Indra’s Drishtikona (Viewpoint)

Why Am I Hopeful About India’s Manufacturing Sector?

Posted : December 9, 2005 at 7:02 am [IST]

India is on the right track to get its place in global manufacturing. As obviously it can’t depend only on its service sector for improving on its GDP growth. Improvement of infrastructure such as roads, telecom, power, and ports both sea and air, will make its manufacturing sector globally competitive. And an export-oriented growth in manufacturing sector will add up in higher GDP growth. Naturally, the quality perception about Made-in-India brands will always play a big role. Private sectors are pursuing the goal well. It is evident from the number of companies that have received Japan’s prestigious Deming Application Prize considered as the Nobel Prize for quality. Besides Japan, there are few countries that are in race.

In South East Asia, companies in manufacturing sector of India and Thailand are vying to practice total quality management (TQM) to receive the Deming Prize, instituted by Union of Japanese Scientists & Engineersto honour the famed Quality Guru. Three 2005’s Deming Prize winners from India- Krishna Maruti, Rane Engine Valves and Rane TRW Steering Systems, surprisingly are all from auto components sector. In 2004 again, three companies from India (Indo-Gulf Fertilisers, Lucas-TVS and SRF) had received the Deming Prize and two of them were from auto component sector. It started in 1998 with Sundaram-Clayton Limited, Brakes Division winning the first Deming Prize as an Indian company.

#FF0080Surprisingly, one does not see the Chinese manufacturing companies vying for Deming Prize. Are they only in mass manufacturing of suspect quality depending still on quality by segregation and not by built-in process design or rigorous statistical control?

Fortunately for India with the entry of Suzuki through Maruti in 80s, a large number of auto manufacturers tried to make an entry in India. Toyota (DCM), Mazda (Swaraj), Mitsubishi (Eicher), Nissan (Alwyn, Premier), Isuzu (Hindustan Motors), Hino (Ashok Leyland) in auto sector and other engineering industries ranging from heavy machinery to textile machines, beside the auto ancillary companies wished to make a long term business relations with India. Though the ventures didn’t go well for Japanese entrepreneurs, it served India a lot particularly its manufacturing sector. The Indian companies got exposed to Japanese manufacturing practices that were well proven and the best in world. Indians learnt Quality Circles, 7 tools of QC, 7 new management tools, 5S, Kanban, Taguchi, Quality Function Deployment, TQM, TPM, lean manufacturing and many other tools and techniques to make manufacturing world class. Indian auto component sectors are today globally competitive and are contributing significantly to export too. And it is clear with 23 auto ancillaries companies in BT 500.

Another evidence of the success of Indian manufacturing is there in the presence of global precision bearing companies with their manufacturing facilities in India. SKF, Timken India, GAG Bearings-India and NRB are also in BT500.

Recently Okuda Hiroshi, chairman of the World’s most profitable carmaker, Toyota Motor Corp, acknowledges the rising quality consciousness in Indian manufacturing by saying that Japanese companies could soon be playing catch-up in quality sweepstakes.

And how does a company get benefited in the process of working for the Prize? It dramatically improves overall quality and productivity. At Krishna Maruti, as reported, customer rejections (parts per million) was at 2,250 when the drive started. It dropped to 80 in 2001-02 and then to 3.6 in 2003-04. And it stands at zero now. Manufacturing cost also reduced. From a high of 10% of sales in 2000-01, it is at 5% today. While a worker made a little more than 10 seat sets a day in1999-2000, it has gone up to15.

At Rane TRW, the customer line rejections were at 1,766 parts per million in 2000-01, in 2004-05 it came down to 171. During the same period, Rane Valve dropped its rejections from 1524 ppm to 139 ppm. So once a company aspires for a Deming Prize from percentage, it starts measuring its errors in parts million instead of parts per hundred as was the practice in traditional quality control. Is it not a big improvement?

As World Economic Forum Founder and Chairman Professor Klaus Schwab said in recently held India Economic Summit, 2005, “It is indeed important for India to excel globally not only in the services sector but also in the manufacturing sector. Manufacturing in India has become much more sophisticated with the introduction of high technology in many of its production processes. A key priority for India is to provide jobs for its large population and in this regard, the resurgence of Indian manufacturing would generate millions of jobs throughout the country.”

I am sure with its success in getting Deming Prizes India is on the right track to make its presence felt in manufacturing sector too besides its spectacular success in IT and ITeS such as BPO. And that must be perhaps the reason that AT Kearney’s survey rates India as the second-most favoured FDI destination. Paul Laudicina, managing director of AT Kearney’s Global Business Policy Council says, “India is on the cusp of an FDI take-off. However, for India to harness manufacturing investor interest and evolve into an FDI capital-intensive hub, the government must maintain its reform orientation and overcome narrow business interests.” Another manifestation of India’s growing manufacturing sector is the success of Indian companies such as Bharat Forge scaling up their capacity through domestic expansion and acquisition abroad.

- Indra

Category: Manufacturing |