How will Industry 4.0 impact U.S. manufacturing?
Advancing technology is bringing the manufacturing industry's warehouses closer to the vision of a smart factory.
The Fourth Industrial Revolution is picking up steam in warehouse aisles and factory floors around the world.
As advancing technology brings the manufacturing industry closer to the vision of a ‘smart factory,’ the future of U.S. manufacturing depends on how well industry leaders play the new cards in the deck: robotics, data, automation and 3D printing—without overlooking the value of human capital.
So far, the U.S. appears ready for change, earning a “well positioned for the future” nod from the World Economic Forum’s 2018 Future of Production assessment, which evaluated production structures in countries around the world. While human-free warehouses and factories are still a long way off, more sophisticated, tech-fueled automation is already becoming a standard feature of the nation’s industrial buildings.
These days, drones equipped with sensors can scan bar codes for inventory purposes, safely restock and pick merchandise on high shelves, and move small items quickly around the warehouse. Meanwhile, robotics and other technologies such as 3D printing, connected sensors and artificial intelligence are drastically transforming the way goods are manufactured.
“Industry 4.0 represents a clear opportunity for the U.S. manufacturing sector when you think about the skilled positions coming back into the economy,” says Aaron Ahlburn, Managing Director, Industrial & Logistics Research, JLL. “Most industry-relevant technology works best when paired with intelligent use, and the U.S. has a competitive advantage when it comes to skilled, tech-savvy labor.”
The United States’ manufacturing sector is the second largest in the world, after China. According to WEF’s 2018 report, the U.S. “is globally renowned for its ability to innovate and is currently at the forefront of major developments surrounding the emerging technologies of the Fourth Industrial Revolution.”
This won’t be the first time the U.S. manufacturing industry has won in terms of innovation. This is, after all, the birthplace of the moving assembly line. And earlier automation technologies have already made this a country where only two in five employees are now directly engaged in production, according to a Congressional Research Service report.
Still, according to the same report, the nation’s share of global manufacturing value has declined over time, dropping from 29 percent in the early 1980s to 18.6 percent in 2015, with slower output growth than China, South Korea, Germany and Mexico. And while the WEF ranks it first for innovation, the U.S. ends up in the seventh slot for structure of production (a country’s current scale of production), with Japan claiming top spot.
“One of the key manufacturing challenges facing the U.S. is to keep up momentum in innovating while also improving productivity,” says Ahlburn. “Automation in factories and warehouses is not a new concept, but the adoption of new technologies is picking up pace and holds the potential to dramatically boost both innovation and productivity.”
Robots are changing the way we work, and that includes on the manufacturing floor. But they—along with a host of other 4.0 technologies—are also bringing in more information than current practices can handle.
“There’s more data than ever to mine at every step of the game, from materials sourcing and process measurement on through the entire production cycle,” says Ahlburn. “That makes data analytics—and human interpretation—a crucial piece. And where can you find that kind of human interpretation? In places where a natural pipeline of talent is flowing out of STEM research and higher education facilities.”
Not only will skilled workers be needed to manage and make sense of new technology, but the daily tasks they work on could also be rather different to today. Automation and robotics on the manufacturing floor can help improve safety, boost productivity and enable workers to focus on the cognitive aspects of their role instead of as opposed to more menial tasks that robots can proficiently cover.
These new dynamics will transform how industrial real estate is used and designed. “Technology adoption is changing the way the four walls of a production facility or warehouse need to be configured,” says Ahlburn. “As more people work begin to work alongside machines, we’re seeing a shift from the highly centralized production model of the past, toward a more decentralized, collaborative environment.”
To meet the challenges of the Fourth Industrial Revolution, U.S. manufacturing leaders have no choice but to invest in advanced technologies. From there, the playing field is wide open.
“There’s no clear road map through the Fourth Industrial Revolution,” says Ahlburn. “But when you think about Industry 4.0 in broad manufacturing terms, the people who power it can make or break this opportunity.”
That means establishing a strong presence in markets where skilled talent is easily found, including of course stalwarts with established innovation districts like California’s Bay Area, the Research Triangle in North Carolina or Boston, but also cities like Austin, Denver, Pittsburgh, Detroit and Cincinnati – just to name a few – where tech and research cultures are being nurtured and celebrated. For a while at least, the smart factory will still be very reliant on significant human involvement.
For more on this year’s World Economic Forum Annual Meeting in Davos, check out JLL’s Davos landing page.