How is Smart Manufacturing Affecting Productivity Growth?

How is Smart Manufacturing Affecting Productivity Growth?

Laura Davis, Manufacturing Technology Insights | Thursday, September 23, 2021

Within the manufacturing sector, labor productivity growth has been a mere 0.7 percent annually. Focusing on the last decade, there has been zero net average productivity growth in the past five years, indicating economic output moved in lockstep with the number of hours worked, rather than rising.

FREMONT, CA: A country’s aptitude to improve its standard of living over time depends entirely on its capacity to raise its yield per worker. Regardless of advances in technology, business, and human capital investment; and other enhancements one can point to during the past decade, labor productivity gains have been trifling. Besides, from 2007-2018 productivity growth slowed to 1.3 percent yearly within the nonfarm business sector. 

Productivity Slowdown Acute in Manufacturing

Within the manufacturing sector, labor productivity growth has been a mere 0.7 percent annually. Focusing on the last decade, there has been zero net average productivity growth in the past five years, indicating economic output moved in lockstep with the number of hours worked, rather than rising.

Learn from Explorers and Trailblazers

Earlier, research unraveled some of the productivity problems by studying the business impact of smart factory initiatives. It is crucial for labor productivity growth to accelerate operational developments by connecting machines, data, people, and value chains.

A subset of businesses with initiatives underway has seen significant results, including 12 percent gains in labor productivity, on average, over three years. A leading group of trailblazers reports this is even higher. Smart factory transformation holds the key to labor productivity growth, but it does not occur as a big bang. Despite buy-in on the significance of intelligent factories, 86 percent agree smart factories will be the chief driver of manufacturing competitiveness in five years. Furthermore, it is also observed that a large number of industrial manufacturers had not begun their ride with any smart initiatives.

Consider the Lift from Smart Initiatives

Given existing industry maturity, it is estimated that smart factory adoption will step up from 2025 as most manufacturers will leverage advanced technologies. Using the study information on smart factory impact and economic forecasting model, the anticipated rise in the compound annual growth rate for labor productivity is two percent from 2019 to 2024 and 2.3 percent from 2025 to 2030.

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