Localized microfactories – the new face of globalized manufacturing

Factory 19

(Samuel Zeller, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Amar Hanspal, CEO, Bright Machines


The way products have been manufactured has evolved significantly over the past decades. Today, most are built in large factories in low-cost regions, primarily in Asia but also increasingly in eastern Europe and South America.

This has largely been good for consumers. Products manufactured overseas have powered our cars, connected our networks and furnished our lives. Lower manufacturing costs have made more products more affordable for more people. However, there are signs that this approach has reached its limits. Low-cost labor pools in distant countries are being exhausted, and in manufacturing settings closer to consumers the growing global middle class is proving unwilling to do repetitive tasks, fueling high turnover.

Not only is it getting harder to find labor in low-cost regions to build products, the growing impact in terms of local jobs, the environment and delays in product distribution around the world is becoming even more serious. In tandem, consumer demand for local, personalized products is a trend that’s been steadily growing. Several years ago, research found that more than 50% of consumers said they prefer customized purchases, and the majority of those said they’d even be willing to pay more for a customized product or service.

This new consumer paradigm presents massive opportunities for large corporations to succeed in a localized economy – if they are set up to take advantage of them. The key to unlocking these opportunities lies in a distributed manufacturing operation – one that relies on a network of smaller, more nimble and flexible factories around the world located closer to where customers are. Simply put, corporations must increasingly think globally (in terms of emerging customer needs), but build locally (in terms of executing those needs).

Image: Visual Capitalist

The possibility of smaller, distributed factories with accompanying ecosystems that serve regional markets, compared to a large production center that ships product worldwide, may seem counter to how industry typically thinks of cost efficiency and scale. Automation is proving to be an important link between large companies and their localization strategies. It enables not only localization in manufacturing, but innovation – and at lower costs and higher efficiency.

This is where microfactories come into play. These smaller factories utilize automation instead of relying on expensive human labor, ensuring quality and consistency in product while enabling scale through efficient output. With their lower operating costs, microfactories effectively democratize innovation by making manufacturing more readily available to entrepreneurs, inventors and makers. For example, if someone today has an idea for a new product – even if they have the technical skills to do so – they cannot manufacture that product at scale without investing significant capital. In 10 years, we’ll see cost-effective microfactories drive a new wave of innovation across industries as manufacturing becomes accessible to all people.

Closer geographic proximity to customers also means closer proximity to customer tastes and preferences. Not only can a company localize the actual product to best suit that particular market, it can focus its marketing efforts on locally designed and produced goods – and take pride in those efforts. Geopolitical policies amplify this trend, as goods produced closer to the consumers who buy them aren’t subject to the same threat of changing tariff structures. Further, smaller manufacturing footprints help companies reach their sustainability goals.

The obvious argument against adopting a more automated factory floor is the loss of jobs for human workers, but the benefits of automated microfactories far outweigh those losses. According to a study by Deloitte and The Manufacturing Institute, every manufacturing position creates 2.5 jobs in local goods and services, and for every dollar of value created in manufacturing, another $1.37 is created in additional value in other sectors. Ultimately, job growth driven by local manufacturing is an important offset against globalization. There’s been much pontificating on the idea that Industry 4.0 will eliminate manufacturing jobs, but a “think global, build local” approach bucks this trend. While globally, job loss from automation will outpace job creation from automation, locally automation is a creator – not a destroyer.

 

Globalization, simply put, has run its course. Once heralded for its cost-effectiveness, a globalized approach loses all impact in a world where low-cost labor is rapidly diminishing, and consumer demand for authenticity is steadily increasing. In this changing world, a localized approach to manufacturing is imperative for companies to succeed. Intelligent automation will enable large corporations to embrace localization and build closer to their customers than previously possible. In this world, product innovation trumps cost advantages – with no player too large or too small to reap the benefits.

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Costa Rica is one of the world’s happiest countries. Here’s what it does differently

GSMA announces speakers for Mobile 360 Series-West Africa

Less than half of EU travellers are aware of EU Passenger Rights

A Sting Exclusive: “Cybersecurity Act for a cyber-bulletproof EU”, by EU Vice-President Ansip

AI-assisted recruitment is biased. Here’s how to make it more fair

Climate change recognized as ‘threat multiplier’, UN Security Council debates its impact on peace

UN’s Guterres condemns ongoing airstrikes on Syria’s hospitals, medical workers

Mergers: Commission approves GlaxoSmithKline’s acquisition of Pfizer’s Consumer Health Business, subject to conditions

Coronavirus (COVID-19): Latest news from Monday’s World Health Organization briefing

UN condemns deadly attack against G5 Sahel force headquarters in Mali

Amidst ‘high political tension’, UN chief appeals to G20 leaders for stronger commitment to climate action, economic cooperation

The Fourth Industrial Revolution is changing how we grow, buy and choose what we eat

Monday’s Daily Brief: numbers of hungry people rising, millions of children need vaccines, Mali children need more protection

Climate change update: consistent global actions urgently needed as we are running out of time

UN experts urge India to align new anti-trafficking bill with human rights law

25 years on from genocide against the Tutsi, UN Chief warns of ‘dangerous trends of rising xenophobia, racism and intolerance’

New EU rules to boost crowdfunding platforms and protect investors

These countries spend the most on education

How a possible EU budget deficit affects the migration crisis

South Eurozone countries threatened by rising borrowing cost and expensive euro

Thought AIs could never replace human imagination? Think again

Rohingya refugee shelters ‘washed away’ in Bangladesh monsoon rains: UN agency

Why are the financial markets shivering again?

This year’s Earth Hour is going digital due to the COVID-19 pandemic

This South African lawyer is reading while running marathons – for book donations

Why infrastructure is the only way to fight a COVID-19 recession in the US

Statement by OECD Secretary-General Angel Gurría on the outcome of COP 25

Impact investment favours expats over African entrepreneurs. Here’s how to fix that

Politics still matter in the US but not in Europe

Will COVID-19 lead to the global resurgence of other deadly diseases?

Germany fears that Americans and Russians want to partition Europe again

A shortened EU Summit admits failures, makes risky promises

How can we produce enough protein to feed 10 billion people?

Young activists share four ways to create a more inclusive world

Should we be worried about third-hand smoke?

UN mission in DR Congo appeals for calm as violent protests continue

EU elections 2019: Rise of nationalist trends and populism in Europe challenges the EU edifice

Madagascar villagers learn dangers of outdoor defecation

UN human rights report cites ‘multiple root causes’ of deadly Chile protests

World Health Day: Statement by Commissioner Stella Kyriakides

Philippe de Backer of ALDE at European Business Summit 2015 stresses: “Reinvent your business”

The Linde Group Logo (Source: The Linde Group website, Press Services, 2018)

EU starts in-depth investigation of Linde-Praxair merger over competition concerns

European Youth, quo vadis?

Flying high: how India could lead the world in drones

UN cooperation with League of Arab States ‘pivotal’, UN chief tells Security Council

North Korean families facing deep ‘hunger crisis’ after worst harvest in 10 years, UN food assessment shows

UN chief lauds Fijians as ‘natural global leaders’ on climate, environment, hails ‘symbiotic relationship’ with land and sea

Africa is launching the world’s largest free trade area – but these are the stumbling blocks

‘Address root causes’ of instability in Mali through ‘aid and support’ urges UN chief

Can North Korea and the U.S. strike a nuclear deal?

Suffering of thousands of war-affected Syrian children ‘unprecedented and unacceptable’

How to make PHC a favourable career choice for medical students: Strategies and reflections

Restoring prospect of peace in Middle East is ‘our shared responsibility’ UN envoy tells Security Council

UN announces roadmap to Climate Summit in 2019, a ‘critical year’ for climate action

Universal Health Coverage will ‘drive progress’ on 2030 Development Agenda

Understanding and demystifying the new outbreak of Coronavirus

This Netherlands football stadium creates its own energy and stores it in electric car batteries

The UK referendum has already damaged Europe: even a ‘remain’ result is not without cost to Britain and the EU

This Dutch company makes environmentally-friendly paint

Would you let an AI vote for you?

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s