Manufacturing in the Third Industrial Age

THE first industrial revolution began in England in the late 18th century, with the mechanization of the textile industry. Cloth previously done laboriously by hand in hundreds of weavers’ cottages were brought together in a single cotton mill, and the factory was born. Productivity increased and prices were reduced.

The second industrial revolution came in the late 19th and early 20th century, with the age of mass production. The first two industrial revolutions made people richer and more urban. Now a third industrial revolution is under way and it will mean a new paradigm shift.

The new industrial revolution means that manufacturing is going digital. This could change not just business, but also the way we live and how we use our scarce resources.

A number of remarkable technologies are converging, such as smart software, new materials, more flexible machines and robots, new processes like 3D printing and a whole range of inter-connected, web-based services.

The factory of the past was based on economies of scale, making large series of identical products. Henry Ford once said that car-buyers could have any color they liked, as long as it was black.

But with the new software and manufacturing technologies, the costs of producing much smaller batches of a wider variety, with each product tailored precisely to each customer’s requirements and taste, is falling.

The factory of the future will focus on mass customization and may look more like those weavers’ cottages before the industrial revolution than on Henry Ford’s assembly line.

Towards a third industrial age

The old way of making things involved taking lots of parts and screwing or welding them together. Now a product can be designed on a computer and “printed” on a 3D printer, which creates a solid object by building up successive layers of material. The 3D printer can run unattended, and can make many things which are too complex for a traditional factory to handle. In time, these amazing machines may be able to make almost anything, anywhere, from your shoes and clothes to your garage and your new car. ´

In the news last week it was reported that the burlesque performer Dita Von Teese had performed in a dress made by 3D printing. The dress looked like a cross between the beautiful robot and the art nouveau buildings from 1920s movie Metropolis. Not surprisingly, one of the dress’ designers was an architect.

The applications of 3D printing are especially mind-boggling. 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 on his portable 3D printer.

Other changes will be equally important. New materials are lighter, stronger and more durable than the old ones. Carbon fibre is replacing steel and aluminum in products ranging from airplanes to mountain bikes. New techniques let engineers shape objects at a tiny scale.

Nanotechnology is giving products enhanced features. Genetically engineered viruses are being developed to make items such as batteries and will maybe also replace penicillin. And with the internet allowing ever more designers to collaborate on new products, the barriers to entry are falling. Hierarchical organizations are being replaced by networks.

The capitalists of the second industrial revolution required large investments in capital to build their factories. In the third industrial age, an innovator can start with a laptop and a drive to invent. Not long ago I visited a company in a rural area of Sweden that designs a new generation of solar panels. The company was based in the founders home and manufacturing was contracted in China, with products being delivered to the end customers directly from the factory.

Like all revolutions, this one will be disruptive. Digital technology has already fundamentally changed the media and retailing industries. Most future jobs will not be on the factory floor but in the offices nearby, which will be full of designers, engineers, IT specialists, logistics experts, marketing staff and other professionals. The manufacturing jobs of the future will require more skills. Many dull, repetitive tasks will become obsolete: you no longer need machine operators when there is no mass production assembly line.

The revolution will affect not only how things are made, but where. In recent decades production from the rich world has often moved to low-wage countries to reduce labor costs. But labor costs are growing less and less important. Offshore production is increasingly moving back to rich countries, both because wages are rising in the BRIC countries and also because companies now want to be closer to their customers so that they can respond more quickly to changes in demand. In a world where everything goes faster and faster, close location is again a key competitive advantage.

Consumers will have little difficulty adapting to the new age of better products, swiftly delivered. Governments, however, may find it harder. Their instinct is to protect industries and companies that already exist, not the upstarts that would destroy them. Governments will continue to provide old factories with subsidies and bully capitalists who wants to move production abroad. This winter I have seen many examples of this in the news flow in France where I live. None of this makes sense.

The lines between manufacturing and services are blurring. Aircraft manufacturers no longer sells jets. They or their intermediaries sell the hours that the aircraft is propelled through the sky. Governments have always been lousy at picking winners, and they are likely to become more so, as entrepreneurs make designs online, turn them into products at home and market them globally from their garage.

As the revolution rages, governments should stick to the basics: better schools for a skilled workforce, development of branding factors to attract talents and investors and clear rules and a level playing field for companies of all kinds. Leave the rest to the innovators.