Predictions of a dramatic change in the way goods are produced - and how it may change business

Those of you who are looking at business production, or operations management, (especially in A2 courses) will certainly want to read this week’s Economist either in the library, or by getting their own copy from the newsstand. They are predicting a new industrial revolution, with a potentially enormous impact on all industries.

This has been a story that The Economist has been running over a couple of years. A while ago I asked if a new manufacturing technology will change the world, and reflected on the fact that we might be beginning to see growing doubts about the outsourcing of business processes.

Here’s a quick summary of the main article:

A number of remarkable technologies are converging: clever software, novel materials, better robots, new processes (notably three-dimensional printing) and a whole range of web-based services. The factory of the past was based on making millions 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 — mass producing items, but to individual customer wants and needs.

The 3D printer is at the heart of the revolution. They 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 garage to an African village. There will be no more waiting for parts. In this new digital revolution, you can simply download the design and print it. New materials promise entirely new products, undreamt of today.

With the internet allowing ever more designers to collaborate on new products, the barriers to entry are falling. Industrialists traditionally needed vast amounts of capital to build factories; the modern equivalent can start with little besides a laptop and a hunger to invent.

Like all revolutions, this one will be disruptive. Digital technology has already rocked the media and retailing industries. New factories could be squeaky clean—and almost deserted. Some carmakers already produce twice as many vehicles per employee as they did only a decade or so ago. Most 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 riveters when a product has no rivets.

The revolution will affect not only how things are made, but the location of activity. Factories used to move to low-wage countries to curb labour costs. But 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.

Plenty to reflect on here - well worth reading the whole report.