There is broad agreement that technological innovation must continue in order for the US to regain global competitiveness in strategic sectors like manufacturing. But a formula for fostering innovation remains elusive for companies across electronics industry sectors ranging from product designers to contract manufacturers and distributors, as well as among startups and established players.
Representatives from each of these sectors tackled the innovation question during the DESIGN West conference and exhibition, held in San Jose, Calif., last week. Among the issues they debated is what role if any the government should play in fostering innovation.
“Innovation isn’t dead, it’s just moved around a bit, so you have to understand where it is and how it works,” said James Truchard, founder and CEO of National Instruments. Where it can be found, Truchard argued, is in emerging ecosystems like the Apple iOS mobile platform, where an estimated 1 billion apps have so far been built. “Ecosystems play a big role, and understanding those ecosystems and what role they’re playing is very important to see that innovation stays alive and well.”
In the case of an established company like National Instruments, Truchard said, technology innovation has shifted from instrumentation based on vacuum tubes 35 years ago to pervasive software today. The test, measurement, and embedded systems company has been focusing on delivering “off-the-shelf ecosystems.”
Domestic contract manufacturers of electronics that survived the exodus of US manufacturing to Asia have tended to be smaller, nimble companies able to adjust to varying manufacturing volumes. Some of those companies are starting to retool in hopes of offering higher-volume manufacturing. Richard Szczepkowski, president of the contract manufacturer Swemco, said his company installed new manufacturing equipment nine months ago in an attempt to move from low- to mid-volume production. The goal was “to see if we can’t bring [electronics manufacturing] back from overseas,” he said.
While it remains difficult to persuade companies with overseas manufacturing operations to pull up stakes and bring work back to the US, Szczepkowski said he is betting that US contract manufacturers can grab a larger share of future medium- and high-volume production once they manage to upgrade their facilities and implement “lean” manufacturing approaches that will help them compete against Asian rivals.
Higher levels of automation, along with replacing manual operations, will eliminate some jobs for operators. But manufacturing plants create a large number of engineering, facility, support and supply chain positions for each job on the factory floor itself. Can't remember exact numbers but the economic benefit is substantial.
The upside of the application of technologies like the cloud to manufacturing and the production of services are of course greater efficiencies along with better and cheaper products. While the cost of a product drops, its value remains. Food production is the classic example.
The downside is that greater productivity translates into fewer skilled jobs as more automation is deployed and managers learn to leverage all the data they've collected and deciphered. Therefore, it appears we'll have to find ways to expand the manufacturing base in order to make up for the job losses and create new ones, assuming we can produce the engineers and technicians to fill them.
More coordination and much higher levels of data between the factory floor and the enterprise/supply chain would be a way for many manufacturers to greatly enhance their use of flexible automation. Some industries such as pharmaceuticals are much more advanced in collecting information on production processes but there is a lot of room for improvement/innovation among the majority of manufacturing companies.
George, it's my understanding that a good amount of linkages are already getting deployed in manufacturing, particularly greenfield plants. The use of cloud-based applications are getting accepted far more quickly than I would have expected. Add to this vendor-managed maintenance as well as some areas of control. The new plant is part of an extended network these days.
I asked the panel about the role of government. Most said the feds should stay out of their way. But it's also likely that foreign government policies like massive subsidies will hamper the revival of U.S. manufacturing as much or more than federal red tape. One panelist noted that once you ship materials to Brazil for assembly, you cannot get those materials out of the country. That sounds like a trade barrier to me.
We don't need trade wars with China and Brazil, we need to compete.
It appears that the linkages between manufacturing and value-added services are growing. John Zysman of the Berkeley Roundtable on the International Economy (and coauthor of the 1987 book Manufacturing Matters) stresses that automation and emerging technogies like the cloud can be used to revive U.S. manufacturing by producing what he calls "cloud-enhanced services." Therefore, the "direct linkage" between services and manufacturing is strengthened. The result should be agile manufacturing the produces more than just the apps mentioned by Truchard in my piece.
I agree with you on this Apresher. The integration between manufacturing and the enterprise side helps not just the manufacturer, but the whole supply chain, from suppliers to customers. It seems that for many manufacturers, the war between IT and control seems to have eased. Interestingly, this was a management problem that stood in the way of technology advancements. I think vendors have played a crutial role and brokering the peace.
One thing that strikes me is the constant talk about the role of government. In many other countries, believe it or not, the government stays out of the way until something bad happens. This is especially true in China. It takes a different turn than here in the US. There are lots of regulations in China. On the other hand, they are not generally enforced. I have some knowledge of this from conversations with Chinese industrialists.
On the business formation end, the US has done fairly well, but we are making it more diffucult. This is the wrong trend.
As for companies with overseas manufacturing moving back to the US, that is actually a bright spot. Recall that most of these companies manufactured in the US before. They did not move overseas because there was lots of expertise there. They typically had to send their own people to set things up. Japanese companies are increasing their manufacturing in the US, at the expense of their home operations. So, lots of manufacturing could very quickly and easily move back to the US. The level of the workers and the management is much higher here. It is a matter of government policy, relative to other locations, that affects currency, cost doing business and markets that matters. Most of the workers in overseas low cost manufacturing move to those jobs from a subsistence farming background. We are not there because of the skill level.
First let me say this is a good article and a timely topic.
What strikes me though is the statement that 1B iOS apps have been created. What that has to do with manufacturing is not obvious. It reminds me of the early days of the PC. The Microsoft powered PCs won the battle against the Apple PCs due to the application count. The fact is, only a small number are used by most people.
Let me give an example of why I am reacting to this. The reality is that the value of these apps is very low for most. I was talking to a guy at lunch one day. He had shown me an iPhone app he had commissioned. I was interested in doing the Android version. Usually I would take a percentage of the profits. So, I asked him what he was making on it. He said his monthly take would pay for about half the bill for the lunch we were having. I didn't bother following up.
One area where flexible automation can and will continue to get stronger is the linkages between the manufacturing floor and the enterprise system. Certainly these linkages using networking have been around for a long time, but making them better and more comprehensive is vital to reaching the next level of flexible manufacturing. More real-time data on the details of production, better communication with the supply chain and the ability to quantify the energy required to create specific products, for example, are current areas of focus. The ability to easily and effectively use manufacturing and process data is key.
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