Made in China 2025

By Catherine
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By Catherine Bolgar

made in China red square isolated stamp

China’s latest Five-Year Plan, dubbed “Made in China 2025,” aims to modernize its manufacturing sector, transforming it into an innovative, high-quality, high-technology global competitor within a decade.

China is losing international competitiveness right now,” says Helmut Wagner, professor of economics and president of the Center for East Asia Macroeconomic Studies at the University of Hagen, Germany. Foreign direct investment (FDI) has shifted to other countries, such as Vietnam and Cambodia, because Chinese wages have risen faster than productivity, he says.

To avoid the middle-income trap, China needs to advance from being the “world’s workbench,” making cheap products, to providing higher-level products and services that eventually can compete with those from highly developed countries, he says.

“So they will try to build an ambitious initiative to restructure the whole of Chinese manufacturing by 2025. They want to be in the mid-range by 2035 and the world’s leader in manufacturing by 2049,” the 100th anniversary of the founding of the People’s Republic, Prof. Wagner adds.

The gradual process reflects how much Chinese manufacturing needs to change if it wants to compete on quality and not just on price, the way Japan and then South Korea evolved to become high-quality manufacturing powerhouses.

IndustrialChina’s government identified 10 key manufacturing sectors to focus on: information technology; numerical control tools and robotics; aerospace equipment; ocean engineering and high-tech ships; railway equipment; energy-saving and new-energy vehicles; power equipment; new materials; biological medicine and medical devices; and agricultural machinery.

The government is taking a top-down approach to improve quality, Premier Li Keqiang said. “We will formulate high standards to spur the upgrade of ‘made in China’ goods,” Mr. Li was quoted as saying in one of China’s daily newspapers. The government also will funnel investment into the key sectors.

“They have always thrown money at this issue, and a lot of engineering talent as well,” says Scott Kennedy, director, Project on Chinese Business and Political Economy at the Center for Strategic and International Studies (CSIS), a Washington think tank.

If China were a small country, this would be an extremely risky way to try to approach things,” Dr. Kennedy says. “But their view is that ‘we’ve got millions of companies, a large market and even if only one in a thousand yields a substantial technological or commercial breakthrough, that might be good enough…’ If they continue on this path, they are more likely to be a very inefficient high-tech power.”

While most other countries have climbed the income ladder by moving into services, China doesn’t want to give up manufacturing. Instead it aims to follow the German example and shift toward a high-end industry, Dr. Wagner says. “Germany was successful by focusing on manufacturing and industry, even after having become a developed country.”

Germany’s relative economic health in the 2008 global financial crisis made China look again at the German model, called Industry 4.0. China wants to do much the same by integrating the Internet into industry to improve efficiency, and by increasing automation.

“But if they totally move toward automation, they will create a labor problem,” Dr. Kennedy says. “The right mix for China isn’t the same as for a country with fewer workers.”

Investment is just one part of the equation. Innovation also requires an educated workforce and protection of intellectual property.

China sends about 500,000 students to universities around the world, while 37 million study at home. China wants 20% of its population to have higher education by 2020.

However, Dr. Wagner says, “when you don’t learn to think creatively but just to repeat, then maybe you will be a good engineer—but it’s hard to be as creative as the Americans.” The challenge, he adds, is to allow enough free thinking for innovation in technology while limiting it to avoid political unrest, which the leadership fears.

“You cannot order innovation,” he says. “You have to create an environment for people to jump up and do what is necessary.”

Innovation comes not only from companies but also from the military and research institutes, where people are pursuing such goals as national security or pushing the bounds of knowledge, such as in pure science, Dr. Kennedy says. China is entirely comfortable fostering military-based and research institute-based innovation while also proactively guiding commercial innovation.

Institution-led innovation may be necessary in a place where the legal framework for intellectual property protection—while stronger than in the past—remains weaker than in much of the world. “The risks of a business model based on innovating and filing your intellectual property, licensing it and building a business off it are still higher than manufacturing and assembling something [that] someone else invented,” Dr. Kennedy says.

Intellectual property rights and investor protections will be key to attracting foreign investors.

“Nothing will happen without foreign investment,” Dr. Wagner says. “Foreign investors have been the most important factor in China’s success in the past 20 years. Will there be enough foreign investors willing to give away their technological know-how to future Chinese competitors? Success will depend on how restrictive the Chinese government will be with foreign investors.”

 

Catherine Bolgar is a former managing editor of The Wall Street Journal Europe, now working as a freelance writer and editor with WSJ. Custom Studios in EMEA. For more from Catherine Bolgar, along with other industry experts, join the Future Realities discussion on LinkedIn.

Photos courtesy of iStock

Staying on Top of Change

By Catherine
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By Catherine Bolgar

 

Network on cityscape background

Just as humans develop from a single cell and end up with some 13 trillion cells by the time they’re born nine months later, so too do products start with a concept or definition—essentially a single data point.

Whether that definition is expressed as a design on paper or digitally, it represents data, explains Callum Kidd, lecturer and leading configuration management researcher at the University of Manchester, U.K. The data then evolves, matures, is iterated and eventually becomes a defined configuration, which is a collection of more data. That process turns out a product whose use, maintenance, quality and lifecycle may be monitored, generating still more data.

We have created a digital world and [have] become more and more adept at creating data. But we haven’t created awareness of managing data, from creation to disposal,” Mr. Kidd says.

Just as in the single-cell example above, “We create life in data from day one, not by adding in something along the way. True, nature has taken millions of years to perfect this, but we need to learn lessons faster if we are to manage products and systems through life effectively.”

86661501_thumbnailKeeping track of this process can be mind-boggling, due to the many changes along the way—and especially when it involves many partners, suppliers and sub-tier suppliers. This is where configuration management enters the scene.

Configuration management is how we define a configuration, which is essentially data at some level of maturity,” he says. “By evolving that data, and managing changes to it reflecting the evolution of its definition, we create physical structures, or systems. These, however, are just data represented in a physical form. Essentially, we manage [product] design and [product] definition data through life. The validated physical representation is merely proof that the data was valid.

Configuration management is like just-in-time [manufacturing] for data,” he adds. “It gets the right data in the right format to the right people at the right time.”

Configuration management is closely linked with product lifecycle management, or PLM, which follows a product from concept to disposal. But “that’s a one-dimensional, linear view of the world,” Mr. Kidd says. “In reality, we share information backward and well as forward.”

Taking the aerospace industry as an example, “it’s highly possible that due to complex work-share arrangements, we could be managing changes in the design, manufacture and support phases of the life cycle concurrently,” Mr. Kidd says. “This adds considerable complexity in managing the status of data at any point in time. We need to know exactly what we have if we are to manage changes to that data effectively. That is one of our greatest challenges in a modern business environment.”

A survey of more than 500 companies last year, Aberdeen Group, a technology, analytics and research firm based in Waltham, Massachusetts, found that for many companies configuration management remains a manual, handwritten process. Aberdeen separated the companies into “leaders” and “followers,” and found that only 54% of leaders and a mere 37% of followers had automated or digital change management.

Yet, keeping track of frequent engineering changes during the development process is the top challenge, cited by 38% of companies. Among industrial equipment manufacturers, 46% named frequent engineering changes as their biggest challenge.

Changes are amplified by the increased complexity of products themselves. In another report, published in 2015, Aberdeen found a 13.4% increase in the number of mechanical components, a 19.6% climb in the number of electrical components and a 34.4% rise in lines of software code over the previous two years.

“Especially for industrial equipment manufacturers, products are getting more complex and customizable,” says Nick Castellina, vice president and research group director at Aberdeen Group. “Configuration management helps manage the flow of all that data and the lifecycle and needs of the shop floor. It centralizes all the visibility into the needs of each new product being built and how that interacts with any materials you’re trying to get at any stage.”

Visibility is important, because “sometimes it’s the minutest of things that can cause the biggest failures of all,” Mr. Kidd says. Automated configuration management not only ensures that all changes are recorded, along with the reasoning behind them, but also serves as a record in the future of every decision that was made in respect of a configuration’s life.

Businesspeople working togetherChange boards, which gather the relevant stakeholders, are the primary mechanism for approving change in configuration management. These boards are dealing with greater volume of change and complexity of the impact. That’s why “every piece of information in that room is retained and digitized. Notes that somebody makes but doesn’t communicate may be relevant,” Mr. Kidd says. Even emails are archived.

“We live in a litigious society,” he says. “Configuration management can prove you did the right thing, even if in the future a decision is called into question. You can show you made decisions based on the best possible information, and in the knowledge that you understood the status of the configuration at that point—in short, proving that you took due diligence in the process.”

 

Catherine Bolgar is a former managing editor of The Wall Street Journal Europe, now working as a freelance writer and editor with WSJ. Custom Studios in EMEA. For more from Catherine Bolgar, along with other industry experts, join the Future Realities discussion on LinkedIn.

Photos courtesy of iStock

A New Model for Manufacturing Innovation

By Valerie C.
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by Werner Krings

The Austrian Economist Joseph Schumpeter argued that industries must incessantly revolutionize their economic structure from within. I interpret this statement to mean that manufacturers, especially in the High Tech industry, must continually strive to innovate with better or more effective processes in order to build new products.

Innovation is a core attribute of successful High Tech manufacturers, impacting every aspect of the business–economics, business profitability, product design, technology, and engineering best-practices, not to mention overall brand value.
Innovation impacts growth

Manufacturing innovation can mean the use Lean and other cost reduction strategies. Increasingly, it means automation and digitization of manufacturing as we move toward the era of the Digital Factory and big data analytics. And, In today’s global landscape, innovation must include the ability to easily replicate processes across sites to ensure higher global quality standards and greater control, visibility and synchronization across operations.

How do you get there?

A key requirement for global innovation is a unified production environment across facilities. High Tech manufacturers that use different processes and production systems in their various facilities will have difficulty achieving innovation– effectively blocking all of the potential benefits. When different plants use different MES systems, for example, there can be little agility, as every change becomes a custom IT project.

Improve operations processes across sites

This is why High Tech manufacturing leaders have moved toward unified and standardized systems, so that process changes and manufacturing agility can be achieved faster and more easily. In such an environment, global shop floor operations can be unified through a Center of Excellence, which can then ensure comparable and measurable manufacturing standards on a global scale. As they say, you can’t improve what you can’t measure.

Measuring Innovation

Innovation can (and should) be measured on an organizational level. The implementation of manufacturing intelligence solutions is often justified by this single function, as part of a manufacturer’s quest to achieve better visibility across operations. The ability to measure is greatly enhanced when it is part of an overall innovation strategy, underpinned by unified technology.

High Tech manufacturers will want to measure several aspects of innovation, such as business measures related to profitability, innovation process efficiency, or employees’ contribution and motivation. Measured values might include new product revenue, spending in R&D, time to market, quality scores for suppliers, and growth in emerging markets.

Manufacturing Innovation

What is pivotal is that innovation must align with corporate strategy and global manufacturing performance in order to ensure continuous growth and return on investment. A well-defined innovation program, combined with an IT infrastructure that supports global agility, is essential for High Tech manufacturers that want to compete and grow in a sustainable fashion, now and in the future.

Now there’s a solution for greater visibility, control, and synchronization of operations. Visit the Flexible Production solution page and read the flyer to find out what a flexible global production platform for manufacturing can do for your High Tech enterprise.



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