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The Future Of Manufacturing, Part I

Changes in technology and global demographics are spurring a manufacturing revolution

Radical changes in technology and global demographics (the latter described in last Thursday’s Insights article) are spurring a manufacturing revolution. Current volatility in the Chinese economy demonstrates how a diminished labor pool and an aging population combined with rapid automation are destabilizing global markets.


The Impact Of Industrial Espionage

Often overlooked is the role of industrial espionage in advancing Chinese manufacturing. In last Sunday’s “60 Minutes” (1/18/16), a report updated the impact of Chinese industrial espionage against the U.S.–claiming a 2M U.S. jobs loss at a cost of upwards of $1T to the economy. Bottom line–the migration of manufacturing jobs from the U.S. and other developed economies is no longer limited to old-style mass production, but now includes high-tech manufacturing as well. Though industrial espionage is a global phenomenon, there is nothing comparable to the scope and magnitude of the Chinese theft of U.S. intellectual property in the past 10 years, regardless of how often denied by the Chinese leadership.

Chinese Labor Costs Rise With Automation And A Declining Labor Pool

Chinese Communist Party Chief Xi Jinping recently called for “an industrial robot revolution” in his country, because of his concerns about the beginning of a manufacturing migration to other parts of the world as their labor pool shrinks, population ages, and labor costs rise (now at $14.60 an hour compared to 60 cents in 2002). –Automated sewing machines and digital printers, for example, have revolutionized the apparel industry with fewer but better paid, higher skill jobs.

Mass Customization And Demand For Quicker Delivery

Further undermining China’s manufacturing prowess is an increasing demand for faster delivery of high tech but customizable products. While China is gaining ground on customization, it can’t compete with Mexico or the U.S. itself on quick delivery. Nor can their manufacturing of inexpensive products compete with the cheap labor in economically undeveloped countries like Indonesia, India, and Thailand. Interestingly, while Africa has great manufacturing potential in the longer term, concerns about its weak infrastructure are holding it back for now.

In my next Insights article, I’ll explore the emergence of product customization–from medicines customized to an individual’s DNA to clothing tailored to a buyer’s exact size, fabric and color preferences.


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