A Factory in Every Home? New Manufacturing Technologies

and Metropolitan Spatial Development

Howard WialThe University of Illinois at Chicago and The Brookings Institution

American Planning AssociationMay 20, 2014

Is There a Connection?

Manufacturing Technologies and Metropolitan Spatial Structure

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Example: The Assembly Line

• Large factories on large plots of land

• Separation of industrial from residential land uses

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Source: www.belarus.by Date accessed: 1/28/2014

3-D Printing: A Factory in Every Home?

• Reversal of previous patterns?• Radical

decentralization of production?

• Integration of industrial and residential uses?

A World-Class Education, A World-Class City

Source: www.blog.programmableweb.com Date accessed: 1/28/2014

A World-Class Education, A World-Class City

Limitations of the Analysis

• What does it mean to say that technology affects spatial structure?

• Economics & economic geography

• Theoretical exploration; no data available

• Only technologies, not other forces shaping spatial structure

• Use of mfg technologies, not their production

• Use by manufacturers, not other businesses or households

• Effects on locations of households & non-mfg firms

• Mfg technologies important but not dominant in shaping land use patterns

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Conceptual Framework

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Agglomeration Economies

• Cost or productivity advantages from geographic proximity

• Lead to geographic clustering, metropolitan areas, higher wages

• Sources:• Common skill needs• Proximity to suppliers, transportation, R&D, etc.• Face-to-face communication• Entrepreneurship

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Amenity Values

• Households (esp. rich) willing to pay more to move away from unpleasant land uses

• Demand for zoning to separate uses

• Gentrification & displacement

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Transportation Costs

• Lower transportation costs encourage firms to spread out geographically

• New technologies can create new modes of transportation with higher or lower costs (e.g., trucking)

• Lighter-weight products reduce per-unit shipping costs

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Source: www.londonshippingcontainers.co.uk Date accessed: 2/6/2014

Plant-Level Scale Economies

• Large-scale production is cheaper when fixed costs are high (e.g., assembly lines)

• Large factories, often on large parcels of land, favors mfg location in nonmetropolitan areas, small metropolitan areas, outlying portions of metropolitan areas

• Reduction of scale economies creates opportunities for smaller manufacturers, more likely to locate on small parcels of land in denser portions of large metropolitan areas

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Input Requirements

• Labor-, capital-, and land-intensity of production

• Labor-intensive production means many jobs in each factory

• Automation issues• Disappearing jobs?• Rising wages?

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Source: www.i.telegraph.co.uk Date accessed: 2/6/2014

Technologies & Potential Impacts

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Modular Pharmaceutical Manufacturing

• Small, programmable factories

• Reusable for different drugs• Makes small batch

production less expensive• “Shipping containers” can

be transported• Large near-term impact on

production

A World-Class Education, A World-Class City

Source: www.assets.inhabitat.com Date accessed: 1/28/2014

Modular Pharmaceutical Manufacturing: Potential Impacts• Modest reduction in internal scale

economies but not much impact on firms size or land use

• More intense competition for pharma mfg among regions with pharma R&D

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Cloud Computing

• Software on remote servers

• “Big data”

• Already in use; large impact on production by 2025

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Source: www.webmedia.greenqloud.com Date accessed: 1/28/2014

Cloud Computing: Potential Impacts

• Some reduction of internal scale economies• Opportunities for smaller manufacturers, more likely

to locate on smaller parcels in denser portions of metropolitan areas

• Disagglomerative potential• No need for manufacturers to co-locate with IT

specialists• Virtual collaboration as substitute or complement for

in-person collaboration?

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Industrial Robotics

• More mobile, flexible• Robots work alongside

humans, learn from them• Limits on speed &

precision limit them to simple, repetitive tasks

• Cost is declining rapidly• Large near-term impact

on production

A World-Class Education, A World-Class City

Source: www.iec.ch Date accessed: 1/28/2014

Industrial Robotics: Potential Impacts

• Reduction of internal scale economies as costs fall• Opportunities for smaller manufacturers, more likely

to locate on smaller parcels in denser portions of metropolitan areas

• Reduction of labor-intensity, overall mfg employment effect uncertain

• Demand for engineers & technicians—could be a location factor for user firms, possibly favoring Midwest mfg centers

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Advanced Materials

• Novel internal structures yield superior properties• Lightweight materials• Self-repairing materials• Nanomaterials

• Some already in use, others many years away

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Source: www.panalytical.com Date accessed: 1/28/2014

Advanced Materials: Potential Impacts

• Lightweight materials reduce transportation costs—less agglomeration of manufacturers

• Possible negative health impacts lead households to locate away from mfg, reinforce separate-use zoning, possibly raise mfg wages

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Advanced Sensing

• Sensors on pallets & parts

• Track every stage of production

• Generalization of GPS & RFID

• Cost is declining rapidly• Already in use; large

near-term impact on production

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Source: www.designworldonline.com Date accessed: 2/11/2014

Advanced Sensing: Potential Impacts

• Short-term adoption by large firms but long-term reduction of plant-level scale economies• Opportunities for smaller manufacturers, more likely

to locate on smaller parcels in denser portions of metropolitan areas

• Demand for logistics specialists & technicians—could be a location factor for user firms

• Removes inefficiencies in production process, puts premium on good freight transportation—could be a location factor for user firms

A World-Class Education, A World-Class City

A World-Class Education, A World-Class City

• Use of IT to cut costs, increase throughput, integrate or remove steps in mfg process• Design, prototyping,

testing• Connect suppliers to

customer firms• Some parts already in use,

others many years away

Digital Manufacturing

Source: www.siemens.com Date accessed: 1/28/2014

Digital Manufacturing: Potential Impacts

• Short-term adoption by large firms but long-term reduction of plant-level scale economies• Opportunities for smaller manufacturers, more likely

to locate on smaller parcels in denser portions of metropolitan areas

• Dispersion of mfg suppliers and/or new agglomeration?

• Customization may encourage mfg to locate near household & business consumers (metropolitan areas)

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• Demand for skilled production technicians—could be a location factor for user firms, favoring metropolitan areas with both IT and production workers

• Removes inefficiencies in production process, puts premium on good freight transportation—could be a location factor for user firms

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Additive Manufacturing (3-D Printing)

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• Products built up from layers of material

• Digital file, computer scanning, physical layering

• No scrap material

• Limited number of materials, no joining

• Used in rapid prototyping

• Probably small near-term impact on production, but expert views differ Source: www.assets.inhabitat.com

Date accessed: 1/28/2014

Additive Manufacturing: Potential Impacts

• Large reduction of internal scale economies as costs fall• Opportunities for smaller manufacturers, more likely

to locate on smaller parcels in denser portions of metropolitan areas

• Quieter, cleaner factories less undesirable as neighbors: less separation of land uses, possible gentrification of formerly industrial areas

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• Reduction of labor-intensity, overall mfg employment effect uncertain

• Reduced demand for machinists & welders, clusters of these workers less of a location factor for mfg

• Demand for industrial designers—could be a location factor for user firms

• Reduced input use makes input transportation less important, encouraging disagglomeration of mfg

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Conclusion

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Summary of Impacts

• General reduction of scale economies favors smaller mfg firms, less land consumption, dense metropolitan locations for mfg

• Most technologies don’t make factories pleasanter neighbors, don’t encourage industrial-residential mixed land use

• Demand for new skilled production workers—could be location factor for user firms

• Good freight transportation more important as mfg location factor

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Public Policy: Build the High Road

• R&D centers

• Technical assistance

• Mfg-specific zoning

• Workforce development

• Improved freight transportation

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Public Policy: Block the Low Road

• Assist only firms with potential for high wages, productivity, productivity growth

• Encourage (or at least don’t discourage) unionization, avoid right-to-work laws

• Compete for mfg on basis of innovation, skilled labor, good freight transportation, not low wages or relocation subsidies

A World-Class Education, A World-Class City

A World-Class Education, A World-Class City