Systems; Manufacturing: Axioms of value facturing

TRIMILLENNIUM MANAGEMENT: MANUFACTURING
Axioms of Value Facturing

By M.Korgaonker

Ever since Japanese companies demonstrated the competitive power of superior manufacturing, the quest for manufacturing excellence has become an obsession with companies. As we enter this millennium, it is pertinent to ask: how will manufacturing evolve? How will it impact the shape of events in the New Millennium?

Indicators now point to a steady progression towards a new strategic orientation for manufacturing which will make it the backbone of the new supply chain paradigm. Manufacturing will aim to deliver high value to the customer by seeking to achieve mass customisation. It will have to meet and surpass stringent requirements on cost, quality, delivery, flexibility, speed, and innovativeness. This will require it to be a vast repository of knowledge and intelligence, not just a hunting ground for job-seekers.

VALUEFACTURING. In this millennium, the accent will be on building a highly-focused, decentralised, and integrated manufacturing network which will leverage the power of information and communication technologies to achieve internal and external integration. Manufacturing facilities will incorporate considerable automation; product- and cellular-layouts will be preferred; and cycle-times will crash. Companies will no longer make to stock; they will make to order. From the employee-perspective, the emphasis will be on workforce flexibility, an enhanced job specification, multi-skilling, and empowerment.

Manufacturing will, therefore, turn into a value centre, best termed valuefacturing. Valuefacturing will not be just an operational activity. It will be the key to competitive superiority. It will seek the elimination of waste. Keeping pace with the shift to valuefacturing will be initiatives related to quality, maintenance, purchasing and interface-building. Quality systems, for instance, will stress automated, pokayoke-type measures to achieve a preventive right-first-time approach. Purchasing will stress long-term sourcing with quality and delivery assurance. And global sourcing will become more widespread than ever before. Manufacturing-cycle times and value-added will be the key productive measures. Valuefacturing organisations will be lean, delayered, and flexible learning organisations.

GLOBALISATION OF BENCHMARKS. Manufacturing enterprises will seek to identify global benchmarks and surpass them in terms of performance and capabilities. There is immense potential for companies to look at far more stringent benchmarks, particularly in areas such as employee-productivity, the manufacturing cost structure, and education and training expenditure. As we move into this millennium, companies will also seek to benchmark hitherto unbenchmarked parameters like flexibility and service-delivery.

GLOBAL LEVELLING OF COMPETITIVE STRENGTHS. There will be a discernible levelling in competitive manufacturing strengths among the major manufacturing nations. What's more, the rest of the world will be able to successfully narrow the competitive gaps that exists between them and the manufacturing triad (Japan, Europe, and the US). The share of the non-Triad countries in the world's manufactured output will rise. Firms in the triad countries will increasingly seek strategic alliances with firms in non-triad countries, resulting in immense opportunities for the latter.

TECHNOLOGY AND INNOVATION. A recent survey among US batch-manufacturing and mass-producing firms indicates that 4 technologies have proved to be most relevant and widely-adopted: cad, TQM, J-I-T, and CNC. All 4 will progress to a new generation, where automation, infotech, and communication technology will integrate them fully with hardware technologies.

MANUFACTURING IN INDIA. At the beginning of the New Millennium, India is set for a technology and manufacturing renaissance. The pace of technological change will increase rapidly, particularly in areas where global manufacturers seek to establish or expand their presence in India. The drive for quality will further intensify, and percolate down to those sectors where modern quality improvement techniques are yet to make an impact.

The rapidly changing lifecycles of products and processes, the need to compete with greater agility, the knowledge orientation of the workplace, and customer-related imperatives will render the public sector model of manufacturing unsuited to cope with the New Millennium. This will raise issues related to the role of the public sector in industrial activity, in general, and manufacturing, in particular.

It is likely that India will emerge as a major international manufacturing centre for a number of finished and intermediate products during this millennium, particularly in those categories where the internal demand is large or where the key raw materials and other factors of production are in plenty. Consequently, more transnational firms will locate their manufacturing activities in India. This will be caused, in part, by the presence of a large Indian market, and, in part, by India's emergence as a regional powerhouse. The subsequent increase in the quantum of investments will push capacity and plant-sizes up, making it viable to introduce new manufacturing technologies. Indian factories will, therefore, be neither offshore nor server units.

Purely Indian firms will face an uphill task in defining suitable positions for themselves in an increasingly globalising manufacturing context. They will have to step up investments, increase plant sizes, focus on technology, product- and process-development, and develop areas of core competence. However, greater access to foreign markets will also allow Indian firms to look for manufacturing locations within countries that offer attractive opportunities. More and more Indian firms will seek to establish their manufacturing presence across the borders.

A nation of 1 billion people will always need to be a strong manufacturing nation. The need of the majority of the people's will have to be met by domestically-produced goods and services. The manufacturing sector is, and will remain the prime generator of demand for goods and services provided by emerging industries such as infotech and telecom. Thus, the need will be to improve and enhance India's capabilities and competitiveness in manufacturing. Perhaps a beginning could be made by setting up a national taskforce or a national commission for developing a vision and a strategy for manufacturing competitiveness in India.

Mangesh G. Korgaonker is the ICICI
Chair Professor & Head of the School of Management of the IIT, Mumbai

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