Critical thoughts on advanced manufacturing: the experiences of Germany and USA.
| Autor | Daudt, Gabriel |
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Introduction
Worldwide, topics like advanced manufacturing or industrie 4.0 are being deeply discussed. In Brazil, this subject has been widespread by large multinational companies. The debates come with high expectations around several technologies that could transform manufacturing, although hardly ever accompanied by due considerations.
Therefore, it seems appropriate to take a step back and make a critical reflection on the broad "advanced manufacturing" issue. The topic is intertwined with national efforts to revitalize manufacturing and pursue technological leadership. Thus, advanced manufacturing is part of a framework that translates this perception and originates policies based on each country's specificities.
For organizational purposes, besides this introduction, this paper presents four sections. The second discusses the most widespread approach to the "fourth industrial revolution". The third states that advanced manufacturing must be discussed from a broader industrial policy perspective. The fourth section intends to analyze the American and German plans for strengthening their own manufacturing activity. Finally, the last section proposes a brief reflection on the subject and point out some preliminary recommendations for Brazil.
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The future of manufacturing and the bazaar of technologies
Normally the specialized literature emphasizes that the world is facing a new industrial revolution. This revolution takes place in a new era in which the internet plays a leading role, contributing to the convergence of various technologies, now being introduced in all industries and reaching machinery and equipment. The essential elements would be the "merging" of the virtual and real world; the use of cyber physical systems; and supply chain flexibility, with real-time information available to suppliers and customers (Schwab, 2016).
As the digital base is incorporated into the shop floor, it becomes possible for production to take place with more flexibility and to make use of less labor requirements, allowing a customized manufacturing. The benefits to employment and productivity are usually exalted as the new production techniques will be more automated and require more skilled workers [1].
This interpretation is part of a wider discussion on the future of manufacturing, having McKinsey Global Institute (MGI, 2012) and Organisation for Economic Co-operation and Development (OECD, 2015) as representative works. Both highlight the constraints imposed by the ongoing global changes, their implications for the advanced economies and the consequences for manufacturing activity.
In fact, MGI (2012, p. 9) pronounces the arrival of "an exciting new era of global manufacturing." Somehow more cautiously, OECD (2015, p. 10) points in the same direction: "[t]here is a growing debate that the world is on the brink of similar industrial revolution(s) and a reshuffling of production will take place in the next 10-15 years."
According to MGI (2012), some elements are notably relevant: demand reorientation toward developing countries, due to their higher growth rates; products proliferation and fragmented consumer's demand; increased value-added services; greater pressure on the supply of natural resources; and more efficient and sustainable processes.
The reorientation toward developing countries and demand's fragmentation are especially relevant. These new markets are presumed to be made up of consumers that require different products to satisfy their preferences, pushing producers to offer a greater variety of products. At the same time, in established markets there is also demand for variety, given faster production cycles, reinforcing the tendency toward fragmentation. In addition, there is a tendency toward increased value-added services. Companies would produce a "bundle" in which services are inseparably from the product. Also, there are major advances in regard to information and communication technologies, advanced materials and robotics, enabling efficiency gains and flexibility in production. According to MGI (2012), these trends modify how firms seek new markets and expand production and R&D. The main features are represented by Figure 1.
Shipp et al. (2012) and De Weck et al. (2013) list promising areas of technology related to advanced manufacturing. Both identify which technologies are strategic (hereinafter we shall refer to it as enabling technologies). Figure 2 shows a hierarchy of technologies and one can note that all mentioned technologies "have been around for a while" (OECD, 2015, p. 10), but only recently a broader application is perceived. Individual firms' and nations' overall competitiveness would increasingly depend on the application of advanced technologies.
From a microeconomic standpoint, firms shall adopt new business models if they are to benefit from many of the opportunities posed by new technologies. Thus firms would be able to respond quickly to consumers' demands and supply's conditions, as the digital production allows a more flexible organization and also because of reductions in product design cycles.
Several authors, such as Schwab (2016), emphasize that the world is on the brink of a big wave of technological advances and profound systemic transformations. It is often treated as an inexorable (positive) wave for job creation, output value, new processes, and so on.
The conventional approaches correctly identify a series of global trends. Also, they somehow reaffirm manufacturing's special role for long-term development. However, it seems misleading, among other things, in interpreting how nations absorb technological progress. The conventional underlying view is based on the idea that technological advances are exogenous, as if there was a "bazaar" of technologies - a term coined by Sinn (2006). Also, it would be enough (for nations) if firms simply choose the best way of incorporating the new technologies into their productive processes.
Instead, the paper's underlying idea is that technical progress is embodied in specific products and processes. It should also be clear that it is something far from spontaneous; technological advances are stimulated by policies that combine effective demand with instruments that support scientific and technological development. Attention must be drawn to the fact that "advanced manufacturing" experiences were originated in developed countries as part of their strategies for the next decades. These strategies have not yet been fully implemented and cover areas to be developed in at least 15-20 years.
The next sections cover the two main ongoing initiatives for implementing advanced manufacturing. From our perspective, it is important to understand the theoretical features that led them to "rediscover" the importance of manufacturing (and industrial and technological policies).
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We need to talk about industrial policy
According to O'Sullivan et al (2013, p. 432), "there is renewed interest in 'industrial policy,' " especially in the aftermath of the 2008 crisis. This renewal reflects changes in the global nature of manufacturing, such as the declining share of manufacturing activity in many developed countries, the growing competition from emerging economies and the accelerating pace of technological change. Besides national peculiarities, an essential dynamic shaping current industrial policy is the growing fragmentation of production (Milberg and Winkler, 2013).
Many analysts advocate that the world has entered a postindustrial phase in which selling services and becoming a "knowledge economy" is better than making "stuff"[2]. Others, like Chang (2009), challenge this pseudo-consensual view and argue that the manufacturing companies are responsible for the relevant sources of demand for services.
Indeed, historically there have been several attempts to foster industrial development, given its centrality to economic development traditional arguments in favor of manufacturing are encapsulated in Kaldor's laws, which highlight its relevance for economic growth and the benefits on productivity and employment (Kaldor, 1981). Rosenberg (1963) argues that manufacturing--more specifically, the capital goods segment--is a major diffuser of technological innovations. Besides, manufacturing drives demand for high productivity activities in others sectors and is also fundamental for the relief of external constraints, mitigating balance of payments crisis.
Less highlighted, though, are the synergies enhanced by the proximity of shop floor activities to others such as engineering. Some authors conclude that when several firms offshore their activities, it contributes to weakening the country's overall economic position (Pisano and Shih, 2009). Splitting certain activities ends up undermining national innovative capacity.
Technological development is strongly related to production, and the proximity of R&D teams to the shop floor is extremely important for innovation. The authors refer to these collective capabilities as industrial commons, which may include the know-how related to R&D, engineering and other skills related to specific technologies.
This finding has been raised while discussing development strategies and public policies have been redesigned under denominations like advanced or digital manufacturing. As mentioned by Andreoni and Gregory (2013, p. 35): "The crisis situation has led many analysts to ask: 'Has off-shoring gone too far?' and, more importantly, 'Does manufacturing still matter for the wealth of advanced nations?'"
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Main international experiences
From our perception it is fundamental to investigate which policies the leading countries are pursuing. Indeed, the experiences here alluded were mainly motivated by political wills to retake industrial leadership. This perspective brings up interesting issues, such as the recognition that technological developments do not consist of "exogenous" trends. Quite the...
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