For the last 30 years or so, the world was focused on globalization. It built supply chains where finding the lowest cost of production was the only consideration. Quality of manufacturing was always a secondary consideration. As a result, the world’s manufacturing industries became highly centralized, mostly in China.
And for a time, this worked relatively well. Consumers had access to goods and services at lower prices. This brought roughly a billion people out of poverty. And the world became more interconnected and interdependent than ever before.
But there was a downside, too…
Western countries began to recognize severe ethical issues such as child labor or unsafe working environments. And countries also recognized that all this overseas production was powered by “dirty” energy. Intellectual property theft was also a major problem.
And then there were the lost jobs. America’s manufacturing base moved overseas. That meant there were fewer “breadwinner” jobs in manufacturing for American workers.
But aside from all this, there was an even bigger problem with this centralized manufacturing model. And if it wasn’t for COVID-19, the world might never have noticed it.
The world’s supply chains became fragile. When everything is functioning normally, hardly anybody realizes this. But that all changed with COVID-19 and the economic lockdowns. Almost overnight, the world’s supply chains were disrupted. For a time, it was difficult to get even basic goods. Nobody was sure if the next shipment would be on time or if it would be delayed indefinitely.
Here’s an example we all might remember. In April, America’s hospitals were running low on personal protection equipment (PPE). These are things like face masks, face shields, and hospital gowns.
According to a survey at the time, 20% of health care facilities were completely out of N95 face masks, while 36% were out of face shields and hospital “booties.” And 34% of medical facilities had no remaining supplies of thermometers.
Even facilities that did have this equipment were running dangerously low. The vast majority had less than two weeks’ worth of this equipment on hand.
Remember when we were urged to not hoard face masks and to save them for medical professionals? That was why.
I’m sure you can guess what caused this shortage. Most of this equipment is manufactured in China. And when COVID-19 hit, supplies were kept within Asian borders as a matter of national security. Here’s another example. China controls about 80% of the world’s antibiotics manufacturing. And almost 100% of the world’s supply of penicillin G comes from China. Can you imagine what would happen if the world were cut off from these drugs?
Rosemary Gibson is a senior advisor at the Hastings Center. She summed it up. She said that, “If China shut the door on exports of these medicines and the ingredients to make them, within a couple of months our pharmacies would be empty.”
The big story in 2020 is that the world finally woke up to how dependent we are on this centralized manufacturing model. And we finally understood the consequences of this model failing.
And that’s why I’m predicting a “manufacturing renaissance.”
There will be two big changes. The first is that manufacturing jobs will come back onshore. The world has finally learned that economic independence is a matter of national security. Put even more simply, manufacturing jobs are coming back to America. Countries all over the world will be looking to bring their manufacturing base back within their borders.
And this will reinvigorate the American manufacturing industry. It’s going to mean more jobs and better-quality products.
Every year, the Boston Consulting Group puts together a global manufacturing cost competitiveness index. Basically, it analyzes the cost of manufacturing in countries around the world. And the results from 2019 were striking.
The cost of manufacturing in China is almost on par with the U.S.
China had an index range between 95 and 97 compared to the U.S. at 100. What that means is that the cost advantages of manufacturing in China are less than 5% compared to the U.S. And this doesn’t consider factors like tariffs, intellectual property theft, quality problems, logistics costs, or these fragile supply chains that we’ve been talking about. When you consider all that, the advantages of manufacturing in China disappear.
In boardrooms across America, executives are discussing the best ways to bring manufacturing back onshore. And we’re already seeing some clear signs.
Back during the summer, we got word that semiconductor giant Taiwan Semiconductor Manufacturing Company (TSM) was building a $12 billion semiconductor fabrication plant in Arizona. And prominent server manufacturer Supermicro also announced that it is building a new plant in the United States. Supermicro produces large server hardware that goes into data centers.
That means advanced components like semiconductors and data center hardware will be manufactured right here in the United States.
A lot of people have been claiming the “death” of American manufacturing for years. They are dead wrong. American manufacturing will come roaring back.
The second change is that this new manufacturing model won’t be centralized at all. It will be decentralized. What that means is that you will not have one giant manufacturing hub. Instead, you will have smaller manufacturing plants scattered across the country. There could be a manufacturing site close to every major city.
As we’ve seen this year, having centralized manufacturing can be disastrous. If a manufacturing hub goes down, the entire supply chain gets thrown into chaos. That won’t be the case with a decentralized model.
But these new manufacturing sites will be different than what we’ve seen in the past. They’ll make use of advanced technologies like machine vision, automated robotics, and 3D printing.
One of the biggest breakthroughs was with artificial intelligence (AI) as applied to computer vision and the ability for a robot to grip an object. This has been a huge bottleneck for manufacturing robots. Right now, even the best robots are still not as fast or as efficient as a human when it comes to picking or sorting objects. And the reason is that these robots still aren’t great at “understanding” how best to grip different objects.
Is this object slippery? Is it delicate? Do I have to hold this object a particular way? These are things that humans know instinctively. But manufacturing robots still have a tough time.
Right now, it takes about 29 seconds for a robotic arm to “look” at an object and “decide” the best way to get it from Point A to Point B without damaging it. But a team of researchers out of UC Berkeley is solving this problem. The team used a form of AI called deep neural networks to train a robotic arm on the optimal way to move objects around without damaging them.
After training, it didn’t take the robot 29 seconds to “decide” how best to move an object. It took just 80 milliseconds.
This was really the last piece of the puzzle. I predict we will start to see this technology deployed in manufacturing plants, logistics facilities, warehouses, and even laboratories in 2021.
Believe it or not, 3D printing, or “additive manufacturing,” is already widely used here in the U.S; 34% of all global installations of additive manufacturing equipment are happening in the U.S.
China is in second place at 10.8%. So America leads the world in 3D printing. And it’s easy to see why. At a very high level, 3D printing is much more cost effective. The technology is known as “additive manufacturing” because layers of materials are added to one another to arrive at a finished product.
Compare that to traditional manufacturing, which is known as “subtractive manufacturing.” With this method, a block of some material, usually metal, is cut, filed, drilled, and eventually reduced to the desired shape and size.
Additive manufacturing wastes fewer materials, it is much faster, and it’s done at a fraction of the cost.
Here’s one simple example from a company that needed to create molds to produce a propeller for a large air compressor.
Additive manufacturing saved $147,000 per mold casting. And additive manufacturing saved eight to 11 months on delivery of the mold castings.
And this is having an impact on a lot of different industries. I’ll give you a prediction for 3D printing in 2021. I predict the first 3D-printed rocket will go into orbit sometime in the next 12 months.
There’s a company called Relativity Space. This is a company that can 3D print an entire rocket – including the engine – in 60 days. It can take up to a year to build a rocket using traditional methods.
So yes, I predict a 3D-printed rocket will go into orbit in 2021.
The other big benefit from 3D printing is a high level of customization. Right now, centralized subtractive manufacturing is inflexible. These techniques can really only build three or four different versions of a product. These plants build out a limited number of products at high volume. Then that product is put on a cargo ship, and it’s sent across the ocean. That takes a long time, and we really have few options for customization.
But a decentralized model that uses additive manufacturing throws all that out the window. You can have very high levels of customization. Remember, these products are literally printed from scratch. You can make anything you want.
And these manufacturing plants won’t be overseas. They’ll be right down the road. So the finished product will arrive in hours, not weeks.
Imagine if a company needs a complex, highly customized gear. And it needs it ASAP. It’s no problem with this model. Simply order the part on Monday afternoon. It’s printed overnight. And it arrives at the warehouse Tuesday morning.
Remember, before the printing press, text was hand-copied by scribes. We don’t have scribes anymore. We also don’t have weavers, elevator operators, or telephone operators. The truth is that technology has historically replaced the menial or dangerous tasks that humans aren’t well suited for. The same will happen with this “manufacturing renaissance.” Some jobs will disappear. But new ones will be created.
Look at Amazon. Here’s a company that has been innovating with robotics for years. And yet Amazon is an amazing job creator.
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