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Home » To Save Money, Manufacturers Turn from Low-cost Labor to Smart Technologies to Boost Productivity

To Save Money, Manufacturers Turn from Low-cost Labor to Smart Technologies to Boost Productivity

February 3, 2015
BCG Perspectives

Technological development is likely to be the catalyst for the next wave of manufacturing productivity gains. This development, which some refer to as Industry 4.0, is characterized by cyber-physical systems and dynamic data processes that use massive amounts of data to drive smart machines. A confluence of forces—falling prices and rising performance of enabling hardware and software, the digitization of industry, increasing connectivity, and mounting pressure on manufacturers to be more flexible and eco-friendly—is likely to accelerate adoption of the next generation of advanced manufacturing technologies. In the near future, they may transform the economics of global production in many industries.

The term “advanced manufacturing” has been around for decades and means many things to many people. We define advanced-manufacturing technologies as a set of highly flexible, data-enabled, and cost-efficient manufacturing processes. These tools offer a range of benefits that, taken together, could redefine the economics of global-manufacturing competitiveness in a number of industries. In fact, leading-edge manufacturers, such as Ford and General Electric, are already using some of the most advanced tools to make high-precision components.

Our research has found that a large majority of American-based manufacturing executives are beginning to explore advanced manufacturing. In our third annual survey of U.S.-based manufacturing executives at companies with sales of at least $1bn, 72 percent of respondents said that they will invest in additional automation or advanced-manufacturing technologies in the next five years. Only 10 percent said that they are unlikely to do so. Roughly three-quarters of the executives we surveyed said that they expect advanced manufacturing to improve productivity and create more localized production. Fifty-six percent of respondents predicted that lower automation costs will improve their competitiveness against products made in low-cost countries.

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Technology Consumer Packaged Goods High-Tech/Electronics Industrial Manufacturing
KEYWORDS advanced manufacturing BCG Perspectives consumer packaged goods dynamic data processes global manufacturing competitiveness High-Tech/Electronics Industrial Manufacturing supply chain IT Supply Chain Management Supply Chain Management: Industrial Manufacturing Technology
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