Urban Production April 2013
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As globalization spread, many companies began moving manufacturing oversees to take advantage of preferable tax codes and labor costs. Technological advances in automation, the emergence of additive manufacturing, and other developments have the potential to move companies' manufacturing operations close to product development and markets. Urbanization continues to gather momentum (already more than half of the people on Earth live in cities), making urban environments the most attractive markets. As these developments unfold, a number of converging trends will revitalize urban production in developed countries.
Even agriculture could find a more important role in modern urban environments.
The growth of urban environments is a driver of urban-manufacturing considerations. A report by the Institute of Mechanical Engineers (London, England) found that the urban population will grow from 3.3 billion people in 2007 to 6.4 billion in 2025. And Yale University (New Haven, Connecticut) School of Forestry & Environmental Studies associate professor of the urban environment Karen Seto and her team concluded that urban areas will grow by more than 1.5 million square kilometers by 2030.
Recent developments in trade patterns could also indicate change, although recent recessionary effects need consideration. Global trade growth has typically increased at double the pace of global economic growth. For example, in 2006 (the last full prerecession year), global GDP grew by 3.5% while trade grew at 8%; however, during the past two years—ostensibly a period of recovery—trade not only has stopped outpacing economic growth but also has begun slowing. Some analysts believe that countries and companies are increasingly looking inward to foster growth and that this trend will have major implications for manufacturing.
A previous Scan™ article, "Inshoring and Reshoring," highlights that the location of manufacturing affects innovation and R&D. When product and manufacturing know-how are colocated with physical production, product development can become a more iterative and integrated process. Several factors—for example, the rising labor costs in traditional manufacturing centers such as China and the increasing costs of energy, logistics, insurance, and transportation—have led many companies to consider moving manufacturing back to developed countries.
Despite increasing real estate costs in most major metropolitan areas, multiple factors may be driving companies to consider urban centers as manufacturing bases. Instituting a culture of innovation is a priority for many enterprises—particularly because product-development cycles are getting shorter and start-ups can launch new products quickly by leveraging crowdfunding platforms such as Kickstarter (New York, New York) and Indiegogo (San Francisco, California).
Creativity is central to innovation. University of Toronto (Toronto, Canada) professor Richard Florida coined the term creative class to refer to a group of young workers who prefer urban environments to suburban ones. Santa Fe Institute (Santa Fe, New Mexico) researchers Luis Bettencourt and Geoffrey West found that every time a city doubles in population, each inhabitant becomes 15% wealthier, more productive, and more innovative, thereby more than doubling the overall output of the city. And companies are taking note; for instance, Accenture (Dublin, Ireland) recently relocated its Boston, Massachusetts, and Washington, DC, offices to downtown areas to attract young talent.
Eberhard Abele, who leads the Institute of Production Management, Technology and Machine Tools at the Technische Universität Darmstadt (Darmstadt, Germany), believes that urban production will become a center of value creation. Small, decentralized urban production units will supplement big manufacturing facilities. Researchers from Columbia University's (New York, New York) Columbia Business School and School of Engineering and Applied Science believe that economies-of-scale considerations could shift toward economies-of-numbers thinking in many industries. The team's study suggests that a shift toward building small, standardized units is occurring. Increasing automation limits classical labor-efficiency gains, and small-scale production enables increased flexibility and resilience.
Since 2009, 25 European companies and research institutes—including competitors BASF (Ludwigshafen, Germany), Bayer (Leverkusen, Germany), and Evonik Industries (Essen, Germany)—have been collaborating on the F3 Factory (Flexible, Fast and Future Factory; www.f3factory.com) project, which focuses on the development of new concepts for modular chemical factories. Modular factories consist of multiple standardized containers with standardized subcomponents and connectors. The containers interconnect easily to create larger chemical-manufacturing facilities, which enables a great deal of flexibility in the production of chemicals. The F3 Factory project concludes in May 2013.
Additive manufacturing, or 3D printing, could also become a driver of urban production. Recently, 3D-printing company Shapeways (New York, New York) held a ribbon-cutting ceremony for a 25 000–square-foot 3D-printing factory—the "Factory of the Future"—in the New York City borough of Queens. The facility will house 50 industrial-scale printers and employ about 50 people, producing as many as 5 million consumer products per year. Carine Carmy, director of marketing at Shapeways, claims that 3D printing will do for product development "what YouTube [Google; Mountain View, California] did for video content and blogs did for journalism.... We're now seeing the democratization of product design" ("A Ribbon Cutting for 3-D Printing [Using 3-D Printed Scissors]," Technology Review, 18 October 2012; online).
Even agriculture could find a more important role in modern urban environments. BrightFarms (New York, New York), for instance, installs hydroponic greenhouses on the roofs of grocery stores. The company aims to provide fresher produce and to reduce food-shipping costs and transportation-related damage to food. Vertical farming is another urban agricultural concept under consideration. Plantagon (Stockholm, Sweden) and AeroFarms (Ithaca, New York) are among the companies providing infrastructure for the concept. The commercial viability of urban agriculture is speculative, but urban farming practices have the potential to eliminate strain on farmland by enabling the growing of food in cities, to provide consumers with fresher food by eliminating long food-transportation distances, to reduce the need for pesticides and herbicides, to grow food using less water than traditional farming requires, and to increase food security in regions that lack sufficient farmland.
Thanks to new manufacturing technologies, novel business-model concepts, and emerging urban infrastructures, urban production can offer short delivery times, facilitate the personalization of products and services for proximate end customers, and establish environmental advantages over traditional production arrangements. Not all products are suitable for urban production, but advances in technology and the development of new concepts will enable the manufacture of a wider range of products within cities.