Manufacturing industry refers to those industries which involve in the manufacturing and processing of items and indulge in either

creation of new commodities or in value addition. The manufacturing industry accounts for a significant share of the industrial sector in developed countries. The final products can either serve as a finished good for sale to customers or as intermediate goods used in the production process. Evolution of the manufacturing industry: Manufacturing industries came into being with the occurrence of technological and socio-economic transformations in the Western countries in the 18th-19th century. This was widely known as industrial revolution. It began in Britain and replaced the labor intensive textile production with mechanization and use of fuels. Working of manufacturing industry: Manufacturing is the production of goods for use or sale using labor and machines, tools, chemical and biological processing, or formulation. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale. Such finished goods may be used for manufacturing other, more complex products, such as aircraft, household appliances or automobiles, or sold to wholesalers, who in turn sell them to retailers, who then sell them to end users the "consumers". Manufacturing takes turns under all types of economic systems. In a free market economy, manufacturing is usually directed toward the mass production of products for sale to consumers at a profit. In a collectivist economy, manufacturing is more frequently directed by the state to supply a centrally planned economy. In mixed market economies, manufacturing occurs under some degree of government regulation. Modern manufacturing includes all intermediate processes required for the production and integration of a product's components. Some industries, such as semiconductor and steel manufacturers use the term fabrication instead. The manufacturing sector is closely connected with engineering and industrial design. Examples of major manufacturers in North Americainclude General Motors Corporation, General Electric, and Pfizer. Examples in Europe include Volkswagen Group, Siemens, and Michelin. Examples in Asia include Toyota, Samsung, and Bridgestone. Economics of manufacturing According to some economists, manufacturing is a wealth-producing sector of an economy, whereas a service sector tends to be wealth-consuming. Emerging technologies have provided some new growth in advanced manufacturing employment opportunities in the Manufacturing Belt in the United States. Manufacturing provides important material support for national infrastructure and for national defense. On the other hand, most manufacturing may involve significant social and environmental costs. The clean-up costs of hazardous waste, for example, may outweigh the benefits of a product that creates it. Hazardous materials may expose workers to health risks. Developed countries regulate manufacturing activity with labor laws and environmental laws. Across the globe, manufacturers can be subject to regulations and pollution taxes to offset the environmental costs of manufacturing activities. Labor Unions and craft guilds have played a historic role in the negotiation of worker rights and wages. Environment laws and labor protections that are available in developed nations may not be available in the third world. Tort lawand product liability impose additional costs on manufacturing. These are significant dynamics in the on-going process, occurring over the last few decades, of manufacture-based industries relocating operations to "developing-world" economies where the costs of production are significantly lower than in "developed-world" economies.Manufacturing may require huge amounts of fossil fuels. Automobile construction requires, on average, 20 barrels of oil. Manufacturing and investment Surveys and analyses of trends and issues in manufacturing and investment around the world focus on such things as the nature and sources of the considerable variations that occur cross-nationally in levels of manufacturing and wider industrialeconomic growth competitiveness and attractiveness to foreign direct.

In addition to general overviews, researchers have examined the features and factors affecting particular key aspects of manufacturing development. They have compared production and investment in a range of Western and non-Western countries and presented case studies of growth and performance in important individual industries and market-economic sectors. On June 26, 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce, commenting that the U.S. has outsourced too much in some areas and can no longer rely on the financial sector and consumer spending to drive demand.[6] Further, while U.S. manufacturing performs well compared to the rest of the U.S. economy, research shows that it performs poorly compared to manufacturing in other highwage countries. A total of 3.2 million one in six U.S. manufacturing jobs have disappeared between 2000 and 2007.[8] In the UK, EEF the manufacturers organisation has led calls for the UK economy to be rebalanced to rely less on financial services and has actively promoted the manufacturing agenda. Manufacturing process management (MPM) is a collection of technologies and methods used to define how products are to be manufactured. MPM differs from ERP/MRP which is used to plan the ordering of materials and other resources, set manufacturing schedules, and compile cost data. A cornerstone of MPM is the central repository for the integration of all these tools and activities aids in the exploration of alternative production line scenarios; making assembly linesmore efficient with the aim of reduced lead time to product launch, shorter product times and reduced work in progress (WIP) inventories as well as allowing rapid response to product or product changes. Manufacturing systems: changes in methods of manufacturing:

Agile manufacturing is a term applied to an organization that has created the processes, tools, and training to enable it to
respond quickly to customer needs and market changes while still controlling costs and quality. An enabling factor in becoming an agile manufacturer has been the development of manufacturing support technology that allows the marketers, the designers and the production personnel to share a common database of parts and products, to share data on production capacities and problems particularly where small initial problems may have largerdownstream effects. It is a general proposition of manufacturing that the cost of correcting quality issues increases as the problem moves downstream, so that it is cheaper to correct quality problems at the earliest possible point in the process. Agile manufacturing is seen as the next step after Lean manufacturing in the evolution of production methodology.[citation needed] The key difference between the two is like between a thin and an athletic person, agile being the latter. One can be neither, one or both. In manufacturing theory, being both is often referred to as leagile. According to Martin Christopher, when companies have to decide what to be, they have to look at the Customer Order Cycle (the time the customers are willing to wait) and the leadtime for getting supplies. If the supplier has a short lead time, lean production is possible. If the COC is short, agile production is beneficial.

The American system of manufacturing was a set of manufacturing methods that evolved in the 19th century. The two notable
features were: A system for making interchangeable parts A high degree of mechanization which resulted in more efficient use of labor compared to hand methods.

The English system of manufacturing was an early system of industrial production that required skilled machinists who were
required to produce parts from a design or model. But however skilled the machinist, parts were never absolutely identical, and each part had to be manufactured separately to fit its counterpart. This was almost always done by one person who produced the completed item from start to finish. The growth of the use of Interchangeable parts and mass production led to the system disappearing from mainstream industry. Mass production using interchangeable parts was first achieved in 1803 by Marc Isambard Brunel in cooperation with Henry Maudslay, and Simon Goodrich, under the management of (with contributions by) Brigadier-General Sir Samuel Bentham the Inspector General of Naval Works at Portsmouth Block Mills at Portsmouth Dockyard for the British Royal Navy during the Napoleonic War. By 1808 annual production had reached 130,000 sailing blocks.This method of working did not catch on in

general manufacturing in Britain for many decades, and when it did it was imported from America, and became known as the American system of manufacturing, even though it originated in England.

Metal fabrication is the building of metal structures by cutting, bending, and assembling processes:
Cutting is done by sawing, shearing, or chiseling (all with manual and powered variants); torching with handheld torches (such as oxy-fuel torches or plasma torches); and via CNC cutters (using a laser, mill bits, torch, or water jet). Bending is done by hammering (manual or powered) or via press brakes and similar tools. Assembling (joining of the pieces) is done by welding, binding with adhesives, riveting, threaded fasteners, or even yet more bending in the form of a crimped seam. Structural steel and sheet metal are the usual starting materials for fabrication, along with the welding wire, flux, and fasteners that will join the cut pieces. As with other manufacturing processes, both human labor and automation are commonly used. The product resulting from fabrication may be called a fabrication. Shops that specialize in this type of metal work are called fab shops. The end products of other common types of metalworking, such as machining, metal stamping, forging, and casting, may be similar in shape and function, but those processes are not classified as fabrication. Fabrication comprises or overlaps with various metalworking specialties: Fabrication shops and machine shops have overlapping capabilities, but fabrication shops generally concentrate on metal preparation and assembly as described above. By comparison, machine shops also cut metal, but they are more concerned with the machining of parts on machine tools. Firms that encompass both fab work and machining are also common. Blacksmithing has always involved fabrication, although it was not always called by that name. The products produced by welders, which are often referred to as weldments, are an example of fabrication. Boilermakers originally specialized in boilers, leading to their trade's name, but the term as used today has a broader meaning. Similarly, millwrights originally specialized in setting up grain mills and saw mills, but today they may be called upon for a broad range of fabrication work. Ironworkers, also known as steel erectors, also engage in fabrication. Often the fabrications for structural work begin as prefabricated segments in a fab shop, then are moved to the site by truck, rail, or barge, and finally are installed by erectors

A flexible manufacturing system (FMS) is a manufacturing system in which there is some amount of flexibility that allows the
system to react in the case of changes, whether predicted or unpredicted. This flexibility is generally considered to fall into two categories, which both contain numerous subcategories. The first category, machine flexibility, covers the system's ability to be changed to produce new product types, and ability to change the order of operations executed on a part. The second category is called routing flexibility, which consists of the ability to use multiple machinesto perform the same operation on a part, as well as the system's ability to absorb large-scale changes, such as in volume, capacity, or capability. Most FMS consist of three main systems. The work machines which are often automated CNC machines are connected by a material handling system to optimize parts flow and the central control computer which controls material movements and machine flow. The main advantages of an FMS is its high flexibility in managing manufacturing resources like time and effort in order to manufacture a new product. The best application of an FMS is found in the production of small sets of products like those from a mass production.

Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing inprocess inventory and associatedcarrying costs. To meet JIT objectives, the process relies on signals or Kanban between different points in the process, which tell production when to make the next part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality. Quick notice that requires personnel to order new stock once existing stock is depleting is critical to the inventory reduction at the center of the JIT policy, which saves warehouse space and costs. However, JIT relies on other elements in the inventory

chain as well. For instance, its effective application cannot be independent of other key components of a lean manufacturing system or it can "end up with the opposite of the desired result." In recent years manufacturers have continued to try to hone forecasting methods such as applying a trailing 13-week average as a better predictor for JIT planning; however, some research demonstrates that basing JIT on the presumption of stability is inherently flawed.

Lean manufacturing, lean enterprise, or lean production, often simply, "Lean," is a production practice that considers the
expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Working from the perspective of the customer who consumes a product or service, "value" is defined as any action or process that a customer would be willing to pay for. Essentially, lean is centered on preserving value with less work. Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS) (hence the term Toyotism is also prevalent) and identified as "Lean" only in the 1990s.[1][2] TPS is renowned for its focus on reduction of the original Toyota seven wastes to improve overall customer value, but there are varying perspectives on how this is best achieved. The steady growth of Toyota, from a small company to the world's largest automaker,[3] has focused attention on how it has achieved this success. Lean manufacturing is a variation on the theme of efficiency based on optimizing flow; it is a present-day instance of the recurring theme in human history toward increasing efficiency, decreasing waste, and using empirical methods to decide what matters, rather than uncritically accepting pre-existing ideas. As such, it is a chapter in the larger narrative that also includes such ideas as the folk wisdom of thrift, time and motion study, Taylorism, the Efficiency Movement, and Fordism. Lean manufacturing is often seen as a more refined version of earlier efficiency efforts, building upon the work of earlier leaders such as Taylor or Ford, and learning from their mistakes.

Mass customization, in marketing, manufacturing, call centres and management, is the use of flexible computer-aided
manufacturing systems to produce custom output. Those systems combine the low unit costs of mass production processes with the flexibility of individual customization. Mass customization is the new frontier in business competition for both manufacturing and service industries. At its core is a tremendous increase in variety and customization without a corresponding increase in costs. At its limit, it is the mass production of individually customized goods and services. At its best, it provides strategic advantage and economic value. Mass customization is the method of "effectively postponing the task of differentiating a product for a specific customer until the latest possible point in the supply network." (Chase, Jacobs & Aquilano 2006, p. 419). Kamis, Koufaris and Stern (2008) conducted experiments to test the impacts of mass customization when postponed to the stage of retail, online shopping. They found that users perceive greater usefulness and enjoyment with a mass customization interface vs. a more typical shopping interface, particularly in a task of moderate complexity.[1] The concept of mass customization is attributed to Stan Davis in Future Perfect[2] and was defined by Tseng & Jiao (2001, p. 685) as "producing goods and services to meet individual customer's needs with near mass production efficiency". Kaplan & Haenlein (2006) concurred, calling it "a strategy that creates value by some form of companycustomer interaction at the fabrication and assembly stage of the operations level to create customized products with production cost and monetary price similar to those of mass-produced products". Similarly, McCarthy (2004, p. 348) highlight that mass customization involves balancing operational drivers by defining it as "the capability to manufacture a relatively high volume of product options for a relatively large market (or collection of niche markets) that demands customization, without tradeoffs in cost, delivery and quality".

Mass production is the production of large amounts of standardized products, including and especially on assembly lines.
With job production and batch production it is one of the three main production methods. The concepts of mass production are applied to various kinds of products, from fluids and particulates handled in bulk (such asfood, fuel, chemicals, and mined minerals) to discrete solid parts (such as fasteners) to assemblies of such parts (such ashousehold appliances and automobiles). Mass production is a diverse field, but it can generally be contrasted with craft production. It has occurred for centuries; there are examples of production methods that can best be defined as mass production that predate the Industrial Revolution. However, it has been widespread in human experience, and central to economics, only since the late 19th century. Prefabrication is the practice of assembling components of a structure in a factory or other manufacturing site,

and transporting complete assemblies or sub-assemblies to theconstruction site where the structure is to be located. The term is used to distinguish this process from the more conventional construction practice of transporting the basic materialsto the construction site where all assembly is carried out. The term prefabrication also applies to the manufacturing of things other than structures at a fixed site. It is frequently used when fabrication of a section of a machine or any movable structure is shifted from the main manufacturing site to another location, and the section is supplied assembled and ready to fit. It is not generally used to refer to electrical or electronic components of a machine, or mechanical parts such as pumps, gearboxes and

compressors which are usually supplied as separate items, but to sections of the body of the machine which in the past were fabricated with the whole machine. Prefabricated parts of the body of the machine may be called 'subassemblies' to distinguish them from the other components. The putting-out system is a means of subcontracting work. Historically it was also known as the workshop system and the domestic system. In putting-out, work is contracted by a central agent to subcontractors who complete the work in off-site facilities, either in their own homes or in workshops with multiple craftsmen. It was used in the English and American textile industries, in shoe making, lock-making trades and making parts for small firearms from the Industrial Revolution until the mid 19th century; however, after the invention of the sewing machine in 1846, the system lingered on for the making of ready made men's clothing.[1] The domestic system was suited to pre-urban times because workers did not have to travel from home to work which was quite impracticable due to the state of roads and footpaths and members of the household spent many hours in farm or household tasks. Early factory owners sometimes had to build dormitories to house workers, especially girls and women. Putting-out workers had some flexibility to balance farm and household chores with the putting-out work, this being especially important in winter. The development of this trend is often considered to be a form of proto-industrialization and remained prominent until the Industrial Revolution of the 19th century. At that point, it underwent name and geographical changes. However, bar some technological advancements, the putting-out system has not changed in essential practice. Contemporary examples can be found in China, India and South America, and are not limited to the textiles industry.

Rapid prototyping Industrial 3D printers have existed since the early 1980s and have been used extensively for rapid prototyping and research purposes. These are generally larger machines that use proprietary powdered metals, casting media (e.g. sand), plastics or cartridges, and are used for rapid prototyping by universities and commercial companies. Industrial 3D printers are made by companies including 3D Systems, Objet Geometries, and Stratasys. Rapid manufacturing Advances in RP technology have introduced materials that are appropriate for final manufacture which has in turn introduced the possibility of directly manufacturing finished components. One advantage of 3D printing for rapid manufacturing lies in the relatively inexpensive production of small numbers of parts. Rapid manufacturing is a new method of manufacturing and many of its processes remain unproven. 3D printing is now entering the field of rapid manufacturing and was identified as a "next level" technology by many experts in a 2009 report.[27] One of the most promising processes looks to be the adaptation of laser sintering (LS), one of the betterestablished rapid prototyping methods. as of 2006, however, these techniques were still very much in their infancy, with many obstacles to be overcome before RM could be considered a realistic manufacturing method.

A reconfigurable manufacturing system (RMS) is one designed at the outset for rapid change in its structure, as well as its
hardware and software components, in order to quickly adjust its production capacity and functionality within a part family in response to sudden market changes or intrinsic system change.[1][2] A schematic diagram of a RMS is shown below (Artist Rod Hill).

The Reconfigurable Manufacturing System (RMS) as well as one of its components the Reconfigurable Machine Tool (RMT) were invented in 1999 in the Engineering Research Center for Reconfigurable Manufacturing Systems (ERC/RMS) at the

University of Michigan College of Engineering. The RMS goal is summarized by the statement Exactly the capacity and functionality needed, exactly when needed. Ideal Reconfigurable Manufacturing Systems possess six core RMS characteristics: Modularity, Integrability, Customized flexibility, Scalability, Convertibility, and Diagnosability. A typical RMS will have several of these characteristics, though not necessarily all. When possessing these characteristics, RMS increases the speed of responsiveness of manufacturing systems to unpredicted events, such as sudden market demand changes or unexpected machine failures.. The RMS facilitates a quick production launch of new products, and allows for adjustment of production quantities that might unexpectedly vary. The ideal reconfigurable system provides exactly the functionality and production capacity needed, and can be economically adjusted exactly when needed. These systems are designed and operated according to Korens RMS Principles. The components of RMS are CNC machines, Reconfigurable Machine Tools, Reconfigurable Inspection Machines and material transport systems (such as gantries and conveyors) that connect the machines to form the system. Different arrangements and configurations of these machines will have an impact on the system productivity. A collection of mathematical tools, which are defined as the RMS Science Base, may be utilized to maximize system productivity with the smallest possible number of machines.

Manufacturing Industry: Market Research Reports, Statistics and Analysis Global Manufacturing Industry

The global manufacturing industry produces goods using labor, tools and machinery, and involves a spectrum of manual tasks carried out by people as well as other high-tech activities performed by machines and computers. Manufacturing plays a central part in many different sectors such as the industrial, automotive and food industries. Other market segments that involve a degree of manufacturing include the chemical, aerospace and defense, electronics and pharmaceutical industries. Manufacturing is used to produce materials such as paper, wood, plastics and packaging. Specifically, industrial manufacturing covers the mass production of finished goods from raw materials where machinery and materials-handling equipment are optimized for output. The main pressures for companies operating in the global manufacturing industry involve the conception of innovative products, competition from domestic and foreign companies, and making a profit while satisfying the need for cost competitiveness.

Influential Industry Success Factors

Labor: The manufacturing of goods is a traditionally labor-intensive activity. The industry is, however, becoming increasingly automated with companies relying more on machines and less on labor skills. Revenue is greatest for companies closest to raw materials and markets, making the best quality goods at the lowest production costs. With much manufacturing work being physically intensive and most companies employing more than 60,000 people on average, the industry incurs considerable costs due to labor unions. Workers contribute to the significant profit made by manufacturing goods, like those made by the aerospace and automotive industries, and are motivated to negotiate a safer working environment, better pay and more benefits. The tradition of labor unions is less instilled in developing nations than in the US, which can therefore be at a competitive disadvantage as labor union actions add to company costs.

Raw Materials: Another significant cost to manufacturing companies is raw materials. The manufacturing of airplanes, cars, infrastructure and many others all require mass amounts of raw materials, which are costly. Transport of raw materials is also an important factor as depending on proximity to the materials used, companies can encounter large expenditure on getting the raw materials to the production site.

Legislation: Due to the potentially harmful impact of manufacturing on the environment, government legislation is becoming stricter regarding the regulation of emissions and safety standards. Enforced standards drive up corporate operating costs and necessitate greater research and development as well as technology-intensive practices.

Leading Regional Market Share

According to the US National Association of Manufacturers, the US represents more than a fifth of the global manufacturing industry, with China producing 15% and Japan 12% of manufactured products. The US manufacturing industrys output is in

excess of $1.5 trillion worth of products, more than 11% of the countrys gross domestic product. The industry represents close to 19 million US jobs, and employs almost 10% of the countrys workforce. Developed markets in the US and the EU are now beginning to foray into emerging markets to generate revenue. These markets can benefit from technological standards in place in developed markets.

Worlds Top Manufacturers

Western Digital is the worlds leading manufacturer, producing computer hard disk drives, with revenue rising over 32% in 2010.

Apple is also one of the worlds top manufacturers, ranking second according to Industry Week; the companys revenue rose close to 80% in 2010, with almost 95% growth in iPhone net sales, which represented almost 40% of Apples overall net sales in 2010, or $25 billion.

Tobacco maker Lorillard is in third place, and enjoyed record profit in 2010. Also in the top 10 are: Microsoft, Philip Morris International and mattress manufacturer Tempur-Pedic International.

Market Outlook The top nations in the manufacturing industry are expected to change over the next five years, according to Deloittes 2010 Global Manufacturing Competitiveness Index. Among those forecast to gain market share are Thailand, Poland and Mexico. India, China and the Republic of Korea are expected to continue to loom large on the global manufacturing market through 2015. Countries expected to see a degree of competitive decline include the US, Germany and Japan. Leading Industry Associations National Association of Manufacturers www.nam.org Association for Manufacturing Excellence www.ame.org Association of Equipment Manufacturers www.aem.org Manufacturing Technologies Association www.mta.org.uk

British Engineering and Manufacturing Association www.bema.co.uk Manufacturers Organization for UK Manufacturing www.eef.org.uk

The new day brings new perspectives With the release of the 2013 Global Manufacturing Competitiveness Index (hereafter, GMCI), Deloitte and the Council build upon the GMCI research, which was first introduced in 2010. This new and updated report includes over 550 survey responses from CEOs around the world collected throughout 2012, and provides their perspective of the key drivers of manufacturing competitiveness for a country; their ranking of the most competitive nations today and in five years from now; and, the public policies creating a competitive advantage or disadvantage for key countries and regions around the world. The 2013 GMCI now augments the detailed CEO perspectives with additional objective economic and related data and analysis that, as a result, provides a rich and detailed foundation to better understand the forces driving manufacturing competitiveness and overall economic prosperity for a nation. It is hoped that this fact-based, framework free of policy recommendations enables constructive dialogue on this important topic among all stakeholders: policymakers, business leaders, academic leaders, labor leaders and civil society. The new normal: uncertainty and unexpected change When the first Global Manufacturing Competitiveness Index was released in 2010, the world seemed poised for a recovery from the worst economic downturn since the Great Depression, with the manufacturing sector leading the way. New production orders were rising and supply chains restocking. But much has transpired since that first release, and most of it unexpected: the devastating earthquake and tsunami in Japan in March of 2011, the Arab Spring, the European sovereign debt crisis threatening the European Union, Vladimir Putins return as Russias president, Standard & Poor's downgrading of the United States (U.S.) credit rating, and an unprecedented unemployment rate in the U.S. now measured in years during an economic recovery. As we enter 2013, much is up for grabs. With the recent restrained growth in China coupled with imminent leadership changes, a delicate and precarious recovery teetering in the U.S., a dark cloud over much of the Eurozone, trade wars in South America, an ongoing malaise in Japan, and the percolating but elusive rise of India, the competitiveness of each nations manufacturin g innovation ecosystem will continue to be a focus area for policymakers, business leaders and much of society.

Emerging markets press for sustained competitive advantage For the 2013 GMCI, CEO survey respondents were again asked to rank nations in terms of current and future manufacturing competitiveness with the results depicted in Table 1. And once again, China tops the list as the most competitive manufacturing nation today and five years from now. The three most significant manufacturing powers for much of the past 60 years the U.S., Germany, and Japan remain ranked in the top 10 most competitive nations today. Of these, Germany ranked as the second most competitive nation followed by the U.S. at number three and Japan at number 10. The global

economic downturn and the Euro-crisis have helped shine a bright light on the considerable advantages and capabilities both Germany and the U.S. possess as locations for advanced manufacturing relative to other nations and their contributions to country-level economic resiliency. However, despite being recognized by executives for providing significant advantages in areas like research and development, access to highly skilled workers, and robust legal and regulatory policies that provide strong intellectual property protections, these developed nations are expected to decline in their overall competiveness rankings over the next five years with Germany falling to fourth and the U.S. to fifth. And Japan drops out of the top 10 into position number 12 over the next five years, continuing its decades-long, cost challenges that reduce its global manufacturing competitiveness. Appendix A provides a detailed description on each of the top 10 most competitive countries today as ranked by CEOs for the 2013 GMCI. Underscoring the extremely competitive nature of todays manufacturing environment, the top 10 most competitive nations five years from now is remarkably similar to todays rankin g. Only India rising from fourth to second and Brazil rising from eighth to third alters the top 10. And as shown in Table 2, those nations expected to decline in their manufacturing competitiveness outnumber those on the rise, with developing nations such as India, Brazil, Indonesia and Vietnam moving into the top echelon. Viewed through a regional lens, yet another significant story emerges. The Americas continues to show significant manufacturing prowess with the U.S., Brazil, Canada and Mexico all in the top 15 most competitive nations five years from now. But the real power has unquestionably shifted to Asia with 10 of the top 15 most competitive nations in five years. And the message for European nations is sobering. Indeed as the sovereign debt issues are being addressed, European nations are likely to be overtaken by emerging economies that continue to move up the manufacturing-innovation ladder and establish domestic research and development centers, world-class infrastructures, and more advanced manufacturing capabilities. Only Germany among the European nations remains in the top 15 most competitive nations five years from now, according to CEOs surveyed. Traditional views of inputs and outputs dont tell the whole story Figure 1 highlights a number of macroeconomic inputs and outputs and compares the top 10 most competitive nations in the 2013 GMCI today against each other. It also shows the relative averages for each indicator based on all 38 countries, as ranked in Table 1. This objective, macroeconomic data serves as an important supplement to provide insights into the CEO rankings of the most competitive nations. Notably, it also illustrates there is no single formula of inputs and outputs that guarantees a nations position as viewed by executives. Clearly, some countries are more apt to use inputs effectively to compensate for respective country weaknesses and bolster particular strengths. For example, the U.S. and Germany, with high labor costs and high corporate tax rates, offset these factors with strong labor productivity, with the U.S. leading the world by a healthy margin. The U.S. is further strengthened by very high innovation index scores, likely to be attributed in part to government policies for protection of intellectual property (See "The impact of public policy" section for additional detail). Moreover, there are many intangibles that are not captured in macroeconomic data. Many U.S. manufacturing companies create an entrepreneurial spirit and appreciate the soft people skills (e.g., artistic ability, appreciation of diversity, and creativity), which may be adding hidden value to traditional hard skills for improved labor productivity, as indicated by above average researchers per million U.S. population. China, on the other hand , still has relatively lower labor costs and is above average in the attractiveness of its corporate tax rates. Yet, China falls below average on labor productivity, researchers per million population and innovation index score. But executives know China has explicit goals and policies to improve in these areas. Japans significant lead in researchers per million population yields only a modest innovation index score, whil e high labor costs, modest labor productivity and high corporate tax rates suppress overall competitiveness and lend credence to CEOs current and future ranking of Japan. Alternately, there are the CEO rankings that do not seem to be easily explained by the macroeconomic input and output indicators. Indias leadership position on low la bor costs does not seem to be enough to make up for its last place position in labor productivity, researchers per million population, innovation index or quality of life scores. But Indias focused and comprehensive national manufacturing strategy, democratic governance and infrastructure development over the next five years may unlock the potential for CEOs around the world to see this rising star. Similar to India, Brazils below average position on all input indicators, except for low labor costs, and all output indicators, except quality of life and manufacturing jobs created, does not explain its expected rise from eighth to third in five years as ranked by CEOs surveyed. Perhaps Brazi ls resources are catapulting it in executives viewpoint. And finally, South Koreas above average position on every input and output indicator does not explain either its last place position in manufacturing job creation or its expected decline from fifth to sixth in five years. As goes manufacturing, so goes the nation So how much does a strong manufacturing sector contribute to economic prosperity? The analysis shown in Figure 2 illustrates that there is a strong association between manufacturing Gross Domestic Product (GDP) and the real (overall) GDP of a nation. The strength of the relationship appears to be especially true for emerging economy nations. Developed nations are grouped together over this time period, with slow manufacturing GDP compound annual growth rate (CAGR) and equally slow overall real GDP CAGR. While emerging economies, driving higher manufacturing GDP growth (CAGR), were experiencing much stronger growth in overall real GDP (CAGR). This association appears to hold whether manufacturing GDP as a percent of total GDP is high (i.e., over 30 percent) or much lower (i.e., less than 16 percent). In other words, higher manufacturing growth,

whether representing a large or small portion of the economy, drives higher total real GDP growth overall, with the emerging nations clustering in Figure 2 with relatively high rankings in both manufacturing and real manufacturing growth (CAGR). The observed association in this study was corroborated in the recently released research of Ricardo Hausmann and Cesar Hidalgo (Harvard and MIT1). Their extensive examination of the economic fabric of nearly every nation in the world over the past 60 years indicates the temporal effects, which show that once a nation begins to build the knowledge and capabilities necessary to manufacture goods, their path to prosperity begins. Further, they show that producing more complex products and developing and deploying more advanced manufacturing processes leads to greater economic prosperity for a nation and its citizens. Finally, their research argues that the linkage between the knowledge networks and capabilities necessary to drive advanced manufacturing and the economic prosperity of a nation is a better predictor of the variation in incomes across nations than any other leading indices. The next section presents the rankings of the k ey drivers of a nations manufacturing competitiveness as seen by CEOs surveyed, as well as select country-specific comparisons related to those drivers. The clear differentiation perceived by CEOs of the competitive capabilities of nations is a fascinating look into the competitive dynamics challenging both developed and emerging market economies around the world in their quest to achieve sustained economic growth and prosperity.

Talent-driven innovation drives manufacturing competitiveness Like those participating in the 2010 GMCI, executives responding to the 2013 CEO survey were again asked to rank the key government and market forces that drive manufacturing competitiveness. The competitiveness framework developed for the 2010 GMCI, shown in Table 3a, was again applied for the development of the 2013 GMCI to both position the discussion of the key drivers of competitiveness and their important sub-components and to allow for a direct comparison between CEO responses in 2010 and 2013. We expect this framework will stand the test of time and continue to allow for longitudinal data analysis over the coming years. As shown in Table 3b, and consistent with the 2010 GMCI rankings, executives again cited talent-driven innovation as the most important driver of a countrys ability to compete. Punctuating the point, and key to the make -up of talent-driven innovation, executives cited the quality and availability of scientists, researchers, and engineers and the quality and availability of skilled labor as the top two most critical individual drivers of the 40 total sub-components (See Appendix B1) making up the 10 main drivers of manufacturing competitiveness (See Table 3b) they were asked to rate. Nothing was more important to CEOs than the quality, availability and productivity of a nations workforce helping them drive their innovation and growth agendas. Catapulting into the second most important driver position is the economic, trade, financial and tax system of a nation, moving up from fourth place in the 2010 GMCI. CEOs' recent experiences with economic volatility, trade barriers, structural cost tax burdens, and crushing national indebtedness, combined with high degrees of policy and regulatory uncertainty, has likely caused them to now place government-related forces and actions as more important to determining a nations competitiveness than anything other than the quality of its workforce. Government-driven trade, financial, and tax policies have now

supplanted labor and materials costs, supplier networks, infrastructure, energy costs, local market attractiveness and everything else as a more important driver of a nations competitiveness. This seems driven by executives concerns that economic, trade and tax policies are often detracting from competitiveness for manufacturers versus helping create an advantage.

The cost of labor and materials now ranks third on the list, followed by supplier networks as the fourth most important driver, moving up four spots in 2013 compared with 2010. But other subtle shifts in the overall rankings suggest that the normal factors of production including the costs of labor, materials, energy and other related items, which can be directly managed and controlled by a company, are far less concerning to CEOs than the many other government and public policy driven factors outside of their control and often outside of their influence. In the following pages, we focus on the top 10 drivers of competitiveness and discuss each in terms of sub-components, relative importance, and implications of their rankings. A mosaic of strengths and weaknesses The significant addition to this 2013 GMCI report compared with the 2010 version is the input received from CEOs on the individual rankings of strengths and weaknesses of an important subset of the most competitive nations relative to the 10 key drivers of competitiveness. While the CEOs rankings of the most competitive nations today and in the future for 38 countries (Table 1), and the ratings for the 10 categories of competitiveness drivers and the 40 individual sub-components of those drivers, in the 2010 report provided many important insights, asking CEOs to rank 38 countries for 10 drivers and 40 subcomponents was certainly too much to ask regarding the time of the more than 550 CEOs who participated in the 2013 GMCI study. Instead, an abbreviated approach was taken by asking the CEOs to rank only six countries on the key drivers of competitiveness and their respective sub-components (Tables 3a and 3b, and Appendix B). For this purpose, three developed economy nations were chosen for more in-depth comparative analysis the U.S., Germany and Japan, and three emerging economy nations China, India and Brazil. As each of these nations finished in the 2010 and 2013 top 10 most competitiveness group, they are often identified as the surrogates for developed and emerging economy competitiveness dynamics. Table 4 shows the results of mean ratings by CEOs surveyed of all drivers relative to each other meaning the lowest rated country and competitiveness driver (i.e., India and Healthcare system) is given an index value of 1.0, and the highest rated country and competitiveness driver is rated 10.0 (i.e., China and Cost of labor and materials). All other country and competitiveness drivers in Table 4 are then indexed relatively against the highest and lowest rated ones, and thereby, creating individual and unique scores for each driver in the matrix. The mosaic that emerges clearly demonstrates the competitive advantage Germany, the U.S. and Japan hold relative to talent-driven innovation as well as against most of the other drivers, with the exception of the cost of labor and materials. Not surprisingly, the survey revealed emerging nations hold an

advantage with regard to the low cost of labor and materials; however, compared to their developed nation counterparts, they lag far behind regarding their healthcare systems and their legal and regulatory environments. Importantly, what also emerges from the CEO rankings in Table 4 is the transformation that China is undergoing across its competitiveness drivers, clearly separating itself from India and Brazil. Further, the CEO ratings seem to suggest China is becoming more and more a developed nation competitor than its emerging economy counterparts. As China, India and Brazil continue to bolster their advanced manufacturing knowledge and capabilities over the coming years and improve their overall competitiveness position over the next five years as forecasted by the CEOs surveyed, it will be fascinating to see the new patterns that emerge in this mosaic. The following pages focus on each of the top 10 drivers of competitiveness and discuss each in terms of sub-drivers, relative importance, and implications of their rankings.

Industrial manufacturing industry insight: Industrial manufacturing CEOs are gearing their companies up for growth. They're cutting costs, improving processes and products and working on increasing their resilience to risksbut talent challenges are looming. What else did they tell us? Strategies are changing. While they're downbeat about the economy, industrial manufacturing CEOs are positive about their own growth prospects. To make sure they're ready to compete, 72% say they're changing strategy this year, taking into account the slow economy, customer demands, and competitive threats. CEOs are responding to customers, competitive threats: But they're keeping a tight rein on costs. 78% of industrial manufacturing CEOs have implemented a cost-reduction initiative over the past 12 months, and 70% expect to trim the fat in the next 12 months. They're cautious with cash. Only 22% of IM CEOs intend to make a major change to their capital investment decisions this year, compared to 36% last year. That doesnt mean they are not ready to invest if the right opportunities arise: 35% are planning to complete a cross-border merger or acquisition in the next 12 months. Great new products are important. 35% of industrial manufacturing CEOs think new products and services are the main route to growth over the next 12 months, compared to 28% of CEOs in the total sample. To get it right, 84% of industrial manufacturing CEOs plan to change their companys R&D and innovation capacity over the next 12 months. CEOs are fine-tuning R&D to get it right: Talent is a #1 priority. Nearly half of industrial manufacturing CEOs say it's becoming harder to hire talent in their industry. It's actually the top area CEOs want to devote more time to. One challenge is generational. More industrial manufacturing CEOs are having trouble attracting and retaining younger workers. With older workers retiring in many markets, that could be a big problem in the future.