Outsourcing: India is not for everyone
By Jim Carbone -- Purchasing, 1/3/2008 2:57:00 PM
Electronics purchasers involved in outsourcing decisions need to take a hard look at India before recommending it as a low-cost manufacturing location. While labor rates are low, they are often offset by higher costs of logistics because of poor infrastructure and a limited supply base, resulting in the need to import many materials needed for production.
Buyers should not be unduly influenced by the fact that other large OEMs have set up operations in India and that India gets written about in many newspapers and trade publications, according to Charlie Barnhart, senior consultant for Technology Forecasters in Alameda, Calif. Often there is a “me too” thinking in deciding to move manufacturing to India because the list of companies in India reads like a who’s who of the electronics industry. Motorola, HP, Cisco, Flextronics, Jabil Circuit and Celestica are some of the major electronics companies in India.
But just because major companies are in India, it doesn’t mean all electronics companies should manufacture in India. Barnhart says before deciding to build in India, OEMs need to understand what their needs are, what they want to accomplish, what their expectations are and the level of resources they want to commit to support their expectations.
He says buyers involved in outsourcing have to carefully weigh the advantages and the challenges of manufacturing in India.
He says there are clear advantages for some large OEMs. “The labor force in India is a better labor force than in China,” says Barnhart. “The work force has more education and I think India culturally has a longer tradition of commerce, more of a free market kind of mentality than China.”
He says China has a kind of a “pseudo free market. The Indian government is pro-business which rolls down through their culture,” he says.
In addition, EMS providers have built “world-class” facilities in India that have the same capabilities of facilities they have in other regions of the world. “They are building world-class factories, the same factories that they have any where in the world. “The HPs and Ciscos of the world that go to India find the tier one EMS suppliers provide a mirror image factory operation to what they are used to seeing anywhere else in the world,” says Barnhart.
However, there are disadvantages to India. One is logistics. “The logistics problems in India are the same, if not worse, that China faced a dozen years ago,” says Barnhart.
He says the issue is the lack of a proper infrastructure. “It takes an inordinate amount of time to get materials and supplies in and out of India just because of the roads and general chaos in their transportation system,” he says.
Barnhart adds the electrical grid is “abysmal and unreliable.”
The other key issue is the supply base. “Buying in India is tough,” says John Boucher, chief procurement officer at EMS provider Celestica, based in Toronto. Celestica builds telecommunications office equipment and automotive systems at its facility in Hyderabad.
He says Celestica buys build-to-print items, like printed wiring boards, cable assemblies and enclosures from suppliers in India. “These are heavier items where there is a benefit in sourcing locally. I have full-time folks in India trying to find suppliers of the right grade steel and aluminum to make sure we have high quality and PCB suppliers that have the right capabilities. It is a challenge and we are developing our own approved vendor list in India” he says.
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I am a software engineer from Silicon Valley. I had a privilege to work at out outsourced office in India. Having educated in the US and worked in the US for 10+ years and then going back to India and working in my home country for 4 years this is what I observed.
1) There is absolutely no talent in this country. In last 10 years there are so many private institutes popped up issuing engineering, medical, management degrees with extremely poor standards of qualification that many of these graduates wouldn't even get a high school degree in the US. It is not that all Indians are morons, I am an Indian as well, but to find a real qualified worker you have to put 100 times more effort and the demand is so high for such candidates that you find it impossible to hire a qualified worker.
2) Infrastructure in India is pathetic. Even in 2007 you have to struggle for power supply, traffic is out of control as newly rich classes with abundance of financing ride cars on the streets that were designed for scooters and pedestrians, and pretty much everything breaks down here on regular basis and it takes forever to get it fixed.
3) You are on your own when it comes to health care, pray to the God that you never fall sick, unless you are filthy rich and can afford the top doctors, same problems apply to medical fields. Total chaos, doctors examine 2-3 patients simultaneously, while chatting with spouse on cell phones about grocery list. There are rumors of malpractices in hospitals where surgeons are allocated quota for surgeries and many healthy individuals get operated without problems.
4) Overall the quality of life is so poor, productivity is so low, the quality of work done is so poor that any talented person would simply wanna quit and move to environment where he/she can be more creative, productive, and find colleagues of equal calibers to get good teamwork done, the very reason many migrate to the USA.
If your bricks are all crooked, irregular shape, you can't build a perfect wall, forget about building a house.
Rajeev Mehta - 1/5/2008 11:19:00 PM EST -
our organization has 40 years of experience in vender
supplyers developement in India.If needed we can help any orgatization.
Kartik shukla - 1/5/2008 5:27:00 AM EST -
“The labor force in India is a better labor force than in China"???
haha. The speaker is talking joke. India is even short of the labor for infrastrure constructions. Reliance had to beg help from Chinese companies to do the job. Thousands workers are from China.
Steve - 1/4/2008 5:40:00 PM EST -
We would be happy in obtaining permission to re-publish article "Outsourcing: India is not for everyone" within our web site. Please contact us on the subject.
Kind regards,
Saulius Masalskis
Baltic Outsourcing Association
www.balticoutsourcing.com
Saulius Masalskis - 1/4/2008 3:29:00 AM EST
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