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 / Spring 2014 / Issue 74(originally published by Booz & Company)


America’s Real Manufacturing Advantage

Another game-changing manufacturing innovation enabled by software and advanced technology is the increasing use of three-dimensional (3D) printing and additive manufacturing technology in a factory setting, wherein products are built by machines laying down one thin layer of material at a time according to digital blueprints. The technology has been in use since the 1980s, but until recently applications in industry had been limited to prototyping parts or products for analysis and testing. Increasingly, 3D printing technology can fabricate complex, high-value parts using powdered metals and lasers. General Electric, for example, is printing cobalt–chromium fuel nozzles for jet engines, as well as other engine components.

Advances in 3D printing technology are enabling customization at increasingly granular levels. Medical device manufacturers can now make personalized orthopedic joint replacement kits custom-fitted to an individual’s anatomy. The 3D printers might be located in hospitals rather than in a central production facility. Another application, which could have significant impacts for product life spans and inventory management, would be the manufacture of replacement parts where demand is both low and uncertain.

Over the next couple of decades, we will see continued improvements in each of these three areas: Ongoing gains in efficiency will raise productivity and add value for all manufacturers. Innovation will flourish and speed-to-market will increase as virtual-to-real manufacturing becomes more commonplace. And mass customization will usher in a new era of choice and flexibility for manufacturers and consumers—in some ways renewing many of the advantages of the craftsman era that were either lost or deemphasized during the era of mass production, but in a modern factory setting.

Advanced manufacturers are actively pursuing the next frontier in production capabilities, which we refer to as Industry 4.0. Still largely in the conceptual stage, the next cycle of software integration, advanced digitization, and networking will harness “big data” feedback in real time from customers and suppliers, as well as information about the operation of the production machinery and the product as it is used. Today, for example, Apple’s iPhone can send diagnostic data back to the company about the way the operating system and hardware are performing. Production machines will be self-optimizing—able to look at what they are doing, change themselves to operate more effectively, and thus continually improve their own productivity, efficiency, speed, and flexibility. Managers and production workers will still be in charge, naturally, but they will be controlling software and processes, rather than the machinery itself.

All these advances depend on sophisticated software design and architecture, which explains why the U.S. is well positioned to succeed as the manufacturing transformation proceeds. The U.S. remains the most advanced country for software development: Sixty-five of the PwC Global Top 100 Software Leaders are headquartered in the U.S., and an analysis by the Business Software Alliance found that 79 percent of the $243 billion software revenue from the top 100 firms in 2011 was accounted for by U.S. companies. Clusters of software expertise exist in other countries, of course. Germany, for example, leads in shop-floor control software, because of the strong relationships between leading machine companies and control providers. India is known for its software-based services. But the U.S. leads in the particular kind of decision-support software architecture and programming that will be most essential in visualization, modeling, and other ways of integrating the virtual and real worlds of manufacturing. This lead arose partly from the country’s traditionally strong position in computer-science education and research, but also because of the culture of innovation, opportunity, and entrepreneurialism that grew up around the industry in Silicon Valley and has drawn the best talent from around the world. To preserve this advantage, however, the U.S. needs to take action.

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  1. Robert D. Atkinson and Stephen J. Ezell, Innovation Economics: The Race for Global Advantage (Yale University Press, 2012): Why the U.S. needs a coherent innovation policy to remain competitive, from two officers of the Information Technology and Innovation Forum.
  2. Peter Cappelli, Why Good People Can’t Get Jobs: The Skills Gap and What Companies Can Do About It (Wharton Digital Press, 2012): The director of Wharton’s Center for Human Resources makes a case for changing the way talent is developed, recruited, and retained.
  3. Kaj Grichnik and Conrad Winkler, Make or Break: How Manufacturers Can Leap from Decline to Revitalization (McGraw-Hill, 2008): Former Booz & Company consultants show how top companies are reinventing themselves to compete in a new world.
  4. Andrew N. Liveris, Make It in America: The Case for Re-inventing the Economy (Wiley, 2011): The chairman and CEO of Dow Chemical makes the case for manufacturing in the United States.
  5. Gary P. Pisano and Willy C. Shih, Producing Prosperity: Why America Needs a Manufacturing Renaissance (Harvard Business Press, 2012): Two professors at Harvard Business School show why manufacturing really matters in an innovation-driven economy.
  6. Harold L. Sirkin, Justin Rose, and Michael Zinser, The US Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback (Knowledge@Wharton, 2012): Analysis and recommendations for U.S. manufacturing from the Boston Consulting Group.
  7. Vaclav Smil, Made in the USA: The Rise and Retreat of American Manufacturing (MIT Press, 2013): An authoritative history of U.S. manufacturing by a noted business historian and author.
  8. Gene Sperling, “The Case for a Manufacturing Renaissance,” speech delivered at the Brookings Institution, July 2013: The director of the National Economic Council discusses U.S. competitiveness in advanced manufacturing.
  9. For more thought leadership on this topic, see the s+b website at:
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