Motoring Africa. Edward T. Hightower
is when businesses and governments collaborate to put in place the factors of production–raw materials, energy, supply chain, appropriately skilled labor, logistics, infrastructure, and public policy–to enable and support the success of a given industry. This partnership between the private and public sector occurs in the most successful examples of industrialization. Entrepreneurs and other businesspeople recognize a market opportunity that could result if they were to locate a production facility or warehouse in a particular region. The people who live in the region see an opportunity to use their skills and talents in perhaps a more productive way. The local government sees the potential opportunity for job creation and a tax base, and offers to help. The help could come in the form of investment and tax incentives, education and training support at the local community college, public land leases, or roads, sewers, power lines, and other infrastructure development. If the region implementing an industrialization strategy has previously only operated in the farming or livestock businesses, the energy infrastructure may not be in place to support manufacturing. In most cases the nearest utility provider must be part of the private-public partnership to enable the industry to flourish in the region. Horse power must be converted into horsepower. (You’re welcome.)
The external and internal material and labor inputs and the sequence of processes needed to produce and distribute products for a given industry are collectively known as the supply chain. North Carolina’s furniture manufacturing companies and the furniture industry were initially enabled by the skilled woodworkers who lived in the area and the large supply of hardwood trees right in the backyards of High Point. To complete these bedroom bureaus and night stands, the “hardware”–steel hinges, drawer knobs, slide tracks, and fasteners–were first either made by the wood carvers themselves, imported, or sourced from the small metalworking shops in Detroit and around the country. If a local entrepreneur were to begin producing and offering the “hardware” near High Point, the industry would improve cost and convenience by having the parts close by. Also, as the artisans migrated from hand carving each drawer and table leg to using more power tools enabled by the new local power station, then the average furniture maker would be able to increase production from five dining room sets per week to five dining room sets per hour! While there may be fewer jobs for hand hardwood carvers initially, as a result of the increased production volume capacity, overall skilled and lightly skilled jobs would grow significantly. Once the companies were successful at selling the increased production volume of dining room sets, more suppliers and other business, both competing and supporting businesses, would flock to the region in search of new business and the efficiency improvements would have the potential to continue.
All around the world and throughout history, periods of industrial development have followed generations of farming as the main driver of the economy in a region. Industrialization typically also involves the workers in a society trading in a relatively limited number of farming jobs for a significantly larger number of higher-paying jobs in factories, yielding growth in employment opportunities. These transformations in how the local population works also lead to mass numbers moving away from rural areas and making their homes in growing urban centers. This clearly has been the dominant trend in China over the last two decades.
A point to keep in mind is that after this manufacturing process and capability is put in place and operating, the industrialization journey is far from over. The industrialization of a particular product is not a one-and-done process. Continuous improvement of the new facility or process must be the norm for sustainable success. As technology continues to evolve, new applications will continue to be developed that can improve the performance of the business. On the cost side of the equation, to remain efficient and profitable, companies must work to improve their raw and input material purchase costs. Cutting the distance that parts have to travel is one way to reduce this cost. Manufacturers must also continuously work to eliminate defects, optimize quality, improve productivity, and reduce wasted steps in the manufacturing process. For example, improving quality will result in fewer production parts being scrapped or having to be reworked. The customer wins and the cost structure wins.
On the revenue side, to satisfy the needs of the customer, the industrial enterprise must implement new technologies as developed, add or drop product lines based on customer preferences, and ensure that there is sufficient capacity in the plant and the workforce to meet customer demand. As a product line succeeds in the marketplace, the enterprise may need to increase its capacity to build more products. As a product’s sales demand declines due to a new competitor or industry transformation, often it may make sense to redeploy its capacity to produce the more popular models. As industrialization succeeds and returns are generated, the process requires more investment, people, and skills training. The virtuous cycle (a chain of events that reinforces itself) of industrialization continues, as it becomes apparent that the skills and technologies from one product sector, especially automotive, can be transferred or introduced to other product sectors. Home appliances, consumer durables, industrial machinery, electric vehicle battery chargers, and solar and other renewable energy systems are examples of products that can be produced by leveraging the skills and capabilities of a region that has industrialized for automobile production.
Sustainable industrialization –
Sustainable industrialization is the next paradigm for industrialization. It involves a deliberate set of strategic and tactical actions taken to optimize the discussed factors of product production for the long-term success and profitability of the business, while at the same time ensuring that the business has a positive impact on the environment, society, and local community.
As defined in Motoring Africa, sustainable industrialization consists of four key elements:
Optimized Productivity & Cost Structure – Elimination of waste throughout the product design and production value chain to optimize profitability and long-term success of the enterprise. Optimizing product cost structure and operations through use of lean enterprise tools and methodologies.
Green Product and Operations – Optimal use of renewable sources of energy in the product creation, manufacturing, and distribution processes. Use of advanced manufacturing tools and processes. Responsible use of non-renewable energy sources.
Circular Economy – Implementation of circular economy strategies, i.e., maximizing opportunities for product sharing during its life cycle, and product restoration and repurposing at the end of its life cycle. Circular economy strategies should be factored into the design, manufacturing, distribution, use, and end-of-life reuse and recycling of the product.
Community Linkages – Responsible management of relationship between the company and the local community and stakeholders. This includes ethical labor practices and responsive community support.
Sustainable industrialization means growing the business to operate at an ideal scale and performance level to optimize the cost structure and margins, thereby enabling the business to sustain and succeed over time. Reducing waste contributes to both the business profitability goals and environmental responsibility. Sustainable industrialization also means utilizing the latest tools, processes, and emerging trends to responsibly manage the environmental and societal impact of the business. This means optimizing the use of renewable energy sources and responsibly limiting the use of non-renewable fossil fuels.
It also means incorporating product use sharing and end of life cycle reuse opportunities into the design, manufacturing, and distribution processes. For example, BMW recently started a program in the US called ReachNow, which allows customers to hail rides from a specific model BMW and a driver, just as they would an Uber ride sharing service. Customers get all of the convenience of owning a BMW without the cost of paying for the car when it’s parked, thus reducing the impact on the environment. The company is also extending this service to its MINI brand, allowing MINI Cooper owners to rent out their vehicles for set periods of time when they are at work, out of town on business, or time periods when they are not in use.
From a societal standpoint, sustainable industrialization will also drive leadership to operate the company with ethical work practices and