Globally Dispersed Manufacturing Networks Evolution & Governance. N. Viswanadham

Transcription

1 xcellence WORKS SUPPLY upply CHAIN Chain NETW Ex INTEGRATED Global S Globally Dispersed Manufacturing Networks Evolution & Governance N. Viswanadham INAE Distinguished Professor Computer Science and Automation Indian Institute of Science Bangalore n.viswanadham@gmail.com IIT Madras Jan 31, 2013 Contents History of manufacturing Mass & Lean production Automation, Sensor Networks & Software: Integrated Manufacturing Networks Modularity, Outsourcing :Global Supply Chain Networks The Global Trade Collapse The Ecosystem Model Governance: Selection, Coordination & Execution The Orchestration Model Conclusions 1

2 History of Manufacturing Phase I: Mass & Lean Production 2

3 The Assembly Line Henry Ford & Alfred Sloan Model T introduced in (Ford s 20 th design) Division i i and Specialization i of Workforce. Each worker had only one task to perform. Indirect- workers (repair men, quality inspectors) resident in factory. Vertical Integration provided cost advantage & better control Owned steel mills, a glass factory, a rubber plantation (in Brazil), iron mines (in Minnesota), a fleet of ships and a rail road. Alfred Sloan developed the Centralized Mass Production System by applying division of labour to management Created decentralized divisions for Each car model : Chevrolet, Pontiac, Buick, Oldsmobile & Cadillac Lean Manufacturing -- --Toyota (1950s) Japanese customers demand variety (Luxury & small cars, large & small trucks): Mass production did not work Lean is a process innovation to serve disparate customer demands at low cost Quick change-over of dies from 24hrs to 3 minutes thus reducing the cost of producing small batches. Process control not Product control Fault Diagnosis Methodologies. Kanban and Just-in-Time inventory management strategies. Team-based work and management culture. These innovations resulted in the Lean Manufacturing & make-to-order manufacturing 3

4 Phase II: Automation: Machines, Systems and Networks Automated Machines and Systems NC Machine Controller Factory Floor Control System 4

5 Distributed Manufacturing System Integrated Information Systems Customer Orders Purchase Orders SUPPLIERS ASNs ERP Finance HR MRP Sales History Demand Forecasting Manufacturin g Schedule APS Production Picks Manufacturing Scheduling Demand Planning Production Planning Duty Completed Inter-site Transfers POD Pick Detail Receipt Detail Inventory Summary Customer Orders Inter-Site Transfers Global Logistics Customer Orders WMS ASNs POD ASNs Vehicle Routes Orders for Routing Exceptions Carrier Discrepancy YMS Load & Dock Detail TMS POD POD Customers EDI Biddin g Carriers ASNs 5

6 Integrated Manufacturing-Service Networks Information Network Enterprise System or Web-site llence Supply Network Manufacturer Demand Network Global Manu ufacturing Excel Supplier Supplier Service Network Logistics Network Logistics Hub Service Provider Banks Distributor Retailer Financial Network 11 Phase III: Modularity, Connecting Technologies, Outsourcing & Globalization 6

7 Product & Process Modularity and Outsourcing Modular Products and Standardized Production Processes, lead to Outsourcing. Standardized component manufacturers have become IP monopolies and wield global market power (Intel chips, Windows OS, Auto components) Products have become commodities. The strategic competitive advantage for assemblers ( Dell, GM, Nokia) moves from factory to managing the global manufacturing. Product Modularity in Automobiles Dashboard Module Different Modules in an Automobile Source: Shimokawa, K., Jurgens, U., and Fujimoto, T. (Eds), 1997, Transforming Automobile Assembly, Springer, New York

8 Process Modularity Shimokawa, K., Jurgens, U., and Fujimoto, T. (Eds), 1997, Transforming Automobile Assembly, Springer, New York. China assembles all ipods, but it only gets about $4 per unit or just over 1% of the US retail price of $ parts that go into the ipod Hard Drive by Toshiba Japanese company, most of its hard drives made in the Philippines and China; it costs about $73 - $54 in parts and labor -- so the value that Toshiba added to the hard drive was $19 plus its own direct labor costs The retail value of the 30 gigabyte video ipod that the authors examined was $299 in June, 2007 Video/multimedia processor chip by Broadcom American company with manufactures facilities in Taiwan. This component costs $8. Controller chip by Portal Player American company with manufactures.this component costs $5. -Final assembly done in China, costs only about $4 a unit The unaccounted-for parts and labor costs involved in making the ipod came to about $110 The largest share of the value added in the ipod goes to enterprises in the United States $163 of the ipod s $299 retail value in the United States was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. The bulk of the ipod s value is in the conception and design of the ipod. That is why Apple gets $80 for each of these video ipods it sells, which is by far the largest piece of value added in the entire supply chain. Apple figured out how to combine 451 mostly generic parts into a valuable product. Source: Varian, Hal R. The New York Times, June 28, An ipod Has Global Value. Ask the (Many) Countries That Make It. 8

9 Global Manufacturing Network llence China Manufacturing hub Inventory hub Global Supp ply Chain Excel India Suppliers InBound Logistics China Eastern Europe Korea Assembly Outbound Logistics USA Europe Distribution Demand USA Europe Retail The Global Trade Collapse 9

10 Last Two Decades Companies were Proud of Their Supply Chains Lean, JIT, TQM, Outsourcing, Collaboration, Visibility Supply-Demand matching Software Providers, Consultants & Implementation Experts flourished Global trade grown exponentially The Asian Century Began The great Trade Collapse G L O B A L T R A D E Globalization & Highly Connected Supply Chains amplified & transmitted market collapse across the globe. Governments turned protectionist. Resources became expensive. High concentration Clusters became vulnerable. Shortage of Talent to deal with new realties. The Great Trade Collapse: Causes, Consequences and Prospects A VoxEU.org Publication Edited by Richard Baldwin page 3 10

11 Shift in Resource Landscape During last century, the prices of natural resources: energy, food, water, and materials (steel) all fell The past ten years have wiped out all of the price declines that occurred over a century Today demand is soaring. New sources are scarce, extraction is expensive. Shortages of one resource is rapidly impacting others. The energy intensity of water is rising due to the lowering of the groundwater table, desalination process & surface transfer of water The world could be entering an era of high and volatile resource prices. No solution in sight for now. The Current Status The three major revolutions have transformed the vertically integrated hierarchical enterprise into a market driven globally dispersed network Organizations extraneous to Supply Chain: Governments, Traders, Energy,.. Social, Political factors influence the performance Governance is Missing 11

12 The Ecosystem Framework The Ecosystem Model A framework to visualize all Operational, Strategic, Management & Execution Issues N. Viswanadham and S. Kameshwaran, Ecosystem Aware Global Supply Chain Management, World Scientific Publishing,

13 The Basic Ecosystem De livery Services Infrastructu ure Institutions Supply Chain Network Investment Climate Co-Evolution, Conflict, Risk Propagation Resources Govt. Investments in Innovation, SEZS, Trade laws, Tax systems Legal & Regulatory Systems Quality Control & Environmental laws Industry Associations & Labor Unions Logistics Transportation, & Trade Facilitation Delivery Planning & IT service providers Freight corridors, Logistics Parks, Trade facilitation Cloud :Data records and Execution Distribution Networks with GPS and Sensor Networks Supply Chain Dash Board Se ervice Delivery Technolog gies & Mechanisms Institutions Supply Chain Ecosystem Supply Chain Resources Equipment Manufacturers Infrastructure Roads, Ports, Airports Water & Power Resources Supplier Clusters Collaboration Banks, Micro Finance Skill Training, Labor Productivity Education Institutions R&D Labs, Innovation MRO for Factories, Vehicle Fleet, etc Suppliers Assembly & Manufacturing Distribution Retailers Consumer 13

14 Transaction Costs upply Chain Ex xcellence Delivery Resource Institutions Shipping, Inventory, Hard & Soft Infrastructure Clusters, Human, Financial, Power Water Taxes, Tariffs, SEZs, FTAs, Social groups Transaction Cost Global S Supply Chain Production, Quality, Transport Coordination Costs Broker fees Multilayer Governance: Partner selection, Coordination & Execution 14

15 Governance: Partner Selection, Coordination & Control A separate chain is formed for each order Partner selection based on Structural features (asset specificity, capabilities) Relational ties (with govt., social organizations, cluster mangmts, etc.) Coordination : Determining who does what and when and communicating to everyone Execution: Monitor order status so that processes work as per plan & control exceptional events Network Governance: Partner Selection Coordination and Execution Other Agencies Coordination Partner Selection 15

16 Three Types of Network Governance The Network Governance model Highly Centralized External Broker (Li & Fung, Olam Intl.) Participant Shared Governance by Elected Board (Healthcare, Dairies, Cooperatives) Participant Shared Governance with a Lead Player Producer-driven (Cisco, Nike) Buyer-driven (Wal-Mart, Carrefour, Levi) All three governance forms are in practice & None proved superior. The Orchestration Model 16

17 Managing the Global Network- Own Nothing Li & Fung has developed deep knowledge & internal systems to identify quality suppliers in emerging markets, help them design & manufacture for Western customers and make on time delivery despite poor infrastructure Li & Fung orchestrates a highly-customized delivery path through the supply chain Suppliers Manufacturers Li & Fung has set up a global video conference network. Clients can monitor details of every stage of an order such as color of a material or the stitching on a garment. Distribution Orchestrator Business Model Plans Planning, Coordination and Overall Responsibility Operational Status Orchestrator Orders Payment Supplier 3PL Contract Mfg 3PL Supplier 3PL Contract Mfg 3PL Execution End Customer Material Flow 17

18 Conclusions Manufacturing has undergone structural changes from human intensive to fully automated; vertically integrated to globally dispersed; fully owned to orchestrating owning none; Strong ties with Trusted suppliers to Order Configured SCNs; Managing Immediate Suppliers to Managing the Entire Network and Reactive Expediting to Proactive Multi-tier Risk Management. Identifying and managing relations with government, trade, social groups, labour, resources and B2B and B2C delivery mechanisms are required capabilities. The principles can be applied in agriculture and services such as health care Theory development needs Integration of Social networks, Interorganizational theory, Machine learning, Optimization, Game theory with SCNs. What Business Can Learn from Organized Crime When 10 men attacked the Taj Mahal Palace hotel in Mumbai, in November 2008, they executed one of the best-orchestrated, most technologically advanced terrorist strikes in history. Before the assault they had used Google Earth to explore 3-D models of the target and determine optimal entry and exit routes, defensive positions, and security posts. During the melee they used Blackberry's, satellite phones, and GSM handsets to coordinate with their command center, which monitored broadcast news and the internet to provide real-time information and tactical direction. When a bystander tweeted a photo of commandos rappelling from a helicopter onto the roof of one of the buildings, the center alerted the attackers, who set up a trap in a stairwell. It took three days for authorities to kill nine of the terrorists and arrest the tenth; which had resulted in 163 deaths and hundreds of injuries. There were resources that could have addressed the problem, but they weren't in the right place, not under the right authority. Governance is missing 18