Supply Chain Automationczx

In this article, we trace 20th-Century develop-ments in the area of supply-chain automation.During the mass-production era, hard automa-tion brought the automobile within the reach ofthe common man. Currently, the trend is to au-

tomate intercompany and company-to-customer re-lationships, also called collaboration, using theInternet. In between, several revolutions have oc-curred that were mainly sponsored by developmentsin computer and communications technologies andin intercompany and cross-country logistics. It is nowpossible to receive orders from a global customer andfulfill them automatically with minimal human inter-vention. The limiting factors, however, are thecountry infrastructure and the lack of trust betweenhumans. In this article, we discuss the history of auto-mation from the viewpoints of material-flow, infor-mation-flow, supervision and control, and relation-ship automation and identify future directions. Themain message is that it is important to make balancedinvestments in all four facets of automation to maxi-mize shareholder value.

BackgroundThe central theme in all industrial developments dur-ing the last century has been automation. The firstsignificant attempt was assembly-line automation forthe manufacture of automobile engines by Henry

JUNE 2002IEEE Robotics & Automation Magazine48

By N. VISWANADHAM

Just in Time to Enhance 21st-Century Industry,Material-Flow, Information-Flow, Supervision and Control,

and Relationship Automation Are Reaching Maturity

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Ford in the early 1900s. Today, there are deci-sion-support systems and communication toolsavailable for automating marketing and sales pro-cesses, as well as the relationships with the suppliers.The motive in all these attempts is to automate pro-cesses in the supply chain, beginning with raw mate-rial procurement and ending with delivery to theend consumer, with the primary goal of serving thecustomer more efficiently and effectively. Thus, au-tomation efforts that first started on the factory floorhave now spread to the entire supply chain. Tech-nology is at the root of all these developments,sometimes causing drastic disruptions in the indus-try and creating revolutions.

There were second- and third-order effects of theautomation of supply-chain processes. For example,Henry Ford’s assembly automation brought the auto-mobile within the reach of the middle class, and thishas led to the creation of shopping malls outside citylimits, well-paved roads and highways, and trucktransportation. A whole set of other industries sprungup and thrived. The Internet created another majorshift, allowing people to shop from their homes, the need fordelivery through multiple channels, and the coordination ofreturns. There are several different ways that one can describethe developments of the last century. Several historians andpopular books have already done this [1]. Our intent is not tosummarize these here, but to look at the developments in aperspective that enables us to identify future trends and re-search issues in this area.

Despite several economic and cultural changes, the maingoal of manufacturing and supply-chain networks has re-mained the same, i.e., to procure raw materials and transformthem into final products and deliver them to the global cus-tomer at the time and place specified by him or her in thepresence of the other players in the market. Basically, this in-volves the automation of material, information, and financialflows, and relationships between businesses and customers.In a manufacturing supply-chain environment, there are sev-eral decisions to be made and facilities to be supervised andcontrolled. Significant efforts have also have gone into theautomation of facilities such as warehouses and factory floors.Recent emphasis has been on automating and integratingintercompany material and information flows. We can clas-sify these efforts into the following interrelated and mutuallyreinforcing categories

� material-flow automation� information-flow and decision automation� automated supervision and control� relationship automation.We will consider each of these separately and list the

achievements during the last century. As shown in Fig. 1, ma-terial-flow automation started with assembly-line automation,information flow was by word of mouth or paper based, hu-mans made decisions and controlled the processes, and, finally,

relationships required face-to-face interactions. The main goalwas to achieve a fully automated perfect supply chain, where acentralized or distributed control system embedded with deci-sion support systems helps in the negotiation and selection ofbusiness partners and customers and generates signals that en-able the automatic flow of material and information amongthe stake holders in the supply chain.

From the investment angle, material-flow automation re-quires heavy investments in warehouses, automated assemblylines, airports, seaports, transport fleets, etc. The other threetypes of automation require investments in information andcommunication technologies, business-to-business (B2B) in-frastructure, content-management tools, monitoring and con-trol equipment, and soft technologies such as databases,decision-support systems, data mining and data warehousingtools, computer-aided engineering tools, and software engi-neering tools. Investments in information technology (IT)could also be heavy because of rapidly changing technologies,the integration of complex software from different vendorsand legacy systems, and the human-intensive nature of re-search and development work. Also, investments in all fourfacets of automation should be balanced and aligned withbusiness strategy. For example, if a company is selling PCs di-rectly to corporate and individual customers, it makes sense tooutsource the logistics and transportation and invest in an ITinfrastructure, customer-relationship management (CRM),monitoring, and assembly lines. Recent history has shown thatinvestments in business-to-customer (B2C) infrastructurewithout consideration of fulfillment issues would not createvalue. Similarly, relationship management with their sup-ply-chain partners is important for global players. Countriesshould develop supply-chain clusters, not just manufacturingfacilities. The ultimate aim of these automation initiatives is to

JUNE 2002 IEEE Robotics & Automation Magazine 49

RelationshipAutomation

InformationAutomation

Control andSupervisionAutomation

MaterialFlow

Automation

AutomatedSupplyChainAssembly

Automation

Paper Based,Word of Mouth

Face-to-FaceInterface

Open Loop(Human)

Controllers

Figure 1. Four facets of automation.

derive maximum value through the establishment of auto-mated supply chains.

In this article, we discuss the recent developments in mate-rial-flow, information-flow, supervision and control, and rela-tionship automation. Our thesis is that these facets should belooked at as integrated developments rather than isolated in-vestments. Only then can one maximize the value that comesout of all these investments. We will also comment on the fu-ture, emphasizing the need for balanced investment in all fourtypes of automation technologies and for aligning the invest-ment strategy with the corporate strategy.

Material-Flow AutomationMass ProductionIn 1913, Henry Ford conducted the first notable material-flowautomation exercise by automating the assembly line for auto-mobile engines. This automation is called Detroit automationor hard automation. This had tremendous impact on theeconomy and society at large by bringing the automobilewithin the reach of the middle class. The next significant tech-nological innovation was the use of computers for controllingtool paths. This has created numerically controlled machines,material-handling robots, and automated guided vehicles.These developments have led to flexible automation and theautomated factory floor. The developments of local factorycomputer networks linking numerically controlled (NC) ma-chines and automated automated guided vehicles (AGV) con-trollers has led to the development of cell controllers andflexible manufacturing systems. After finishing processing atone machine, jobs in these systems proceed to another auto-matically without human intervention. There are also plan-ning tools aiding job shop scheduling. Warehouse

management systems that manage automated storage and re-trieval of semi-finished and finished goods have also come intobeing. The lean manufacturing revolution pioneered by Toy-ota and followed by other Japanese car manufacturers has cre-ated another revolution. The “just-in-time” philosophy,partnerships with suppliers by sharing information, and under-taking joint product development have created success forthese companies. All these developments were basically fo-cused on the factory floor within a single company. Also, mostof these developments occurred in the auto industry.

Global ManufacturingToday, hardly a single product is manufactured by any onecompany or in any one country. With the globalization ofmanufacturing, there arose a need for moving materials,mostly semi-finished goods, in the form of subassembliesfrom suppliers in one country to manufacturers in anotherand distributors in yet another country. Domestic and inter-national logistics became very important. A typical materialand information flow between two partners is shown in Fig.2. There were developments to fill this need from airport andseaport operators by automating loading and unloading op-erations and through containerization. Several countrieshave also created trade-free zones and technology parks.Third-party logistics providers who take responsibility fortransporting material from one company to another and alsomaintain warehouses emerged. Transportation-managementsystems (TMS) and vehicle routing software that aid in effi-cient fleet management were developed. Track-and-tracesystems help businesses track shipments and plan productionschedules efficiently. Distributors and resellers are anotherbrand of intermediaries that help in the final delivery of theproduct to the end consumer.

Efficient linkages between various stake holders in the sup-ply chain, from raw material providers to the end customer,are important for reducing inventories and delay times and ul-timately meeting customer demand on time, every time. Oneof the best practices in improving the efficiency of inboundmaterial transfer is a supply hub that uses the concept of ven-dor-managed inventories. Another best practice is cross-docking, where material from the manufacturers, to the dis-tributors, to the retailers is transferred from one truck to an-


WarehouseFreight

ForwardingCustoms

ClearanceAirlines/Shiplines

CustomsClearance

FreightForwardingWarehouse

Buy

ers

Sel

lers

Info

rmat

ion

Figure 2. Material flow between two businesses.

It is important to make balancedinvestments in material-flow,information-flow, supervision andcontrol, and relationshipautomation to maximizeshareholder value.

other at the cross-docking station without the need forinventorying in warehouses. The location of supply hubs andcross-docking stations and their scheduling are issues that re-quire attention.

The ingredients necessary for global manufacturing to suc-ceed (such as global logistics providers and the infrastructure interms of ports, airports, and IT bandwidth) are not uniformthroughout the world. With a few exceptions, most countriesdo not have efficient infrastructures. In the future, global man-ufacturing may occur between countries that have compatibletransportation and information infrastructure.

Information-Flow and Decision AutomationThe Manufacturing Planning—Enterprise-ResourcePlanning EraB2B is the most recent chapter in a long cycle of business au-tomation that traces back to the 1960s. For the last four de-cades, virtually all IT efforts have focused on automating andimproving the efficiency of individuals and operating unitswithin the four walls of a company. A vast majority of businesscomputing over the last several decades has been inwardly fo-cused and accessible only by the employees of the enterprise.

The first major breakthrough in business computing oc-curred with the advent of the mainframe computer in the1960s, where the focus was on automating functional processes,such as general ledger and accounting. Businesses introduced awide range of applications, such as manufacturing planning(MRP), drafting and design [computer-aided design (CAD)],and inventory-management systems. During these early phases,neither the business units in a company (e.g., manufacturingplants, regional sales offices, corporate headquarters) nor cus-tomer and supplier relationships outside a business’s four wallswere automated. Employees on a divisional level could shareand access information, but all external-facing communicationand commerce occurred through fax and phone lines. The nextstage in information-flow automation—enterprise resourceplanning (ERP) applications—is centered on sharing informa-tion among multiple individuals and functional areas of a com-pany. As a result of the development of client/serverarchitecture and relational-database-management systems, mul-tiple users from different functional areas across the enterprisewere provided real-time access to the applications developedduring the preceding waves of computing, as well as a host ofnew applications focused on areas such as CRM andbuyer/seller transactional analysis.

While these advancements allowed stakeholders within acompany to gain an integrated view of the core business pro-cesses of the enterprise, information was still not shared withcompany’s customers and suppliers. For example, individualemployees from the same company could extract and share in-formation stored on the company’s financial databases or inven-tory-management systems, but customers and suppliers wouldhave to access this information by using phone calls, faxes, andelectronic-data interchange (EDI). With the emergence of the

Internet, information sharing among partners with extranets isnow seen as a source of competitive advantage.

B2B Market PlacesA B2B e-Marketplace (also referred to as a trading exchangeor trading community) is a trusted, Web-based intermedi-ary that

� facilitates trading between commercial buyers and sellers(Fig. 3)

� facilitates the replacement of paper, catalog, phone, fax,and e-mail transactions in the supply chain by electronictransactions over the Internet

� provides new, collaborative mechanisms for formingand growing supply-chain relationships on the Internet

� leads to “raw-material-to-retailer” supply-chain optimi-zation in specific vertical or horizontal markets for bothindirect and direct materials.

B2B requires a major infrastructure. The range of servicesprovided by companies include

� indirect goods procurement and workflow management� content and catalog management� real-time dynamic pricing and auctions� supply-chain management tools� collaborative product design software� real-time logistics and fulfillment capabilities� advanced analytic tools� payment services.For B2B marketplaces to be competitive, the value propo-

sition should be to facilitate transactions from end to end, in-cluding strategic sourcing, financing, insurance, warehousing,and settlement, not just matching buyers and sellers. A farmore reaching value proposition is provided by the solutionprovider that has the ability to monitor, integrate, and dissem-inate data across the supply chain to improve buying practices,optimize channel management, and improve the capacity uti-lization of multiple participants in the supply chain.

Supply-Chain PlanningFor years, companies have relied on a range of methods to tryto build more tightly integrated business processes with trad-ing partners. The most significant method has been EDI, astandard for transmitting business documents over private orvalue-added networks in order to share product information,invoices, and purchase orders among business partners. EDI


S

S

EM

OEM

OEM

EM

B

B

Figure 3. Three-tier supply chain with marketplaces.

distributes information asynchronously by way of batch trans-missions, whereas real-time pricing and product informationis the growing demand from businesses. The Internet hasopened up possibilities for widespread, real-time sharing of in-formation among multiple trading partners. With the Internet,market activity (the buying and selling of goods) of multipleparticipants and their information systems can be tied togetherin a real-time, globally-shared environment. The Internet isboth a commerce channel and decision making platform.

Today’s companies and supply chains are dynamic and het-erogeneous. The Internet gives companies global visibility andinformation-sharing capabilities, and these are precipitating afundamental change in supply-chain management. Static sup-ply chains are quickly giving way to more flexible value chainscomposed of partners that can be assembled in real time tomeet unique requirements (Fig. 4). The Internet has loweredthe barriers to effective collaboration, allowing companies toeasily share demand-forecast information, production-capac-ity requirements, manufacturing schedules, and new productdesigns. Transaction flows among trading partners have alsobeen greatly facilitated, so companies can remit quote re-quests, purchase orders, shipment notifications, and onlinepayments in a highly efficient and cost-effective manner. Inmore and more industries, it is becoming apparent that thecompetitive field is no longer limited to company A versuscompany B. The game is now supply-chain network versussupply-chain network, with an increasing reliance on collabo-rative relationships to create links of value. Buying, making,moving, and selling products and services are the sub-pro-cesses of supply-chain planning. Companies need superior de-cision-making tools and workflows that can leverage theavailable data, and, in real time, maximize performance ofthese sub-processes and the entire supply chain. Some of the

processes that need support include: collaborative forecastingand planning; collaborative product-life-cycle management;supply, distribution, and production planning; procurement;transportation planning; and demand-supply matching.

Automated Supervision and ControlThis is a critical area that needs significant attention from boththeoreticians and practitioners.

Factory AutomationThe theory of cybernetics made possible the real-time controlof individual equipment, such as the lathe, milling machine,robot, etc., using analog controllers. In the computer era, pro-grammable controllers replaced analog control systems. Withthe advent of local area networks (LANs), factory-automationnetworks have come into being; we have cell controllers con-trolling multiple machines, and factory controllers controllingseveral such cells. It is possible to feed the raw material into acell and get the finished product stored in an automated stor-age and retrieval system (ASRS), all automatically with thehelp of manufacturing controllers and warehouse manage-ment systems. The theory of automatic control has helped inthe development of real-time control systems and supervi-sory-control systems. Virtually all these efforts have focusedon automating and improving the efficiency of operating unitswithin the four walls of a factory.

Automation of Other Supply-Chain ElementsThe supply chain can be decomposed into horizontal pro-cesses, such as product development, customer acquisitionand retention, procurement, supply chain and order deliv-ery, etc. The corresponding sub-processes of all the stake-holders in the value chain need to be integrated without fric-

tion using IT tools, such as XML. En-terprise application integration softwaredeveloped specifically for the supplychain is designed to electronically con-nect trading partners with a user’s enter-prise systems. There are several prod-ucts, in the market designed to connecttrading communities together. TMSsoftware streamlines and integratestransportation operations. Warehouse-management systems (WMS) make dis-tribution centers and warehouses runmore efficiently and profitably. Ad-vanced planning and scheduling (APS)technology helps in matching procure-ment and production activities moreclosely to actual customer demand. Ad-vanced software now lets companiesshare this critical data with their supply-chain partners.

The Internet makes process integra-tion between the decision-making sys-


Internet

LogisticsProvider

Supplier

Supplier

Retailer Bank

Distributor

Assembler

Customer

LogisticsNetwork

Material FlowIntegration

IT Network (Extranet) Information Network

Logistics Hub

Figure 4. Integrated supply-chain network.

tems of original equipment manufacturers (OEMs), theirsuppliers, and customers bidirectional and tightly integrated.Suppliers can interact dynamically and initiate actions withineach other’s information systems by pre-defining businessrules that trigger events across systems. That means that supplychains can be fully automated from the information angle. Forexample, when a supplier fulfills an order, requests are auto-matically generated to the supplier’s suppliers to replace com-mitted stock and a ripple effect through the supply chainensues. Less human intervention is required at each step, as de-cisions in inter-business processes become more automatedusing decision-support systems. Customers’ and suppliers’computer systems can make more intelligent business deci-sions. For example, if one supplier’s price drops below that ofothers, the customer’s application software might automati-cally move that supplier up in the vendor of choice list. A cus-tomer consulting the vendor-of-choice list before orderingwould see the cheaper supplier at the top of the list and placean order with that supplier rather than the others. The rapid,two-way flow of information, enables just-in-time delivery,reduces the cost per transaction, and streamlines the way re-sources flow through the supply chain.

Supply-chain event management involves monitoring thesupply-chain process for exceptions and taking corrective ac-tions. For example, the breakdown of a truck carrying replen-ishment of a critical component will have a significant effecton the production schedules of the OEM. Monitoring thisevent and taking appropriate corrective action, such as send-ing another shipment by a faster transport medium or rerout-ing another shipment, will need real-time decision makingand access to production schedules of the OEM, shipmentsstatus, etc. Supervisory-control theory can help in developingdecision-support systems for the real-time monitoring andcontrol of supply chains.

Relationship AutomationIn a supply-chain network, there are multiple players includ-ing first-, second-, and third-tier suppliers, contract manu-facturers, OEMs, distributors, retailers, and so on. There isneed for coordination between all these players for com-bined forecasting by sharing point-of-sale information, jointscheduling, and joint product development.

Automating Customer RelationsIt is a challenging task to align the enterprise to meet the needsof the customer—available 24 hours a day, seven days a weekvia telephone, e-mail, and the Internet—and to keep accuraterecords of customer interactions and resolve issues quicklywith care. As the range of products and services expand andcustomer demands increase, support systems and tools becomethe integrating factor in business operations. The ability of anemployee or self-service option to serve the customer well de-pends on the speed and latency of the infrastructure movingthe data to the person who needs it, the data profiling tools tounderstand a customer’s preferences rapidly, well-constructed

Web interfaces, and the ability to manage it all as if the com-pany is aligned around delivering on each customer’s needs.With multiple customer segments and multiple products andservices, it is increasingly difficult to deliver the expertise re-quired to keep the many promises a business makes every day.To do this and concurrently maintain competitive cost is chal-lenging. The solution to this problem is intelligent andproactive software than can manage various interactions andfollow up work items in a manner that aligns business goalsand delivers on promises made, over and over again—whichleads to attracting new customers and keeping them.

The overall CRM-solutions framework includes: multi-media 24 × 7 customer interactions, intelligent work and cus-tomer contact routing, data mining decision making, andtracking tools that link into legacy systems. This new solutionsframework creates new operational efficiencies through thealignment of front-office and back-office processes in directsupport of the promises to customers and the business goals forgrowth, relationships, and efficiency.

Automating Supplier RelationsPartner-relationship management (PRM) uses the Internet toprovide integrated solutions to the challenges of vendor/part-ner communication. An effective PRM system organizesleads, profiles, and documents in a central repository that canbe updated and viewed in real time over the Internet. PRMsystems, like extranet systems, enable the user to view infor-mation according to their specific characteristics—each useronly sees information appropriate for their permission leveland interests. For example, they provide resellers with instant,on-demand access to information and tools. Since resellershave self-service processes for answering their questions anddoing their everyday work, the need for costly face-to-facemeetings and direct mailings falls dramatically. A good PRMsystem allows companies to track usage and activity, givingvendors tighter control over communication.

The FutureThis century has been the century of automation. All the vari-ous aspects of business activities have slowly been automated,starting with material-flow automation and followed by in-formation-flow automation and automated supervision andcontrol. More recently, automation has gradually evolvedfrom within the four walls of the enterprise to encompass the


Automation has gradually evolvedfrom within the four walls of the

enterprise to encompass theoutside world, resulting in the

drive towards the automation ofrelationships.

outside world, resulting in the drive towards the automationof relationships. We are charting these initiatives in order togain better insight into some of the possible technologies oftomorrow (Fig. 5). For digital products, the delivery of theproduct to the final customer could be trivial. Our discussionis more concerned with physical products. What about the fu-ture? The future is already here in some countries and forsome products.

Design Your Supply ChainMost current supply chains were not designed—they grewwith the industry. They are complex, inefficient, and donot use the Internet, mobile communications, or othertechnologies. The design of supply-chain networks for a setof products and markets that includes supplier selection, in-formation transfer between stakeholders, and monitoringand performance with minimal inventories at various stagesis essential for survival. It is important to note that all fourfacets of automation mentioned above are important. Com-panies with the capability to use technology to automate re-lationships and produce new products will have a definiteadvantage over others.

Building Bridges Between BusinessesThe next cycle in manufacturing automation—automatingaround customers and suppliers—is evolutionary and iterativein nature. Now, the Internet is both a commerce channel anddecision-making platform. This shift opens up manifold possi-bilities for intra- and inter-supply-chain collaboration, rangingfrom customer-driven ordering, to collaborative design andmanufacturing, to real-time pricing on the demand curve, to

optimizing demand and production forecasts, to fully auto-mated purchase orders and billing.

Is it possible to fully automate material movement fromthe supplier to the OEM? The answer is, “No,” at least not inthis decade. Shipments have to go through various agencies,airports, and seaports. The streamlined movement of mate-rial through integrated scheduling and real-time monitoringwith small waiting times is what one can hope for. This canbe achieved through information integration and use of deci-sion-support systems. Basically, based on the knowledge ofwhere and when the material is to be delivered, its currentlocation, and the status of the logistics operators undertakingthis movement, the decision-support system determines thebest schedule.

Distributed Flexible ManufacturingManufacturing started as a local activity within a city where allactivities from components manufacture to final product wereperformed. Examples include auto manufacturing in Detroitand Toyota cities. With global manufacturing, this scenariohas changed. Now, no product is built in any one country orby any one company, with the result that inter-company lo-gistics and collaboration became very important and critical.The Internet is used to advantage here for information trans-fer. But international logistics are enormously complex, re-quiring investments in cargo complexes and transport. Thisalso increases the cost and time of delivery. But customerswant rapid delivery of fresh products at competitive prices.Manufacturing itself is automated and commoditized. Designand partner relationship play a major role.

Given the above scenario, one trend that may occur is formanufacturing to revert back to city clusters again, but with an


AutomatedSupplyChain

Relationship Automation

Control andSupervisionAutomation

Material FlowAutomation

Information Automation

MachineControllers

AssemblyAutomation

Paper Based,Human Interface

Purchasing,Marketing

CRM, SRM

Software RelationshipManagement Agents

Airport,Seaport,DistributionCenterAutomation,ASRS

Factory FloorAutomation

Marketplace Embedded SC

Collaborative SCP

Internet, ElectronicMarketplaces

LAN, ERP

CAD/CAM/CAE

WMS,TMS

CellControllers

B2BControllers

FactoryControllers

Figure 5. Progress of automation technologies.

important difference: the Internet will now be used for globalknowledge transfer and for monitoring relationships. Productswill be manufactured locally in a country or region and deliv-ered locally. Thus, the customer will get a branded productdelivered rapidly at a competitive price. We may see severalregional automated supply chains collaborating on a globalscale by sharing knowledge and information.

Also, there will be a big push for manufacturing plants tobe more flexible. Currently, machines and layouts at each lo-cation are very specialized—they are not interchangeable. Itis virtually impossible to move production from one locationto another or from one company to another. There is noflexibility in terms of production because most of the plantsare unique in what they produce and in terms of materialsand material-handling equipment used. Manufacturing maybe outsourced to third-party contractors to gain economiesof scale.

Supply-Chain Performance MeasurementAlthough a significant amount of work was done in the su-pervision and control of equipment and material flow, verylittle attention is given to defining performance measures,measuring the performance, and improving it. Sup-ply-chain-performance measurement provides the means bywhich the network can assess whether its performance hasimproved or degraded. The importance of using measures isto help ensure that a supply chain is competitive. There are anumber of companies involved in the supply chain, and all ofthem should work in concert for the supply chain to do well.Ultimately, the end consumer has to be satisfied and givenperfect delivery of his or her order. Perfect delivery meanson-time defect-free delivery every time. Defect is a genericterm that includes design defects, manufacturing defects,wrong delivery, delayed delivery, etc. A good discussion ofthis is available in [2].

Building the Infrastructureto Maximize Shareholder ValueMost countries do not have efficient transportation and infor-mation infrastructures. Also, not all companies (manufactur-ers, suppliers, distributors, logistics providers) are Internetenabled. The ingredients necessary for global manufacturingto succeed, such as global logistics providers and the infra-structure in terms of ports, airports, and IT bandwidth, are notuniform throughout the world. Thus, the future of somecountries is in the past of advanced countries. There are defin-itive directions that one can see in terms of the future.

As described in the previous sections, the wheel of automa-tion incorporates the four aspects of material-flow automa-tion, information-flow automation, control-and-supervisionautomation, and relationship automation. The ultimate aim ofthese automation initiatives is to derive maximum value by es-tablishing automated supply chains.

Automation in all its forms significantly reduces the cost ofoperations and, at the same time, positively impacts the reve-

nue streams from operating a supply chain, thereby creatingtremendous value. Hence, in this process of value creation,each of the four aspects of automation is a key value driver.For example, hard automation on the factory floor results in areduced workforce and labor cost. Similarly, information au-tomation through intranet systems and corporate LANs canresult in increased employee productivity, resulting in in-creased output. Control-and-supervision automation resultsin increased asset utilization through intelligent decision-mak-ing, resulting in an increased return on assets. And, lastly, rela-tionship automation improves customer satisfaction that,consequently, improves customer loyalty that, in turn, resultsin increasing revenue streams.

Furthermore, since these automation initiatives are closelyrelated to the infrastructure of the enterprise, they have a mul-tiplier effect on the value delivered to the enterprise. For ex-ample, an intimate customer relationship can provide theenterprise with opportunities for cross-selling of other goodsand services and generate new revenue streams. In the samemanner, investments in IT have multiple impacts, such as in-creased personal productivity, leading to lower manpower re-quirements and greater coordination between teams andemployees, leading to faster time-to-market and reducedproduct-development time.

There is no doubt that enterprise-automation initiatives of-fer a great opportunity to increase the value of the enterprise.However, in order to maximize value, there has to be a sys-tematic approach to value creation. Such a process is necessarybecause value can be destroyed by an inappropriate strategyjust as easily it can be created by a planned investment initia-tive. Consider the case of the failed dot-com revolution.Companies invested too much in relationship automation bybuilding expensive Web sites. At the same time, their mate-rial-handling processes were not automated enough to handlethe orders that the relationship-management exercise wasgenerating. Eventually, they ended up incurring significantlyhigh material-handling costs and reduced-revenue streamsfrom unhappy customers. A systematic approach would haveensured that they invested appropriate amounts of their in-vestment dollars into automating their relationship, mate-rial-handling, and control-and-supervision processes. Animportant consideration to keep in mind when making suchinvestments in automation initiatives is that certain invest-ments cannot take place until previous investments are madein some prerequisite technologies and processes. For example,it is counterproductive to jump the gun and invest in global


Companies with the capability touse technology to automate

relationships and produce newproducts will have a definite

advantage over others.

supply-chain planning software until the enterprise has globalsupply-chain visibility through information systems integra-tion. Hence, it follows that in order to create value, it is im-portant to follow a sequential investment strategy whereineach investment builds on the value created by previous in-vestments.

AcknowledgmentsThe author would like to thank Prof. Peter Luh for invitinghim to be a panelist at the IEEE International Conference onRobotics and Automation at the panel discussion. Also, thanksare due to Roshan S. Gaonkar for his help in figures, discus-sions, and critical comments.

KeywordsAutomation, manufacturing, supply-chain networks, collabo-ration, logistics, shareholder value, supervision and control,information technology, relationship automation.

References.[1] J.P. Womack, D.T. Jones, and D. Ross, The Machine that Changed the

World. New York: Harper-Perennial, 1990.[2] N. Viswanadham, Analysis of Manufacturing Enterprises. Norwell, MA:

Kluwer, 1999.

[3] N. Viswanadham, “Manufacturing automation: The past, present and fu-ture,” The Total Enterprise Automation Conf., Singapore, June 2001.

N.Viswanadham is Deputy Executive Director of The Lo-gistics Institute-Asia Pacific and also a professor in the Depart-ment of Mechanical Engineering at the National University ofSingapore (NUS). He is Senior Editor of the IEEE Transac-tions on Robotics and Automation. He has held several prestigiouspositions before joining NUS: he was a GE Research Fellowduring 1989-90; Tata Chemicals Chair Professor at the IndianInstitute of Science, Bangalore; and the recipient of the 1996IISc Alumni award for excellence in research. He is the authorof several textbooks, journal articles, and conference papers.He is the lead author of two textbooks: Performance Modelling ofAutomated Manufacturing Systems (Prentice Hall, 1992) andAnalysis of Manufacturing Enterprises—An Approach to Leveragingthe Value Delivery Processes for Competitive Advantage (KluwerAcademic, 2000). His current research interests include sup-ply-chain management and B2B logistics.

Address for Correspondence: N. Viswanadham, Department ofMechanical Engineering, The Logistics Institute-Asia Pacific,The National University of Singapore, 10 Kent Ridge Cres-cent, Singapore 119260. E-mail: [email protected].


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