View from India: Reimagine businesses, become resilient
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Component shortages and supply chain disruptions emerging from a pandemic outbreak are reason enough for manufacturing companies to think seriously and chalk out resilient strategies.
Building resilience is essential for the manufacturing industry to prepare itself for contingencies. “Resilience is more important than what we think, it may be understood as something that enables companies to have a competitive advantage, build scale and chalk out newer opportunities. Resilience could mean that companies have to adapt to change and become agile to reimagine businesses,” said Martin Reeves, Managing Director and Senior Partner, Boston Consulting Group, USA, at the CII Manufacturing Conclave 2022.
When businesses are reimagined, they could factor in risk mitigation measures in the supply chain. Like the proverbial belief that it’s not wise to put all eggs into one basket, goods procurement need to be diversified rather than relying on a single source. Along with this, procedures need to be in place to take this forward. “Volatility leads to resilience through agility. Policies, practices and people are three dimensions that can make the company Resilient. Policies are meant to be ecosystem friendly so that end to end systems can be resilient. Practices could mean that manufacturing units need to extend protection to their partners as well. The third dimension is about people, it refers to leadership initiatives required during a crisis,” reasoned D Shivakumar, Group Executive President and Corporate Strategy, Aditya Birla Group.
Manufacturing companies could build capabilities for every link of the supply chain and become resilient to meet the changing requirements of customers. “We require a robust supply chain to create products of global standards. It may be a good idea to have industrial hubs near rural areas so that the rural folk get a better life. Production linked incentives (PLIs) have begun to attract large investments,” felt Vinod Sharma, Managing Director, Deki Electronics Limited.
Technology has a role to play in building a resilient supply chain. Tech tools help in connectivity and accuracy, which are essential to monitor multi-tier suppliers. Information from advanced analytics and big data help to predict issues that crop up in the supply chain management. Real time updates can help in tracking goods and ensure timely delivery. “We have tapped into small and medium enterprises (SMEs), partnered with them and brought them onto the digital platform to fulfill customer requirements. We are a digital first company. During the pandemic we have become more agile as we moved from a top down company to a bottom up company. This has helped in aligning with the market fluctuations,” said Amrit Acharya, Co-Founder and Chief Executive Officer, Zetwerk, sharing his insight.
In the coming decade, the Indian manufacturing professionals require skills and knowledge to address the changing face of the manufacturing sector. It could be challenging to align with the outcomes from technologies like IoT, AI and ML. For instance, adoption of these technologies may require a structural change. It doesn’t stop at just that. Probably a structural change needs to be backed by labour and industrial regulations. Then factories that are analog in nature may switch to the digital. “The digital outlook would mean that website needs to revamped and become more customer friendly and engaging through chat bots. Digital also could mean that companies could make their fixed cost structure a lot more variable,” said Baba N Kalyani, Chairman and Managing Director, Bharat Forge Limited. An overnight transformation of the labour intensive manually operated shop floor may not happen. It takes time and involves a change in mindset as well.
Structural risk mitigation and smooth supply chain operations are key to the manufacturing unit’s survival. “The global manufacturing scenario has been badly affected by the pandemic. The logistics industry with the movement of goods has been disrupted. This, in turn, has made the domestic supply chain fragile. Along with manufacturing, the auto industry has also faced shortage of chips,” highlighted Vikram Kirloskar, Chairman, CII Manufacturing Council and Vice Chairman, Toyota Kirloskar Motor Pvt Ltd & Chairman and Managing Director, Kirloskar Systems Pvt Ltd.
Taking a cue from this, the government has come forward with a slew of measures for Indian manufacturers to be self-sufficient. One such initiative is the PLI scheme. Though PLI was launched in 2020, the Union Budget 2022 gave it a push. The PLI scheme covers key sectors like pharmaceuticals, medical devices, large-scale electronics manufacturing, food products, solar EV modules, automobiles/auto components, ACC (Advanced Chemistry Cell) battery and textile products. The scheme, as the Budget indicated, has the potential to generate at least 60 lakh new employment opportunities. It has potential to create an additional production of Rs 30 lakh crore worth products during the next five years.
With PLI, the government plans to take manufacturing to a new high. “Prime Minister Narendra Modi has focused on the manufacturing sector through schemes like the PLI. India can become a global leader in manufacturing through partnerships between the government, industry and academia. To illustrate, the government has committed $10 million towards strengthening the manufacturing sector. This includes the semiconductor industry as well as API in pharma,” added Piyush Goyal, Union Minister for Commerce & Industry, Textiles, Consumer Affairs, Food and Public Distribution. API or Active Pharmaceutical Ingredient is the ingredient that can be converted into medicine. If the overseas supply of API is staggered, it could lead to a health crisis in the country.
So one thing is certain, whether it is PLI in manufacturing or API in pharma, it can result in economics of scale, generate employment and make the industry competitive in the global market. “In the current financial year, the services exports is expected to cross $250 billion, while the merchandise exports is projected to cross $400 billion. India can achieve a trillion dollar mark in the services and merchandise exports by 2030. This can create lakhs of jobs and encourage big companies to forge ties with MSMEs (Micro, Small & Medium Enterprises),” observed Minister Goyal.
The government has rolled out schemes for the electronics and semiconductor industry. Both industries could be strengthened for the manufacturing industry to thrive. “Everything in the manufacturing sector would utilize some amount of electronics systems. As it requires knowledge about embedded systems along with the software involved, it’s essential to develop talent and build a skilled workforce,” concluded Kalyani.
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