MAKE IN INDIA: HOW MANUFACTURING IN INDIA CAN BECOME GLOBALLY COMPETITIVE

Growth in manufacturing is crucial for India’s economic development. To capitalize on the demographic dividend, India must create nearly one million jobs per month over the next decade. Manufacturing has the potential to provide large-scale employment to the young Indian population and thereby enable a significant section of the population to move out of poverty. With this in mind, the Indian government has adopted “Make in India” as a core policy initiative to encourage and accelerate growth of the country’s manufacturing sector. Let’s analyse, explore and find a way out for experiencing the true potential of India’s untapped manufacturing sector.?

Now let’s explore several analyses points that contribute to India’s limited manufacturing competitiveness:

Low productivity.?Manufacturers are held back by poor workforce productivity, primarily because of a lack of automation, outdated manufacturing processes, limited use of design-for-manufacturing, and numerous non-value-added tasks.

Talent and skill shortage.?Rigid labour laws force companies to hire casual workers. Vocational schools are not well-equipped to train workers. Companies fail to focus on intermediate-level manager or foreman (Meister) grades that can provide on-the-job training to direct labour, and Indian academics stress simulation and Excel modelling for engineers over Kanban and kaizen processes.

Inefficient supply chains.?Infrastructure bottlenecks and structural impediments attributed to state-level taxation policies have contributed to longer lead times and excess inventory across the value chain.

Lower levels of supplier competence.?Many Indian tier 2 suppliers have been part-to-print suppliers that have not invested in improving their product development or quality control capabilities. This has made rework and returns routine, further reducing productivity.

While these challenges seem daunting, best practices can help manufacturers address the issues and be globally competitive.

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Challenges and solutions for global competitiveness

Challenge: Indian manufacturing practices are labour-intensive

Manufacturers use the low cost of labour to offset the high capital outlay required for automation. We have seen manufacturers use semi-automation or low-technology automation solutions or custom design their own automation equipment to control capital costs. By itself, this is not a bad option. But it becomes a problem when manufacturers depend solely on labour arbitrage to gain a competitive advantage rather than concentrating on quality and productivity.

Solution: Make smart investments in asset productivity

A number of fundamental steps can improve manufacturing productivity, such as efficient line balancing, lean plant layout, and process de-bottlenecking. In addition, manufacturers can drive incremental innovation and leverage know-how of vendors and industry groups to keep their manufacturing practices up to date.

Another 15 to 20 percent improvement is possible with structural changes. For example, smart automation—investing in capital equipment to improve productivity—places automation tools at select locations, ideally stations that have significant quality issues or stations with long cycle times.

Challenge: Skilled manpower is in short supply

While India has a large working-age population, finding skilled manpower is difficult. One reason is the quality of training provided by Indian vocational trade schools, which lack the necessary equipment and infrastructure to impart relevant training, meaning companies have to retrain their labour force once recruited. India’s rigid labour laws also restrict companies from making radical changes and rewarding their best workers.

Solution: Develop employee skills across all levels

The manufacturing industry can take collective and individual actions to grow a skilled labour pool. At a collective level, the industry can establish and support vocational training institutes for developing skilled labour pools around key manufacturing clusters. In addition, establishing standards for curriculum and certification testing will ensure all entry-level workers have the skills needed to perform their jobs. For example, in the early 2000s, the Indian IT industry was able to rapidly induct hundreds of thousands of workers by setting up and partnering with specialized training academies or creating large-scale internal training programs.

Challenge: Supply chains are largely inefficient

Supply chains in India are a key contributor to non-value-added functions. An array of external factors affects supply chain networks, including market volatility and skewed demand patterns, infrastructure and transportation bottlenecks, and poor structuring of supply chain networks to optimize on sales and excise taxes. Manufacturers struggle to mitigate these external forces, which lead to increased raw material and finished goods inventory across the value chain.

Solution: Increase agility to reduce waste across the supply chain

Supply chain agility is crucial to a lean organization. Agile companies carry less inventory, manage flow better, and have fewer stock-outs. A manufacturer that wants to become more agile should focus on organizational setup, Processes, Technology and tools.

Challenge: Suppliers fail to provide high-quality products

Tier 1 or tier 2 suppliers tend to be small or medium-size enterprises with limited engineering or process capabilities. Adoption of lean and quality systems is often low, which results in poor quality products. Supplier quality issues stem from the usual suspects: talent shortage (to solve quality problems at the source), process discipline (to prevent poor quality products from moving through the value chain), and effective measurement and monitoring systems (to track and solve issues).

Solution: Improve supplier fitness and product quality

Solving deep-rooted supplier quality issues is possible, but it is not easy. It requires making all suppliers across the value chain lean. After all, one lean factory in an inefficient value chain is pointless; all partners need to become lean for the enterprise to be lean.

The best results will come from a long-term approach, focused on suppliers and supply relationships. These relationships should have built-in incentives and mandates for lean improvements that will result in quality and cost improvements across the entire value chain. The first step is offering suppliers incentives to become lean not only in their processes but also in additional capability areas such as product development.