How Policymakers Can Boost U.S. Competitiveness By Supporting Smart Manufacturing

Smart manufacturing—the application of information technology to every facet of modern manufacturing processes—is in the midst of transforming the global manufacturing landscape. The digitalization of manufacturing will transform how products are designed, fabricated, used, and serviced post-sale as much as it will transform the operations, processes, and energy footprints of factories and the management of manufacturing supply chains. ITIF Vice President of Global Innovation Policy Stephen Ezell explained that “the advent of smart manufacturing heralds a future where products are designed and produced more quickly, efficiently, safely, and better customized to individual needs and demands.” The countries, and enterprises and industries therein, that lead in embracing smart manufacturing techniques will gain first-mover advantage over global competitors. Thus, public policy will play a pivotal role in setting the competitive landscape informing smart manufacturing leadership. At a recent event hosted by ITIF, a panel discussed how smart manufacturing will shape the future of U.S. manufacturing competitiveness and explored what public policies are needed to keep the United States at the global forefront of this emerging manufacturing revolution.

Ezell noted that if implemented successfully, the move to smart manufacturing will drive impressive economic and strategic benefits. Analysts estimate smart manufacturing will increase global manufacturing productivity by 10-25 percent and produce $1.8 trillion in global economic value by 2025. For firms of all sizes that choose to use smart manufacturing techniques, an anticipated 25 percent increase in revenues from new products and services awaits. Ezell suggested that whereas previous manufacturing technology transitions worked to enable geographically dispersed production with a heavy focus on low-wage locations, smart manufacturing enables more localized manufacturing, moving production closer to the markets that generate the demand.

For approximately the past 10 years, global competitors, such as Austria, Germany, China, Sweden, and the United Kingdom, have been heavily investing in the penetration of smart manufacturing within their economies through both private and public initiatives. For example, Ezell pointed to Germany’s Industry 4.0 program that has allocated over $550 million to help German small- and medium-sized enterprises (SMEs) embrace technological developments and increase productivity. Additionally, the Austrian government partnered with a private company to finance an extensive workforce retraining program within their manufacturing sector, both saving old and creating new jobs. Caralynn Collens, CEO of UI Labs and director of the Digital Manufacturing Design and Innovation Institute, pointed out that manufacturing industry partners are met with a choice to conduct business in any number of high-cost economies engaging in smart manufacturing. It’s often not a question of which U.S. state to work in; instead, it’s which country elsewhere in the world. Senator Chris Coons (D-DE) is of the firm belief that America’s days as a global manufacturing leader are poised to continue in the future, if we take the right policy steps now. He suggested that the coming congressional session is an opportunity to renew our focus to compete globally in a proactive, bicameral, and bipartisan way.

All panelists agreed that assistance and commitment to SMEs in the U.S. manufacturing space play vital roles in facilitating the advanced manufacturing revolution. Encouraging the adoption and further development of smart manufacturing technologies by SMEs will help codify important industry standards while promoting access to the global marketplace more effectively. As Senator Coons suggested, and all panelists agreed, the government plays a key role in facilitating this growth. For example, Senator Coons played an important role in advancing the PATH Act through Congress last year, which enhanced and made permanent the R&D tax credit, considerably bolstering the long-term innovation capacity of U.S. manufacturers, large and small alike.

As Diego Tamburini, industry strategist with Autodesk, pointed out, there is a common misconception that technological innovation in the manufacturing sector is synonymous with a “robot takeover of the factory floor” and associated job loss. But there was consensus across the panel that, in fact, developments in and the implementation of smart manufacturing technology present great opportunities for job creation and an overall increase in efficiency and production within the United States and across the globe. However, to realize these benefits, both public and private sector initiatives must be put in place to retrain the current workforce and prepare to meet these needs. UI Labs represents a successful public-private initiative helping to drive such smart manufacturing development. UI Labs provides an ethical growth and guidance forum where universities and industry partners work together to prepare the incoming workforce to efficiently use these new technologies. William Sisson, senior director at United Technologies Research Center, explained the immense benefits of his company’s workforce retraining program and encouraged other companies to follow suit.

By optimizing access to data and the use of technology, smart manufacturing initiatives have the potential to drastically cut waste and improve sustainability across the entire sector, particularly through more energy-efficient production practices. Sisson mentioned the energy efficiency benefits United Technologies has seen since adopting smart manufacturing technologies, including a 25 percent increase in energy efficiency and a 47 percent cut in water usage.

The event also noted that the federal government, in partnership with industry leaders, can do much more to get smart manufacturing technology from the lab to the marketplace more quickly and effectively, and strengthen the American labor force while doing so. The United States can lead the smart manufacturing revolution of tomorrow, but only if it implements the right public policies today.