This post is a summary of a book with the complete title above, published in November 2012 by McKinsey Global Institute (MGI), the business and economics arm of McKinsey&Company http://www.mckinsey.com/insights/manufacturing/the_future_of_manufacturing
The MGI undertook this research to gain a better understanding of how manufacturing contributes to developing and advanced economies in the 21st century. We find that manufacturing stll matters a great deal, driving innovation and productivity in advanced economies and economic advancement in developing ones. The factors we describe point to an era of truly global manufacturing in both advanced and developing economies. The new era of manufacturing will be marked by highly agile, networked enterprises that use inoformation and analytics as skillfully as they employ talent and machinery to deliver products to diverse global markets. As long as companies and countries understand and act on the powerful trends shaping the global competitive environment, they can thrive in this promising future. Manufacturing has always included a range of activities in addition to production. Over time, service-like activities, such as R&D, marketing and costumer support, have become a larger share of what manufacturing companies do. A new era of global manufacturing is ahead, driven by shifts in demand and by innovation in materials, processes, ICT and operations. The prospect is for more "global" manufacturing industry, in which developing economies are the source of costumers as well as the source of low-cost production. Some forces are already being felt: the shift of global demand toward developing economies, the proliferation of products to meet costumer demand, the growing importance of value-added services, and rising wages. Other trends are now becoming more pronounced, such as a growing scarcity of technical talent, and the use of greater intelligence in product design and manufacturing to boost resource and track activity in supply chains. Innovations create new possibilities. These innovations include new materials such as carbon fiber and nanotechnology, advanced robotics and 3-D printing, and new ICT that can generate new forms of intelligence, such as big data and the use of data-gathering sensors in production machinery and in logistics. Taken together, the opportunities and challenges have the potential to shift the basis for how companies pursue new markets and how they will expanf their production and R&D footprints. However, for most manufactures, the more pressing workforce issue likely will be the struggle to find well-trained talent. Manufacturing is increasingly high-tech. The global supply of high-skill workers is not keeping up the demand, and MGI projects a shortage of 40 million high-skilled workers by 2020. New ICTs, and new methods will require new tools, talent and mindsets. To respond quickly to changes and meet the demand for faster product cycles, companies will need to build integrated systems of suppliers, reseachers and partners. And the productivity will expand beyond capital/labor trade-offs to include resource productivity. Manufacturers have to fight hard to win the war for talent, everything from experts in big-data to skilled production workers. In many places, manufacturers will need to get more involved in building a talent supply. For example, Siemens is implementing apprenticeship program in Charlotte, North Carolina. Apprentices graduate from the work-study program with degrees in mechatronics. The role of policy in manufacturing is largely about enable and creating an environment for competitive and innovative companies to flourish, helping create sustainable conditions for local manufacturing. They need to remove regulatory barriers (from red tape to trade barriers) and strengthen underlying enablers by supporting R&D and investing in infrastructure. A key policy for manufaturing is education and skill development. The basis of competition in most sectors is shifting and access to diverse talent pool is critically important. Companies need to build R&D capabilities as well as expertise in data analytics and product design. They will need qualified, computer-savvy workers and agile managers. In addition to continuing efforts to improve public education, policy makers need to work with industry and educational institutions to ensure that skills learned in schools fit the needs of employers. Building an industrial base is necessary for economic development, we are not aware of a nation that has skipped the industrial stage and moved up to wealthy-nation status. So, for example, even as India has jumped ahead into services exports with a successful business-services outsourcing industry, it continues to follow the traditional development path, too, building up physical infrastructure to support industry and removing barriers to enable manufacturing to expand. In addition to its contribution to productivity and consumer surplus, manufacturing is a disproportionately important driver of R&D. Many innovations and tech that are developed in manufacturing also can be used in other sectors, multiplying the benefits beyond this sector. Among a small set of countries that we analyzed, manufacturing shouldered between 67% and 89% of business R&D expenses in 2008 and in Germany, Japan and the U.S. manufacturing companies registered between 53% and 73% of all patents between 2007 and 2009. Even in industries where innovation and production are tightly linked, companies do not automatically relocate R&D to their offshore production sites. Food companies must tailor their products to local taste. Yet Nestlé develops many of its products in Europe. Makers of mobile phones and other consumer eletronics products need to engage with dozens of parts suppliers that cluster around Asia production sites. Even so, Apple continues to come up with its innovative iPhone designs in California. And German automotive companies are among the most global players, yet Volkswagen maintains most of its platform development in Wolfsburg. New tech and innovations as well as new sources of demand provide the opportunity. In the coming years, countries will have a rising need for high-skill production workers, engineers who have the training to work in cross-functional specialties (e.g. eletric power trains in autos) and workers familiar with new materials and ICTs. Companies that can maintain or improve access to highly skilled talent, particularly in R&D will have a competitive advantage. To fill talent supply, companies are working individually or with other companies to partner with universities on training.In addition to technical skills, global manufacturers face a shortage of leadership talent, particularly in developing economies. Companies must create leadership opportunities in emerging markets, even if they have not spent time working in a developed economy. In Brazil, the mining giant Vale SA found that it lacked managerial talent and needed to train current workers as well as build a talent supply. It approached public universities in the states in which it had operations, and together they created graduated programs in disciplines directly related to its business. University professors teach the curriculum, and Vale executives work as part-time teachers and consultants. Vale has also invested $12 million in professional training centers outside the company to reach people.
