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docdivakar
George, I understand you were trying to put forth an use case to make a general ...
DMcCunney
It's especially noticeable in consumer electronics, but the life cycle of just ...
The distinction between manufacturing and production, and why it matters
George Leopold
4/10/2012 3:56 PM EDT
Manufacturing: To make into a product suitable for use.
Production: The creation of utility; esp.: the making of goods available for use.
As the U.S. presidential campaign heats up and unemployment continues to hover above 8 percent, we have been highlighting efforts to revive U.S. manufacturing as a way to put engineers and technicians back to work. What we have come to understand in our reporting is that the next engine of economic growth in the West is about much more than metal bending or the other metaphors associated with the post-World War II industrial boom.
Some economists, such as former Labor Secretary Robert Reich and Christina Romer, former chairwoman of the President Obama’s Council of Economic Advisors, downplay the role of manufacturing in job creation. Romer and others argue that lack of demand, rather than the decline of manufacturing, is the real source of persistently high unemployment. Reich, for his part, points to automation that adds value but shrinks the manufacturing workforce. Few would argue that those manufacturing jobs are coming back.
That is why “production” and its economic benefits are critical to a Western economic revival. We wholeheartedly agree with those who continue to argue that you can’t control what you can’t produce—the operative word here being “produce.”
Manufacturing, argues John Zysman, co-author of the watershed 1987 book Manufacturing Matters: The Myth of the Post-Industry Economy, has evolved to become a subset of production. The words are often assumed to be synonymous, and any debate over their meaning merely an exercise in semantics. In an economic context, however, production takes in much of what is created by the brain as well as the hands.
Zysman provides the example of the crane maker who wants to get into the business of port management, a booming sector in places like China. One way the crane maker might do that is to embed intelligence into his newest crane. The added value increases the chances that the crane maker will get a contract to run a port facility.
Production thus includes the vast service sector and the massive ecosystem that has arisen around delivering services. Services now account for the lion’s share of the U.S. economy; some estimates put it as high as 80 percent of the annual U.S. gross domestic product. The march of networking technology since the beginning of the manufacturing decline in the 1970s means many services can now be delivered via emerging infrastructures like cloud computing. Google and Amazon invest billions in server farms; producers can then leverage the technology to deliver what Zysman and his research colleagues call “cloud-enhanced services.”
In our community discussion about cloud-enhanced services, many readers have provided real-world examples of how the cloud and earlier networks have been leveraged to promote engineering collaboration. These are prime examples of how networks have matured into a new kind of utility that allows both service providers and manufacturers to add value to their products.
It is this capability, not the return of manufacturing jobs from China, that will again allow U.S. companies to compete in the global marketplace. As one contract manufacturer told us, too much money has already been invested in Chinese manufacturing operations to simply pull up stakes and move back to the States; but this same New Jersey manufacturer has been reinvesting in his own domestic operations in hopes of moving up the value chain to higher-volume, flexible manufacturing.
So there is a real distinction between manufacturing and production. Not only does America need to make more stuff, but it also needs to increase production of goods and value-added services that will create the jobs needed to revive U.S. and Western economies.
Value-added production really does promise, as the saying goes, to lift all boats.
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Duane Benson
4/10/2012 5:03 PM EDT
I like the phrase "cloud enhanced." I hear far too many people just talking about the cloud as a complete replacement for distributed computing power. In the same way that the Internet has added to and enhanced conventional business, not replaced it with 100% virtual businesses, cloud computing will add to and enhance but not replace localized computer.
Your crane example is a good one and just one of many. This same approach could work for everything from cars to refrigerators. Appliance manufacturers could get back into the repair business and add preventative maintenance, upgrades and other as of yet unthought of services to their production business.
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junko.yoshida
4/11/2012 3:18 PM EDT
I like your suggestion here, Duane. "Appliance manufacturers could get back into the repair business and add preventative maintenance..." In other words, there is a whole area of eco-system jobs to be created by adding newly enhanced features and services to goods.
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george.leopold
4/12/2012 9:30 AM EDT
The promoters of cloud-enhanced services also call it "ICT-enabled" services (Information and Communications Technology), so you can see they have been working on their branding....
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chanj
4/10/2012 6:55 PM EDT
The article sounds to me that manufacturing is a subset of production. Production includes a lot more, for example, service; whilst manufacturing means transforming materials into a product - for example, assembling components and parts to be a PC. If this is one of the interpretations, the distinction does matter because of multiple reasons.
In my opinion, bringing back manufacturing may be difficult because US has lost the infrastructure for it after years of outsourcing. Infrastructure covers labors and manufacturing facilities. Americans may not necessarily enjoy working in production line, assembling toasters or moving heavy refrigerators. They might rather work in front of a computer, writing code or administering computer network. With this said, bringing back production may not be as hard. Engineering services and design service are highly liquid. It can move anywhere in the world. Therefore, these can all be done in US instead of elsewhere as long as our society has enough supply of skilled labors. The cloud computing has been helping to facilitate the production better.
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iniewski
4/10/2012 10:46 PM EDT
Cloud computing can deliver remote computation, data storage or processing but would it deliver remote production? The crane examples doesn't seem to be realistic...Kris
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george.leopold
4/12/2012 12:30 PM EDT
OK, Kris, try this one: A corporate farmer has embedded into the front end of his tractors sensors that determine soil characteristics and crop types and tells the sprayers he is pulling behind the tractor what if any pest/herb -icides or fertilizers to apply to his fields. Such value-added systems are coming off the drawing boards and might sell like hot cakes in developing countries struggling to produce enough food for their growing populations. The key is that the related services would be developed here.
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docdivakar
4/16/2012 6:10 PM EDT
George, I understand you were trying to put forth an use case to make a general point in that crane example. But your argument does not reach far enough -how does one KEEP the IP-enabled value added products / services from getting copied in places where there is no respect for intellectual properties? Now a days, the gap between lead-lag-innovate/copy cycles is shrinking so businesses in US can not still at all. A new product gets copied in no time by those either riding the coattails or refusing to invest in R&D and innovation.
MP Divakar
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prabhakar_deosthali
4/11/2012 6:53 AM EDT
In the sense of "Product", there are many products which do not require assembly lines, blue collar workers and all that. In today's world the word product connotes many things - such as an insurance policy, a tour package or any such offering . In this broader sense the term Product differs with the term "manufacturing" because there are many products which do not require manufacturing but just some bundling of the services
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Robotics Developer
4/11/2012 4:12 PM EDT
I agree with iniewski that the crane example is an over-reach. The US must produce and export goods, services and technical solutions in order to continue to have jobs on shore. We must move up the food chain from just bending metal to creating systems and integrating technologies to further enhance the next generation of products.
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DMcCunney
4/14/2012 12:19 AM EDT
It's especially noticeable in consumer electronics, but the life cycle of just about any product winds up with it becoming a commodity. Commodity products are fungible - they can be easily replaced by something else that does the same thing, and competition reduces to price.
Margins are razor thin, perhaps pennies on a dollar, and making money requires large market share and bringing in a *lot* of dollars to make pennies on. The sort of manufacturing outsourced to China is generally commodity products, because the competition is on price, and producers need the lowest possible costs.
The issue for the US is creating products that *aren't* commodities, which exist higher in the value chain and can command prices that allow making money even with the higher overhead and pay scales of the US.
This has been going on for many decades. Not that long after WWII, for example, Japan began to cannibalize the US steel industry. Their industrial infrastructure had been largely destroyed by bombing intended to halt production of war materials. They rebuilt using state of the art equipment and practices, achieved greater productivity at lower prices than US manufacturers could achieve, and rapidly took over the market for basic steel. US steel companies had to move up the value chain concentrating on higher value finished products.
Manufacturing done here can't be commodities unless shipment costs from elsewhere are prohibitive. And the incentive won't be strictly jobs in manufacturing. The products need to be the sorts of things that have an eco-system around them to sell, install, and service and support them, because that's where the jobs will be. The days of the assembly line worker are numbered. One of the major Chinese manufacturers announced a full-scale push into robotics to automate precisely the kind of rote work people like FoxConn are doing. If it *can* be done by a machine, it probably *will* be.
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