by 
I am not against machines. I have made my peace with the fact that software applications control most of the things I do, determining and measuring even my productivity at work. In fact, knowing how stormy the weather can be at some of my travel destinations, I am happy to let aircrafts land themselves with minimal assistance from the pilot.
But in electronics manufacturing and especially in the convoluted structure we call the supply chain — where designs are translated, and components are purchased and put into products to be manufactured and shipped to end-users — machines and applications have a growing role, and increasingly they are beginning to relegate humans to the background of enterprise activities. Is that healthy for humans and the business organizations they've built?
Of course, you may believe that everything your company does can be handled via phones, email, video conferencing, and, in future, maybe even telepathy. The day may come when we dream up a product and a robot takes over and transforms the concept into winning designs and actual devices. It hasn't occurred, and it will be a long time before that happens. For now, though, the human touch in the supply chain is as critical to success as the admittedly phenomenal applications companies spend millions on to enhance their supply chain efficiencies.
I speak often with industry executives whose operations span the globe, and many of them spend countless hours in the skies each year reaching out to customers, suppliers, analysts, government officials, and other interested parties. I'll like to share why here and also tell a few of their stories.
A Frenchman I know, who works as a senior executive in the sales division of a major US semiconductor company, logs more than 300,000 miles in the air each year. “I go where the customers are, but these are not always sales visits,” he says. “I talk about technology roadmaps. The sales may not materialize for another couple of years following these visits, but keeping my contacts fresh is worth several trips.”
There are other reasons executives spend more time on the road, meeting new contacts, renewing old business relationships, and sleeping on strange hotel beds. A senior supply chain executive at a major hard disk drive vendor in the United States spends weeks at a time in Asia every three months or so. Each trip typically takes him to four or more countries and involves numerous factory visits, training sessions for local employees, and unannounced fact-finding drop-ins at suppliers. These are in addition to briefings with customers to reassure them about redundancy measures critical to unhindered supply of components.
During a recent visit to a contract manufacturer and design house in Europe, I learned of challenges customers are facing in Asia and other low-cost regions where hiring and retaining technical employees now constitutes one of the more intractable problems facing manufacturers in the region. Many of the companies that transferred or outsourced manufacturing operations to China from Western regions over the last decade are seriously weighing pulling these back because so much time is wasted simply on employee recruitment. A top executive at an electronics company in the midwest of the US spends about three weeks each quarter in China overseeing recruitment and training of employees.
“The cost of manufacturing in China is rising dramatically, and there's been a definite increase in requests for alternatives,” Martin Kingdon, director of business development at the Heerbrugg, Switzerland, office of Escatec SDN. BHD, told me in an interview. Escatec, which is headquartered in Malaysia and does a lot of design, prototyping, and some high-end manufacturing in Switzerland, is benefiting from that trend, Kingdon said. Having significant operating presence in both Europe and Asia has helped the company better understand customer needs and match services to their corporate goals.
Many companies have simply yielded such personal contacts to outsourced partners and rely on supply chain management applications to stay in touch with customers and contract manufacturers. The days when the electronics supply chain depended solely or even heavily on people to determine what would satisfy customers is disappearing fast. At many small component suppliers, distributors, and manufacturing companies, the interactions among suppliers, contractors, and customers are shrinking fast, replaced by software applications that now link all segments of a company's supply chain with the outside world.
Increasingly, too, sales, purchasing, procurement, manufacturing, project management, design, coordination, monitoring, measurement, and other activities are performed by computers, leaving limited functions for employees, many of whom sometimes wonder where exactly they fit in now within extended supply chain operations.
This trend accelerated after the horrible 2001 economic downturn as companies tried to reduce the impact of human failings on their operations. Millions were spent on supply chain management applications, and the rapid growth of the cloud has hastened the adoption of machine-to-machine communications in the electronics supply chain. The results so far have been positive in that the industry has a better handle on its boom-and-bust cycles and has improved visibility into demand, supply, and inventory conditions. Recoveries from market downturns have been swifter, and the impact of a demand slowdown less savage.
What has been sacrificed in the meantime is the ability to forge the personal contacts and relationships that serve as the foundations for long-term engagements. A personal experience comes to mind here. I once phoned an executive at a North American company who I had known for years for what I thought would be a quick clarification on some issues about his firm's product. I couldn't even get through to the secretary for the first 10 minutes, during which the communications system bounced me around. I persisted. Finally, I got hold of the receptionist who said she would have to route my call back to the communications maze. I declined and called his cellphone.
“Next time, just call my mobile number,” he said. If hadn't known him that well, I would never have merited that privilege.
Thanks for an insightful article Bolaji and a deep soul searching one too. I think there are two sides of the coins here. I understand the impact and an increase in machine applications involvement in electronics supply chain activities. I suppose like you mention nearly all global electronics manufacturers – OEM,ODMs and EMS providers have an established facilities in Asia today and the trend is likely to continue despite current challenges facing the industry in China etc. I suppose in order to stay on top of the game, the companies have resulted into finding more suitable ways or methods to increase productivity, by integrating IT to allow everyone to stay in touch and thus increase management efficiency and possibly minimise risks. More so financially, IT involvement is reported to be more cost effective and can readily address many of the challenges in this fast changing business environment. I applaud the clock speed technology has brought to our lives.
However, crucial as IT may seem, I know for a fact that no matter the involvement of machines in productivity, a level of human involvement is still paramount. Replacing the vital human personal touch, human relations required to foster a successful business with machine applications is beyond my comprehension. As much as I applaud the accelerated services provided by these machines, to heavily rely on its usage without due consideration to human's wellbeing is a major concern and one which might be detrimental to the welfare of human race now and in the near future. The challenge I think is how could the industry strike a balance in this rapidly involving world.
Hi, Bolaji
I believe it's man who gives technology its space, functionality, and time. I always hear of people complaining about technology as if technology would have invented itself, and would have replaced human work or human interaction by itself.
The ability to forge the personal contacts that serve as foundations for a long-term relationship with a client/supplier is still dependable of human action, interaction, and decision.
If this step is not taken by a human, and it's replaced by a machine/technology it's only the human the one to blame as it is the human the only one capable of decide if a man or a machine is the one to perform the action.
In your personal experience example, it's obvious you could reach your contact because you have known him from before, and had his mobile number which you used as the last resource.
Now, what would have it happened if I would have tried to contact the same person, and why?
-Susan
Bolaji, you are right. Certain technologies are making the process little bit cumbersome, especially with top level employees/companies. Instead of doing the things simpler, offices are using technologies for making the process automate and systematic, but intern not in a friendly way to the common man. In similar situations, only personal contacts can help us to get through.
I agree with the sentiment of the article but I wonder if the next generation of would be leaders and entrepreneurs would also agree as they seem happier interacting through social media.
Just taking the example of our homes. How simple were they , say about 5 decades ago when all the food was home made by our women in the house and at the end of the day when men would return from work they would be greeted by their wives, mothers or sisters and be served a fresh cup of tea/coffee , piping hot soups and what not.
Over the decades the home food supply chain has undergone transformation. It is all those machines that have taken over – The Fridge, the microwave, the toaster , the juicer, the ready to cook dishes and what not. Women are no more at home when men arrive from work. Women sometimes arrive later.
So our home food supply chain is now in the hands of machines and we are not complaining! We now cook just for a change and not as a routine.
So we should also accept the M2M technologies that will make most of the electronic supply chain work tomorrow.
So let us , the people, concentrate more on other creative things , hitting the right buttons only to override some M2M actions, like the pilots do in an emergency landing.
The other thing we lose in automation is judgment. Machines are not programmed to over-ride something that is outside their specs. There is still a lot of room for judgment in the supply chain, and yes, maybe exception management will eventually be automated. And yes, things can be analyzed and planned. But every day I come up against something that defies logic, programming and requires human intervention.
@Prabhakar, good point. Machine involvement in our homes has helped to improve our lives and reduce household activities. Like you said human involvement is still crucial. The question is how far can technology stretch its boundaries?
Hi Susan,
I like your assertion. I walked into a store 1 or 2 months back, the store installed Self- Service Machines about 16 in numbers of them and left with 3 or 2 persons at the Tills to provide humanly based services to customers/shoppers. You know what it means — 16 machines providing services to shoppers, this however would have resulted in job loses at the process.
A visit to the same store 2 weeks ago, to my surprise and of course i was amazed to see that all the 16 machines had disappeared. As usual, i love the Self-Service Machines but unfortunately this time around i couldnt used them as they were no longer there. Asked a staff where are the machines, she responded — OLDER PEOPLE DONT LIKE THE MACHINES, THEY COMPLAINED AND MANAGEMENT DECISION WAS TO REMOVE THEM ALL.
If machines have to work well — technologists and designers have to dual -carriage research works of human involvement ( usability and users' attitudes) with that of engineering.
At the end of the day, it is still the personal contact, and the elements of trust and confidence in a supplier to be able to deliver. That trust and confidence is placed in people, not technology. Perhaps that eventually will; change, but today it seems more prevalent than ever.
Hi, Wale
That's a typical case of a company thinking always only to serve one type of clients/customers instead of offering something to everyone. Before, the elderly were almost forgotten in that shop. Now, it seems like the ones like you, who prefer self-service were left aside. It would have been much better customer service to have a balance between self-service machines and humans to serve two kinds of customers.
Some managers don't seem to understand that is not necessarily a matter of chosing machines/technology or humans. It's a matter of balancing.
I do prefer self-service, too, most of the time, and also depending on what kind of situation it is.
-Susan
Besides the cost of labour, I also think what you get for your money is important. The common belief is that China is very good at imitating but not too much in innovating. Once a client who was getting his fire detectors made in China told me a story that is a perfect example of the imitation capabilities of China. A few years back, my client provided a sample to the manufacturer as a reference for the batch of products that was going to be manufactured there. Apparently, that particular sample had a random scratch mark on the chassis. When my client received the first batch of products, he was quite surprised to see the same scratch mark repeated on every single item! Another common belief is that although software work is cheap to outsource in India, the end results often need redoing due to the poor coding practices. In addition, to this extra effort, retesting of the modified software also adds to the total cost. Therefore, if one wants to achieve a high standard of quality in products, cheap labour has to be approached with great care and caution.
@Cryptoman,
“ Therefore, if one wants to achieve a high standard of quality in products, cheap labour has to be approached with great care and caution. “
You have a point here. But the only factor that will make companies reconsider their outsourcing strategy is the increasing cost labor in the then cheap-labor countries. In a recent past, manufacturers have perfectily been able to balance good quality products and cheap labor. Things may not be the same today, but it did work fine in the past.
“Labor rates at all of these countries dropped, except for China, which continued to climb.”
Is there any reason why labor rates in China keep increasing than in other countries? Is that due to China's desire for hegemony? How will the country's economy be affected when manufacturing companies withdraw from China?
Labor cost is very important parameter in any equation to select the right country to outsource engineering or manufacturing operations. Same way it is very important to consider the risk of natural calamities based on geographical location and previous history of operations.
@Eldredge, You said it. You can put your almost complete trust in human beings and your partial confidence in machines, Trust implies relationship and confidence implies capability. If you have trust for and confidence in the capability of the humans involved, then those capabilities will include overriding a machines limited responses in order to take in a wider scope of considerations. The machine is a subset of the human race. I have yet to see a machine create a human.
Labor costs can be easily determined. Many other costs are just in the estimator's head. How do you calculate the potential cost of a natural disaster before it happened and even afterward; how do you prepare for the unknown and value the cost to the enterprise of putting in redundancies for an event that has yet to occur?
We can blame executives for putting so much emphasis on labor but oftentime it is the only “known” factor of their total production cost that they are able to somewhat estimate as accurately as possible. The rest are just numbers on an Excel file.
the infliction point coincide with the recession, so there might be an inference. I highly doubt that companies will pull out of China as they (both companies and government) have invested so much in the infrastructure projects. Even if the labor rates keep on climbing, the domestic market is big enough to support the industry and increased price of products.
I think there are other distinct advantages to manufacturing in China, although labor rates may not be one of them. Over the years manufacturing clusters have become prolific, starting along the coast and moving inland. We've published a white paper ( Clusters Meld the Benefits of Modern Offshoring and Traditional Vertical Integration) on manufacturing clusters, its posted on the EBN Avnet Velocity site. http://www.ebnonline.com/velocity/
I think another aspect is that with personal contacts, you can correspond between customer and suppplier on a higher level. For example, the integrated management system my company uses can send out automated e-mails to provide a customer with part numbers and quantities that shipped on a given day, along with tracking numbers. But it can't analyze situations where the shipmwent left the facility with a larger or smaller quantity than was expected, and provide a projection regarding when the remainder of the order would be completed.
@Cryptoman – A friend of mine works in softweare testing, and related the same kinds of issues with outsourcing software development. I supppose offshore sources may eventually develop enough expertise to address some of the quality problems. but Iwonder if, by that time, labor rate rise enough to wipe out the benefit anyway.
The question you posed upfront–should we continue to consider the cost of labor–made me stop and think about that for a second. What a wonderful world it would be if all costs were equal and we didn't have all this squabbling and infighting about jobs and outsourcing. Of course, there's no way I can see eliminating job costs from the equation, and your points are well-made.
Barbara,
How do you plan to achieve that?
Wages everywhere are a function of Two things only.
One is Demand for Labour and the other is Supply of the Labour.
Everything else,Like Mandating Minimum Wage standards,etc is just secondary to this fundamental fact at hand.
I don't know of a good way to do that,but you never know some smart people might be able to do it in the future.
Regards
Ashish.
Houngbo,
China's wages are increasing because of three major reasons-One is that the Governments of most States are mandating/pushing for massive increases in Minimum Wages there.
Obviously,one you mandate Minimum Wages,prices rise for everything and especially Labour.
The second is that People are less willing to work for dirt-poor wages which they were willing to work for previously(expectations of a much better life).
And Finally,its because the supply of Labor coming in from Rural/interiors of China is drying up thanks to their One-Child policy.
The country's economy will hopefully be able to move up the Value chain(into Services) as manufacturers withdraw from the country.
Otherwise,things could get ugly very,very quickly.
Regards
Ashish.
Crypto,
Good examples!
I am assuming that you feel that we are not going to see any concrete cases of Innovation from either China or India today-Correct?
Thanks for sharing!
Ahsish.
Wade,
I agree.
A lot of countries(other than China) are copying this mercantilist model.
Its quite an effective way to offer customers with everything all at one go.
I like it and I am sure it will continue to be a massive way in which manufacturers tend to coalesce and pool their resources together.
Regards
Ashish.
Hi tech4people,
I think making a conclusive statement such as “we are not going to see any concrete cases of Innovation from either China or India today ” is difficult. It depends on the incentives available for people to make innovations. I am pretty sure there are very creative thinkers in India and China and such people are the drivers of innovation at the end of the day. Yes, the current manufacturing trends in those countries are based on western designs. However, that will not be a stopper for innovation in India and China. As a matter of fact, having access to every step of manufacturing high-tech products can be very inspiring for young people working there. Thanks to this exposure they have the opportunity to “borrow” ideas from existing designs to create better and more advanced products.
I also think that innovation does need to be supported by a solid infrastructure of mentors, designers, private and government support. The education system has to plant the seeds of curiosity into young minds rather than giving merit to memorising what is already available in textbooks. That is how creativity is nurtured, i.e. by providing the necessary space for the human brain to develop in the right direction. All of these essentials of innovation cannot be created overnight though. A country has to commit to a long journey in order to join the club of solid innovators.
At the end of the day, there is no mental difference between the people on this planet. Anyone can create anything. The difference is in how people are taught, directed and motivated throughout their lives as well as the living and the sociopolitical conditions in their home geography.
Crypto,
Absolutely right!!!
How do you see the increasing trend of Chinese,Korean and Indian Students attending Higher Education in American Colleges play out into this theme?
Will it ensure that these countries get the right Engineering skills and manpower back in their home countries?
Increasingly,I see a lot of restrictions on these Skilled people in the West[US,UK,Europe];basically you can study here but we don't want you working here.How will that impact things?
Regards
Ashish.
Hi Ashish,
I think foreign students at Western universities are a good competent labour resource for the Western high-tech industries. Only the selected few foreign students, i.e. “creme de la creme”, are allowed to work in the West after completing their studies. The West will carry on employing the relevant foreign workers for years to come as this is one of the key drivers of innovation in the West.
Following is an excerpt from Apple's webpage:
“At Apple, interns are an important part of the team. Whether you sign on for a summer internship or a co-op during the academic year, you'll be working on critical projects. Better yet, you'll be that much closer to landing a full-time job at Apple after graduation . “
That is a good example of how the big companies create the “natural selection” environment I mentioned above. Have you noticed how big and successful companies boast with having an international working environment with people from so-and-so number of countries in the world? Those Western companies have discovered long ago that by employing international talent, they make every spent dollar stretch as far as it possibly can. I have seen many examples of how employing foreign workers is so beneficial for a company but I will not get into the details of this in order not to get off-topic.
As for the returning students to their home countries, surely the aggregate intellectual level of the nation goes up, however, unless there is a suitable infrastructure to allocate the returning talents into suitable jobs, such talents are simply wasted. I have witnessed many examples of such waste in a third world country where extremely talented and well-educated technical people end up doing irrelevant work purely to earn their bread. This third world country was (and still is) simply not equipped to make use of such people. This situation can only be described as a tragedy in my book.
I conclude by saying “An education abroad ensures nothing at home unless that home is built well enough to accommodate”.