Perspectives on Electronic Globalization

Technologies of global electronic communications, political-economic forces of globalization, business strategies of global outsourcing, and tendencies of global cultural interchange are all implicated in a growing, complex matrix. This blog explores various aspects of it, with the vantage point of business strategy providing a focus.

Wednesday, June 30, 2004

The Accidental Manufacturing Superpower?

The last stretch of the road to Jigani village on the outskirts of Bangalore is sheer hell. Some day there will be a major multilane highway whizzing past this village. But in June 2004, to reach the village, our car had to navigate roller-coaster ditches of swirling red earth. These dug-up swaths of earth are the first stage of road building in this as-yet rural part of the IT metropolis of Bangalore.

As soon as you enter the village, you see the sign for APC. This is the Indian manufacturing plant of American Power Conversion, the global leader in making devices that provide "clean" power to computers of all types.

APC is headquartered in Rhode Island, just a few miles west of my university’s campus. I was aware that some years ago, APC had started an Indian manufacturing operation. One of the MBA graduates from the University of Rhode Island who worked at APC, Javed Ahmad, had been tapped to put the Indian operation into motion.

While in Bangalore, my thoughts were naturally about software and IT services. That’s what Bangalore has become famous for (or notorious for, depending on your perspective). So, when I heard in one of my meetings with the software leaders of Bangalore that the most successful IT hardware exporter from Bangalore was APC, a bell went off. “This must be the doing of Javed”, I thought. In the few hours I had before my flight out of Bangalore, I managed to reach the APC factory in Jigani village on outskirts of Bangalore. Javed was his usual polite and hospitable self, and gave me a tour of his plant.

Six production lines with sophisticated automatic transfer machines, where robotic arms with their Japanese automation wizardry punch in hundreds of tiny electronic components into printed circuit boards rolling on belts, run 24 hours a day and 7 days a week. Final assembly of larger components, and the subsequent finishing and packing operations are done by skilled men and women workers. The average production line in this factory that never sleeps spews out 120 Back-up Uninterrupted Power Supply (Back-UPS) units – the staple product of APC – every hour.

Some of the lines were making not the bread-box sized basic UPS but giant TV-sized larger units. All these devices were packed, arranged on palettes, and loaded into containers on backs of trucks waiting at the loading docks. Then – and I shudder to think how – these trucks make their way out of the potholed access ditches of Jigani, into the snarled traffic of Bangalore, over the messy highways with stray cattle and slow-moving tractors, to the port of Chennai about 500 kilometers away. And, then – unlike the efficient ports of Hong Kong and China where goods are usually steaming out on fast ships within hours of arrival at the port – these APC India containers would wait and wait until the congested Chennai port could berth a ship, the port workers could load the ship, the customs officials would give the green light, and finally the vessel would be en route to Rotterdam or Long Beach.

In his soft-spoken style, Javed explained that there was no intention of making the Bangalore factory an export unit when it started operations. But within six months, the factory was doing so well that the entire strategy was changed. Bangalore became an export production hub for APC, and the original goal of supplying the Indian market – while still relevant – became a secondary goal. In 2004, this factory was about to ship $400 million worth of hardware out of Bangalore and was beginning to nudge APC’s China operation from the top spot as a global manufacturing unit. In good old Rhode Island, next door to my university, the company has its headquarters but not much product is being manufactured.

The APC unit in Bangalore is fanatical about quality. It has gone for all the top quality control certifications and is in the quest for the very difficult Six Sigma level of quality. Over the four years of operation, APC’s India unit has built a network of suppliers who are equally devoted to quality and also run 24x7 operations. In the classical Japanese style, these suppliers make multiple deliveries – using their trucks and minivans over those impossibly potholed roads – to keep the APC production lines supplied with “just in time” inventory of parts.

Javed thinks that the “accidental move” by APC – from opening a factory to supply just the Indian market to becoming a global production hub – is a story likely to be repeated by many multinational firms that are opening up Indian factories to cater to the Indian market. He firmly believes that, despite all the infrastructure hassles, Indian plants can out-compete just about anyone – including China – in terms of low costs and high quality of production.

If Javed is right, then the globe-facing segment of India’s economy may turn out to be more than just a one-trick pony: it could become an “accidental manufacturing superpower.”


Nik Dholakia

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