Supply chain becoming highly technology intensive

March 11, 2014 6:41 am

“The transportation and communication technologies have shrunk the world dramatically,” says Professor N. Viswanadham, Fellow Member, IEEE and INSA Senior Scientist – Computer Science and Automation, Indian Institute of Science
Technology is the enabler and facilitator of globalisation. It is the fundamental force in shaping the pattern of transformation of economies. In an exclusive interview, Professor N. Viswanadham shares how technology is shaping the supply chain communications and coordination.
Could you give us a brief background on the global supply chain scenario?The modular product designs and standardised processes lead to globalisation. The tail of the supply chain has moved to the Asia Pacific — the so called low-cost countries. There are several important developments happening globally that are making news in the manufacturing sector. More and more companies are exploring the option of shifting manufacturing back to America due to reducing cost differential and rising overhead costs and supply chain risks.
The US Federal Government and many American states are also encouraging such an incentive move.  Germany, the leading country in manufacturing, has started the initiative industry 4.0 which involves use of recent technology developments such as Internet, cyber physical systems, smart factories etc. to enhance the technology depth as well the manufacturing productivity. In the US, companies such as GE and several start-ups are concentrating on maintenance and repair automation of engines and rotary equipment used in aircraft, trucks, gas turbines, power generators and household dishwashers, refrigerators etc. This is enabled by use of sensor networks- and data-based decision analysis using big data collected from sensor networks and unstructured data from operator text messages, audio and videos recordings, weather patterns and many more.
What are the advantages of automating supply chain? Also discuss the risks involve, if any.There were several best practices that were developed and followed over the years in high-performance supply chains. They include modularisation (design of products as standard sub-assemblies produced using standardised processes), supply hubs (facilities to store inventory for the suppliers nearer the manufacturer site), cross docks (transhipment facilities where goods from manufacturers are sorted and loaded onto retailer trucks), postponement (final assembly after receiving the customer order) merge-in-transit (final assembly is done during the transit to the customer). These best practices can be implemented in a supply chain network that integrates three different flows: the material flow, information flow and financial flow. Reducing costs, without sufficient regard for its risks, made the supply chain more brittle. In the highly dynamic, connected world, all the industries are affected by incidents in all corners of the world. In this sense, some parts of all the supply chains are affected every day. The recent home loan crisis and the resulting financial failures are being felt all over the world. The resulting credit squeeze has lead to the global trade collapse. Also, recent events such as terrorist strikes on ships, political instability in several natural resource rich countries, oil price and currency fluctuations, protectionist policies of the governments during global financial crisis, labour unrest and shutdown of shipping docks, financial institution (bank) failures and natural disasters etc. have awakened managers to supply chain risks. Designers have to make the supply chains resilient to the risks that affect the partners of the networks, the industry and the environment.
Brief us the role of IT in supply chain automation.There are several disruptive changes happening in the supply chain field. It is becoming highly technology intensive. Technology is the enabler and facilitator of globalisation. It is the fundamental force in shaping the pattern of transformation of economies. The transportation and communication technologies have shrunk the world dramatically. Transportation systems for moving goods have several innovations, during the last few decades including the commercial jet aircraft to container shipping. The new transmission channels — the satellites and the optical fibres — have revolutionised the global communications. The Internet is the real innovation, facilitating instantaneous communication and effortless low-cost search tool for information as well as information delivery.
What are the innovative technologies expected to drive the growth in supply chain automation?The recent innovations such as wireless and RFID will further create efficiencies in the supply chain communications and coordination. Internet and its applications in logistics, warehousing and transportation using big data are causing big changes in IT.
In cognitive factories, human beings, machines, robots, AGVs and other resources communicate with each other. They have collaborative decision-making capabilities. Smart products know the details of how they were manufactured and how they are intended to be used. They can also answer questions such as “which parameters should be used to process me?”, “when should I be made?”, “where should I be delivered?” etc. Thus a smart factory can orchestrate the manufacturing process, depending on the real-time needs.
What is your outlook on the supply chain automation industry in India?India produces several assembled products such as tractors, cars, two wheelers, cars, cell phones etc. for consumption in the country. However, India imports large amounts of machines and tools from other countries, rather than producing them in the country. For example, 77 per cent of telecom equipment, 78 per cent of high-tech equipment and 35 per cent earth moving and mining equipment are procured from other countries.
There are many reasons for lower manufacturing productivity. They include low technological depth, low labour productivity, poor infrastructure, low returns on capital investment due to high interest rates among others. Economic growth is driven by technological change in process and product improvements in the factory, production planning and supply chain management. The labour productivity of Indian workers is lower compared to other nations. The existence of poor hard infrastructure and the lack of attention to soft infrastructure such as trade facilitation, warehouse and transport management software lead to high logistics costs. Additionally, there exists poor implementation, too many stakeholders, poor coordination and execution. The government had introduced the special economic zones and the cold chain initiatives; however, they did not bring about a huge change in the efficiency of manufacturing.