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 Manufacturing Made in Germany | The consistent strength of Germany's manufacturing sector is directly linked to the close interaction between government, industry, and academia. Federal and regional policy initiatives, corporate standards, and dual academic-vocational training have fostered economic growth in Germany despite the protracted global economic crisis. Based on the most recent figures reported by Germany Trade and Invest (GTAI) in 2010, 25% of Germany's Gross Domestic Product is derived from production-based industries, a statistic that underscores the importance of the manufacturing sector to overall economic health. These strengths are recognized worldwide, as revenues from the global export of products "Made in Germany" reached a record 1.1 trillion euros in 2011, according to the quarterly Foreign Economic Report, published in January 2012 by the Federation of German Industries (BDI).
In addition to global exports, the Mittelstand, or Small and Medium Enterprises in Germany (SMEs), represent another core strength of production. 99.6% of the 3.72 million companies throughout the nation are SMEs, and their staff represents 79.5% of total employees in Germany (source: GTAI). Based on a report from the German Chambers of Industry and Commerce (DIHK), approximately 200,000 new jobs will be created by SMEs in 2012. The Federal Ministry of Economics and Technology recognizes the import of these companies, and has sought to offer support with their new initiative, Building on SMEs: greater responsibility, greater freedom. The High-Tech Strategy of the Federal Ministry for Education and Research has also contributed to the support of industrial growth in Germany by pledging 4 billion euros to foster the development of cutting-edge technologies.
Germany sets an example worldwide for a strong workforce, from political offices to the classroom: the unique dual vocational-academic training model prepares an expert labor force for the jobs of the 21st century. Over half of all German high school students go on to dual training, available for 344 trades (source: The Economist). For more insights into the German model of vocational education, see this month's GCRI interview with Prof. Dr. Friedrich Hubert Esser, President of the Federal Institute for Vocational Education and Training (BIBB).
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Event: Manufacturing, Innovation, and Workforce Training: What Works in Germany and the United States for Jobs and Growth
On May 16, the German Center for Research and Innovation, the Aspen Institute Program on Manufacturing and Society in the 21st Century, the Embassy of the Federal Republic of Germany, and the Representative of German Industry and Trade (RGIT), in cooperation with the German-American Chambers of Commerce (GACC), will host a conference at the Aspen Institute in Washington, DC on Manufacturing, Innovation, and Workforce Training: What Works in Germany and the United States for Jobs and Growth. This event is the second in GCRI's manufacturing and innovation series, following the successful joint event with the Information Technology Innovation Foundation (ITIF, Washington, DC) on Germany's Innovation Model in October 2011. This conference will bring together leading representatives from government, industry, and academia to explore the ways in which manufacturing is an engine of growth and job creation in the U.S. and Germany. The speakers, panelists, and participants will discuss approaches through which policy can further strengthen the overall competitiveness and innovation capacity of these two leading industrial nations. Each program segment will be followed by a moderated Q&A session. For a full list of speakers and panel topics, please see the full program. To register for the conference, click here. Unable to travel to Washington, DC? A video of the event will stream online live at 8:30 a.m. on Wednesday, May 16. Watch in real time by clicking here.
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Interview: Prof. Dr. Friedrich Hubert Esser, President, Federal Institute for Vocational Education and Training (BIBB)
Since its foundation in 1970, the Federal Institute for Vocational Education and Training has worked to identify future challenges in vocational education and training (VET), stimulate innovation in national and international vocational systems, and develop new, practically-oriented solutions for both initial and continuing VET. Prof. Dr. Friedrich Hubert Esser became President of the BIBB on May 1, 2011. In this GCRI Interview, he discusses the key factors that have led to the success of the German vocational education and training systems. He also addresses how this knowledge could be applied to the U.S. market, and the structural developments necessary for a rapidly changing global manufacturing and technical environment. To read the full interview, click here.
Prof. Esser completed an apprenticeship as a baker before studying business administration and economic and business education in Braunschweig and Cologne. Prior to joining BIBB, he headed the Vocational Education and Training Department at the German Confederation of Skilled Crafts (ZDH) in Berlin. Prof. Esser is the author and editor of numerous scholarly publications involving skilled trades. His research and work focus on occupational and qualifications research, European vocational education and training, the German Qualifications Framework (GQF), the European Qualifications Framework (EQF), and entrepreneurship. To learn more about Prof. Esser, click here.
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Challenges and Opportunities for the German Innovation System
Over the last decade, Germany has maintained and modernized its traditional industrial structures. In 2010, German investment in R&D reached a new high - 2.82% of GDP. Germany's research slowdown that began in the 1990s and lasted approximately until 2005 has been replaced by a multiannual growth in R&D expenditures.
Germany's industrial innovation strategy, characterized by strong, high-value technologies and the skillful adaptation of cutting-edge technologies, has proved quite successful over the last years. There is potential for growth fields in cutting-edge technology markets to be accessed even more rapidly. Germany is currently caught in a difficult position between classical producers of cutting-edge technology, such as the U.S. and Japan and ambitious emerging countries. Structural economic changes, the further increase of R&D intensities, and a targeted expansion of cutting-edge technology should be a declared goal.
Due to the demographic change and the economy's ever-increasing orientation towards knowledge intensity, skill shortages in growth-oriented occupations are to be expected. There are several policy areas that will help to address these issues: Education and training to adjust the skill structure of the workforce; company-internal measures for retaining older employees' valuable skills; measures to increase the participation of the non-working but highly skilled (mostly female) employment population; and immigration policies that take into account the extensive reserves of skills available internationally.
The number of business start-ups in Germany is still relatively low by international standards. Entrepreneurial spirits may no longer be a bottleneck to increasing the number of start-ups, but many young businesses in Germany are not sufficiently funded. Tax incentives to promote private investments in venture capital funds and a legal framework that makes investments of venture capital funds in Germany attractive are therefore on the political agenda currently.
An extraordinary opportunity has recently emerged with Germany's Energiewende (energy transition). Businesses are keen to gain a strong foothold in the world market in the field of sustainable power supply technologies. But the transition is challenging as it requires major investments in infrastructure and R&D. Coordinated action among the stakeholders will be necessary to turn this potential into true innovation leadership.
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Drivers for Innovation in German Manufacturing
Germany's industrial sector is still large and highly competitive and has been the main driving force behind Germany's role as the leading export nation in the world during the last decade. Most recently, Germany's economy, and its industrial sector in particular, recovered from the 2008-2009 world economic crisis faster than any other OECD country.
Much of the success of German manufacturing is based on product innovation, which often focuses not on basic innovations but on adaptation and optimization of basic innovations to customer needs, thus creating ever new market niches. This type of innovation is also enhanced by strong interdisciplinary cooperation between company units (i.e. R&D, production and marketing) and by the embeddedness of firms in a strong and highly decentralized system of application-oriented higher education and research institutions (e.g., Universities of Applied Sciences, Technical Universities and Fraunhofer research institutes). To a large degree, this success is based on a group of roughly 1,400 family-owned mid-size Mittelstand firms. Typically, these hidden champions focus on market niches within which they become global technological and market leaders. Labor market policy and industrial relations also play a role by encouraging job stability, thus providing strong incentives for firms to invest in (firm-specific) workers' qualifications and to create flexible internal labor markets. This in turn enhances labor productivity and job satisfaction, establishing durable conditions for process and product innovation.
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Innovation: Digital Factory - Grid Engineering for Manufacturing
Factories are complex facilities with a long "lifespan," which need to be permanently outfitted to accommodate changing products, markets, and technologies, and to fulfill both the economic and ecological requirements of sustainable, long-term production. This adaptation process, called factory engineering and design, requires digital tools to support factory lifecycle phases, from investment planning to ramp-up and full production, until their eventual environmentally-friendly dismantling. Factory engineering and design is also applied along factory scales, from networks and supply chains to production sites, infrastructure, manufacturing systems, machines, workplaces, and processes. "Digital Factory" methodologies and tools are employed for continuously integrated product design, as well as process and factory planning and optimization, which aim to increase planning efficiency and reliability regarding costs, time and quality. This process indirectly affects the amount of time required for manufacturing and bringing the products to market, as well as value-adding operation efficiency.
The "Digital Factory" is a joint research project of the Fraunhofer Institute for Manufacturing Engineering and Automation (Fraunhofer IPA), the Institute for Industrial Manufacturing and Management (IFF, Stuttgart University) and the Graduate School of Excellence for advanced Manufacturing Engineering (GSaME, Stuttgart University). It consists of a "Reference Model for Factory Life Cycles" and a "Reference Model for Factory Data Management," and is supplemented with digital tools for modelling, simulation, optimization and visualization of products, factories and processes. For networking and distribution of data, models, tools and computer resources, the "Digital Factory" employs state-of-the-art integration technologies, such as grid and cloud technologies. The "Grid Engineering for Manufacturing Lab - GEMLab" is the state-of-the-art IT environment for integration and distribution of data, models, engineering tools, simulation applications and computing resources based on Grid Technologies. To learn more, please click here.
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