Are factories the new frontier of big tech?

0:01Every factory is a tech company, period, because they embrace, embody and deploy technology at a much faster pace than many others. Making physical goods will remain as a fact and a reality. But I think really getting on the front foot of anticipating change and building adaptability into strategies is going to be really key. Technology runs the machines, but people run the future. They're the heart of the factory and the human workforce remains the competitive advantage. We all love things, from our phones and high-tech gadgets to our favorite foods, clothes and necessities like medications. And it's not just individuals who have come to assume that they can always get what they want when they want it.

0:46Businesses have developed complicated supply chains to get what they need. And for a couple of decades until the pandemic, they felt confident they could rely on them. But then we learned that supply chains can easily be disrupted. And that risk is only growing, with everything from climate events to geopolitics impacting how and when we get our stuff. At the same time, new technologies from AI to automation and robotics are opening our eyes to the way things can be made more efficiently. So what do all businesses need to do to take advantage of these opportunities and thrive in the decade ahead?

1:24I'm Lizzie O 'Leary, a podcaster and journalist. And I'm Femi Oke, a broadcaster and journalist. And this is a special series of Take On Tomorrow, the podcast from PwC's management publication, strategy and business. Today, boot up your software and power up your robots as we look at the future of how we make things.

1:50To help us understand how this looks in 2025, we are joined by Cara Haffey, PwC's UK Leader of Industry for Industrials and Services. Welcome to the show. Thank you for having me. Cara, can you just describe for the audience the way we make things today compared to, say, 10 or 20 years ago? What are the big changes? I would say the big changes for me are in the digitalisation, the connectivity around businesses and supply chains. For me, that kind of looks like the big picture of change. A lot more automation and not so linear in terms of supply or indeed the kind of manufacturing. What are the challenges that this industry currently faces and how does that impact other businesses in other industries?

2:39I think skills and skill shortages and the capability of how that kind of flows into what people need at the right time is a big one. Rising costs. So, you know, people are so conscious of the cost of doing business in lots of countries. And then I suppose more recently, we've really had supply chain disruptions over the last five to 10 years. And overarching all of that, you can't leave that question without talking about decarbonization and the environmental and climate change pieces that manufacturers are really conscious of and looking to kind of how they affect opportunity as well as challenge.

3:15Well, opportunity is where I'm going here. What are the opportunities and developments you are seeing right now in the way we make things? We definitely point towards a more efficient manufacturing process. I think the key, I suppose, if you take that really back into kind of a customer-centric piece, it's much more about customization, about made-to-order rather than kind of making for stock. Now, those are really broad things. that does not apply to every business. But I think in general, that's what we've kind of got towards in developments and opportunities. And I think the big question that we're grappling with is how does human creativity and human purpose work within that manufacturing efficiency and automation and the world of AI?

4:05That's certainly what gets me thinking. Cara, thank you so much. We're going to come back to you in just a little bit. But first, as you touched on there, technologies like AI, robotics and automation are transforming the way factories and our supply chains work. So how can businesses be ready? To find out, we spoke with Kiva Allgood, head of the Center for Advanced Manufacturing and Supply Chains at the World Economic Forum.

4:36Today's factories look more like data centers, right, than dusty old workshops. They're bright. They're connected. They're software-defined, which means that everything they do is with purpose and insight. They're flexible cells, and not cells like in your body, but manufacturing cells with robots and cobots, working alongside people with digital twins, simulating kind of production stages. Those individual cells could be production cells that produce product for one individual. You may like a pink jacket. I may like a brown jacket, but we like the same cut. So how do you make sure that you're able to modernize in a way that can drive that production of one?

5:16But for me, it's also the people inside. When you see the joy in people's eyes, when they're proud of what they just built, because they know it's going to have a positive impact on people on the other side, that often gets carried through in pride in quality and products. I like the visual that you gave us. Modern factories looking more like data centers. So technology is playing a big part on our modern factories and how they are developing. What about the impact of Gen AI on manufacturing in general? What have you spotted? Well, Generative AI is becoming the ultimate process engineer, right?

5:54And it's accelerating design. It's accelerating predictive maintenance. It's writing in all the work instructions. It's taking some of those mundane things that often used to sit in this like giant binder, you know, your standard operating procedure manual that used to be over to the right. And I'd say AI is a buzzword, but it's also a reality in manufacturing for decades. So they've had learning models. They've had the ability to automate based off of being able to take past history and put that into the performance. Now the technology's caught up. Now I can do it in nanoseconds and can help make those decisions.

6:32With digital technologies playing such a big part of modern manufacturing, when it comes to the human workforce, what is their role? What part do they play? I love this question. Well, technology runs the machines, but people run the future. They're the heart of the factory. And the human workforce remains the competitive advantage. So someone who knows, has been working on the same machine for 20 years, knows the rhythm, knows when it starts to do X or Y that something's not working properly. Integrating that in and being able to kind of learn from the people is the most important piece. I think there are lots of factories that are lights out.

7:14There's very few humans. But the human talent is essential, right? They're setting the parameters. They're interpreting the data. They're sitting in the network operations center really overseeing the innovation. And I think that's an important piece. Rules are changing. So now you have, within the network operator, you've got a quality person and a production person sitting there. Then you have robotics technicians. They manage a fleet of robotics for AGVs. Their job is to ensure that their uptime is 100%, that their maintenance is done. You have the team member on site that's responsible for 3D printing emergency parts.

7:51So they've got to be able to scan, control, print. So it's really transforming and it's transformative. So people will always be part of the journey. And the sites that invest in people, we've noted that when you invest in skills assessments, upskilling, reskilling, you see a 20 % improvement in productivity immediately. Kiva, some experts say that there's a huge deficit in the amount of labor that will be required in manufacturing over the next few years. And then I'm also getting a sense of a workforce or workforces being concerned that their jobs will be taken over by technology. Can both be true at the same time?

8:35What are you seeing from your area of expertise looking at global manufacturing? Yeah, Femi, I think this is one of those where the narrative gets confused And, you know, people who work in factories often think, oh, if I let that AGV or robot in, then I'm going to lose my job. It is true. As you go through the automation process, the roles do change. So the illustration of you used to have 10 people on a line looking for defects. Now a robot can look for the defects and automatically spit it out. Often then you need someone who sets up that process, who manages that process, who makes sure the parameters and data, it's different skills.

9:16They're more technical skills. They're more scalable skills. So the roles will change. But the reality is that in North America alone, we have a 2 million person gap, skill gap. And that is predicted to get to 10 million globally. And why is that? Because, again, you still need the people to show up and help set, manage, control, work. And that's why these jobs are so exciting. You can't have a data center or the cloud or the internet that we're talking on today if you don't have electricians and you don't have plumbers who are there to set those things up. So I think at the heart of really all consumption, whether that's video, cloud, gaming, there is a product of some sort.

10:00I consider manufacturing the most noble role in the world. because you're producing something that people can use, that people can use to learn, that people can use to heal themselves. We've got to figure out a way to how to attract and retain and motivate young students in high school and junior high to aspire to be a plumber, to aspire to be an electrician, to want to work in a factory and see products built. That, to me, is super critical, because we do not have enough manufacturing people and jobs, and then automation isn't going to be able to get us out of that. As part of your work with the World Economic Forum Center for Advanced Manufacturing, you work with companies from all different kinds of industries.

10:46And because technology is such a big part of manufacturing, we have seen some interesting, unique, incredible partnerships. What has caught your eye, your imagination that you would like to share with us as far as collaboration partnerships? all consent? Oh, I mean, it's been, for me, just coming from the telco space over the last 30 years, you know, you see partnerships and conversations that you never would have thought of. So 45 % collaborations have grown, really unique ones since 2020. So you now have automakers and shipmakers. You have a software-defined vehicle. Some of the most advanced electrical vehicles, I had the pleasure of being in a partner's facility, and I could use my voice to open the door.

11:33I could use the voice to have it massage. I could use the voice to drop down a 37-inch TV. You have heavy industry teams that are partnering up with energy and renewable providers. And in my view now, every factory is a tech company. And they're working with chip designers. They're working with consumer brands. They're working with recyclers. They're redesigning their products up front so that you can get the rare materials out at the back end. They're being very thoughtful around that full value chain, which you never would have really seen 10 years ago. It is really clear from our conversation how manufacturing has been advanced by technology and how it benefits from technology.

12:15But how about society? How are we benefiting? Almost every modern society has gone through some type of industrial revolution. Now I'd say that through that industrial revolution, we're doing that next cycle, which is the technology revolution. And I think modern manufacturing creates jobs, cleaner production, stronger communities. So now that you have smart factories, they make strong societies, I like to say, because with that cleaner production, you get better jobs and you have more resilient economies. Manufacturing is highly resilient. People still need toilet paper. I mean, that's the reality of it.

12:53So there's these underlining kind of societal needs. But it's often overlooked. Like I said, I feel it's the most noble role in the world. Both my sons work in manufacturing, go to plants. And for me, it's how do we elevate that role? I think it is changing that mindset that every factory is a tech company, period. because they embrace, embody, and deploy technology at a much faster pace than many others. I will hold on to that phrase. People still need toilet paper now and in the future, right? So a decade from now, Akiva, what will manufacturing look like? We'll still be making toilet paper.

13:36What other trends should we be looking out for? Oh, geez. By 2035, I think factories, they won't just make products. You know, they will have made tremendous progress. You'll have zero waste, near zero emissions, and like endless adaptability. You'll be able to customize production for one. In my opinion, you'll also start to see cross-sector production. So you'll start to see similar to what's happened in the semiconductor industry, where you've got some large manufacturers that have perfected and every semiconductor uses the same three or four manufacturers. I think you'll start to see a little more consolidation there as well.

14:17I also think that AI and automation will make them reconfigurable on demand. You can produce anything, anywhere, again, with almost net zero and environmental impact. And for me, that's kind of the aha moment. Yeah, thanks, Kiva. Thank you.

14:38Cara, how do you think factories might change and continue to change over the next decade or so? I think it will vary. When you look at human creativity and the need for jobs for humankind is a big, big question that we need to think about. Developed economies with really high labour costs are obviously clearly focused on the acceleration of automation, how you make things much more standardised and collaborative. But there is so much that's not standardised and actually how companies want to be competitive and change and differentiate from each other's will be really interesting to how that's accessible globally and how the service element comes with that.

15:23And the kind of what do we want our future to be? Because there's some things that we can do, but should we do them? And how do human beings play in the product? We're still always going to want to make a product, I believe, but how do human beings play in that? Well, I think you're identifying the big question that a lot of people have when we have these conversations about automation and about AI, which is, okay, what's the impact on jobs? And how do we keep workers doing things that are meaningful? Yeah, and I think deep in each of us is that feeling of purpose. So to your point of how do we balance that?

16:05How do we empower individuals in these businesses to work with the technology, to work with the skills and make it better for everybody and use that innovation? I think there is that piece of kind of human creativity meets the machine. And like, what can we do with that? And that's really exciting, but also can feel dangerous, can feel difficult. And I don't think we should shy away from that. But where we get value from will change. We all do know, I think, deep within us that humankind needs a purpose and jobs. Beyond the workforce, this feels like we're talking about potentially much larger impacts on society when we rethink how we make things.

16:49Is that something your clients are wrestling with? Yes, I think they are. There's a real view to actually what are the steps we need to be taking now, whether that's through sustainability, environmental impact, you know, the wider stakeholder environment for their local economies. Actually, what we've seen recently is the kind of where they should place themselves. So, you know, unfortunately, we've seen a lot more kind of that view on supply chain resilience and the macroeconomics and also, you know, unfortunately, geopolitical risk all coming into actually a real thought of localization versus globalization.

17:29And there's definitely a lot more of those conversations in my clients than I have heard over prior years. Well, that tension between globalization and localization has clearly been something that companies have focused on. Obviously, we think about COVID there, but also geopolitics. Do you think that has impacted the way things are sourced and made? Is there a desire to stay closer to home? I think there is a desire now to stay closer to home. I think I feel that companies are much more aware and indeed knowledgeable of their full supply chains. And I genuinely believe that is a thing that has changed is that sourcing and the regional supply networks.

18:15Now, that's not always possible. You know, we're talking about global supply chains. It's not an overnight thing that you can change. but I would say the careful balancing of cost, resilience and geography or something that industrial businesses are really focused on at the moment. So businesses in and outside of manufacturing might be listening and thinking, what can I do to navigate this changing world? What advice would you give them? I think the key things that have given us a level of confidence over the past are about being agile and as resilient as possible. the key thing that i think has really changed certainly in my career and working with industrials is building that strong ecosystem of partners i think there used to be quite large walls up i think those have come down and actually the sharing of information and the collaboration with people who do things really well and actually how people partner is a huge piece and investing in people's skills i think the reskilling and the investing of building skills is key to why people will stay with businesses knowing that they're being invested in.

19:23Well, then I'm going to ask you to look into a crystal ball of sorts and, you know, spin forward a decade. What do you think the world of manufacturing is going to look like then? Or at least what will the broad strokes be? I suppose it's an example for me in terms of a vision for manufacturing. I am working with more of businesses in the kind of startup into the space industry at the minute. That is really exciting for me. Are we manufacturing there? So if you think of zero gravity manufacturing. Making things in space. Exactly. If you think of the capability that zero gravity and kind of how that impacts on real, real key precision manufacturing.

20:09to the kind of nanomillimeter precision of straightness lines. And if you think of that, then actually, can you start that there and then bring it down and kind of really grow from there? We're thinking about semiconductor. If you think of how much over the last 10 years, people have talked about kind of the semiconductor world and manufacturing and how that's affected manufacturers at many points in time in terms of trying to get that into their supply chain. what can kind of space manufacturing give us or does the cost of that just mean that it's like totally crazy and I think as well you look at the vision for manufacturing for different technologies you know we've seen some of the developments in chemical technology which has helped in batteries recently actually like what are those new things that we don't know that kind of come together to really affect how we manufacture, what products for the future.

21:06Cara, thank you so much for talking with us today. Thank you so much. I think what is so striking to me is less the idea of robots running everything, but this human-machine interface where we are working in concert with AI and automation to make a more efficient and streamlined process. I like the way you said in concert. It's like a collaboration so that AI is adding value to your work, not taking your work over. And if you invest in your workforce, you're not replacing them. You're actually boosting them. That's quite positive. That's it for today. For more on how business can help solve society's biggest challenges, follow Take On Tomorrow wherever you listen to podcasts.

22:06Just visit pwc.com slash take on tomorrow. Take On Tomorrow is brought to you by PwC's Strategy in Business. PwC refers to the PwC network and or one or more of its member firms, each of which is a separate legal entity.