Amidst all the present excitement and eagerness on competing with China, Indian manufacturers need to figure out ways to emerge in the new landscape with confidence and complete readiness.
If you are a business based in India, you must be facing a host of new factors that this pandemic has triggered. The market outlook is not very encouraging. Business demand is low and the customer behavior is uncertain. The areas of supply chain and operations have become very complex. Technology is shaping up to be the only savior for both businesses and customers but there is a big learning curve that goes into it. How can an average trader grasp the new realities of doing business in this fluctuating landscape? How can one be assured of market access and visibility in this crisis-hit phase?
The answers are not easy but they are not impossible to find. One big setback that the crisis has unleashed is also the one that is proving to be a blessing in disguise. Both large and small players across the globe have realized the importance of diversifying their supplier base instead of tying up their supply to one source country. Indian manufacturers have a chance to convert this crisis into a massive opportunity.
For this big shift, we need to remember what made China the strong name that it is today. Expert analysis at the World Economic Forum has indicated how China made advances across competitive drivers like infrastructure, favorable policies, a large consumer base, and established a supplier network over the past 10-15 years. Many factors have helped strengthen and evolve its manufacturing capabilities from low-cost goods to more advanced products. According to global experts, however, China was seen at a crossroads even before the crisis– it was trying to maintain cost advantage and core low-cost production base but was also building the more complex capabilities for advanced manufacturing. As per the strategic directions from the World Bank China 2030 report, we can see many shifts underway in China as it was seeking to maintain and expand its presence as one of the world’s most competitive countries.
That means that while the time is tempting to compete with China, it may not be that easy to do that. Do you have what it takes to compete with China? Just see if you tick any of these boxes:
1. Go for gaps:
Look for unmet demand in specific verticals. There are a lot of new opportunities in segments like Pharma, Chemical, Textiles and Healthcare. These are the hot verticals right now. The Clothing Manufacturers Association of India (CMAI) has started seriously considering a list of categories currently imported from China. There is a strong push for identifying the products its members can ramp up or shift manufacturing to India. As businesses are grappling with logistics and marketing issues worldwide, these industries are facing shortages or uncertainty of products, supplies and services. If you are an Indian manufacturer that can rise up to serve any specific demand areas or supply chain parts for a medical product, material, solution or component, you can have a big advantage. The same benefit would play out if you can fill in a recent need in the market of textiles or technology components.
2. Diversify the supplier base:
The world has suffered a lot in these trying times. But regional roadblocks and unavailability of supplies have shown that suppliers should not be concentrated in any one region like China. It is not just about the number of suppliers but also the various phases of the supply chain that have seen over-reliance on a specific region. From initial parts of production to post-manufacturing shipping and other components, everything cannot be sourced from only one region or group of suppliers. Spreading the chain out is going to be a logical business strategy now. Doing this will require using modern B2B marketing platforms where you can build an alternative base of suppliers from all over the world.
3. Align with global quality standards of manufacturing:
Remember that Chinese companies paid attention to the global quality standards as set by world-class brands in other parts of the world.
Indian companies should focus on ensuring quality control. Constantly monitor production processes and optimize them till they reach the right cost-quality equation. Quality of materials and labour, technological sophistication, product quality are the ways to compete successfully with suppliers from China.
4. International packaging:
Once your goods leave the dock, on an international logistics journey, you have very little control over them. The packaging quality decides the condition of your product when it arrives at the destination. The right packaging protects companies against spillage, rough handling and unauthorized entry. Many manufacturers ignore packaging by outsourcing the entire task of logistics and packaging without putting in place a monitoring mechanism. But International markets, especially in the EU are sensitive to packaging issues.
Done right, International packaging can help manufacturers take full advantage of exports.
5. Achieving scale:
One of the obvious benefits of the economies of scale is reduced cost per unit and therefore cost competitiveness. But to achieve this requires long-term buyer commitment. High-quality products and manufacturing to specifications can help in securing long-term contracts. Local vendor development can scale your key inputs and help translate the economies of scale into the price.
6. Making use of Govt. schemes:
In India, and many other regions all across the globe, Governments have ushered in many stimulus packages to assist business survival and continuity. Many funds and projects for industries, especially SMEs (Small and Medium Enterprises), have been announced in the last three to four months. These should be availed with the right strategy so that an Indian manufacturer can gain financial and other strengths needed right now. These impetus efforts are meant to help both existing and new businesses. They will help to drive ecosystem access, stability, and overall business resilience. An existing trader can bounce back faster by using these schemes. An aspiring player can get into the business with the right by using these support packages.
Everyone is in reconsideration mode. Many new challenges have emerged because of the COVID crisis. If an Indian manufacturer can bring in a new idea that solves the current set of problems, that business would have a big leap. Much room has been created for products and solutions that are needed afresh in this crisis. Customers are giving hints for new unmet needs. Businesses are showing hunger for new partners and ideas. So innovating well and early would be a big step in the race to compete with China. Let us not forget that China has been strong on integrated infrastructure like large ports and highways, cheap-and-fast labor and sophisticated logistics.
WEF experts have assessed that the current Chinese enterprises are weak in green design capabilities and have significant gaps in energy-saving product development and safety. This is an example of new solutions: environmentally friendly and energy-efficient manufacturing, which was found missing in China’s manufacturing conditions.
8. Deep penetration of local markets:
Looking out to compete with China would, ironically, mean a good look inwards. There is opportunity for sourcing and innovating in the domestic market. Whether it is the availability of closer or cheaper options, just having a good and comprehensive look inside local markets would be a big jump for any Indian player. Local partners can help in many areas like costs, speed, ability to deliver, variety and credibility. A marketplace like TradeLeaves can show up authentic, certified and trustworthy opportunities to explore the domestic market. The ‘vocal for local’ is also a powerful consumer sentiment that manufacturers can bank on.
Deep penetration of local markets is also how China has succeeded in the first place. A CII-Evalueserve report ‘Growing Footprints of Indian Companies in China’, gathered information and insights from 54 Indian companies operating in China, with presence across multiple industries such as manufacturing, healthcare and financial services. About two-thirds of these businesses have observed that collaborating with local partners was important for business success in China.
Vantage India: Encashing the continuum
If you go back to the 2016 Global Manufacturing Competitiveness Index (GMCI) by Deloitte Touche Tohmatsu Limited (Deloitte Global) and the Council on Competitiveness (the Council) in the US, the role of manufacturing in driving global economies is clear. Though China was rated the most competitive manufacturing nation, it was also expected to slip to 2nd position. Interestingly, the US was expected to take over China’s number one position by the end of the decade while Germany was put at number three. Out of the top 10 manufacturing nations, two regions, North America and Asia Pacific dominated the competitive landscape. Here, five Asia-Pacific nations (China, Japan, South Korea, Taiwan and India) were expected to factor in the top 10 by 2020. The five Asia-Pacific nations of Malaysia, India, Thailand, Indonesia and Vietnam (MITI-V or the ‘Mighty Five’) were also expected to be included into the top 15 nations on manufacturing competitiveness over the next five years.
So it is clear that the pandemic has only accelerated a shift that was already in progress. Right now, the environment is conducive and strong for replacing China in many aspects of business, especially in manufacturing. Third-party manufacturers and contract-business deals are now looking for routes other than China.
The reclassification of MSMEs in India and the Atmanirbhar package announced by the Government of India assume significance in establishing a recovery route.
Now is the best time to emerge as a strong contender when businesses are reconsidering trade links with China. But it has to be an opportunity used with a smart business sense and with the right tools to one’s advantage.