sometimes it will not be machines doing
the making, but micro-organisms that have been genetically engineered for the
task.
Everything in the factories of the future will be run by smarter software.
Digitization in manufacturing will have a disruptive effect every bit as big as in
other industries that have gone digital, such as office equipment, telecoms,
photography, music, publishing and films. And the effects will not be confined
to large manufacturers; indeed, they will need to watch out because much of
what is coming will empower small and medium-sized firms and individual
entrepreneurs. Launching novel products will become easier and cheaper.
Communities offering 3D printing and other production services that are a bit
like FaceBook are already forming online—a new phenomenon which might be
called social manufacturing.
The consequences of all these changes, this report will argue, amount to a
third industrial revolution. The first began in Britain in the late 18th century
with the mechanization of the textile industry. In the following decades the use
of machines to make things, instead of crafting them by hand, spread around
the world. The second industrial revolution began in America in the early 20th
century with the assembly line, which ushered in the era of mass production.
As manufacturing goes digital, a third great change is now gathering pace. It
will allow things to be made economically in much smaller numbers, more
flexibly and with a much lower input of labor, thanks to new materials,
completely new processes such as 3D printing, easy-to-use robots and new
collaborative manufacturing services available online. The wheel is almost
coming full circle, turning away from mass manufacturing and towards much
more individualized production. And that in turn could bring some of the jobs
back to rich countries that long ago lost them to the emerging world.