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Are We Getting Ready For The New Industrial Revolution? Part IV

19 September 2014

Carlos Ghosn

 

This is concluding my series of posts on the topic of re-industrialization.

 

In November 2012, Carlos Ghosn, President of Renault Group, and better known as the "cost-killer", announced that he would have hired 1,300 more workers for the factory located in Valladolid in Spain, to produce their new "Captur" model.  This happened after Ford's dramatic announcement in October 2012 to move to Spain its production at the factory in Genk, Belgium, and consequently dismiss 4,300 workers!   This was followed by the January 2013 VolksWagen's announcement to invest around EUR785 million ($1 billion) in a plant near Pamplona, Spain, over the next five years.  As a result, the new VW factory will have a workforce of about 4,600 people, and the capacity to produce up to 300,000 cars per year, making it one of the largest manufacturing units of the German Group.

 

Which is the message for sleeping economies, such as the Italian one?

 

I guess very positive: we can make it!  As long as we are willing to embrace change and labor laws transformation, as much as Spain has been able to do.

 

In fact, Spain is making it: according to Eurostat, in the second quarter of 2013, the Spanish productivity had reached the Italian one, thanks to a 15% increase over the past ten years.  The added value per worked hour is now at 32€ for both Countries.  On the other hand, Italy has remained substantially flat for the past 15 years.

 

Also, France and Germany have further improved…

 

Finally, we can not forget the fundamental role that technology has played and will play in the definition and in support of the New Industrial Revolution.

 

In this regard, I've found McKinsey's Director Katy George very insightful re. the digital technologies' role in the Industrial Sector of the future.

 

In a brief video, she explains the concept of next-shoring, and why epochal changes in customers' demand and in technologies - as well as in energy and labor costs - are forcing manufacturing companies to radically rethink their production and distribution strategies.

 

New technologies such as advanced robotics and digital manufacturing are posing threats, but also generating huge opportunities.

 

The productivity gains which will be required to Western Industrial companies will be highly dependent on the developments of the so-called Information Age.  The data processing demand, as much as data storage, is going to grow exponentially, and new technologies such as Oracle's "Software in Silicon" are going to enable and support this incredible growth in computing power’s demand.

 

Also, Michael Chui of McKinsey Global Institute has recently highlighted advanced robotics among the 12 most economically disruptive technologies that will transform business and life in next decade.  Business leaders and other institutions must prepare for these important changes.

 

Advanced robotics—that is, increasingly capable robots or robotic tools, with enhanced “senses,” dexterity, and intelligence—will be able to take on tasks once thought too delicate or uneconomical to automate.

 

Another key technology evolution is energy-storage devices which store energy for later use. “These technologies, such as lithium-ion batteries and fuel cells, already power electric and hybrid vehicles, along with billions of portable consumer electronics. Over the coming decade, advancing energy-storage technology could make electric vehicles cost competitive, bring electricity to remote areas of developing countries, and improve the efficiency of the utility grid.”

 

As these technologies will be altering the business or social landscape, it is critical that businesses and other institutions understand which technologies will matter to them, and prepare accordingly by initiating the changes required to capture the benefits associated with them.

 

The nature of the work itself will continue to change: one more reason to insist on the importance of strong education and retraining programs to address the manufacturing’s ever-increasing productivity imperative.

 

It is clearly a game to be played at a pan-European level, as no single Nation can cope with so many radical changes in a globalized economic word.

 

However, as Roland Berger said, "The European Union has what it takes to succeed in reindustrializing Europe to remain a major economic power, but it must act with coordinated European policies, and above all... accept the change!"

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