The changing world of manufacturing

  • Articles
  • Dec 10,21
Contribution of manufacturing industry to GDP has been on the downtrend. In a highly inter-connected and evolving world, manufacturing is on a mission to rediscover its relevance and importance, says R Jayaraman.
The changing world of manufacturing

Moore’s Law may have to be revised upwards, the rate at which electronics is taking over the world will make that happen. With the IOT, Industry 4.0, digital management, data analytics and 3D printing, the world of consumers is changing. The staggering increase in the silicon wafers needed to cater to this demand, is truly mind boggling. And, companies like Intel, AMD, TI are all primed up. These trends are going to have a serious impact on the oldest industrial profession in the world - manufacturing. 

The world of manufacturing has to change as well, to stay relevant. As it is, contribution from manufacturing industry has been on the downtrend (refer the above Graph).

Yet, in any industrial economy, it is manufacturing which creates the value, using which, others create further value. A simple example will illustrate this point. A car is manufactured for, say, Rs 100. It is then sent to dealers using logistics and warehouses, from where it is sold to the customers, or sent to retailers in mofussil, where the sales take place. After the car is sold, the mechanic repairs it when needed, spare parts are sold, painting is done and so on. In this value chain, some 30-40 % value is added in the parts that are outside the plant. These are classified as “services industry”. 

Thus, as the length of the value chain outside the plant increases, the share of manufacturing in the overall pie reduces. Over the years, the volume of production has gone up significantly, the cost of production has also gone down dramatically, resulting in a “compensated growth” rate. This rate is the net of the two aforesaid rates, which move in opposite directions. However, to sell these products, the value chain outside the plant, in both directions, have to increase. These two directions are: incoming materials (pre – production) and outgoing materials (post production). The pre-production value is already factored in the “plant value added”. 

It is the post-production value chain that has increased, again, substantially, but, which gets classified as “services”. Also, the “services” parts in the pre-production value chain, like logistics, warehouses, loading/unloading etc. have also gone up. This is one reason why the share of “manufacturing” has gone down and that of the “services” sector has gone up. The increasing value generated in the post production value chain has led to further cascading. For example, because of the increased employment in the post production value chain, more consumers demand more products and services, thus leading to an expansion in the GDP. These services are expansionary in nature, for example, wealth management of high networth individuals, restaurants and hotels, museums, places of worship, beach resorts, cruise ships, stock market related activities, and so on. 

In a such a highly inter-connected and evolving world, manufacturing is on a mission to rediscover its relevance and importance. The winds of change keep blowing, never for once relenting in their speed or intensity. Sometimes they may be non-substantial, for example, when the vacuum tube driven TV was replaced by the pentode powered new model, the black and white TV was replaced by the coloured elders, and so on.  To such changes, the manufacturing industry adapts by replacing old technology by the new ones, incurring capex, to stay in-date.  However, for example, when the atom bomb was discovered, which changed the potential nature of wars which could be waged in the future, the manufacturing industry had to undergo cataclysmic reformation, to get ready to manufacture an entirely new range of weapons of mass destruction, which were nuclear powered. 

Tracing the long winded, 250 years of manufacturing, prior to the industrial revolution, it was the age of the artisans, who blew the wind, using a leather windbag, through a pit of burning coal to heat and beat a piece of iron into shape. Along with the potter, the tiller, the milkman, the shepherd and the cowherd, they all ran the society along a set of lines where the individual was the prime mover. Dignity of labour, earnings from wages for which one personally worked with one’s own hands, were the norms. 

The steam engine blew the whistle on these pastoral scenes and ushered in a new power – that of organised labour. Man discovered the market, discovered that goods could be made and sold in bulk, could be used by a mass of people who may or may not be known to each other. The developments that took place after this seminal event slowly changed the concept of “dignity of labour”. No more was the workman known for his skills and mastery as an individual – but he became a part of a collective, which, together, as an organisation, defined the new rules of engagement. Manufacturing came to be the centrepiece of the value adding chain of activities which gave rise to products and services. 

The first wave of automation swept the manufacturing industry when Henry Ford designed and successfully ran the assembly line which ran without interruption, round the clock, and workers were told that they could be, at best, cogs in the wheel. With the advancements made through automation, more and more persons were made “redundant” or “non-compulsory” and the “dignity of labour” further eroded. No more was doing a job of a carpenter, a sculptor, a chiseller “valued” for their individuality but only for their contributions to the final, finished product.

The wireless world has transformed the world into a connected, seamless, single monolith, where, a person sitting in a design centre in Asia could see the changes needed to be made in a machine in the West, and, using standard protocols, make these changes and get acceptance through emails and Whatsapps and Twitters and Facebook posts. People are more available on the iPhones than on one-to-one conversations and discussions. Indeed, with the Internet of Things on the horizon, there is a visible breathlessness in manufacturing. Not only will many of the current jobs vanish but the new ones will need different skills, different languages, different means of communications. 

The usual banter between workmen and their supervisors and the management team members will vanish too, to be replaced by computer print outs (virtual), 3D machine outputs, signals through Whatsapps and robot to robot debates and “robo-cussions”. More and more workplaces will become like the blast furnaces and rolling mills of steel plants, where it is difficult to meet any operator on the shop floor, only one or two mugs looking intently at the consoles, whenever they get the time in between looking at their Whatsapps and Facebooks and internet surfing. Also, like many of our cities where people have stopped going to each   other’s places, but prefer to talk via Whastapps and electronics. 

In such a scenario manufacturing will have to make changes. What will be affected will be – teamwork, as more and more individuals become empowered through gadgetry to play God; co-ordination which needs a lot of continuous person-to-person meetings and development of a common language (aka computerese); an esprit de corps which needs people to work with each other and experience ups and downs together, thereby bringing about synergy and good practices. Replacing all these will be more gadgets, automation run by computer consoles, gadgets connected by wireless connections, putting people further behind machines. With AI, “neural” networks, big data analytics, man is making it more and more difficult to live with fellow man, eliminating the reasons for interactions progressively. 

Manufacturing will soon be less manned, more gadgeted, more connected and driven by AI devices using IOT, analysed and decisioned by big data analytics algorithms and robotised. The only place where manufacturing will still have a connectivity with people is the traditional field of “customers”. One needs to be cautious here, robots may even replace humans as customers too, in times to come. Welcome to the brave new world, indeed.



About the author:
R Jayaraman is the Head, Capstone Projects, at Bhavan's S P Jain Institute of Management & Research (SPJIMR). He has worked in several capacities in the Indian industry, including Tata Steel, for over 30 years. He has authored more than 60 papers in academic and techno economic journals in India and abroad. Jayaraman is also a qualified and trained Malcolm Baldrige and EFQM Business Model Lead Assessor.

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