Future of Manufacturing in India: Reclaiming the Glory of our past!

When asked for my prediction on the future of manufacturing in India, I vehemently stated that India will be the second largest manufacturer in Asia within this decade itself. My prediction is that manufacturing will grow to 25% of GDP. My son then asked, “What makes you so confident?”. In response I placed a bet of Rs. 380!! Yes, I placed crisp notes of 200, 100, 50, 20 and 10…all face down. What stared at us were the images of engineering marvels of India. Konark, Ellora, Hampi, Sanchi, Rani ki Vav…all of them have been standing tall as symbols of our audacious vision, unwavering resolve, ingenious engineering, and rich illustrious heritage.

Till about a few centuries ago, India accounted for 25% of global trade. One of the big exports from India was cloth (muslin). With the advent of Spinning Jenny in 1770s, Britain started to gain leadership in cotton cloth. The machines brought down the manufacturing cost by 85%. Since then, colonized and economically constrained India lost its global trade leadership. India fell behind in economic growth and prosperity.

  India’s participation in the past Industrial revolutions (3 of them) has been lukewarm and significantly delayed versus the developed countries. Surely, early industrialization brought lots of wealth to the select group of developed countries.

Oh...Yes, there have already been three industrial revolutions! First industrial revolution happened in the 18th century; it changed the life of cottage industries through large scale use of water and steam energy driven machines. Second revolution saw the use of electrical energy for mass production in factories. Later in 1970s, we saw the start of third revolution which was driven by large scale use of electronics and basic automation.

Now is the age of Industrial Revolution 4.0. This time it is driven by digital power. Digitalization impacts not only the industries but every aspect of the human lives. This revolution changes the way we consume (not just the way we produce). While the 3rd and 4th phases focused on mass production to lower costs, the current phase builds capability to deliver mass customization at lower costs and quicker speed to market. Industry 4.0 is the decisive opportunity for India to reclaim its glorious leadership in manufacturing and trade.

Current business trends necessitate adoption of Industry 4.0

The following key trends dictate and set ever grand expectations from our manufacturing function:

• Today’s customer expects anytime, anywhere services and products. This creates an interesting task for sales and supply chain to be agile, while maintaining low cost
• Customers are connected through various social media channels and have multiple point of purchase options. This makes demand furthermore volatile, making forecasting perplexing.
• Sustainability is an important agenda that requires immediate interventions. Customers and shareholders both keenly look for initiatives taken by their choice brands.
• Geopolitical disturbances have prompted businesses to work on SC resilience strategy and build capabilities (read flexibility) in sourcing, manufacturing, and distribution. Localizing and ‘Complexity reduction’ are amongst top agenda items for Supply chain heads.
• Rapid advancements in digital technologies have made data transfer, storage (cloud), and big data analytics affordable. Companies that make early breakthroughs shall enjoy the first mover advantage over competition.
• “China+1” sourcing approach gives a definite boost to Indian manufacturing.
• Government initiatives like ‘Make in India’, National Logistics Policy, SEZs, incentives to digital industry pave way for India to become second largest manufacturing hub in Asia

What are the business implications? Well, Customer centricity is the mantra! Agility and resilience are key focus areas. Status quo must be disrupted. We cannot afford to continue in the era of long-lead times, large batch sizes, only cost focus. New age supply chains must have dynamic and optimized networks with shorter lead times and real-time decision making. Manufacturing decisions need to be balanced across multiple dimensions and not cost alone.

Pathbreaking Technologies of Industry 4.0

Industry 4.0 digitally connects operations to harness the power of data and computing. It augments human intensive processes and reduces errors & risks.

There are many digital technologies, tools, solutions that are being adopted across sectors. I enumerate below the key ‘hero technologies’:

1. IIoT (Industrial Internet of Things): 85% of the production assets today are currently not connected to each other. IIoT represents use of sensors and connected devices that are set-up to continuously capture, store and analyze operational data.
2. Augmented Intelligence: 70% of production data that our machines generate is NOT captured at all. AI (Artificial Intelligence) helps use this data intelligently. Systems shall use data to automatically generate better insights and make decisions.
3. Wearables: This phase of industrial revolution will see emergence of human-machine interface. Wearables increase operator productivity by more than 25% Devices worn by operators collect or transmit data and enhance performance.
4. Advanced Robotics: In addition to significant increase in use of robots on shopfloors, we are also unleashing the robots out of their cages. Collaborative Robots (Cobots) is likely to be a $38bn global market by 2025. AGV, AMR, advances conveyors and adaptable robots may be deployed as per use cases. Our focus shifts from muscle power to cerebral power; this surely paves way for more women in manufacturing roles.
5. 3D Printing: Using alternative and additive materials, we can print customized products/ parts/ prototypes/ engineering materials on-demand and on-site.

Tangible benefits realized by the early adopters.

Companies have achieved 10% increase in plant utilization, up to 80% reduction in logistics headcount, 10% improvement in handling efficiency, 20% improvement in process efficiency, 50% reduction in response time, 5% increase in machine uptime, 30% reduction in maintenance cost, 10% reduction in working capital, 15% reduction in logistics cost, 10% improvement in service level and 25% higher throughput. Of course, all above has not been achieved by the one company at once. Definitely, these figures do give us an idea of the significant size of prize.

Treading the unconventional path requires industrious preparation.

Kearney research shows less than 50% of digital initiatives have a clear business rationale and 40-85% of initiatives fail to deliver the value expected.      It is thus critical to begin with a strong assessment of business needs and then evaluate/choose from the advanced manufacturing technologies.

Further, we observe that digital transformation initiatives do not scale effectively. Digital initiatives do not yield the desired benefits as the adoption is limited to pockets of functions/ geographies.     In addition to being driven by clear business needs, one must ensure basic operational excellence. These serve as a strong (and compulsory) foundation for implementation advanced manufacturing technologies.

It is prudent to identify capability gaps in people & processes, and proactively develop specific capabilities.

Digital systems, data analytics, operational process excellence are building blocks for IIoT, AI, Predictive process control. One must first strengthen the foundational competencies.

Organization structure, KPIs and inter-dependencies would also require a review (and modification) to prepare the company for the digital transformation.

There will be a net increase in employment while the nature of work done by humans will change radically. It is most urgent to re-skill and up-skill to keep pace with the revolutionary changes Industry 4.0 brings.

Factories that have achieved large scale adoption of emerging manufacturing technologies are recognized as “Lighthouse factory.” It gives me immense joy and pride to share that we have 7 Indian factories already in this distinguished league. These are from Mondelez, Cipla, Dr Reddy, Unilever, Tata Steel, Schneider and Renew Power…and there are many more to follow.

“It is happening here, and it is happening now!”

Do share your feedback below. Let me know which Supply Chain topic/issue you would like me to cover next.

… Let’s Unravel our Tessellations!

All views expressed in this article are my own and do not represent the opinions of any entity whatsoever with which I have been, am now, or will be affiliated.