Global approach?

Mahindra and Mahindra's Scorpio is now a legend. It is a completely 'India' car designed at a fraction of the cost of all international automakers. Mahindras used the knowledge of their vendors to have some form of distributed design to speed up and reduce the cost of new product development.

http://findarticles.com/p/articles/mi_m3012/is_10_182/ai_94335258

The link is a very detailed article on the evolution of Scorpio.

Boeing 787 dreamliner followed pretty much the same story. Boeing had a practice of giving completed designs to its vendors. For the 787 they let their vendors do a lot of their own designing themselves. The 787 project, if documented, could be a lesson of how not to manage a new product development.

http://seattletimes.nwsource.com/html/boeingaerospace/2003986302_webbair01.html

This brings me to my central belief that nothing is 'good' or 'bad'. There is a lot more to these practices than meets the eye. Implementing modern techniques taking them at their face value is not a guarantee of success. The deeper implications need to be understood.

It is not that collaborative designs cannot succeed in aircraft industry. Also it is not that the concept will always be a hit in automobiles. There are a lot of 'other' factors involved.

I am not too sure of being able to document these other factors as of now. I would love contributions to help me answer this..

taxing of alternate technologies

If we consider the life cycle of any product, at least 30% of it is paid as some for of 'tax' to the government. The taxes are justified as the production of goods consumes some resources that are in public domain. The idea would be to balance the revenue from taxation with the costs that the government has to incur because of that industry / product. Of course there is some additional amount for general public expenditure.

The nature of costs have drastically changed. However the taxation has not. Water and air are much more dearer today than a few years ago. The taxation has to changed to reflect this. Some products that may seem to earn money for the government, may actually be a drain on the system. Cigarettes and alcohol are major tax revenue earners, at least in the Indian context. However, when this amount is compared to the money spent on subsidised public health care or the loss of human resources it may not amount to much.

If there is some product in a particular category that does not use up as much of the water and air resources, meaning it uses clean technologies, it must be taxed considerably lower. There could be a special subsidy for green products or an additional duty levied on polluting industries.

In the short run the subsidies may seem to 'cost' the government, but it the long run we may all be better off with cleaner products and technologies. But of course governments all over the world have their own ways. In this context taxing of India's first electric car "Reva" at par with other cars seems unjust.

http://www.sonyclassics.com/whokilledtheelectriccar/

Check the above link. Things are maybe not as straight and simple as they seem.

Ahh, but there is hope too, check the link below.

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/307933/1/.html

Happy weekend.

Going Green

I am sure this will not be the first post on the topic of environment friendly manufacturing. The Sri Lanka Sunday Times has reported that the worlds first clean fabric manufacturing zone (MAS Fabric Park) has opened in Sri Lanka. They plan to recycle most of the effluents, generate bio gas, compost (fertiliser) and all. Look at the link below.

http://www.sundaytimes.lk/071021/FinancialTimes/ft302.html

A question is if such examples are mere blips in the otherwise "dirty" world of manufacturing. I strongly believe that there is no question on the need of clean technologies. Sustaining business on a long term needs clean policies.

At some level it is all a question of economics. Water is very cheap, so there is no incentive for companies to recycle. Air is free, so again, clean technologies are not really a priority. What should the governments do? This question can be a wasteful intellectual discussion and would probably have no end. A better question is what we in business should do.

All new facilities set up anywhere must be environmentally friendly. Yes, strong anti pollution legislations may not happen in the near future. But, one bout of acid rain can change all that. The recent Nobel peace prize to Al Gore has also made it difficult for governments to ignore the issue. Businesses can expect strong pressures for clean technologies in a few years. Rather than have facilities that are rendered redundant, it would be smart to start the plans from today.

Here's one more link

http://www.edmunds.com/insideline/do/News/articleId=123102?imw=Y

Kia Motors is planning mass production of its new "green"vehicle.

One supplier?

On July 16th 2007, an earthquake struck Japan. Riken, a company making piston rings for almost all Japanese auto companies had suffered massive damage. Most automakers were forced to slow down their output. The article below highlights the damage.

http://www.usatoday.com/money/world/2007-07-18-toyota-quake_N.htm

More important were the questions that ere raised about the Single vendor concept of JIT. In this era where disasters are not as rare as they were earlier, would this strategy of single vendors work out? A damage to one vendor can halt the entire industry.

The article below takes a much more pragmatic view of the event.

http://www.ventureoutsource.com/contract-manufacturing/supply-chain-management/lean-manufacturing/just-in-time-jit-strategy-feels-earthquake-tremors

Toyota and Honda had deployed their engineers to help Riken back on its feet. This kind of cooperation in commercial relationship is not something that we here often. The single vendor concept was forcing them to work as partners.

And at the end of the day, I believe that its almost impossible to plan for all disasters. The buffers, if created, to mitigate the impact of all possible disasters might turn out to be costlier than the disasters themselves!!

I feel JIT system will not be changed much because of this damage. Maybe one more line would be added in the formal partnership relationships that would talk about disaster management. Lets see what happens, till then, Long live JIT...

soft suicide

Have a look at the article in Times of India,

http://timesofindia.indiatimes.com/20_new_car_models_to_roll_out_in_2008/articleshow/2458531.cms

Wow, 20 new car models models in 2008. A rough assumption: 20 could be the number of new vehicles introduced by all vehicle companies in India combined from 1950 to 1975.

All said and done, I am not sure if our companies are ready for so many models. A thing to note here is that we are talking of 20 models and that may mean about 300 variants (colour, air conditioning, etc).

Most Indian plants, including lines of Suzuki, Hyundai and Tata Motors have been set up to mass produce a few models / variants. Most of them are setting up new plants and I think these new facilities will be tuned for mass customisation. So, till this time the new facilities come online, producing multiple variants from the old facilities is going to be taxing.

It is impossible for automobile companies to not introduce new models and yet get the necessary sales. It is also similarly very expensive for Indian auto companies to produce multiple variants from existing facilities. So the companies are introducing new models and hoping that the new facilities come up soon.

It is a catch 22 situation. Though it seems that the new facilities will come up in a year and two and that this is going to be a short term challenge, I think otherwise. The volumes in India are much lower than volumes in other countries. The specific challenge here is providing all the models / variants at much lower volume.

The good part is that I am in academics with zero investment in automobile equity. I can wait and watch, and maybe a year later write a few more lines. Right now, all I can say that it is going to be an interesting and thrilling journey.

India overtaking China in manufacturing?

There was a report by Capgemini that India is all set to to challenge China as the preferred destination for manufacturing outsourcing. The big 'if' is that government needs to work on and improve the existing infrastructure.

At some level, I do not think that this conclusion needs research. It is common knowledge. There is no difference of skill level among Indian and Chinese. The same manufacturing machines can be set up in either India or China. In addition, India has theoretical added benfits of being a democracy and having an active legal system.

Summary report on Capgemini site
http://www.capgemini.com/m/en/n/pdf_India_Set_to_Challenge_China_as_Global_Offshoring_Sector_Evolves.pdf

News item on indiatimes
http://economictimes.indiatimes.com/Indicators/Manufacturing_India_to_challenge_China/articleshow/2413138.cms

Blaming China

US companies have shamelesly imported material from India, China and other south east asian countries in flagrant violation of laws and ethics that they profess in their home state. Be it child labour, retirement plans, working conditions or wage parity; American companies have ignored everything to ensure that they get 'cheap' products.

Whenever things go wrong, American companies have had no problems in shifting the blame to these countries. It is very interesting that China has been able to arm twist Mattel to issue an apology saying that the recall were less of production and more of design issue.

See this link:
http://www.economist.com/business/displaystory.cfm?story_id=9867908

Outsourcing production or services does not absolve the parent company from responsibilities of the product adhereing to guidelines and regulations. It is immature and possibly dangerous for the outsourcing firms to blame their partners for lapse. Imagine, if Mattel customers reduce buying 'Madi in China' toys, Mattel as a company would suffer tremendous drop in sale!!

The new DELL

Dell enjoyed its supply chain excellence based direct selling model for many years. This year it has started selling PC's through Wal Mart and Sam's Club stores. This would be a new ball game for Dell, a game that Dell's competitors' (HP and Acer) have been experts at.

Dell is trying to target retail consumers and is faced with its first bout of problems. Rising customer service costs, maintaining dealer relations, rising product complaints (because of higher product variety), etc.

The article (link pasted below) does not point out solutions, only highlights the problems.

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1799

Hello..

Its a new Monday morning....

This place would be for current and relevant information on Operations Management. Operations could actually mean anything today. But I will stick with a few things: Production, Supply Chain and Technology.

I do not intend to create new knowledge here. I intend to create links to the best material available and have a brief summary on it so that you can decide if its worth your time to study the entire article.

Wishing me best of luck!!!