Governance of Distributed Manufacturing and Service Networks

After a hectic schedule of assignment and case studies, it was time for a refreshing MILS session in operations domain by N Viswanadham. He is a Professor and Executive Director for the Centre for Global Logistics and Manufacturing Strategies (GLAMS) at the Indian School of Business (ISB). He has held several prestigious positions before joining the ISB such as Deputy Executive Director of The Logistics Institute-Asia Pacific and also Professor in Department of Mechanical and Production Engineering at the National University of Singapore; GE Research Fellow during 1989-90 and Tata Chemicals Chair Professor at the Indian Institute of Science, Bangalore.

 He started the session by covering the history of manufacturing and explained the evolution of manufacturing industry. Firstly, he explained mass and lean production, as part of mass production he mentioned about the invention of the assembly line by Henry ford along with his division and specialization of work force. He demonstrated how vertical integration provides cost advantage and better control. During the 1950’s “Customised production was the need of the hour”, during which Toyota came up with Lean Manufacturing. Secondly, He talked about automated machines and systems along with integrated information systems (for example: ERP, APS, WMS). He also explained integrated manufacturing-service networks and it’s constituents, viz. the supplier, the service and the demand networks. Next he gave an overview on product and process modularity and outsourcing during which he made it obvious that modular products and standardized production processes leads to outsourcing. He also gave an overview on the Global supply chain network, along with the importance of suppliers, Assembly (Manufacturing hub), Distributors (Inventory hub) and retailers in the supply chain system along with Inbound and outbound logistics with respect to the manufacturing firm.

He recalled the global trade collapse in vivid detail and its impact on supply chains. Globalization and highly connected supply chains amplified and transmitted the market collapse across the globe; Resources became expensive; High concentration clusters became vulnerable. “Shortage of talent to deal with new realities” was the need of the hour all over the world owing to the collapse. He described the shift in resource landscape during the last century and how the prices of natural resources, energy, food and water and material all fell but the past decade seems to have wiped out all the price declines that occurred over the past century. Today, demand is soaring, new resources are scarce and extraction is expensive. And the horror story of how shortage of one resource is rapidly impacting others.

He illustrated the Ecosystem model consisting of the Supply chain ecosystem at the centre and having four links: Resources, Institutions, Delivery service infrastructure and Supply chain networks (SCN’s). Resources comprise of equipment manufacturers, infrastructure, roads, ports, airports, banks, skill training, education, innovation, vehicles etc. Institutions referred to Legal and regulatory systems, quality control and environment laws, industry associations and labour unions, government investment in innovation, SEZ’s, trade laws and tax systems. Service delivery technologies and mechanism comprises of logistics, transformation and trade facilities, delivery planning, distributed networks, supply chain dash boards.

He also describe that governance has three major parts: Partner selection, coordination and control. Partner selection can be based on structural features (asset specificity, capabilities) and relational link (with government, social organizations, cluster management etc). Coordination is determining who does what and when and communication the same to everyone in the system. Execution is to monitor order status so that processes works as per plan and control exceptional events. He also mentioned about three types of network governance: Highly centralized external brokers (Li & fung, Olam international), Participant shared governance by elected board (Health care, Dairies, cooperatives) and Participant shared governance with a lead player by producer driven (Cisco, Nike) or buyer driven (Wal-Mart, Carrefour, Levi).He gave example of Li & Fung while explaining Orchestration model by stating that it has developed deep knowledge and internal system to identify quality suppliers in emerging markets, help them design and manufacture for western customers and make on time delivery despite of poor infrastructure.

He concluded by stating that Manufacturing has undergone structural changes from human intensive to fully automated;  vertically integrated to globally dispersed; fully owned to orchestrated owning ; strong ties with trusted suppliers to order configured SCN’s; Managing immediate suppliers to managing entire networks and Reactive to proactive multi-tier risk management. Development needs integration of social networks, inter organizational theory, machine learning, optimization, game theory with SCN’s.

Courtesy
Ravinder Reddy
Class of 2014

Photo Courtesy:
Arun Tilak

Class of 2014