The COVID pandemic, despite its disruptive effects on every aspect of our lives (not to mention all the painful losses we’ve endured since 2020), has caused us to re-examine and rethink how we function in almost every area. From personal interactions, to how we work, how we conduct healthcare procedures, to how we eat and how much we cook, and everything in between; COVID has induced a multitude of changes, and many of them have been for the better. Let’s learn more about building the factory of the future below.
One industry that has been greatly affected by COVID is that of manufacturing. Manufacturers saw many issues arise due to the pandemic. They saw supply chain disruptions, delivery delays, increased costs, rapid changes in demand, and general uncertainty. All of these issues only served to highlight the fact that manufacturing already needed a facelift.
Manufacturing Needs an Update
A pandemic is certainly not the only unexpected event that could affect manufacturing. Other concerns are things like geopolitical unrest, natural disasters, and shipping disruptions. These, and other potential problems, mean that manufacturers must be prepared and have plans in place to keep moving forward, despite these harmful events.
Of course, the potential for the unexpected is certainly not the only reason why manufacturing needs to be updated. The manufacturing process itself is in great need of change as manufacturing, production, and distribution is currently responsible for a large portion of the world’s pollution. In fact, altering these processes to “greener” methods could eliminate 45% of global emissions.
Not only would updates to manufacturing processes be good for the environment, they would also be beneficial to manufacturers who are feeling the strain of trying to fill orders quickly, maintain product quality, work efficiently, increase flexibility, maintain safety, and improve sustainability, even as they reduce costs and increase production complexity. These manufacturers are under massive pressures which create other sustainability issues from within.
Manufacturing With Sustainability in Mind
Bringing manufacturing up to speed with modern digitalization would increase both sustainability and efficiency. Not only that, but currently manufacturing represents 54% of the world’s energy consumption and 20% of global emissions. Rethinking just 5 areas of manufacturing could reduce emissions by an amount equal to eliminating all forms of modern transportation. With new AI and IoT technologies, these changes are 100% possible.
Sustainability in manufacturing is beneficial to all and could be invaluable. For instance, responsible waste management would reduce costs. New ideas behind sustainability drive innovation; green processes ensure early completion of regulatory requirements; and the company image is strengthened by its embrace of environmentally friendly processes.
The first step to achieving all of this is through shared data and connected tech. Manufacturing factories of the future must include adaptable technology, scalable production, and a versatile workforce. It also must include smart technologies such as wearable sensors for manufacturing workers, virtual twins to explore products and processes prior to manufacturing, industrial IoT, and cloud software for faster connections across physician and organizational barriers.
Through updating manufacturing processes and procedures, manufacturers can not only make a significant positive impact on the environment, but they can also plan for the future and be prepared for the unexpected without missing a beat.
eCommerce is growing at a phenomenal rate. On average, 71 percent of consumers express at least some frustration when shopping is impersonal. Because of that, it comes as no surprises that from 2015 to 2018, interest in customized products grew by 2.4 times. The future of shopping is customization—it is no longer just a luxury. The solution is through the product configurator.
But let’s take a step back and look at customization in general.
There are four approaches to customization and they range from low to high customization. In order from low to high, they are adaptive, transparent, cosmetic, and collaborative. Adaptive means that the product is standardized and designed to accommodate many uses. There is no customer input. Transparent customization is when the manufacturer adducts the product based on customer data. In this, only the function of the product is customized. Cosmetic has customer choices restricted to the final stages of manufacturing. As the name cosmetic implies, only the appearance is changed. And finally, there is collaborative. Collaborative customization creates a truly unique product based on customer preferences. Both function and appearance are customized by the customer.
And this is why a business needs a product configurator—especially since not all customization is good customization. Configured products, products produced by product configurators, take the benefits of standard and bespoke products and combine them into a cost-effective and mass-produced customizable product. It has lower costs, high scalability, and low effort. In addition, products are readily available, and are available to both small and large businesses alike.
How does a product configurator work?
Product configurators are powered by rules. They are built on a product database that includes data such as the features and functions of each part (maximum load, environmental exposure, usable lifespan) and how products work together within assemblies (fastener options, physical measurements, and wire sizes and colors). These rules are in place to make sure that misconfigurations do not happen and that everything works as it should. Configurable parameters include: product size and bore stroke, energy source, materials and finishes, and output power, duty cycle, and RPM.
Product configuration is good for business and makes customization scalable. Offering custom products can improve engagement, increases brand loyalty, widens the customer base, reduces work and returns, and grows profits and revenues. By investing in customization, companies are more likely to meet product targets. For example, companies that had no customization reached 64 percent of their revenue goals. Companies that invested in customization efforts, however, reached 72 percent of their revenue goals. Across the table—from quality, cost, and launch date—companies that invested in customization were around ten percent closer to their goals.
To find the right configurator, you should look for: real-time pricing, data available early on, 360 degree visualization, and customer experience. Product configurators can vary in complexity for different applications, so you need to find the best one for your business.
Take a look at the following visual deep dive to better understand the technology behind the product configurator below:
The Taiwanese government has offered assurances there is enough water to keep the country’s chipmaking industry running till May.
Taiwan has become one of the most important semiconductor manufacturing hubs in the world. TSMC is one of the biggest chipmakers, relied on by companies across a number of industries. That demand is at a record high, with multiple industries impacted by shortages.
Unfortunately, Taiwan is currently in the midst of its worst drought in 56 years, impacting the water supply that’s available for a number of critical industries, including semiconductor manufacturing.
According to Bloomberg, the government has offered reassurances the country has enough water to last until May. At that time, the yearly monsoons should alleviate the drought, although experts are already warning rainfall may fall short of historical levels.
In the meantime, manufacturing at TSMC has not yet been impacted, and the company says it has contingency plans in place.
Samsung is considering a $10 billion factory in Texas, its most advanced to date in the US.
Samsung is the largest smartphone maker, as well as the largest memory chip maker, but the company lags behind rival TSMC as a semiconductor maker. While Samsung has been working to catch up for some time, there are a number of current factors that could be driving Samsung’s considerations.
US officials have shown increased interest in revitalizing the US semiconductor business. The early days of the pandemic illustrated the potential shortcomings of being so reliant on China and overseas companies for critical tech components, as multiple companies and industries were paralyzed when China went into lockdown. There has also been increased concern over the security implications of relying on China.
As a result, there’s never been a better time to invest in the US semiconductor industry. Adding to the opportunity is Intel’s recent troubles, including its decision to outsource production of some of its chips to TSMC, although Samsung was also part of the negotiations.
According to Bloomberg the company is locking to establish a factory in Austin, one that will eventually be able to fabricate 3 nanometers processors. If the deal moves forward, construction would begin this year, with manufacturing starting as early as 2023. The project could end up costing more than $10 billion.
Intel is in talks with TSMC and Samsung to produce some of the company’s chips.
Intel has fallen on hard times of late. Once the undisputed leader of the semiconductor industry, the company has struggled to keep up with demand, has been plagued with security issues, lost one of its most high-profile customers, seen an exodus of its top chip engineers and experienced difficulties moving to 7nm processors.
Intel’s troubles have led the company to consider outsourcing production of its chips to outside companies, something that would have been unthinkable just a few years ago. In October, CEO Bob Swan said the company was looking at outsourcing and would make a decision in the next couple of months.
According to Bloomberg Intel is now in talks with both TSMC and Samsung to outsource its production to them. The talks with Samsung, whose abilities still lag behind TSMC, are described as preliminary.
It’s unclear how much business TSMC could take on. TSMC is the company Apple outsources production of its custom silicon, now used in iPhones, iPads and Macs. As a result, reports indicate that Apple has already booked some 80% of TSMC’s 5nm production, raising questions about how much of Intel’s business TSMC could absorb.
While Intel is still holding out hope it will be able to turn things around and keep production in-house, it’s an amazing fall for one of the titans of the semiconductor business.
A huge survey by Alibaba of 5,015 US B2B SMBs and SMB manufacturers indicates a significant pivot to digital. Small and medium manufactures have traditionally been slower to integrate digital into their businesses. However, according to the survey, SMB manufacturers have been digitizing at twice the rate of other industries during the pandemic – to support other manufacturers as they accelerate their digitization.
Key findings from the full U.S. B2B SMB survey:
SMBs accelerated their pivot to digital: 93% of B2B companies are now conducting some portion of their business online, up from 90% in December, and 43% are utilizing ecommerce, an 8% increase over the same time period.
SMBs are finding opportunities internationally: even with supply chain disruptions during the pandemic, 63% of B2B companies report conducting some amount of cross border B2B trade, up from 59% in December.
SMB manufacturers surpassed other industries in digitization: amid the pandemic, manufacturers’ online B2B trade increased 8% – twice the rate of the overall 4% increase in all industries for the same period and tied with retail as the industries with the most digital growth. In December, U.S. manufacturers’ online B2B trade volume lagged all other industries except construction but have now passed multiple industries in their pivot to digital.
“We were happy to see the increasing digitization of US B2B companies and that many are increasing trade despite the pandemic, showing the resilience and grit of American business owners and entrepreneurs,” said John Caplan, President of North America and Europe of Alibaba.com. “Our research finds that digitization is no longer a nice-to-have, but a must-have for companies in every industry to bridge from surviving to thriving in the next era of business.”
Hon Hai Precision Industry Co. (Foxconn) Chairman Young Liu has said China’s “days as the world’s factory are done,” largely because of the US-China trade war.
Foxconn is the primary manufacturer of Apple’s iPhone, as well as a leading manufacturer for other smartphones and devices. The company has primarily operated factories in China, where there is an entire ecosystem geared toward tech manufacturing.
US officials have grown increasingly worried about the tech industry’s reliance on China, especially after the pandemic hit. As factories across China shut down, countless US companies saw production significantly impacted. The escalating trade war between the US and China has only made things worse.
As a result, according to Bloomberg, Liu believes manufacturing will become decentralized across the world, with manufacturing ecosystems in the Americas, India and Southeast Asia. Already Foxconn has managed to move 30% of its manufacturing outside of China.
Meanwhile, officials have been focusing on boosting semiconductor manufacturing within the US to help end reliance on China. It would seem there is merit to Liu’s prediction.
Verizon is the first company to receive Ericsson’s US manufactured, 5G commercial basestation.
5G promises to be one of the most transformative networking upgrades in history. The fastest variety of 5G, mmWave, delivers speeds measured in gigabits rather than megabits. In addition, 5G latency is usually in the single digits. As a result, 5G holds potential to be a viable replacement for traditional types of internet access, such as DSL, cable or fiber.
Despite the benefits of mmWave 5G, it has notoriously short range and even worse building penetration. In order to provide coverage, carriers must place basestations every couple of hundred meters, making basestations a high-demand component for 5G rollouts.
Ericsson has been working to meet demand, including ramping up a smart factory in Texas to manufacture the equipment.
“Ericsson’s smart factory is a cornerstone of our collaboration as we work together to bring 5G to our consumer, enterprise and public safety customers,” said Kyle Malady, Chief Technology Officer of Verizon. “Together these types of innovation will accelerate our 5G deployments, as we expand our 5G leadership in technology and continue to rapidly build the ecosystem with our partners.”
“As the most advanced platform for innovation, 5G will enable a transformation across enterprises – as we’re now experiencing in our own smart factories,” said Fredrik Jejdling, Ericsson Executive Vice President and Head of Networks. “Automation and remote operations have become more important, and we’re working with our customers to make them available for the benefit of industries. From producing the first 5G base stations at our 5G USA Smart Factory earlier this year, we’ve made our first commercial delivery to Verizon. That’s just the beginning.”
The US has been working to bring more high-tech manufacturing in-country in an effort to better insulate the tech industry from the kind of setbacks it suffered as a result of the pandemic. Ericsson’s announcement is another significant step in that direction.
A bipartisan group of lawmakers has unveiled a bill aimed at using more than $22.8 billion to help bring more semiconductor manufacturing to the US.
US officials have become increasingly concerned over the lack of US-based semiconductor manufacturing. In recent decades, the vast majority of the industry has moved overseas. The coronavirus has demonstrated the danger of relying on overseas production for components that are critical to so many industries. As the pandemic took a toll on China, American companies struggled to keep up with demand as a result of impacted supply chains.
One of the first steps toward semiconductor independence was a deal reached with TSMC to build a $12 billion facility in Arizona. As the primary chip provider for Apple’s iPhones and iPads, as well as other tech companies, a US-based TSMC plant would help insulate supply chains from future disruptions.
In the bill unveiled by US Senators John Cornyn and Mark Warner, as well US Representatives Doris Matsui and Michael McCaul, more than $22.8 billion will be used to bring even more semiconductor manufacturing to the US.
“Semiconductors underpin nearly all innovation today and are critical to U.S. communications and defense computing capabilities. While Texas has been a leader in manufacturing this technology and the U.S. leads the world in chip design, most of those chips are manufactured outside the United States,” said Sen. Cornyn. “This legislation would help stimulate advanced semiconductor manufacturing capabilities domestically, secure the supply chain, and ensure U.S. maintains our lead in design while creating jobs, lowering our reliance on other countries for advanced chip fabrication, and strengthening national security.”
“America’s innovation in semiconductors undergirds our entire innovation economy, driving the advances we see in autonomous vehicles, supercomputing, augmented reality, IoT devices and more. Unfortunately, our complacency has allowed our competitors – including adversaries – to catch up. This bill reinvests in this national priority, providing targeted tax incentives for advanced manufacturing in the US, funding basic research in microelectronics, and emphasizing the need for multilateral engagement with our allies in bringing greater transparency and attention to security and integrity threats to the global supply chain,” said Sen. Warner.
Should the bill pass, it should provide a significant stimulus to US semiconductor efforts.
After years of exporting semiconductor manufacturing overseas, the Trump administration, Intel and TSMC are in talks to open chip factories in the US.
For years companies have relied on Asian semiconductor factories for the most critical components powering computers, phones, tablets and more. In addition to the cheaper cost associated with oversees manufacturing, there has also been the benefit of scale. With entire industries located in concentrated areas of Asia, companies are able to tap into a vast pool of talent, expertise and supplies.
Recent events, however, have shown the inherent dangers of relying solely on foreign manufacturing. As the coronavirus pandemic first hit China, factories that American businesses relied on were shuttered, causing problems for a wide range of companies. For example, the supply chain issues resulted in Apple facing product shortages, delayed launch dates for new products and even impacted the company’s ability to provide support and give replacement devices to customers.
The impact has not been lost on the government, or chip makers. According to The Wall Street Journal, (WSJ) officials have been talking with Intel and TSMC about building factories in the US.
“We think it’s a good opportunity,” said Greg Slater, Intel’s vice president of policy and technical affairs. “The timing is better and the demand for this is greater than it has been in the past, even from the commercial side.”
Likewise, TSMC is reportedly talking to US officials as well as Apple, one of its biggest customers, about building a factory in the US. The WSJ’s sources say officials are also interested in helping Samsung expand its existing chipmaking facilities in the US.
If the talks result in concrete action, it should go a long way toward insulating the American tech industry and help protect it from future global disasters.
Apple is turning its considerable resources and expertise to manufacturing face masks for medical personnel amid the ongoing crisis.
CEO Tim Cook made the announcement on Twitter:
Apple is dedicated to supporting the worldwide response to COVID-19. We’ve now sourced over 20M masks through our supply chain. Our design, engineering, operations and packaging teams are also working with suppliers to design, produce and ship face shields for medical workers.
In the video, Cook says the face shields pack flat, assemble in less than two minutes and are fully adjustable. The company has already delivered its first shipment to Kaiser hospital facilities in the Santa Clara Valley, to positive feedback from doctors.
Apple plans to ship over one million by the end of this week, with one million being shipped every week after. Initially, distribution will be in the U.S., with hopes to expand worldwide.
Cook makes it clear that, “for Apple, this is a labor of love and gratitude, and we will share more of our efforts over time.” The company is to be commended for the example its setting, one that hopefully many other companies will follow.
Foxconn is informing investors that it plans to “reach full seasonal capacity by the end of March.”
Foxconn is one of the biggest electronic manufacturers, and the primary maker of Apple’s iPhone. The company has been dealing with restrictions the Chinese government has imposed on travel and business, leading to its factories in China to be shut down. Three weeks ago the company received permission to reopen its Zhengzhou factory, although it was only at 10% capacity initially.
According to the presentation (PDF) to investors, Foxconn is focused primarily on the safety of its employees, and it continues to comply with governments’ guidelines and requirements regarding the reopening of its factories.
“As of today, the production resumption has reached 50% of seasonal required
capacity,” reads the document. “Based on the current schedule, we shall be able to reach full seasonal capacity by the end of March.
“There are still plenty uncertainties which we can not quantify the potential impact on the full year. However, AI, semiconductor and 5G are still critical catalysts for the long-term. Therefore, we believe some demands will be pushed out to later of this year.”
The coronavirus has already led to Apple, Microsoft and many other companies issuing updated guidance, as the virus continues to spread and impact a variety of industries.
The Raspberry Pi 4 just received a RAM upgrade, bringing it to 2GB for the same price as the 1GB version: $35.
Raspberry Pi was originally developed to help teach computer science, but became popular with computer tinkerers, engineers and corporations. The devices are increasingly being used in home automation, as well as manufacturing. With the announcement of the RAM upgrade, the Raspberry Pi could become an even bigger mainstream success, as 2GB of RAM makes it possible to use the machine as a full desktop computer.
Raspberry Pi’s announcement makes a compelling case for the new model, especially when comparing it to the original.
“The fall in RAM prices over the last year has allowed us to cut the price of the 2GB variant of Raspberry Pi 4 to $35. Effective immediately, you will be able to buy a no-compromises desktop PC for the same price as Raspberry Pi 1 in 2012. In comparison to that original machine, we offer:
40× the CPU performance
8× the memory
10× the I/O bandwidth
4× the number of pixels on screen
Two screens instead of one
Dual-band wireless networking
“And of course, thanks to inflation, $35 in 2012 is equivalent to nearly $40 today. So effectively you’re getting all these improvements, and a $5 price cut.
“We’re going to keep working to make Raspberry Pi a better desktop computer. But this feels like a great place to be, eight years in. We hope you’ve enjoyed the first eight years of our journey as much as we have: here’s to another eight!”
Huawei has announced it is preparing to spend €200 million to build a factory in Europe.
Amid ongoing concerns its equipment opens governments and corporations up to spying by Beijing, Huawei likely hopes that manufacturing equipment locally for the European market will help alleviate those concerns. The €200 million budget is for the land, construction and equipment necessary to establish the factory.
“The wireless communications equipment produced by this plant will be mainly used in Europe,” read the company statement. “With this plant, Huawei states that it will be able to cover every link along its value chain and drive local industries forward, both upstream and downstream. These links include R&D, sales, procurement, production, logistics, service, and talent development. The plant will also be one of Huawei’s first implementations of its advanced manufacturing technologies in Europe. This will drive the technical competitiveness of European industry and boost the resilience of local supply chains and infrastructure.
“It is estimated that this project will generate 1 billion euros worth of products annually and directly create 500 jobs. Huawei has operated in Europe for 20 years, directly employing over 12,000 employees. Huawei has directly and indirectly created approximately 170,000 jobs in Europe as a result. Moving forward, Huawei is committed to operating ‘in Europe, for Europe’, remaining open and collaborative, and continuing to contribute to Europe.”
As Huawei continues to struggle with increasing U.S. pressure, this announcement shows the length the company is willing to go to address concerns.
Following assurances from Foxconn that the coronavirus would not impact its production, it appears factory shutdowns are on the verge of doing just that and impacting iPhone output in the process, according to Reuters.
The Chinese government has told companies to shut down production until at least February 10, and Foxconn has stopped “almost all” production as a result. According to Reuters, a “source told Reuters on Monday that Foxconn has so far seen a ‘fairly small impact’ from the outbreak as it was utilizing factories in countries including Vietnam, India and Mexico to fill the gap, adding that the company will be able to make up for the delay if factories work overtime after the ban.”
The real concern is if production is stopped beyond February 10. If manufacturing remains stopped for weeks, a month or more, the impact to Foxconn’s output, and the iPhone specifically, would be “big.”
This is just the latest indication that the coronavirus could have severe implications across various industries as governments and agencies around the world struggle to deal with the outbreak.
The Verge is reporting that Taiwanese company Foxconn will not be adjusting manufacturing schedules or closing factories as China struggles with the coronavirus outbreak.
Foxconn manufactures electronics for numerous companies and is probably most well-known for manufacturing Apple’s iPhones. The company operates several factories on the Chinese mainland. In the wake of the coronavirus outbreak, China has put as many as 15 cities in lockdown, with Wuhan—where the virus was initially identified—under virtual quarantine. Financial experts around the world are warning the virus could have serious consequences across industries.
In spite of the dire circumstances, however, Foxconn does not foresee any impact to its manufacturing.
“Foxconn is closely monitoring the current public health challenge linked to the coronavirus and we are applying all recommended health and hygiene practices to all aspects of our operations in the affected markets. Our facilities in China are following holiday schedules and will continue to do so until all businesses have resumed standard operating hours,” the company said in a statement, according to The Verge.
“As a matter of policy and for reasons of commercial sensitivity, we do not comment on our specific production practices,” the company continues, “but we can confirm that we have measures in place to ensure that we can continue to meet all global manufacturing obligations.”
It remains to be seen the impact the virus will have on business and world economies, but Foxconn’s statement should help reassure at least some sectors.
Wuhan may be known as the first place the new coronavirus was identified, but it’s also a center of transport and manufacturing. Now experts are concerned the former may have significant impacts on the latter, according to Bloomberg.
As of the time of writing, there have been nearly 2,800 cases of the virus across China and 15 cities have been put in lockdown. As the epicenter of the outbreak, “Wuhan itself has been effectively quarantined, with all routes in and out of the city closed or highly regulated,” according to CNN.
As Bloomberg points out, as “the capital of Hubei province, Wuhan is the biggest water, land and air transportation hub in inland China, according to the Ministry of Commerce. It’s also a major rail hub with multiple lines linking it to major cities, and a renowned education center.” The city has also been moving into high-tech industries, including chip-making and biomedicine.
With the city quarantined, experts fear it could have far reaching implications.
“Complicated supply chains and just-in-time production could mean that production outages in Wuhan factories have broader spillover effects,” Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings, told Bloomberg.
With a world economy that is ever more connected, it’s too early to predict just how much impact the virus could have as more cities are quarantined or put in lockdown. But it’s a safe bet that the longer it goes on, the more the effects will be felt across industries.
“The acquisition today of Fiix is a really exciting one,” says Rockwell Automation CEO Blake Moret. “It spans the gap that’s traditionally existed between manually entered keystroke data and real-time data that’s coming from the equipment itself. This helps take maintenance and automation really to a whole new level.”
Fiix Inc. is a privately-held, AI-enabled computerized maintenance management system (CMMS) company. Fiix, founded in 2008, is headquartered in Toronto, Ontario, Canada.
“We’re really taking manufacturing to a whole new level,” added Moret. “We’re taking the traditional operational technology and know-how that’s existed on the plant floor for so many years and we’re marrying that with IT technology and bringing those together. It’s really unlocking a whole new level of productivity across all the industries that we serve.”
Fiix’s cloud-native CMMS creates workflows for the scheduling, organizing, and tracking of equipment maintenance. It connects seamlessly to business systems and drives data-driven decisions. The company’s revenue grew 70% in 2019 with more than 85% recurring revenue.
“We believe that the future of industrial asset management is performance-based,” said Tessa Myers, vice president, product management, Software & Control, for Rockwell Automation. “With the addition of the Fiix platform and expertise, our customers will benefit from a 360-degree view of integrated data across automation, production, and maintenance, helping them to monitor and improve the performance of their assets and optimize how maintenance work is done.”
James Novak, Fiix CEO, said, “From the beginning, Fiix has been on a mission to connect maintenance and operations teams to the tools, resources, and technology they need to modernize and join the future of maintenance. Joining Rockwell Automation will allow us to help even more companies modernize maintenance and increase asset performance by connecting to industry-leading data, automation, and production systems.”
The company says that the addition of Fiix directly aligns with Rockwell Automation’s software strategy.
Rockwell Automation CEO Blake Moret also discussed their involvement with COVID treatments and the vaccine:
“We’re involved with virtually all of the manufacturers who are working on the treatments and the tests and the vaccines around the world for the COVID virus. We’re really helping them and helping the world to recover. So we’re involved in the formulation, the packaging, the tracing, and you obviously have to do this at unbelievable scale to be able to meet the need.”
Rockwell Automation Taking Manufacturing To Whole New Level
“Where you have a high variation you’re always going to have the need for human input,” says Dave Petratis, CEO of Allegion. “If your manufacturing designs or products have very little labor input, let’s say like a cell phone, you can automate that. But where you add variation to the product that’s being developed or manufactured it requires labor. I can think of a variety of industries where automation will not kill the need for human skills in manufacturing globally.”
Dave Petratis, CEO of Allegion, discusses the impact of technology and automation on manufacturing jobs in an interview on Bloomberg Markets and Finance:
The Real Breakthrough That’s Coming is Digitization
We see the growth in manufacturing in technical jobs where people are able to manage those automation schemes at higher levels of pay. I’ve been a part of that manufacturing story over my 38 years and have lived that. I think there’s a great underlying story. American manufacturing is doing a great job of driving productivity inside the factory. That’s why the goods and services produced have never been higher, but the skills of those jobs are at a higher level.
That puts challenges on manufacturing like Allegion. At Allegion we have advanced the capabilities of automation in our style of product and it never ends. The real breakthrough that’s coming in the next decade is digitization. This is how we use information technology, artificial intelligence, and information to be smarter manufacturers.
Automation Will Not Kill the Need for Human Skills In Manufacturing
I challenge that (the assertion that technology will replace humans). Where you have a high variation you’re always going to have the need for human input. If your manufacturing designs or products have very little labor input, let’s say like a cell phone, you can automate that. But where you add variation to the product that’s being developed or manufactured it requires labor.
An example of that would be right here in the Indianapolis where we have manufactured here for over a hundred years and shipped globally. We produce 2,200 variations of an exit device which is in the building that you occupied today. It requires human input because of the variation. I can think of a variety of industries where automation will not kill the need for human skills in manufacturing globally.
Amy Karam, author of the book, The China Factor:Strategies to Compete, Grow and Win in the New Global Economy, recently was interviewed at Google’s Mountain View campus, providing insight for companies to better compete.
“The main intention of “The China Factor” is to equip western-based companies with strategies and tactics and knowledge to better compete with emerging entrants like those from China,” says Karam. “China has risen, they’re doing a great job, there a strong force in our economy and they do business differently. The premises is that we as western-based companies need to change our game. We need to know that emerging competitors have different approaches and we need to be more creative about that.”
“The other element is the innovation advantage and how do we protect or maintain and evolve our innovation advantage?” she asks. “How did China become so strong? What are the strengths and weaknesses of each side, the West and the East?”
Working for Cisco in China Was Eye Opening
Karam’s time at Cisco where she was involved in the Cisco sales strategy shaped her opinions of how Western companies can better compete. “The results were eye opening,” she said. “Wow, this isn’t business as usual. It’s not like our domestic competitors. It’s not a product superiority play anymore, where it’s like my box is better than your box so I’ll win the business. That’s not what was happening in emerging markets and especially with some emerging competitors.”
“That was the catalyst for me to say, wow, this is not a trend, this is not a blip, this is here to stay.” She noted some big competitive differences with Chinese companies. “First is the severe price discounting and that’s no shocker right? Most of us know that that’s generally a pretty consistent market penetration strategy, but there was really no bottom to it. I encountered a lot of escalations where they say, hey my competitors just discounted me by another 25% and I need approval for another discount. We realized that wasn’t going to be a successful strategy for either competitor and even for the customer, it wasn’t a winning game.”
“Another big thread was financing, which we didn’t really get into very much as a Western based company but that’s a a real helpful tool for emerging customers. This competitor would help them with financing and to an extreme degree. Sometimes they would help finance over a very long
period of time and that was a real great value to these emerging markets customers.”
“Another huge trend that came up was the use of politics to influence business decisions,” Karam said. “We’re like whoa, where did that come from what do we do about that? I would get escalated complaints from emerging markets that we’ve been working this deal for two years, we had in the bag and in the eleventh hour they would just say it was a an influence from above and we have no idea where it came from. It was government-to-government influencing for business decisions at a more granular level.”
What Can Western companies Do at the Practical Level?
“For those who are business geeks, you know there are the 4 P’s of marketing… product, price, place, promotion, so I created the 5th “P” which is politics,” said Karam. “I created the 5 P’s of Global Marketing framework. Because this has become such a a big world but it’s small at the same time, we need market access, we want to play and other peoples sandboxes, but there are certain rules and there are certain limitations that we need to encounter. When Google pulled out of China in 2010 for censorship reasons that was a big decision and the implications were huge. You could have affected 1.5 billion people in terms of access to knowledge, but there were really good reasons and those were the the boundaries within which a Western based company decided that they did not want to operate.”
“Recent headlines say that Google is going back in,” says Karam. “So market access is really important and reach is really important, so the political element is knowing that co-oppetition is is the new element. It’s an integral part of a strategy going forward, it’s not us versus them. It’s how do we all play together within our own boundaries and desirables to get ultimately the success that we need. That’s it at a high level.”
“Then how do we at the working level deal with politics?” she asks. “Politics even happens at the organizational level and generally there’s a pretty negative connotation to politics, but it’s really important, we can’t ignore it anymore, we we need to embrace it and apply it.
“So how do we apply it from a sales perspective is to educate the sales teams on some of the tools available from the US government and the local governments in the different countries,” asks Karam. “How can they engage with their own government to help influence their own sales locally? Reaching out to the consulates, how do you get them involved, how do you know that some of these deal opportunities are happening early on in the game? There may be unfair trade issues that you’re experiencing so that maybe some intervention sooner rather than later so it’s not at the eleventh hour when we oftentimes hear about it.”
“We’re also organizationally changed and we’re able to convince the senior vice president of government affairs to shift the focus from just a policy perspective to helping with sales objectives,” she says. “Using the influence that they have in the government affairs group for more of the end result in terms of numbers and not just policy has been very effective.”
How Should Western Companies Evolve and Change?
“Very simply, go global,” says Karam. “A lot of times Western based companies have been hesitant to go global. The second part is let’s move out of emerging markets being a novelty. I think a lot of Western based companies dabble in emerging markets thinking it’s really cool, it’s let’s try it out let’s throw a few people and in there and see how it works out, and then… oh no, not making the ROI that we need so we need to pull out. It needs to be a longer-term investment, it needs to be a commitment and you need to know that it’s it’s not just a temporary thing.”
“Make sure that your product development is catering or customizing to local customer needs,” she says. “We can’t just recycle, saying this is a mature product in this market and let’s just throw it over the fence and see if they’re going to like our old product.
How Can Western Companies Maintain Their Innovation Advantage?
“Every company, East to West, really wants to be innovative because that’s where the next phase of growth comes from,” says Karam. “We see contingents of emerging folks coming to Silicon Valley wanting to learn the secret of how is Silicon Valley innovative, how do you do it how do you become creative? But the idea is that we have to also be creative – we have to be innovative at being innovative, so you can’t just the rest on your laurels. This whole concept of innovation is evolving and as more players from different backgrounds are becoming innovative they’re bringing different business models.”
“Some business model innovations are coming from the East,” she says. “They’re really good and commercializing things and we’re really good at making things, really cool things, but they’re really good at making money yet from really cool things or even making money from ok cool things.”
“We also talked about supply chain or process innovation,” said Karam. “There’s the reputation of manufacturing, they’ve got it down. One venture capitalist who I interviewed for the book says, you know all this business about bringing manufacturing back to America, we don’t have the efficiencies, we don’t have the ecosystems yet to do that, and some of the Eastern countries do. We need to either establish that ecosystem or just understand that there’s there’s a different source of innovation happening out there.”
“What I’m saying s let’s get more creative, let’s figure out what’s our what’s our innovation 2.0,” she says. “How are we going to step up our game and learn from others as well?”
Ashley Furniture, the country’s largest home decor retailer, has been cited by the Occupational Safety & Health Administration for “failing to protect workers from moving machine parts” at one of its manufacturing facilities.
The violations allegedly occurred at a factory in Wisconsin.
“Workers risked amputation injuries each time they serviced the machinery,” said Mark Hysell, OSHA’s area director in Eau Claire. “Ashley Furniture failed to implement required safety procedures to protect machine operators until after OSHA opened its inspection. The company must make immediate, enforceable safety improvements at its facilities nationwide.”
“The agency determined that the company failed to implement procedures to prevent machines from unintentional start-up when operators changed blades, cleaned machines and cleared jams exposing workers to dangerous machine operating parts. The company failed to have operators use locking devices to prevent unexpected machine movement, a procedure known as lockout/tagout. This violation is among OSHA’s most frequently cited and often results in death or permanent disability,” says OSHA.
This isn’t the first time OSHA has flagged Ashley Furniture in recent history. In January, the company was cited for 38 violations. OSHA proposed nearly $1.8 million in fines.
Ashley Furniture called OSHA’s allegations “outrageous”.
“The claim that Ashley failed to protect its workers from moving machine parts is outrageous. At all times, Ashley has machine guards in place that are provided by the manufacturer and, in some cases, the company has gone beyond what manufacturers put in place by installing additional guards and implementing special procedures to protect workers,” the company said in a statement.
