Systems; Manufacturing: Manufacturing Customisation

TRIMILLENNIUM MANAGEMENT: MANUFACTURING
Manufacturing Customisation

By R.Bhimmadipati

The manufacturing environment has changed rapidly as we enter the millennium. The widespread acceptance of free trade as the principal means of growth ranks among the previous century's most significant intellectual achievements. Free trade has raised customer expectations in hitherto-closed economies such as ours. And the convergence of information and communication technologies has given free trade a further impetus. At the same time, the impact of unrestrained growth on the physical and social environment will continue to cause concern in this century. In developing countries like India, the debate on sustainable development will acquire a sharper edge as we strike a balance between an ever-pressing imperative of growth and the social and ecological costs associated with this growth.

THE CHALLENGES. What does this change mean for Indian manufacturing? What strategies will enable manufacturers to cope with emerging challenges? How can they recreate and remodel themselves to benefit from new opportunities and retain relevance. Make no mistake: manufacturing is, and will remain, a key sector of the economy, and its success or failure will affect our lives profoundly. Manufacturers in India will be required to provide more for less. Can Indian manufacturing identify the areas in their companies that create value, and those that destroy it? Will they acquire the resolve to tackle these issues squarely?

Manufacturers must come to terms with shorter product-technology life-cycles. Rapid changes to product and process technology pose a huge challenge. Can the industry afford the high cost of development and keep pace with technology? Or will technological change be a tool which advanced countries use to protect their markets and products? How should Indian manufacturers respond? Cost is another issue: traditionally, Indian manufacturers have enjoyed the benefits of low wage-costs. This is likely to be a transitory advantage. Manufacturers will be compelled to invest in world-class facilities to provide consistent quality and delivery, thereby meeting the twin-challenges of value addition and employee-productivity.

Finally, as customer expectations and lifestyles change, quality (or reliance) as a measure of product quality will become a given. The dynamic differentiators in this century will be convenience, aesthetics, new models, and features. The ability to innovate around product designs and to create and satisfy emerging needs will distinguish the winners from the losers. While all these factors represent challenges to Indian manufacturing, they also represent opportunities that will arise. Faster growth will witness an increase in the size of the market and create demand for a range of products and services. In such a situation, what strategies should millennial manufacturers use to meet the challenges and exploit the opportunities?

CUSTOMER FOCUS AND MASS CUSTOMISATION. Companies should manufacture what the customer wants, and not sell her what they choose to make. This will require companies to recognise the fact that markets are not a homogeneous mass, but a heterogenous aggregation of individuals with differing requirements in terms of price, product, delivery, expected-performance, and service. Companies will have to view supply chains as assemblies of resources and assets within the value chain, which will help them meet the needs of several customer segments.

Differential supply chains based on product and customer segmentation will become commonplace. Flexible manufacturing systems capable of responding speedily and cost-effectively to the requirements of customers will be critical to success. Manufacturers should strive to meet the unique demands of their product and market segments without compromising their economies of scale. In all these efforts, information will be the glue that will bind all the links in the value chain, and enable swift and accurate response.

RESEARCH AND DEVELOPMENT. India's international obligations concerning intellectual property rights at the World Trade Organisation will make acquisition of technology by Indian companies dearer. Indian manufacturers will have to increase investments in R&D besides forging closer links with scientific institutions to continually lower their operational costs, improve their performance, and create new products (or services) and processes. These will mean investments in re-tooling, modernisation, and R&D. This, in turn, require higher rates of growth and enhanced cash-flows. To be able to make these investments and be competitive globally, the manufacturing sector will witness a drive towards consolidation.

CORE COMPETENCIES AND SHARED SERVICES. In what may, at first sight, appear to be inconsistent with the move to consolidate, manufacturers will outsource significant parts of their operations to gain speed and reduce costs. This, in turn, will create new opportunities for a wide variety of services and skills. Companies will cease trying to integrate either forward or backward to benefit from the economies of bundling. Support processes will be outsourced or performed by a shared service-centre. This will transform fixed costs into variable ones, and enhance the quality of service delivery. It will also enable manufacturers to concentrate on their core processes and deliver superior value.

THE VIRTUAL ORGANISATION. The use of the Net will be widespread and pervasive. The Net will shrink response-times, link customers, producers, and suppliers into a seamless network, and configure and re-configure value chains. It will accelerate the trend towards disaggregation and outsourcing. Already, businesses in India are taking tentative, exploratory steps in this direction, and we can safely predict the creation of radically new business models as we move through the millennium. The end-to-end transparency enabled by infotech will result in virtual organisations. These will be communities of several physical organisations, each of which will plan, allocate, and dedicate its resources towards optimal performance.

THE PEOPLE. New technologies require new mindsets, attitudes, and skills. As India Inc. loses the advantage of low wages, it will have to offer the customer higher value. This can happen only if employees at all levels of the organisation learn new skills, and are motivated and empowered to work towards higher levels of customer satisfaction. Indian companies, which traditionally are loathe to invest in people, must do so aggressively as part of their change strategy. If all this sounds forbidding, it is also exciting. For those companies that take steps to recreate themselves, the process will not be painless. But the rewards will be ample.

R. Bhimmadipati is the head (Operating Practice), Price water house coopers

Issue Contents Write to us Subscriptions Syndication