In the past, mass production has contributed to American prosperity. Today, however, big factories that churn out high-volume products are highly automated and relatively easily outsourced to third-world countries where production-line work requires minimal training and provides upward mobility for low-skilled workers.

It’s not that foreign labor is cheap—American labor is too expensive for the kind of work that remains after manufacturing is automated. So, big production facilities are simply going out of style in advanced countries, and large manufacturing plants are becoming obsolete. Bigger doesn’t produce better; bigger isn’t more rewarding to work for.

The advantages of sheer size have become liabilities. The age of big plants, covering square miles with billions of dollars’ worth of assets, is over. Everyone thought that the oligopoly of the large car companies would go on forever. Just a decade ago, who’d have thought of GM in bankruptcy? The HBO documentary, “The Last Truck: Closing of a GM Plant,” showed the shutdown of a three-quarter-mile-long production facility that had become too expensive to operate. The impact on the thousands who had worked there for decades brought home the reality of globalization and the destruction of the big-factory, mass-production way of life.

Automated production equipment today is smaller and cheaper, and requires fewer operators with better education and advanced skills. These types of people simply don’t like to work on a time-card-punching production-line environment. They prefer the stimulating, innovative, fast-changing, adaptive atmosphere of small companies, with personal incentives and performance-based rewards.

In "Wired" magazine, February 2010, Chris Anderson writes about micro-factories, which he sees as the portals to the future of American manufacturing. They operate with “crowd-sourced” designs, released under “share-friendly” licensing.

In Anderson’s example of a small automobile manufacturer, the pros handle the elements that are critical to performance, safety and manufacturability, while the community designs the parts that give the car its shape and style. Customers are well equipped with tools such as 3D design software and photorealistic rendering technology, and they are encouraged to enhance the designs and produce their own components that they can sell to their peers. Final assembly is often done by the customers themselves in local assembly centers as part of the “build experience.”

Big companies are full of bureaucracy, procedures and approval processes—structures designed to defend the organization. Transformative change happens when industries democratize, when they’re divorced from the creativity-crippling domains of large corporations. The Internet democratized publishing, broadcasting and communications, and the consequence was a tremendous increase of participation in everything digital. Now the same is happening with manufacturing.

The resurgence of entrepreneurship and specialized companies heralds the dawn of a new industrial manufacturing paradigm, built around small pieces, loosely joined, virtual and informal. Communities form around shared interests and needs. Most participants are not employees; they are driven by ability and need, rather than affiliation or obligation.

Today, micro-factories make everything from cars to bike components to bespoke furniture in any design that can be imagined. The collective potential of millions of small companies is being unleashed on global markets, as ideas go straight into production—no expensive tooling or big financing needs.

Global supply chains are now able to serve the small as well as the large, with changes driven by two forces. First, the explosion in powerful but cheap prototyping tools that are easier to use by non-engineers. And second, the shift in business practices of factories, which have become increasingly flexible, Web-centric and open to custom work.

Welcome to the next Industrial Revolution.