Monday, June 30, 2008

Yahoo for Indian manufacturing?

A report in the Economic Times says that among the top five companies in India, four are manufacturing companies. Chk this report here:

On the face value this is a time to say "Cheers" to the Indian manufacturing industry that has been in the shadows of accomplishments by service companies. History has repeatedly shown that the super powers, whether Romans, Greeks, Russians, Americans or Chinese have been all manufacturing led economies. India with a push in service and software oriented industries was trying to create a different path for global dominance. While creating a different path is not a problem it had imposed a sort of step motherly feeling for manufacturing. The general sentiments also did not favour manufacturing. That India would always be an underdog to China in manufacturing was accepted as fait accompli.

At one level the report surely increases the confidence level of Indian manufacturing. It sort of creates a feel good factor. This feel good factor is not a small thing as it slowly create a wave of positive attitude towarda manufacturing industries. This would mean more people taking up manufacturing as a profession, more investments, more output and so on. It is only on the basis of such positive sentiments that economies develop and take off. There are of course tens of ways to counter the article. The aquistions of Indian firms are still young and cannot be called a success. Manpower is still a huge problem. But overall the article does give a thumbs up for the manufacturing sector.

Wednesday, June 11, 2008

Fuel costs dictating change

Continuously rising oil prices have thrown many calculations out of gear. Suddenly the cost of one drop of fuel has begun to matter. There are reports of Americans moving towards smaller and fuel efficient cars. I refer to Americans because they are the most inefficient users of oil and other energy. As a fallout of this most automakers have changed their production plans. Check this report on Nissan.
Nissan is cutting production of its SUVs and trucks and moving towards making more Ultima cars which I believe would be a lot more fuel efficient. Most other automakers would have already changed their plans as well. To be able to make the new plans effective is altogether a different question.

Small cars are typically low margin high volume business. SUVs are high margin vehicles for manufacturers. Changing from SUVs to small cars is not merely changing from one vehicle to another, it is a huge change in mindset. Every small waste has to be examined in case of low margin businesses. SUV factories may not be tuned to operate in this environment where every single bolt and washer has to be accounted for.

Since the talk is on changes being dictated by fuel, I would like to point out one more article-
Airlines are now washing the engines more often as small specks of dirt can increase the fule consumed. They are also switching to lighted seats, carrying lesser water for toilets. Fuel which was 15% of their costs in the year 2000 is all ready more than 40% of the costs today.

If I think of the time aircrafts in India spend on circling the airports (plus the low cost of manpower), I am sure the proportion of fuel costs would be much higher. Smarter management to reduce this time would easily bring a smile to the bottom lines of most airlines. Such changes and calculations would be considered academic last year, but today it could mean a difference between life and death.