3 point strategy to make Indian manufacturing globally competitive
Prof. Vijay Sampath is Head-Consultancy Services at Bhavan’s SPJIMR, Mumbai and Adarsh Ramaswamy is Director, Sambuddha Management Consulting and an alumnus of Bhavan’s SPJIMR share insights on making Indian manufacturing globally competitive.
Trade wars, Pandemics and Chinese geopolitics are devastating global supply chains and economies. To avoid risk and increase resilience, nations and corporations are increasing domestic production in strategic sectors and broad- basing supply chains beyond China. These developments offer vast opportunities to Indian manufacturing.
AT Kearney’s annual “Reshoring and China diversification indices” track the “rebalancing” of US manufacturing imports away from China. This report shows that companies are willing to spread risk, instead of relying solely on cost advantages. Future threats will force companies to reorganize global supply chains by accelerated “scattering” of suppliers. Strategic decisions will focus on resilience and risk mitigation, to ensure profitability.
Indian manufacturing companies should view this period as a “Once-in-a-generation” opportunity to reach standards of South Korea, Taiwan, Israel, and “beyond” China.
To capture the opportunity we have to look beyond clichés like cost and local advantages. Global companies will now pay premiums for resilient supply chains that are reliable and flexible. Contrary to some viewpoints, quality is not the key issue with Indian manufacturing or local conditions like land, red tape, connectivity etc. What then is the way ahead?
To capture global markets, Indian companies must instead focus on 3 strategic capabilities- Reliability, Scalability and Flexibility or the “R,S and F” Framework (R.S.F). With these capabilities, companies can scale with quality, resulting in cost efficiencies and reliability, thus becoming globally competitive. Thus giving the assurance of resilience and adaptiveness.
India’s $ 177 billion p.a. IT-BPM market was built on a similar framework like R.S.F, growing exponentially after the Y2K event. Indian IT industry used the opportunity to integrate world class processes with the capabilities of Indian talent. It resulted in 24/7, reliable and adaptive global scale operations, with innovations like seamless Onshore-Offshore operations.
It is in this context that we place RSF as strategic capabilities to achieve global standards and win customers.
Customising Reliability- Scalability-Flexibility for manufacturing organizations
While there is unanimity among industry experts and business owners that Reliability, Scalability and Flexibility (R.S.F) are 3 major drivers for India to be globally competitive, the approach and outcome will vary across sectors. In particular the sequencing of processes will depend on conditions unique to each company and industry.
Therefore, while global standards in RSF are necessary for all segments, the nature of industry and starting point of the journey for every company will require “Mass-Customised solutions” for each case. With universal adoption, these solutions will drive strategic competitiveness of the entire sector.
In our experience two characteristics determine the starting point of change – 1) The interaction of suppliers and customers and 2) The level of industry maturity.
The illustration of automotive industry suppliers (Exhibit.1 below), based on our past experience, demonstrates need for mass-customisation within the RSF framework. Suppliers to an automotive OEM in India can be classified into 3 categories, defined in the exhibit as Type 1, 2 and 3.
Each category has, 1) unique characteristics defined by their customers and, 2) weaknesses arising from their processes. Therefore, the priority sequencing and intensity of Reliability, Scalability and Flexibility will change for each type.
Similarly, if we analyse the maturity of industries, unique factors need to be addressed in organizations to achieve global standards.
Exhibit 2 illustrates the differences in maturity across different sectors. For better understanding, in addition to R.S.F, cost competitiveness, delivery and technology adoption are also added.
Exhibit-2: Competency mapping across different sectors