Making Manufacturing Futuristic In India
Why India’s Manufacturing Sector Needs To Have A Constant Radar On Innovation.
By Prajakt Raut and Pankaj Bansal: Managing Partners — Caret Capital
Even as Industry 4.0 and Manufacturing 4.0 concepts were gradually becoming mainstream, Manufacturing 5.0 is already promising to transform industry. Yet again.
Given the pace of change, it is imperative for companies to have a constant radar on innovation else they run the risk of being disrupted by emerging companies with a DNA for technology, new business models and unencumbered by legacy infrastructure, systems, processes and people. New-age companies are also asset-light and use SAAS tools for synchronising between value-chain stakeholders that give them the unique advantage of being able to easily adopt newest technologies, models and remain nimble and yet have the resilience in their supply chains.
And it is not just new technologies to make existing processes more efficient, it is also adopting new transformative business models that disrupt the way existing industries work. Think about concepts of distributed procurement and distributed production which completely contradict age-old concepts of ‘efficiencies of scale’ which required consolidating rather than distributing procurement and production.
The good news is that there are also several easy-to-adopt technologies and tech-enabled solutions that legacy companies can quickly pilot and integrate into their existing legacy systems without having to overhaul the way they currently work. The problem is not really the absence of technology, but the inability of most legacy companies to find transformative technologies, experiment with them, adapt them for their organisation and adopt them. Change is difficult for legacy companies. But in today’s business dynamics, without the DNA for change, it will be difficult for companies to stay competitive. Or perhaps will become challenging for them to even be relevant.
Given the changed geo-political dynamics, India is fast emerging as a potential global hub for manufacturing. While India still lags behind China, given how China has behaved in the past few years has created opportune conditions for India’s manufacturing sector.
The manufacturing sector in India has the potential to leapfrog a few generations in the manufacturing sector — much like we did in several other sectors like finance and telecom.
India is a strong contender to become the potential hub for manufacturing for companies across the world. Coupled with the call for ‘Supply Chain Resilience’ among the world’s corporations, this is a golden period for transforming India’s manufacturing sector and capturing a fair share of the global manufacturing pie.
Read our article on Why Making India’s Value Chain Efficient Should be a Priority for Companies and the Country.
Assurance on quality, reliability and cost are factors that will give confidence to leaderships of companies to make India a key part of their strategy. And for transforming their game on quality, reliability and costs, manufacturing companies will have to constantly up their game on 6 key vectors:
- Planning
- Procurement
- Production
- Testing & QC
- Distribution
- Stakeholder and Customer/Client Experience
Of course, technologies like AI, ML, advanced analytics, robotics (RPA), IoT, etc. will be critical for manufacturing companies to adopt along with SAAS tools that enable seamless (and often automated) synchronisation across different stakeholders, and traceability across the entire process.
And of-course, this needs to be done keeping in mind the environment and social goals.
Large manufacturers need to enable their SME vendors with technology to ensure their own cost-efficiency and reliability.
According to a Forbes article, small companies own 96% of industrial units in India and account for 40% of the nation’s overall industrial production and 42% of India’s exports. Every industry will have upstream vendors who supply the materials and products required for them to make their own product.
Typically, most large companies will have visibility over their most immediate vendors & suppliers. And this was OK in the old world order. But with a far more fragmented value chain (largely due to the potential of distributed procurement & production, and just-in-time procurement becoming more practical), it is imperative for companies to have visibility deeper into their supply chain.
Hence, larger companies must make it easier for the mid and small manufacturing players to adopt technologies that can not just optimize their operations, but also give larger companies far deeper visibility into their supply chains.
Attracting International Investments
Tamil Nadu Minister TRB Rajaa says that the world sees opportunity in India because of port infrastructure, workforce, state policies and consumption in the country. Top companies across the globe are looking to invest in India and explore opportunities with state governments.
Recently, Boeing invested Rs1600 crore in India to open its largest aerospace engineering facility outside of the United States. Apple plans to shift more than 18% of its iPhone production to India in the next two years, up from 7% in 2023. Hyundai has acquired a plant in India with an annual production capacity of around 1,30,000 vehicles.
However, these islands of excellence are not the sole indicators of FDI boost in the Indian manufacturing sector. India still needs to strive harder to become an obvious and preferred FDI destination for high-end, high-tech manufacturing for a cascading positive impact on its economy. This requires India to lower the cost of capital, strengthen its infrastructure, invest in its human assets, and eradicate bureaucratic red tape.
In Summary
The Indian manufacturing sector is on an upward trajectory and scaling towards global excellence. However, startups, large corporations, small and medium enterprises and governments must collaborate to invest in new technologies to transform the value chain.
Caret Capital (Formerly known as Supply Chain Labs) is a Venture Capital fund that backs category building startups making India’s value chain efficient.
Caret 360 is the CXO community initiated by Caret Capital to help tech startups and industry discover each other. Collectively, the mission is to make India’s value chain efficient.
