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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

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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
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User Rank: Strategist
5/27/2014 | 11:52:48 AM
Aging workforce
I find the disconnect -- between the aging workforce alarmists and the swaths of older unemployed workers looking for work -- to be very interesting. And it applies to IT as well. And it's not all about older workers not having the necessary skills (although, that does play a role). A great example is the mainframe industry where offshore outsourcing, primarily to India, is the trend. Mainframe shops cry about the lack of resources, while LinkedIn is packed full of experienced workers looking for work.

I think the real story is about industry looking for cheaper resources...
User Rank: Author
5/27/2014 | 12:39:29 PM
Re: Aging workforce
This isn't about looking overseas for those lower cost resources, though, it's about automating in response to scarce talent/high labor costs. It makes the case that other countries could get a jump on advanced manufacturing because they're short on labor. 
User Rank: Author
5/27/2014 | 1:23:56 PM
Re: Aging workforce
The author urges US manufacturers to consider what rivals are doing abroad with regard to IoT. That is competitive context, not a call for outsourcing. Another employment reality about the upcoming demographic shift is the US will have a large older population that will need personal care -- and we're not ready with robot nurses yet.
User Rank: Ninja
5/28/2014 | 11:07:57 AM
Re: Aging workforce

It's always about the money while trying to make it look like something else to justify corporate greed and self center actions.  Remember when just about every fortune 1000 company offered a non-contribution pension because their employees where so "valued" and their most important asset?   Now that we've had a corporation friendly government for the past 30 years there are no rules left to favor the aging worker.

User Rank: Ninja
5/28/2014 | 10:18:25 AM
USA ahead of game on aging workers

Over the past 15 years or so investment in automation is what's kept the US ahead of the game on productivity, and there's no reason not to expect the same with the use of the cloud.  In addition, the US Supreme Court pretty much took the fangs out of the Age Discrimination Act of 1967 when it ruled in favor of IBM over a mass lay off of workers age 50 and older in a class action suit solving IBM's aging worker base problem, just replace them with younger workers.  As a result of this ruling, it's getting rarer and rarer to find any personnel in large corporations over the age of 50.

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