There has always been a comparison between Indian and Chinese manufacturing. There is a big surprise for many of us when we look at the Chinese product prices. There is always a myth that quality of Chinese products is not up to the mark. We all wonder as to how Chinese manufacturers are able to sell these products at such lower prices & how China has made so much progress in the past 25 years! Many cases even the raw material price is higher for Indian manufacturers compared to the Chinese selling prices.
Here are some points which may give us some of the answers. These are from my experience in the industry mainly the manufacturing industry. I don’t claim that all these points hold good for all but are certainly some of the areas where Indian manufacturers should focus on to be better.
Produce in Bulk and Sell Everything:
This is the first strategy in China. They ensure that the products are introduced at lower prices in the markets which they want to capture. Once the consumer starts preferring that product may be the prices go up. We see many examples of this strategy adopted. The electric bulbs, battery cells were some of the classic examples of this strategy.
Copy – Paste Technique:
Chinese always believe in copy pasting a successful product. They don’t spend time, energy and money in R & D. Because of this strategy they are “fast to market”. They save a lot of money in R & D which of course has a positive impact on the product price. This may not be true for all the products but definitely true wherever there is no need to reinvent the wheel!
Productivity in China is much higher. An average Chinese worker definitely produces 20 – 25% higher than average Indian worker (may not be true everywhere).Automation in the Chinese industry is much higher, and that too low-cost automation. A lot of attention is paid to the multi-skilling of the employees. We need to re-look at our labour laws and make necessary amendments. Innovative automation which is simple but can be sustained is the key to success. It shouldn’t be “Jugaad” but should be institutionalised improvement through low cost automation.
When we consider low cost automation, it is basically for saving human efforts. Monotonous operations can result in human errors. This may affect the quality of the product and ultimately the productivity. Therefore low cost automation should be used to work as POKA YOKE (mistake proofing). With the automation in place, what is most important is to right size the manufacturing line or process. Deploy that human resource where needed or for implementing improvements. In modern times Industry 4.0 is becoming a buzz word. Every manufacturing company feels that they should be adopting Industry 4.0 but a word of caution here. First get your basics right. Take actions which can bring up the productivity and the OEE (Overall Equipment Efficiency) to the desired level and then start reviewing the relevance of Industry 4.0 for your company. Go step by step and review what is relevant to you. Industry 4.0 should be basically used to provide you the real time data which enables you to take quick decisions without loss of time. There is a myth that Industry 4.0 requires a big investment. A step-by-step approach doesn’t look at the payback that the investment gives you and if the payback is advantageous then and only then go for it.
Being communist form of the government, a lot of factors are advantageous there. The government is stable and doesn’t go for re-election every 5 years. Due to this the infrastructure projects are undertaken with much longer time horizon. Of course there is a considerable change in this for past 4 to 5 years in India as well. The power availability in China is much better and is at a low cost. No industry suffers without power and in addition, power cost per kilo-watt-hour is less than half compared to India. This has a significant influence on the product cost.
In my opinion the education system in China has a much more practical orientation. The students are encouraged to go the best of the universities in the world by the government so that they come back and give it back to their country. We need to bridge the gap between the industry and the academics so as to get the mutual benefits. The academic education especially in the final years, should expose the students to the industry & business concepts. There has to be an internship in each course which will enable students to get an exposure to the industry. We should also encourage entrepreneurship much more & the current government schemes should be made use of.
Supply Chains: In most of the cases, the entire supply chain is built in the vicinity. This means that the customers and the suppliers are situated nearby. This must be resulting in to lowered inventories as well as lower transportation costs. This results into lower product cost. Proximity of a supplier is considered to be a major advantage while selecting the source. This has also been Japanese strategy along with single sourcing which has helped supply chains in several ways.
Partnership approach between the government & the business : We see a lot of examples where government has a partnership with the private businesses. In fact in many cases even when the multinational companies invest in China, we find that there are always joint ventures. In India we need this to happen more and more. There needs to be more unity in people, different states and the central government. The “one nation” approach is still missing to a large extent in India & therefore we in many cases have “regional” mindset. This needs to change as soon as possible.
India is capable of developing itself as a strong manufacturing base if we address the above points with an open mind. May be the pandemic COVID -19 has given us the opportunity to attract companies from all over the world to establish/expand operations in India and we shouldn’t lose it! We shouldn’t get stuck in our usual “happy go lucky” approach and we should be able to see in reality the “ease of doing business” improvement.
As I write this article, the honourable Prime Minister of India has urged the nation to become self reliant and start using goods made in India. The government has also announced a lot of schemes to help Micro/SMEs/MSMEs as well as entrepreneurs. I think it is a great opportunity for Indian manufacturers to take advantage of it, keep the above points in mind and start implementing the actions which will take them towards becoming competitive. In my opinion the industry should also approach government with joint venture proposals with companies in Europe or Asian countries like Korea and Japan and have a technology transfer so that they are able to reach the excellence in manufacturing and become the best in class! Examine carefully possibility of government funding such projects so that you have a less burden of arranging the finance.
If we plan the implementation of all the actions well, I have no doubt that India can become a strong player in manufacturing sector and the manufacturing sector will be 25% of our GDP. Let’s make it happen!
Director – Dietz Consulting Partners Pvt. Ltd.