On a busy road, one driver hits the brakes. The car behind brakes harder. The third car comes to a full stop. And the fourth crashes into the third, badly damaging both cars. This is how a chain collision often starts. This happens not only on the road but also in economies. Scared consumers hit the brakes, buying much less than they used to do. End-product makers stop buying machines and instruments. Machine and instrument manufacturers come to a complete standstill. And their suppliers go bankrupt. We need to recognize that this is happening right now and move quickly to prevent the biggest industrial crash ever.
Never in history did consumers hit the brakes as hard as today. Consumer confidence plummeted in an unprecedented fashion. Even companies that at the moment see little change will be hit in a few months. The Dutch government has rapidly built a first-aid kit for businesses that were immediately hit by the corona crisis. However, the Dutch manufacturing industry will soon require intensive care, as it consists mainly of machine and instrument suppliers (OEMs) and their suppliers, first and second tier.
At the same time, we notice a sudden awareness of the importance of the manufacturing industry as a supplier of (corona)tests, face masks, breathing kits and other vital stuff. Both people and politicians are now aware of our dependency on far-away regimes that either cannot or do not want to deliver products. And they’re becoming aware of the fact that complex value chains shut down when one tiny part can’t be delivered. We were already starting to become aware of the dangers associated with growing protectionism and foreign takeovers of our innovative companies, but the corona crisis has opened our eyes all the way.
Therefore, we need to work right now on our European production chains. Making them shorter and more effective. Creating flexibility to manufacture whatever vital stuff is needed in any crisis. And making production chains more circular and therefore less susceptible to geopolitics on the fly. We need production sovereignty: the ability to quickly and affordably produce critical goods.
The best way to do so is to set up a digital, flexible and resilient production network, a virtual smart factory. Ideally, it will operate regionally, so that parts don’t have to cross borders. For individual companies, this may not seem attractive: typically, entrepreneurs will want to sell and source worldwide. We shouldn’t hinder them in doing so. However, I’ve already spoken to entrepreneurs who have changed their sourcing strategy, ensuring that they buy at least 20 percent of each item within Europe. That could be a good policy for governments, non-governmental agencies and even manufacturing companies.
Let’s start building our smart production network now. We can map and redraw production chains and share our intel on good regional suppliers. We can start a virtual smart factory by building and using (European!) data platforms. We can adopt and stimulate the use of flexible manufacturing technology such as 3D printing and smart robots. And we can persevere in innovating products and production technology.
Governments can contribute by stopping the import of unsafe products by enforcing EU standards. And by smart and fast licensing of flexible production sites, as well as by rapidly implementing 5G networks and acting as launching customer for breakthrough technologies. Governments can also increase access to training 21st-century skills. And finally, they can set up well-targeted financing of innovations needed for the virtual smart factory and new, circular, value chains.