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WCM/U4 Topic 1 Manufacturing Performance and Competitiveness of Indian Firms

Aspiring to become a World-Class manufacturing (WCM) organisation is a common aim of many manufacturers. However, recent research by authors, such as, Hanson et al. (1994) and Schonberger’s (1996), reveals that few manufacturers are achieving this status and many are failing to even start the race to improving their manufacturing practices and performance. For some manufacturers, this may be due to inertia or, more seriously, it may be due to lack of relevance and advice available on the means and the steps required to attain WCM status.

Chandra and Sastry (1998) conducted a survey of the top executives of 56 manufacturing firms using the manufacturing futures survey questionnaire (Miller et al. 1992) to assess the strategies being planned by Indian manufacturing firms to improve their competitiveness and the extent of performance improvements that have taken place. Today, Indian firms are facing a very different competitive scenario as compared to the past. They are facing competition from imports and

MNCs in the domestic market. Several firms also have to compete with new entrants in global markets. The new competition is in terms of World-Class quality products, with higher performance, reduced cost and a wide range of products, all delivered simultaneously.

It appears that the manufacturing strategy of most firms is focused on improving product and process quality, after-sales service and on delivering products on-time. However, firms are currently giving low priority to improvements that require fundamental changes in manufacturing-changing processes, capability to rapidly change product mix, new process and product developments, etc.

In terms of manufacturing performance, the survey revealed that over the last two years, there has been a marked improvement in the performance of firms on a variety of factors, such as productivity, reduction in customer returns, improvement in first-pass yields and in the overall perception of quality by customers. Other performance indicators that have improved are on-time delivery, shop floor response to design changes and reduction in manufacturing cycle times. The real challenge for Indian companies, therefore, is to improve manufacturing processes, quality and technology for excellence.

India is undertaking path-breaking reforms in its industrial sector. Its manufacturing sector registered a growth rate of 8 per cent per annum during the 1980s. This was considered to be very respectable, considering the statistically significant decline the sector had been registering since the mid1960s. One of the reasons for this may be attributed to the liberalization process initiated by the Government of India in the early 1990s, one of the major objectives of which was to raise the growth performance of the industrial sector by removing various constraints, especially the requirement of an industrial license (Mani and Bhaskar 1998). However, on the global competitiveness level, India had an overall ranking 45 out of 53 countries in 1997, which slipped to 50 in 1998 (Sharma et al. 1999). The basic question arises is how competitive are Indian manufacturing firms? Today’s competitive environment is very different when compared to the past. The Indian manufacturing firms are facing competition from imports as well as from multinational companies (MNCs) in the domestic markets. Earlier, these firms segregated these two markets and served them with different quality products and services, compromising on quality in the domestic market. This is no longer possible. Therefore, many strategies that may have worked in the past are not likely to succeed now.

At present, the competition is in terms of reduced cost, improved quality, high performance products, a wider product range and better service-all delivered simultaneously. Traditionally,

Indian firms have followed an opportunistic approach to growth as opposed to a competencebased approach that seeks to strengthen key aspects of manufacturing. Consequently, these firms paid little attention to their factory floors. Of course, there have been some exceptions to this and some firms had indeed built up their capabilities. Firms are also paying more attention to quality, but little to faster throughput and delivery, wider product range and better service? There is no evidence to suggest that enough progress is taking place in this direction. Perhaps, firms are struggling to improve ‘quality’ first and expect to take care of other issues later.

Furthermore, the Indian market is also witnessing a quiet revolution where old products are being substituted by better ones. For the first time perhaps, products and services are being introduced to meet in customer needs, a practice not discernible earlier. The trend of rapid introduction of new products is forcing manufacturing firms to profitably produce a larger variety in smaller volumes! Consequently, these firms have to search for new processes, materials, vendors, factory layouts, techniques for reducing cycle times, designs, channels, etc., to deliver these products. Moreover, manufacturing firms are also being asked to integrate services with products to meet customer needs. Thus, the real challenge facing Indian manufacturing is to improve substantially on several dimensions–quality, technology, Shop floor practices supply chain coordination, and time—to-market-simultaneously and over a short period of time. In. short, Indian manufacturing is under pressure to demonstrate manufacturing excellence, and to progress faster on the road to World-Class manufacturing for sustained profitability and growth.

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