Evidence of manufacturing strategies in Indian industry: a survey

Evidence of manufacturing strategies in Indian industry:a survey

G.S. Dangayacha, S.G. Deshmukhb,*a Department of Mechanical Engineering, Malaviya National Institute of Technology, Jawahar Lal Nehru Marg, Jaipur 302017, India

Department of Mechanical Engineering, Indian Institute of Technology, Hauz Khas, New Delhi 110016 India

Received 18 September 2000; accepted 28 August 2002

Abstract

This paper presents findings of an extensive survey of Indian manufacturing companies. The survey encompassedfour sectors: automobile, electronics, machinery, and process industry. Various manufacturing strategy issues (such ascompetitive priorities, order winners, and activities of improvement) have been identified and assessed in Indiancontext. Sector wise comparison of competitive priorities, order winners, and activities of improvement (advancedmanufacturing technology, integrated information systems, and advanced management systems) is provided. Ourresults showed that most of the Indian companies are still emphasizing on quality; however, automobile sector has setto compete globally with high innovation rate, faster new product development, and continuous improvement.Manufacturing competence index is also computed for each sector.

Keywords: Manufacturing strategy; Competitive priorities; Order qualifiers; Order winners; Activities of improvement

1. Introduction

Manufacturing companies are under increas-ingly diverse and mounting pressures due to moresophisticated markets, changing customer choiceand global competition. The market for productsis becoming increasingly international. In thisinternational marketplace, companies find them-selves having to adopt international standards.Community groups and environmentalists arebringing increased pressure to bear on manufac-turers to improve the reliability and safety of their

products and manufacturing processes. In such acompetitive scenario companies have to search fornew processes, new materials, new vendors, newshop floor design, and new channels to delivertheir products and services at competitive price.Indian companies have quite often followed anopportunistic approach to growth as opposed to acapability driven approach, and paid very littlestrategic attention to their shop floors in the lastfew decades (Chandra and Sastry, 1998). This wasreflected in poor quality of products, little aware-ness about competitiveness, little integration ofvarious functions such as marketing, sales, pro-duction, etc. A comparative analysis of selectedeconomic indicators of major Asian countries(Table 1) reveals that manufacturing value in

G.S. Dangayach, S.G. Deshmukh / Int. J. Production Economics 83 (2003) 279-298

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India is about 18% of Gross Domestic Product(GDP). India has comparatively low per capitaGross National Product (GNP) and exports, i.e.US $387 and US $35 billion, respectively (Statis-tical outline of India, 1999-2000).

Between the 1950s and the 1990s, India'sindustrial development policy was characterizedby excessive regulation. Initially set up to avoidover capacity in a capital scarce economy, itspawned a maze of regulations governing product,capacity, technology and foreign exchange avail-ability. In the late 1980s, inflows of foreigntechnology and equity were permitted and manu-facturing capacity constraints lifted. The gradualopening of the Indian economy resulted in theentry of foreign competitors and expanded pro-duction by domestic manufacturers. By the 1990s,the Indian economy was undergoing structuralchange and imports were largely unregulated(Upadhyay and Kanavi, 1999).

Since the introduction of reforms in 1991,Indian firms are facing a very different competitivescenario compared to the past. The abolition ofthe license regime meant the end of protectionand control measures. Manufacturing in India is ata critical juncture. The Indian perspective onmanufacturing is characterized as a supportactivity for marketing and finance and invitedlittle top management attention. Most of firms arestill very far from world class practices. Meanwhileinternational competitors are continuously work-ing on improving manufacturing, bringing in newproducts and making manufacturing more proac-tive and responsive (Chandra and Sastry, 1998).As a result of this, Indian industry is facingcompetition both from imports and from multi-national companies in the domestic markets. Thenew competition is in terms of reduced cost;improved quality, products with higher perfor-mance, a wider range of products and betterservice, all delivered simultaneously. Mohanty(1995) has elaborated on the corporate-manufac-turing relationship in the contemporary contextof global competition. He has also outlined aneed for improvements in corporate learningand development of effective methods for man-aging manufacturing function from a strategicperspective.

G.S. Dangayach, S.G. Deshmukh / Int. J. Production Economics 83 (2003) 279-298 281

In this light manufacturing strategy is urgentlyneeded for Indian firms to:

• respond to business strategy or corporateobjectives;

• correct present weaknesses or to exploitstrengths;

• cope with anticipated environmental changes;• get distinctive competence which is currently

not available;• make manufacturing function strong;• achieve internationally competitive perfor-

mance objectives.

2. Manufacturing strategy

Since Skinner's (1969) landmark article, anumber of researchers have elaborated the rolemanufacturing function in corporate strategicprocesses and emphasized that manufacturingcan be a formidable competitive weapon, ifequipped and managed properly (Hayes andWheelwright, 1984; Hill, 1987; Miller and Roth,1994; Hayes and Pisano, 1994). Later, Hayes andWheelwright (1984) categorized manufacturingorganizations in four stages according to manu-facturing's strategic role. Stage I organizationsreact blindly to the demands placed on them fromthe top and offer no strategic advantage to thefirm. Stage II organizations follow the trends ofindustry practice. Difference between stage III andstage IV firms lies primarily in their proactiveness.Three dimensions distinguish organizations instage IV:

• Manufacturing is involved up front in majormarketing and engineering decisions.

• Efforts are made to anticipate the potential ofnew manufacturing practices and technologies.

• Long-range programmes are pursued in orderto acquire manufacturing capabilities in ad-vance of needs.

Therefore, stage IV organizations are fullyproactive and they follow world class practices.Proactiveness is the single characteristic thatdiscriminates between manufacturing functionsthat offer strategic benefit to the firms, whereas

reactive manufacturers are forced to catch up withthe leader when their product engineering depart-ments responded to the competitive challenge.

Various researchers (Skinner, 1969; Hill, 1987;Hayes and Pisano, 1994) elaborated on customerexpectations, i.e. cost, quality, delivery, flexibilityand innovation which are popularly termed ascompetitive priorities or manufacturing perfor-mance objectives. These competitive priorities canbe defined as follows:

• Cost: Production and distribution of product atlow cost.

• Quality: Manufacture of products with highquality or performance standards.

• Delivery dependability: Meet delivery sche-dules.

• Delivery speed: Respond quickly to customerorders.

• Flexibility: React to changes in production,changes in product mix, modifications in de-sign, fluctuations in materials, changes insequence.

• Innovation: Introduction of new product andprocesses.

Hill (1987) introduced the concept of orderwinners and order qualifiers and differentiatedbetween them. Order qualifiers are those criteriathat a company must meet for a customer even toconsider it as a competitor. Order winners arethose criteria that win the order. To providequalifiers companies need only to be as good ascompetitors but to provide order winners theyneed to be better than competitors. Similar tocompetitive priorities he identified various orderwinners and qualifiers, which are market and timespecific. He categorized them into manufacturingrelated and non-manufacturing related criteria.Manufacturing related criteria includes price,delivery reliability, delivery speed, quality, demandincreases, product range, design and distribution.Non-manufacturing related criteria may includedesign leadership, marketing and sales, brandname, technical liaison and support, and aftersales support.

The studies on manufacturing practices specificto some countries such as Hungary (Chikan andDemeter, 1995), Brazil (Rohr and Correa, 1998),

282 G.S. Dangayach, S.G. Deshmukh / Int. J. Production Economics 83 (2003) 279-298

Table 2Sector wise statistics

Parameter

Exports (billion US $)Percentage of total export (billion US $)Foreign direct investment inflows (billion US $)

Automobileindustry

5516.554

Electronicsindustry

6518.360

Machine Toolindustry

61.6N/A

Processindustry

6017.03.5

Source: Hand book of Statistics (1998).

Singapore (Ward et al., 1995), Belgium (Gelderset al., 1994), Sweden (Lindberg and Trygg, 1991;Horte et al., 1991), USA (Kim and Arnold, 1993),UK (Neely et al., 1994), Japan (Hitomi, 1997), andErstwhile USSR (Ardishvili and Hill, 1992) havebeen reported in literature. In context of India sixstudies have been reported (Chandra and Sastry,1998; Sharma and Upadhyay, 1998; Nagabhushnaand Shah, 1999; Yadav et al., 1999; Dangayach,2001, 2000). In literature, Chandra and Sastry(1998) identified priorities of 56 manufacturingfirms in general. Sharma and Upadhyay (1998)have performed a pilot study of 20 manufacturingfirms. Nagabhushna and Shah (1999) reportedmanufacturing priorities and action programmesin electronics and machine tool industry. Yadavet al. (1999) described about level of competence in80 manufacturing firms. Dangayach (2001), Dan-gayach and Deshmukh (2000) studied threemanufacturing companies from automobile andelectronics sector. Dangayach and Deshmukh(2001) studied manufacturing strategy aspects in25 Indian process companies through surveymethodology. In all these studies sample size wassmall. These studies are restricted to only a sectoror limited area. We have covered all major sectorsof the Indian industry in our study and our samplesize is quite large (10 0) as compared to otherreported studies in India (with 29% responserate).

3. Indian manufacturing industry

Manufacturing industry is made up of manydifferent sectors, each of which is influenced by theoverall manufacturing climate, but each of which

also has its own ups and downs. From the Indianperspective, the major manufacturing sectors areautomobile, electronics, machinery, and processindustries. Table 2 gives the comparative statis-tics of all four sectors (Handbook of Statistics,1998). We selected these four sectors for oursurvey.

3.1. Automobile industry

The Indian automobile sector witnessed entry ofglobal players such as Ford, General Motors,Suzuki, Honda, Mercedes, Daewoo, Santro, etc. inthe four wheel segment, and Piaggio, Suzuki,Honda, Yamaha, Kawasaki, etc. in the two wheelsegment. The Indian automobile industry has verybright future since by the end of present decadepassenger car sales are expected to reach 8 million.Table 3 (a) shows the trends in production andsales of passenger cars. The turnover of auto-mobile sector is 5.8% of GDP in 1998-99. Thegrowth came with expanding middle class in-creased purchasing power of Indian consumers,the increasing competition in auto industry andeasy auto financing (Seshasayee, 1999).

The automobile industry is fairly mature,involves huge investments in research and devel-opment and technology and is seen as an indicatorof the economic progress of the country (Choudh-ary and Goyal, 1997). Indian auto componentindustry is one of the growing industries. It isreflected from figures (Ganesh, 1998): Production(US $290 billion) Export (US $28 billion) Invest-ment (US $150 billion) and Employment (2.5million). No automobile company can produce allthe components needed in an automobile. Thesecompanies have to purchase (even multinationals)


Table 3

Year Production (Nos.) Sales (Nos.)

(a) Trends in production and sales of passenger cars (in thousands)a1995-96 348.240 345.3401996-97 407.539 411.30b

1997-98 401.002 416.40b

1998-99 520.60 521.99

(b) Segment wise investment in electronics sectorc

Segment Investment (billion US $)

Consumer electronics 10Industrial electronics 52Computer systems 36Telecommunication 95Strategic electronics 25Components and materials 180Software industry 125Science and technology 27Manpower development 160Statistical quality control 11

Total 721

(c) Trends in Indian machinery industryYear Production (in billion US I Import (in billion US I Export (in billion US I

1993199419951996199719981999 (projected)2000 (projected)

10.515.018.020.019.820.023.026.0

9.214.015.027.525.030.036.048.0

0.41.01.20.60.81.01.21.4

aSource: Hand book of Statistics (1998).b Includes last year back log.cSource: Cleveland et al. (1989).dMetal cutting and metal-forming machine tools. Source: Ganesh (1998).

various components from local suppliers. This isthe boost to the auto component industry.

3.2. Electronics industry

In electronics industry entry of multinationalcompanies such as Samsung, LG, Sony, Aiwa,Daewoo, etc. raised the competition level in thedomestic Indian market. Domestic electronicappliances are now in the reach of middle-classconsumer due to competitive prices and easyfinancial schemes which has increased the

demand for a variety of appliances. A typicalmiddle-class consumer in India desires to havehis own television, washing machine, musicsystem, videocassette recorder, etc. The electronicsindustry has emerged as a growth sector with anannual growth of more than 20% in 1998. Theproduction and export of electronic products inthe eighth 5-year plan was US $700 billion and US$160 billion, respectively. Table 3(b) shows thesegment wise capital investment of electronicssector (The Hindu Survey of Indian Industry,1998).


3.3. Machinery industry

In machine tool industry lead-time plays animportant role. Now due to an easy import policyof the government of India a customer does notwant to wait for longer time. Better qualitymachine tools are available at competitive pricesin a shorter time from foreign competitors. Thissituation has forced the indigenous manufacturersto pay more attention to this sector. Indianmachinery are a major source of inputs for thecountry's defense, railways, and infrastructuralrequirements as well. In terms of value of outputthe industry may be contributing no more than1% to the national GDP (The Hindu Survey ofIndian Industry, 1998). Table 3(c) shows the trendsin Indian machinery industry.

3.4. Process industry

Process industry includes companies drawnfrom manufacturing of cement, steel, petrochem-icals, fertilizers, and drugs and medicine. India isthe 4th largest producer of cement in the world

after China, Germany and USA, as it produces83.2 million tonnes in 1997-98 out of world totalof 1148 million tonnes (Statistical outline of India,1999-2000). The output of cement of variousgrades may reach the 200 million tonnes by theyear 2010 (The Hindu Survey of Indian Industry,1998). The petrochemical industry has been amongthe fastest growing sectors in India. The consump-tion of all petrochemicals including synthetic fibersand intermediates recorded a growth of 16%,while the growth rate of thermoplastics wasaround 12% a year during 1980s (Gopalkrishnan,1998).

Fig. 1 gives a force field analysis for manufac-turing strategy-related issues. It reflects the forcesresponsible for changes in manufacturing manage-ment (Leigh, 1995). Earlier local strategy issueswere given more importance than manufacturingstrategy issues. Economies of scale, logistics,vertical integration, etc. were important issues inIndian manufacturing industry. It is observed thatforces responsible for having manufacturing strat-egy now seem to be stronger than the forcesresponsible for local strategy.

Forces for a local strategy Forces for manufacturing strategy

, p\Low value-to-volume/weight ratio

impacting transmission costs

_ _ | \ A d a p t a b l e manufacturing

i |\ Critical link to market impacting need

for local visibility

Economies of scale

_ — - K Barriers to free track by government

^St ra tegy for manufacturing excellence

in local market

[•^Competitive strengths or weaknesses

i K Logistics

t | \ Vertical integration

P\ Mundane purchasing

Brand Maintenance

Speed of new product development

Strategic focus on manufacturing

Emphasis on human resource

Integration of IT into operation /I

Development of infrastructural issues < ^ i -

Assessment of manufacturing

capabilities

Cost-effective and timely distribution

of products

Cost and efficiency of make versus

Buy decisions

Supply chain management

Importance to competitive priorities

Determination of order winners

Investment in improvement activities

Fig. 1. Force field analysis driving the manufacturing strategy.


Various issues in manufacturing strategy identi-fied in the literature (Skinner, 1969; Hayes andWheelwright, 1984; Hill, 1987) are order winners,order qualifiers, competitive priorities, speed ofnew product development, development of infra-structural issues, etc. Based on this, we tried tomap these issues in companies of various sectors.

The specific objectives of this survey are to:

• find out important issues in manufacturingstrategy;

• assess competitive priorities of an organization;• assess sector wise industry status.

4. Research methodology

Survey methodology is used for study and focusof study is cross-sectional. The objective of study isto become more familiar through survey andinformation is collected at one point in time. Themethodology was based on a questionnaire surveyand personal interviews. Final version of thequestionnaire was sent to the CEOs of 345companies. After reminders, phone calls, e-mailand re-reminders, 100 filled responses have beenreceived, which gives 29% response rate. Sectorwise statistics is given in Table 4. Area wisedistribution of respondent companies is observedas under:

Table 4Statistics of the respondent companies

Parameter Number

Region Number of respondents

Northern IndiaWestern IndiaSouthern IndiaEastern India

6615136

Industry sector1. Automobile (Auto.)2. Electronics (Elec.)3. Machine Tool (Mach.)4. Process (Proc.)

Total

Number of employees1. o1002. 100-5003. 500-10004. 1000-30005. 3000-50006. >5000

Total

Sales turnover (million US \1. o0.2562. 0.25-1.253. 1.25-2.54. 2.5-12.55. 12.5-256. 25-507. >50

Total

Exports (% of total sales)1. Nil2. o20%3. 20^10%4. 40-60%5. 60-80%6. >80%

Total

26252425

100

22201829

65

100

6141020122810

100

100

Total 100

4.1. Creation of industry database

A database of 345 industries has been createdbased on industries from all over the country. Thiscontains name of company, location, main products,type of industry, and their postal addresses. Four

sectors are identified for study of manufacturingstrategy aspects, which are Electronics, Machin-ery, Process and Automobile. The targetcompanies were selected from the following twosources:

1. Directory of ISO 9000 certified industry (Direc-tory of ISO, 1994).

2. Industrial directory (Industrial directory, 1999).


4.2. Design of questionnaire and data collection

A structured questionnaire has been developedon five point Likert scale (1—strongly disagree,5—strongly agree). We have adopted interval scalefor our study, as it can be ranked. Interval scaleindicates the relative amount of a trait (Best andKahn, 1986). Interval measures may be added orsubtracted and compatible with various statistics(Flynn et al., 1990). The widely used Likert scale isan example of an interval scale.

The questionnaire contained two sections 'A'and 'B'. Section 'A' contained 15 questions,pertaining to organizational strategy and section'B' contained 40 questions related to competitivestrengths, performance measurement activities,quality improvement criteria, environmentalfriendly technologies, information technology ap-plications, world class manufacturing practices,order winning criteria, functional integration,customer satisfaction, supplier orientation of anorganization. Implementers (i.e. middle manage-ment level) may fill section 'B'. Annexure wasgiven in the end of questionnaire, which containedkey for responses and explained in brief theterminology used in the questionnaire to avoidunknown bias.

To assess content validity a ‘‘dry run’’ was madeand few questionnaires were administered to twoleading practitioners, one consultant and twoacademicians. Based on their feedback the presentform has been evolved and the final version of thequestionnaire was sent to the CEOs of 345companies. To avoid non-response bias fewquestions have been created on reverse scaled.

After reminders, phone calls, e-mail and re-reminders, 100 filled responses have been received,which gives 29% response rate. Outs of 100responses 66 were collected through postal mailand 34 through personal interviews. For personalinterview appointment was taken on phone and itwas conducted in companies located in andaround (100 km) New Delhi.

4.3. Profile of respondents

Out of 100 respondents 38 were CEO/GeneralManager/President/Vice President/Executive Di-

rector with 20-30 years experience. With 10-20years experience, 37 respondents were of Divi-sional Manager/Production Manager/Head-Operations/Works Manager/Director-Technicallevel. Twenty-five respondents were AssistantManager/Production Engineer/Quality Engineerwith 5-10 years experience.

‘‘Automobile sector’’ includes companies pro-ducing light and heavy-duty vehicles and auto-motive components. ‘‘Electronics sector’’ includescompanies manufacturing telephones, electroniccircuits, control panels, computer peripherals,insulators and domestic electronic appliances."Machinery" sector companies produces powerpresses, weighing machines, computer numericalcontrol machines, pumps, air conditioners, com-pressors, agricultural machines and material hand-ling equipment. Firms in ‘‘process sector’’produces paints, drugs and medicines, tyre, steel,cement, petroleum products, textile fabrics, ferti-lizers and chemicals.

4.4. Chronbach's Alpha

Inter-item analysis is used to check the scales forinternal consistency or reliability. Chronbach'scoefficient alpha is calculated for each scale, asrecommended for empirical research in operationsmanagement (Best and Kahn, 1986; Flynn et al.,1990). Chronbach's alpha values for each scale ismore than 0.5, which is considered adequate forexploratory work (Nunally, 1978).

Item Chronbach's alpha

Competitive priorities 0.7922Order winners 0.7715Attributes of Hayes and 0.7525Wheelwright's modelImprovement activities 0.9079

5. Observations

The discussion of the results is divided into foursections. The first section describes on competitive


priorities. The following sections are devoted tothe order winners, stages according to Hayes andWheelwright's model, activities of improvementand manufacturing competitive index.

5.1. Competitive priorities

Manufacturing capabilities represent an holisticset of tasks, which should be performed by themanufacturing function in order to support thebusiness strategy; and the degree of relativeemphasis given to each of them representsmanufacturing's competitive priorities (Industrialdirectory, 1999). Table 5 shows sector wise meanand standard deviation for competitive priorities.For each priority respondents were asked toindicate the degree to which they agree on a fivepoint Likert scale.

We have expanded the basic four competitivepriorities identified by various researchers (Hill,1987; Gerwin, 1993) into 12 dimensions. Table 5depicts that top most competitive priority for eachsector (i.e. automobile, electronics, machinery, andprocess) is quality; however, for automobile andelectronics, it is product durability and formachinery and process sector combined, it isconformance quality. Overall mean for all sectorsis also highest for quality (overall mean 4.18).Delivery (overall mean 4.02) is the second pre-ferred competitive priority in general, whereasinnovation (overall mean 3.65), flexibility (overallmean 3.63) and cost (overall mean 3.17) areaccorded next priority. It is interesting to notethat all sectors have shown cost as last priority.Sector wise competitive priorities are representedin Fig. 2 (of Table 5).

5.2. Order winners

We have identified 10 criteria as order winnerscommon to all industry sectors. Respondents wereasked to indicate the degree of agreement for theirorganizations on five point Likert scale. Table 6shows the mean and standard deviation scores foreach criterion. From observation of Table 6, wefind that three most important order winningcriteria for most of the companies in general areconformance quality, product durability and

efficiency whereas three least important criteriaare attractive packaging, competitive price andversatility. Sector wise order winners vary withtype of product and market. The top three orderwinners for the automobile sector are productdurability, conformance quality and efficiency,whereas that of electronics sector are productdurability, after sales service and efficiency. How-ever, top three order winning criteria for machin-ery sector are conformance quality, variety indesign and product durability, but that for processsector are conformance quality, product range andproduct durability. According to Hill (1987), orderwinning criteria are market and time specific.Corbett and Wassenhove (Kim and Arnold, 1996)have argued that order qualifiers and orderwinners are dynamic in nature. The criterion,which is order winner today, will become orderqualifier in future due to competitive squeeze.

5.3. Application of Hayes and Wheelwright's model

Respondents were asked to indicate their degreeof agreement for the attributes present in theircompanies on five points Likert scale (where 1—totally disagree and 5—totally agree). Sector wisemean and standard deviation for stages (as perHayes and Wheelwright's model) of companies isgiven in Table 7, which shows that few automobilecompanies are in stage IV and stage III, due toearly entry of multinationals (such as Suzuki,Daewoo, Ford, Santro, Mercedes, Toyota, Honda,General Motors, etc.), which forced the companiesto improve their performance. However, electro-nics sector companies are in stage II with meanscore 3.49. Machinery and process sector compa-nies are in stage III with mean values 3.37 and3.28, respectively.

5.4. Activities of improvement

Based on the literature, we have identified 27activities of improvement for Indian companies toaddress issues in manufacturing strategy. Theseinclude advanced manufacturing techniques, inte-grated information systems (IIS) and advancedmanagement systems (AMS). A detailed list ofvarious activities is given in Table 8. Respondents

Table 5Competitive priorities

Competitive priorities Sector wise statistics Overall (Std. Grand meandev.)

Automobile (n = 26) Electronics (n = 25) Machinery (n = 24) Process (n = 25)

Mean Std. dev. Mean(rank) (rank)

Std. dev. Mean(rank)


Std. dev.

(Std. dev.)

QualityConformance qualityProduct durabilityProduct reliabilityProduct performance

Sector statistics

DeliveryDelivery speedDependable delivery

Sector statistics

InnovationNew products

Sector statistics

FlexibilityProduct customizationProduct mix changesDesign changesVolume changes

Sector statistics

CostLow cost

Sector statistics

4.36(3)4.64 (1)4.40(2)4.22(4)

4.35

3.90

3.87

1.020.830.830.81

0.87

3.84(9) 1.243.86(13.95 (6) 0.63

0.92

0.92

3.20 (12) 1.303.17

3.59 0.87

4.40(3)3.52 (10)4.56(2)4.24(4)

4.46

0.650.580.571.10

0.72

4.50(1)3.68 (6)4.30(3)3.70(4)

4.04

0.770.920.810.95

0.86

4.56(1)3.52 (10)3.56(8)3.84(4)

3.87

0.730.841.001.25

0.95

4.04(6) 0.954.24 (5) 0.504.50

3.70 1.054.50 (2) 0.86

3.84(9) 1.244.04 (3) 0.75

4.14 0.72 4.10 0.95 3.94 0.99

3.79 1.00 3.24 1.26 3.63 1.26

3.40 (12) 1.18

3.40 1.18

2.50 (12) 1.16

2.50 1.16

2.50 (12) 1.163.20

3.20 1.30

4.45 (0.79)4.07 (0.79)4.20 (0.80)4.00 (1.02)

3.86 (1.11)4.18 (0.68)

4.00

4.00

3.953.953.683.90

(5)

(7)(8)(11)(9)

0.84

0.84

0.910.721.200.85

3.40

3.40

3.845(8)03.643.88

(11)

(8)(9)(10)(7)

1.08

1.08

1.190.931.100.80

3.65

3.65

3.263.283.203.25

(7)

(9)(8)(11)(10)

1

1

1111

.30

.30

.13

.23

.38

.32

3.56

3.56

3.923.603.283.75

(11)

(6)(7)(11)(6)

1.47

1.47

1.231.321.341.15

3

3333

.65

.74

.65

.45

.68

(1

(1(1(1(1

.17)

.15)

.05)

.25)

.03)

3.17 (1.12)

4.18 (0.85)

4.02 (0.89)

3.65 (1.17)

3.63 (1.12)

3.17(1.12)

I

5-

3


4 5

4

3 5 -

2 5

2

1 5

0 5

Q

-

- -

- _

- - — - -

—-

-

-

- -

- p.

/ </ </ /Quality Delivery Innovation Flexibility Cost

Fig. 2. Sector wise competitive priorities (on a scale 1-5, 1—least important, 5—most important).

were asked to indicate degree of investment inabove activities in their companies on five pointLikert scale (where 1—no investment and 5—heavy investment). The top 10 activities ofimprovement in Indian companies are TQM,management training, customer relations, shopfloor automation, workforce involvement, employ-ee empowerment, CAD, SPC, MRP and bench-marking, whereas least preferred 10 activities areRobotics, AS/RS, bar coding, AGVs, GT, DNC,FMS, AMHS, Recycling, and ABC. Other inter-esting observation is that overall mean foradvanced manufacturing technology (AMT) is2.1 and that of for AMS are 3.3, which reflectsthat Indian companies want to gain competitiveadvantage without investing in technology butlaying more emphasis on AMS. Table 9 showssector wise mean and standard deviation for

activities of improvement. It depicts that all sectorsare giving more importance to AMS like TQM,Management training, customer relations, bench-marking, etc., whereas investment is very less inadvanced manufacturing technologies (AMT). Itseems that Indian companies follow path ofimprovement defined as Simplify (AMS)-Inte-grate (IIS)-Automate (AMT).

Simplify: Simplification of processes with AMSsuch as TQM, BPR, WI, etc.

Integrate: Integration of various functionsthrough information systems (MRP, MRPII,ERP, etc.).

Automate: Deploying AMT like CAD, CAM,FMS, etc.

The relative importance given to various im-provement activities varies from sector to sector.However, in all the sectors, first priority is given to


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AMS, followed IIS followed by AMT. Sector wisemean values for activities of improvement aregiven in Fig. 3.

5.5. Manufacturing competence index

Manufacturing competence is a measure of thecombined effects of a manufacturer's strengthsand weaknesses in certain key performance area(Corbett and Wassenhove, 1993). Competitivepriorities are strategic manufacturing issues iden-tified in the gamut of manufacturing strategy(Skinner, 1969; Hill, 1987; Gerwin, 1993). Wehave calculated competence index (Table 10) ofeach manufacturing sector according to formulagiven by (Cleveland et al., 1989).

-Log**}, (1)

where Q is the manufacturing competence index, ithe strategic manufacturing issue, R the rank ofstrategic manufacturing issue, Ki the inverse rank(if R = 1; K= 12; when i = 12; and if R = 2;

K = 11), and Wi the weight of strategic manufac-turing issue.

We have mapped the highest and lowest meanvalue into 100% and 0%, respectively, for eachindustry sector using a linear approximation.

Wi = þ 1 ðstrengthÞ when % score > 60% ;

= 0 ðneutralÞ when % score is

between 40% and 60%;

= — 1 ðweaknessÞ when % score o 40% :

Similar calculations have been done for each sectorissues. Manufacturing competence index for eachsector as observed from Table 10, is given below

Automobile sector =2.69Electronics sector =2.11Machinery sector = 1.04Process sector =0.26

Interestingly, there seems to be an associationbetween the manufacturing competence index andoverall sector mean as per Hayes and Wheel-wright's model. For example, manufacturingcompetence index of 2.69 and overall sector mean

Table 7Application of Hayes and Wheelwright model to companies in survey

Stage Name Attribute Sector wise

Automobile

Mean

statistics

(» = 6)

Std. dev.

Electronics

Mean

n = 25)

Std. dev.

Machinery

Mean

(« =

Std

24)

. dev.

Process (n

Mean

= 25)

Std. dev.

I I

I I I

Internally 1.1. Minimize manufacturing'sneutral negative potential

1.2. We use internal controlsystems to control manufacturing1.3. Fire fighting is common atour plant1.4. Short term performance isemphasized1.5. Outside experts are called in,to make decisions about strategicmanufacturing issues1.6. Manufacturing is keptreactive and unfocused

Stage mean/Std. dev.

Externallyneutral

ILL Industry practice is followed

11.2. Capital investment is theprimary means for catching upthe competition11.3. Aim is to achieve parity withcompetitors


Internally III. 1. Manufacturing investmentssupportive are screened for consistency with

the business strategyIII.2. Manufacturing strategy isformulated and pursuedIII. 3. Functions of our firm arewell integratedIII.4. We actively developproprietary equipment

3.81

3.86

3.3.

3.04

2.86

1.90

3.13

3.50

2.77

3.27

3.18

3.72

4.00

3.81

2.86

1.08

0.73

1.26

1.01

1.54

0.90

1.08

0.93

1.06

1.27

1.08

1.02

1.09

1.08

1.40

4.20

4.24

3.36

2.92

3.08

2.40

3.33

3.88

2.96

3.64

3.49

4.04

3.28

3.88

2.32

0.89

0.57

1.19

1.44

1.69

1.55

1.22

03.10

1.44

1.12

1.15

0.55

1.26

0.86

0.67

4.00

3.70

2.90

2.90

2.50

2.40

3.06

3.10

2.90

3.10

3.03

3.90

3.20

3.80

2.60

1.18

0.83

1.32

1.15

1.32

1.27

1.17

1.35

1.16

1.10

1.20

1.09

1.10

0.92

1.06

3.68

4.20

2.96

3.04

2.64

2.00

3.08

3.32

2.92

2.92

3.05

3.64

3.40

3.40

2.68

1.15

0.81

1.40

1.33

1.39

1.06

1.19

1.00

1.30

1.20

1.16

1.18

1.22

1.20

1.24

Co

CO

b

13

s

!•

§3

a85

8

!Oo

Stage mean/Std. dev. 3.59 1.14 3.38 1.08 3.37 1.04 3.28 1.21

Table 7 (continued)

Stage Name Attribute Sector wise statistics

Automobile (n = 6) Electronics (n = 25) Machinery (n = 24) Process (n = 25)

Mean Std. dev. Mean Std. dev. Mean Std. dev. Mean Std. dev.

IV IV. 1. Manufacturing functionprovides credible support to thebusiness strategyIV.2. Manufacturing is involvedup front in major marketing andengineering decisionsIV.3. Long range programs arepursued in order to acquiremanufacturing capabilities inadvanceIV.4. Aim is to pursue amanufacturing based competitiveadvantageIV.5. Efforts are made toanticipate the potential of newmanufacturing policies andtechnologiesIV.6. Target is to achieve superiorposition than competitor


Overall sector mean/Std. dev.

4.00

3.50

3.72

3.81

3.86

4.36

53.22

3.44

0.87

1.18

1.12

1.15

0.93

1.15

1.06

1.09

3.36

3.08

3.28

3.20

3.16

3.52

3.26

3.35

1.50

1.123

1.40

1.31

1.53

3.40 0.95 3.36 1.31

3.70 1.10 3.20 1.26

3.10 1.18 3.10 1.34

3.40 1.21

2.90 1.06

3.25 1.40

3.15 1.39

3.30 1.38

3.25 1.40

1.07 3.31 1.15 3.22 1.34

1.20 3.19 1.14 3.15 1.22

I

5-

3


Table 8Various activities of improvement

Type Activities of improvement

Advancedmanufacturingtechnology (AMT)

Integrated informationsystems (IIS)

Advancedmanagement systems(AMS)

Computer aided design (CAD)

Computer aided engineering(CAE)Computer aided process planning(CAPP)Computer numerical control(CNC) machinesDirect numerical control (DNC)Robotics (RO)Group technology (GT)Flexible manufacturing system(FMS)Automated material handlingsystems (AMHS)Automated guided vehicles(AGVs)Bar coding (BC)Automated storage and retrievalsystem (AS/RS)

Material requirement planning(MRP)Manufacturing resource planning(MRPII)Enterprise resource planning(ERP)Activity based costing (ABC)

Office automation (OA)

Customer relations (CR)Total quality management (TQM)Recycling (RC)Business process reengineering(BPR)Statistical process control (SPC)Just-in-time manufacturing (JIT)Benchmarking (BM)Workforce involvement (WI)Employee empowerment (EE)Management training (MT)

of 3.44 in Hayes and Wheelwright's model forautomobile sector and 0.26 and 3.15, respectively,for process sector. Fig. 4 gives the sector wisegraphic presentation of manufacturing compe-tence indexes.

6. Concluding remarks

Economic reforms and global competition havegiven Indian manufacturing companies an oppor-tunity to look at the strategic role of manufactur-ing. This has motivated Indian companies to givehigh priority to quality management.

The study depicts that manufacturing strategyof most companies is focused on improvingproduct and process quality and delivering pro-ducts on time; however, competitive advantagecan be obtained through fundamental changes inthe way manufacturing is organized. Indiancompanies are giving less importance to flexibility,whereas firms of other countries (USA, JapanKorea, Singapore, etc.) are giving priority toflexibility. Swedish companies are introducingFMS, robotics and CAM as a part of strategicdirection (Horte et al., 1991). Similarly, competi-tive priorities for Brazilian companies are cost,delivery and flexibility (Rohr and Correa, 1998).These companies have already qualified on thequality dimension. According to Chikan andDemeter (1995) Hungarian companies are nowpursuing quality as the top competitive priorityafter transition from planned economy to marketeconomy. Quality is the most important competi-tive priority for Indian companies since most ofthe companies are engaged in ISO certificationprocess. For them ISO 9000 is synonym forquality. Today about 5000 companies in Indiahave obtained ISO 9000 certification. The compe-tition from multinationals has made Indiancompanies quality conscious. Traditional qualitycontrol is now moving to preventive measuresreflected in wide adoption of TQM practices, e.g.,Sundaram Clayton (a medium scale company) haswon a Deming award for quality. Indian compa-nies perceive that survival of manufacturing isdependent on quality of design, quality of manu-facturing and time of delivery.

The study also highlights that most Indiancompanies are in stage II (i.e. externally neutral)of Hayes and Wheelwright's model, which showsthat they are still following old practice of inwardlooking and protective environment. To competeglobally they should invest more in research anddevelopment and other infrastructural issues like

Table 9Sector wise activities of improvement

Activity type Activity Sector wise statistic Grand

Automobile (n = 26) Electronic (n = 25) Machinary c (n = 24) Process c (n = 25) Mean(rank)

Mean(rank)


Std. dev. Mean Std. dev.(rank)

Mean Std. dev.(rank)

Std. dev.

Advancedmanufacturingtechnology(AMT)

Integratedinformationsystems (IIS)

Advancedmanagementsystems (AMS)

CAD

CAECAPPCNCDNCROGTFMSAMHSAGVsBCAS/RS

Overall mean/Std. dev.

MRP

MRPIIERP

ABC

Overall mean/Std. dev.

OA

CRT Q MR CBPRSPCJITBMWIEEM T

3.70 (2) 0.88

2.60 (15)2.63 (173.50 (7)2.54 (19)1.48 (27)1.98 (24)2.63 (18)2.04 (21)2.45 (201.40 (25)1.41 1.6

2.49

3.27 (12)

2.10 (19)2.68 (12)2.68 (13)

2.79

3.27 (11)

3.68 (4)4.13 (1)2.30 (15)3.22 (13)3.10 (9)3.54 (6)2.92 (10)3.52 (4)3.45 (8)3.96 (1)

1.2721.421.261.460.801.191.301.260.971.391.23

1.19

1.28

1.431.451.30

1.36

1.20

1.000.800.991.131.071.041.011.000.931.10

3.68 (5) 0.98

2.58 (15)2.64 (14)2.64 (14)2.00 (20)1.80 (25)1.96 (23)2.00 (22)2.96 (10)1.56 (27)1.96 (24)1.88 (24)

1.25

2.76 (13)

2.84 (11)2.20 (19)2.68 (13)

2.44

2.85 (8)

3.84(1)3.80 (2)2.36 (18)3.00 (9)3.24 (6)2.36 (17)2.92 (10)3.30 (4)3.48 (7)3.96 (1)

1.371.401.601.411.331.321.301.361.311.361.39

1.34

1.36

1.471.751.52

1.52

1.14

0.950.861.421.21.041.261.290.981.040.94

3.70 (2)

2.17

3.20 (8)

1.21

2.702.80221221111

.50

.00

.60

.20

.30

.30

.30

.40

.20

2.13

2.80

211

.10

.90

.90

(12)(11)(13)(20)(24)(17)(16)(26)(26)(25)(27)

(10)

(19)(21)(22)

1111111

.33

.43

.64(1

.36

.04

.16

.180.850.8511

1

1

111

.03

.05

.18

.25

.37

.53

.09

1.31

1.10

2.803.302.303.102.302.103.403.301.03.80

(9)(5)(15)(7)(14)(18)

(3)(4)(6)(1)

.18

.21

.10

.30

.26

.21

.15

.13

.02

.02

2.24 (19) 1.313.33(6)1

2.20 (21)2.28 (18)2.64 (14)1.96 (23)1.59 (27)1.72 (26)2.08 (22)2.96 (10)2.96 (10)1.96 (24)1.80 (25)

2.16

3.24 (7)

2.84(11)2.68 (12)2.68 (13)

2.86

3.48 (8)

2.80 (9)3.56 (3)2.24 (20)2.60 (16)3.24 (6)2.36 (17)3.40 (3)3.52 (4)3.36 (5)3.80 (1)

.27

.36

.65

.09

.12

.21

.28

.49

.28

.31

.41

1.31

.14

.36

.54

.39

1.35

.36

)0.98.27.27.27.21.30.18

)0.93.20

)0.99

3.33 (6) 1.09

2.582.582.862.131.591.982 252.062.061.731.67

2.29

3.01

2.612.362 27

2.75

3.20

3.533.692.362.983.102.703.183.523.343.80

(15)(16)(12)(22)(27)(24)(20)(24)(23)(25)(26)

(10)

(14)(17)(19)

(7)

(3)(2)(18)

(11)(9)(13)(8)(4)(5)(1)

.29

.40

.53

.33

.07

.22

.48

.26

.10

.27

.27

1.25

.25

.40

.56

.32

1.38

.20

.02

.03

.19

.25

.14

.20

.15

.01

.04

.01

I

Overall mean/Std. dev. 3.42 1.02 3.34 1.11 1.023 1.15 3.17 1.17 3.23 1.11


3 5 -

3

2 5

2 •

1 5 -

1

0 5 -

0 -

| 1 | 1

Auto. Elec. Mach. Proc.AMT

Auto Elec Mach. Proc.IIS

Auto. Elec. Mach. Proc.AIMS

Fig. 3. Sector wise activities of improvement.

Table 10Competence index for automobile sector

Competitive priority

Product durabilityProduct reliabilityConformance qualityProvide high performance productsNew productsDependable deliveryProduct customizationProduct mix changesVolume changesProvide fast deliveriesDesign changesLow price

Mean

4.454.404.364.224.003.953.953.953.903.863.683.59

Rank

123456789

101112

Inverse rank (K)

121110987654321

Log KWC

1.08

1.04

1.00

0.95

0.90

0.85

0.78

0.70

0.60

0.48

0.30

0.00

W

+ 1

+ 1

+ 1

+ 1

0000- 1- 1- 1- 1

Q= WiLogKi

1.081.041.000.950.000.000.000.00

-0.60-0.48-0.30

0.00

Manufacturing competence index for automobile sector, Ci = PfgWi L o g K i = 2:69:

Similarly, manufacturing competence index for electronics sector, C i ^ P fgWiLog Ki} 2:11:

Manufacturing competence index for machinery sector, Ci = Pfg Wi Log Ki = 1:04:

Manufacturing competence index for process sector, C i ]T{ fgWi Log Ki = 0:26:

organization culture, information technology, etc.A few Indian companies are moving slowlytowards internally supportive to externally sup-portive stage, since second highest score for stagesIII and IV (mean 3.2). These companies havestarted investment in improvement activities such

as advanced manufacturing technology (CAD,CAM, etc.) and advanced management systems(TQM, BPR, etc.).

Although India has excellent scientific andtechnological development infrastructure it hasneglected the development of technological


2.5

1.5

0.5

Auto. Elec. Mach.

Sectors

Proc.

Fig. 4. Sector wise manufacturing competence index.

capabilities to exploit the emerging global oppor-tunities (Chandra and Sastry, 1998). Indiancompanies have to innovate and commercializetheir innovation through timely and cost effectivesystems and through building up of systems formanaging global technological changes.

Indian automobile sector has set to competeglobally due to high innovation rate, faster newproduct development and continuous improve-ment. It is reflected with the highest competitiveindex value (2.69), whereas the other sectorselectronics (2.11), machine tool (1.04), and processsector (0.26) lag behind. Companies of the processsector seem to have neglected the developmentactivities, due to constant and continuous demandof products.

The process industry sector seems to be low oncompetence. This could be because of highinvestment required coupled with captive marketfor industries such as cement, fertilizers, steel, etc.,hence not many multinationals are willing to cometo India. In this sector local market strategyseems to be stronger than global strategy, e.g. acement company of Northern India concentrateonly on the consumers situated around in periph-ery of 500 km. Its product is well known in this

zone but not recognized in other parts of thecountry.

In our study we have tried to map thecompanies under study in various manufacturingstrategy-related issues based on the followingframeworks:

• competitive priorities,• order qualifiers/order winners,• relative position of the firms in H & W's

framework,• investment in improvement activities,• manufacturing competence index,

The study has highlighted a number of interest-ing aspects of manufacturing function and strat-egy. Companies selected in the study were differentin nature and product range. The overall resultsare encouraging with 29% response rate, in Indianscenario and underline the need for more suchstudies of Indian firms. Viewing the challenges toIndian companies, in an integrated framework,one needs to put the strategic issues in properperspective. The manufacturing competence indexis pointer in this direction.


7. Limitations and directions for future research

In our study we tried to assess the manufactur-ing strategy issues in Indian manufacturing in-dustry. We have considered four majormanufacturing sectors, viz. automobile, electro-nics, machinery, and process. Response rate (29%)is also better than earlier reported surveys inIndian context. However, this study has limita-tions, which future researchers could consider.Due to resource constraints, we could not includeservice sector and software sector in our study.Second, we adopted mono-respondent approachdue to high cost associated with multi-respondentapproach. Third, the correlation between manu-facturing competence and business performancemeasures (such as profit, exports, market share,etc.) may provide further insight into the practicesfollowed by Indian companies.

Acknowledgements

Authors would like to thank the anonymousreferees for their valuable comments, which hasimproved the contents and format of the paper.

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Documents

Evidence of manufacturing strategies in Indian industry: a survey