A oggi, il settore manifatturiero contribuisce solo per il 16 per cento al PIL indiano, producendo il 2 per cento dell’output a livello globale, pari a un decimo della produzione cinese. Nonostante i bassi livelli di produttività, sulla scia di una serie di iniziative come i piani governativi Make in India e l’Automotive Mission Plan 2026, negli ultimi anni l’industria indiana ha fatto tuttavia registrare tassi di crescita interessanti, specie in settori come l’automotive, il pharma e la chimica. Per essere in grado di sostenere la competizione globale, le aziende all’avanguardia stanno adottando le migliori best practice internazionali, come i metodi lean applicati alla produzione e al supply chain management.
With $2.3 trillion in GDP, India is the world’s ninth-largest economy and the third largest by purchasing power parity at $8 trillion. Yet manufacturing accounts for only 16% of the country’s GDP, compared with the services sector, which is nearly 52%. India represents 2% of the world’s manufacturing output, a tenth of what China produces. In the last 7 years (2102-2017), manufacturing grew at a CAGR of 7.32 per cent, + 7.7 per cent in 2017 alone. Automotive, Drugs & Pharmaceuticals, Chemicals, Food Processing and Electrical Equipment are the most relevant sectors in the country.
Despite some relevant constraints, the growth of manufacturing in India has been achieved by leveraging some local advantages. The Indian manufacturing basis is traditionally highly dependent on low labour cost and low-technology solutions or jugaad design to reduce capital costs, which are significantly effecting its operational improvements: low capacity utilization, more defective products and quality complaints, longer duration in launching new products, lower agility to scale up, fulfilment delays etc. Especially in small and mid-sized companies, out-dated manufacturing processes lead to low productivity and the lack of skilled labour force restrict the potential growth. Given the gap between skills needed and skills available, companies have to retrain their workforce and to fiercely compete for retaining the best profiles. Relying on labour implies a higher share of non-value-added time, poor plant-floor ergonomics and inefficient line balancing which results in significant idle time and high work-in-progress inventory. Besides, fragmented supply chain represents a big bottleneck to productivity improvement and manufacturers organise high inventory to mitigate market volatility and skewed demand patterns.
Nonetheless, Indian manufacturing companies are working hard to emerge in the global competition, no matter if the goals are increasing efficiency, improving quality or reducing energy, water and environmental impact. Three examples help shed light on such efforts.
- BHARAT FORGE LIMITED is a leading supplier of forged and machined - Powertrain & Chassis components for the commercial vehicles (trucks and buses). In FY17, though the revenue was declined by 10.2% due to weak demand in export and in the domestic market, the management was able to retain a growth rate in Net Profit ratio (11% in FY17, 5 years back in FY12 the sales turnover was 98% compared to FY17 but NP was only 6.4%). The initiatives (such as “variation reduction in processes”, using “Six Sigma” technology and complying “TS 16949 quality system standard”) along with the support of highly skilled workforce and the strident focus on lean manufacturing enabled the company to provide zero-defective products at competitive prices.
- TAPASYA ENGINEERING WORKS PVT LTD, based at Mumbai, has been designing and manufacturing Oral Solid Dosage processing equipment for over 54 years. It has adopted QbD (Quality by Design) philosophy as a business strategy in operations by introducing lean manufacturing practices such as One Piece Flow, Kaizen, re-engineered design for interchangeability and 5-S at each workstation. These continuous improvements have benefited TAPASYA’s B2B customers while improving product quality, traceability, on time delivery and cost competitiveness. Consequently, a relevant part of TAPASYA’s production is exported and its domestic growth is increasing at 11% CAGR. TAPASYA’s Managing Director Mr. Dev Bakshi points out that “in the era of industry 4.0, there is a call for developing smart machines for the pharmaceutical industry, this industry requires heavy data management and to support this, TAPASYA’s machines are automated with process control and data acquisition features while maintaining data integrity. For customer, this means quality of their product as built in feature of the processing plant and ease in data management by reducing human dependency and paperwork”.
- VIKRAM WOOLLENS, with an annual turnover of about USD 16 million, is a prominent player in the worsted segment of the Indian Woollen Textile Industry. Here, energy amounts to approximately 6% of the product cost (the third highest cost component after raw materials and labour) and dyeing activities consume copious amounts of energy and water. This has compelled management to explore and implement energy efficiency measures, low carbon solutions and renewable energy in operations. Higg index tools–an apparel and footwear self-assessment standard for measuring environmental and social sustainability throughout the supply chain–have been implemented along with Six Sigma and 5-S to understand employee’s challenges, strengths and areas where they seek improvement. The ultimate purpose of using Higg index tool is to reduce the consumption of water, chemicals and waste generation. In last 2 years, the management was able to reduced fresh water consumption by 31.7% as water recycled was increased from 65% to 75% along with other quality measurements.
As these examples highlight, especially companies exposed to global competition are now focusing their efforts to align to the best-in-class practices: better customer experience, improving competitive advantage, continuous improvement towards manufacturing excellence and optimisation of costs. In fact, all these challenging tasks are the basic requirements of today’s business and they induce state-of-the-art managerial approaches and techniques in Indian manufacturing plants. One of the most diffused approaches in operations and supply chain management is lean manufacturing, to optimize the production activities in both large and small companies.
To this regard, an interesting survey was conducted in 2013, aimed at identifying the status of lean manufacturing in Indian industries certified by TQM system ISO 9001/ISO 14000. It resulted that among the 11 main approaches, supply chain management, resource reduction and scientific management were the least preferred. In most cases, lean manufacturing was regarded as a shop floor initiative where cost reduction was the main objective. According to this survey, the most frequent lean tools were Kaizen, 5-S and TPM (Total Productive Maintenance), while Kanban (pull system), Root Cause Analysis and Supplier Involvement have received minimum score values. The benefits of Lean tools implementations mostly fall in categories like “Reducing waste and overall cost” with some improvements in quality. While Decreased Inventory, Improvement in Flexibility and Response Time were not recognized as focus, the major improvement projects were limited to production floor only. As mentioned above, a mismatch between the required competences and the educational offer has often constrained the diffusion and the implementation of Lean Thinking methods and other managerial approaches beyond the operational level. To this regard, it is well accepted that a lack of skilled/qualified people in understanding Lean philosophy has been the main barrier to its diffusion and implementation.
In September 2014, Prime Minister Narendra Modi launched the “Make in India”, an ambitious campaign with the avowed goal of transforming India “into a global design and manufacturing hub”, to encourage and accelerate growth of the country’s manufacturing sector. While many observers highlight that three years after the launch, the results of Make in India program are far below the expectations and that some major constraints to its take-off till remain, other parallel initiatives are taking place. To exemplify the strong commitment to strengthen manufacturing in India, it is worth just to mention:
- The AMP – Automotive Mission Plan 2026, a collective vision of Indian Government and the Indian Automotive Industry. By 2026, the Indian Automotive sector is likely to contribute to 65 million jobs, in excess of 12% of the country’s GDP and comprise more than 40% of its manufacturing sector;
- The growing number of Indian Institutes of Technology (IITs), academic institutions with strong domestic and international reputation which are continuously evaluating and modifying their curriculum as per the emerging trends in the industry. From 2007 to 2017 they passed from 6 to 23 active institutes;
- The Ministry of Skill Development & Entrepreneurship has established 1,200+ training centres to enable Indian youths to take up industry-relevant skill training that will help them in securing a better livelihood;
- The implementation of Good and Services Tax provides a common tax framework to all Indian states enabling companies to better negotiate with suppliers, business managers to better foresee sales, inventory management to become less expensive.
Despite the persistence of several constraints the Indian manufacturing sector is growing and quickly bridging the existing gaps as shown by several excellent experiences.
As witnessed by the large participation at the Indian Manufacturing Excellence Award, held in Mumbai in December 2017, the best manufacturing companies have already reached top standards in the operational excellence using Lean methods, Six Sigma, Total Quality management, etc.. The next edge is related to the impact of digital revolution and Industry 4.0. Additive manufacturing, extensive use of big data, artificial intelligence and cyber robot is the new frontier. Moving from individual excellences to a diffused and strong improvement takes time and required educated resources, proper infrastructures, investment and leadership, but India has the potential to accomplish the target.
(Amit Neekhra, IEMB – International Executive Master in Business candidate, SDA Bocconi Asia Campus, Mumbai;
Alberto Grando, Operations and Technology Management Unit, SDA Bocconi School of Management, Milan)