The Future of Manufacturing: Driving Capabilities, Enabling Investments

Global Agenda Council on the Future of ManufacturingThe Future of Manufacturing: Driving Capabilities, Enabling InvestmentsNovember 2014 2The Future of Manufacturing: Driving Capabilities, Enabling InvestmentsWorld Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel.: +41 (0)22 869 1212Fax: +41 (0)22 786 2744Email: contact@weforum.orgwww.weforum.orgWorld Economic Forum® © 2014 – All rights reserved.No part of this publication may be reproduced orTransmitted in any form or by any means, includingPhotocopying and recording, or by any informationStorage and retrieval system.REF 101114Members of the Global Agenda Council on the Future of Manufacturing (2012-2014) Ludovico Alcorta, Director, United Nations Industrial Development Organization (UNIDO), ViennaBadr Al-Olama, Chief Executive Officer, Strata Manufacturing PJSC, a Mubadala Company, United Arab EmiratesArindam Bhattacharya, Senior Partner and Managing Director, The Boston Consulting Group, IndiaLlyr Campbell Jones, Vice-President, Latin America, BAE Systems Plc, United KingdomFadi Farra, C-Founder and Partner, Whiteshield Partners, United KingdomJoão Carlos Ferraz, Director, Brazilian Development Bank (BNDES), BrazilGary Gereffi, Professor of Sociology, Duke University, USAKevin Kolevar, Vice-President, International Government Affairs and Public Policy, The Dow Chemical Company, USAYasushi Konno, Chief Consultant, Global Manufacturing Industries Sector, Nomura Research Institute Ltd, JapanJennifer McNelly, President, The Manufacturing Institute, USAAtul Mehta, Director, Global Manufacturing, Agribusiness and Services, International Finance Corporation (IFC), Washington DCSetsuko Miyakawa, Director, Industry Department, Asian Productivity Organization, JapanNi Jun, Shien-Ming Wu Collegiate Professor of Manufacturing Science and Dean, UM-SJTU Joint Institute, University of Michigan, USAAloke Palsikar, Global Head, Manufacturing, Tech Mahindra Limited, IndiaGary P. Pisano, Harry E. Figgie Jr. Professor of Business Administration, Harvard Business School, USAJean-Paul Rodrigue, Professor, Hofstra University, USAVikas Sehgal, Managing Director and Global Head, Automotive, NM Rothschild & Sons Ltd, United KingdomDaniel Viederman, Chief Executive Officer, Verité, USAJames X. Zhan, Director, Investment and Enterprise, United Nations Conference on Trade and Development (UNCTAD), Geneva This report was completed and edited by Jean-Paul Rodrigue (Hofsra University), Fadi Farra (Whiteshield Partners), Jun Ni (University of Michigan), João Carlos Ferraz (BNDES) and Ludovico Alcorta (UNIDO). 3The Future of Manufacturing: Driving Capabilities, Enabling InvestmentsContentsForeword3 Foreword4 Chapter 1. The Future of Manufacturing: Challenges and Opportunities in a Shifting Global Economy5 Global Manufacturing at a Threshold: Emerging Technologies and Geographies8 Focusing on Manufacturing Capabilities12 C hapter 2. The State of Global Manufacturing and the Competitive Industrial Performance Index13 V alue Added and Exports: Learning from History15 Manufacturing Employment Tre nd s17 T he Competitive Industrial Performance Index24 C hapter 3: Focus on Global Value Chains: The Case of the Apparel Industry25 T he Apparel Industry27 U pgrading the Apparel Value Chain30 C onclusion. Transforming Manufacturing Capabilities through a Global Multistakeholder Initiative31 E merging Trends32 F actors of Convergence33 F actors of Divergence35 T he Need for a Global Manufacturing Capabilities InitiativeThis report focuses on an analysis of trends in global manufacturing, mostly from a value chain perspective, and represents a joint effort between the World Economic Forum Global Agenda Council on the Future of Manufacturing and the United Nations Industrial Development Organization (UNIDO). It emphasizes that future developments in global manufacturing are increasingly relying upon the development of capabalities related to innovation, labour and infrastructures. Developed countries have experienced a substantial decline in manufacturing employment, but this trend has also been counterbalanced by improvements in manufacturing capabilities. While developed countries remain among the most competitive, as noted by UNIDO’s Competitive Industrial Performance Index, many developing countries have substantially improved their industrial competitiveness. An overview of the apparel industry stresses the fact that value chains can be upgraded to help manufacturing actors develop their capabilities. Still, corporate and national strategies to expand and improve manufacturing capabilities would benefit from a more concerted effort. The World Economic Forum Global Agenda Council on the Future of Manufacturing and UNIDO have issued a joint declaration in Abu Dhabi in 2013 with the intention to launch a Global Manufacturing Capabilities Forum. The initiative aims to identify, analyse, discuss, and propose solutions to problems faced by