Networked World: Distributed Manufacturing Vs Mass Manufacturing
By: Amit Bhushan Date: 29th Oct. 2014
This thought paper is to provoke those who propagate that industrial development is a result of governments making focused effort towards development of infrastructure and supporting policy environment to create right taxonomy to suit 'players' for select type of industry. Though interventions by government do have a role, however it should realize growth drivers in changing market conditions rather than mindless pursuits in infrastructure and taxation system.
Industrial development had followed a trajectory where early industrial development was on the back of development of engines, motors which brought in efficiency in use of labour & capital mix in businesses. The result was reduction in manpower through machines though the capital required to set up business went up. This wave witnessed inventions of many machines that help us through our day to day life.
Next wave saw 'Assembly lines' which streamlined the production processes by defining order of activities in a manner which would further enhance efficiency in labour though it enhanced capital requirements further. A basic level of supply chain which hunted for cheapest sources of raw materials was developed. The earlier wave of machine developments and improvement in efficiency of existing ones continued in this period however public attention to the many modern management practices that evolved during this phase was much greater than ever.
With the growing sophistication in demand and rising complexity of products, we saw evolution of supply chains in the later phases of development. This was basically due to a growing need to bring in efficiency in the entire system of production where efficiency of each player was becoming increasingly important. This phase saw emergence of China as a manufacturing powerhouse due to its ability to support multiple ecosystems for production of multiple industry types on the back of skilled labour and a vast domestic market. Vast manufacturing entities with huge assembly capabilities became focus and a belief was nurtured that this supports the highest standards of labour and capital efficiency.
However the shift of some of the high tech operations from China to the USA while shift of low tech goods to cheaper manufacturing locations in different geographies, continued strength of innovation houses in Germany and other countries point to the fact now the shift is likely towards distributed manufacturing. The distributed manufacturing may involve relatively smaller operations (than those in China) with a mix of local as well as global sourcing in order to meet the demand in select geographies in an efficient manner. It will enable corporates to support 'customized offerings' based on consistency of demand from the consumers in defined geographies, maintain a larger number of product lines and greater flexibility to change ops in select units basis change in pattern of demand. This phase is already challenging the efficiency level of the labour-capital mix used in previous phases (dominated by efficient supply chains, so to say) as well as support larger consumer choices. Sprawling new brands in electronics, automobile etc. challenging the erstwhile leaders and forcing them re-look at their products, time and again and tumultuous market shares are a pointer that such a manufacturing phase has come to stay and those resisting change might end up losers.
In the new phase, the businesses will need to evolve a lot of sub-brands alongside flagship brands and support and entire gamut of operations from manufacturing line to sub-brand management and its distribution. The business units will be utilizing a lot of local strengths by sourcing locally as well as in areas where locals do not have strength, global sourcing will be resorted to. The process is already on with political developments in many of the emerging markets some of which are focusing on greater value addition for the 'raw materials' alongside greater push for 'local manufacturing'. The process with receive a further impetus as the countries initiate look at local 'techno-commercial standards' and other associated issues and evolve a taxonomy. The new phase basically takes into account the 'cost' of 'idle labour' to the society and then tries to optimize the labour-capital mix to evolve the economy.
While some of the actions taking place may be billed as anti-globalization, however globalization has prospered as a result of 'consumerism' and not in vice-versa or in isolation. The idea of local manufacturing presented above, if evaluated in this light would appear pro-consumer since it involves local strengths while co-opting others where local competencies may be lacking (rather than a whole-sole lump sum imports) and results in more choices for customers (instead of an oligarchy determining competition in markets). The current technologies and management thoughts can continue to evolve in the direction. The idea though may not be new but it's about when and how an idea evolves. I think that this about the time when the idea can be revived once again, though falling commodity prices might numb 'demand for change' in emerging markets dependent on export of commodities.
By: Amit Bhushan Date: 29th Oct. 2014
This thought paper is to provoke those who propagate that industrial development is a result of governments making focused effort towards development of infrastructure and supporting policy environment to create right taxonomy to suit 'players' for select type of industry. Though interventions by government do have a role, however it should realize growth drivers in changing market conditions rather than mindless pursuits in infrastructure and taxation system.
Industrial development had followed a trajectory where early industrial development was on the back of development of engines, motors which brought in efficiency in use of labour & capital mix in businesses. The result was reduction in manpower through machines though the capital required to set up business went up. This wave witnessed inventions of many machines that help us through our day to day life.
Next wave saw 'Assembly lines' which streamlined the production processes by defining order of activities in a manner which would further enhance efficiency in labour though it enhanced capital requirements further. A basic level of supply chain which hunted for cheapest sources of raw materials was developed. The earlier wave of machine developments and improvement in efficiency of existing ones continued in this period however public attention to the many modern management practices that evolved during this phase was much greater than ever.
With the growing sophistication in demand and rising complexity of products, we saw evolution of supply chains in the later phases of development. This was basically due to a growing need to bring in efficiency in the entire system of production where efficiency of each player was becoming increasingly important. This phase saw emergence of China as a manufacturing powerhouse due to its ability to support multiple ecosystems for production of multiple industry types on the back of skilled labour and a vast domestic market. Vast manufacturing entities with huge assembly capabilities became focus and a belief was nurtured that this supports the highest standards of labour and capital efficiency.
However the shift of some of the high tech operations from China to the USA while shift of low tech goods to cheaper manufacturing locations in different geographies, continued strength of innovation houses in Germany and other countries point to the fact now the shift is likely towards distributed manufacturing. The distributed manufacturing may involve relatively smaller operations (than those in China) with a mix of local as well as global sourcing in order to meet the demand in select geographies in an efficient manner. It will enable corporates to support 'customized offerings' based on consistency of demand from the consumers in defined geographies, maintain a larger number of product lines and greater flexibility to change ops in select units basis change in pattern of demand. This phase is already challenging the efficiency level of the labour-capital mix used in previous phases (dominated by efficient supply chains, so to say) as well as support larger consumer choices. Sprawling new brands in electronics, automobile etc. challenging the erstwhile leaders and forcing them re-look at their products, time and again and tumultuous market shares are a pointer that such a manufacturing phase has come to stay and those resisting change might end up losers.
In the new phase, the businesses will need to evolve a lot of sub-brands alongside flagship brands and support and entire gamut of operations from manufacturing line to sub-brand management and its distribution. The business units will be utilizing a lot of local strengths by sourcing locally as well as in areas where locals do not have strength, global sourcing will be resorted to. The process is already on with political developments in many of the emerging markets some of which are focusing on greater value addition for the 'raw materials' alongside greater push for 'local manufacturing'. The process with receive a further impetus as the countries initiate look at local 'techno-commercial standards' and other associated issues and evolve a taxonomy. The new phase basically takes into account the 'cost' of 'idle labour' to the society and then tries to optimize the labour-capital mix to evolve the economy.
While some of the actions taking place may be billed as anti-globalization, however globalization has prospered as a result of 'consumerism' and not in vice-versa or in isolation. The idea of local manufacturing presented above, if evaluated in this light would appear pro-consumer since it involves local strengths while co-opting others where local competencies may be lacking (rather than a whole-sole lump sum imports) and results in more choices for customers (instead of an oligarchy determining competition in markets). The current technologies and management thoughts can continue to evolve in the direction. The idea though may not be new but it's about when and how an idea evolves. I think that this about the time when the idea can be revived once again, though falling commodity prices might numb 'demand for change' in emerging markets dependent on export of commodities.