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By Robert B. Cohen, PhD, Senior Fellow, Economic Strategy Institute
September 18, 2020
This report finds that manufacturers are approaching a significant turning point where the full benefits of digital computing and analytics as well as 5G communications will reshape how goods are produced. While smart factories are uncommon, they offer overwhelming benefits in managing operations, output, and productivity. Enterprises should note that smart factories signify an economic disjuncture that alters the economics of the shop floor much as Adam Smith’s Wealth of Nations defined a conceptual model of the firm that relied upon the division of labor in a pin factory1. Today, smart factories with 5G communications indicate that our old conceptual model of the firm no longer describes modern industrial operations. We must develop a modern model of the firm that is based upon new job skills and the rapid analysis of information. This new manufacturing ecosystem will define the Factory of the Future.
What is striking about the smart factory with 5G private networks are the changes in flexibility, scalability, and reliability. These plants can change production lines and the products they produce in noticeably short times. Connectivity is wireless, so cabling on the factory floor is a thing of the past. In these smart factories only the floor, ceilings and walls do not move. Computerized models with digital depictions of production processes, products, and algorithms to improve operational performance are commonplace in these smart factories with 5G private networks. In addition, many of these factories can respond to demands for customization far better than traditional ones.
The Smart Factory
Enterprises, particularly manufacturing firms, are building Factories of the Future that benefit from almost instantaneous analysis of operational data. They combine powerful computing analytics for applications in the cloud with data from their next-generation manufacturing facilities. New, 5G communications plays a key role in shortening the time to get crucial information from machines and industrial processes in smart factories and ensures that smart factories are flexible, have high-speed, ultra-reliable connectivity, and are scalable2.
Smart plants will transform production facilities. Walls, floors, and ceilings will be fixed. Everything else – including all the machines -- will be mobile or changeable. To achieve this functional change, the Factory of the Future includes several dimensions only present in a limited fashion in today’s factories. By contrast, smart factories analyze data, often complex data, extremely rapidly. They interconnect operational data with sophisticated computing and storage that is often virtual and based upon Open Source technologies.