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Smart Manufacturing Supply Chain Networks

Innovation for India in India by India

N. ViswanadhamComputer Science and Automation

Indian Institute of Science

Bangalore- 560012n.viswanadham@gmail.com

NIE Mysore Nov 6, 2015

N.Viswanadham

ContentsContents

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 ManufacturingHistory of Manufacturing

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

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Phase I: Mass & Lean ProductionPhase I: Mass & Lean Production

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The Assembly Line The Assembly Line Henry Ford & Alfred Sloan Henry Ford & Alfred Sloan

Model T introduced in 1908.

(Ford’s 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 Lean Manufacturing ----Toyota (1950s)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, Phase II: Automation: Machines, Systems and NetworksSystems and Networks

Automated Machines and Systems

NC Machine Controller Factory Floor Control System

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Integrated Manufacturing & Service Network

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ii ii ii

Supplier OEM Distributor

Customer

B2B Logistics Chain B2C Logistics Chain

i

i

ii

iService Center Logistics

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

Supplier Distributor

Supplier Retailer

Manufacturer

Service Provider

Information Network

Enterprise System or Web-site

Logistics Network

Logistics Hub

Financial Network

Banks

Supply Network

Service Network

Demand Network

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ERPFinance HR MRP

SUPPLIERS

APS

Global Logistics

Manufacturing Scheduling

Demand Planning Production Planning

WMS

TMS

Demand Forecasting YMS

Carriers

Sales History

Manufacturing Schedule

Inter-Site Transfers

Completed Inter-site Transfers

Production Picks

Purchase Orders

ASNs

Customer Orders

Orders for

Routing

Inventory Summary

ASNs

Customer Orders

Customer Orders

EDI Biddin

g

Vehicle Routes

Exceptions

Pick Detail

Receipt Detail

Carrier Discrepancy

POD

ASNs

ASNs

POD POD

POD

Duty

Load & Dock Detail

Customers

Integrated Information Systems

Decision Making using Internal Data 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.

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Borderless ManufacturingBorderless Manufacturing

Assemblyxxx

Shellyyy

Liningzzz

FillerSikkim

ZipperJAPAN

Label, elastic,studs, toggleand stringAAA

Made in India

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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

451 parts that go into the iPod

The retail value of the 30-gigabyte

video iPod that the authors

examined was $299 in

June, 2007

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.

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

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.

Source: Varian, Hal R. The New York Times, June 28, 2007. An iPod Has Global Value. Ask the (Many) Countries That Make It.

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Product Modularity in AutomobilesProduct Modularity in Automobiles

DashboardModule

Different Modules inan Automobile

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

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Process Modularity

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

Transforming Automobile Assembly, Springer, New York.

Supply Chain Clusters A competitive Advantage

Inbound transportation

Manufacturing Consolidators

Distribution & Delivery

Outbound Transportation

Customermanagement

ProductionPlanning & Forecasting

Supply Chain Cluster

Returns &Repairs

Raw materials

Information flow Infrastructure

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Global Global Manufacturing NetworkManufacturing Network

USA

Distribution

Inventory hub

Europe

Retail

USA

Europe

Demand

China

India

Suppliers

InBoundLogistics

Assembly

China

Korea

Manufacturing hub

OutboundLogistics

EasternEurope

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 ThingsInternet 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 (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)

RFID tags In a Warehouse

Technology ChangesTechnology 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 carSelf driving car

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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.

Daimler’s SelfDaimler’s Self--Driving Truck Tested on Real Driving Truck Tested on Real RoadsRoads

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 ChangesRetailing: 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 FactoriesSmart 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 Printing3D Printing-- Additive ManufacturingAdditive 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 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 SectorPower 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 world’s 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 customer’s 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 driver’s log would be shipped to a Genpactfacility 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 ClubTrillion 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 HMV—lost 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 Future Smart Supply Chains NetworksNetworks

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Smart: DefinitionSmart: 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

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A smart supply chain is an inter-organizational network connected with smart services to enhance the customer experience

B2B MarketplaceB2C Market Place

Service Center

IOT

Supplier OEM Distributor Customer

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The Six Dominant PlayersThe 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 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 ScenarioIndian Manufacturing Scenario

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Indian Manufacturing SectorIndian Manufacturing Sector

India’s 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 StatesManufacturing 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 IndiaLogistics In India

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Indian Freight Transport IndustryIndian 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 Logistics Performance Performance in Indiain 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 Stages in Indian Manufacturing to

become Globally Competitive 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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