The New Face of Global Manufacturing

Local micro-factories democratize innovation, making production more readily available to all entrepreneurs, inventors and makers.

The production of goods has evolved significantly over the past few decades. Today, large factories in low-cost regions, primarily in Asia but also increasingly in Eastern Europe and South America, build many products.

This has largely been good for consumers. Products manufactured overseas have powered our cars, connected our networks and furnished our lives. Lower manufacturing costs have made more products more affordable for more people.

However, there are signs that this approach has reached its limits. The industry is exhausting low-cost labor pools in distant countries, and in manufacturing settings closer to consumers, the growing global middle class is proving unwilling to do repetitive tasks, fueling high turnover.

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Not only is it getting harder to find labor in low-cost regions to build products, the growing impact in terms of local jobs, the environment and delays in product distribution around the world is becoming even more serious.

In tandem, consumer demand for local, personalized products is a trend that’s been steadily growing. Several years ago, research found that more than half of consumers said they prefer customized purchases, and the majority of those said they’d even be willing to pay more for a customized product or service.

This new consumer paradigm presents massive opportunities for large corporations to succeed in a localized economy — if they are set up to take advantage of them.

The key to unlocking these opportunities lies in a distributed manufacturing operation — one that relies on a network of smaller, more nimble and flexible factories around the world located closer to customers. Simply put, companies must increasingly think globally (in terms of emerging customer needs) but build locally (in terms of executing those needs).

Enabling innovation

The possibility of smaller, distributed factories with accompanying ecosystems that serve regional markets, compared to a large production center that ships product worldwide, may seem counter to how industry typically thinks of cost efficiency and scale.

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Companies must increasingly think globally but build locally.

Automation is proving to be an important link between large companies and their localization strategies. It enables not only localization in manufacturing but innovation — and at lower costs and higher efficiency.

This is where micro-factories come into play. These smaller factories utilize automation, ensuring quality and consistency in product while enabling scale through efficient output. With their lower operating costs, micro-factories effectively democratize innovation by making manufacturing more readily available to entrepreneurs, inventors and makers.

For example, if someone today has an idea for a new product, even if they have the technical skills to do so, they cannot manufacture that product at scale without investing significant capital. In 10 years, we’ll see cost-effective micro-factories drive a new wave of innovation across industries as manufacturing becomes accessible to all people.

Getting closer to customers

Closer geographic proximity to customers also means closer proximity to customer tastes and preferences.

Not only can a company localize the actual product to best suit that particular market, it can focus its marketing efforts on locally designed and produced goods — and take pride in those efforts.

Geopolitical policies amplify this trend, as goods produced closer to the consumers who buy them aren’t subject to the same threat of changing tariff structures. Further, smaller manufacturing footprints help companies reach their sustainability goals.

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In this fast-changing world, a localized approach to manufacturing is imperative for companies to succeed.

The benefits of automated micro-factories far outweigh losses. According to a study by Deloitte and The Manufacturing Institute, every manufacturing position creates 2.5 jobs in local goods and services, and for every dollar of value created in manufacturing, another $1.37 is created in additional value in other sectors.

Ultimately, job growth driven by local manufacturing is an important development. There’s been much pontificating on the labor impact of Industry 4.0, but a “think-global, build-local” approach bodes well for the future.

Benefits for all

Globalization, simply put, is changing. In this fast-changing world, a localized approach to manufacturing is imperative for companies to succeed.

Intelligent automation will enable companies to embrace localization and build closer to their customers than previously possible.

In this world, product innovation trumps cost advantages — with no player too large or too small to reap the benefits.

This article originally appeared on World Economic Forum and was republished with permission. 

Amar Hanspal is the CEO of Bright Machines, a company that is transforming factories around the world by delivering intelligent, software-defined manufacturing. He previously served as Autodesk’s co-CEO and Chief Product Officer.

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