Industry 4.0 is coming. We expand on 3 trends that are and will continue to shape the future of manufacturing: 1) 3D printing is accelerating product development, 2) Onshoring production streamlines the supply chain, and 3) Artificial intelligence improves productivity. Many hardware companies have been slower to take advantage of automation, digitization, and other software-led improvements. This means that there is still lots of room for growth when it comes to hardware-based businesses – so don’t be last in the race to this new frontier.
The Dawn of a New Day
When it comes to epic hardware startup failures, there is no shortage of examples out there. As a hardware entrepreneur, you’ve undoubtedly heard it all before: your business is more time-intensive, harder to scale, and more expensive to finance in comparison to your software counterparts. With a potential return on investment barely visible on the distant horizon, it’s no wonder that investors are wary to jump on board and throw down their cash. After all, who would take on all that risk when it seems so much easier to invest in a software startup?
Until quite recently, this has been the dominating perspective with regard to hardware companies. However, exciting new advances in technology are changing the game – and the future of hardware manufacturing as we know it. With automation and digitization on the rise, CB Insights calls this new wave of industrial technology “Industry 4.0”, as in the fourth Industrial Revolution. As living proof of Industry 4.0, we’re starting to see various case studies of hardware-based businesses that are agile, productive, more cost-effective, and increasingly innovative. In particular, there are three trends that seem to be ushering in this new age of hardware manufacturing: 1) 3D printing, 2) onshore production, and 3) artificial intelligence. In understanding and applying these trends, you can attract attention from investors, gain a leg up on the competition, and propel your business into the future.
#1 – 3D Printing Accelerates Product Development
In the past, one of the most time-consuming and costly stages in the life of a hardware startup was product development. It took lots of time and money to create and refine prototype designs. Factoring in customer feedback was tough, as it often meant making significant changes to existing products. Constant iterations caused investors to lose confidence in the company’s trajectory, making them reluctant to provide continued funding. However, advancements in 3D printing have made development approaches like rapid prototyping possible. With such technology, hardware startups can respond nearly as quickly to customer needs as software startups.
In fact, according to an industry survey conducted by Forbes, speeding up the product development process is the top priority for firms that use 3D printing. The majority of firms take advantage of 3D printing technology in the early stages of product development, such as proof of concept and prototyping. Before sinking money into ordering and manufacturing thousands of physical parts, startups have the ability to create a real-life version of their product. This allows them to iterate on design requirements in a more agile, low-risk manner. This is particularly important in fast-moving industries in which competition is fierce and customer needs are continuously evolving.
Some hardware startups are even using 3D printing capabilities to handle small-batch production runs. That being said, benefits from economies of scale still reign supreme for items being mass-produced in factories. However, if your business is producing on a smaller scale, fulfillment using additive manufacturing may actually make more sense. Companies like Watt Fuel Cell use additive manufacturing for production runs (as opposed to just prototyping). This technique yields a better response to dramatic thermal shifts and more control over manufacturing than typically seen in tubular fuel cells. Indeed, heightened control over production is becoming increasingly important as many companies look to implement mass-customization capabilities.
#2 – Onshoring Production Streamlines the Supply Chain
On the whole, “made in China” production approaches of the past were overwhelmingly driven by cost. Paying for labor in the United States was expensive. Why not give your margins a much-needed boost by moving manufacturing offshore? At the time, although such decisions lengthened the supply chain, labor cost savings made it worthwhile. Yet, this may no longer ring true. Present-day advancements in technology might be turning the tables when it comes to the business case for offshore production.
As stated by the Financial Times, “From flying robots to smart-home appliances, the trade-off between speed, labor costs, component prices, and manufacturing complexity is, in certain cases, tipping the advantage back towards the US.” In other words, the money that you save may not be enough to justify the complexities and coordination challenges that come along with offshore production. This is especially true for companies that can rely on automation and robotics to perform what were previously high-paying human labor jobs. Offshoring means added shipping costs, duty fees, and the headache of hiring and managing the right team overseas. By the time you factor in the travel back and forth from your headquarters to your factories, the per-unit cost savings may seem marginal at best.
Even more important than costs savings may be time savings. The longer and more complicated your supply chain, the slower you move. In crowded industries with outspoken, demanding customers, agility is critical for survival. Onshoring production can enable companies to up their game when it comes to responsiveness. Greater supply chain flexibility allows them to quickly course-correct when needed, without playing a dangerous game of telephone that extends to overseas manufacturers. What’s more, a “Made in the USA” tag may bring even greater reputational benefits with regard to brand equity.
#3 – Artificial Intelligence Improves Productivity
Today, manufacturers across a variety of different industries are clamoring to apply artificial intelligence (AI) capabilities to their operations. One of the ways that AI has proven to be particularly advantageous is in speeding up the time-intensive R&D process. This is especially true for companies looking to develop new materials, which is often the longest stage of product development. As CB Insights puts it, “Better digitization of the scientific method will be crucial to developing new products and materials and then manufacturing them at scale.” In short, formerly-improbable R&D discoveries may be within reach with the help of the right intelligent software.
Outside of R&D benefits, AI also stands to help companies improve productivity and lower operating costs. According to one study conducted by Accenture, 71 percent of executives in the industrial equipment sector believe that AI will have a significant impact on the future of their organization. With technologies such as machine and deep learning, computer vision, and advanced analytics, companies have the ability to simulate human intelligence at lower costs. This means that formerly-expensive human labor activities can be replaced by AI-driven automation that is cheaper and more accurate. Despite fears of the general public with regard to job security, the widespread adoption of AI will benefit industries in the long run. In fact, Accenture’s research indicates that by 2035, AI will have added approximately $3.7 trillion to the manufacturing sector.
The New Frontier
Trend reports from CB Insights predict that in the next five years, manufacturing efficiency will increase at seven times the rate of growth seen since 1990, thanks to key technological advancements. Nonetheless, at present, hardware companies have been slower to take advantage of automation, digitization, and other software-led improvements. This means that there is still lots of room for growth when it comes to hardware-based businesses – so don’t be last in the race to this new frontier.