What do manufacturing companies need to do if they are to thrive in the ‘Make in India' environment? They will have to worry about capital, skills and culture. Each of these has significant impact on the shopfloor where the outcomes of all these plans, both Government and corporate, will actually face reality. As we shall see, it will also require that we look beyond the shopfloor and take a supply chain view of the business.

Drive capital efficiency on the shopfloor
Any form of growth needs capital infusion to support it. With more and more companies coming in, there is likely to be an increasing demand for capital. Despite a lower inflation level, this will place challenges on lowering interest rates. If so, how efficiently a company uses capital will be key in deciding its ability to succeed and grow.

Our work in CGN, across various manufacturing industries, has shown that there are tremendous opportunities to improve capital efficiency in Indian shopfloors. This could be a loss of capacity or lowered productivity. Capacity is lost for a variety of reasons: material non-availability, labour non-availability, re-work, machine downtime for maintenance or power outage.

These are areas where too often we set our standards too low. In one case, we estimated that there was a 30-50 percent capacity increase possible, with little or no investment. By utilising this capacity the company had a potential to drive up EBIT by as much as 8-10 percentage points. This will encourage investors to pump more money in the company and will reduce the need for delayed growth because new capacity has to be installed.

Another area of capital blockage in our shopfloors is in inventory. While working capital may be funded by banks, it is not an efficient use of that capital. One company looked at a program to release capital deployed in inventories to create new productive assets.

So, on the one hand reducing inventories allowed faster response to the market and reduced space requirements. On the other hand, the same funds could be moved to creating new productive capacity and supporting growth.

Working with partners along the supply chain will be critical to drive capital efficiency. No matter how good ‘my shop' is, it will be affected if my supplier is irregular or of poor quality. Similarly, it will be thrown off if the customer is inaccurate in ordering.

Capital efficiency cannot be attained in isolation, but only if we reach out and work with our business partners in the supply chain. The concepts of supplier collaboration are well know, but very poorly executed. Small changes in these areas can lead to significant improvements.

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