Returning Competition to the Factory Floor Pankaj Chandra Indian Institute of Management Ahmedabad ICRIER’s Silver Jubilee Conference, November 6-7, 2006

Large Volume Operations Nokia’s factory Chennai AMUL’s operations in Gujarat ORPAT’s factory in Morbi Daiso’s 100 Yen retail outlets in Japan

NOKIA’s Factory in Chennai –1 million handsets per month –1200 operators AMUL (GCMMF) –12 plants –11, 962 Village Societies, 2.5 million farmers –Daily Milk collection: 6.3 million litres per day Mehsana: million litres per day –Sales Turnover: Rs crores

ORPAT’s factory at Morbi –5000 wall clocks per day –More than 4000 operators –Sales turnover: Rs 300 crores DAISO’s 100 Yen Retail Stores –2400 retails stores; 30 stores per month –Sales turnover: US$ 3bn. –380 stores outside Japan in 15 countries –10 th fastest growing company in global retail industry –Variety: 70,000 items per outlet –All products sell outside Daiso at a price greater than 100Yen !

Changing the Frame Lead Time Skills Scale Strategy Tools of Production

The Textile Supply Chain in Gujarat MCT DLT Ginning & Pressing1225 Spinning8 38 Weaving2340 Processing1121 Garmenting1549 Customs-10 Transport (overseas)-35 ** MCT= Manufacturing Cycle Time (days) DLT = Delivery Lead Time (days)

Skills Dilemma Indian Textile & Apparel Sector –Export target US$ 50 bn. by year 2010 –Expected Investment in the Indian Textile & Apparel sector – Rs bn.

Manpower required to run the additional plant & equipment – Textile sector: about 70,000 supervisors and 1.05mn operators Apparel sector: about 112,000 supervisors and 2.8mn operators in the apparel sector (Not to mention auxiliary services & NATURE OF SKILLS)

Scale Chinese Capacity Strategy – capacity leading the demand (credit issue in India?) New organizational forms –TAMA, Tokyo region, Japan –Wenzhou, Zhejiang Province, China –Rajkot, Gujarat, India Evolution of “coordinating specialist firms”

Formation of “Cluster:” TAMA Technology Advanced Metropolitan Area TAMA Association formed by MITI in 1996 Includes adjoining areas of Saitama, Tokyo and Kanagawa prefectures –Along Route 16 & Ken-O-Do Expressway –Inland industrial area covering 74 municipalities

–Number of workers: 4 million –Value of shipped goods: $214 billion (1998) –Total Value add (in Million $): 1,083,883 (Japan), 81,862 (TAMA), 63, 890 (Holland) –Total Value add($)/worker: 116,447 (TAMA), 110,184 (Japan), 94,970 (USA), 58,260 (Germany) –TAMA has twice the shipment value of Silicon Valley

Some Performance Indicators No. of New Products in the Market in the last 3 years: 22 (against 4 by non-member SMEs) % of firms cooperating with research universities: 65 (an increase of 55% over last five years) Patents: 62.9% of TAMA firms held patents as opposed to 29.6% of all SMEs in Japan R&D Expenditure/Sales: 5%(PDS),2%(PPS) Profit/Sales ratio: 2% for PDS (1% All Japan SME median)

DNA of TAMA Linkages between firms: “creation of new technologies, new products and new businesses by combination of different technologies and knowledge” R&D units of large enterprises (about 15) University & Colleges with science, engineering & management departments (34) Product Developing SMEs (about 300) Product Processing SMEs (about 16262) All are R&D oriented TAMA Association – the “coordinating” organization

Strategy Managerial strategy for large number of operators on the shop floor or configuring quick throughput lines Role of Small and Large enterprises

PRODUCT-PROCESS MATRIX Project Job Shop Batch Process Assembly Line Continuous Process Bidding Delivery Product Design Flexibility Product- Differentiation Flexibility in Volumes Price Availability Very Jumbled Flow Rigid Flow One of a kind Low Volume Many Products Hig Volume Few Products

Debate on Manufacturing must Refocus on Operational Productivity Capabilities - built by individual firms –manufacturing ability will define success – new tools of production –inter-firm linkages (GPNs) will help learn & reduce risks –quick throughput lines Quality and Quantity of Manpower

New Organizational Forms Attract world-class producers of goods & machinery to setup manufacturing & R&D facilities in India

Thank You!