Why India and rest of the world we are still dependent on Made in China Products and not MakeInIndia for many products.
Why India and Rest of the world are still dependent on Made in China products when the skillsets are available in India?
If you have been closely monitoring the recent COVID-19 Situation going around the world and its unimagined impacts to human life, healthcare system, businesses, Country economy, political leaders etc it brings out clearly one aspect –most countries in the World are very much dependent on China for their products & supplies.
Since early 2000’s when Globalization started becoming popular the dependency of China has increased multifold and Chinese companies have made substantial investments in many parts of the world and with increase in Digital Commerce, ability to work from anywhere, sell from anywhere, Easier cross border logistics, relaxed trade barrriers, Western Civilization opting to move towards Service economy – all these factors have resulted in dependency of China to Countries becoming more stronger and tightly integrated into their processes and trade and countries find it difficult to breakaway from the dependency factor China has created over them.
This article is mainly written from the viewpoint of Indian manufacturers as to why we are still dependent on Made in China Products and not Make in India for those products.
My Exposure to Chinese Manufacturing EcoSystem – My first visit to China was in 2006 and since them over the past 15 years Have visited China over 15 times for varied reasons like visiting CellPhone Manufacturing Sites, Trade Fairs for Electronics, Trade Fair for Industrial Tools, Complete Tour around the Shenzhen Ecosystem and the various cottage manufacturing Units and interaction with many Manufacturers, Assembles and Integrators.
My Exposure to Indian Manufacturing Ecosystem – From 2006 to 2013 I was part of setting a Mobile Phone Manufacturing Unit in India where we started with Assembly of Phones and then eventually except the Electronics Raw Materials like Chips, Resistors, SMD Boards, Solder Pastes, Resins etc everything else was Manufactured here locally. I would say the Ecosystem for Mobile Manufacturing was almost there. And Since 2013 I am involved in Industrial Products Distribution where I run a Omni Channel Business with Technical Consulting, Source and Trade of Generic Products, Custom Designing of Cutting Tools , Retail Setup for Hand Tools and Power Tools etc – so I have regular interactions with most OEMs for various Industrial Products & Consumables every now and then.
So here I have jotted down few points on what I think are the areas in Favor of Make in China and Areas where are lacking for Make in India
Areas in Favor of Make in China
1. First Mover Advantage with Government Support – The China manufacturing Ecosystem started well early in the late 70s when China opened the economy. It coincided well with the start of the outsourcing to Asia due to higher costs in Western World and eventually led to many products being manufactured in China. As a result they have started 20 years well in advance and Industries have matured and the government has spent great effort and time in developing this ecosystem possibly through subsidies, loans etc. And may be the way the government is setup – Same Rules for the whole country, decision making is faster and streamlined across the whole country.
2. Mature Industrial Proliferation – Due to the early start there is a very high proliferation of small scale industries and well-connected ecosystem. These are not even large industries run by very technical people, you can find multiple small industries in a single building assembling products and running extra hours to make whatever is required.
3. Excess Capacity in Capital Intensive Machineries - Due to their early start the Chinese Ecosystem has excess Capacity built for many of the Capital intensive machines like Injection Molding, Forging Units, Semi Conductor Fabrication Units etc. These machines are highly capital intensive and do not justify the setup if there are lesser volumes - this is one critical factor why China is still able to produce items at a larger scale at a very lesser cost. They have built the capacity over longer period time and it is extremely hard to overlook this aspect of Manufacturing.
4. Well Connected, Well Bonded and InterDependent Factory Networks- As mentioned early there are multiple suppliers doing similar products and sometimes in the same building and they source from each other or from one common source. This well connected and interdependent relationship has helped them to keep assembling or producing products/brands quickly to meet customer needs across the world. In many cases the actual Manufacturer of the base product might just be one big company but there are 100’s of smaller ones buying from the large manufacturer and selling it across of the world. In seems as if they actually work towards one goal of Making China as the Lead Manufacturer to the World and since there is huge demand anyways everyone’s supply is met someway or the other.
5. Speed of Adoption & Replication and setup – Recently APPLE CEO Tim Cook said it is not about low cost or excess manpower in China – it is the speed at which they can actually changeover and setup and start production of items. That’s is something I have observed during my multiple visits to China. They may be copy paste, but the speed at which an idea is replicated and moves from NPI to Mass production is phenomenal
6. Discipline in Execution – This is something I have observed with my Colleagues or suppliers or distributors once they agree to a certain aspect they are committed and disciplined in executing that task. We have seen very little people not adhering to that. I don’t know if this is coming from the way they have been governed but it is amazing how they can stick to particular aspect of work and just be loyal and get it done whatever it takes.
7. Growth of Internet and Emergence of Alibaba – With the very rapid digitization of the world and growth of AliBaba, sourcing of products and selling of products has become very easy. The Alibaba portal has listing of all possible products and has all possible suppliers in this list and the best part is all the suppliers are verified by them. This brings huge confidence to someone on the otherside of the internet who is worried if he is going to get substandard products or cheated by the supplier. Alibaba has ensured all these doubts are removed by giving multiple options like supplier verification, complaint mechanism and since Alibaba has themselves established as the gateway to Chinese Suppliers and Rest of the World, most suppliers listed in Alibaba are genuine to what they commit and deliver.
8. Product Marketing thro Fairs/Exhibitions/TradeShows – The trade shows and exhibitions in China are just eye candy – anyone who is into similar business line will be awestruck with the size, magnitude, presentation and setup of these tradeshows, They have all kinds of similar & complementing products, suppliers, demo products in the exhibition and the travel arrangements, trade centers are all well setup for anyone to visit and go thro the Shows with very less hassle. Marketing is a very important aspect here which connects them to the rest of the world.
Now these are few points which I feel there is still a superior advantage of Make in China and the same points could be looked from an Indian Perspective as to why we are falling behind despite having similar resources to become a strong manufacturing alternative to the China EcoSystem.
Now We will quickly look at few points what we need to do differently to improve the ecosystem here
Areas to think for Make in India
1. Longer Term Thinking & Mindset Change– One big aspect here for most Indian Entrepreneurs we should change our mindset here would be to think for a really longer term aspect say 10 years and invest accordingly. Most of us here think as a reseller and the option of manufacturing that same item is not even considered. We only look at the total landed cost for the moment and not think as the potential manufacturer for the whole world rather than being a reseller in India
2. Government Support – The government has been providing support for local manufacturing but may be its required to provide them additional benefits, SOPs, Facilities to boost the confidence in Indian Manufacturers to start investing in Manufacturing here locally. Cost of Infrastructure is very high and it takes up a major portion of the cost and time to setup a manufacturing facility, similarly cost of Finance is also very high. So in such cases the support can be in terms of ready to run facilities with a smaller cost, Project loans without collateral security, Industry Guidance and technical support for promoting sales, exports and performance improvements.
3. Increase Exposure to Export Markets – In most cases the Indian businessman is more focused on meeting his Sale requirements and his local customers and for his volume requirements and capital requirements his needs are met by just importing from China. But with greater exposure to Markets Outside India it might actually push him to change the mindset from Reseller to Exporter to the Global Market. This can be facilitated by the Government Bureau.
4. Government Push and Initiative– This is something we need, Government needs to consider this as a huge opportunity for India to Make In India and if they can select a few large volume supplies and focus on setting up the manufacturing clusters in India and that will enable local importers or resellers to relook at their process and consider manufacturing them locally here. Combined with the Government Support and Exposure to Export markets this will build the big picture and propel most resellers to consider manufacturing. One example could be the health care supplies Segment - promote local manufacturing of health care and surgical supplies and be a alternative supplier for the world.
We in India, have the technical skills, abundant manpower and proven track record of being a reliable exporter for many segments. So technically nothing stops us from becoming an exporter for the whole world like China for other simpler products . With the right mindset, longer term thinking, government support and initiative it can slowly move in that direction.