Mitch Free, Founder & CEO, MFG.com
Manufacturing is what created wealth and built America into one of the greatest countries in the world. Manufacturing creates sustainable jobs and is the backbone of our ability to defend ourselves as a nation. It seems common sense that a strong manufacturing sector is critical to sustaining our standard living, yet we lost our way when we starting outsourcing to low cost countries in exchange for increased short term profits. We cannot blame the companies who quickly embraced and became enamored by the savings from low cost country sourcing. Our capitalist society and Wall Street rewards profits, not job creation or being good to the environment.
Now for the positive news. There is a renaissance in American manufacturing that is exciting on many levels and it is being fueled by a convergence of technologies and shifts in business models. In short, the digitalization of manufacturing is creating new opportunities for those who can grasp the possibilities and adapt their businesses accordingly. Computer Aided Design (CAD), Computer Numerical Control (CNC) machining, Additive Manufacturing (also known as 3D printing) and the connectivity of the Internet have converged to forever change the way manufacturing and supply chains operate.
An analogy to what is happening in manufacturing would be what happened in the photography industry. There was a time when a well trained and experienced person was required to develop pictures in a dark room with expensive equipment. Then came the time where you could drop your film off and have pictures back in a week, they came the one hour photo developing and now anyone can edit and print beautiful pictures with consistency. Today you can email a picture to multiple people and they could print it with the same degree of easy and quality. Why? Because it is a digital process and as such the required skills and the cost of the equipment have commoditized.
Today in manufacturing you can send a 2D or 3D CAD file to suppliers with a high degree of confidence that they will be able to produce your parts or product exactly as the digital representation (CAD file) depicts. This is very different from the days where manufacturing was more of an art and you had to find the guy or company that had particular expertise. The ability to make a quality part or product has commoditized and is no longer a differentiator for manufacturing companies. Today their competitive advantage comes from how well they utilize the technologies and service the customer.
What does all of this mean for product companies? Product companies rarely have in-house production capability today, they focus on design, marketing and distribution while outsourcing the production. Understanding and harnessing the digital technologies allows them to:
• Use the internet and marketplaces like MFG.com to have a virtual factory of unlimited size that can scale up and down on demand with no capital investment.
• Easily distribute manufacturing to produce closer to their customers. One can think of production capacity today almost like printers on a network.
• Produce on demand in near lockstep with customer orders thus reducing inventory, work in progress and the risk of being stuck with product that becomes obsolete.
• Allow customers to customize products to their individual tastes or needs. Because manufacturing is a digital process there is little cost to customization, yet customers are typically willing to pay a significant premium for products they customize.
As product lifecycles get shorter and shorter, product companies and their suppliers have to be able to able to react fast and take steps to mitigate risks. Producing nearly on demand, allowing customers to customize their products and easily distribute the manufacturing has made the model of having a factory on the other side of the world mass produce a large volume of your widgets and waiting six weeks for the ship to arrive an obsolete business model ripe for a more agile and technologically sophisticated competitor to disrupt.
This convergence of technologies and shift in business models is reinvigorating the manufacturing sector in America. But it is not the smoke stack type factory jobs of past generations, it is technology based jobs applied to making things in a digital way. The greatest challenge the manufacturing industry faces is that people with manufacturing skills often lack the technology skills and those with technology skills often shy away from a career in manufacturing due to an outdated perception of manufacturing. For those who get it, opportunity and profit is abundant in the new industrial revolution.