Economic growth may have slowed over the past 50 years, but Olivier Scalabre, Senior Consultant and Managing Director at the Boston Consulting Group in Paris, predicts that relief will come in an unexpected form and from an unforeseen place.
“We are on the verge of a huge change, and this change, surprisingly enough, is going to come from manufacturing – again,” he said.
Scalabre explained that the first and second industrial revolutions, defined respectively by the rise of the steam engine and assembly-line production, both brought huge improvements in productivity, but that the third, fuelled by digitisation, has not. Instead, the Internet, which many hoped would produce growth, has made us less productive. Meanwhile, efforts to relocate production to low-cost countries and create larger specialised factories have not had the desired impact on efficiency.
“We hoped it [the Internet] would produce growth, and indeed it changed our lives,” Scalabre said. “It made big waves in the media, the service, the entertainment spaces, but it hasn’t done much for productivity. Actually, what’s surprising is that productivity is on the decline despite all of these innovation efforts.”
Robots and 3D printing
Scalabre predicts that the fourth manufacturing revolution will result from traditional manufacturing and new technologies that are combined to create a new era defined by improvements in efficiency, productivity and customisation. This transition will focus on two principal technologies: advanced robotics and 3D printing.
Whereas only 8 per cent of tasks in factories around the world are currently automated, this number is expected to rise to 25 per cent by 2025, resulting in a 20 per cent increase in productivity. Meanwhile, 3D printing, which has already revolutionised the production of plastic, is making inroads into metal manufacturing. Together, these two materials account for 25 per cent of global manufacturing.
These technologies will not only increase productivity and output but, more importantly, will create better, smarter products and an unprecedented level of customisation. While advanced manufacturing robots can be programmed to perform any product configuration without any set-up time or ramp-up, 3D printing can instantaneously produce any customised design.
“We are now able to produce a batch of one product – your product – at the same cost and lead-time as a batch of many,” Scalabre said, adding that manufacturing is set to become not only more productive but also more flexible.
A return to the home market
The transition to customisation will cause a huge macroeconomic shift, in which factories will be relocated back to home markets and consumer proximity will once again become the norm. Meanwhile, factories will become smaller and more agile, operating on a multi-product, made-to-order basis.
In future, China and other emerging economies will no longer be the factories of the world. At present, the cost of producing goods in Brazil is already on a par with France, and by 2018 manufacturing costs in China are expected to be equal to those in the United States. Instead, Scalabre argues that global growth is going to come from the emerging economies, driven by domestic consumption.
“In the next five years, the next billion consumers in China will inject more growth into our economies than the top five European markets together,” he said.
“The fourth manufacturing revolution is a chance for all of us,” Scalabre says. “If we play it right, we’ll see sustainable growth in all of our economies. That means more wealth distributed to all of us and a better future for our children.”
To watch Scalabre's TED talk, click here.