Why Software Is the Secret Ingredient in America's Manufacturing Renaissance

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Why Software Is the Secret Ingredient in America

Two months ago, Trendsexplained why the U.S. is returning to its former position as a world leader in manufacturing:1

  • Labor costs are rising in China and in other countries that once held a low-cost advantage. While Chinese workers were paid $17 per hour less than American workers as recently as 2006, the gap is expected to narrow to just $7 per hour by 2015.
  • Meanwhile, an abundance of affordable energy—thanks to the shale gas revolution—has given U.S. manufacturers an advantage over foreign companies that must rely on imports. At the end of the year, prices of natural gas in the U.S. had fallen so far that Americans were paying one-third of the price in Europe, and one-fourth of the price in Asia.

But, there's another reason for the American manufacturing renaissance: U.S. companies enjoy a competitive advantage over overseas competitors in software.

The U.S. is the world leader in software development. Of the top 100 software firms, 65 are based in the U.S., and American companies generate nearly 80 percent of the $243 billion in annual revenues from software.

As outlined in a recent article in Strategy+Business,software is making a positive impact on each of thefive steps of product development and production in the U.S.:2

  1. In product design, visualization and simulation software allows manufacturers to improve product design, testing, and optimization.
  2. In production planning, automation design technology makes it possible to digitally design entire factories or individual pieces of equipment, and then simulate and optimize against a range of production scenarios for cost, speed, productivity, utilization, energy usage, and quality.
  3. In engineering, new software makes it possible for engineers to program and coordinate all automation tasks from a single portal, optimizing workflows and improving productivity.
  4. In execution, manufacturing execution systems monitor production performance in real time, enabling short-term control of manufacturing output and long-term optimization of production-unit configuration.
  5. In service, mobile devices, powerful networking, and "big data" analytics are enabling technology-based services opportunities, such as remote monitoring and advanced predictive failure analysis, that will reduce costs and improve utilization and productivity.

In each of these areas, software is enabling American manufacturers to increase productivity, efficiency, innovation, speed-to-market, and flexibility...

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