Second fastest growing country in terms of economic growth
Friday, 13 July 2007
Peter Marsh
THE chief executive of Geekay Polymers, an Indian maker of plastic parts, knew he had a problem. Tiny air bubbles had appeared inside some of K. Kannan's injection-moulded components, revealing a fault in the manufacturing process that was already annoying an important Japanese customer and posing a threat to Geekay's expansion plans.
Geekay is one of about 40,000 engineering companies, most of them small, in the southern Indian city of Coimbatore - the site of a novel experiment to try to boost the export capabilities of Indian manufacturers.
Just why Mr Kannan encountered his manufacturing difficulty - and how he resolved it - sheds light on some of the broader challenges facing India as it attempts to emulate the rapid growth of China as a global manufacturing power.
Even after several years of impressive economic expansion, India remains an industry minnow. The country accounted for less than 2.0 per cent of global manufacturing output last year, as against 13 per cent for China.
Even so, in the four years to 2011, India will be the second fastest growing country in the world after China in terms of manufacturing output, according to Global Insight, a US consultancy. It predicts this output expanding at 7.0 per cent a year.
James McGill, head of the Asia-Pacific operations of Eaton, a US maker of industrial and automotive parts, says his company sees "a lot of potential" in India, particularly in fields such as "low-volume" manufacturing where design and ability to react quickly to changes in specification are important.
Sajjan Kumar, chief executive of North Carolina-based Sigma Electric, a manufacturer with six plants in India mainly supplying larger businesses in the US and Europe, says: "Because of concerns about such things as China's political direction, a lot of US businesses are worried about adding to their operations in China. They view India as a good alternative."
To exploit this potential, Tata Consultancy Services, an India-based information technology and business consultancy that is part of the Tata group, India's biggest industrial conglomerate, has chosen the city of Coimbatore for an experiment in identifying small to mid-sized Indian engineering producers that could step up their operations to become sizeable exporters.
The job of TCS managers in the project is to "tutor" some of them in ways to make themselves more valuable to potential customers abroad, for instance by improving their technical quality and being more reliable with deliveries.
TCS's project in Coimbatore - a sprawling city 300km south-west of Bangalore - could become the forerunner of a service the consultancy would offer across India. Its plan is to link small Indian businesses with the companies' international clients in fields such as automotive and aerospace manufacturing, particularly in the US and western Europe.
TCS has identified just over 100 companies in Coimbatore - including Geekay - which it thinks could play a role in making parts and complete engineering products on behalf of its clients. It is also working in a similar way with about 90 companies in two other Indian cities, Pune and Bangalore. These 190 businesses could become a core group of potential suppliers for western companies, and which could be added to later as the service expands, so TCS believes.
Geekay is based in a small workshop crammed with injection moulding machines. While most of them sport impressive brand names, almost all were bought second-hand and look slightly the worse for wear, in spite of the attention of Mr Kannan, the company's founder.
With a move into exports (a field in which the company has no experience), Mr Kannan believes he can boost Geekay's revenues significantly, starting with a 20 per cent increase this year on the company's sales in 2006 of $160,000 (£80,000).
Existing customers include Pricol, an Indian maker of vehicle parts, and the Indian manufacturing operations of Sicame, a French electrical goods supplier.
But a potential block to these ambitions is Geekay's lack of technological expertise, a problem manifested by the mystifying air bubbles that started appearing in the components it had been making for the Indian operations of Mitsuba, a Japanese vehicle parts supplier.
"Our parts were being rejected by Mitsuba, and we could not work out what was going wrong," Mr Kannan says. Eventually a simulation exercise on a computer - in a small laboratory set up by TCS in Coimbatore to help companies such as Geekay improve their operations - linked the fault to the way the company's moulding machines were being programmed, as a result of which Mr Kannan was able to fix the problem.
Another company that TCS is helping is Ammarun Foundries, a maker of cast parts for general engineering and vehicles. The business is based on a large site on the outskirts of Coimbatore and has 500 employees, mostly working with equipment that would be considered outdated in other parts of the industrialised world.
N. Visvanathan, Ammarun's chief executive, recognises that if he wants to become a serious exporter he has to improve the reliability of the company's processes and that this can only be done with new investments.
"If we spent $5.0m on new equipment, I feel we could increase sales to about $20m by the end of the decade, with 40 per cent coming from exports," he says. It is possible TCS could help, perhaps by coming up with ideas for a new business plan or introducing Ammarun to new sources of loans.
TCS hopes that by the end of the year the companies it is working with might be able to win export orders worth a few million dollars, with its part in fixing up the contracts being rewarded by additional fees from its clients.
Assuming the project works well, TCS could extend it to several hundred India-based suppliers for its foreign clients. The prize: a new source of income for TCS as a "supply chain manager" and the chance to boost growth at its big customers as well as India's network of small suppliers.
.......................................
FT Syndication Service
THE chief executive of Geekay Polymers, an Indian maker of plastic parts, knew he had a problem. Tiny air bubbles had appeared inside some of K. Kannan's injection-moulded components, revealing a fault in the manufacturing process that was already annoying an important Japanese customer and posing a threat to Geekay's expansion plans.
Geekay is one of about 40,000 engineering companies, most of them small, in the southern Indian city of Coimbatore - the site of a novel experiment to try to boost the export capabilities of Indian manufacturers.
Just why Mr Kannan encountered his manufacturing difficulty - and how he resolved it - sheds light on some of the broader challenges facing India as it attempts to emulate the rapid growth of China as a global manufacturing power.
Even after several years of impressive economic expansion, India remains an industry minnow. The country accounted for less than 2.0 per cent of global manufacturing output last year, as against 13 per cent for China.
Even so, in the four years to 2011, India will be the second fastest growing country in the world after China in terms of manufacturing output, according to Global Insight, a US consultancy. It predicts this output expanding at 7.0 per cent a year.
James McGill, head of the Asia-Pacific operations of Eaton, a US maker of industrial and automotive parts, says his company sees "a lot of potential" in India, particularly in fields such as "low-volume" manufacturing where design and ability to react quickly to changes in specification are important.
Sajjan Kumar, chief executive of North Carolina-based Sigma Electric, a manufacturer with six plants in India mainly supplying larger businesses in the US and Europe, says: "Because of concerns about such things as China's political direction, a lot of US businesses are worried about adding to their operations in China. They view India as a good alternative."
To exploit this potential, Tata Consultancy Services, an India-based information technology and business consultancy that is part of the Tata group, India's biggest industrial conglomerate, has chosen the city of Coimbatore for an experiment in identifying small to mid-sized Indian engineering producers that could step up their operations to become sizeable exporters.
The job of TCS managers in the project is to "tutor" some of them in ways to make themselves more valuable to potential customers abroad, for instance by improving their technical quality and being more reliable with deliveries.
TCS's project in Coimbatore - a sprawling city 300km south-west of Bangalore - could become the forerunner of a service the consultancy would offer across India. Its plan is to link small Indian businesses with the companies' international clients in fields such as automotive and aerospace manufacturing, particularly in the US and western Europe.
TCS has identified just over 100 companies in Coimbatore - including Geekay - which it thinks could play a role in making parts and complete engineering products on behalf of its clients. It is also working in a similar way with about 90 companies in two other Indian cities, Pune and Bangalore. These 190 businesses could become a core group of potential suppliers for western companies, and which could be added to later as the service expands, so TCS believes.
Geekay is based in a small workshop crammed with injection moulding machines. While most of them sport impressive brand names, almost all were bought second-hand and look slightly the worse for wear, in spite of the attention of Mr Kannan, the company's founder.
With a move into exports (a field in which the company has no experience), Mr Kannan believes he can boost Geekay's revenues significantly, starting with a 20 per cent increase this year on the company's sales in 2006 of $160,000 (£80,000).
Existing customers include Pricol, an Indian maker of vehicle parts, and the Indian manufacturing operations of Sicame, a French electrical goods supplier.
But a potential block to these ambitions is Geekay's lack of technological expertise, a problem manifested by the mystifying air bubbles that started appearing in the components it had been making for the Indian operations of Mitsuba, a Japanese vehicle parts supplier.
"Our parts were being rejected by Mitsuba, and we could not work out what was going wrong," Mr Kannan says. Eventually a simulation exercise on a computer - in a small laboratory set up by TCS in Coimbatore to help companies such as Geekay improve their operations - linked the fault to the way the company's moulding machines were being programmed, as a result of which Mr Kannan was able to fix the problem.
Another company that TCS is helping is Ammarun Foundries, a maker of cast parts for general engineering and vehicles. The business is based on a large site on the outskirts of Coimbatore and has 500 employees, mostly working with equipment that would be considered outdated in other parts of the industrialised world.
N. Visvanathan, Ammarun's chief executive, recognises that if he wants to become a serious exporter he has to improve the reliability of the company's processes and that this can only be done with new investments.
"If we spent $5.0m on new equipment, I feel we could increase sales to about $20m by the end of the decade, with 40 per cent coming from exports," he says. It is possible TCS could help, perhaps by coming up with ideas for a new business plan or introducing Ammarun to new sources of loans.
TCS hopes that by the end of the year the companies it is working with might be able to win export orders worth a few million dollars, with its part in fixing up the contracts being rewarded by additional fees from its clients.
Assuming the project works well, TCS could extend it to several hundred India-based suppliers for its foreign clients. The prize: a new source of income for TCS as a "supply chain manager" and the chance to boost growth at its big customers as well as India's network of small suppliers.
.......................................
FT Syndication Service