My Chinese colleague asked incredulously, “Do you really want to order some plastic bags from China?” I gave her an exasperated look and nodded sadly. But more on that later!
Make in India is not merely a slogan of the government in power; it is a crying need of the nation. Why is a manufacturing-driven economy essential for India when it is considered a low-level, low value-added activity as compared to some of the activities of the service sector? There are two key reasons for this. One, a nation of 130 crore people cannot live on the subsidy granted by others. We cannot survive on a cost-arbitrage alone, generated by providing low-cost services to the West. We are also too large an economy to bank on trading alone. Second, manufacturing alone has the capacity to employ over two million youth coming of age into the workforce every month with a low to medium skill set.
Much has been written about the unfavourable environment for manufacturing in the country. Labour laws, infrastructure, power, finance, approvals; the list goes on. The current government vows to address these issues and might well be able to solve them to an extent. Would this trigger a boom in our manufacturing? Would this reduce our dependence on China as a supplier of products? Unless we change our fundamental disconnect with labour, this is not likely to happen.
There is a far more important question to be answered here. “Who will Make in India?”
Lack of attitude and aptitude
India requires quality manufacturing for a burgeoning economy. Domestic consumption would fuel demand for quality goods. Economies of scale thus developed would enable global competitiveness and a sustained growth in production that is required to pull a billion people out of poverty. This demands knowledge, skill and attitude in our manufacturers; the knowledge of what to do, the skill of how to do it, and the attitude of actually doing it, delivering a great product to the customers.
Majority of our manufacturing suffers from a lack of these basic aspects. We continue to churn a low quality product, that is not able to stand firm even in the domestic market, let alone in a global marketplace. Investment in training of labour, development of special purpose machines to complete certain tasks with quality and a culture of quality is missing. What is worse is the lack of willingness to learn and improve. Barring some islands of excellence, limited to automobile and ancillary industry, it is difficult to find reliable contract manufacturers.
As a large appliances player, we strive hard to develop local manufacturers. We give them samples, support and advances to develop products for our firm. It has been an uphill task, to say the least, to get even a sample from the factory at the specified time. After repeated follow ups if one manages to get a sample, it is so far out in specifications that there is no hope. Worse still, there have been times when samples have been made right, order has been placed, but the final shipment is different in specs and quality, wasting not only the effort but also a lot of precious cash. After years of efforts we are yet to have a reliable, trouble-free partnership with any contract manufacturer.
We have placed our vendor developers in these factories. We have tried to control intermediate processes of procurement and development. However, the probabilities of error simply multiply due to poor appreciation for quality at all levels, from the owner to the shop floor worker. So are the working conditions that at times the factory floors are terribly hot, unkempt and full of dust. Workers simply do not have the training or the attitude to keep the workplace clean. They eat, spill and have a siesta on the same floor. Such factories remain mired in a vicious cycle of low cost and low margins, unable and unwilling to invest for quality.
So coming back to the order for branded plastic bags from China. Yes, we designed the bag, assessed various vendors in India and paid an advance to a seemingly reliable factory. A promised delivery time of three weeks got stretched to two months, and when the final product came, it was so bad that we had to junk all production. This shook me to the core. If we cannot get a simple plastic bag from India, what hope do we have for quality manufacturing in the country?
Is this the worst that can happen? No. There is a far more scary and disturbing thing happening, which shakes my very belief in the future of manufacturing in India. There are many factories in India that actually have the capability of making quality products. Often, a sound technical person has set up these factories, passionate about his craft. These factories are adept at doing exports business. They earn the dollar income and invest in infrastructure and quality. They even know what great customer service means. So what is the problem with that.
Well, the matter is that such owners simply do not wish to focus on the domestic market. They are enjoying a relatively easy exports business, servicing large buyers. They are not willing to spend the time and effort to develop the complex distribution in India or to build a brand here. However, such factories can act as great contract manufactures to brands which are laying out the distribution and investing in brand building.
Shockingly, almost all such manufacturers simply refuse to service domestic buyers. There is an intense brahminical attitude – we shall only serve the foreign buyers! For years, we have fought a losing battle to try and convince such factories to serve our demand, to develop products for the domestic market which is not small by any means. We are astonished at the cold reception we get at such places. Multitude of such manufacturers put up booths in global trade fairs in Germany, Hong Kong, Dubai and Chicago. They sit there, awaiting the buyers from foreign lands. When an Indian approaches them, the stiff upper lip comes into play. The first question invariably is – which market – and when told India, invariably the reaction is one of disdain – “Sorry we don’t sell to Indian market!”
In the beginning, it was simply too surprising for me to accept. I took it up as a challenge to convince them to supply to us. After all, we represented a fairly well known and successful brand. We were told Indians don’t want quality. We said we want quality products. We are getting them from Italy and Germany. This did not make them budge. Then they said we work with advance payment. We were even willing to offer that, since we have to pay advances to our foreign suppliers too. Then we were told Indians only waste time, get samples made and never order. Well that could be the case with foreign buyers too – at times even we get paid samples made from our contract manufacturers abroad and have to reject them for various reasons. As a professional, one could not understand how could someone refuse doing business. I even tried explaining to many such factory owners the fundamentals of macroeconomics – that the European markets are in a decline. They must hedge their risks by starting business for the growing Indian market.
After failing to make an impact over a number of years, one reached the only conclusion possible – quality Indian manufacturers are too focused on the easy dollar income. When dealing with Indian market, they are afraid they would have to really work at the real costs and reasonable margins.
It is not as if the global markets are any less price sensitive. This is our age old class-based attitude that is kicking in here. Serving a foreign buyer is akin to working for a multinational, reporting to a white boss, feeling one up in the hierarchy. Working for an Indian brand is simply not acceptable to people who are in the foreign orbit. Sadly, one has seen many such factories suffering over the years as markets dry up in Europe, and wither down. The arrogance, however, still remains unchecked!