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Role of Productivity, Quality and Jobs in making 'Make In India' a success
By Somshubhro Pal Choudhury and Anil Paranjape
Editor’s Note: This is part 1 of a two-part series on the role of productivity in making ‘Make In India’ a successful program
The showcase initiative of the Modi Government, #MakeInIndia has entered its third year. The goal for #MakeInIndia was to transform India into a global design and manufacturing hub, improve contribution of Indian manufacturing to 25 percent of GDP by 2025 from near stagnant levels of 16 percent and create 100 million manufacturing jobs. The intense global outreach by the Government, handsome schemes and incentives offered persuaded several global companies including Foxconn, Airbus and Hyundai pledge to set-up manufacturing base in India. But this was pre-Trump era.
Globally, the world is on an accelerated de-globalisation path; a complete U-turn in strategy of the last 20 years when companies trotted globally to setup cost effective supply chain and low-cost manufacturing. In the US, Trump’s focus of getting the jobs back to US with a carrot-stick approach has created widespread ripples so much so that Carrier scuttled the plan to lay-off a thousand American employees and move jobs to Mexico. After all, which CEO would risk waking up in the morning to be trolled on Twitter and thrashed for moving jobs overseas with Trump’s famous 3:30 AM tweets?
Global and regional trade treaties today reek of protectionism, re-shoring or right-shoring are the corporate mantra and ‘make in one’s own country’ efforts are on a rise the world over. The same de-globalisation and nationalistic trends made a case for Brexit and it is likely more European countries will follow suit. In this economic climate, many large corporations are expected to steer for some manufacturing in their home base. This when, China is saddled with supply over-capacity, there is lower demand globally and not enough takers in their home market.
On the other hand, Industry 4.0 is taking automation to a new level with 3D Printing, Internet of Things (IoT), augmented/virtual reality, human-robots collaboration (cobot), adaptive and additive manufacturing and new age robotics with artificial intelligence driving productivity and quality.
Robotics and automation are not new but technologies have visibly progressed. Even in mid-size factories in developed countries, the extent of automation has been tremendous. In US, most of the companies that survived the Chinese onslaught in manufacturing, have super lean manpower and rely heavily on robotics and automation. #MakeInIndia, especially the job creation goals, would hence be operating against an increasingly tough head wind.
Recently, as an advisor to a US-India startup building solutions for predictive analytics of machines, the author, visited several medium-size factories in India, and had the opportunity to chat with plant managers and owners issues and challenges facing the manufacturing sector especially issues relating to productivity, quality, availability of labour and the state of automation at the facilities.
Challenges to Productivity
The first thing that strikes you at a typical midsize Indian factory is the sheer number of people as compared to a similar size unit in the US. Labor is in abundance and under-utilised too, in Indian factories. Individual machines are used for specific tasks like injection moulding and these are not integrated as part of a typical automated production line. There were a couple of employees at each machine involved in operating the machine, inspecting the output, sorting and counting the output and transferring them to the next step. One of the factories visited worked two 12-hour shifts. Productivity leaped when they shifted to three 8-hour shifts. The inference: Beyond 8 hours of repetitive work, per worker productivity drops severely even though machines can operate 24/7. Now this is not a radical find, is it?
China’s official labour cost is widely acknowledged to be 4 times that of India; but the productivity is several folds higher on account of better human capital development through education, training, use of more machinery that automates repetitive tasks and advanced manufacturing processes.
In recent years, Indian enterprises too are pursuing ambitious productivity targets. A case in point is Tata Steel which is working towards doubling productivity over the next 5 years through higher automation levels, no doubt. This move would put further pressure on manufacturing job growth.
The issues with Quality
Across companies, quality of output has been identified as the topmost issue scoring higher than even productivity gains. The quality issues that plague the manufacturing sector are labour related as demonstrated below.
Quality checks a manual effort
Across Indian factories, the tasks of inspection for defective components, sorting and counting continue to be primarily manual and therein prone to errors. Another requirement at the companies has been to create a method to diagnose from the machine PLC11 any operational deviations to reduce the need for manual inspection of machine output to detect production problems. Similar requests were made on vision analytics for inspection which could complete the quality and counting inspection and notify the need for interventions.
Automation may well lead to downsizing staff with many seeing it as essential to enhancing quality, productivity and growth in domestic and export revenues. Automation and implementing some elements of Industry 4.0 were deemed necessary to demonstrate modernisation to global clients to increase exports.
Transitory contract labour is currently the norm in the manufacturing sector. The average factory worker wage is Rs 8,000 – Rs 12,000 a month. Archaic labor laws and high proportion of unregulated contract force are characteristic of Indian manufacturing enterprise. The booming service economy, employment alternatives, spread of service sector jobs to manufacturing hotspots and Tier-II cities has created job alternatives and pay competition.
Drivers of Uber and Ola, the delivery work force of Swiggy and Big Basket enjoy higher average pay packages, making these jobs more attractive for the factory work force too.
While we discourse on Skill India, setup training institutions and accelerating efforts to augment skillsets in manufacturing, the same industry is looking to be more machine-driven and error-free that even a novice can achieve ie effectively de-skilling.
Diploma holders start work at a small base salary in manufacturing. The repetitive work and poor pay drives them to seek more lucrative alternatives. At one of the plants visited by the author, near two-thirds of the labor force was on contract and deployed on the production floor with a very basic training to report at best that something is not working. They are ill equipped to take fix issues.
Maintenance is inadequate despite the count of maintenance staff being excessive. Most Indian factories operate at ‘run to failure’ or ‘scheduled maintenance’ approach.
Maintenance staff was at least 10 times more in these Indian factories compared to US. Sadly, there is limited knowledge of the machines and machine abuse is rampant. The machine OEM’s maintenance contractors generate standard reports and only the red flagged ones are ever addressed. Maintenance teams seek quick fixes that can have production resume and seldom analyse failures. Review of factory operations would mitigate inefficiencies and enable root-cause analysis to avoid repeated breakdowns and downtimes leading to productivity losses, which are unfortunately commonplace.
A simple solution of getting PLC data scrubbed and parsed would give insights on not just machine utilization, idle time and downtime but also on production and quality as management explores alternative information sources to make decisions without relying solely on factory personnel.
The authors: Somshubhro Pal Choudhury is an IoT Advisor Bharat Innovations Fund and Anil Paranjape is a Venture Partner, Bharat Innovations Fund