Manufacturing creates wealth
Politicians keep insisting that America must get back to creating wealth. But they want to do it by getting Americans to borrow more money to buy more ‘stuff’, most of which is made offshore. Increasing consumer debt to increase consumption does not create wealth. It is a consumption of wealth, without replacing it.
There are only three sources of wealth: natural resources, labour and knowledge. Natural resources (oil, minerals and the like) are tied to geography. The largest transfer of wealth in human history occurred within the past half-century, from countries that had generated wealth through productive knowledge, innovation and enterprise, to areas that had little else than their oil.
Service industries and government jobs do not increase wealth – they just circulate money. Manufacturing creates wealth by taking goods of lower value, adding knowledge and labour and creating higher value. Mining and farming create wealth for the same reasons.
Knowledge and innovation are the key ingredients for productivity and wealth generation. Through inexpensive, universal communications, knowledge-based work is migrating worldwide to the highest-quality, lowest-cost providers. Productivity has become a fierce, head-to-head competition between regions and nations for the single reason that it is the source of wealth, the key to improvements in living standards. Those who can produce cheaper, faster, better - win!
Manufactured goods dominate foreign trade and US factories manage to make more goods with fewer workers. What has changed is that they have abandoned products with thin profit margins, like consumer electronics, toys and shoes. They have ceded that sector to China and other emerging nations with low labour costs and low profit-margin requirements. Instead, American factories are focused upon more complex goods requiring specialised labour and generating higher margins.
Large multinational conglomerates have created the negative image of manufacturing. These companies have no loyalty and have proved that they will close down a plant and outsource products to foreign countries without hesitation. In America, they lead a relentless effort to reduce the wages of their workers and break the unions. They continue to outsource products and complete plants and seem totally indifferent to the future of US manufacturing.
Manufacturing is the foundation of economic growth, the key to higher living standards and the future of the middle class. In the US, this recognition is generating the re-birth of manufacturing.
The connected factory
I recently completed a white-paper for Intel, discussing the growth of standard computing and communications architectures in the industrial factory automation and process controls environments.
The industrial automation business is changing rapidly. Manufacturing has become more competitive as extremely agile and low-cost producers undercut long-established vendors. Customers meanwhile require ever-faster innovation and shorter product cycles, something most leading manufacturers cannot easily deliver. These trends suggest that new and more agile processes are needed – now.
What is coming is the connected factory, with seamless connectivity between everything in the factory with distributed, intelligent, autonomous I/O. The connected factory delivers a more robust level of performance, greater process efficiency and wider agility in operations to provide seamless operations in changing global conditions.
The large, centralised production plant is a thing of the past. The factory of the future will be small, movable (to where the resources are and where the customers are). In the old days, this was not done because of localised know-how and investments in equipment, technology and trained personnel. Today, those things are available globally. Services migrate worldwide to the best, low-cost providers. Knowledge moves easily and can be transferred anywhere. These processes move more easily if automation systems are based on open architectures that all use the same computing and communications platforms.
Initiatives in security and low-cost/low-power processors will generate significant new growth at all levels of the automation pyramid during the next 3-5 years. Standard computer/network architectures will spread into all corners of the factory and plant floor.
In the 5-10 years timeframe, industrial automation systems will shift from deterministic, hierarchical type controls towards smaller, more distributed processing and intelligent, autonomous I/O. This will bring major advantages such as robust system performance, predictive diagnostics and the ability to operate seamlessly with multiple device networks.
Billions of intelligent connected devices will need to communicate with other machines, and with the cloud. Intel is broadening the traditional context of machine-to-machine computing by adding capabilities that will enable connected devices to interact intelligently over a network.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant towards technology trends.
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