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Raja Simhan T.E.

Indian manufacturing firms are still using IT only in bits and pieces, say experts. They haven't moved up the rung in terms of competitiveness.

A GLOBAL survey two years ago by a leading consultancy firm ranked India at 42, from a list of 53 countries, in terms of its competitiveness in the manufacturing sector. The situation has not changed much since then.

Despite having sound technical expertise, Indian manufacturing firms, compared to their counterparts globally, lack competitiveness. This is mainly due to lack of technology usage by Indian firms when compared to competitors abroad, feels V.M. Cavale, a manufacturing expert and consultant.

Prior to setting up his own consulting practice, Netw7ork Management Consultants, Cavale was with the Unilever group of companies, KPMG Consulting and Consindia HR Services Pvt Ltd.

Citing a KPMG-MDI survey, Cavale says optimised supply chains - linked to business objectives, built around supply chain processes, propelled by management tools, enabled by technology and integrated with suppliers and customers - have not yet been realised by most Indian manufacturing firms. "Indian firms continue to use IT in bits and pieces". There is no centralised IT solution across organisations for free flow of information. "Those in charge of decision making on business spending in Indian manufacturing companies do not understand IT correctly," he says. In today's competitive world, without IT nothing is possible, he feels.

For instance, lean production tools — a systematic approach to identify and eliminate waste (non-value-adding activities) - like just-in-time (JIT) and Kanban are yet to be used in a big way in India, he says.

Fragmented information

One of the biggest problems faced by Indian manufacturing firms is the fragmented information available within an organisation, with departments working in isolation. A company may take pride in having a sound ERP (enterprise resource planning) but its implementation would not give the expected results without a proper integration between departments - missing in many firms. Information within departments is not exchanged properly, leading to a lot of repetitive work, he says.

According to Cavale, the market is very dynamic with forecasts changing frequently. The manufacturing cycle time continues to be long and Indian OEMs (original equipment manufacturers) take over 45 days to manufacture major components. "To become world-class manufacturers, Indian firms need to bring down the cycle time to less than a month or 20 days. This can be done only with the use of technology across the board," he says.

Cavale says KPMG-MDI surveyed about 700 Indian manufacturing firms to understand the level of IT used in the firms. It was found that only about one-third of the firms used IT across the organisation. In about one per cent, there were islands of automation and half of the firms used IT only for office automation. "Integration is a major issue among the Indian manufacturing firms today," he says. A survey of the top 50 Indian companies, across industries, on IT spending, revealed that only one firm spent 4 per cent of the total revenue on IT, three companies spent 3 per cent and 33 companies less than 1 per cent. Globally, the average IT spending on total revenue was over 4 per cent, he points out.

For the most part, Indian manufacturing firms have a weak alignment of supply chain strategy with business strategy.

Many firms are still rigidly structured along functional lines with department-specific performance measures. They are yet to adopt a process-oriented style of functioning, he says.

Technology has become an enabler for aligning business to consumer demand.

Technology can achieve breakthroughs in the area of supply chain design, configuration and planning which otherwise can never be thought of.

Organisations are still in the process of harnessing the power of IT to improve their supply chains, he says, quoting the survey.

On e-enablement of the supply chain, Cavale says technology could be a good enabler of quantum improvements, but IT achievements have been limited to date among Indian manufacturing firms.

Integrated systems that truly manage supply chain information are not yet commonplace in usage.

While integration within an organisation is an issue, supply chain integration with various vendors is another area of concern for the manufacturing companies.

Firms having strong supply chain integration have seen 50 to 60 per cent reduction in lead time (time taken to convert raw material to finished product), and over 50 per cent reduction in inventory, he says.

Look up the five-stage process

According to Cavale, there are five stages for successful supply chain integration in an organisation; the fragmented information period (pre-integration phase), process thinking (ERP), complete integration within the company, integration with vendors and customers and finally virtual network. Most Indian firms are only in the second or third stage — process thinking. There is a long way to go, he says. "ERP alone will not help companies. It has to be integrated with a good SCM solution - the latter should be a top priority for manufacturing firms and help optimise the productivity level," he says.

Says S. Srinivasan, General Manager, Business Strategy and Systems, Sundaram Fasteners Ltd, while technology is an important enabler to do things efficiently and quickly in a firm, companies need to be more creative in using IT.

The manufacturing time cycle has narrowed substantially, with clients asking for products within days. If they are not delivered on time, the client switches over to another supplier.

A few years ago, to receive an order used to take two to three months, while today the product delivery needs to be within a few days from receiving orders. Technology enables such a speedy delivery schedule, he says.

According to Srinivasan, there is enormous pressure on pricing for manufacturing firms. Today, OEMs talk only about price reduction not about increase, while a decade ago price increase was a routine. Further, if there is a design change of a component, it should be incorporated across the organisation within seconds, which can be possible only through technology, he says.

raja@thehindu.co.in

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