Nov 23, 2016

The Changing World of Manufacturing – Part III – Length of Value Chains

R Jayaraman

The Changing World of Manufacturing –Part III – Length of Value Chains

Manufacturing is the ultimate value chain, the chain that creates or generates the values that companies promise to their customers. Value chains are common features where organised activities are done in sequenced, co-ordinated, calibrated, measured ways to create finished products and services.

In Indian agriculture of yore value chains were short due to the fact that all the necessary ingredients were generated at the site – the ploughing field. Manure was made up of human and cow dung, water was from the nearby well, the wooden plough was produced from the nearby trees, and the output was sold in nearby markets through the mechanisms of “MANDI” OR “SANTHE.” It was a self-regulating, market driven barter system that governed those early times.

With industrial revolution came the longer value chains. Vendors or suppliers were involved in activities that provided some of the inputs needed for large factories, which could not produce the supplied / vended goods due to a lack of skill or resources or by choice. Oftentimes the perceived risks involved in managing long value chains through long chains of command deterred promoters who cut short the number of links. Thus evolved the broken up, specialised pieces of value chains, which became the model for the production and dispatch of goods and services. Needless to say, such systems, with the value creating pieces at long physical distances from each other, and with large number of persons involved in creating the final value, called for a common currency, thus spelling the death of the barter system. With “global companies” becoming the norm the day is not far off when the world will switch to one “Universal Currency” (UC), to wipe out the advantages and disadvantages of economies. Had this happened in 2015, Donald might have been Trumped out, whose arguments of immigration, off shoring, job stealing etc. would have lost their teeth, ground by the UC toothpaste.

Manufacturing was the earliest manifestation of the industrial revolution. The ability of the inventor to come out with various goods which can be used by the market started off a set of activities which were used to convert the invention into a mass produced item for sale. This process involved machines, tools, man, other resources and management to come together in unique ways and create a totally new entity. Mass production and sales made possible the investment of money into such ventures by capitalists through the profits earned. This “pancha loka” (or five worlds) was the precursor of the soon rampaging juggernaut called “manufacturing.” Manufacturing made markets and vice-versa. They fed on each other. The value generation or value creation was the pre-requisite to produce goods and services. No goods, no services. Service is merely an extension of the manufacturing activity.

Value chains have, over the years, mutated, lengthened, shortened, widened, covered long distances and deepened through automation, computer usage and connectivity. Mutation occurred through maturity of the pancha loka. Over the years people got adept at building machines. “Growth” of machines happened in terms of higher volumes and production rates, production of the entire range of components in one machine, sophisticated machines enabled accessorisation leading to product differentiation, automation extended the speed range and complexity index, and connectivity has now enabled modularised manufacture and software driven production and controls. More is to come.

Tools have evolved from the basic hammer and tongs to the electronically controlled and operated implements, many of which can fit into small pockets in trousers. They have come a long way. Man has also evolved into a sophisticated creature, which term now includes “woman” as well (however, the spelling of woman indicates the reverse – such are the peculiarities of the English language), demanding and getting high salaries, perks, work from home options and sophisticated tools to work with.

The “other resources” list has lengthened and deepened, from power and water to on-tap charging of cell phones, oil and lubrication at the point of application, remote transfer of funds through mobiles. The future is only restricted by human imagination. There is more to come.

Finally, to put together the “chatur loka” as described above into a meaningful whole God created a voracious creature called “management.” Ever since the times of Peter Drucker, Peters and Waterman, Edwards Deming, CK Prahalad, Ram Charan, Eiji Toyoda and illustrious others this creature is still evolving and will continue to do so even after the chatur loka will die out. This loka is powered by the human brain and is an ever growing mutant which will never be satisfied by what it creates, looking for PDCA and continuous improvements, till death and doom do them apart.

Manufacturing is the basis of all value creation and we enjoy the fruits of this all-consuming activity of modern society. Manufacturing links the market with the customer, resources are put to optimal use to maximise the output, the right machines are designed and built to add muscle to the nerves of the human brain to optimise the process of creating value. Tools will continue to facilitate the process of manufacture, providing essential background music without which no orchestra can be enjoyed. With digitisation and industry 4.0 knocking progressively on the doors of manufacturing we are in for an interesting epoch of human development. Fasten your seat belts and become a part of the “march of the pancha loka.” All the best.

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