By Nader Mikhail
We are in the midst of a digital explosion. Rapidly advancing technology is giving us insights into consumer behavior and manufacturing trends like never before, completely changing the way we build and use products. This trend—officially recognized as the third industrial revolution—promises mass customization and rapid adaptation to demand fluctuations. But to get to a future where technology guides global commerce, we need to embrace this new kind of manufacturing. The future is here, and it’s not going to be kind to those who aren’t ready.
The first industrial revolution brought the power of the steam engine to manufacturing. Rural towns turned into cities and modern concepts of social class and capitalism made their way into the 18th century zeitgeist. In the early 20th century came the second industrial revolution. Henry Ford’s assembly line allowed mass production to proliferate through Europe and the U.S. Suddenly, consumers had access to affordable products that opened doors for transportation and migration of communities. With the further innovation of transport systems, raw materials became easily retrievable, and goods began to flow across land and sea.
Enter globalization. A trend whose modern wave took hold in the years after World War II, globalization led corporations to outsource manufacturing and introduced developing countries to a number of industries. The creation of multinational trade organizations like GATT, which later morphed into WTO, further allowed the global economy to flourish by reducing tariffs and promoting foreign trade. The result? Affordable products whose components are better traveled than the average owner.
But things are changing.
We find ourselves today in another wave of revolution, a digital approach to manufacturing. The Internet of Things (IoT), 3D printing, and robotics are all reducing costs while reducing our need to transport parts from all over the world. What we’re seeing today is a movement towards more localized manufacturing networks that will have profound effects on the way we consume and live.
The Changing Tide
More and more, consumers want customizable products. The assembly lines of yore were ideal for identical products with few iterations, optimizing for the supply side of the equation. But today, driven by social media trends and millennial consumer behavior, companies must increasingly optimize for the demand side. So we’re now seeing mass-production being altered to allow for variations in manufacturing, consumers want to pick their new Apple iPhone’s color. They want to choose the design of their new Nikes. They want the freedom to “build” their dream car online and have that model tailor made for them. The technology exists today to make these desires a reality. But we’ve just begun the climb toward reaching manufacturing’s potential.
Advancements in robotics will allow companies to manufacture the products consumers want with greater speed and precision. Advancements in chemistry will result in cheaper, lighter, stronger materials that radically drop the cost of production and delivery. From the newest smartwatch to lifesaving medical devices that can be made on demand and to exact specifications, the future will be filled with products we only dreamed could exist.
The need to get new products fast will change the way we transport goods. Setting aside the cries of U.S. politicians to bring manufacturing back inside the country’s borders, companies will be compelled to change their manufacturing plans because of cost. Robotics and 3D printing will likely bring supply closer to demand, specifically to countries where high-tech manufacturing practices are readily available—along with the talent needed to develop it. The digital revolution calls for supply chain managers, data scientists, and engineers to pioneer new methodologies. The new supply chain professional will need to work with technology to help analyze trends and determine what needs to be acted on and what are just false alarms. Machines won’t have all the answers; they will always need human experts to drive value.
Take 3D printing, otherwise known as additive manufacturing. While still in its infancy, additive manufacturing has already produced a car, a human organ, and countless medical devices. As the process continues to develop, it will improve to the point where we no longer need disparate manufacturing locations to build our products. Prototypes could be developed and iterated upon in minutes. Customization will take a whole new direction, and will result in demand for products that previously would not have existed. Not to mention, remote regions that previously had to wait for precious supplies could be given the tools to simply make them then and there, with little more than a WiFi connection.
The IoT is also playing a key role in the third industrial revolution. Billions of sensors around the world are collecting and communicating data to vast plains of storage centers, to an almost overwhelming degree. Signals tell shippers if a perishable product is in danger of overheating; sensors monitor consumer habits in a shopping mall; predictive maintenance signals save truck drivers money and time. As we get better at processing the vast amounts of data from IoT devices and sensors, we will eventually be able to build a manufacturing process that can quickly respond to changes in demand or environment.
So we now face a post-globalization era, driven by shifting consumer trends and the digitization of manufacturing. The economic effects should be good for the U.S., Europe, and Mexico, as well as some countries in Asia that excel at advanced manufacturing—notably Japan and South Korea. Other countries will have to catch up. The digital revolution isn’t happening overnight, but it’s not going away either. To capitalize on this revolution, companies will have to do more than just adopt new technologies; they’ll have to adapt their organizations and processes. It might be difficult at first, but your customers will thank you—while your competitors wonder where their customers have gone. SW
Nader Mikhail is the founder/CEO of Elementum. He believes there is one global supply chain, not one for each company. To make this supply chain ridiculously simple and accessible to all companies, Mikhail draws upon over 15 years of experience building teams and companies—from transforming Fortune 100 companies at McKinsey to modernizing the supply chain at Flextronics Mikhail hails from Huntington Beach, CA, and is a proud alumnus of UC Irvine and Stanford University.
Jul2016, Software Magazine