Insights (Change of Manufacturing)

Transformation No. 1: Making Manufacturing “Antifragile”

As production ground to a halt in China early last year, it didn’t take long for supply chains to be disrupted. Consider this… Around 80% of the drugs taken in America and Europe have key pharmaceutical ingredients made in China. What if people don’t have a supply of life-saving drugs?  What if pharmaceutical companies don’t have the ingredients to produce more? What if medical device manufacturing companies don’t have the key electronic components required to make ventilators?  Suddenly, the world has realized how fragile its supply chains really are. Today’s centralized manufacturing models are vulnerable to these sorts of black swan events. I believe that this experience is a catalyst for changing where and how products are manufactured. Rather than having a highly centralized manufacturing infrastructure primarily in mainland China, companies and countries will look to bring their manufacturing back onshore. The reality is that the labor cost differentials just aren’t that large anymore. And with technologies like 3D printing, computer vision, robotics, artificial intelligence (AI), and automated manufacturing, companies can now affordably produce products in developed markets. I’m envisioning a future where goods will be “printed” or produced at smaller manufacturing sites close to the markets they serve.

Not only would this reduce the risk of supply chain disruptions, but it would also cut logistics costs and speed up delivery time. The reality is that this massive shift had already started during the tense trade negotiations between the U.S. and China. The global pandemic simply kicked this into high gear.  And contrary to what many people think, this new revolution in manufacturing will create jobs, not eliminate them. Millions of new jobs will be created to build and maintain this next generation of manufacturing facilities. This is a decade-long process with a completely new manufacturing infrastructure that needs to be built. We are being forced to rethink and reinvent how and where the world produces the things that it wants and needs.