By Wasana Nadeeshani Sellahewa
(Commonwealth) _ A severe recession choked off demand, huge developing economies jumped into the top tier of manufacturing nations, and manufacturing employment declined at an accelerated rate in advanced economies throughout the past ten years. Still, both the developing and developed worlds continue to place a high priority on manufacturing. It still offers a route from subsistence farming to improving wages and living standards in the first case. It continues to be an essential source of innovation and competitiveness in the later, significantly boosting research and development, exports, and productivity growth. However, the manufacturing industry has transformed, bringing with it new possibilities as well as obstacles, and neither corporate executives nor policymakers can depend on their previous answers in the modern manufacturing environment.
Manufacturing the Future: The Next Era of Global Growth and Innovation, a significant research from the McKinsey Global Institute, provides a detailed picture of how manufacturing contributes to the global economy now and how it will likely change over the next ten years. The following findings are part of our research: Manufacturing’s function is evolving. As a country develops, manufacturing’s contribution to the economy changes: in today’s advanced countries, manufacturing fosters innovation, productivity, and trade more than growth and employment. In many nations, manufacturing has also started to use and rely more heavily on services in order to function.
There are several facets to manufacturing. With five different groupings of industries, each with its own unique success factors, it is a diversified industry.
Manufacturing is expanding globally. It presently contributes around 16% to the global GDP and 14% to employment. However, the proportionate size of the manufacturing sector in an economy fluctuates depending on the level of development. Our research shows that as nations get more industrialized, manufacturing employment and production both increase quickly. However, after reaching a high (20–35 percent of GDP), manufacturing’s portion of GDP and its share of employment both decline in an inverted U pattern. Because customers have more money to spend on services as wages rise, the expansion of that industry accelerates, making services a more vital source of growth and employment than manufacturing.
No two industrial sectors are comparable; some require more work or more specialized skills. Some businesses rely significantly on transportation, but for others, being close to clients is the most important factor. We have categorized the manufacturing industry into five major categories and examined how various production characteristics affect the locations of plants, R&D activities, and market entry.
Automobiles, chemicals, and pharmaceuticals are among the industries that make up the greatest output category (gross value added). These fields need close closeness to markets and rely largely on international innovation for their regional markets. Regional processing, which includes sectors like printing and food and beverage production, is the second-largest industry. The smallest group generates labor-intensive tradeables, accounting for just 7% of global manufacturing value added.
By 2025, a new class of global consumers will have formed, with developing economies accounting for the majority of spending. In-demand new market opportunities will result from this. As clients expect more variety and different kinds of after-sales services, demand in mature sectors is fragmenting. Nanomaterials, 3-D printing, and sophisticated robotics are just a few of the material and process advances that promise to spur new demand and boost productivity across all manufacturing sectors and regions.
These chances present themselves in a very difficult setting. In certain areas with inexpensive labor, pay rates are growing quickly. The climate is far more unpredictable now than it was before the financial crisis because of fluctuating resource costs, a growing skills scarcity, and increased supply-chain and regulatory concerns.
