Real Life Successful Experiences, Learnings & Ideas

We have two connotations to global competitiveness – one, India being an export powerhouse for the rest of the world; and two, can we also be so competitive and value adding to the domestic market that with the power of the domestic market, we can again become export competitive?

We will share our experiential learning in terms of sectoral, national, international and above all the rural perspective which is going to be very important in the days to come.

Our PM Mr Modi always talks about the three tenets of Atmanirbhar—scale, speed and skill. The scale is all about getting the volume of economies and cost reduction which is an extremely important foundational principle to get the business from any part of the world, not to speak of, within our own country. Skill is about achieving quality and productivity. Speed to market not only applies for new product launch but also for delivering the acquired orders within the shortest and promised lead time to the customer. These three tenets of quality, delivery and cost (QDC) are classical and universal principles, which will never vanish even if digital and other revolutions take place in this country.

Learnings from four sectors

I will share my personal learning from four sectors:

1) Footwear exports of Pond’s India.

2) Hitachi Commercial Refrigeration.

3) Cooper Bussmann fuse gear electrical industry, which is a global $20 Bn company headquartered in America.

4) CNC machine tool ­ one on the Japanese platform namely Makino and the second one Starrag, which is a European company headquartered in Switzerland.

Pond’s India‐ Shoes

I worked with them in different leadership positions. Ponds­-Hindustan Lever Shoes and Copper Bussman­ Fuses were labour intensive. I worked in these industries in and around Pondicherry and Dindivanam in a rural / semi­-rural atmosphere. Hitachi Commercial Refrigeration and CNC Machine tool industries were capital intensive.

The labour­ intensive sector has got business dynamics of export­-led growth. Pond’s India had domestic-oriented cosmetics and also other products which were export-­oriented with a 50/50 turnover ratio. In the1990s, it was into consumer fashion product. To achieve global competitiveness, it scheduled weekly flights to Europe. If the goods were not ready on Friday, we lost the business; order lost was equal to production lost.

It had subjective quality attributes. You can assess the quality of leather or the colour. All five senses are used to understand the quality. There was intense price competition within our own markets, not to speak of the global competition at that time with Indonesia, Thailand and Malaysia.

Cooper Bussmann ‐ Fuses

The Cooper Bussmann fuses were also labour­-intensive with the below product (fuse) features:

• It is an industrial non-­durable product. Once the fuse is replaced, its life is over.

• Ready stock delivery supply chain; the fuses which were hitherto stocked in America and England came to be stocked in Pondicherry in a huge warehouse and shipped across the world after production, with zero defect.

• Safety­-critical product with global brand image.

• High variety starting from 0.2 ampere.

• Acquired an Indian electrical industry and transformed the culture of manufacturing as well as business development to be globally competitive.

Hitachi and Visicoolers

The Coca­Cola Visicoolers manufactured by Hitachi looks like a simple product when we go to the retail chain and look at the glass door fridges. It is a consumable durable product. It is very important that it has to fulfill the tropical requirements of relative humidity of 75 and 40 degrees Celsius. The service reach to the retail market is critical. So it is manufacturing as well as servicing-­led. Merchandising appeal is required to pull the customers to go and have a bottle or can of Coke.

Makino Machine Tools

The Makino & Starrag Machine Tools where I have been working for the last 15 years is an industrial durable product. Reliability is very important to the customer. Without understanding the customer’s requirements, we cannot become globally competitive. It's an outside­-in approach, even in the Machine Tool industry. The value driven innovation is underlined in this. Total life cost of the durable equipment is more important than the initial investment cost and cost per part of the customer’s machined part. An important development in the emerging industry is Automation and Digitalization.

From the business dynamics, emerges the manufacturing dynamics. There is a job design at the shop floor of the value chain starting from the MSME of the supply chain to the OEM. For the integrated approach for Atmanirbhar, MSME and the OEM have to talk to each other. The industry forces result in various drivers of QDC (Quality­ Delivery and Cost) leading to appropriate manufacturing systems and job design.

To win over other companies, best practices must be followed like:

• giving highest priority to quality

• focussing on target zero defects

• low-­cost automation for Indian markets

• flexible manufacturing approach for footwear industry

• global certification

• local sourcing as well as international sourcing of critical parts

• benchmarking

When Mr Balaraman was the MD in Pond’s, he invited leather specialists from Ambur (in Tamil Nadu) to benchmark our company. It is important to get global certification for the refrigeration industry and getting locally critical parts, including the double glazed door.

In one single visit to an exhibition, we tend to meet a large spectrum of people who offer a variety of merchandise for us to procure. In a B2B transaction, the exposure and width and depth of product knowledge become limited.

With CNC machine tools, it is important to know how to localize the Indian content and at the same time not to localize critical parts which have to come from Germany and Japan such as the CNC controllers, spindle, etc. The focus should be on moving ahead, without losing much of the employment.

I will share my experience with export processes under three essential principles, which I would like call as 3Ps which are:

• Product­led approach

• People dimension

• Promotion

All four of us—panellists started our career in exports with Pond’s India. Pond’s had placed a heavy emphasis on exports and they had a product-­led vision. Product quality was the essence of this vision. Pond’s wanted the entire team including the workforce to understand the product, ingrain quality in them and understand quality control.

Product‐led approach

For example, if you want to lay down the specification of a product like a shoe upper, you can go by the engineering dimensions or look at the polish or the finish or specify the product / quality assurance attributes like AQL levels. These would be taken care of, if the processes are set in. But it is important to step into the shoes of the customer and realise what would be comfortable for the customer to wear—would the shoe bite him? Will he be comfortable wearing it for long duration and so on and try and assimilate that kind of thinking. A customer­-centric product approach was infused into all the product groups that we handled in Pond’s—mushrooms, thermometers, leather products or whatever we took up then.

In one of the projects that came up in Levers under the visionary leadership of Mr S.M.Datta, we brought in palm oil from Malaysia through Calcutta, took it to Dabgram, formed zero distilled fatty acid there and brought it to Nepal. There, we created a unique process called saponification, which is soap making under DFA method.

Apart from feeding it to the markets of Nepal, it was also exported to northern states of India—Bihar, UP and so on. We not only did all the engineering specs for making a soap but also used the soap every day—we would wash our hands at least 50 times in a day, to get the right kind of a perfume and other attributes when we wash it. We should not simply look at it as another product that we need to manufacture and then send it off.

Hindustan Lever produced a fish paste in a factory in Gujarat. It was tasted by people to see what kind of a bite it had, mainly to appreciate the viewpoint of the customer. This was the sense which was instilled into all of us.

People dimension

When we look at export products, we may not actually understand and appreciate the way customers look at it. But in order to put us into the shoes of the customer, the workforce must be skilled up. A friend of mine put up a BPO operations company across the rural parts of India. The BPO was set up successfully in the second tier towns of India. It was not just a cost reduction approach. The workforce had a pride in working in that setup, where the opportunities of employment are limited. Their social status got enhanced and as a result, they had self-satisfaction; attrition rates were much lower. So, training efforts that were spent on people lasted for longer periods. Thus productivity got enhanced. The focus should not only be on the products or the processes but also on people and skilling them appropriately.

Promotion

I was doing the job of running a business in Reliance Retail in the subsequent part of my career as I moved from Lever. I travelled to interior China and to the Far Eastern markets as a buyer of merchandise appropriate for our Reliance Retail. In that process, there were many learnings.

In those countries, the promotion councils for exports and, the product communities had extensive promotional plans. They would stage an export seminar or do an exhibition in Bombay, Delhi or Hong Kong and ahead of time invite us over there to the stall and then give us feedback.

In one single visit to an exhibition, we tend to meet a large spectrum of people who offer a variety of merchandise for us to procure. In a B2B transaction, the exposure and width and depth of product knowledge become limited.

In some places like Yiwu and Guangzhou in China, the exhibitions become permanent. This is a good way for the interaction of the buyer and seller. This doesn't have to be necessarily initiated by the government. It can be done on a PPP model; private participation with the business forum or Export Promotion Council trying to promote such a culture.

I am going to look at four countries —India, Bangladesh, China and Vietnam. All are significant and relevant countries and can give a good perspective.

China

• In spite of the trade war, they are down but not out. They are working on outbound investment. As the labour intensive industries will be winding down in China, they are investing in any and every country which is ready or asking for joint ventures. With their Belt and Road Initiative, they have gone all out to invest in many countries. Even sunset industries like apparel manufacturing will continue under the Chinese flag in other countries.

• Chinese factories always had a productivity edge because of the piece rate approach.

• They have realised some of the damages they have done to the environment and are focusing on upgrading their environmental approach and Rural Development.

• They have identified technology and Innovation ascritical areas for the future.For example, they have a factory in Hangzhou called the Hangzhou Xunxi smart factory for making apparel and clothing. They are able to accept orders as small as 20pieces right up to 100 pieces,by working in modular systems. By using technology,they are able to turn around e-­commerce orders extremely fast. They are also asking for a lot of Indian talent to come over and work there.

Chinese factories always had a productivity edge because of the piece rate approach. They have realised some of the damages they have done to the environment and are focusing on upgrading their environmental approach...

• Their weakness has been on compliances and IP (Intellectual Property)commitment and that is where India scores.

• With open arms, they embrace all kinds of industry partners —China, USA or Europe. The big approach from the government has been FTAs (Free Trade Agreements). This has been a big booster to the industry community to attract investment.

• They have done their pitching right and the maximum investments are from Singapore, Korea, China and Thailand—all from the local zone in Far East.

• The FTAs hinge upon using localised raw materials. Therefore, localisation of raw materials is a big project and focus area, and it's going at a good pace.

• Wherever possible, they try to enter into JVs with a buyback scheme so that the marketing side of the business is also quite comfortably locked up.

• While their ease of doing business is quite high, they are very strict on environmental compliances.

• The labour efficiency is very high; the workers are naturally very agile. This helps them in the industries which they have picked up.

Bangladesh

• It is a country where the leadership and the people are ambitious. For example, by 2030 or 35, they want to become the 25th highest country in terms of GDP and they want to move on to being a developed country.

• The credit support from the Bangladesh Central Bank and local banks has been extremely good; this has helped them in getting capital and working capital management.

• They depend a lot on ready-made garments for their exports and economy; they have stepped up from being a country making just basic products to fashion value added products.

• They have invested in the safety of the factories.

• They are continuously investing on having their factories LEED­-certified. They have the highest LEED-certified garment factories.

• They are also investing on sustainability in terms of materials, machines and processes. These things don't go unnoticed by customers.

• They are investing in scale.

Bangladesh is right next to us almost like a province of India, but they are going to give us a good competition in the near future.

India

• If you want to invest in new projects, just as in Vietnam, many of the States will compete with each other and make a pitch to you. Pick the right State, find out the stability and longevity of the government there.

• If you do decide to go to a state which is not your own state, you could find local partner companies to help you navigate.

• Because of the bureaucracy, there will be some delays. You will have to be persistent and patient for things to work out.

• Scout for Marketing / Technology joint ventures.

• Implement all the compliances, however high the demands are; this is going to be yet another USP for the Indian factories.

• Hire schooled workforce and train them; these trained Indian workers, with their supervisors and middle management become a big weapon.

• Deploy sound systems and processes for execution.

• Leverage the PLI (Production Linked Incentive) scheme for scaling up export competence.

When I joined Pond’s as a management trainee in 1986, most people thought of Pond’s as a dream flower talcum powder manufacturing company; they did not know that Mr V Narayanan and Mr V Balaraman had already built a bouquet of world-­class export businesses.

What strikes me even now is how a company like Pond’s India could leverage its global connections as a MNC and build many businesses within a short time. They were able to create outstanding teams led by young entrepreneur managers. All this was done in very small towns and even villages where the awareness of global competitiveness and exports was not there.

Even though these businesses started were from scratch, most of them were highly successful and globally competitive. They achieved high customer satisfactions and great financial results. This has been a great learning for me personally and to our panel members.

How the world has changed since then! When we started these businesses, China was already a superpower but countries like Bangladesh and Vietnam were nowhere in the picture. Today, as Venky mentioned, Bangladesh has become a leader in exports of labour intensive businesses. I heard that the per capita income of Bangladesh is going to become better than that of India.

During my last visit to Bangladesh, I was told that there's not a single girl in Bangladesh who has to worry about a job for herself because there's such a strong demand in the apparel industry.

The funny part of it is that Bangladesh does not have artificial intelligence, industry 4.0, IT and sophistication. Just on the back of the apparel industry, they have been able to develop as a nation and even go ahead of more developed and so­-called developed countries. Many other countries have followed Korea.

The India story has been very different. We have had our successes in IT. There is a fair bit of very sophisticated manufacturing but when it comes to large scale mass manufacturing, which can give jobs to our large population, there is a niggling doubt if we have missed the bus.

A lot of things are happening at the government level like Atmanirbhar. But over the years, if you look at the trends, it's been more of a decline as compared to other countries. It is so surprising for a country with such intellectual capability and outstanding professionals. Why are we not able to become globally competitive in many industries?

We are also plagued by other issues like farmer distress and migrant workers problem. A large percentage of our population live on agriculture, which is not remunerative.

The India story has been very different. We have had our successes in IT. There is a fair bit of very sophisticated manufacturing but when it comes to large scale mass manufacturing, which can give jobs to our large population, there is a niggling doubt if we have missed the bus.

On the one hand, we're talking about export and labour intensive businesses and lack of jobs and, on the other hand, we are talking about industries which can substitute agriculture. There is a huge opportunity where the two can come together and lead us to the next level of development as other countries have done.

The story of Laguna Clothing

15 years ago, I set up a company called Laguna Clothing. The mandate was to make world-­class formal shirts for international premium brands. This was promoted by a very well­-known Italian mill known for its design and fabric. The joint venture was with a global apparel producer based in Mauritius.

They saw the benefits of a sustainable life built around the agricultural community. It stopped people from migrating to the cities in search of work. That itself is very inspiring for the customers and they want to be part of the story.

I was asked to conceive and set up this project in India, mainly because the Italian mill had already set up a mill in Kolhapur and they wanted to use that as the base for international and domestic business as well as to forward integrate into a production of high­-end formal shirts.

We first did a pilot around Bangalore and then we realised that it was better to set up in rural Karnataka.We went 60 kilometres from Bangalore and set up the factory in Kanakapura.

Laguna Clothing has been extremely successful as a business. We serve demanding global brands. We have received outstanding customer feedback on quality, delivery and service. Financial performance has been exceptional. It has been a grand success story as far as stakeholders have been concerned. It is not the lowest cost product. But we give a combination of design and quick turnaround; we end up being a design to delivery business, giving great value, rather than the lowest cost. In 2019, we set up another factory in the same area. Currently, we are setting up in rural Jharkhand.

The rural advantage and challenges

Why did we decide to go to rural India? In Bangalore, we realised that there was no local labour pool. People working in shopping malls were coming from distant States and they were basically unstable. We decided it was better to go to the pool of labour, which is the key requirement for a successful business. Moving to 60 kilometres outside Bangalore appeared to be a major leap of faith and risk, but then we benefited greatly.

The moment you must step out of the city, many of the infrastructure and other benefits disappear. We tried to look for industrial estates closer to the city; there were industrial estates, but private companies had taken the land and they were no buildings. The industrial estate was empty for 20 years.

The fact that we had a stable labour pool created a strong foundation for the business. Local support was extremely positive; there was a strong desire to make it happen locally from everybody because all these families were mainly marginal family farmers. They would have to send their girls to the cities to work in difficult circumstances, often being badly exploited just to make a living.

For them to work in small to medium-­sized factories near to where they stay, which could supplement their earnings and create a stable livelihood was extremely attractive. This was even more of an incentive as we went to the poorer areas like Jharkhand.

The laws of the land are so complicated. It's hopefully changing now. In Karnataka, a non­-agriculturist cannot buy agricultural land. We got our HR manager who was a khata holder to buy agricultural land and get it converted to industrial land and then sell it back to us. For each acre of land, there were 30 to 40 claimants who had to sign before the lands were sold. It is a very complex process.

Most of the girls we hired were farmhands; they were cultivating produce. Initially, they were all scared of women coming to a factory. So we had to go and talk to the panchayat leaders, explain what we were trying to do, how it was safe and build confidence in the community. We had to train all these people from scratch.

Even after they get training, the more difficult part was building an industrial culture. In the village where there were many festivals, instilling discipline of coming in time every day to work and working for a fixed period of time was a challenge. We had to adjust to a lot of local practices and religious traditions, declare some local holidays and adjust our leave calendar. As many of our staff and managers were coming from Bangalore, we created a five­-day work week.

The biggest impact was on customers. It was important to have a factory near a big city so people could fly in internationally and spend an hour or two going to a factory. But as we moved out of the congested and polluted city of Bangalore into the rural, green field area, which is non­-polluting, the customers who came to the factory could see the cluster of villages from where people would come to work. They saw the benefits of a sustainable life built around the agricultural community. It stopped people from migrating to the cities in search of work. That itself is very inspiring for the customers and they want to be part of the story.

As we progressed, we started working with the community. We tied up with the local schools and BDOs (Block Development Officers) and organised health camps by tying up with hospitals in the city. This had a huge impact because there were virtually no health facilities in the area. Hundreds of elders would come to the camp. We organised cataract operation for them and gave them glasses. We had 80 such camps and they were very beneficial to the people around. All these helped us to get a stable workforce to build our business. We could also give back to the community.

To summarise my thoughts:

• Globally competitive does not mean being the cheapest converter. It is about giving value, right from design and IP to delivery.

• The intellectual, IPR related work with manufacturing preferably done in rural areas should be a huge success factor for being globally competitive.

• If you have a motivated and good professional team with clear business plan, it is more than possible to achieve high levels of customer satisfaction and profitability. This can be a great opportunity not only for businesses but also for the community at large.

• Because of forced labour in China in certain areas like getting cotton yarn and, lack of transparency, many countries like the US want to move away from China sourcing.

• Because of technology and digital transformation, the entire value chain is getting transformed; this is a big opportunity for us.

• Having a one­-off company is not enough to be internationally competitive. Scale is required. Forming clusters like the traditional clusters in Ambur (Leather) and Tirupur (Textiles) and forming modern clusters in different parts of the country is very important. There is a cluster in Vishakhapatnam set up by a Sri Lankan company. It is known as Brandix India Apparel City which is a self-sustaining eco system bringing together world­class apparel supply chain partners to collaborate and come out with solutions for world class branded apparel clothing. This is one of the most competitive places in the world.

• There is a strong case for going rural especially for labour­intensive industries. Also creating a sustainable ecosystem and stopping migration to cities is a great opportunity which we all must look at. This is even better in States like UP, Bihar and Jharkhand where the pain is acute.