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As globalization has swept the world in the past decade, the conventional wisdom says that China is becoming the world’s factory while India is where you go for services. American companies sometimes miss manufacturing opportunities in India as a result. India has historically been associated with shoddy products, unreliable delivery and uncertain pricing. But some things have changed-and changed drastically.
If an organization is considering globalization, there are three types of opportunities relating to manufacturing in India. First, if the company is a supplier of any product or service for manufacturers, it could find a huge and ready market in India.
Second, if the company is already exporting products into India in a significant way, it may wish to consider building or buying a location in country, as it will find qualified blue- and white-collar workers.
Finally, the company might find or develop high-caliber vendor partners in India for its global supply chain.
India and the World MarketIn May of this year, Korea’s Hyundai Motor Co. announced that it had exported 500,000 cars from its manufacturing plant near Chennai in South India. Headed to markets in Africa, Europe and Asia, many of the exported models are manufactured only in India by this $58 billion company.
In the recent battle for Land Rover and Jaguar, the winner, India’s Tata Motors, got most of the press. But the runner-up was an Indian company whose products have been selling in the United States for 14 years. Mahindra and Mahindra, a $6 billion conglomerate based in Mumbai, India, is one of the largest sellers of small tractors in the United States. Its products and market strategy have drawn the attention of market leader John Deere.
Americans may soon have the opportunity to buy an SUV designed and built in India. Mahindra spent $120 million to design the Scorpio, which has become the market leader in India. It plans to launch a version of the four-cylinder, diesel-powered vehicle in the United States via a partnership with Global Vehicles USA-more than 300 dealers are already signed up to sell the vehicle.
The Bharat Forge facility located in Pune, India, about 100 miles from Mumbai, is reminiscent of plants run by Toyota and other world leaders in quality. A number of fully robotic lines produce crankshafts for India’s truck and car market. Larger forgings are produced on semi-automatic presses. The $2 billion Bharat Forge, which also owns a unit in Lansing, MI, has grown primarily based on its reputation of high quality.
In a bid to establish their quality credentials, a number of factories in India began applying for the prestigious Deming Application Prize. Until 1997 not a single company from India had won the Deming award. But by 2006, a slew of 16 factories from that nation-including Rane Brake, Sundaram Clayton and TVS Motors-had swept the awards, accounting for more winners than any country outside of Japan. But the India story goes beyond the automotive industry.
A significant cluster of high-quality producers of brass and bronze components resides in the city of Jamnagar in Western India. Most of the vendors also have custom-built machine tools for each high-volume component, with production exported to Europe. It may be expected that blank CD and DVD production would be dominated by Taiwan, Korea or China. But the second largest producer of such products, Moser-Baer, is located near New Delhi, India. Today this company is leveraging its manufacturing expertise to enter the solar market.
However, India still poses major problems for American manufacturers. Infrastructure is creaky at best. Land acquisition is a dicey process and overblown bureaucracy continues to throttle growth. But American companies such as General Motors and Ford Motor Co. continue to expand their manufacturing operations in India for good reason, in fact Ford is increasing production capacity by fivefold by next year.
What is the takeaway from this? India is not about to become the destination of choice for most manufacturers. But its ability to produce high-quality products has expanded dramatically in the past decade. And it may well make sense for an organization to look more closely at India’s capabilities for its own benefit.