The silent advance of the new manufacturing industry

They are spread out all over the ultra-modern production hall, in all possible colours and with different degrees of finish. With an open or closed body, with a cooling compartment or with a large roller shutter, we even spotted one with a snow plough in the front. The very first fully electric vans made in Belgium.

Completely customised, according to the specific needs of the customer', Jean-Charles Carrette is proud to say. He is the founder and CEO of Addax Motors, a manufacturing company that saw the light of day barely four years ago in Deerlijk, West Flanders. In 2018, the first electric delivery van rolled off the production line here, and this year they are already aiming for an annual production of several hundred cars. List price? Around 30,000 euros. Addax itself is growing rapidly: the company already has 36 employees - 1 in 4 is a developer or researcher - and is planning to open a second production line soon.

When we submitted our official application to the federal government a few years ago to be recognised as a car manufacturer, they were a bit surprised', Carrette recalls. The image of the manufacturing industry in Flanders has not been clear for a long time,' confirms Dirk Torfs, CEO of Flanders Make. His organisation has some 700 researchers who - with strong financial support from the Flemish government - are conducting research into the needs and competences of the new manufacturing industry in our country.

Ten years ago, the industry still seemed to be hanging on by a thread, but in recent years the picture has gradually changed. After many manufacturing companies left Flanders for decades in search of cheap labour, the manufacturing industry has partly reinvented itself here over the past ten years. With a lot of attention for innovation and digitalisation. While manufacturing companies traditionally focused on improving physical components, in 2021 they will increasingly distinguish themselves through less visible digital innovations. When we first examined the innovation budgets in our Flemish manufacturing industry in 2017, we were lagging behind the global average. Today, we are sometimes even slightly above it.

This translates both into the continued growth of important players in Flanders - think of Picanol or Vandewiele - and in bringing production back to Flanders. Admittedly, the latter is happening on a rather modest scale for the time being. Pure tape production of very large volumes will probably never return, but the production of small, very flexible series definitely has a future in Flanders. In my view, the really new future is rather: today I am building my production here, and therefore we no longer need to outsource it to low-wage countries.

Volvo Gent is already a good example. First, the factory was awarded the production of a few brand-new electric models, and now the possibility of a battery factory in Ghent is being seriously considered. If, a few years ago, we still more or less assumed that the future of the manufacturing industry would involve almost exclusively machines - without human intervention - we now know better.

We need to focus again on factories with people. Dirk Torfs: 'Only then can we respond very flexibly to the demands of customers from all possible sectors, who also want to be able to react more quickly themselves. And who can also produce in very small series if necessary. The new manufacturing industry is therefore not only focusing on product innovation, but also on production innovation. Long and uncertain supply chains are at odds with this. Paradoxically, digitalisation and robotisation could eventually bring more production jobs to Flanders. On the one hand, we make production cheaper by automating as many processes as possible; on the other hand, we make it smarter and of higher quality by deploying well-trained people of flesh and blood where necessary.

in function of the specific needs of the customer

EPITOME OF FLEXIBILITY

It was exactly this strategy that allowed Addax to build a new car factory in the unsightly town of Deerlijk. In terms of manual labour, this is purely an assembly plant,' Jean-Charles Carrette acknowledges. We leave the technical complexity as much as possible to the suppliers of high-tech parts. To put this in concrete terms: each electric vehicle that leaves here takes no more than 35 man-hours. That is very little, so we work very efficiently. This is mainly thanks to the completely digital control of the production line: our workers receive all instructions via a screen at their workstation and everything is managed in the cloud.

At the same time, Addax is also a model of flexibility. With its electric delivery vehicles, the company is targeting different markets, ranging from cities and municipalities over amusement parks and industrial customers to supermarkets and so-called last mile applications. The very last stage to the end consumer in parcel shipping, for example.

Each van is fully customised, depending on the end application. So no series of two thousand identical vans rolling off the production line. This also seems to satisfy two of the main conditions that 'new' manufacturing companies in Flanders will have to meet in 2021 in order to be sufficiently profitable, despite the eternal labour cost handicap. Expensive manual labour is limited to the absolute minimum, flexibility towards the customer and towards the finishing of the product is maximised.

MADE IN BELGIUM AS A MARKETING ARGUMENT

As soon as the first plans left the drawing board, Carrette was more or less certain that the new electric delivery van would roll off the proverbial conveyor belt in his own country. Such an electric vehicle is composed of both purchase and production parts. The purchase parts are very specific and there are only a handful of producers worldwide, so as a car manufacturer you actually have very little impact on them.

The production parts - which are mainly used to build the chassis and the bodywork - are in our case parts made of steel, aluminium, glass or plastic. For this, we wanted to work with Belgian suppliers as much as possible. After all, in the building phase of a brand new product, it is much easier and more comfortable when your suppliers are around the corner, and you can switch and adjust much faster than when you have to wait for new parts from, say, China.

The industrial production of such a prototype is also more likely to be done here in Western Europe than in the Far East or Eastern Europe. It is true that the production costs are often a lot lower there, but other factors have also come into play. With this product, we are also writing a new, sustainable story. For that reason alone, it would be strange to go to China with it. That is why we initially started knocking on the doors of a few former suppliers of Ford Genk: could they teach us how to assemble such a car?

Initially, our production was still in Genk, but after two years we moved it here. Precisely because we found that a very short line between the engineers and production simply offered great added value. Such a model allows us to respond very quickly to changing market demands. The fully digital control of production also makes the entire production process a lot more cost-efficient. That is probably one of the biggest differences compared to the industrial production of a few decades ago.

We can now produce cars in our own country at a relatively low labour cost. Moreover, our cars are built entirely with IoT technology (Internet of Things, FMI), so that we can ensure a very accessible after-sales service from the factory. We no longer need an extremely expensive network of local dealers for this.

Last but not least, the macroeconomic context has changed dramatically and is no longer comparable to that of, say, two decades ago. Whereas Western European car producers were still exporting en masse to relatively nearby low-wage countries such as Slovakia or Romania, this story no longer holds true. Even China is not really cheap anymore. So you have to move your production further and further out, but by doing so you lose more and more flexibility,' Carrette says. For an innovative challenger like us, the latter is simply not an option. It is also no coincidence that we do not have any Asian competitors today, while we do have to deal with a handful of European competitors targeting the same niche markets.

And let's be chauvinistic for once: the label Made in Belgium on our electric vans is also a strong marketing and sales argument today. It stands for technological quality and durability.

SHORTAGE OF COMPUTER CHIPS

Of course, one swallow does not make a Summer. The concept of reshoring - bringing back industry from low-wage countries to, say, Western Europe or the US - has been around for a few years now with regularity. Yet the number of large companies that have actually taken that step remains relatively limited. Shoe giant Adidas, a company that had concentrated its entire production in Asia for years, unexpectedly opened several new factories in Germany and the US in 2016.

These so-called speed factories were largely automated and, above all, had to be able to respond very quickly to the very latest and very fast-changing market trends, which they would therefore be on top of. Two years ago, however, the company decided to close those factories in Germany again and to deploy the technology in Asian factories from now on.

In its own country, the electronics manufacturer ED&A did take the step: it decided to start producing its electronic components for machine builders in its own country again, even though production had been systematically outsourced to low-wage countries for years. When we interviewed CEO Gert D'Handschotter about this a few years ago, he said that this model was gradually reaching its limits. Subcontractors could not always meet the required production capacity, the quality sometimes left much to be desired and the often long waiting and transport times and the lack of flexibility were also becoming a problem for the company.

The latter argument also featured prominently in the past year and a half. Since the outbreak of the pandemic, almost all economic sectors have been confronted with faulty supply chains. And politicians, too, gradually started to notice: for many essential or strategic products, our hands appeared to be tied to producers from low-wage countries. The current chip shortage, which is affecting virtually all economic sectors, is yet another illustration of this. Just before the pandemic broke out, the stock market house Bank of America also published a revealing study. It questioned 3,000 large companies worldwide: 80% of them said they already had plans to rearrange their own supply chain.

It is true that the massive reshoring of industrial production to Western Europe or the US has not yet taken place,' Robert Boute points out. He is Professor of Operations Management at Vlerick Business School and has been following the issue for years. He sees a possible double explanation. On the one hand, it is perhaps a little too early to really speak of a massive trend; on the other hand, many large companies continue to cling with the courage of despair to the idea of low Asian labour costs. Even though this is now largely outdated.

Moreover, in the past few months we have effectively established that, as a company, you have to be able to be very flexible. If you continue to depend partly on production in Asia, this becomes increasingly difficult of course. Nevertheless, Boute also sees more and more signs in his own country that companies want to change their guns. Major industrial players such as Barco or TVH have meanwhile opted for the so-called dual sourcing strategy: they are also looking for local suppliers for strategic components, so that they can respond more quickly. That really is new.

Jobs, jobs, jobs

A crucial question in this whole debate: does the so-called Industry 4.0 really provide us with anything, from a purely economic point of view? In the knowledge that this new manufacturing industry will mainly focus on maximum automation and that the number of new jobs will therefore remain rather limited? We now know that every activity in the manufacturing industry also has a strong multiplier effect,' counters Boute. A pure production job quickly creates three or four extra jobs in logistics, maintenance or IT. This is precisely why we absolutely must continue to invest in new growth of the manufacturing industry in Flanders in the coming years.

It is an illusion to think that the large factories with an enormous amount of manual labour will ever return here. But it is precisely thanks to our highly educated workforce that Flanders can once again develop into an important centre of highly innovative production'. The Flemish government also seems to recognise the importance of this change of course. Back in 2016, it emphasised in its 'Vision 2050' that the transition towards Industry 4.0 was of strategic importance for Flanders. With that, there was also a trend change in the government's discourse that there was no future for industry here.

But of course, there is often a wide gap between theory and practice in this country, as Addax also experienced when it presented plans for an innovative and high-tech car factory in Deerlijk. Unfortunately, we were not able to claim any Flemish investment subsidies for its construction,' Jean-Charles Carrette explains. VLAIO (Flemish Agency for Innovation and Enterprise, FMI) or Flanders Make put money on the table for project-based innovation and for research and development, but there was no government support for the really heavy investments in production capacity.

In a way, that is a pity. Things are moving so fast for us that we have outgrown our capacity, so we will soon have to start up a new production line. Hopefully we can count on some Flemish investment support, so that we don't have to go to Wallonia or France.

Michiels, F. (2021, December). De stille opmars van de nieuwe maakindustrie. Doorbraak, 18-21