Manufacturing – Global Value Chain Perspective

The MForesight National Summit took place last week. The Summit theme was Factories of the Future: Digital, Distributed, Democratized Manufacturing. I participated in it in my role as a member of its Executive Committee and Leadership Council.

It was a very thought provoking and stimulating event. MForesight has now posted the speaker presentations.  The presentations and discussions were centered around the key themes: digitization of manufacturing, distributed supply chains, and proliferation of manufacturing capabilities. A summary of the event has been posted as well.

Gary Pisano articulated the concept of The Great Convergence of manufacturing, services, and knowledge economy with information and data playing a central role in this convergence. Global value chain concept facilitates a deeper understanding of manufacturing in an increasingly connected global economy. The recent  Global Value Chain Development Report 2017 contains very interesting information and data on these developments. [The short essay entitled “Global value chains shed new light on trade” by David Dollar is a very readable introduction to the ideas and findings of this report.] After a great deal of very insightful analysis of increasing role of services in production, authors state:

“Perhaps what really matters is not what a person makes but what the person does. For a long time, notions of economic performance have been closely tied to economic sectors— manufacturing, agriculture, and services. In a world of fragmented production these distinctions are hard to sustain and may not be economically meaningful. Instead, the focus could be on the implications of performing certain tasks. Do product design and marketing offer greater scope for innovation and learning-by-doing and thus for productivity growth than product assembly?”      [Page 156]

Taken to its logical conclusion, the dis-aggregation of production and corresponding value chain analysis has deep implications. From the point of view an individual, the value added is not merely a function of her/his skills and work but also the the organization where the work is performed. For the organization, it is critical to have the best possible systems that harness the most value and long term competitiveness from the inherent skills and capacity of its workforce. In this connection, the recent HBR article by Nicholas Bloom entitled “Corporations in the Age of Inequality” offers very interesting and relevant insights.

Ultimately, technological and business innovations will shape the future as traditional boundaries between manufacturing, services, and knowledge work become more blurred and global economy evolves in the coming decades. It will also have significant impacts on how we educate the next generations in our schools and universities.