Why Siemens is expanding U.S. manufacturing
In his State of the Union address Tuesday, President Barack Obama talked about the importance of upgrading Americaās aging infrastructure. He told the story of how our company, Siemens, recently created hundreds of manufacturing jobs in North Carolina. He quoted our U.S. CEO as saying that if America upgrades its infrastructure, weāll bring even more jobs.
But thereās another important reason we chose North Carolina, along with more than 100 other manufacturing sites in this country. By manufacturing in the U.S., we get proximity to our largest market; highly skilled workers and crucial software engineers in the Research Triangle, educated at some of the worldās best universities; ready access to ports for export, and cutting-edge innovation that we can link directly to our manufacturing sites. All in a business-friendly atmosphere.
America is poised to lead the next manufacturing renaissance. Sophisticated software is the critical component — and thatās what America produces better than anyone. But smart public policy is also needed. So is a sharp focus on what will make U.S. factories more productive, efficient and sustainable.
When industry insiders talk about Americaās improving manufacturing outlook, they usually cite four components of production that have shaped global manufacturing for the past decade. But these elements are now being radically rethought ā in a way that plays to U.S. strengths.
First, the idea that the world is āflatā has been supplanted by the idea that speed matters. Innovation speed is now understood to be a competitive advantage. So keeping design and manufacturing half a world apart ā manufacturing in China, for example, when your design team is in California ā makes less and less sense.
Second, the assumption that lower wages always correlate with lower total cost has proved to be false. Manufacturers increasingly recognize that months-long transportation chains can contribute to substantial direct and indirect costs.
Third, the belief that U.S. energy costs would be a long-term disadvantage has been deflated by unconventional fossil fuel reserves. The āshale galeā is driving U.S. natural gas prices to less than a quarter of those in much of Europe and Asia.
Fourth, the faith that outsourced ālow-valueā manufacturing jobs would be replaced by higher-value service jobs has been adjusted to the reality that manufacturing underpins the economy. It is crucial to create and sustain steady high-wage employment.
But the major reason why U.S. manufacturing is so well positioned for a renaissance is software that can bring the real and virtual worlds together in a way that erases all boundaries between the two. It connects everyone involved in product design and execution to the same network, sharing the same sets of data, to improve collaboration and decision-making.
This is nothing less than a paradigm shift in industry: The real manufacturing world is converging with the digital manufacturing world so that organizations can digitally plan and project the life cycles of products and production facilities.
This is the technology that automakers are using to turn around the U.S. auto industry, and that Procter & Gamble uses to make paper towels. Callaway is using it to make golf clubs, and NASA to design, build, test and practice ālandingā the Mars Rover Curiosity.
The United States holds a decisive advantage in global manufacturing: Nobody does software like America. That is one of the reasons why we have invested more than $25 billion in America in the past decade, with significant emphasis on our software portfolio.
Software changes the manufacturing game in three fundamental ways:
First, it enables increased efficiency with time. SpaceX, the worldās first commercial spacecraft that docked with the International Space Station last summer, leveraged software to reduce its time-to-manufacture by 80 percent.
Second, it enables new levels of productivity with resources, connecting every function ā from marketing to design to execution ā in a manufacturing company, improving alignment while reducing errors and waste. Ford used just such an approach to save more than $100 million in warranty costs for in-vehicle software services.
Finally, software enables unprecedented levels of sustainability. As demonstrated by NASA, software can reduce or eliminate physical prototypes, saving enormous resources while further improving speed.
From Charlotte to California, Michigan to Mars, America has the opportunity to lead the next industrial revolution, and the White House is right to encourage it.
By enabling virtually what was once only possible physically, the industrial software revolution adds to the traditional manufacturing renaissance. It makes real that age-old American aspiration: If you can dream it, we can build it.
PHOTO: Former Treasury Secretary Timothy Geithner (R) walks with Siemens Energy Director of Operations Mark A. Pringle (L) during a visit to Siemens Energy’s plant in Charlotte, North Carolina, January 25, 2012. REUTERS/Chris Keane