Aging Workforce Will Drive Internet Of Things Progress
Countries like Germany, facing worsening demographics, are embracing smart manufacturing. Here are three ways the US can help its manufacturers do the same.
Here are some cold, hard demographic facts. The population of some manufacturing powerhouses is projected to shrink between 2010 and 2050 -- Japan (-15%), Germany (-13%), and Italy (-1%), for example. Other countries' populations will increase only marginally, such as China (+2%) and Korea (+5%). At the same time, these countries will be crunched by their worsening "dependency ratio." The share of the population, such as retirees and dependents, relying on those at work will dramatically increase in the years ahead, the Pew Research Center reports.
How does this connect to the Internet of Things and related smart manufacturing tactics? These people-pinched countries already are rapidly transforming their manufacturing sectors with industrial automation, and they are among the early adopters of IoT capabilities. One indication of this pro-automation mindset is their increasing robot density, as measured by the number of multipurpose industrial robots per 10,000 manufacturing employees. In 2012, Korea's, Japan's, and Germany's densities were at least twice as high as in the United States.
The demographic pressures also partially explain why Germany launched "Industry 4.0" in 2012. This government initiative is aimed directly at helping companies in the country to capitalize on the rising importance of the Internet of Things. Examples of the potential application areas include the smart electric grid, smart transportation, smart buildings, smart medical technologies, next-generation air traffic management, and advanced manufacturing.
Because "necessity is the mother of invention," countries such as Germany must find productivity gains to offset their demographic decline. In an April research note, Deutsche Bank was quite explicit about the importance of Industry 4.0 in this regard. "For its promoters, Industry 4.0 is not only about improving Germany's international competitiveness, it is also seen as a tool for tackling the most pressing global challenges (for example, the consumption of renewable and non-renewable resources) as well as specific national challenges (for example, the labour supply that is changing due to demographic shifts)."
Why it matters to the United States Though the United States will fare better than Germany or Japan in terms of population growth, it faces the same daunting problem with regard to supporting its dependents. Even using the rosier projection of the US Census Bureau (as reported by NIST), which sees the US population growing to 439 million (vs. 401 million in the United Nations' forecasts), the US will go from 4.7 workers per retired person in 2008 to 2.7 in 2050. It was 7.1 workers per retiree in 1950. At 2.7 workers per retiree, there will be fewer people available for jobs in manufacturing, as well as in industries such as healthcare and elder care.
To make matters worse, the adoption of smart manufacturing capabilities isn't moving very fast in the US. Only 13% of companies say they use smart manufacturing, according to the American Society for Quality's 2014 Manufacturing Outlook survey. Lagging US smart manufacturing adoption raises three big worries:
-- Rival countries compelled by demographics -- a worker shortage -- may adopt advanced manufacturing solutions more quickly, because they're indispensable for survival, not "nice things to have." They'll become more adept in using these techniques, gain advantages in terms of cost or speed to market, and grab market share that US manufacturers might struggle to recapture.
-- US manufacturers could yet face their own worker shortage as baby boomers retire, creating a skill vacuum that they can't quickly fill.
-- The automation disadvantage could hit small businesses the worst. Ninety percent of US manufacturers have fewer than 500 employees. To compete globally, they'll need to invest in new IoT-related technologies such as 3D printing, intelligent robotics, open source electronics (the three being referred to by IBM as "Software-Defined Supply Chain"); automated control and processes; and interconnection of sensors, actuators, RFID readers, and other end points.
3 critical elements of response There are many ways that the US can help its manufacturers embrace smart manufacturing, but here are three critical areas.
Capital: Small manufacturers need capital to invest in new technologies
Alain Louchez is the Managing Director of the Center for the Development and Application of Internet of Things Technologies (CDAIT) at the Georgia Institute of Technology (Georgia Tech). He chaired the Telecommunication Union (ITU) conference, on "Internet of Things: Trends ... View Full Bio
The Business of Going DigitalDigital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.
. We've got a management crisis right now, and we've also got an engagement crisis. Could the two be linked? Tune in for the next installment of IT Life Radio, Wednesday May 20th at 3PM ET to find out.