Technology Level in the Industrial Supply Chain: Thermodynamic Concept

Abstract

Functioning of an industrial supply-chain can be viewed as a series of Carnot cycles, operating between numbers of temperature pairs. Economic temperature of vendors and receiving farms is determined by the technology level of their production process. Instead of the Cobb-Douglus equation of production, the level of technology can also be calculated from the second law of thermodynamics. Technology is the integrating factor of the non-total differential form of the Production, as it directs the actual process variables of the production chain. System entropy changes with collection and distribution of goods and money. Advantages and limitation of vendor development can also be explained. Case studies from Indian automobile industry and some industrial clusters have been presented in this article as empirical evidence for this hypothesis. For large manufacturing organizations, technology level can be estimated from the annual balance sheet, but it is difficult to determine it in the unorganized portion of the supply chain and industrial clusters. Average income of worker and production rate per person is a fair indicator of the technology level. Correlation analysis of these two indicators with Technology level has also been included in this study.