'Made in America' Renaissance
3D printing, robots and urban manufacturing are helping reverse the United States' three-decade obsession with outsourcing by turning everybody into entrepreneurs.
'Made in America' RenaissanceBy Hsiao-Wen Wang
From CommonWealth Magazine (vol. 526 )
Head far enough north from New York City along the Hudson River, and you eventually come to Schenectady, the small town where Thomas Edison's business took a major step forward. Its dwindling population, weed-strewn train tracks, and old and dilapidated houses symbolize America's Rust Belt, once the center of the country's manufacturing might but generally moribund for the past three decades.
Among the remnants of the glory days are two red-brick buildings more than a century old that formerly served as General Electric's headquarters.
Edison moved his generator company, Edison Machine Works, to Schenectady in 1886, and it eventually evolved into the global monolith that today has 300,000 employees and annual revenues of more than NT$5 trillion, and makes everything from nuclear power plants and light bulbs to aircraft engines and MRI scanners.
Founded in Schenectady in 1892 through a merger between Edison's business and his chief competitor at the time, the Thomas-Houston Company, General Electric now produces industrial batteries in its place of birth. The batteries from GE's new facility in the upstate New York town are shipped around the world, to Nigeria, Kenya, India and even Mongolia, to provide backup power for mobile phone towers, a reminder of an earlier industrial age in which Edison played such an important role.
GE's battery factory, home to 370 employees, was described in Time Magazine's "Made in the USA" cover story in April as a new model of manufacturing.
This plant that began mass production just over two years ago is nothing like the typical electronics contractor factories in China, where assembly floors are crowded with female workers standing alongside conveyor belts. At the GE facility, machines outnumber people.
The production of the batteries begins when a white sodium chloride and nickel powder is pressed into tubular shapes. The tubes are loaded onto five small cars on a wheeled platform, 600 tubes to a car, then sent along a track into a kiln with automatic temperature controls where the tubes are heated. The cars then continue on to a cooling station. It has only after taking a 90-degree turn that the cars arrive in an assembly area where humans are finally needed.
Five small unmanned wheeled platforms, each carrying 600 tubes packed with sodium chloride and nickel powder, ride a conveyor belt into an oven with automatic temperature controls where the tubes are heated, then continue on to a cooling room. Only after taking a 90-degree angle do the small vehicles arrive in an area where humans are finally needed – the assembly department.
In this immaculate factory, one often sees eminent scientists standing next to machines discussing how to improve yields with the plant manager, himself busy controlling the production line with an iPad.
Though wages in China have increased 20 percent annually in recent years, average hourly wages in the United States are still seven times higher. So why did GE decide to ignore the globalization trend toward low-cost production and insist on manufacturing batteries in a place where labor is much more expensive?
Five Minutes from Lab to Factory
"The real consideration in where we locate the business... it's really not about how cheap is the labor," says Prescott Logan, general manager of GE Energy Storage Technologies. "We need to be close to people who have expertise."
To develop industrial batteries that are half the size and 25 percent lighter than conventional batteries and last for 10 years, researchers at the GE Global Research Center have studied sodium nickel chloride batteries for more than 10 years.
The center also has 50 scientists researching how to advance this new material to be faster and more stable but also cheaper to make. And testing progress is easy. It's only a five-minute drive from the lab to the manufacturing facility.
"It's the speed of innovation that can make a difference today. That five minutes means everything," Logan says.
No longer is manufacturing in the United States defined by the old black-and-white images of Ford plants with workers welding and hammering away at car bodies. The sector has grown increasingly reliant on software-controlled processes and innovative materials, two trends that have made it nearly as cool as Silicon Valley.
"For the first time in many years, we're in an inflection period," explains Christine Furstoss, GE's global technology director for manufacturing & materials technologies. "Manufacturing is becoming a much more integrated part of the design process than ever before. We really take the traditional process – design, choosing materials, manufacturing – and make them much more collaborative. This is the shift from the linear model to a much more collaborative model."
The linear production flows of the past can no longer meet the needs of the market, because everything is "all together now," Furstoss says. Having R&D and manufacturing under the same roof gives GE a competitive edge.
Cheaper than 'Made in China'
Because of this manufacturing revolution, the wave of outsourcing that has swept the U.S. over the past 30 years is reversing course.
Innovation has suddenly gained the upper hand on costs, and proximity to markets has replaced access to cheap labor. As a result, the manufacturing sector is once again gravitating to America as it examines its global footprint.
Reinvesting in talent and technology, GE now produces hot water heaters in Kentucky that are US$300 cheaper than those "Made in China" and has invested US$60 million in a factory in Mississippi to manufacture aircraft engines.
"We started to realize outsourcing is an outdated business model," admitted GE CEO Jeff Immelt in the March 2012 Harvard Business Review article "On Sparking an American Manufacturing Renewal."
Ford Motor Co., Volkswagen of America, Ashley Furniture, Chesapeake Bay Candle, Sleek Audio and toy company Wham-O are among the companies who have brought production lines back to the U.S.
This "insourcing" movement reflects the growing recognition that manufacturing remains America's chief source of innovation and a path to overtaking rivals.
Though the sector now employs only 9 percent of America's workers, down from 25 percent 50 years ago, it accounts for 67 percent of American private-sector spending on R&D and 30 percent of the country's productivity gains.
"For some types of manufacturing, it is very important to maintain production capability, because it's tied to your ability to innovate," Harvard Business School professor Willy Shih told CommonWealth Magazine.
"People say, 'I weigh all the costs – the labor cost differentials, the inventory pipeline risks, the coordination cost of me having to coordinate with manufacturing. Also the IP costs,' And people say, 'that tradability equation does not look as good as it did 15 years ago!' I would argue that's why some things are coming back," Shih says.
This realization has brought the U.S. to a pivotally important moment in economic history.
In the 18th century, the Industrial Revolution catapulted England into a dominant global position.
In the 19th century, the Second Industrial Revolution helped the U.S. and Germany become the world's economic centers.
The factories of steel magnate Andrew Carnegie brought down the price of steel by 90 percent over a 20-year period while oil baron John D. Rockefeller's refineries cut the price of fuel (like kerosene) by 80 percent. Wherever railroads went, communities prospered. Many of America's biggest companies were born as the domestic market expanded, and the word "millionaire" became part of the country's everyday vocabulary.
Today, 3D printing, robots and urban manufacturing are bringing a new shine to the "Made in America" label and spawning a third industrial revolution, one that unlike the revolutions of the past can empower anybody to become an entrepreneur.
And the sparks of entrepreneurship are spreading from fashion-oriented New York to high-tech Silicon Valley, from the ivy-draped universities of Boston to the cluttered docks of San Francisco.
The World's Shortest Supply Chain
The former editor-in-chief of Wired magazine, Chris Anderson, is one of those trying to capitalize on the rare opportunity. He quit his job last year to set up his own manufacturing facility focused in part on 3D printing.
The new starting point for Anderson's life is a tiny workshop in a quiet suburb of the University of California, Berkeley.
He first took our CommonWealth team to a furniture shop next door that uses 3D printing technology and then took three steps to his own workshop, where he is developing DIY drones.
"These are the designers, and the manufacturers are in the next room, and the supply chain is ten feet long. Talk about a short supply chain!" Anderson says, subverting highly respected global supply chain theory in two short sentences.
Costing only US$2,000, 3D printers eliminate the high capital and risk thresholds manufacturing start-ups usually face. With a machine and accompanying software, a one-man factory can "print out" sneakers, smartphone casings, necklaces and even precision components for aircraft engines.
Because the process does away with expensive molds, the cost per unit of "printing" one toy duck and thousands of toy ducks is the same. The economies of scale so critical to manufacturers in the past are being supplanted by a new frontier – "mass customization."
The onset of cheaper robots will curb the American manufacturing sector's nomadic tendencies and migration toward Asia, Africa and Latin America, while helping a new generation of low-investment startups take root in the U.S.
Dream Factory in Urban Environment
One of the more surprising aspects of this American manufacturing renaissance is where it's happening – in high-rent districts in the heart of congested cities rather than on inexpensive lots in spacious suburbs.
One startup in San Francisco, about 10 minutes by car south of Fisherman's Wharf, is housed in a gray, concrete building in the shadows of AT&T Park. The wooden post at the facility's entrance is emblazoned with the image of a goose and the words "Protect from extinction."
Inside the main door, an old desk on the left with an iMac on it exhorts visitors to "Be a creator," beckoning them to design their own iPad case.
In the computer you can select the outer covering for the case from 20 solid fabric colors, 10 fabric patterns or six types of leathers and the inside lining of the case from an equally dazzling array of choices before topping it off with an elastic strap of one of 14 colors. In all, there are over 1 million different combinations. Order one from Taiwan via the Internet, and it will be in your hands in two weeks.
This San Francisco company, DODOcase Inc., specializes in manufacturing cases for the iPad and other high-tech devices. Its 40-year-old co-founder and president Craig Dalton has only a 10-minute bike ride to work every day.
Thanks to e-commerce and 3D printing, budding American entrepreneurs like Dalton no longer have to engage in a tug-of-war between family life and ambition. They now have their families at their sides and global markets at their fingertips.
As for the United States, reports of its absence from this century's global innovation race and tidal shifts in economic power were premature. Rather, it has simply joined the party a little late.
Now, with the rise of 3D printing, robots, and urban manufacturing brewing a third industrial revolution, America's innovative vitality seems poised to once again set it apart from Europe and Asia.
Translated from the Chinese by Luke Sabatier