2009

Who Will Be the Next

Manufacturing Superpower

Ashutosh Agrawal
Email: aagrawal.ie@gmail.com
Blog: www.frontiers2explore.blogspot.com
LinkedIn: www.linkedin.com/in/itsmeashu

The article was written for a leading Indian Business

Magazine ‘Dare’. The article won the cover story contest
and was published in Feb 09 Issue.

Web Link:
http://www.dare.co.in/announcements/contest/analyses-on-
who-will-be-the-next-manufacturing-superpower-that-won-
blackberry-bold.htm
Ashutosh Agrawal Page 2

WHO WILL BE THE NEXT MANUFACTURING SUPERPOWER

Definitely not an easy question to answer, given the dynamism and uncertainly of
world economy, political conditions and changing customer aspirations. For such predictions
one can always look into the past and present for trends & clues and extrapolate them with
best of human intention and judgement.

Let’s take a brief look at the history of previous shifts. The shifts in manufacturing base
in the past were not disjoint or unrelated. It was always an improvement shift. Not only the
improvement in methodology of manufacturing but more importantly the improvement in
serving the customers at that time. USA took the lead from U.K. & Europe, when it used
mechanisation coupled with new inventions, mass production & assembly techniques to
make new useful products and make them available to masses. Japan took the lead, when it
added the quality and sophistication to what USA provided. The high quality and hi tech
products of Japan, made the customers worldwide crave for them. Japan would have
maintained its lead but for its aging population and so entered China with its low cost and
massive scale. China made products more affordable and is preferred manufacturing
destination for any company who wants to reduce manufacturing costs. Also its low cost
imitations, though of cheap quality, made the sought after products accessible to
economically weaker and to a larger section of society. So where does one go from here? The
answer lies in understanding the customers and the value proposition they will expect from a
product in future.

The next phase of manufacturing will have to fulfill following four aspects of the
unique customer value proposition.
1. High Quality: The craving for quality product created by Japanese products can never be
satiated. And lack of quality in Chinese manufacturing has left customers more aware and
appreciative of quality. Quality will be the corner stone of future manufacturing
excellence.
2. Low Cost: Again after tasting the low cost products of Chinese manufacturing, one cannot
go back to paying more. Value for money will be on top of the customer mind.
3. Innovative & Customised Products with small delivery lead time: This is the stage to
which a customer has been pampered by companies nowadays. The coming generation
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will be highly individualistic. They will seek expression of their personality & individuality
in every product they use. Be it clothes, shoes, gadgets, food or anything else.
At the same time, the economically weaker section will look for bare minimum product
features and will not pay for any feature which they don’t require. Innovative and
Customised products will be the key the meet the demands at both top & bottom of the
pyramid, and customers will expect quick delivery as usual. The company who delays the
product delivery will lose the customers to other competitors.
4. Seamless integration of product and services: A customer will not look for a product, but
for a solution. A complete package of product and service bundled together, which will
cover his needs.
To put it this way, the customer of future will demand a car customised to his body size and
his tastes of performance and style, at the cost of Tata Nano, with quality of a Porsche and he
will expect the company to give delivery and after sales service at his doorstep and if he
doesn’t know driving, to teach him driving too.
Sounds outrageous! But just before you reject it as a wishful thinking, won’t you as a
customer wish that way? These four aspects will form the theme of next manufacturing
phase. Convergence of above conflicting four aspects may seem impossible today, but only
that nation which enables this convergence and fulfils this irresistible customer value
proposition, will undoubtedly host the next manufacturing revolution in the world.

Drivers
Now what will be the drivers to achieve this uphill and seemingly impossible task? Again we
look at the history for answer. History is full of paradigm changing, path breaking thoughts,
which revolutionised the manufacturing. Did anyone really expected to reduce cost and
improve quality by decreasing the batch size? No one did before Sir Taichi Ohno. It was a
paradigm change. Did anyone thought that rather than arm-twisting the suppliers,
collaborating with them will reduce cost? Or did anyone even dreamed of that giving away
chunks of operations to someone else will reduce cost for them? Again a paradigm change.
Did anyone really thought that our legacy of functional based organisation is in fact
hampering our growth and the need of hour is to reengineer with process focus? Going
further back in history, once people could never believe that investing money on a non value
adding activity like quality control will lead to less cost and more sales and Sir Deming had to
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take his ideas elsewhere. Old Paradigms and Mindsets have been challenged and changed
before and it’s imperative to challenge and change them further to see another
manufacturing revolution. Also Global outlook and world sourcing will be the key aspect of
the future. An engineer sitting in Germany converting the requirements of a customer in
Australia, into required drawings and passing it on to a manufacturing hub in India, which in
turn will source the raw material from Africa and other parts of the world. Whole world will
be the playground for companies as they seek customers and resources in future.

Needless to say, this uphill task will require next generation, paradigm changing and
path breaking thinking and action. And this will be the biggest driver for the manufacturing
revolution. Any nation with leadership, entrepreneurship and managerial capacity to take
risk, challenge existing mindsets, generate new thinking and put it in action will herald the
new revolution in manufacturing.

Another major driver will be the way we will manage the energy requirements. One
thing is for sure, the new manufacturing phase will not be powered by fossil fuels. Following
case points in that direction. A small town in Uttar Pradesh receives electricity only for 6-7
hours a day. The sugar mills in that area were struggling to survive as energy costs were
soaring. Rather than blame the government or diesel prices, sugar mills installed a boiler and
turbine to generate the electricity. And guess what the fuel was? It was Bagasse, the by-
product and a waste of sugarcane crushing. This breakthrough story is already old now.
Innovative means of trapping renewable sources have been in progress for quite some time.
Further we need to integrate all the possible renewable energy means into a solution
package, scale them up and drive down their lifecycle cost. Imagine a manufacturing plant,
with its roof covered with solar panels, solar concentrators fitted in adjoining area,
concentrating the solar energy onto a tower like receiver on top of the buildings, windmills
dotting the roof tops and adjoining landscape, a biogas plant collecting all the human excreta
from the buildings, any useful by-product form the manufacturing plant being ploughed back
to generate energy, the buildings and landscape designed for maximum energy efficiency
with use of LED based lighting systems and passive cooling. Such manufacturing plant will be
not only be self sufficient and save money but also bring earnings in form of carbon credits
and some extra electricity over the weekends. Next phase of manufacturing will happen in
this type of plant. The nation which adopts these technologies rapidly and on large scale, to
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power both manufacturing and transportation, will make technologies affordable in process
and gain the edge.

Another driver will be the adoption of new technologies like rapid prototyping,
nanotechnology and others in mainstream manufacturing. It should not be confused that next
manufacturing phase will be technology driven. Instead it will be value driven and only those
new technologies which are able to deliver desired product features at low cost will drive the
next manufacturing phase. Also remember, focus will be on adoption of technologies on large
scale rather than doing basic research on them. A nation though is not doing any basic
research in new technologies, but takes risk and adopts them fast on large scale will have a
manufacturing edge.

Further a significant driver will be to find the right blend of technology and human
intervention, to allow customisation at low cost. Consider this. An engineer after interpreting
the customer requirements makes required drawings for its manufacturing and passes them
on to automated machine shops to make parts for that customer order. The assembly line
worker receives customised parts on the belt and assembles them as per the drawings and
parts list for that particular customer order. The truck for transporting the products to
distribution centre will be converted to a paint shop, inside which painters are painting each
product as per the customer requirements, enroute to distribution centre. Any guess, where
the product is being packaged? At distribution centres. It all sounds funny, until someone
starts doing it profitably.

The next pertinent driver is the competent, flexible and motivated workforce to make
it possible. Multi-skilled workers adept at various crafts and computer savvy will form the
asset base of any manufacturing industry of future.

Last but not the least, government policies will also be a major driver. Policies which
enable adoption of renewable energy sources, infrastructure development and
entrepreneurship will give a boost to the next manufacturing revolution. The rise of China in
manufacturing is due to the top down approach, i.e. the government support to industries
and entrepreneurship in form of capital and other facilities.
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Who will it be?

Now, who is the one that will host the next manufacturing revolution? No one better
than India is in that demographic sweet spot to make it happen. A young workforce,
entrepreneurial spirit, managerial talent and global outlook, we have nearly all the drivers,
but not at their best. We are a young nation and within a decade our working population will
peak to 800 million. But still the organisations are complaining about talent crunch. Out of so
many graduates being churned out every year, only 10-25% are employable. India is riding
high on entrepreneurship, but more confined to IT and service sector, as entrepreneurship
suffers in manufacturing sector due to high capital requirements and lack of manpower with
relevant skills. World’s biggest democracy, but with unstable governments, resorting to
retrograde steps to woo vote banks. Also India lags behind when it comes to adoption of new
technologies. If India fails to bridge the gaps with respect to these drivers, then China may
continue as the world manufacturing leader. China is also in same sweet demographic spot as
India and is in fairly good position on many drivers. If they wake up and come out of their
cheap, low cost and massive scale production to provide the irresistible customer proposition
discussed above, then the trend may break and China may continue to host the next
manufacturing revolution. One more region can prove to be an underdog, the rich Middle
East nations. They are quick in adapting the best technologies in world, evident form their
grand buildings, man-made islands and other engineering marvels. Their wealth increases
their appetite for new technologies and risks associated with them. They have started to look
beyond Oil. They have been leveraging their wealth to attract the talent from other countries
and they can continue to do so to drive the next manufacturing revolution. By doing so, they
will also come strong on all the drivers for the next manufacturing excellence.

It would be premature to zero on any one of them. All the three has the potential but
let’s not forget. One is not rewarded for having the potential but for applying the potential.

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