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- 2. Outline Four Industrial Revolutions:First, Transport, Scientific, Computer The New Industrial Revolution: Seven Principal themes China’s Powering Up Further Steps
- 3. First Industrial Revolution Thefirst industrial revolution took place over about 80 years from 1780. Retrieved from http://enciclopedia.us.es/index.php/Archivo:Maquina_vapor_Watt_ETSIIM.jpg It involved a combination of technical changes in fields such as textile engineering, metallurgy and power systems (chiefly new steam engines) to deliver a competitive boost mainly in the United Kingdom and the rest of Europe, infiltrating the United States later.
- 4. Transport Revolution The secondindustrial revolution took place between 1850 and 1900. It was brought about by a set of technology changes involving communications systems such as the railway, iron or steel hulled steamship and telegraph. Retrieved from http://www.rail.co.uk/images/4820/original/1968-coal-train-at-Padiham-by-Geoff-Marsh.jpg
- 5. Scientific Revolution The thirdindustrial revolution occurred between 1870 and 1930. Retrieved from http://lessons-from-history.com/Images/series-second%20industrial%20rev2.jpg It was triggered by the stimulus of a number of new industries made possible by key science based discoveries, including ways to make metals and other products cheaply and in high volumes, with the new era greatly helped by the thennovelty of low cost and readily available electricity.
- 6. Computer Revolution The fourthindustrial revolution took place over half a century from 1950. It was based on the powerful impetus that cheap electronic computer processing provided to a huge part of the global economy, including manufacturing. Retrieved from http://www.honolulumagazine.com/images/2011/Nov11/WeLived/welived46.jpg
- 7. A Conclusion fromFour Revolutions All of them have a time lag to a long time to have their full effect. The impact of the first industrial revolution was initially focused on a few sectors, such as metals, textiles and heavy machinery. It became relevant to other fields of industry, sometimes many years later due to many different reasons such as geographical limitedness. Aircraft was a key transport to drive the transport revolution but the concept of air travel for most people, even for `the developed world`, has settled around 70’s. `The first electronic computer was developed in 1946. But the power of the computer became evident to most people only after the invention of the microprocessor 25 years later. It took another quarter of a century after this - to the late 1990s - for the first signs of the internet to become evident. Other applications for the internet – including Twitter or Facebook - began to appear some years after this.`
- 8. The New Industrial Revolution `Thenew industrial revolution started around 2005, and will probably last for about 50 years. `
- 9. The New IndustrialRevolution Overlapping Technologies Customized Manufacturing Environmentally Responsiveness Niche Approach Hybridized Manufacturing China’s Powering Up Retrieved from http://scienceofthetime.com/wp-content/blogs.dir/2/files/2012/12/InternetRevolution.jpeg Cluster Dynamics
- 10. Customized Manufacturing `There willbe more opportunities for customization with many companies offering a mix of 'mass customization' and 'mass personalization' to widen choice. The way goods are designed and made will become more complex.` Retrieved from http://limiteditems.files.wordpress.com/2010/02/nikeid.png
- 11. Environmental Responsiveness `Manufacturers willdemonstrate a greater awareness of the environment,attempting to make things on a sustainable rather than a destructive basis.` Retrieved from http://b.vimeocdn.com/ts/457/136/457136452_640.jpg
- 12. Niche Approach `The needfor craft-based disciplines- centred on traditional concepts of 'touch labour' - will continue to be strong. ` Retrieved from http://dtamfg.socialmediacontractors.net/files/2013/08/Micromanufacturers-Carve-NicheMarket-in-Manufacturing.jpeg `Even in parts of the world where labour costs are high, so long as companies choose industrial sectors to compete in where customers are happy to pay relatively high prices.`
- 13. Hybridized Manufacturing `Companies willincreasingly spread their manufacturing between emerging economies and 'developed' nations in a 'hybridized' style. The new period will be an age of 'industrial democracy' in its truest sense.` Retrieved from http://www.haberler.gen.al/resim/09/04/hyundai-izmit-fabrikasi-500bininci-aracini-uretti-1.jpg `Behind hybridization strategies will frequently be companies' need to gain maximum access to the growing markets in the developing part of the world.`
- 14. China’s Powering Up ‘In2010, China reacquired the title of the world's largest manufacturing country by output.` `It has 130 million people working in manufacturing, or roughly 40 per cent of the total world manufacturing.`
- 15. Technology Push ‘Scientists andtechnologists rarely discover anything completely new.’ ‘They generally build on what is already known.’ ‘Big companies such as General Electric, Electrolux and ABB are channelling more of their spending on research and development into countries such as China, India and Brazil by setting up research and technology centres.’ Retrieved from http://images.dailytech.com/nimage/Samsung_Analyst_Day_7_R_and_D_Map.png
- 16. China’s Rise ‘The changeshave moved UK the number one in manufacturing in the late nineteenth centuryfrom joint fifth position both in 1990 and as recently as 2006 to an unimpressive looking tenth in 2010. Its share of the world total has fallen from 4.8 per cent in 1990 to 2.3 per cent in 2010.’
- 17. People Power Retrieved from https://www.adbusters.org/sites/default/files/magazine/splash_image/adbusters_107_chinainc_S.jp g Chinaaccounts for a fifth of the world's people. Since living costs in China are substantially lower than in most developed nations, wages are also much less. In 2009, the average cost of employing someone to work in a factory in China (including social security and related costs) was $1.36 an hour, compared to $53.80 in Norway, $40.10 in France, $33.50 in the US and $30.80 in UK.
- 18. Government Assistance In 2008,about a quarter of the China’s overall manufacturing was controlled by non-Chineseowned businesses. Retrieved from http://bizgovsociii.files.wordpress.com/2012/04/iphone_label.jpg According to statistical convention, production from factories based in China is counted as being‘Chinese’: This is irrespective of the ownership of the company which holds title to the goods.
- 19. Apple Example Value chainsinvolve multiple players in many countries,with the key tasks spread globally rather than squeezed into one place. The 'value added' of the productive work done in China frequently accounts for only a small proportion of the total traded price of the product. Retrieved from http://www.nytimes.com/imagepages/2010/07/05 /technology/20100706-iphonegraphic.html?ref=technology
- 20. Shock Treatment `While totaljobs have been falling, the numbers of relatively well-paid, highly skilled posts in fields such as engineering have been rising. ` Retrieved from http://i2.cdn.turner.com/cnn/dam/assets/130331213012-beckerman-visaworkers-story-top.jpg `Instead of employing large numbers of relatively poorly paid, and often low-skilled production employees, companies are more likely to have a higher proportion of their workers in fields such as development, sales and marketing.`
- 21. Shock Treatment Retrieved fromhttp://s1.hubimg.com/u/4599666_f260.jpg `As people around the world have grown richer, they have preferred to spend a greater part of their incomes on services of different kinds - such as travel, leisure and retail.` `Even though virtually all services are dependent on manufactured goods, higher expenditure in these fields has naturally tended to 'crowd out' the component of manufacturing in total output.`
- 22. Shock Treatment 'Design-only' manufacturerswill become a more substantial and dynamic group. Retrieved from http://s3.amazonaws.com/sortfolio.production/portfolio_images/images/24719_13831539 00.large.jpg?1383153900 Such businesses, predominantly located in the high-cost regions, will employ large numbers in product development. They will leave physical production to others, mainly in parts of the world with lower wages.
- 23. Further Steps `Increasingly, manufacturing businesseswill act like consultants. The businesses will spend a great deal of time and effort in discussing with the customer its requirements before creating the goods it needs. ` Retrieved from http://www.adafruit.com/adablog/wpcontent/uploads/2013/05/ShapewaysCustom3DRing.png `Workers will be predominantly able, academically qualified people, with skills in engineering and technology, along with the personal capabilities to apply them to a wide set of challenges.`
- 24. Further Steps `For themost talented, imaginative and technically qualified people, the new industrial revolution will create huge opportunities that will turn out no less exciting than those that changed the world during the original industrial revolution of the late eighteenth century.` Retrieved from http://www.wired.com/magazine/wpcontent/images/18-02/ff_newrevolution_f.jpg
- 25. Further Steps Where willTurkey positioned in this revolution? What should be the vision of `Country of Intermediate Staff`? Since Turkey known as a OEM (Original Equipment Manufacturer) country, how can it be classified as a ODM (Original Design Manufacturer) country? Is the existing `design capability` of Turkish manufacturing (or R&D) scene enough to be advanced in `the New Industrial Revolution`?
Editor's Notes
- #4 It was, initially, a British phenomenon. From the revolution's start in about 1780, its effects spread within 50-100 years to a limited number of other countries. The impact was felt almost exclusively in the 'developed' nations, chiefly other parts of Europe, and North America.Helped by advances in energy transfer linked to steam engines, the first revolution led to large factories maldng goods according to standardized designs and production methods. It made possible fairly simpleproducts, using relatively large numbers of people. It was the majör force turning agrarian-based communities into industrial ones. A key indicator was large-scale migration from the countryside to towns. There was little regard for environmental impact, in terms of either how products were made or what they did when in use.
- #5 The second big historical change was the transport revolution of the mid-nineteenth century. Again, thisstarted in Britain. It was triggered by the invention of the railway locomotive, and the establishment of the necessary infrastructure of a rail and signalling network. Canals and steel-hulled ships appeared at roughlythe same time.The new modes of transport opened up fast communications links for people and goods.
- #6 The scientific revolution started in about1860; to some degree it overlapped with the transport revolution. Itsbiggest feature was electricity. Such a convenient and clean form of energy,capable of being produced on demand and relatively cheaply, had notpreviously existed. The scientific revolution stimulated the advent ofcheap steel, aluminium, new building materials and modern chemicals,including pharmaceuticals.
- #7 The computer revolution started in about 1950, almost a century afterthe transport revolution. It led to small, cheap data-processing machines,including personal computers, the Apple iPad and the internet routingequipment that facilitates the worldwide web.
- #9 It is characterized by seven principal themes.
- #11 There will be more opportunities for customization - with many companies offering a mix of 'mass customization' and 'mass personalization' to widen choice. The way goods are designed and made will become more complex.
- #12 Manufacturers will demonstrate a greater awareness of the environment,attempting to make things on a sustainable rather than a destructive basis.
- #13 Due to greater efficiencies and use of improved automation technologies, the number of people involved in manufacturing will stay relatively low as a percentage of the world population.However, a growing proportion of the industry workforce will have technical qualifications and be in jobs where the emphasis is on learning new skills. Items thathave a high technology component, use little direct labour and require alot of variation will often continue to be made in high-cost countries – at least for sale in these locations - rather than be shipped in from relativelyfaraway low-cost nations. The likelihood that operating plants in a highcostcountry will make economic sense becomes all the greater if theproducts in question sell for high prices -perhaps because they are part ofa narrow niche where competitors are few.
- #14 There will be more of an emphasis on locating productive capacity in regions where the goods being made will be used, rather than on transporting the products long distances from such plants. Its effects will be spread globally, as opposed to being concentrated among a limited group of developed or rich economies. Increasingly, a mix of manufacturing processes will feature productionin both high-cost and low-cost nations- 'hybridized' manufacturing. Suchan approach will be part of the way of operating not just oflarge businessesbut also of small companies. The notion of 'micro-multinationals' – smallcompanies which mimic much larger ones in the way they operatefactories, technology partnerships and selling operations on a global basis- will become more familiar. Thebenefits will be that much more apparent when goods being made are foruse in the same country or close by. It follows that 'localism' – makinggoods for local consumption - will become more of a feature. While localism is making an impact, there will continue to be a bigrole - especially in the high-cost nations - for exporters. Since demand exists for their products theworld over, it makes sense to send them there. Also, for many companiesof this type, product quality is high, giving them a big advantage.
- #16 The same trend can be seen in the number of academic researchers who have partnerships with companies so the two groups work together. Such arrangements - part of the trend towards so-called 'open innovation'- help to speed the flow of new ideas to the commercial 'sphere.'
- #17 But perhaps the biggest loser - if not in purely statistical terms so much as in national self-regard- has been the US. Iu 1950 the USaccounted for not far off half- 44.7 per cent - of the world's total goodsoutput. In 1990, the US remained the world's biggest manufacturer, with ashare of 23.1 per cent as compared to japan in second position with lessthan 19 per cent. However, by 2010, due to China's strong progress overthe previous 20 years, the share of the US had contracted to a relativelymeagre 18.2 per cent.
- #18 One key factor behind the idea that China's position is close to unassailableis the straightforward matter of population. In explaining China's advance, lower costs have been an importantelement. The idea of the 'China price' - the cost of having a specific item madein China - being a lot lower than elsewhere has helped to drive downmanufacturing costs all over the world.
- #19 the government'sinterest in opening the country to the influence of foreign companies. The result ofthis foreign involvement in China was that in 2008 about a quarter of thecountry's overall manufacturing was controlled by non-Chinese-ownedbusinesses. According to statisticalconvention, production from factoriesbased in China is counted as being 'Chinese: The same happens in other countries; output of products made in a factory in theUK owned and operated by a French company helps to increase Britain's gross domestic product, not that of its European neighbour.It has helped toincrease China's emergence as the global manufacturing leader.
- #20 Most of the Apple product's value is due to the innovationand skills locked inside the minds of its employees - virtually noneof whom work in physical production as normally defined. In economicjargon, it is a 'factoryless goods producer' or a 'virtual' manufacturer. Apple's products are made under contract by other companies, mainly inChina, using value chains that involvemany manufacturers of componentsin other countries. In 2009, 11.2 million iPhones were assembled in China and shipped to the USat a factory transfer price-of $179 each. In the US, the devices went on sale for approximately$500 each, giving Apple a gross profit margin per unit of $321.The value of the exports from China to the US attributable to theiPhone shipments came to $2 billion.· However, the exports were offset by$121.5 million of components made by the US companies Broadcom andNumonyx and shipped to China to be assembled into the finished phone. the iPhone contributed $1.9 billion tothe US's net trade deficit with China, or 0.8 per cent of the country's total$226 billion China deficit for the year. Of the $179 factory transfer price for each phone,only $6.50, or 3.6 per cent, carne from the physical aspects of the finalassembly process. Of the remaining $172.50, most carne from the value ofcomponents made not in China but in other countries, includingJapan, South Korea and Germany. to be a deficit with China of $1.9 billion on theiPhone turns into a net surplus with this country of $48 rnillion.24 Of the $321gross margin, probably about half- about $160 per phone - went to thedistributors and retailers involved in the sales supply chain. The other$160 was kept by Apple. It paid for salesand marketing expenses, alongwith the technical and design work done by the several thousand engineers worldng on the iPhone. But an educated guess is that about $100 of the$160 came from paying for the technological development that madethe device possible. In 2006, 41,000 jobsworldwide were supported by work divided up along the value chain of theiPod. Of these 13,900 were in the US, half of them highly paid engineeringand other professional jobs, mostly within Apple itself. In 2006 the total wages paid to the 41,100 people employed in iPodrelatedwork came to about $1 billion, or roughly $25 per device sold. More than two-thirds ($525 million) of the earnings in the US wentto comparatively well-paid professional employees, either at Apple or incompanies worldng for it.28 Thecountry's great leap in manufacturing has made a big difference to Apple'sability to make, and sell, its products. But a lot of the value locked into thefull extent of Apple's manufacturing operations has remained in the US.While Apple's success has given China some economic benefits, thepositive impact on the US economy has been much greater.
- #21 While total jobs have beenfalling, the numbers of relatively well-paid, highly skilled posts in fieldssuch as engineering have been rising. The US is symptomatic. Here,manufacturing employment among workers with a college education hasheld up a lot better than manufacturing employment generally. Between1992 and 2009, the number of employees with an advanced college degreeincreased from 841,000 to 1.2 million, an increase of 43 per cent. Overthe same period, the number of workers with relatively low sldlls asmeasured by their school qualifications fell by a similar proportion, from11.3 million to 6. 7 million. Instead of employing large numbers of relativelypoorly paid, and often low-skilled production employees, companiesare more likely to have a higher proportion of their workers in fieldssuch as development, sales and marketing. Here, typically, people are paidmore, but also contribute more in terms of ideas and adaptability.
- #22 That manufacturinghas become more efficient - as a result of which it has needed fewerpeople - is the main reason for the overall change. The higher efficiencyand smaller workforces have pushed down the prices of manufacturedgoods - an important phenomenon linked to the experience curve. Another factor has been social change. As people around the world have grown richer, they have preferred to spenda greater part of their incomes on services of different kinds - such as travel,leisure and retail. Even though virtually all services are dependent on manufacturedgoods, higher expenditure in these fields has naturally tended to'crowd out' the component of manufacturing in total output.
- #23 The way companies switch their approach to suit the broader platform forglobal manufacturing will be central to their, and the world's, future.'Design-only' manufacturers will become a more substantial and dynamicgroup. Such businesses, predominantly located in the high-cost regions, willemploy large numbers in product development. They will leave physicalproduction to others, mainly in parts of the world with lower wages.
- #24 More companies will combine manufacturingwith services, as a way to find more innovative ways to make themselvesvaluable to their customers. Increasingly, manufacturing businesseswill act like consultants. The businesses will spend a great deal of time andeffort in discussing with the customer its requirements - before creatingthe goods it needs. A good analogy is with the medical profession. Thebest doctors use empathy and knowledge to find out how a patient needsto be treated. They then supply a range of goods - medicines – andservices - clinical treatment - to improve the condition. Manufacturingmanagers will increasingly resemble physicians. Workers will be predominantly able, academically qualified people, withskills in engineering and technology, along with the personal capabilitiesto apply them to a wide set of challenges.A lot of thisinvolves training the right kind of engineers - people who can combineskills in the 'hard' aspects of physics, chemistry and metallurgy with thecapabilities in communication and worldng in teams that are increasinglynecessary in a globalized world.
- #25 Governments havea part to play in encouraging such networks to work well - for example,by handing out grants to encourage programmes of visits by different companies to others' facilities, as well as through providing the necessaryfunds for educational institutes that often play a part in clusters. Thefruits of this activity will be products that help people to live happier andhealthier lives, without causing undue environmental harm. For the most talented,imaginative and technically qualified people, the new industrial revolutionwill create huge opportunities that will turn out no less exciting thanthose that changed the world during the original industrial revolution ofthe late eighteenth century.