Mr. Avinash Bapat
Global Visibility to Surplus Manufacturing Capacities for Improved ROI
Surplus Manufacturing Capacities and Role of Technology in Giving them Visibility to Global Manufacturers
Make in India and Online Manufacturing Platforms as enablers
“Made in India” should become a national movement like Swachh Bharat -P.M. Modi
I urge all the citizens to make “Made in India” and “Vocal for Local” as much of a movement as “Swachh Abhiyaan.”
Manufacturing industries should strive to utilize their manufacturing capacities to their fullest extent. It will push the “Made in India” and “Vocal for Local” movements further. One way to achieve this is by outsourcing surplus manufacturing capacities. Tech platforms promoting online manufacturing can drive this by providing global visibility to such companies.
Underutilized manufacturing capacities
Many of the manufacturing facilities (production units) are lying idle or underutilized in India. Thanks to the global slowdown due to COVID-19 pandemic that has made global economies go for a toss, situation has worsened. The Covid-19 pandemic has caused many global companies to withdraw from China. As a result, India is now emerging as an alternative manufacturing destination. Due to favorable manufacturing climate in terms of well-equipped manufacturing capacities, Government subsidies that encourage global investments and availability of skilled and productive workforce, India is we placed. There is huge scope for manufacturing units in India for maximizing their capacity utilization and rationalization of their capital expenditure.
According to the April 2021 data released by the RBI, the capacity utilization of 700 manufacturing companies in the third quarter of 2019 – 2020 was 68.6% . It further declined to 47.3% in the first quarter of 2020-21. The third quarter of 2020-21 saw a resurgence in the manufacturing capacities (based on the data from 610 manufacturing units) to 66.6% due to easing of lockdown restrictions. But, it still means about one-third of manufacturing capacities in India are remaining idle or underutilized.
What is the reason for surplus manufacturing capacities?
Unplanned investment in capital like plant and machinery leads to creation of excess manufacturing capacities. This is a persistent scenario in India since decades and the pandemic has made this situation of underutilized manufacturing capacities even worse.
The automobile industry, electrical and electronics industry and textile industry have further been hit due to resource crunch at global level. This is result of global supply chain disruption resulting in further addition to underutilized capacities worldwide.
What Happens When There Are Idle Manufacturing Capacities?
Full utilisation of capacity is necessary to achieve higher rate of growth. Leading to higher rate of output, employment, income, investment and to make the best use of the scarce capital resources.
The manufacturing units will continue to incur fixed costs such as depreciation, property taxes, plant manager’s salary, etc., even if they are idle. This will adversely affect the profitability of the company. Too much idle capacity can hurt an economy.
Hence, Indian manufacturing units can leverage their unutilised capacities by outsourcing their facilities to global companies. These are those Global companies that are looking to set up pan-India manufacturing operations. Global companies can collaborate for better utilisation of already established manufacturing facilities. However, there is no dedicated and centralised source that can provide up-to-date information on the availability of idle manufacturing capacities. Such online manufacturing platform source enables potential manufacturers to access instant information. Currently, they have to rely only on references, which may not always be reliable. Online manufacturing platforms can be enablers for these companies.
Technology Can Be the Enabler For Discovery of Available Surplus Manufacturing Capacities
Technology can be the answer to this problem of lack of information. It can bridge the gap by providing ready-to-use information about the available surplus manufacturing capacities. Subsequently, this information will be shared with global companies that are looking up to set manufacturing facilities pan-India.
The best potential solution would be a digital platform that offers a simple and secure user interface. On the platform, the manufacturing units having surplus capacities and the global companies looking for pan-India manufacturing facilities can connect with each other.
One of the themes under the “Digital India Programme” is “IoT-based advanced analytics and automation to improve manufacturing processes with plant availability, yield, and throughput, and save costs through asset management.” This serves as a boost to set up such digital platforms supporting online manufacturing, as the Government would provide the necessary subsidies.
India’s manufacturing industry is already moving in the direction of industry 4.0 where everything will be connected and every datapoint will be analysed.
A digital platform launched by Capximize India Pvt. Ltd. has created a global platform for surplus manufacturing capacities through high end cloud-based technology. It will enable corporates to leverage manufacturing capacities of platform members to maximize ROI. The platform uses a recommender system based on its proprietary algorithm to recommend the right manufacturing partner resulting in cost competitiveness for participating entities.
On the Capximize Platform (www.capximize.com), you can be a Capximizer i.e., you have available surplus manufacturing capacity. Alternatively, you can be a Capximizee, located anywhere in the world and are looking for pan-India manufacturing capacities for your business requirement. A significant aspect of this platform is that it ensures complete data confidentiality and data security, thereby making the platform secure and reliable for the users.
To conclude, let’s take a look at the advantages of outsourced manufacturing capacities
1. A 2% increase in capacity utilisation will add approximately 8 billion dollars to India’s GVA (Gross Value Added), which is an important measure to determine the GDP. There will be zero capital investment as the plant and machinery is already available; hence this will create very high incremental ROI for the capacity provider.
2. Also, increased utilization of surplus capacities will help in the conservation of capital expenditure.
3. For the companies looking to utilise these idle capacities, it will give access to pan-India manufacturing options, improved cost of production, conservation of capital and reduced lead time.
4. A technology platform like Capximize enables secure access to up-to-date information on the availability of idle or underutilized manufacturing capacities, providing global visibility to the local manufacturers.
5. It also provides opportunities for potential cross industry use of available machinery.
6. Improved utilisation of manufacturing capacities can provide strong support to the Government in achieving manufacturing sector targets that will shoot up our country’s economy.
7. Also results in reduction of carbon footprints through logistics optimisation