Smart Manufacturing Supply Chain Networks

Innovation for India in India by India

N. Viswanadham
Computer Science and Automation
Indian Institute of Science
Bangalore- 560012
[email protected]
NIE Mysore Nov 6, 2015

Contents

History of manufacturing
Mass & Lean production
Automation, & Software: Integrated Manufacturing Networks
Modularity, Outsourcing :Global Supply Chain Networks
IOT, Sensor Networks ,Predictive Analytics, Cyber physical

systems

Future Smart Supply Chains Networks

Indian Manufacturing Scenario
Conclusions

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History of Manufacturing

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Input-Output model of a
Manufacturing System

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Technology driven Waves of Industry Innovation

Industrial Revolution: Machines and Factories that power

economies of scale and scope
Henry Ford and Vertical Integration

Internet Revolution: Computing power and rise of

distributed information Networks
ERP,CRP etc packages

Globalization: Outsourcing, Collaborative supply chain

networks
Industrial Internet (In Progress): Predictive Analytics:
Machine-based , physics-based, deep domain expertise
Intelligent devices, systems, and decisioning represent the ways in

which the machines, systems and networks can merge

Phase I: Mass & Lean Production

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The Assembly Line

Henry Ford & Alfred Sloan

Model T introduced in 1908.

(Fords 20th design)
Division and Specialization 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

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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 customer demands
Quick change-over of dies from 24hrs to 3 minutes thus reducing

the cost of producing small batches.

Process control not Product control
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

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Phase II: Automation: Machines,

Systems and Networks

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Automated Machines and Systems

NC Machine Controller

Factory Floor Control System

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Integrated Manufacturing & Service Network

B2B Logistics Chain

i
Supplier

B2C Logistics Chain

OEM

Distributor
Customer

i
i

i
Service Center

Logistics

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Multi-tier Supply Chain Network

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Internet Revolution

Computing Power and

rise of distributed
information Networks

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Integrated Manufacturing-Service Networks

Information Network
Enterprise System or
Web-site

Supply Network

Demand Network
Manufacturer

Supplier

Distributor

Logistics Network

Logistics Hub

Supplier

Service Network

Retailer

Service
Provider

Financial Network

Banks

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Integrated Information Systems

Customer Orders
POD

POD
Customer Orders

ERP

TMS

Duty
Pick
Detail

Finance HR MRP
Purchase
Orders

Receipt
Detail

Sales
History

Global
Logistics
Customer
Orders

Vehicle
Routes
POD

Production
Picks

Customers

Exceptions

SUPPLIERS
Manufacturin
g Schedule

Demand
Forecasting
ASNs

Orders
for
Routing

Completed
Inter-site
Transfers

Carrier
Discrepancy

WMS

POD

Manufacturing
Scheduling

APS
Demand Planning
Production Planning

YMS

EDI
Biddin
g

Inventory
Summary

ASNs
Load &
Dock
Detail

Inter-Site
Transfers

ASNs

Carriers

ASNs

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Decision Making using Internal Data

IT investments of the last decade such

as ERP, APS respond inside-out based
on order shipments i.e. by analysing
internal data sales, shipments,
inventory, etc .

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The Plough-Plate Food Supply Chain

The supply chain involves farmers, seed producers, fertilizer

factories, financial institutions, millers, government, warehouses,
retail shops, railways, truck transport companies, etc. Their
relationship among the actors is adhoc leading to inefficiencies

Phase III: Modularity, Outsourcing &

Globalization

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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
supply chain.

Borderless Manufacturing
Assembly
xxx

Lining
zzz

Shell
yyy

Made in India
Filler
Sikkim

Label, elastic,
studs, toggle
and string
AAA

Zipper
JAPAN

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China assembles all iPods, but it only gets about $4 per unit or
just over 1% of the US retail price of $300
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

451 parts that go into the iPod

Video/multimedia processor chip by Broadcom American company

with manufactures facilities in Taiwan. This component costs $8.
The retail
value of the
30-gigabyte
video iPod that
the authors
examined was
$299 in
June, 2007

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 iPods $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 iPods 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, 2007. An iPod Has Global Value. Ask the (Many) Countries That Make It.

Product Modularity in Automobiles

Different
Modules in
an Automobile

Source:
Shimokawa, K., Jurgens,
U., and Fujimoto, T. (Eds),
1997, Transforming
Automobile Assembly,
Springer, New York.

Dashboard
Module
210706
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Process Modularity

Shimokawa, K., Jurgens, U., and Fujimoto, T. (Eds), 1997,

Transforming Automobile Assembly, Springer, New York.
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Supply Chain Clusters

A competitive Advantage
Raw materials

Inbound
transportation

Manufacturing

Consolidators

Supply Chain Cluster

Production
Planning &
Forecasting

Customer
management

Returns &
Repairs

Outbound
Transportation

Distribution
& Delivery

Information flow Infrastructure

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Global Manufacturing Network

China

Manufacturing
hub

Inventory
hub

China

Demand
USA

InBound
Logistics

USA

Eastern
Europe

Outbound
Logistics

India
Korea

Europe

Suppliers

Europe

Assembly
Distribution
Retail
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Analytics 1.0: Decision Making using Internal Data

Several long term and short term decisions are made

Sourcing: which country & from whom
Demand estimation using sales data
How much to manufacture, inventory levels at various
places to match the demand
ERP, APS, TMS,WMS etc make decisions analysing internal
data: sales, shipments, inventory, etc .
Control using PLCs, Robots, BPOs etc.
Monitoring equipment for preventive maintenance using IOT

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Phase IV: IOT, Sensor Networks .

Predictive Analytics, Cyber physical
systems

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Internet of Things

Aristotle divided things in nature into those that have soul

and those that do not i.e. Charam and Acharam
IoT technologies can be categorized into Tagging things,
Sensing things and Embedded things .
The tagging things provide seamless and cost-efficient item

identification, allowing the things to be connected with their

records in databases.
The sensing things enable us to measure and detect changes in the
physical status of our environment.
The embedded things yield information about the internal status
of the embedding object.

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RFID tags In a Warehouse

RFID tags (5) placed on the inventory periodically signal their
locations to access points/readers (4). They in turn, send information,
via LAN (1), to the RF controller (3) and locating software (2)

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Technology Changes

Mobile Internet
IOT
3D printing
BitCoin
Drones
Driverless Cars & Trucks
Mobile has been a driving force for Apple, Google, China
Mobile, Alibaba, Facebook, and Verizon
New start ups: One a day in Bangalore: Uber, Ola Cabs,
Doctorie.com, MGaadi, Dosa King, Mobile apps, ..
Cyber security: Estimated annual cost of computer crimes in
US: phishing, identity theft is presently at over $100 B (Ultron)

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Self driving car

The car is equipped with a battery of cameras, radar, and

sensors that give the car a 360 knowledge of the surrounding
environment and allowing it to react proactively to obstacles.

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Daimlers SelfSelf-Driving Truck Tested on Real

Roads

Truck Platooning is the future of transportation in which trucks

drive cooperatively at less than 1 second apart made possible by
automated driving technology.

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Game Changing Disruptive Innovations

Ecommerce is disrupting traditional distribution.

Uber and Ola are upending radio and yellow taxis.
Airbnb has hotels very concerned and Bitcoin is future currency
Robotic doctors are a reality, a solution to doctor shortage
Amazon, Alibaba and DHL are testing package delivery drones.
Driverless cars are a boon in traffic congestion & bad drivers
Vehicle Tracking and Dispatch keeps track of the location and
inventory on every vehicle (radio transmitters and GPSs).
Amazon filed for a patent for 3D printers mounted within trucks,
to print customers' purchases on the fly & deliver them instantly,
GENPACT monitors Penske trucks, assigns drivers and workload
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Retailing: Disruptive Changes

Retailers gain understanding of how shoppers move around
their stores where they go, in what order, how long they stay,
when they come to the store. How all these map to actual sales.
Retailers use predictive models for price discounting,
advertising, and couponing.

Forecasting based on past data, batch size calculation using square

root formula are replaced by real time visibility & delivery on

demand

Wal-Mart predicts customer buying behavior by mining POS

data and links inventory data with the suppliers .
Netflix has a 5-star recommendation system for each subscriber
from their viewing habits using sophisticated algorithms

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Smart Factories

In smart factories, humans, machines, robots and other

resources communicate with each other as a social network.
Smart products know the details of how they were
manufactured and how they are intended to be used.
Smart Products also actively support the manufacturing
process, answering questions such as When was I made? ,
Which parameters should be used to process me? ,
Where should I be delivered to?, etc.
The factory can orchestrate the manufacturing process
depending the real time needs.

3D PrintingPrinting- Additive Manufacturing

Subtractive manufacturing removes material from a

larger block of material to create a product.
3D printers create a 3D object by building it layer by layer.
CAD program in the printer slices the design into
hundreds, or thousands of horizontal layers. These layers
will be printed one atop the other to make a 3D object using
resin and gypsum materials ($3 per cubic inch).
Nike creates multi-coloured prototypes of shoes Others
print jewellery, create art, toys for their kids,
replacement parts for appliances such as dishwasher etc.

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Service, Maintenance, and Repair

Much of the service, maintenance is carried out on a set

timetable or reactively by rushing technicians to repair
In 2011, 21,500 commercial jet aircraft and 43,000 jet
engines were in service. Each jet engine contains three
rotating equipment: a turbo fan, compressor, and turbine
i.e. 129,000 major pieces of spinning equipment
An intelligent aircraft will tell maintenance crews the
status of the aircraft subsystems and supply real time,
actionable information to help aircraft operators predict
which parts need replacement and when.
It is shift from current maintenance schedules based on
the number of flights to those based on actual need.

Big Data in Logistics Applications

Trucks are equipped with radio transmitters and GPSs.

Vehicle Tracking and Dispatch keeps track of the location
and inventory on every vehicle.
Annual traffic density figures are used to generate the most
efficient routes to minimize the cost of transporting goods.
Warehouse Operations and Cross docking use information
system that dynamically coordinate trucks & the dock
Generation of routes and manifests for the trucks
dynamically based on their inventory loads and tracking &
monitoring the delivery.

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Power Generation Sector

There are 56,620 power plants that run on natural
gas, oil, coal & nuclear energy around the world
accounting for 75 % of the total global capacity
Estimated that 300 million labour-hours a year
just to service the worlds steam and gas turbines,
aircraft engines, freight, CT and MRI scanners.
Lot to be gained by sensor driven automation

Penske works with Genpact in India and Mexico.

Genpact workers in India and Mexico

Arrange for titles and registrations for the trucks leased by Penske
in US
Check the customers credit status and arrange for all the necessary
permits. If the truck gets stuck at a weigh station, failing to fulfill
some permits, the truck driver would call an 800 number, and the
BPO staff transmits the necessary documentation to the weigh
station and the truck would be on road within a half-hour.
After the trip, the drivers log would be shipped to a Genpact
facility in Juarez, Mexico, where mileage, tax, toll, and fuel data
are punched into Penske computers and then processed in India.

Genpact manages the logistical services of Penske.

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Trillion Dollar Club

Over the past decade, six technology-led companies Amazon,

Apple, Face book, Google, Netflix, and Pandora have
collectively generated more than $1 trillion market value
Nokia, Motorola, Borders, Barnes & Noble, AOL,
Blockbuster, Tower Records, and HMVlost more than
90% of their 2003 enterprise values.
The common denominator of the business models of the
Trillion-Dollar Club: the digital information that surrounds
the product and company (the virtual self), can generate more
value than the physical entity alone.
Companies need to master the new rules of the digital
economy to win.

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Future Smart Supply Chains

Networks

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Smart: Definition

Smart has its original meaning of "stinging, sharp" as in a

smart blow
Smart Student : having or showing quick intelligence or
ready Mental Capability
Smart Machines: Capable of making adjustments similar to
human decisions, in response to changing conditions
Smart Windows: regulates the amount of light transmitted in
response to varying light conditions using sensors & controls
Smart Buildings, Smart Grids,

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Smart Supply Chain Network

B2C Market Place

B2B Marketplace

Supplier

OEM

Distributor

Customer

Service Center
IOT

A smart supply chain is an inter-organizational network

connected with smart services to enhance the customer
experience
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The Six Dominant Players

Suppliers
Logistics Players: B2B and B2C
Contract manufacturers
Original Equipment Manufacturers
Distributors
Retailers
They are independent companies globally
distributed & highly connected

Big data Enabled Business Processes

Procurement: Supplier & Logistics provider
selection, Inventory management
Dispersed Cognitive Manufacturing: Embedded
Machines, Smart parts, Cognitive PLCs
Distribution & Retail: Warehousing, B2C
Logistics, Recommender systems
Service Chains:

Logistics networks,
Repair & Maintenance of Machines, Trucks, etc.,
Traceability and Product recalls
Risk Mitigation
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Indian Manufacturing Scenario

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Indian Manufacturing Sector

Indias manufacturing sector is 16% of GDP & 1.8% of

Global manufacturing.
Why Lower productivity in manufacturing:
Low technological depth : SCM, Production planning, Quality &

Service
Low labor productivity : Indian Workers are almost four (Thailand) or
five (China) times less productive.
Poor Infrastructure: High logistics costs, High % of damaged goods
Poor implementation: Too many stakeholders, Poor Coordination &
Execution. Talent deficit

Low returns on Capital Investment

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Manufacturing Clusters in Indian States

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Indian Auto Clusters Small car Hub

Indian automotive industry

has grown in clusters,
Manesar in North, Pune in
West, Chennai in South,
Jamshedpur-Kolkata in East
and Indore in Central India
Location advantages such as
infrastructure, access to pool
of educated workforce and
supportive state government
policies are some of the
factors that play a role in
attracting auto investments.

Logistics In India

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Indian Freight Transport Industry

Roads carry around 60% of the total freight transport volume.

1000 Trillion ton km by road & 675 Trillion ton km by rail
The Indian truck market is dominated low-cost trucks
manufactured by local manufacturers.
Only 10% of Indian truck operators own fleet of more than
25 trucks, and 1-2 %own between 200 -1,000 trucks.
80 % of truck operators own less than 10 trucks. Majority of
them are owner-drivers with a single truck.
The Indian transport industry is organized by transport
middlemen or goods booking agents for the small truck
operators or owner-drivers.

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Logistics Performance in India

Indian Infrastructure is poor as compared to developed
and developing countries and is rated 54 /160 in 2014.
The underlying Institutional problems

Poor Hard and Soft Infrastructure

Blind imitation of the infrastructure growth of developed

countries rather than following market requirements

Low Technology Penetration in inter-organizational
management processes such as trade documentation
Responsibility Fragmentation among government agencies
Lack of 3PLs, Research and Talent in logistics
Concentration on low cost labour ignoring ICT

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Stages in Indian Manufacturing to

become Globally Competitive

Stage I : Reverse Engineering, Low cost assemblage and

Local marketing (Current State)
Stage II: Improve Productivity in Energy, Capital, Labour &
Management , Infrastructure, Distribution & Warehousing.
Technology intensive collaboration: Mobile, Internet, Cloud, Big

data, Sensor enabled smart networks, Predictive analytics

Planning and Execution of Supply Chains (Orchestration)
Improve the presence in Global trade
Targeted Skill Training

Stage III: Product discovery, Machine & Process Innovations

in manufacturing, distribution and service to create smart
resource efficient products
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