Pune, India 11 June 2020

Manufacturing in India contributes to nearly 15% of GDP as we are home to some of the largest manufacturers cross-domain. From Cement manufacturing to the likes of Tata Motors, Asian Paints and Amul, spread across the country – we produce everything domestically, from electronics to automobiles, and from pharmaceuticals to durable goods.

We are not just capable of meeting domestic demand, but also international.

India has rightly been coined as a manufacturing powerhouse, resourceful and ready for the ramp-up to Industrialization 4.0.

How will the COVID-19 crisis change the way manufacturing occurs and takes place at scale?

In 2017, India took over France to become the sixth-largest economy in the world. India is predicted to be a $1TR manufacturing economy by 2025 owing to the large domestic markets, significant FDI’s and a large and growing populace of semi-skilled labour. According to IBEF, around 24 per cent of India’s total employed population was working in the industrial sector in 2018. 

Manufacturing in India is an industry that is supported by the Government and public policy. The goal, to enhance output and productivity. From upskilling labour to ‘Make in India’ that was launched in 2014, till ‘Vocal for Local’ that is being campaigned in 2020 – India is a lucrative market for domestic and multinational manufacturers. 

All of the efforts from the Government and its people are working towards stimulating growth and GDP. India as a global manufacturing hub is no longer a dream.

COVID-19: India’s biggest hit in 15 years

As COVID19 ensued, headlines such as “Manufacturing at a halt” and “Manufacturing factories lie empty” were seen plastered on all news channels. It’s true and yet shell shocking that the IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) fell to 27.4 in April, from 51.8 in March, which was the steepest decline India has seen since the last 15 years.

While India and the world were undergoing the wrath of this communicable disease, there were some lessons to learn and take away. India was not prepared for this economic downturn caused by a virus.

On the brighter side, India has strength in numbers and capability. We outdid ourselves within the realm of PPE kits. An essential item for everyone on the frontlines, battling COVID-19 and fighting to save lives. 

India went from manufacturing 0 to 4.5L PPE kits in a day, in just 2 months, with Bengaluru coming out as the front runner of production.

The two things that were evident from the global crisis for the manufacturing industry were:

1. The need to diversify manufacturing hubs as the danger of centralizing within China were felt. Some of the contenders are India, Vietnam, Bangladesh and Ethiopia.
2. Digitization of processes and workflows could’ve led us to not a complete shutdown, but a slowdown. Had this been in place, a certain level of manufacturing could’ve taken place with minimal human contact
3. As the world trust shifts away from China, the supply chain and manufacturing of essentials might take place/go via other countries

The smart factory with digitization

As the world changes day by day, India must evolve and adapt.

If India is to compete on a global scale, it is imperative we take into account the benefits of digitization as we walk towards Industrialization 4.0. Digitizing brings in not just efficiency but also volume. As markets become more dynamic and competitive, smart factories, IoT and even robotic process management will be the need of the hour.

What is a ‘smart factory’?

Smart factories are paperless factories that have data coming from all sub-systems and integrated into one central system. Smart factories can be built with the help of technologies like ShopWorx who is offering apps for advanced production planning, real-time monitoring and alerts for production / processes failures, preventive & predictive maintenance, advanced traceability and more to ensure good production quality and optimized production efficiency.

From digitizing shop floors with technology, to digitizing distribution channels till digitizing supply and demand – companies must use the technology available if they want to compete. After all, India’s sweet spot lies within the power of digitization combined with the low cost of labour to create a competitive advantage for us. 

The curse to this blessing lies within the lack of data. Currently, which is traditionally stored and used is inaccessible. This data is often not available in real-time. Data has the power to give backing to qualitative and quantitative information which has the potential to bridge the gap between company goals and India’s goals.

In the instance of ShopWorx, enabled real-time data from the factories, accessible remotely even when away from the factory. This has allowed a much more in-depth analysis of the factory floor, ensuring it’s well managed and prepared for run time. With ShopWorx, we’ve seen a 8-10% month on month OEE improvement and a 92% reduction in excess/unplanned downtime in factories we service.

With ShopWorx we enable Indian manufacturing factories to have a heightened awareness of their factory floor, through data and smart algorithms. 

Post-COVID India: Digitized

The Coronavirus has over time highlighted various critical gaps in the manufacturing sector. It has shown us the importance of digitization and the importance of technology as a supplement to success. Therefore, it is fair to state that the COVID-19 crisis has acted as a catalyst to the transition to manufacturing digitization globally. 

Companies have now realised for business continuity to ensue, it is imperative that they take on digitization as an initiative. The size of the manufacturing plant does not matter here. COVID-19 had the power to make everything stop in its tracks.

Some of the reasons why digitization must be of top priority as we recover from the damages: 

1. Data as a business bloodline: In a post-Corona era data its usage was taken with a pinch of salt. Now, data is going to be a key factor in decision making for manufacturing. It can be large scale data of global manufacturing trends, or macro level at the factory in terms of efficiency. How we collect, store, analyze and data will change manufacturing as an industry, for the greater good.
2. A remote/decentralized workforce: The COVID crisis has forced everyone to embrace ‘work from home’ as a part of their jobs. For manufacturing, unfortunately, that meant a complete shutdown; now, business people are going to focus on the safety element as an answer to ‘why digitization’. If a process can be done with lesser human interaction, it should.
3. A shift to online first: In an online first set up, it is extremely tedious to have physical records and business workings. It is almost essential that digitization takes place so that records are accessible when offsite, and online behaviours and activities are tracked

As India prepares for recovery, Prime Minister Narendra Modi pledged total spending of Rs 20 lakh crore as a stimulus to the economy, especially for industries and MSME’s along with working-class and middle-class citizens. The package is aimed at helping MSME’s fight the liquidity crunch and has available emergency credit and accessible loans.

According to an Economic Times report, in the beginning of June, Public Sector Banks sanctioned loans worth Rs 17,705.64 crore under the 100% Emergency Credit Line Guarantee Scheme starting June 1. This is targeted towards MSME’s who were hit hard due to the COVID-19 lockdown.

The overarching goal of this 20L CR package would be to help Indian manufacturers resume business, reignite supply chains and be able to substitute imported items with local ones.

Challenges of a digitized India post-COVID 19

India is indeed on the path of digitization, and COVID-19 provided a unique opportunity for us to accelerate acceptance and penetration of digital interfaces.

However, India faces two challenges to become ‘truly digitized’

1. The rural-urban digital divide
2. Dearth of cost-effective and reliable internet (data/broadband)

India is a country of 1.3B people in total, out of which a mere 504 million were recorded as active internet users according to the Hindustan Times. Moreover, India faces a rural-urban split in mobile users. Data suggests that for the first time, in 2019, rural mobile users outnumbered urban, with a 10% margin, according to a study by YourStory.

With the cost of 4G data in India being the cheapest worldwide, at just $0.26 per 1GB according to Mary Meeker’s Internet Trends Report, we should’ve seen a higher 4G penetration, but that number stands at 88%. 

When the data was further dug into, ⅔ of India’s Internet users were between 12-29 according to IAMAI. By just looking at the numbers, you can see that the working population amongst this is around the age bracket of 23-29, which further pulls down the number.

Rural India faces a multi-dimensional challenge with data – their main issues lie within connectivity, quality of service and affordability. 

With the COVID-19 situation, reports by Ericsson ConsumerLab showed that the average time spent on 4G went up by 2.2 hours per day during COVID-19. This resulted in a 20-50% increase in mobile usage for a quarter of Indian consumers during the period.

Adjusting to change in a post-COVID world:

Manufacturing has taken a deep and hard hit due to the COVID crisis, as we have seen. Everything was at standstill for 2-3 weeks, only essentials were in service. India battled with the COVID situation bravely, and is slowly coming out of the dark side.

Companies like ShopWorx, amongst others have now started using the ‘Netflix Subscription’ model for their businesses. This is a win-win for both the company and the end user. 

Pay as you go, is a simple concept to lower upfront costs, and gather revenue over a larger time span.

This was also done to aid manufacturing to get back on their feet, steadily and without too much debt/struggle.

India is fighting the Corona epidemic, together, as one.

Conclusion

In conclusion, I leave you with this quote from mark Mobius, founder of Mobius Capital Partners and the father of emerging markets, “The sectors in India that have already moved into digital transformation of their business models will do better in recovery,” he said.

The Government reforms are working in the right direction for its citizens. Opening new avenues of growth, enabling investment opportunities and in turn bumping up production, all to reach the end goal of ensuring labour is occupied meaningfully.

Lastly, and on a positive note Deepak Sood, ASSOCHAM secretary said , “India stands a very good chance to emerge as an alternative to the global manufacturing hubs. The nation has the advantage of a vast pool of highly skilled, skilled and semi-skilled manpower. 

A note from the CEO of ShopWorx

I see India as a land of opportunity and potential. I see Indians as a resilient force – we aren’t giving up, and we are fighting this battle, step at a time. We will surely defeat this epidemic, when we all join hands – the Government, policy makers, providers, suppliers and users. It’s highly likely we will come back stronger, more self sufficient and much more digital-first.

More power to India.