While Indian industry jumped from Stage 1 to Stage 5, and is now on to Stage 6, it is yet to fully appreciate and absorb the benefits of the new work standards, which global companies are adopting to do business across country lines. Prof R Jayaraman believes India is uniquely poised to adopt Stage 7, in view of the ‘knowledge bank’ of highly educated and trained IT personnel, with vast global experience..

 

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Prof R Jayaraman, who is currently serving as a Professor of Operations and Supply Chain Management at SP Jain Institute of Management and Research (SPJIMR), Mumbai, has spent almost 30 years in the Indian industry, in various capacities. For 25 years he has worked with companies such as Tata Steel and Tata Communications. He continues teaching post graduate students at SPJIMR in Mumbai.

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In the 19th century, India contributed to almost 30 per cent of the world GDP, with no organised manufacturing whatsoever. Industry itself was in a nascent stage. Subsequently, India’s GDP went down dramatically, after the colonisation by the British. Recovery actions, initiated by the independent country’s first Prime Minister soon stanched the slide, and brought the downward momentum to a halt. We are where we are today, due to the efforts of many Prime Ministers, government administrators, private industrialists, the huge many entrepreneurs who toil day and night in the unorganised sector and the never tiring worker, both skilled and unskilled, who work with largely low technologies even today. The ‘industry’ sector has contributed about 25 per cent to 30 per cent each year, in the last five years, to the GDP of India, however, the declining trend continues.

 

Stage 1

Indian economy is a law unto itself. It does not obey many of the conventional thought processes, as to how an economy should progress. For example, the industrial revolution started off as a craft based activity, characterised by highly skilled individuals, who would innovate something like an electric loco or the telephone, and, with others, produce small quantities.

 

Stage 2

Over time, the activities would increase in volume, with the introduction of more machines and equipment. However, the expansion was limited. And then, Henry Ford happened. The era of mass production dawned on the world, and, with it, a new paradigm was created. Henry introduced mass production, using the automotive assembly line. His black Ford ‘Model T’ revolutionised industry.

 

Stage 3

The next concept to be adopted was the ‘product mix’. While Henry Ford insisted that everyone should buy only the Model T, Alfred Sloan, at General Motors, saw things differently. He gave a first level freedom of choice. He boosted the idea of the product mix by his policy of ‘a car at every price point’. This was sophisticated marketing stuff, for those days. Naturally, this feature whetted the appetites of a growing market, and, soon, technological advancements and operations management driven manufacturing succeeded in creating a new clientele. Products were streaming out of new plants. Different varieties, different shapes and sizes to meet newly emerging needs. Mass production had matured. The seller’s market was in full swing.

 

Stage 4

Some years later, Fiegenbaum and Shewhart proposed PDCA (Plan, Do, Check and Act) as a weapon for developing competitive advantage. They sensed that the days of ‘seller’s market’ were coming to an end, and soon buyers will start dominating the market. Thus was the ‘customer is king’ era welcomed by the manufacturing fraternity.

 

Stage 5

Dr Deming, Dr Crosby and Dr Juran followed in their footsteps. These quality gurus, along with a slew of Japanese luminaries, like, Ishikawa, Kano, Imai, Taichi Ohno, Eichi Toyoda were responsible for the next revolution in the manufacturing industry. Concepts like statistical quality control, continuous improvement, quality circles, team work, total quality were introduced in quick succession. The Japanese were in the forefront during this era of ‘quality revolution’. American companies were growing through new products introduction, expansion of capacity, superior marketing techniques and developments in the transport sector. They captured frontier markets, coming out of the pre-World War II isolation, and became globally active. The American economy grew enormously, as did the Japanese. Globalisation was the next revolution. Japanese plants like NUMMI, the Georgetown plant to manufacture Camrys, takeover of many American companies was a significant development during these years. 

 

The legend of Toyota and lean manufacturing flowered.

Indian manufacturers, meanwhile, were shackled by the ‘licence permit raj’, and could not find any opportunity to grow. The licencing regime was designed with the assumption that every businessman is out to profiteer, in preference to making a profit, and profit became a dirty word.  Black marketing, corruption, poor productivity, low availability of goods, together with a pathetic transport system made life difficult for all Indians. It is to the credit of all Indian businessmen that they managed to survive this phase, which lasted from 1947 to 1990. In fact, between 1950 and 1990, the ‘industry’ and ‘services’ sector contribution grew from 45 to 65 per cent of the GDP, while the GDP itself was growing.

The inefficiencies which were the hallmark of those days left an indelible scar on the industrial culture of the country. However, the business community kept its efforts on. One such significant action was the visit of an Indian business delegation to Japan, under the leadership of that doyen of public sector management, Dr V Krishnamurthy, to observe TQM and Toyota Production System (TPS), in the land where these originated. They came back with a desire to get into these movements. Soon, many other industrialists followed suit, and over the next twenty years, many large industrial houses adopted the latest Japanese methods to ramp up production. Owing to this peculiar growth path – from large inefficiency to adopting techniques which would give very high levels of performance – there was a leapfrog effect. The Indian industry did not go through the pains of the regular growing up pattern adopted by the American, Japanese and European industries, and went from stage 1 to stage 5. In a matter of about 10 years, Indian industrialists caught up with some of the best in the global business scenario. The fact that many top talented Indians left the country for pastures greener in the USA led to the development of the ‘global Indian’. And with a never say die entrepreneurial spirit, Indian business managed to hold its head above water. Prime Minister Narasimha Rao brought in the much needed ‘economic reforms’ in 1991. Nudged and cajoled by industrialists like JRD Tata, Nani Palkhiwala and others, he sought it fit to end the licence permit raj. This was the same time when TQM and TPS were introduced in the Indian industry.

 

The period 1991 to 2000 was one of expansion, consolidation, ‘catch up’, and ‘match up’, which the Indian industry did very well. In spite of the many hurdles, Indian businessmen created large businesses, with huge expansion activities, through green field plants and mergers and acquisitions, especially abroad, and brought in new technologies and work methods. Indian businessmen were quite active in many parts of the world, in Africa, in Latin America, in the middle east and south east Asia. Funds were brought in from abroad as well as raised from the domestic capital markets, to be invested in productive facilities. Foreign remittances from Indians living abroad into the country has always been the highest in the world. Aditya Vikram Birla, Ratan Tata, Narayana Murthy and Azim Premji and others have laid a path of investing in foreign shores, which benefited Indian companies, in terms of learning about global work methods, standards, markets and competition. This is an ongoing exercise and is a significant part of Indian industrial activity in all sectors.

 

Stage 6

Stage 6 of industrial development started off sometime in 1988, when the Malcolm Baldrige Model for business excellence (BE) was revealed in America. Since then, using TQM and BE, many American and other global companies have become highly competitive, sustainable and address the Triple Bottom Line requirements. Indian companies have also adopted these methods now in some measure, although the coverage and intensity leave a lot to be desired. Only some of the larger Indian business groups, and some smaller ones, with the help of organisations like the CII, are using these methods. Many B School students and many employees in companies are largely ignorant of these, which does not bode well for the industry. BE is a holistic approach to business, and, along with the balanced score cards methodology, has helped companies to achieve growth with sustainability.

 

Stage 7

Stage 7is threatening to dawn. As of now, it still remains in its infancy. This is the world of IoT, digitisation and digitalisation, AI and data analytics – all culminating into Industry 4.0. This could be the future, but, as of now, things are in their infancy. 

 

While Indian industry jumped from Stage 1 to Stage 5, and is now on to Stage 6, it is yet to fully appreciate and absorb the benefits of the new work standards, which global companies are adopting to do business across country lines. India is uniquely poised to adopt Stage 7, in view of the ‘knowledge bank’ of highly educated and trained IT personnel, with vast global experience. Coupled with a slew of government interventions to remove more shackles and make the country business friendly, with good ease of business atmosphere, the growth is bound to be very high in the coming years. I expect that the Indian industry will adopt the ‘softer’ aspects of Industry 4.0 easily. This includes AI, programming, internet applications and usage, data analytics, machine learning and digitisation. However, I expect that building plants like what Mercedes Benz, BMW, Volkswagen and other auto companies have already done is still way off. We need to develop engineering skills, technical expertise to operate such highly automated plants, as well as designing them. If one were to see the working of a distribution centre system or the never-ending, fully automated conveyors for sorting being used by Walmart and Fedex, Indian plant designers are quite far away from developing such systems, and it will take them many years, if at all, to do so. On this front, I think we will continue to depend on plant designers and builders from abroad, but, we will write the softwares which run these plants.

 

Hence, the strategy to be adopted could be two pronged – capitalise on your strengths and improve on your weaknesses. India should develop data analytics capabilities, companies like Mu Sigma are in the forefront. We should also learn AI, develop apps for IoT, learn the multifarious uses of IoT, and machine learning algorithms. Developing superior algorithms will be a competitive weapon of the future. 3D printing is another application, which resonates very well with the Indian cultural ethos.

 

Stage 8

With 3D printing, one might 

see the Stage 8 of the industrial development – replacement of mass production by distributed manufacturing, perhaps at the village level. Then, Indian villages will once again prosper.