The Blog is moved to www.andreacaputo.org

Dear All,

I decided to move the blog directly on my website www.andreacaputo.org.

You can find all the old article there.

See you there ;)

Andrea

[Last] Episode: What is changing in manufacturing

Usually when we refer to production, factories and industries, we all think about the production function. As we now an output is mainly made by Labor, Capital and Land. The way they combine together is called technology. As I reported in my previous posts technology is deeply changing. During the 20^th century technology had a lot of innovations. By thinking on processes we shifted from the mass production of the beginning of the century to lean production in the 1990s. Yet we needed a huge amount of capital, land and labor. Thus, companies moved from richer countries to poorer as the process of globalization gathered pace. Poorer countries allowed the same production level for less capital, land and labor costs. Costs not technology. Yes, the famous abroad outsourcing process wasn't a technological breakthrough. It was simply a movement, allowed by transport cost reduction and internet communication, from a high-cost place to a low-cost place. The technology of production didn’t change at all or so. But now something is changing. New production machines as 3D printing allows people to produce some products (even iPhone or car parts) directly at home (at $ 1,299 you can buy a 3D printer). Furthermore, people having ideas and no money now can go online and see their ideas produced and sold, and they gain 30% of the profit. I don’t know if this is a revolution but it seems to me. For sure is big change. Let’s see what and how is changing in production.

The figure of the entrepreneur and the role of capital in production could change. Henry Ford needed heaps of capital to build his colossal River Rouge factory; his modern equivalent can start with little besides a laptop and a hunger to invent.

The factory will change. The factory of the past was based on cranking out zillions of identical products: Ford famously said that car-buyers could have any colour they liked, as long as it was black. But the cost of producing much smaller batches of a wider variety, with each product tailored precisely to each customer's whims, is falling. The factory of the future will focus on mass customisation—and may look more like the 18th century weavers' cottages than Ford's assembly line.

The geography of supply chains will change. An engineer working in the middle of a desert who finds he lacks a certain tool no longer has to have it delivered from the nearest city. He can simply download the design and print it. The days when projects ground to a halt for want of a piece of kit, or when customers complained that they could no longer find spare parts for things they had bought, will one day seem quaint.

The role of labor in production will change. Labour costs are growing less and less important: a $499 first-generation iPad included only about $33 of manufacturing labour, of which the final assembly in China accounted for just $8. Offshore production is increasingly moving back to rich countries not because Chinese wages are rising, but because companies now want to be closer to their customers so that they can respond more quickly to changes in demand. And some products are so sophisticated that it helps to have the people who design them and the people who make them in the same place. The Boston Consulting Group reckons that in areas such as transport, computers, fabricated metals and machinery, 10-30% of the goods that America now imports from China could be made at home by 2020, boosting American output by $20 billion-55 billion a year.

Source: The Economist, Special Report on Manufacturing and Innovation, A third industrial revolution, April 21^st 2012.

Third Episode: Collaborative production, from outsourcing to crowdsourcing

In 1950, in the era of mass production, New York City was the capital of manufacturing in America, with 1 million of people working in the sector. Today only 80,000 people are employed in the sector, largely by specialist producers. Yet nourished by the city’s entrepreneurial spirit, a new industry is emerging. It might be called social manufacturing.

Quirky, for example, is a design studio with a small factory complete with a couple of 3D printers, a laser cutter, milling machines, a spray-painting booth and other bits of equipment. This prototyping shop is central to their business of turning other people’s ideas into products.

Yes, have you ever had an idea about a product with no knowledge on how to build it? Now you know Quirky exists. The process works like this: a user submits an idea and if enough people like it, Quirky0s product-development team makes a prototype. Users review this online and can contribute towards its final design, packaging and marketing, and help set a price for it. Quirky then looks for suitable manufacturers. The product is sold on the Quirky website and, if demand grows, by retail chains. Quirky also handles patents and standards approvals and gives a 30% share of the revenue from direct sales to the inventors and others who have helped. In this way, Quirky can quickly establish if there is a market for a product and set the right price before committing itself to making it.

Shapeways is an another online manufacturing community, it specializes in 3D printing services. It shipped 750,000 products last year. Users upload their designs to get instant automated quotes for printing with industrial 3D printing machines in a variety of different materials. Users can also sell their goods online, setting their own prices. Some designs can be also customized by buyers.

Easy online access to 3D printing has three big implications for manufacturing:

1.    Speed to market is increased

2.    Market risk almost inexistent: entrepreneurs can test ideas before scaling up and tweak the designers in response to feedback from buyers

3.    It becomes possible to produce things that cannot be made in other ways, usually because they are too intricate to be machined.

Once in digital form, things become easy to copy. This means protecting intellectual property will be just as hard as it is in other industries that have gone digital.

MFG.com, another online production service, provides a lot of services with more than 200,000 members in 50 countries. Firms use it ot connect and collaborate, uploading digital designs, getting quotes and rating the services provided. This could tunr into the virtual equivalent of an industrial cluster.

Dassault Systemes, a French software firm, has created an online virtual environment in which employees, suppliers, and consumers can work together to turn nee ideas into reality. It provides lifelike manikins on which to try out new products. They call such services “product life-cycle management” because they extend computer modeling from the conception of a product to its demise, which nowadays means recycling.

As digitization has freed some people from working in an office, the same could happen in manufacturing. Product design and simulation can now be done on a personal computer and accessed on the cloud. It means people involved in can work from anywhere and share ideas. This could means the factory of the future could be anyone sitting in his own office.

Source: The Economist, Special Report on Manufacturing and Innovation, A third industrial revolution, April 21^st 2012.