Business Report

Making Innovation

The hubs of advanced manufacturing will be the economic drivers of the future because innovation increasingly depends on production expertise.

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This article is part of the November / December 2014 Business Report Breakthrough Factories.
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Visitors to the Crosspointe Rolls-Royce facility in Prince George County, Virginia, have to don safety glasses and steel-tipped shoes, just as they would at any traditional factory. But then things start to look different. Past the cubicles filled with programmers and support staff sits a 140,000-square-foot factory with spotless white concrete floors, bright lighting, surprisingly quiet equipment, and very few human beings.

Opened in 2011, Crosspointe is the kind of factory that makes a good backdrop to a political speech about advanced manufacturing, as President Barack Obama knew when he arrived less than a year later. It’s global: the U.S. operations center of a U.K. company, it uses titanium forgings from Scotland, Germany, or the United States; shapes them into fan disks; and, after milling, polishing, and testing, ships them off to England, Germany, or Singapore. Once there, each disk will become one of 10,000 parts in a typical engine.

It’s also highly automated: $1.5 million machines made by DMG Mori Seiki do the initial milling of the disks, following steps directed by Siemens software with a minimum of human interference. On a day in early summer, eight machines were being monitored by three operators. Computer screens in front of the machine displayed instructions in pictures and text, flashing warnings when a part had not met specs or the machine needed to be serviced. Later an automated measurement machine with a probe on the end would spend eight hours inspecting 1,000-plus distinct dimensions of the part. For the next 25 years, Rolls-Royce will keep data on each part, starting with exactly how it was made. Sensors in the engine will track how the engine and its parts are holding up, and maintenance and flight data will be carefully recorded.

It’s not just pristine floors, scarce workers, and a global network that make Crosspointe emblematic of manufacturing today. It’s also the ecosystem surrounding the facility. Just down the road is the Commonwealth Center for Advanced Manufacturing, a research center whose members include Airbus, NASA, and the University of Virginia.

There, Rolls-Royce staff who know the challenges and details of manufacturing work with researchers and suppliers to improve the factory and its products, says Crosspointe manufacturing executive Lorin Sodell. “Often a great idea for a new manufacturing process won’t ever make it into production because that connection is missing.”

Most of the advanced machining and other innovative processes in place at Crosspointe were developed and first tested at a similar research center near the company’s plant in Sheffield, U.K., called the Advanced Manufacturing Research Center. Sodell is already working with suppliers housed in the Virginia research center to diagnose and quickly address new tooling issues and any other problems that might arise.

To understand why manufacturing matters, we must lose some misconceptions. First, manufacturing no longer derives its importance primarily from employing large numbers of people. As software drives more of the manufacturing process, and automated machines and robots execute much of it, factories don’t need as many workers.

Second, the idea popularized in the 1990s and 2000s that innovation can happen in one place (say, Silicon Valley) while manufacturing happens in another (such as China) is not broadly sustainable. If all the manufacturing is happening in China, these networks are growing there, meaning eventually all the innovation—or at least a lot of it—will be happening there too.

Manufacturing will make its most essential economic contribution as an incubator of innovation: the place where new ideas become new products. Thanks to advanced manufacturing technologies, that place can in theory be pretty much anywhere. Robots, software, and sensors work no matter what language is spoken around them. In practice, however, advanced manufacturers thrive best in an ecosystem of suppliers and experienced talent. For this reason, specialized manufacturing networks have taken hold in many regions. Among the success stories highlighted in this report are China’s dominance as a manufacturer of consumer electronics, Germany’s lead in precision tooling and robotics, the United States’ strength in aerospace and car manufacturing, and its role in pushing forward important new manufacturing technologies.

Innovative manufacturing today requires as its base that manufacturers and their suppliers build strong relationships and share knowledge extensively, says Mark Muro, a senior fellow at the Brookings Institution.

China’s achievement is especially significant. Today, it would be nearly impossible for any other region to replicate the country’s manufacturing prowess in electronics or the speed with which its companies can introduce new products, says Harvard Business School professor Willy Shih, a longtime executive at IBM, Eastman Kodak, and other multinational firms who studies the links between manufacturing, product development, and innovation.

It’s not a new idea that manufacturing and innovation are linked. Seventy percent of industrial research and development spending in the U.S. comes from the manufacturing sector. Some have been skeptical, however, that innovation requires manufacturing know-how.

Apple, for example, has thrived with a system of designing its products in California but having them assembled in China using digital design and manufacturing instructions. That arrangement, printed on the back of every iPhone, has been popular with investors who appreciate not only Apple’s wildly successful products but also its “asset light” structure and relatively small workforce. “Couldn’t everyone do what Apple did?” says MIT professor Suzanne Berger, who participated in a three-year-long university task force that examined manufacturing in hundreds of global companies and produced the book Making in America. “In a way, the case that motivated our whole inquiry was Apple.”

Apple did not participate in the study, but in time Berger came to see that the company’s case was not so black and white—that even Apple finds links between manufacturing and innovation. Apple owns the automated production machines in the Chinese factories that manufacture its products. Many California-­based Apple engineers spend at least 50 percent of their time in China as new products are launched, she learned.

One engineer explained to Berger that it was critical to be on the ground in China for two reasons: to see what problems arose when the products prototyped in the U.S. hit large-scale production, and to “understand where I left too much on the table, where I could have pushed farther with the design.”

After three years of study, Berger is a believer that the United States must continue to manufacture if it hopes to be an innovation leader. She finds evidence that the manufacturing communities for emerging high-tech sectors such as solar and wind energy and batteries are already being built outside the country in places where technical expertise, manufacturing skills, and even plant layouts are quickly pulling ahead.

Without manufacturing, “we lose capabilities in the workforce,” says Harvard’s Shih. “It limits what you are able to do down the line.”

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Breakthrough Factories

A capacity for advanced manufacturing boosts innovation. This report examines how manufacturers like Audi, Flextronics, DMG Mori, BMW, and others effectively link the two.

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