Now it’s the turn of manufacturing to eat the world

Technology is about to transform American industry as the production line becomes a chorus line, creating dozens of similar but complementary, customized products

In a world where software eats everything, perhaps it was inevitable that it would finally munch its way into manufacturing. Technology is about to transform American industry, presenting investors with a huge opportunity.

About a decade ago, China overtook the United States as the global leader in manufacturing and now produces more than 28 percent of the world’s goods by value, compared to the US share of less than 17 percent.

For investors, the decline of the US as the world’s leading industrial producer seemed to strip America of its manufacturing mojo. The labor-intensive business of making products emigrated in search of cheaper labor on the other side of the world, hollowing out the hearts of industrial cities and sending capital to seek new fortunes in Silicon Valley.

Investors discarded the twentieth-century titans who built their wealth on heavy industry, replacing them with software giants who could create unimaginable value from production lines of code.

American industry is coming back and investors have three good reasons to be excited.

1. Customization is the New Black

Move over Henry Ford. The newest assembly lines will not only be in Asia, they will also be next door and they will be smart. They will be software driven. They will produce limited runs using 3D printing of everything from plastic accessories to sophisticated electronic components.

Customization and personalization are the hallmarks of modern manufacturing. The production line has become a chorus line, with companies producing dozens of similar but complementary, customized products designed to suit the tastes of individual consumers. Manufacturing is no longer the art of making the same thing for faceless millions, but the science of creating personalized goods that allow individuals to feel connected but special. That means making small, high-quality, custom runs on demand.

“Innovative manufacturing models—distributed small-scale local manufacturing, loosely coupled manufacturing ecosystems, and agile manufacturing—are arising,” says Deloitte in its report The Future of Manufacturing. ”Numerous factors are leading manufacturers to build to order rather than building to stock.”

The only way to do this at volume is using new-generation software and additive manufacturing – better known as 3D printing. Most people still regard 3D printing as a cute toy, but smart manufacturers are already embracing it, using machines developed by companies like Desktop Metal and Nexa3D that can create factory-quality components at 20 times the speed of previous models.

Industrial manufacturers as diverse as BMW, Subaru, Motorola, the Williams Formula One Racing Team and America’s largest supplier of dental molds and accessories have installed Nexa3D’s NXE400 ultra-fast printers to produce custom items that are precise enough for dentistry, durable enough for car parts, and on course to disrupt the entire manufacturing industry. Many factories of the future will be little more than large rooms full of high-speed 3D printers churning out limited runs of customized products.

2. Yanking the Supply Chain

Wages may be cheaper outside America, but if the product cannot reach the consumer, that becomes a false economy. It took the Covid-19 pandemic, a worldwide semiconductor shortage that is closing western auto plants, and one windblown freighter stuck in the throat of world shipping, to realize that the supply chain has a chokehold on the future.

Months before the Ever Given was grounded for a week in the Suez Canal, halting about 12 percent of the world’s trade at an estimated cost of $9 billion each day, half a world away, freighters were piling up outside the Port of Los Angeles in unprecedented numbers. By early February, weeks before the Ever Given approached Suez, 40 container ships were stacked outside Los Angeles, waiting an average of eight days to berth and unload. The backlog, which began in October, was blamed on an understandable shortage of labor during the pandemic but also on a troubling and mysterious shortage of equipment.

Investors realize there is an urgent need for more nimble, flexible supply chains and a growing desire to bring the manufacturing of products back home.

Technology is “reducing the cost of capital and slowing the need to offshore production toward lower-wage countries,” Brahima Sangafowa and Karim Foda note in their book Growth in a Time of Change, published by the Brookings Institution before the pandemic. “There are emerging trends of reshoring in global manufacturing production back to some advanced economies. Beyond the changing labor and capital cost dynamics, other factors such as proximity to consumers, the supply of skilled labor, and ecosystem synergies are playing a role as drivers of reshoring.”

Companies like Launchpad, backed by Idealab creator Bill Gross, are developing the software that will help bring the supply chain back to America, using artificial intelligence to take designs from blueprint to final production, automatically sourcing components and manufacturers, slashing time and costs for the limited runs and customized goods that people increasingly need and want to purchase.

“This kind of enhanced automation could help make the manufacturing system more resilient in the face of unexpected shocks like COVID-19, and fuel a manufacturing renaissance in the US,” Marco Annunziata notes in Forbes, where he describes Launchpad as “The Tesla of manufacturing.”

3. The Whole Package

With the rise of ecommerce and online delivery, packaging is no longer a dumb box and is ready for its close-up. In an era when consumer’s only physical interaction with a retailer is via freight, the humble carton has become a fully-fledged brand ambassador. In a pandemic lockdown, that smile on the Amazon box could be the only grin entering a household for weeks.

Packaging is being reinvented. It must be stronger, more attractive, more efficient, more environmentally friendly and less wasteful than ever before.

Highcon, which recently completed a $45 million IPO on the Tel Aviv Stock Exchange, has developed digital cutting and creasing technology for printed packaging and displays that is finding fans around the world. Charles Linney, Executive Director of Linney, a marketing services company in Mansfield, UK, founded in 1851, said his new Highcon’s Beam 2 was three times more productive than Linney’s analogue machines. “The time to create make-readies is now reduced to minutes rather than days,” he said.

Aviv Ratzman, Highcon’s co-founder, says its shorter production process, which also cuts transportation and the use of dyes, contributes to the move led by Walmart, Nestlé and Mondelēz and other corporations toward more sustainable and eco-friendly packaging, “a key component in sustainability, reducing carbon footprint and supporting the circular economy.”

These changes in manufacturing present enormous opportunities for smart investors. OurCrowd will be redoubling our efforts to provide entrepreneurs in these areas with the resources they need to move fast and fix things. If you have a great new manufacturing idea, technology or company – let me know.