May 07, 2013

The Maker Movement and Digital Factories

On Monday 10 December 2012 the Today Programme on BBC Radio 4 discussed the rise of digital factories, digital manufacturing, the associated “Maker Movement” and the emergence of the “New Industrial Revolution”. You can listen to what they had to say here.

Over the past 30 years or so it has been the US-China cross-Pacific economic model of co-dependency that has driven innovation and GDP growth. For years America has pushed the boundaries of innovation, Chinese manufacturing prowess has brought low cost goods to market and American consumers have consumed – by the container load.

Last year alone America’s trade deficit with China was $295bn. However this economic model that once worked so well has put the world out of balance. China consumes too little of what it produces and so when demand for its exports falls like now its economy can stall. GDP rates have already started to fall but they have turned on the printing presses in response and have started throwing money at a big problem.

Then in the US, the problem is the exact opposite: it produces too little of the stuff it consumes. Creating a big disharmony as it pushes up a big deficit as it imports goods and exports credit.

So quite rightly this traditional model of economic co-dependence is on the decline. And filling the void left by the old model is a new paradigm of economic production – digital manufacturing.

Professor Michael Pettis (his blog available here) is famous for refuting the widely held position that the Chinese economy will overtake the US. In fact Michael Pettis has a bet on with The Economist (they hold that China will be the largest economy by 2018 while Pettis has taken a stance to the contrary).

Because of the problems associated with the old US-China model (current account imbalances, trade wars and accusations of currency manipulations) Professor Michael Pettis says we are now at the end of globalisation period. So perhaps it’s not just politics that is going local, but also economics…

So what’s going to fill the vacuum left by the halt of globalisation and the decline of the traditional model of trade?

Yes just as we suggested earlier Radio 4 has said it will be “digital factories”. These are factories and workshops driven not by artisans and large numbers of individuals doing repetitive tasks on a production line but factories driven by computer assisted design files uploaded into the machines.

According to Chris Anderson writing here and here, this is part of the “New Industrial Revolution”. One where collaborative computer driven design allied to three dimensional printing revolutionises medium scale manufacturing.

It won’t mean the end of mass manufacturing but just as YouTube has challenged Holywood, the “Maker Movement” as it is also known will challenge IKEA, Mattel and even General Motors.

Mass production in China is all about one size fits all, making millions of the same thing, taking months of time to manufacture and then ship to market. The difference with the “Maker Movement” and “Digital Manufacturing” is that this stuff is all unique, made to order and ready in a week.

The Maker Movement fills a huge gap in the market, between the space occupied by MNC manufacturers who create millions and the artisans and workshops that create a handful of products.

The beauty of “Digital Manufacturing” is that everything that comes off the line can be different. You can modify each one at no additional cost.

There are of course other factors driving the paradigm shift. With the enduring economic hardships there’s been a continuing trend for US companies to repatriate manufacturing. The reshoring of manufacturing has also been driven by an increase in Chinese manufacturing costs, the travel and time uncertainty, the fact that robots cost the same on both sides of the Pacific and critically: a fall in the cost of energy in the US thanks to shale gas.

So there you have it. Not only is digital changing the way we live our daily lives but it is changing the terms of international trade and facilitating a new industrial revolution.

You can hear more about the co-dependent economic model which define US-China relations in the SoundCloud clip below which includes a segment from the Radio 4 Today Show which inspired this blog.

[This blog was originally published on my business blog, Twitter for Law Firms]

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