Jong Ha Lee

8/14/15

COLLABORATIVE

MANUFACTURING AND ITS

REALITY NOW Demystifying the Hype

The manufacturing world has gone through three major industrial revolutions, and is now struck with a fourth: collaborative manufacturing. Analysts, reporters, and the public enthusiastically speak about its potential to completely transform the industry, and the remarks are justified; however, are we really that close to achieving collaborative manufacturing? Or is it still just a distant topic with many years to come? The following paper discusses the utopian idea of collaborative manufacturing, its current state, and limitations.

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About BriteHub and Preface

BriteHub is a supply chain and product management software startup located in Oakland, California.

In 2013, BriteHub set out to help buyers find an easier way to communicate with suppliers and manufacture products more efficiently. After graduating from the Techstars program in Boulder, CO, BriteHub introduced a beta platform to promote the interactions between buyers and suppliers. Its initial marketplace simply helped connect buyers and suppliers in the manufacturing space. However, through our initial business model, BriteHub discovered that the two sets of users had an easier time communicating and creating meaningful business relationships through the use of a collaborative technology solution. BriteHub’s deep dive into Software as a Service (SaaS) solution has taken such findings to build a strong foundation upon which it can continue to provide more meaningful development.

The BriteHub tools suite continues to develop based on user demand and improved supply chain management. Today, BriteHub’s workflow, collaboration, and supply chain management tools are proving to be successful for companies that are striving to become digital enterprises and keep up with the new standards in the industry.

After setting up headquarters in Oakland at the end of 2013, BriteHub has established partnerships with local, regional, and national partners. The Department of Commerce awarded BriteHub a federal grant to establish a regional manufacturing network at the end of 2014. A partnership with Autodesk has also enabled BriteHub to be embedded into the Fusion 360 Computer-Aided Design (CAD) software. Currently, we are continuing to develop business with leading manufacturing companies, city and state departments, and manufacturing alliances across the country and internationally.

Working in the manufacturing industry for two years, we have experienced many problems and solutions, especially with smaller enterprises in the United States. Collaboration was one of the biggest problems, yet the biggest solution we found in the current manufacturing industry. Underutilized, undiscovered manufacturers as well as designers reaped benefits by incorporating our BriteHub platform, which simply promoted easier communication and collaboration with one another. This made us question: “Why is collaboration such a difficult topic in the manufacturing space?”

The following paper develops ideas, challenges, and most importantly, the current state of collaborative manufacturing. While we also assert our own opinion on collaborative manufacturing, it is still one of many unique perspectives on this new “hype” in the blue-collar industry. Nevertheless, we sincerely hope this paper will drive new thoughts for the reader, and at least be informative on exploring current manufacturing industry.

Best Regards,

Jong Ha Lee Research and Development Intern

Dorian Ferlauto Chief Executive Officer

Adam Kuperman Vice President of Operations

TABLE OF CONTENTS

1. Executive Summary ................................................................................................ 1

1. Overview of the Manufacturing Revolution ..................................................... 3 History of Manufacturing: The Three Industrial Revolutions .............................................. 3 Industry 4.0: Collaborative Manufacturing ............................................................................ 3

2. Introduction to Collaborative Manufacturing ................................................. 4 What is Collaborative Manufacturing? ................................................................................... 4 Key Ideas .................................................................................................................................. 4

Collaboration between Employees ........................................................................................ 4 Collaboration in Design and Engineering ........................................................................... 4 Collaboration between Vendors and Customers .................................................................. 4 Collaboration of Systems ...................................................................................................... 5 Collaborative Reporting and Analytics ................................................................................ 5

Emerging Trends ..................................................................................................................... 5 Information Technology ........................................................................................................ 5 Modeling and Simulation ..................................................................................................... 5 Supply Chain Management .................................................................................................. 6 Production Flexibility ........................................................................................................... 6 Sustainable Manufacturing ................................................................................................. 6

Obstacles of Implementation ................................................................................................... 7 Standardization .................................................................................................................... 7 Infrastructure ........................................................................................................................ 7 Education .............................................................................................................................. 7 Data Security ........................................................................................................................ 8

Estimated Impact ..................................................................................................................... 8

3. The Current State of Collaborative Manufacturing ..................................... 10 Overview ................................................................................................................................. 10 Country Segmentation and Analysis .................................................................................... 10

United States ....................................................................................................................... 10 Germany .............................................................................................................................. 13 China ................................................................................................................................... 16 Mexico .................................................................................................................................. 19

Conclusion .............................................................................................................................. 21

4. BriteHub’s Perspective ........................................................................................ 21

5. Conclusion .............................................................................................................. 23

6. Works Cited ............................................................................................................ 24

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EXECUTIVE SUMMARY

Through three major industrial revolutions, the global manufacturing industry has undergone huge developments in production technology. However, a new fourth industrial revolution is in talks, namely collaborative manufacturing. Coined in many different terms – Industry 4.0, advanced manufacturing, Industrial Internet of Things – it still is rather a broad and complex concept, but focuses on one specific idea: collaboration between manufacturers, businesses, products, and consumers to streamline and decentralize manufacturing processes.

Collaborative manufacturing can be broken down into five types of collaboration in the manufacturing industry: Collaboration between Employees, Collaboration in Design and Engineering, Collaboration between Vendors and Customers, Collaboration of Systems, and Collaborative Reporting and Analytics. Correspondingly, five general trends similarly juxtapose the five collaborations: Information Technology, Modeling and Simulation, Supply Chain Management, Production Flexibility, and Sustainable Manufacturing, respectively.

However, obstacles exist in achieving collaborative manufacturing. Standardization, infrastructure, education, and data security are just a few of the many important challenges that the industry needs to overcome. Without solving the four problems, collaborative manufacturing will never live up to the ideals the public hopes it will achieve. Currently, it is evident that the global manufacturing industry is unable to prevail over these obstacles. Long years of research, development, and implementation will be necessary; however, once the obstacles are solved, “Cyber-Physical Systems” will be created, and lay the foundation for mass adoption of collaborative manufacturing.

Estimated impacts of collaborative manufacturing are huge as well. Main improvements include in productivity rate, global real GDP, and overall economic growth in less developed countries. Undoubtedly, other unforeseen benefits will arise as well.

After analyzing the key ideas, trends, obstacles, and impacts of collaborative manufacturing, it is conclusive that collaborative manufacturing is a difficult, yet a promising revolution in the manufacturing industry. Countries have also acknowledged this fact, and have released their own initiatives and approaches. So what are their strategies, and what is their current state of collaborative manufacturing? What can we conclude?

The United States is still a manufacturing power; however, it lags behind in collaborative manufacturing efforts. While it has initiated many advanced manufacturing organizations, centers, and research efforts, some have been discontinued, and is currently demonstrating little improvement besides trying to allocate funds to small and medium-sized enterprises (SMEs). It is in a minimal, but still a positive direction.

Germany, on the other hand, has better foundations for actualizing collaborative manufacturing. With its preexisting strength in SMEs and provision of research and development through Fraunhofer-Gesellschaft, Germany has actively pursued in detailing its “Industrie 4.0” platform. In addition, Germany has a long-lasting, established dual education system that produces highly skilled workers. With a strong foundation, early acknowledgment of collaborative manufacturing, and the Industrie 4.0 Working Group, Germany is perhaps the most prepared country to pursue collaborative manufacturing.

China has long been a mass, low-level manufacturing country, but is actively moving towards a higher level of manufacturing. However, it is necessary to accept that China is well away from

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achieving Industry 4.0, or collaborative manufacturing, as it still is in the process of fully migrating to Industry 3.0, which focuses on using IT to achieve automation of manufacturing. Nevertheless, as it has been before, China’s government policies are bold and extremely growth-oriented, which hints the potential for China to develop quickly.

Lastly, Mexico’s internationalism in its manufacturing industry shows potential as well. While Mexico has a tendency to rely heavily on its high-level manufacturing sectors and large corporations, it has been experiencing constant growth, even becoming more cost-effective than China in certain industries. In addition, with its 44 Free Trade Agreements, Mexico gains many advanced technologies from foreign countries to develop its manufacturing industry. However, Mexico’s manufacturing scale is significantly smaller than any of the previous countries mentioned, and its collaborative manufacturing initiatives focus largely on symposiums and forums. It is still a question whether Mexico is ready for collaborative manufacturing, but it definitely shows potential.

In specifically analyzing the current U.S. manufacturing industry, BriteHub believes while larger initiatives are important, developments of infrastructure for small, local network of SMEs is equally, if not more important. The direction of U.S. manufacturing initiatives is positive and suitable; however, we ask for a little more delicacy in creating meaningful relationships with SMEs, which we believe will be one of the driving factors of collaborative manufacturing in the United States. Nevertheless, BriteHub believes a progressive future for U.S. manufacturing is ahead of us.

In conclusion, collaborative manufacturing is still at a very developmental stage. Contrary to praises and expectations made by industry leaders, reports, and the general public, it is conceivable that many obstacles exist, and the industry is not yet prepared for the change. Large corporations and countries have implemented aspects of collaborative manufacturing separately, but a full adoption is many years away. Nevertheless, BriteHub believes collaborative manufacturing holds great promise, and strives to become a part of it.

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OVERVIEW OF THE MANUFACTURING REVOLUTION

History of Manufacturing: The Three Industrial Revolutions

In the manufacturing industry, there have been three major industrial revolutions, each impacting the world in different ways. The first industrial revolution occurred at the end of the 18th century, where mechanical engineering and equipment transformed production of goods. Water and steam powered facilities gained interest, improving manufacturing efficiency greatly. The second industrial revolution followed in early 20th century, with effective division of labor in production lines created through electrical equipment, such as conveyer belts. Lastly, as it continues through today, the third industrial revolution promotes further automation of machines, as well as the development of electronics and Information Technology.1 However, we are faced with yet another industrial revolution, namely Industry 4.0 in this turn of the century.

Industry 4.0: Collaborative Manufacturing

Several terms – Industry 4.0, Internet of Things, Advanced Manufacturing, Collaborative Manufacturing, et cetera – have been coined to describe this new industrial revolution, where automated systems are evolving further to better manufacturing production in numerous ways. Markus Löffler, McKinsey & Company IT Director, asserts that Industry 4.0 will “decentralize production control and trigger a paradigm shift in manufacturing”, while Professor Henning Kagermann, President of Acatech – National Academy of Science and Engineering argues that it will “[strengthen] the economy, [intensify] international cooperation and [create] new, internet-based markets”.2 Furthermore, according to a report from the Boston Consulting Group, Industry 4.0 is expected to increase the speed of production by 30 percent and efficiency by 25 percent.3 Without a doubt, this new era of manufacturing holds great promise. However, what exactly is collaborative manufacturing? Is the industry fully utilizing its potential? Further exploration on collaborative manufacturing and its use examples is required to answer such questions.

Source: FMER (2013)

Figure 1: The four stages of the Industrial Revolution

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INTRODUCTION TO COLLABORATIVE MANUFACTURING

What is Collaborative Manufacturing?

The idea of collaborative manufacturing has been present since the beginning of the 21st century. In 2004, Manufacturing Enterprise Solutions Association (MESA) defined it broadly as a way to “streamline end-to-end business and supply chain processes and provide a more comprehensive and accurate information base”.4 In 2015 however, The Boston Consulting Group, had a more precise definition: “[Collaborative] Manufacturing will [transform]…single automated cells to fully integrated, automated facilities that communicate with one another and boost flexibility, speed, productivity, and quality”.5 Both definitions, neither right nor wrong, describe this new era of manufacturing, entailing the same main idea: collaboration between manufacturers, businesses, products, and consumers to streamline and decentralize manufacturing systems.

A noteworthy thought to keep in mind when understanding this concept is that collaborative manufacturing is an overarching “revolution”. It is not a phenomenon only pertaining to businesses, and operates on a national, even on a global level. Countries such as Germany, China, and United States, et cetera has declared its own government initiatives to promote collaborative manufacturing and in return gain a stronger manufacturing and economic presence. However, as to juxtapose government programs, large and small companies have also started to incorporate collaborative manufacturing in their business models and supply chain management. Thus, collaborative manufacturing is a complex, multifaceted concept that must be analyzed with different perspectives.

Fortunately, Larry Korak, the Director of Industry and Strategy at Infor, has conveniently broken down this rather broad idea into five aspects.6 Although still relatively general, these five categories cover most of the opportunities collaborative manufacturing offers, and the following paper will explore more specific examples later when analyzing the current state of collaborative manufacturing.

Key Ideas

Collaboration between Employees This is perhaps the simplest form of collaboration, already present in current manufacturing companies. Also known as “social business”, collaboration between employees must be purely focused on business activity and incorporate business transaction information to advance work more efficiently. This also includes training employees to learn new aspects of collaborative manufacturing and collaborate with a variety of departments.

Collaboration in Design and Engineering This collaboration mainly focuses on product design and management, where a wide range of tasks such as CAD documents, change orders, and engineering requirements are all incorporated to successfully manage manufactured products. The manufacturer gains insight in monitoring product development to flexibly change product design when needed.

Collaboration between Vendors and Customers A primary example of this collaboration is Enterprise Resource Planning (ERP) systems, where web-enabled vendor self-service portals provide real-time status of projects and requirements to manufacturers. Just-in-time inventory methods, as well as product customization through communication with customers are the core foci of this “customer service collaboration”.

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Collaboration of Systems Connectivity between information systems, such as legacy systems and add-on apps and modules, should be flexibly enabled through open-source technologies. The key idea is “integration”: software, cloud, mobile, and reporting services must all be integrated so that manufacturers can gain single, unified information addressing all aspects of the business. In addition, each application (company computers, for example), as a part of this unified system, should get access to business-critical information without fail.

Collaborative Reporting and Analytics This last collaboration is perhaps the most sophisticated of all. By combining gathered information from multiple systems, modern business intelligence solutions deliver key performance indicators (KPIs) and analyses on both internal and external business aspects. In addition, the validity of business analyses is confirmed across the company, as the same set of data provided by all aspects of the company were consumed to create the report. By integrating real-time data analysis, the manufacturer will have improved performance and a competitive advantage in analyzing the present and the future.

Emerging Trends

Emerging trends in collaborative manufacturing predominantly parallel the five key ideas, as developments in the manufacturing sector move towards achieving these ideals. Thus, emerging trends are mainly more specific examples of how the ideas can be achieved. The following trends are general, non-mutually-exclusive trends, based on “Emerging Global Trends in Advanced Manufacturing” by the Institute for Defense Analyses, and may not necessarily be exhaustive.7

Information Technology Information Technology is the most well known, yet most important and pervasive trend for manufacturing. Although IT today is highly developed in many sectors, its potential is not fully realized in the manufacturing sector. IT systems enable real-time, customized control in manufacturing such as energy management in factories. In addition, IT links all stages of production, from pitching products to the right component suppliers to connecting manufacturers with the right consumers; such interactions include “smart production” and “smart products”, the latter having products communicate information back to its manufacturer. In the future, robots authorize complex decisions using high volumes of IT data and replacing more labor.

Modeling and Simulation Collaboration in design and engineering revolves around this trend, where companies reduce expensive prototype models produced solely based on the initial design stage and may not work. Instead, companies use collaborative manufacturing to streamline Computer-Aided Design (CAD) and production by using cost-effective simulation tools, Autodesk for example. In Autodesk, manufacturers can easily design their product using a 3D modeling tool with various components. Then, before proceeding to create the product, manufacturers can Request-For-Quote (RFQ) by using BriteHub software, connected with Autodesk, to ensure the right components and suppliers are available for the product. This complete CAD to RFQ process managed by BriteHub and Autodesk epitomizes this important trend.

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Supply Chain Management The manufacturing world is progressing towards a decentralized supply chain management system. While still maintaining vertical integration within individual factories, horizontal integration between all facilities globally to integrate production data will be enabled. Through both processes, many benefits will follow, including transparency, product customization, self-sufficiency, and information sharing within the system.8

Production Flexibility Production and supply management systems are becoming more robust to sudden demand changes. New market dynamics and rapidly changing consumer demands are shortening product life cycles, resulting in shortages or surpluses of products with the traditional, inflexible production facilities. Now, companies such as Zara are incorporating “mass customization” by tracking changes in consumer taste and customizing products to meet as much demand as possible while reducing unnecessary production cost inefficiency.

Sustainable Manufacturing Finally, with climate issue becoming a global concern, countries and companies have started to mandate “sustainable manufacturing”, which entails using non-polluting, conservable energy resources to manufacture goods. While sustainable manufacturing is still a premature concept with slow adoption, it is proving to have numerous positive benefits, including reduced input energy costs and better brand recognition for companies. IT-based solutions for sustainable manufacturing are growing in popularity.

All distinct trends and ideas converge to detail one giant manufacturing process, powered by collaborative manufacturing. At the core, a new system is born, namely “smart factory” or as the German manufacturing initiative calls it, a “Cyber-Physical System” (CPS). This facility is the future for collaborative manufacturing, the fourth Industrial Revolution.

Figure 2: Complete CAD to RFQ process between BriteHub and Autodesk

Source: Autodesk Fusion360 (2015)

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Obstacles of Implementation:

While these key ideas and emerging trends show huge potential, challenges – some insurmountable currently – exist in bringing collaborative manufacturing to a reality. The following list outlines general non-mutually-exclusive challenges addressed by several reports, and may not be exhaustive:9 10 11

Standardization If collaborative manufacturing is to enable inter-company and cross-continent networks, a new form of standardization in the industry is required. This reference architecture, as the Germans call it, will provide a framework for all technological systems currently present. However, standardization will be extremely difficult with companies using different Product Life Management (PLM) systems, Enterprise Resource Planning (ERP) systems, and other software and machinery present in each individual plants. In addition, an international standard will have to be established, which will be difficult to achieve especially with different policies and regulation for each country.

Infrastructure To support the sheer amount of data that will transfer between businesses, consumers, and even governments, a highly robust and sophisticated technology infrastructure will be needed. This may include fixed and mobile broadband services, Internet infrastructure, manufacturing system networks, et cetera. While modifying existing network of systems will already be difficult for multinational companies (MNCs), the cost implications will be a huge problem for all manufacturing companies and government sectors. Small and medium-sized enterprises (SMEs) will need to build a new infrastructure from scratch, governments will need to support these SMEs, and large companies will have to harmonize its existing systems with the overall network. It still is a question whether this large infrastructure of manufacturing companies will become a reality.

Figure 3: The Overarching Collaborative Manufacturing Process

Source: IDA (2012)

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Education Even with the necessary IT components for collaborative manufacturing, professionally training employees will become a hindrance for smooth adoption. All employees in the integrated system will need to become more interdisciplinary, making decisions ranging from strategic planning to system operations to simply operating machinery. Lower-level employees themselves will need to be highly independent and self-sustainable, while senior management will need to incorporate all the following changes while running a business on a day-to-day basis. Following industry standards, college and high-school education will need to adapt and strengthen entrepreneurial approaches to increase the IT-related skills and innovation abilities of the workforce. Increasing the level and variety of work, enabling independence, and changing the overall thinking for employees is a necessary problem to overcome in order to fully utilize the capabilities of collaborative manufacturing.

Data Security Data security will absolutely be the most important factor in achieving inter-company and cross-country networks. In a highly connected industry where many aspects of plants and manufacturing networks are automated through collaborative manufacturing, confidential data theft and espionage attacks will occur. However, too little is known about relevant attacks. Industrial IT security has only started to be discussed in the automation industry since the public debate surrounding malware such as Stuxnet, Duqu or Flame. Moreover, software also plays an increasingly important role in delivering and maintaining security and safety, but it has not yet been properly taken on board by manufacturing processes – and where solutions are available they have yet to be implemented. Both preventing and handling cyber security issues persist in manufacturing companies, and will require a large cost for maintenance in the future.

Macro-challenges such as standardization, infrastructure, education, and data security will act as important long-term obstacles to prevail, and will require long periods of research and development to be sufficiently solved. Collaborative manufacturing processes will not occur if the industry fails to solve any of these obstacles. However, the full potential will be realized once obstacles are solved and will improve the industry, technology, and economy exponentially.

Estimated Impact

Like the other past Industrial Revolutions, estimated impacts are to be significant. According to Accenture, Industrial Internet of Things (IIoT), only a part of the bigger collaborative manufacturing concept, is expected to add around USD 10.6 trillion to the GDP of 20 developed and developing countries over the next 15 years. However, with additional investments to maximize technological and economic growth, “countries could generate up to an estimated USD 3.6 trillion in additional value…for a total of USD 14.2 trillion”, lifting real GDP by 1.5% overall by 2030.12

Figure 4: The Importance of Cyber Security in Swiss Manufacturing Companies

Source: Deloitte (2014)

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Specifically analyzing Germany, where collaborative manufacturing is more well known as “Industrie 4.0”, productivity may improve up to 30 percent, with additional growth of about 30 billion Euros a year, according to The Boston Consulting Group.13 Although Germany is a country with a preexisting strong manufacturing prowess, similar margins of improvement are expected in other developed countries such as United States, United Kingdom, Japan, et cetera.

Developing countries are also included in the bigger picture. According to McKinsey Global Institute, consumption in developing countries may rise from USD 10 trillion to 30 trillion in 2025, accounting for nearly 70% of global demand for manufactured goods. These economies include China and India, but also Indonesia, Kenya, Vietnam, and other less recognized emerging markets.14 With the rise of developing countries’ economies, collaborative manufacturing will become ever more important, connecting factories and distribution channels worldwide. This combination of horizontal and vertical integration globally will only be achieved through collaborative manufacturing.

Figure 5: Growth in Developing Countries

Source: McKinsey Global Institute (2012)

Figure 4: The Impact of IIoT

Source: Accenture (2015)

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Research from various credible sources clearly conveys that collaborative manufacturing has great potential for developing the world exponentially. However, are we currently utilizing all the opportunities collaborative manufacturing offers? Where are we in the development and actualization of this revolutionary idea?

THE CURRENT STATE OF COLLABORATIVE MANUFACTURING

Overview

With such a promising future, countries have started its own initiatives, including Germany’s “Industrie 4.0” and China’s “Made in China 2025” reform. In addition, along with countries, companies such as IBM and SAP have implemented aspects of collaborative manufacturing in its business models. However, especially for businesses, collaborative manufacturing is still many years away from full adoption. According to the Manufacturing Leadership Journal from Frost & Sullivan, only 22% have effective, highly collaborative structures throughout the company, though 90% of companies agree collaborative manufacturing is important.15 Furthermore, while countries are slightly ahead of the game with large funding and initiatives, obstacles still exist, including cyber-security and integration between large corporations and small and medium-sized enterprises (SMEs).16 The following case studies further demonstrate the current state of collaborative manufacturing in various countries, describing both successes and limitations.

Country Segmentation and Analysis

United States The United States manufacturing industry experienced one of the worst recessions between 2000 and 2009, losing 33.6% of its jobs and 5.8 million workers.17 In addition, its export output heavily declined compared to other countries, with a manufacturing good trade deficit of $458 billion in 2013. This includes $81 billion deficit even in advanced technology products, which the United States prides itself in. Nevertheless, real manufacturing output officially grew by 7.7% over the decade, most of its growth attributed to computer and electrical components (NAICS 334), and petroleum and coal products. Otherwise, “13 of 19 manufacturing industries classified by the U.S. Bureau of Economic Analysis (BEA) saw inflation-adjusted declines in value added.”18

Figure 6: Employment Decline, 1970-2012

Source: ITIF (2015)

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However, manufacturing has been experiencing steady growth in the 2010s. Employment levels are in positive trend, with 878,000 jobs added from 2010 to mid-2015 and almost recovering to 2009 employment levels.19 In addition, lower domestic energy costs and higher manufacturing costs in other global economies have shown positive effects. However, Adam Nager and Robert Atkinson, authorities in the Information Technology and Innovation Foundation (ITIF), heavily attribute this growth to cyclical changes driven by resurging demand. They argue that durable goods have primarily driven output and employment growth in this recovery stage, after a plummet in consumer demand during the recession. As non-durable, demand-inelastic goods such as food currently experiences decline in output after its growth during the recession, the cyclical resurgence in demand for durable goods is driving the manufacturing industry, demonstrated by transportation equipment and primary and fabricated metals industry accounting for 72% of total manufacturing jobs gained from 2010 to 2013.20

Currently as of June 2015, U.S. manufacturing is showing mixed results. According to the Institute for Supply Management (ISM), its Purchasing Manager’s Index (PMI), a measure of economic health in the manufacturing sector, has stayed over 50% in the past 30 months.21 Such level indicates growth in the manufacturing industry. In addition, 11 of 18 manufacturing industries indicated growth, with a gain in orders indicating that U.S. customers are providing demand for factories against a backdrop of limited prospects for overseas sales. 22 23 On the other hand however, according to the Federal Reserve, industrial production growth level has consistently been decreasing since last November, putting the sector in a technical recession.24 Experts attribute the decline to strong dollars and low oil prices, after the Greece euro crisis and 60 percent crude oil plunges last year.25

This mixed state of current U.S. manufacturing provides little conviction for investors, and the industry is unable to produce continuous growth. Thus, the U.S. manufacturing industry needs a new stimulus: collaborative manufacturing.

United States has numerous organizations, public and private, to promote advanced manufacturing. National Network of Manufacturing Innovation (NNMI), a public-private partnership, act as “regional hubs for manufacturing excellence” in order to improve the global competitiveness and investment of the US manufacturing industry. National Institute of Standards and Technology (NIST), which provides technical support for the domestic manufacturing industry and is responsible for the Advanced Manufacturing Portal connecting government, university and private initiatives, have received 2.515 billion USD for the 2015 fiscal year.26 27 Lastly, the Advanced Manufacturing Partnership (AMP) launched by President Obama in 2011 has made progress in creating collaborative manufacturing a reality. The following table outlines selected initiatives below.28

Source: Federal Reserve via FRED (2015)

Figure 8: Industrial Production Index, Seasonally Adjusted

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Figure 9: AMP Recommendations

Previous Recommendations Current Status

1. Increase R&D Funding in Top Cross-Cutting Technologies

• Received 2.2 billion USD for R&D in FY 2013, nearly 20% increase from prior year

• In Process: Build process to incorporate regular input from industry, labor and academia

2. Establish a National Network of Manufacturing Innovation Institutes

• Consortium of over 100 companies, universities, and organizations

• Three additional pilot manufacturing innovation institutes over regions

3. Foster a More Robust Environment for Commercialization

of Advanced Manufacturing Technologies

• $1 billion Small Business Investment Company fund to support advanced manufacturing

• In Process: Developing partnership with the Association of University Technology Managers to enhance startup and licensing activity

4. Develop Partnerships to Provide Skills Certifications and

Accreditation

• Supported 5‐year goal of 500,000 workers receiving industry‐recognized credentials through a partnership between Skills for America’s Future and NAM, supported by the Manufacturing Extension Partnership (MEP)

5. Establish a National Advanced Manufacturing Portal

• Created National Innovation Marketplace, a portal connecting U.S. manufacturers to over 2 billion USD in technology buying opportunities (now discontinued)

• In Process: Launch of manufacturing.data.gov, including a database of research activities, as part of ‘Open Manufacturing Data Initiative’

• In Process: MEP launched a competition for regional B2B network pilot projects

6. Streamline Regulatory Policy • Launched regulatory modification to remove

outdated and inefficient regulations – 580 reform proposals submitted and 100 acted upon

While many of these initiatives are heading towards the right direction, challenges exist in achieving a successful collaborative manufacturing platform. For example, there are no tax reforms enacted for manufacturing technologies, which may provide to be a hindrance for the development of new technology for small and medium-sized enterprises (SMEs), an essential area for collaborative manufacturing in the United States.29 Furthermore, once SMEs partner with larger corporations, they will eventually become a major part of US exports, both directly and indirectly (through supplying to corporations). Thus, in the future where SMEs and large businesses are integrated through collaborative manufacturing, new tax reforms and regulations will be necessary to support the partnerships. Such assertion is emphasized and analyzed further with countries such as Germany.

Poor U.S. infrastructure is another important issue to address. According to a survey conducted by Building America’s Future Educational Fund and the National Association of Manufacturers (NAM) in 2013, 70 percent of manufacturers believed U.S. physical infrastructure is in “fair or poor shape”, and 60 percent did not believe that the infrastructure was well positioned to support the growing

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economy for the next 10-15 years.30 Though these statistics are from 2013, articles from 2014 and 2015 still indicate the same issue with regards to old and inefficient infrastructure costing over 900,000 jobs and 97,000 manufacturing jobs.31 32 A highly sophisticated manufacturing infrastructure is of utmost importance for collaborative manufacturing to flourish. For example, even if advanced system software achieves horizontal and vertical integration between factories, a lack of physical, infrastructure to support the process will only result in an ineffective collaborative manufacturing process, not fully utilizing its potential. Furthermore, long-term investment in public infrastructure over the next 15 years will add 1.3 million jobs at the initial boost besides manufacturing.33 For the current economy and the future of manufacturing, U.S. infrastructure requires further development and investment.

Recognizably, other unaddressed challenges also exist in achieving collaborative manufacturing in the United States. Through an in-depth analyses of the 2007 recession, cyclical growth in the 2010s, and the current initiatives for collaborative manufacturing, it is conclusive that the U.S. is in a mixed position: while the government is increasing funding for collaborative manufacturing hubs and development, many important challenges are yet to be addressed. This current state correlates to both positive and negative trends in the manufacturing industry. Thus, though external issues currently show little positivity for growth, United States must start developing collaborative manufacturing internally so it could have a comparative advantage when external factors are less of an issue in the future. For the United States, collaborative manufacturing is currently at a minimal, yet in a positive direction.

Germany Germany has been long renowned as a manufacturing power. Although Germany is the third largest exporter in the world, behind China and United States, its account balance ranks the highest.34 Such statistics demonstrate the sheer power of Germany’s exports and its domestic manufacturing capabilities, resulting in the manufacturing industry accounting for 22 percent of Germany’s economy in 2014.35 Similar to other developed economies, Germany’s manufacturing level declined during the 2008-09 financial crisis, reaching a record low of -28.40%; however, its peak jobless rate only resulted in 7.9%, and production rebounded quickly in 2010 to around 15% growth.36 37

Ever since, Germany has been experiencing steady growth in manufacturing, despite various crisis such as the war in Ukraine, Ebola outbreak, and the Greek Euro crisis. In 2014, German exports increased by 3.7% compared to 2013, with a foreign trade balance of 217.0 billion Euros.38 As of July 2015, Germany has experienced a combined 2.7% increase for bookings during April and May due to growth in foreign demand and depreciating Euro, while domestic demand has been decreasing slightly. However, the Greece Euro crisis is a major factor to recognize, as the European economy may shift drastically.39

Figure 11: Production Index for Manufacturing

Source: Statistisches Bundesamt, Wiesbaden 2015

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There are still certain challenges in Germany’s successful manufacturing industry however. One of the most prominent challenges for Germany is high wages in the manufacturing sector, against low-cost competition from China.40 In addition, Germany has a narrow export-dependent model, with vehicles, machines, electronic devices and chemicals accounting for more than half of Germany's exports as of 2012.41 Nevertheless, Germany’s manufacturing model has been highly successful, for three main reasons.

A key success factor for Germany’s manufacturing industry is its Mittelstand, a German phrase for its small and medium-sized enterprises (SMEs). According to Armin Schmiedeberg of Bain and Co., these SMEs operate as oligopolists, specializing in specific niches and allowing little competition. They rely little on dealers, and rather enforce their own sales and maintenance networks.42 Possessing the capabilities as a premier producer, these SMEs outcompete Chinese producers who focus on low-cost, high-production manufacturing.

German SMEs possess specialized industry technologies due to an intricate collaborative system. While the government has little intervention in leading its highly successful manufacturing industry, “Intra-sectoral networks of companies, trade unions, banks and technical institutions” focus on revitalizing the industry as needed. 43 An example is the Fraunhofer-Gesellschaft, a 2.45 billion USD independent nongovernmental organization that provides high-quality, affordable research SMEs cannot afford. It consists of 60 research institutes with more than 250 business focus areas and core competencies. This allows Fraunhofer to connect latest university findings to industry-specific products, enabling SMEs to upgrade its technologies, and keep ahead of the competition.44

Lastly, Germany has a long-lasting, established dual education system that produces highly skilled workers. Around half of high school students in Germany train in one of 344 trades, from tanner to dental technician, many of such courses set by unions and employers' federations. Furthermore, state and local governments provide schools for apprentices, with chambers of commerce and industry running the exams. 45 Such system is maintained at the highest levels of education, where part-time Masters and Ph.D. candidates engage in the manufacturing industry and transfer their knowledge, while gaining practical experience.46

However, even with preexisting strong capabilities in manufacturing, Germany has yet launched another initiative to further develop its manufacturing industry, namely Industrie 4.0. The following information mainly refers to Germany’s Industrie 4.0 Working Group’s final report.47

Industrie 4.0’s key idea focuses on creating Cyber-Physical Systems (CPS), which comprises of a global network of smart machines, storage systems, and production facilities capable of autonomously exchanging information while operating independently. These systems operate as command centers for different manufacturing areas, enabling large, cloud-based interactions for both an individual company as well as an array of companies if needed. However, Industrie 4.0 also focuses on creating smart factories and smart products, which are at a more decentralized, lower level than CPS. Smart factories encompass both the manufacturing process enabled through the Internet of Things and the manufactured product. These “smart” products have information such as wear and tear cycles, identification and location embedded in them to provide better optimization strategies for factories.

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In order to achieve Industrie 4.0, the Working Group has proposed a dual strategy for Germany to adopt: to become a leading supplier and a leading market in manufacturing. To have strong equipment suppliers in alignment with Industrie 4.0, Germany needs to adapt existing IT technologies with CPS capabilities while developing new technologies, promote R&D and training to develop methodologies and pilot applications, and develop new value networks and business models. To be an overall leading market, the manufacturing sector needs to integrate large Multi-National Corporations (MNCs) and SMEs into value networks by implementing technology transfer initiatives, which entail the sharing of best practices, and development of technological infrastructure and training programs. This dual strategy, in effect, aims to achieve three key goals of Industrie 4.0: inter-company horizontal integration networks, end-to-end holistic manufacturing across the entire product development chain, and flexible, reconfigurable vertical integration process for individual products if needed.

However, even as an industry leader with a highly defined idea, Germany has numerous challenges yet to be resolved. The Working Group has identified eight courses of action Germany should take to address its challenges, as outlined below:

Figure 12: Cyber-Physical Systems

Source: Bosch Software Innovations (2012)

Figure 13: Standard Reference

Architecture

Source: Siemens (2013)

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1. Standardization and creation of reference architecture to provide a general framework for all partner companies

2. Managing CPS through two models: the planning model, which is an engineering prototype design, and the explanatory model, which validate the planning model through simulations

3. Reliable, comprehensive broadband/communication network 4. Proactive actions to integrate operational safety to reduce environmental harm and data

security for misuse preventions in the highly networked Industrie 4.0 5. A flexible working environment with decentralized management leadership, greater decision-

making for individual employees, and a manageable work-balance 6. Promote or mandate training and professional development, especially in Industrie-4.0-

specific content 7. Regulatory framework provided since R&D stage for companies to comply, but a framework

that still facilitates innovation 8. Resource efficiency calculation to measure the costs and benefits of CPS platforms

However, these courses of action themselves have challenges, including SME adoption, revamping the famed vocational education system, cyber security trust between partner companies, et cetera. Even for Germany, a vanguard in the manufacturing industry, Industrie 4.0 and collaborative manufacturing are still yet to be fully implemented. At this current moment however, Germany is undoubtedly at the forefront of adopting the next revolution of this industry. Its delicate balance between global MNCs and specialized SMEs continue to drive the industry. Independent organizations such as Fraunhofer-Gesellschaft, GBITKOM, VDMA, et cetera consistently develop R&D while uniting companies to advance the industry together. With such an intricate and secure network in the manufacturing industry, Germany has high prospects in leading collaborative manufacturing with a definite starting point.

China China has been experiencing tremendous growth in its manufacturing industry, overtaking the United States to become the world’s largest manufacturer in 2011 and doubling its GDP in the past decade. Such a feat was achieved by the United Kingdom in 150 years during its industrialization.48 Even during the economic downturn in the 2008 crisis, Chinese production still experienced growth, with roughly 7 percent growth at its lowest manufacturing production level.49 China’s “Five-Year Plan” has fueled such immense industry development, with supply of labor force corresponding to the structural transformation of the industry and sustainable investment in infrastructure.50 Proving its power as a cheap, cost-effective producer, China has definitely grown as a manufacturing giant.

Figure 12: Ratio of Manufacturing Exports to Global Total

Source: Siemens (2013)

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Recently however, manufacturing growth has been in decline, reaching its lowest level since the 2008 crisis, declining to 5.6 percent growth as of April 2015. To couple such decline, wages have risen 50% over the past five years in major cities like Beijing and Shanghai, reaching an all-time high of 51,369 Chinese yen/year in 2014, a substantial problem for China’s low-cost manufacturing sector.51 52 As China grew richer, manufacturing’s role in its economy weakened, while lower-cost locations such as Vietnam received attention. Other complexities such as the increase in demand for business-to-consumer online sales, rising consumer demand for customized products, and an overall complexity in the manufacturing value-chain are posing challenges for the Chinese manufacturing industry.

At this moment in time, China is still a manufacturing giant; however, all factors point to a different direction, for China to become a manufacturing power through innovation: collaborative manufacturing.

Collaborative manufacturing ideas were briefly mentioned in the initiation of the 12th Five-Year Plan (2011-2015). The proposal glanced over changing the industry layout into “advanced manufacturing bases with international competitiveness based on key state projects”, while strengthening SMEs and their product quality. Still at a developing stage, the Chinese government did not delve deeply into the concept of collaborative manufacturing and rather generalized the idea as creating “intelligent manufacturing structures” to utilize resources and energy more efficiently.53 The plan nevertheless is strongly focused on “improving China’s ability to develop advanced technologies and captur[ing] global manufacturing networks”.54

However, China released a new ten-year national plan, namely “Made in China 2025” reform on May 18th, 2015. Directly inspired from Germany’s Industrie 4.0, the proposal specifically focuses on putting Chinese manufacturing industry on par with that of other industrialized nations through advanced restructuring and innovating of the manufacturing sector. While government intervention will be necessary, “Made in China 2025” will also rely on market institutions, which will strengthen intellectual property rights protection for SMEs and allow firms to self-declare technology standards to help them better participate in international standard settings. Along with market drivers, the government will focus on projects including establishing manufacturing innovation centers (15 by 2020 and 40 by 2025) and boosting intelligent manufacturing.

There also is a large, dual-focus: localized production and globalized innovation. Firstly, the plan focuses on raising its domestic content of core components and materials to 40% in 2020 and 75% in 2025. The plan suggests a strong buy-local push for more sophisticated products from Chinese manufacturers. However, the plan also calls for Chinese firms to gain international recognition through greater foreign investment in innovation. This will require large MNCs to cooperate with Chinese firms in providing critical component, technology, and management. All collaborative manufacturing developments mentioned above is expected to propel China into an advanced manufacturing power, with 25 to 30 percent improvement in productivity and 60 percent reduction in unforeseen production losses.55 56

The whole Chinese economy is actively rushing the industry to adopt collaborative manufacturing. However, it is necessary to acknowledge that China is still far away from adopting collaborative manufacturing, as their current industry is still stuck between assembly lines and early digitization of industrial processes. Most of the Chinese government’s efforts have focused on digitizing manufacturing processes (Industry 3.0), and has been slowly moving into automated, connected processes (Industrie 4.0). According to statistics released by Ministry for Industry and Information

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Technology (MIIT) in 2015, only about 60 percent of companies use enterprise Resource Planning (ERP) and Manufacturing Execution Systems (MES). Similar statistics apply for Product Lifecycle Management and Supply Chain Management software. Furthermore, there are only 14 industrial robots per 10,000 workers as opposed to 282 workers in Germany. More statistics aside, China’s manufacturing industry is simply not ready for the newest development in the manufacturing industry: collaborative manufacturing.

Still, the Chinese efforts have been impressive. Between 2013 and 2014, MIIT has supported 720 pilot companies, and has announced to continue funding 6.7 billion USD to support domestic SMEs and emerging industries with the hopes of promoting local production of advanced products and technologies.57 Furthermore, provinces and cities are also expressing their interest. For example, Chongqing is supporting the digitization of automotive suppliers and equipment manufacturers with 40 million CNY, while Nanchang is building an industrial park for digital manufacturing in aerospace technology with 80 million CNY funding.58

As well as funding, China has stepped closer towards realizing collaborative manufacturing through a unified standard of manufacturing. In 2014, MIIT succeeded in bringing 14 state-run associations from different sectors together and creating a voluntary quality management standard for automated and intelligent manufacturing.60 Grasping the need for development in the manufacturing industry to drive consistent economical growth, China has made massive efforts in the past few years to internally grow its manufacturing technologies. However, its external partnership with Germany will play an equally important role in developing its future.

The Sino-German “innovation partnership” began in 2011, with its third meeting in Berlin as of October 2014. The

partnership, while encompassing broader industries such as agriculture and urbanization, will benefit China greatly in its manufacturing industry. As explained previously, Germany is a

Figure 13: Local Funding for Collaborative Manufacturing59

City/Province Funding (in

millions CNY)

Nationally 100 (only 2013)

Chongqing 40

Nanjing 40

Qingdao 30

Shenyang 100

Henan 80

Ningbo 100

Zhengzhou 30 (per annum)

Figure 14: Distribution of Industrial Software, 2014 (in percent of companies)

Source: MIIT (2015)

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manufacturing power and a leader in collaborative manufacturing. Through bilateral innovation policy platform and two-way investment in R&D, China will be able to gain invaluable technology of German companies such as Siemens, SAP, and its strong SMEs.61 However, a fair compromise must be achieved; China will have to deregulate its state data control policy, since it may limit the partnership and German companies will certainly want a guarantee of its sensitive manufacturing technologies. Thus, clear, agreeable terms and conditions must be robustly formed for the two-way partnership to occur. This partnership, coupled with China’s preexisting strong economy and manufacturing industry, will help China become a well-rounded manufacturing power.62

The Chinese government’s efforts for collaborative manufacturing both internally and externally are very recognizable, and are pointing towards a much better future. However, it still is a developing economy with low-level, mass manufacturing systems. Their future for manufacturing looks promising with its ambitious initiatives for innovation, but that future will take a significant amount of time to achieve.

Mexico Since the turn of the century, Mexico has been experiencing constant economic growth, largely due to its manufacturing industry. Accounting for 18 percent of its GDP in 2015, Mexico’s manufacturing industry is constantly growing, demonstrating 3.8 percent growth monthly as of July 2015. 63 64 Such growth has been fueled by Mexico’s high-end manufacturing sectors, increasing cost-competitiveness, and Mexico’s large amount of integration with foreign countries for trade.

In the early 2000s, as China displayed strength in low-cost manufacturing, Mexico began focusing on high-end manufacturing, including automotive, aerospace, and electronic products. While clothing exports dropped 43 percent, automotive and electronic exports increased by 157 percent and 73 percent, respectively between 2002 and 2012. With a strong trade connection with United States and Canada through North American Free Trade Agreement (NAFTA), Mexico’s high-end sectors were able to remain cost competitive, while exporting greatly to nearby countries. Such growth has maintained until today, with the automotive sector experiencing double-digit growth and the plastics industry averaging 13.4 percent growth since 2010.65

In the 2010s, Mexico has also become more cost-effective relative to China, as China’s manufacturing costs have been exponentially growing, resulting in average labor costs 20 percent lower in Mexico than in China. In addition, average electricity and industrial natural gas prices are 4 percent and 63 percent lower, respectively according to a study by Boston Consulting Group.66 The reduction in costs has driven lower-end manufacturing as well, with exports of textiles averaging 9 percent growth over the last two years.67

Figure 16: Mexico Manufacturing Growth, based on Sectors

Source: Trademap, Strafor (2015)

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Lastly, Mexico’s open-minded trading policies have increased its export growth. Mexico currently has 44 free-trade agreements, more than that of any other country.68 In addition, the NAFTA, reducing most of the tariffs in traded goods, have accounted for almost 80 percent of Mexican exports as of 2012.69 Continuing with the current theme of expanding its manufacturing exports to foreign countries, Mexico is initiating advanced manufacturing events and symposiums, in an effort to keep up with the global trend of collaborative manufacturing.

Still a relatively young, growing manufacturing country compared to world leaders such as United States and Germany, Mexico is primarily promoting advanced manufacturing through well-established manufacturing cities and hosting various symposiums. Tijuana is one of such key potential advanced manufacturing cities. Located close to San Diego, California, Tijuana is regarded as the intersecting hub between US innovation and Mexico’s production capabilities. In addition, with 568 plants and more than 164,903 workers in high-tech industries such as aerospace, medical device, and electronics, Tijuana is by far the biggest export manufacturing city in Mexico. Thus, Tijuana has been experiencing 4.4 percent GDP growth and 3.5 percent unemployment rate in the last 10 years, on average.70 Tijuana Economic Development Corporation (TijuanaEDC), a nonprofit organization dedicated to helping companies establish manufacturing operations in Tijuana, currently uses this site attractiveness to draw in corporations that have both high production capabilities and innovation, such as Samsung, JVC, Plantronics, et cetera. In contrast to Germany, which highly focuses on the integration and development of SMEs in its advanced manufacturing initiatives, TijuanaEDC hopes the large corporations in Tijuana will naturally innovate and establish itself with advanced manufacturing technologies. Thus, though it does not neglect the importance of SMEs, SMEs are not a significant part of TijuanaEDC’s advanced manufacturing initiative.

Besides attracting large corporations, Tijuana has hosted many advanced manufacturing conferences and symposiums. The Intelligent Manufacturing Initiative (IMI), hosted on November 10, 2014, focused on methods to improve global competitiveness of U.S. and Mexico’s manufacturing industry.71 Key stakeholders reached an agreement to establish a Binational Intelligent Manufacturing Institute (BIMI), which will coordinate IMI efforts to meet companies’ needs and develop specialized capabilities in both countries.72 This in effect would spur federal government initiatives to promote advanced manufacturing. Another huge initiative is the Advanced Manufacturing Meetings Baja California, held during November 2-4, 2015. As Mexico’s first one-to-one meetings platform connecting manufacturers with suppliers in the advanced manufacturing sector, the summit will focus on topics such as new technologies and their impact, the new supply chain paradigm through innovation, et cetera. Business-to-Business meetings, workshops, and exhibitions will enable interaction between businesses, policymakers, and technologies to further propel Mexico’s future in advanced manufacturing.73 Both of the initiatives have heavy support from industry leaders, institutions, and government departments, which display Mexico’s constant urge to progress its manufacturing industry.

Other national organizations exist to promote collaborative manufacturing as well. Mexico, along with U.S, EU, and Norway, is a part of Intelligent Manufacturing Systems (IMS) initiative, a global organization supporting manufacturing R&D that encourages international business innovation for collaborative manufacturing. In Mexico, IMS has hosted events such as IMS Information Day,

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Manufacturing Technology Platform (MTP) Project Workshops, et cetera to promote awareness for collaborative manufacturing in Mexico.74 Furthermore, it has organized projects such as Economics of Model Based Manufacturing (EMBM), Sustainable Supply Chain Management, and Virtual Simulation and Training of Assembly and Service Processes in Digital Factories (VISTRA).75 Although it has yet to make an impact on Mexico’s manufacturing industry, the organization holds great promise in innovation and research.

One key general characteristic that unifies all initiatives and symposiums is international organizations and trade. For example, IMS and Mexican-U.S. Entrepreneurship and Innovation Council (MUSEIC) mainly hosted the IMI conference in Tijuana.76 In addition, TijuanaEDC’s advanced manufacturing strategy is highly dependent on international corporations utilizing Tijuana’s manufacturing sites, rather than relying on domestic SMEs and their production. A dissertation from the Essex Business School attributes this tendency to Mexico’s numerous FTAs and exports.77 With a strong focus on international trade from exports created domestically by international corporations and FTAs to support these large companies, domestic SMEs have been unable to stay competitive and capitalize on Mexico’s expanded manufacturing network. Naturally, Mexico’s manufacturing industry highly depends on corporations instead of SMEs, which inherently is opposite to Germany’s policies despite both countries being heavy exporters. It is unknown yet whether such reliance will positively impact the future of Mexican advanced manufacturing, as Mexico itself is still not as sophisticated in manufacturing innovation.

Mexico has shown strong manufacturing growth through its cost-effectiveness, high-tech manufacturing sectors, and power in international trade. With every year, Mexico is adopting more initiatives and symposiums on collaborative manufacturing, with the assistance from organizations such as IMS and MUSEIC. Nevertheless, it is at a developmental stage to adopt sophisticated ideas on collaborative manufacturing, and is concentrating excessively on further growing high-tech manufacturing sectors through traditional methods, with less focus on SMEs. However, as a market full of opportunities, Mexico is primed for possible development of collaborative manufacturing in the next decade or so.

Conclusion

Each country has its own strengths and weaknesses in collaborative manufacturing. Some countries are more prepared to develop and implement aspects of collaborative manufacturing in the upcoming years, while others show more potential and may need to wait longer. Collaborative manufacturing, because its potentials are immense, is exaggerated greatly on its implementation within a couple of years; however, even in the most advanced manufacturing countries like Germany, collaborative manufacturing seems a long way away. While all countries undoubtedly acknowledge collaborative manufacturing will be a major source of growth, the current state of collaborative manufacturing stands at a prototypical stage.

BRITEHUB’S PERSPECTIVE

Though thorough research is important in analyzing the current state of collaborative manufacturing, BriteHub also has its own perspective on collaborative manufacturing. As a small start-up focusing on enabling collaboration between players in the manufacturing industry, BriteHub has firsthand witnessed different experiences, situations, and complexities unrevealed in large-scale research papers. Incorporating both research and personal experiences, BriteHub hopes

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to provide a perspective more pertinent to the SMEs involved in the U.S. manufacturing industry. Please note: the following section is a subjective opinion of BriteHub, and may not necessarily be qualified, proved, or correct.

BriteHub believes the purpose of collaborative manufacturing is aligning companies’ agendas with their final products as effortlessly as possible. We believe providing tools to help players in the industry work together and achieve the most cost-effective and quality output is of utmost importance in collaborative manufacturing. For example, BriteHub not only hosts a marketplace for manufacturing buyers and suppliers to easily connect for products, but also integrates CAD software, a simple project management system, and plans to release Engineering Change Order (ECO) for easier collaboration. Contrary to large-scale, ideal collaborative manufacturing systems on a macroeconomic scale, BriteHub focuses on strengthening small, valuable connections to create long-lasting relationships.

Working with U.S. manufacturing SMEs, BriteHub always encounters companies whose problems directly relate to collaboration. Dorian Ferlauto, the Chief Executive Officer of BriteHub, describes this collaboration as not large-scale collaboration such as Cyber-Physical Systems, but day-to-day collaboration to organize and manufacture products on a contract basis. She asserts that the manufacturing infrastructure today is built in separate silos (design, production, distribution), and systems are often too robust for efficiency. ERP systems, though it manages large amounts of data and tasks, are rather ineffective in quick process changes. Especially for SMEs, ERP systems are not only a financial burden, but also do not support nimble, small-quantity, and customized manufacturing that SMEs have a comparative advantage in. Perhaps these problems are only pertinent to SMEs; however, while we believe that investing in larger initiatives is important to facilitate mass adoption of collaborative manufacturing in the future, we also strongly believe that initiating small, implementable collaborative manufacturing strategies in the manufacturing industry is equally, if not more important. BriteHub has actively pursued this ideal, in an effort to demonstrate the immediate impacts we can make even as a small start-up.

Nevertheless, BriteHub expresses its utmost support for the U.S. government’s efforts for collaborative manufacturing. Its funding amount is staggering, and we hope many manufacturing facilities gain the opportunity to grow together, helping the U.S. become an even greater manufacturing power. While BriteHub respects the federal government’s determination to adopt collaborative manufacturing, we pose a question on whether current U.S. manufacturing facilities and infrastructure can support the large, highly connected system in the future. After offshoring many manufacturing plants 20-30 years ago due to lower cost, sheer large-scale manufacturing has decreased greatly. Fortunately, offshoring has allowed more advanced technologies to develop, but the industry is realizing the lack of infrastructure to support collaborative manufacturing, even with the current reshoring trend due to increase in foreign manufacturing costs.78

Rightfully, the government is investing in infrastructures, centers, and initiatives for SMEs to grow and create a network for manufacturing collaboration. It will take time to reestablish a strong manufacturing infrastructure but the current initiatives are suitable. However, though it may be difficult especially in such a large industry, BriteHub encourages digging deeper and focusing on how the funding for SMEs is actually allocated. Dorian believes the current funding is mainly focused on workforce development, such as training employees, which isn’t necessarily the main focus for collaborative manufacturing to occur. In addition, she has seen difficulties in SMEs submitting Request-for-Proposals (RFPs) while maintaining their day-to-day manufacturing tasks. Many SMEs in United States need to devote a significant amount of resources to request, process,

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and finalize government grants. Thus, efficient and smooth allocation of grants does not always occur, and local manufacturing organizations eventually possess the grants for a later, unguaranteed use. These problems, knowingly, are very difficult to solve; however, they need to be addressed for the United States in the coming years to take further steps towards collaborative manufacturing, especially with SMEs.

Our viewpoint stands as such: in the current industry where large-scale manufacturing infrastructure is insufficient, we must not only pursue large initiatives, but also start to develop smaller collaborative infrastructure for local SMEs, which can be integrated later on. Recognizably, there are notable challenges in developing a working partnership between SMEs, manufacturing organizations, and the federal government; however, this partnership, BriteHub believes, will be a foundational step to cultivate large-scale collaborative manufacturing in the future.

Collaborative manufacturing is still yet to come for the United States, but BriteHub wholeheartedly agrees on the positivity of U.S. manufacturing initiatives and gladly waits for a more progressive future for U.S. manufacturing.

CONCLUSION

After undergoing three impactful industrial revolutions, the public is again excited for the new upcoming revolution, namely collaborative manufacturing. Certainly, it possesses industry-changing ideas that could improve manufacturing immensely in the upcoming years. But currently, the industry is not ready. Global and nation-wide initiatives exist, but are not fully implemented. Manufacturing is still in a state of recovery after the 2008-09 recession. Unimaginable challenges exist, such as integrating many manufacturing machining systems into one, and enhancing cyber-security tenfold. Some companies and countries may be in a later stage of development, but collaborative manufacturing, as stated, is in a stage of development. While the industry is progressing towards the utopian idea, it needs time: collaborative manufacturing is not reality.

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