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Ecosystem Aware Systems,

Networks and Governance

EE Centenary Lecture

N. ViswanadhamINAE Distinguished Professor

Computer Science and AutomationIndian Institute of Science, Bangalore

Dec 15,2011nv@csa.iisc.ernet.in

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AgendaAgenda

Global Manufacturing and service Networks

Recent Disruptive Changes

Our solution

The GRIP framework

– Innovation

– Governance

The 4 Stepped Design Framework

Our Research

– Food and Green

Conclusions

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Our approach is applicable to not onlyfor supply chain networks but for othersystems such as Smart Cities, SmartVillages, Green Supply chains, Foodsecurity, Health Care, etc

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Global Manufacturing and Service Networks

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Machine ControllerMachine Controller

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Factory Floor Control SystemFactory Floor Control System

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Evolution of Automation TechnologiesEvolution of Automation Technologies

Assembly Automation

Factory Floor Automation

Airport, Seaport, Distribution CentreAutomation, ASRS

CAD/CAM/CAE

LAN, ERP

Paper-based, Human Interface

Collaborative SCP

Marketplace Embedded SC

Machine Controllers

Cell ControllersFactory

Controllers

WMS, TMSB2B

Controllers

Internet, E-mail, Electronic Marketplaces,

Purchasing, Marketing Department

CRM, SRM

Software-based Relationship Management Agents

AutomatedManufacturing

Relationship Automation

Information Automation

Con

trol & S

up

ervision

Au

tomation

Mat

eria

l F

low

A

uto

mat

ion

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ii ii ii

Supplier OEM Distributor

Customer

i i

Design Manufacturing Sales

i i

Machine 1 Machine 2 Machine 3

B2B Logistics Value Chains B2C Logistics Value Chains

Fac

tory

Flo

or

to t

he E

nter

pris

e

Supplier to the Customer

Evolution of Evolution of Manufacturing NetworksManufacturing Networks

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Global Supply Chain Global Supply Chain NetworkNetwork

ManufacturingDistribution

Retail

Supplier

RetailStore

DistributionCenter

Back to DC

Supplier

China

India

Singapore

Malaysia

USA

UK

USA

UK

Europe

Transport hub

Inventory hub

Demand

Suppliers

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Last Two Decades Companies were Last Two Decades Companies were Proud of Their Automated Supply ChainsProud of Their Automated Supply Chains

They worked hard to reduce costs and to get inputs to the right places at the right times. Lean , JIT, TQM, Outsourcing, Collaboration, Visibility

The biggest supply chain Challenge was supply-demand matching

SAP, Oracle and other Software Providers, Consultants and Implementation Experts (IT majors) flourished

Global trade has grown exponentially, Growth rates increased & the stock markets rallied: The Asian Century Began

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Recent Disruptive ChangesRecent Disruptive Changes

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Disruptive changes facing Supply Chain NetworksDisruptive changes facing Supply Chain Networks

1. Highly connected supply chains amplified & transmitted US, EU market collapse causing Global trade collapse. Companies need to market their products in local markets. High concentration of clusters made the industry more vulnerable

2. Governments turned protectionist. Regulations on Green SCN. Social unrest against outsourcing aggravated

3. Resources (natural, human, financial) have become expensive . Talent shortage to deal with new realties is in short supply

4. Efficient delivery paths got affected due to Piracy and Terrorism (Somali Pirates, Attacks on Civilians)

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The great Trade CollapseThe great Trade Collapse

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Trade flows dropped by more than 20% from 2008Q2 to 2009Q2The synchronization was due to the connectivity of global supply chains that reacted “just in time” to the collapse in demand

The Great Trade Collapse: Causes, Consequences and Prospects A VoxEU.org Publication Edited by Richard Baldwin page 3

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Our SolutionOur Solution

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Redesign the Supply ChainRedesign the Supply Chain

Redesign supply chains to be socially responsible, socially responsible, environmentally friendly and regionally environmentally friendly and regionally competitive with

– Constraints on resources and energy

– Access to high quality products to customers at affordable prices

– Exploiting all possible innovations from the eco-system elements

– Mitigating all the risks arising from various eco-system elements.

The design should include governance mechanism for real time control and exception management of the entire chain network

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Why Redesign?Why Redesign?

Original design is for local supply chains to manufacture and deliver goods using streamlined truck transport (with little or no monitoring) within the same judicial system, culture and currency.

Applied to the globally dispersed systems and networks without considering possible innovations and risks and appropriate governance structures

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Supply Chain Ecosystem

EcosystemsEcosystems comprise of networks of companies, comprise of networks of companies, Countries and their governments, Other social and Countries and their governments, Other social and political organizations, Resources including political organizations, Resources including natural, financial & human resources with talent, natural, financial & human resources with talent, connections, knowledge of the industrial connections, knowledge of the industrial environment, interacting together with the environment, interacting together with the landscape and Climate landscape and Climate

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SUPPLYCHAIN

ECOSYSTEM

DE

LIV

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Y S

ER

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INF

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ST

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CT

UR

ELogistics Parks, SEZs, Freight Corridors

Logistics & IT companies

TransportRail, Air, Ship, Road

RE

SO

UR

CE

S

Industry Clusters

Human, Financial & Natural Resources & labor Unions

Infrastructure, FIIPorts, Airports, Roads

Customs , Export & Other Govt. Regulators

INSTITUTIONS

Quality Control & Environmental Issues

Social, Financial & Trade issues

INDUSTRY VALUE CHAINS

Retail Chains Distribution Manufacturing Suppliers

July16,2010 18N.Viswanadham

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The Ecosystem The Ecosystem ExpliansExplians

Investment Climate

Virtuous Co-evolution

Connectedness Risks The Trade Collapse

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The GRIP FrameworkThe GRIP Framework

Governance

Risk Analysis

Innovations

Performance Management

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Innovations

– New to the market as well as new to the world innovations Successful in creating Blockbuster industries

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Innovations that Create Blockbuster Industries

Blockbuster products: Nano, Video Games, Cell phones, Search engines, Wikipedia, e-mail, Social networks– New Business models: Containerization, Outsourcing, BPOs, FDI,

Sell direct, e-retail, ATMs, Clouds, e-bay, PPP

Creating New Resources: Industrial Clusters, Special economic zones (China), New Universities, Search Engines

New Delivery Models: Digital delivery, Home delivery Suez & Panama canals, Telemedicine

Government regulations: Deregulation of Telecom & Airlines, Green, Free trade agreements, SEZs

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NORTH AMERICA

SOUTH AMERICA

Panama Canal

21,000 KM

8,000 KM

Pacific Ocean

Atlantic Ocean

16,000 KM

10,000 KM

LogIstIcsInnovatIons

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Innovations in Indian Telecom A Booming industry

Deregulation of Telecom– FDI.– Special Economic Zones to attract Nokia, Flextronics– Allowing foreign manufacturing and service providers

Estimating the market right– How many people will make a phone call if making a

phone call is as cheap as a post card

India has 881 million mobile phone users as of Oct 2011. Adds 10 M customers a month.

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Innovative Governance

Orchestration: Governance with a stakeValue Chain Governance: Food Security not Grain security

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Managing the Global Network- Own Nothing

Suppliers DistributionManufacturers

Li & Fung orchestrates a highly-customized delivery path through the supply chain

Li & Fung has developed deep knowledge & internal systems to identify quality suppliers in emerging markets, help them design & manufacture for Western customers and make on time delivery despite poor infrastructure

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Network Orchestration in Airlines

Major airlines were asset-intensive and own aircrafts, reservation systems, maintenance teams, baggage crews, & catering services.

Southwest, JetBlue and RyanAir retained only the core of branding and the concept of the airline and put all other operations out to bid: They leased engines & aircraft, and contracted out baggage handling and maintenance .

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4 steps in Supply Chain Design4 steps in Supply Chain Design

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Supply Chain DesignSupply Chain Design

1. Global supply chain Formation

2. Project Planning and Management

3. Supply Chain Planning

4. Supply Chain Execution

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Global Supply Chain Formation

Map the Supply Chain Ecosystem for the Industry Vertical

Formulate the Supply Chain Strategy

– Product offered, Innovations, In-house vs. outsource

Select possible locations for the suppliers, factories, DCs

Identify the Supply Chain Risks

List the feasible supply chain configurations

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Execution : Online Supervisory Control

Penske Logistics provides trucking services in USA

Genpact workers in India and Mexico – arrange for titles and registrations for the trucks leased by Penske in

USA

– Assign trucks and drivers to the pick up. Monitor the truck once it is on the road. If the truck gets stuck at a weigh station, failing to fulfill some permits, the truck driver would call the BPO staff . They transmit the necessary documentation to the weigh station and the payments made through credit card.

After the trip, the driver’s log would be shipped to Genpact .

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Our ResearchOur Research Empirical

– Food supply chain in India Can India be the Food basket for the world?

– Smart Villages: Pochampally

– Indian General Elections

– Tata Singurdebacle : Talent and Governance failure

– Smart Heath care and Health Cities

Mathematical– Global supply chain Design (MIP formulation)

– Location selection in global supply chains based on Investment climate

– Integrated Logistics provider (Planning and Execution)

– Low carbon Logistics ( Selection of low carbon partners)

– Orchestrator Design for SMEs print supply chain

– Bundling : product + Service

– Supply Chain Risk mitigationN.Viswanadham

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Food Security : To Serve 100M Urban PoorFood Security : To Serve 100M Urban Poor

Kitchen

Kitchen

Mid Day Meals

Households

HawkersGPS

Consumers

Vocational Training using Government programs

Processed Food

Products

Meat & Diary Products

PDS

Distribution Center

Distribution Center

Distribution Center

IT Backbone on Cloud IT Backbone on Cloud

Governance of Food Security System

Industry CEOs/Technology

Officers

Restaurant Chains

Government

City Governance

Advisory Board

Business Development

Executive Director

Quality Control Board

Manager Sourcing

PDSMeat

Diary Vegetables and Fruits

DataMonitoring &

ExecutionCall Center

Stakeholders

Manager Services

ICT Hygiene, Quality

Waste Management

Vocational Training

Manager Food

Preparation

Warehouses

Kitchens

Food Processing

Manager Distribution

Hawkers School

Food Courts Transporta

tion

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Central /State Governments

Regulatory Bodies

Industry Value Chains

Transportation and Communication

Inbound Logistics

Outbound Logistics

GreenSupply Chain

Delivery T

echn

ologies & M

echan

isms

Resou

rces

Purchasing

Waste Disposal & Recycling

Infrastructure ports, roads, airports, rail

Forests, Mining , Cement & Steel

Financial Resources

Clusters

Water & Power Resources

Citizen Groups,Social Activists,

NGOs

Land Resources

Institutions

Training staff

Manufacturing

Smart and Green Technologies innovation

ISO CertificationBusiness

Organizations

Reverse Logistics

Maintenance, Repair Operations(MRO)

Re use, Recycling, Remanufacturing

Distribution & Retail

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ConclusionsConclusions

Our ecosystem research is applicable to systems of systems such as smart villages, smart cities etc.

Design of systems and networks using the ecosystems helps use of innovations and risk mitigation startegies. On line control called Governance is a must.

Supply/service chains need to be redesigned using STERMSTERMframework using theories of competition law and new Institutional Economics

The Indian Systems and networks theory research should focus the verticals of importance to India such as Food, Transport, Energy, Water, Village and City development etc.

The research should include both empirical and mathematical approach with focus on final implementation

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