Microfactory Developments

Microfactory is a small-to-medium scale, highly automated and technologically advanced manufacturing setup, which has a wide range of process capabilities. Typically, it is a whose output can be scaled up by replicating such setups in large numbers. Microfactory requires less energy, less material, and a small labor force, owing to the high-tech automated processes. The concept of microfactory also promotes the miniaturization of production equipment and systems according to the product dimension which helps in reducing the size of the factory, which, in turn, needs less capital, as well as lowering operating expenses.

With advancements in manufacturing technologies, such as 3D printing, along with other enabling technologies, microfactories has found its use in a variety of industries. New innovative start-ups have embraced this concept challenging the traditional way of manufacturing.

Traditional Manufacturing Model vs. Microfactory

The traditional manufacturing concept aims to reduce costs by building a large factory to achieve economies of scale and mass production. However it needs an extensive and costly distribution network to make products available to customers. Microfactory challenges this concept by setting up multiple small, but high-tech, manufacturing units, close to customers, which can function as retail outlets providing a customized product. Another difference is the sales strategy. In the traditional model, products are first manufactured in large quantities and then pushed to the market through various distribution channels, whereas, in the microfactory concept, products are manufactured only after getting confirmed orders from the customer, thereby generating pull from the market.

The following is an example of a hypothetical business case of manufacturing 250,000 cars per annum, comparing traditional manufacturing versus microfactory. Both setups are different and have several aspects that would lead to a complex comparison matrix.

Increased Innovation – Microfactories are versatile, highly-automated factories that enable lean manufacturing and boost the rate of innovation by integrating several functions. Being a small automated setup, microfactories enable several tests and iterations to be performed on a small scale without impacting the time and cost. Whereas, in a traditional factory, the impact of time and cost on several iterations would be huge.

Lower Costs – Microfactories are small-sized factories that require less floor space compared to traditional large factories. Energy consumption and raw material consumption is less, thus creating reduced waste and emissions. This positively impacts the operating energy, environmental energy, and processing energy of the factory, ensuring cost savings. Microfactories also cuts down on labor costs as the factory is highly automated with the support of artificial intelligence and robotics.

Increased Productivity – Microfactories require a small team of skilled staff for and do not depend on huge manual labor. In addition to the agility and high automation levels of microfactories, the engagement level of workers is also very high which boosts morale and thereby increasing productivity.

Customization/Personalization – This trend is driving manufacturers toward small factory space as it provides high-mix, low-volume manufacturing capability, where products can be customized and manufactured on-demand. The level of customization could range from small-batch with the current trend to individualization, where an individual can design the product via a consumer website.

Manufacturers Using Microfactory and Key Technology Providers

Automotive, garment, consumer appliances, and electronic waste treatment are some of the leading application industries currently using microfactories for commercial production. Local Motors in USA was one of the pioneers in establishing a microfactory for automotive production. Several companies are also investing in the development of new and advanced technologies required for establishing microfactories. Bright Machines has announced the availability of its AI driven automated microfactories. Combining software machine learning, computer vision and adoptive robotics says it can transform the most manual phases of today’s production line.

Manufacturers using Microfactories

Manufacturing technologies have evolved significantly over the years. Presently products are manufactured in large factories achieving economies of scale, and most of these factories are located in low-cost regions, primarily in Asia, and a few in Eastern Europe and South America. This has helped customers getting products at a better price. However, there are signs that this might not be the case forever. Low-cost labor is getting exhausted in these countries as the younger population is not willing to perform repetitive low skilled jobs or the cost has started going up significantly. In addition, the delivery delays, as well as the demands and preferences for indigenous products, are increasing worldwide. This will eventually make it difficult for manufacturers to get products manufactured at distant low-cost locations and bring them to the local market.

Another important aspect that should be considered is changing customer requirements. More and more customers are seeking products that are personalized/customized. Surveys conducted show that more than 50% of consumers in developed countries prefer personalized products and are ready to pay higher prices for it.

Considering the changing consumer dynamics, along with limitations to get products sourced from low-cost countries, large organizations need to rethink their manufacturing strategies. Organizations worldwide will have to understand that opportunity lies in opening multiple distributed manufacturing operations. This can be done by setting up a network of small, technologically advanced, flexible manufacturing facilities, similar to a microfactory, in close proximity to the customer location. It will help manufacturers to produce small batches of customized products suitable for local tastes and save logistics and transportation costs to the tune of 25% to 40% of the product cost. Not only this, but microfactories can help to offer a solution to the possible threats from global protectionism, trade war and disruption from epidemics like Ebola and Covid.

(Source: Futurebridge Analysis)

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Innovation Key on Road to

Technology and scientific research crucial to Vision 2035 aims to develop world-class strengths with stress on quality, not quantity. China has for the first time unveiled an ambitious road map for its plans to transform into a leading world power by 2035.

Technology innovation and scientific research are key to the Vision 2035 strategy. China plans to become a leading global innovation engine, to catch up to the average income level of developed countries, and display world-class strengths in economy, global governance and soft power, as well as green development.

China will recalibrate its reform strategy, putting greater emphasis on the quality, rather than quantity, of future growth with tech innovation and scientific research as key.

Resources will be directed to seven scientific frontier areas, including artificial intelligence, quantum information and integrated circuits, where US sanctions have been most keenly felt.

The ambitious Sci-Tech Innovation 2030 Agenda, will focus on quantum computing, plan engines and deep-sea stations among others.

China is prepared for a lost US market and is expecting a continuation of the decoupling policies, like the banning of hi-tech product exports to China. In fact, China has no option left but to reply on itself by boosting domestic innovation.

Digital push will set rules to protect personal data

Policymakers intend to build a “Digital China” with clearer boundaries for how and when tech companies can use the massive amounts of data they collect from users.

In his work report to the National People’s Congress, Premier Li Keqiang highlighted “innovation-driven development” and efforts to create “new strengths for the digital economy” under the 14th five-year plan that was submitted to delegates.

The National Development and Reform Commission, the agency involved in drafting five-year plans, said it would research and draft policy documents on the new internet industry, with a focus on guiding the integration of the digital and physical economies.

The draft plan also shows Beijing’s intention to speed up the roll-out of two “fundamental” pieces of legislation: the Personal Information Protection Law and the Data Security Law.

Both laws build on the framework set up by the Cybersecurity Law. The Personal Information Protection Law focuses on protecting personal privacy, while the Data Security Law is aimed more at protecting national security, establishing rules around markets for data and how the government collects and handles data.

Beijing aims to increase added value in the digital economy to 10 per cent of gross domestic product GDP by 2025, up from 7.8 per cent in 2020. The target was ambitious but reasonable considering the untapped potential of the digitalization of traditional industries, said Li Yi, chief research fellow at the Shanghai Academy of Social Sciences. “In the past two decades, the digital economy has transformed the way average consumers live, work and entertain [themselves], but there’s still huge room in the so-called industrial internet.”

The plan also calls for nurturing new digital industries, including artificial intelligence, big data, blockchain and cloud computing, along with expanding 5G technologies to more industries such as smart transport and logistics. The new five-year plan encourages firms to share data from search, e-commerce and social media services for the development of a third-party big data platform.

China’s digital economy was valued at 5.2 trillion yuan. At 40 per cent the size of that in the United States, it was still the second largest digital economy in the world, accounting for 36 per cent of China’s gross national product.

The 14th five-year plan also increases scrutiny of internet platforms, continuing a government crackdown on monopolies and unfair competition.

The encouragement from the government has led to the explosive growth of internet companies, but as Big Tech has now gained more powers, the regulators are becoming cautions with their tolerance.

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