Navigating the Current Macro Economic Landscape

A real charmer of the audience, Mr Kamlesh Jain kept around 120 students of IIT Madras quite captivated and enthralled by his presentation, here at DoMs. The students though mostly from the management department, also included a good number of B Techs and M Techs as well. As it happened to be so, Mr. Jain was an Ex-employee of Lehman Brothers and thus had the first-hand experience of the 2008 Economic crisis which had hit the world. He explained, along with funny titbits, how the world evolved and gave a bird’s eye view of the World’s Economic environment, thus justifying the topic he presented to the fullest using his excellent oratory skills.

Firstly, he shared his experience at Lehman brothers which had been a AAA rated company by various rating agencies. He shared how, on the day the company fell, he was still interviewing candidates from the IITs and how nobody, not even the managerial employees of the companies saw the downfall coming. This, as indicated by him, was the trigger of sorts for him to start viewing the world economy as a whole and observe the changes on a much higher level than before. He narrated how in 2001, the Global Bubble started, when the then US President George Bush Sr. and Mr. Greenspan, Chairman of the Federal Reserve, both mitigated this bubble using all that was within their grasp. But as was inevitable, the bubble burst around mid-2007. Global financial crisis, Sub Prime Losses and a stiff credit crunch was faced. The price of each share of the Lehman Brothers crashed from a whopping $157 to $2.  The 2008 events were encapsulated in the documentary: “Too Big to Fail”. Here, we saw Freddie Mac and Fannie Mae fall in the area of Mortgage Guarantee, as Sis AIG in Investment Exposure and finally we have the famous penny stock by Citibank. And Surprise, Surprise! America the world’s most ardent capitalist country whose economy is completely dependent on the fate of its markets, turned tail and transformed into a socialist frontrunner when the US government started its Bailouts. Ironically it was the Public sector saving the private sector in this capitalist economy.

In 2009, the Bailout bubble started, which was also the year of Obama’s famous change reign; as also the time when Bernanke fired his Bazooka and reduced federal interest rates down to 0% which over shadowed Greenspan bringing it down to 1% and Global Stimulus Package was launched. As a temporary solution the US did what it could do to save itself but in 2011, Europe was in trouble. The PIIGS were in a soup as they say and high inflation hit all who had been scoring through high debt.

 Here, now Mr. Jain took the opportunity to influence our young minds towards future technologies and potential future global GDP contributors. With the help of well-established pie charts and graphs he depicted how the BRIC nations had an important role to play and the economic roadmap of the future. Japan who had developed the first metro almost a hundred years ago now was predicted to have a stagnated growth in the future by most experts. The OECD alone today contributes 65% of the Global GDP. Thus in 2030, India is predicted to contribute 7%, china 28%, US 18%, EU 12% and Japan 4% of global GDP. The key players would be the BRIC nations and the Frontier Nations. The Sri Lankan and Pakistani Stock Markets have had 111% and 45% returns over the last 2 decades. Statistical proof of growth was given as: Dow 46%, Nikkei 3%, Hangseng 120%, Shanghai 42%, and Nifty 461%. Thus, in 2060, Global GDP contributors would be: India 18%, China 28%, US 17%, EU 9% and Japan 3%. It is the growth potential that drives the Indices and at $15Trillion the US has a debt hangover that could last a decade. Today and in the future, there is ‘More money and Less Value’ for all commodities like Dollar, Euro, Oil and Gold.

Mr. Jain predicts a structural change which is already in motion. Financial markets are at “The New Normal” and Investment bankers’ pay checks have slimmed down whereas recruitment pay checks have fattened he jests. The few ‘Game Changers’ are estimated to be Energy efficiencies, Technology Disruptors, Wars and even the Frontier Nations. New growth Drivers of Innovation, Positive demographics, Favourable climate changes, productive uses of oil resources, efficiently managed public finances; all of which seems a myth today shall be the key areas of turnaround successes in the future, he envisions.

He concluded by saying that the current on-going wait for that one change to occur, a change that would trigger the bigger change to improvements, should be over soon. It could be anything - EU triple Dip recession, A fight for Water..

Or the most effective one,         

                                          ‘The wait for the Dollar to fall’

Courtesy
Hakimuddin Rassiwala
Class of 2014

Photo Courtesy:
Arun Tilak

Class of 2014     

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     

Capabilities needed to be successful in Global Organizations

 Mr. John Wyatt , the president of Wyatt consulting , a firm that specializes in providing consulting services to senior management on leadership, organization design and change management,  was here at DoMS to interact with the students and enlighten us on some of the essential skills we should possess to attain leadership roles in MNC’s.  During the past 13 years, John’s consulting practice has been focused on working with CEO’s and other senior executives in Fortune 200 organizations to design and lead major organization changes. John’s recent CEO or business unit head clients include: HP, Motorola, Fannie Mae, Lyondell Chemical, ITT, Kimberly Clark and Mercer Human Resources Consulting.

According to him, for a person to reach leadership role in any MNC, behavioural skills are more important than technical skills. Here he quotes six behaviour skills/ capabilities or the essential building blocks. They are: Self-awareness and self-management, reaching out to collaborate, Confident but not arrogant, Able to deal with ambiguity, to be culturally sensitive and able to sell ideas.

‘Self-awareness and self- management’ means that one should be able to do self-monitoring and possess a social radar. ‘Reaching out to collaborate’ means that one should foresee how one’s actions would impact others, and should take the initiative to communicate. ‘Confident but not arrogant’ entails that one should present themselves as positive and assertive but at the same time should avoid acting arrogant and should avoid looking at others condescendingly. ‘Can deal with ambiguity’ means that in corporate world, often we are faced with decisions involving right vs. bright. It means certain solutions are right but other solutions which might not be right may seem bright or attractive. We should be able to deal with decisions of right vs bright, accept responsibility without full authority and constructively work through conflict. ‘To be culturally sensitive’ means that we should be sensitive to values and behaviour of other people’s culture. We should be able to adjust our own behaviour accordingly. ‘Can sell ideas’ means that we should understand the stake holder’s needs and implement ideas so that their needs are met.

These skills need to be possessed to develop new capabilities in any organization. Mr. Wyatt also emphasized that we as students should start developing these skills right from now. Also, he mentioned that certain undesirable behaviour like Challenging but not listening, not being a team player, being not able to manage emotions and ‘me first’ orientation should be avoided.

He gave us insights regarding subtle cultural differences present among different nations and that which should to be taken care of while working in that country. With around 25 years of experience in consulting, Mr. Wyatt recollected examples from his own experiences and motivated students to develop essential skills required to reach leadership roles in MNC’s.  

Courtesy
Praveena
Class of 2014

Photo Courtesy:
Arun Tilak

Class of 2014