THE CHEESE HAS MOVED

It’s amazing to see how we can all play all these different roles and join hands together

INTERVIEW DATE: May 09, 2020

WHERE WERE WE

Factories were allowed to open with limited capacity. The Covid-19 cases continued to spike. By this time, the total caseload had risen to more than 60,000 confirmed cases and more than 2,000 deaths. The hardest-hit places were the big cities, Mumbai, Delhi and Ahmedabad. One thing was for sure: this was going to be a long haul.

Therefore it was a breath of fresh air when we did this talk.  Both Swapnil Sansare, CEO and Founder, Divide by Zero Technology and Mayank Dalmia, Director, Wave Mechanics and Investor, KAHM Capital came in with a positive view on a number of things about the manufacturing industry, from the near term to the long term. Edited, abridged excerpts follow the key highlights of the interview. 

KEY TAKEAWAYS

Swapnil Sansare

• I can say from the perspective of the MSMEs that we all are coping up and all the rules are changing, the ways of communication are changing. 

• It’s amazing to see how we can all play all these different roles and join hands together. That’s the human spirit where we evolve and rise above a crisis. I can see that happening. 

• We realized the true enormity of the crisis, when, being in the 3D-printing industry, we started to get a lot of calls for protective equipment. I am greatly thankful to the medical fraternity for their support; that helped us in delivering the 3D-printed protective and medical equipment to hospitals, as well as other customers.

• We have provided support to even our vendors to help them with the restart process, with the documentation, finding them the transportation options and so on.

• An open-source movement is happening all across the globe wherein people are helping each other design PPEs which can be 3D-printed and quickly delivered.

• Diversification is required in manufacturing. Even when we are manufacturing for the auto industry, we can also make ventilator parts. If we are making a 3D printer or an EV (Electric Vehicle) component, we can also make a robot component which can actually help the medical industry.

• We as an industry are dependent on other countries and companies outside India, a lot of our supply chain basic requirements for making these 3D printers or CNC machines are dependent largely on European and Chinese manufacturers. We need to work toward manufacturing these components required by the supply chain locally. That would really push the growth of our manufacturing sector.  

• The demand is going to shift. To borrow a leaf from the book called “Who Moved My Cheese”, the cheese has moved.  Now we all need to look at where it is moving. The world is not going to be the same, the modes of communication, job roles, processes, the way transactions will happen; everything will change. Taking all this into account we need to remodel our businesses. 

Mayank Dalmia

• For the manufacturing industry this is especially challenging; how does a manufacturing business rapidly transition to a digital interface? Some activities and functions can go digital and can be done from home, but your core activity of production can not be entirely digitalized; it needs some physical presence.

• These are challenging times for the policy makers as well. India has a federal structure — different states have different realities. A policy that may work well in Karnataka, may be unworkable for a state like Rajasthan or Bihar. This situation requires a lot of patience from all the stakeholders.

• We got an opportunity to restart operations because of an order we received to produce critical ventilator components. In the beginning we were limited to about 15 percent manpower, not much in the manufacturing context, but eventually we were able to ramp up machining output to 60 percent and deliver a good number of components. 

• In terms of morale, there is a bit of uncertainty and insecurity, especially in terms of what is going to happen. Personally, I am in a positive frame of mind. I believe that we can emerge from this stronger.

• At the policy level the government was very quick to move for provisioning of PPE, and we also have companies like BEML and BEL (Bharat Electronics Limited) to thank for facilitating this process.

• Traditional Indian manufacturing businesses don’t see marketing and communication as an important area to spend time on.

• There has been too much focus on low-cost manufacturing in India, but I think we must start moving away from low-cost driven to value and competence driven because low-cost manufacturing is a game of diminishing margins. 

THE TALK

What is the situation on the ground?

Swapnil Sansare (SS): The situation has lent a completely different perspective on everything about life: be it one’s business, relationships, customers, vendors, or employees. When the lockdown started on March 24, we thought all operations would be sorted post this period. We realized the true enormity of the crisis, when, being in the 3D-printing industry, we started to get a lot of calls for protective equipment. We needed to deliver certain ventilators parts and face shields that could be 3D printed, and certain parts to be used in UV disinfection robots. 

I am greatly thankful to the medical fraternity for their support; that helped us to respond to the requirements that arose and helped us in delivering the 3D-printed protective and medical equipment to hospitals, as well as other customers.

We have never seen this kind of a situation — the supply chains came to a complete halt. How can you even manufacture your products? How do you deliver it to your customers? In short, these past 45 days have been a learning experience. We have finally accepted the change and are trying to cope with that for now. 

MD: This is obviously a difficult time. Everywhere, we are reminded about how unprecedented the times are on a daily basis. For the manufacturing industry this is especially challenging; how does a manufacturing business rapidly transition to a digital interface? Some activities and functions can go digital and can be done from home, but your core activity of production can not be entirely digitalized; it needs some physical presence.

These are challenging times for the policy makers as well. India has a federal structure — different states have different realities. A policy that may work well in Karnataka, may be unworkable for a state like Rajasthan or Bihar. This situation requires a lot of patience from all the stakeholders.

For Wave and the rest of the Kahm Group, there are certain decisions that have been taken aimed at keeping the pain to the minimum, such as not reducing salaries. In terms of morale, there is a bit of uncertainty and insecurity, especially in terms of what is going to happen. Personally, I am in a positive frame of mind. I believe that we can emerge from this stronger. 

What were the hardest things that you had to encounter or manage during the first phase and how did you cope up with that?

MD: Machining being the core activity, the hardest part was the first 10 days when we were completely shut, following government directives to cease all operations. A challenge was transitioning the sales team and the projects team [to the new reality]. 

We were quite stressed, given that we are in two essential areas: aerospace as well as medical and in both of these areas a lot of our international customers continued functioning as they were always declared essential from the get go. 

Luckily, we got an opportunity to restart operations because of an order we received to produce critical ventilator components. In the beginning we were limited to about 15 percent manpower, not much in the manufacturing context, but eventually we were able to ramp up machining output to 60 percent and deliver a good number of components. 

I would say that a big challenge has been the supply chain, in terms of raw material, consumables & logistics; we have been lucky to have our raw material stock, but a lot of our peers don’t have it in place. 

SS: As Mayank pointed out, there was a situation of complete uncertainty during the initial ten days or so. I am privileged to have an amazing team and we were able to function despite everything.   

I can say from the perspective of the MSMEs that we all are coping up and all the rules are changing, the ways of communication are changing.  We have provided support to even our vendors to help them with the restart process, with the documentation, finding them the transportation options and so on. It was definitely worth every effort because it’s amazing to see how we can all play all these different roles, and join hands together. That’s the human spirit where we evolve and rise above a crisis. I can see that happening. 

On the manpower side we are allowed to run as an essential service at 33 percent capacity, but since our machines are completely automatic, we are still running at around 45-60 percent capacity on the production side. 

What has been the role of your companies in contributing to the supply chain of essentials such as PPE, ventilators, and others?

SS:  An open-source movement is happening all across the globe wherein people are helping each other design PPEs which can be 3D-printed and quickly delivered. In 3D printing as you know we are not dependent on customized tooling. So that helped a lot in delivering face shields, face masks and fulfil all these requirements coming in from local hospitals, particularly the government hospitals handling Covid patients. A lot of other types of innovation also came into place to handle this. For example, there is a small device called an ‘ear pressure reliever’ [an ear pressure reliever is a device that holds back mask strings to prevent masks from hurting the ear. The device was first designed by an Olympian to help with wearing swimming gear. – Editor]. Then we also moved to making UV disinfection boxes and robots; where a robot has a large UV lamp mounted on it and is positioned in different areas and hospitals to sanitize and disinfect them.

There is a lot of innovation happening to help our doctors and medical workers who are fighting on the frontlines of these pandemic — they are being supported by engineers and manufacturing workers at the backend. There are a lot of groups made on Telegram and WhatsApp where people have started to communicate about all the supply chain and engineering options. Doctors and engineers from across the globe are in these groups, contributing to these designs. We call it distributed manufacturing. Once those designs are made available, we could actually send it to many-many partners across the globe and they can actually make those parts on their 3D printer or CNC machines. 

MD: Personally, I have seen a lot of companies transition to producing protective equipment and masks. What has been really surprising is that these supplies have not reached hospitals or medical professionals with the speed that that was needed. I know doctors that are involved in fighting Covid-19, and as you rightly mentioned they are fighting this like medieval Knights, where they wear a PPE suit in the morning and get to take it off only at night when the day’s battle is over.

It is quite a tragedy that we are seeing medical professionals getting infected. Even more we are hearing about cases where medical professionals and nurses are being shut out in their societies. This is something which needs to be addressed by the government. And we need to make it sure that the PPE needs to go in sufficient numbers into the right hands, over and above mere symbolic gestures. 

At the policy level the government was very quick to move for provisioning of PPE, and we also have companies like BEML and BEL (Bharat Electronics Limited) to thank for facilitating this process. They helped us get permission to re-open & contribute to this need. So that was a very big silver lining from my perspective.  

We have seen in the US, for example, that auto companies have been roped in to produce ventilators. Are their instances of the same in India? Can other manufacturers not step up to produce such equipment?

MD: The short answer is that yes, manufacturers from [other sectors like auto] can retool to produce items like ventilators. We are seeing companies in the aerospace and defense industries like Lockheed Martin and others successfully producing ventilators. So it is very much possible for various types of industries to set up and produce these items.

That being said these are not simple devices to get to market. Especially when you add the factor that they are life support systems and justifiably so they are required to meet regulations and certifications. For example, one thing seen across these WhatsApp and Telegram groups, everyone was running into a wall of how to get their design or prototype certified; who is the right body to actually walk us through this process. Similarly, there have been a lot of questions which have still not been resolved. So, you are prevented from selling a working design, without the necessary approvals & certifications.  That is one area that  we could definitely improve on; make the regulatory framework for approving medical devices and medicine more efficient.

SS:  I completely agree with Mayank. Bigger medical equipment brands already had these approvals and certifications to manufacture these equipment. For the newer entrants, there is a lack of clarity in terms of whether you get the certification from, or, say, a particular UV device will be certified by ICMR or any other body.  There is definitely some clarity required to speed up this manufacturing process here in India and for regions beyond India since there is a global need for these equipment. 

Audience Question: I am from a company that makes barcoding and tracking devices. There are a lot of issues which we face and as far as the materials and supplies are concerned, which are available but hard to get. My question to the panelists is that why do we still see the lack of visibility of PPE manufacturers in India except for a few international brands like 3M and Honeywell? 

SS: There are well-known PPE manufacturing companies in India like Venus, JCT, Adiya Birla and others but yes there is a lack of visibility. Media plus a role to highlight these heroes. In terms of regulation there is a lack of clarity which means that a lot of effort has to be put in to reach out to the authorities to understand the compliance process.  Infrastructure-wise you cannot manufacture PPE or any such equipment in a standard manufacturing setup, it requires a particular kind of  setup and the machinery and ensuring what we call it as a clean-room environment. But I can see a change happening now in the area of government support as well.

MD: We may not have the brand names of the likes of Honeywell, but some of the companies that Swapnil mentioned have done a pretty good job. The challenge really lies in distribution since it is not reaching the right people.

In terms of branding, you can kind of expand that question generally for all of Indian manufacturing, where it is more about the lack of marketing and communication, which traditional Indian manufacturing businesses don’t see as an important area to spend time on.

Audience question: I have seen that we aren’t promoting Indian digital non-contactable thermometers because the Indian brands are very-very costly compared to the Chinese brands. I would like to have your perspective on this.

SS: Infrared thermometers, even if they seem like a small and simple device, require getting the supply chain together of a lot of different components both mechanical and electronics and a lot of assemblies. Ensuring all of that takes a lot of effort but as the numbers go higher, I think definitely Indian manufacturers will also be able to compete with other international brands, be it Chinese or any other.

MD: On the pricing issue, a simple answer is that these companies have been building these devices from before Covid. They have an established supply chain and distribution network,  all of their costs have been optimized and therefore they have the pricing advantage. Just put yourself in the shoes of a medium or small size Indian manufacturer; first you spend money developing the product, then you spend money finding suppliers and ordering the various items & getting it to your facility; all of these come at a higher than the normal cost given the current context. Finally, you end up with a product that is not competitive because you’re not enjoying any of the economies of scale that an existing manufacturer enjoys. 

The thing about Covid is that it hits those people the hardest who have underlying issues and that is perhaps a metaphor for industry and economies as well in terms of how this crisis has impacted them. To explore these issues, let me start by asking you this: why do you think Make in India could not take off in the way that it should have? 

SS: One reason I think is that as an industry we are highly dependent on the automotive sector. Even in 3D printing, 70 percent of the consumption happens from the auto sector, and that is true in general for tier 1, 2 and 3. Now the auto sector has been in a state of confusion for a while, because lots of changes have been happening back to back in the last couple of years. 

Diversification is required in manufacturing. Even when we are manufacturing for the auto industry, we can also make ventilator parts. If we are making a 3D printer or an EV (Electric Vehicle) component, we can also make a robot component which can actually help the medical industry.

In addition, we as an industry are dependent on other countries and companies outside India, a lot of our supply chain basic requirements for making these 3D printers or CNC machines are dependent largely on European and Chinese manufacturers. We need to work toward manufacturing these components required by the supply chain locally. That would really push the growth of our manufacturing sector.  

MD: To answer why Make in India has not taken off, the answer is quite complex and you are likely to get different answers from different people.

I feel that it’s a combination of issues. One of the major reasons for this is cost & productivity of manufacturing, where we are in strong competition with other emerging nations. For example, in aerospace, we compete heavily with countries like Morocco, Tunisia,  Romania and Poland, etc. You may be surprised to hear that they are as cost-effective as we are, especially given that they probably have a slightly better-educated labor, but these emerging economies are able to garner the same or even greater amount of productivity from the available workforce.  Another factor that works against us is the cost of capital, for example, when it comes to automation. It’s simply not financially viable for us to invest in automation given that you have a plenty of supply of (manpower). Of course, there are negatives to not investing in automation which we experienced in the last two months but the case for automation is not yet too compelling. 

In India, there are two areas that need a lot of work: one is the area of R&D. There has been too much focus on low-cost manufacturing in India, but I think we must start moving away from low-cost driven to value and competence driven because low-cost manufacturing is a game of diminishing margins.  It’s only a matter of time before other emerging nations undercut you. Organizations need to take up a long-term view and start spending money on innovation, and start moving away from just being contract manufacturers, try to get into the products, try to do disruptive innovation. We need to look at things like international collaborations, and technology partnerships.

The other area which I think would strengthen a lot of the SMEs would be that of flexibility when it comes to labor. We are seeing in countries like the UK, Ireland, and the US that the governments are helping the businesses pay nearly 70 percent of the workforce wages during the lockdown period. That’s a very strong signal from the government that we are here to help the economy and the industry. Here we are yet to see something of that scale. Of course, I am not advocating for exactly such a move in India but something needs to be done to help manufacturing companies that are not able to produce yet are compelled to maintain their entire cost base. That is not viable. As an SME owner I can relate to a lot of industry peers who have been wondering in the last one month about all these odds that are stacked against the SMEs. 

To add one last point: access to capital. Swapnil, I am not sure how you are managing your cashflows, and whether you have banking partners that are helping with that, but I would definitely say that this is an area that also needs to improve quite a bit. We either have NBFCs that are extremely aggressive, or traditional banks which are extremely conservative especially when it comes to lending to an SME. I think there needs to be a view from the government’s side that, since we aim to be a global manufacturing powerhouse globally, we need to support the SME businesses. They need capital support, they need flexibility. 

SS: I completely agree with Mayank. There have been certain facilities made available from SBI and other such institutions, but here again it is very difficult to get through the processes. They are tedious and long — considering the kind of situation we are in, gathering all those documents and going back and forth becomes very difficult. Right now, that could be a major issue. 

To elaborate a bit on the issue of labor, we are seeing that some home states of migrant laborers have dramatically changed labor policies with the aim to generate employment and make the home states some sort of a manufacturing hub. How is this going to work?  

SS: if you look at Mumbai and the nearby industrial areas, nearly 50 percent or more of the workforce has migrated back to their respective hometowns. We need to look at ways to retain labor, ensure that you are assuring them a pay, and providing them facilities. A lot of companies are doing this. 

[As for the homestates becoming manufacturing hubs with change in some labor policy] I don’t think that could work. After all, there needs to be a certain assurance for the laborers in terms of a job assurance and safety requirements and support. It’s time we all should look at how we can grow together. There has to be a win- win proposition for everyone to have a successful enterprise.

MD: It’s definitely not a good idea to simply do away with labour laws, that would be a step too far. These laws are there to protect people who are really at the bottom of the pyramid, whose situation the three of us here in the room cannot begin to understand. That being said, it comes down again to what is our intention as a country; do we want to become competitive at a global level, not just in terms of cost but in terms of quality and innovation? If the answer to that is a yes, then I think there needs to be a very clear definition that the onus of people welfare should be on the government, the onus of efficiency and productivity should be on the company. For that to happen a company needs to be free to take some actions which may not be popular. That’s not to say that those people affected by this action should be just left aside, that’s where the government safety net has to support them.

Imagine a picture in America where the US government would say that sorry you can’t terminate anyone or even furlough anyone, that would be unimaginable. The data is in: more than 33 million people have lost their jobs in the US in the last two months alone. And at the same time you have seen the government step in a way that was completely unprecedented. You had their central bank give a sort of a blank cheque saying that here is our support to industries, you have the government depositing $1,200 in every affected citizen’s account.The idea of a Universal Basic Income which we had been debating in classrooms and universities suddenly became a reality. 

I know that India, as an economy, is much more complex and there are no clear-cut winners or losers here. But I definitely feel that the onus of efficiency and productivity should be on the companies. 

To answer your second question of what will happen when, let’s say, these labor laws are scrapped, will there be an immediate impact [in terms of improvement in business proposition for industries]? The answer is no. Because suddenly having 50 percent of your workforce gone is not going to make your product better, it may improve your price but it is not going to improve your quality or your delivery. Where it would help will be in  companies becoming more cost efficient and reinvesting savings back into the company to improve. When we talk about automation, if somebody is operating at 10 percent, 12 percent net margin, then automation is a dream because the cost of capital itself is close to that number if not more. So then, innovation is just left in the hands of a few that are operating at very healthy operating margins. So in order to improve all these things, yes it would have a positive effect, but definitely in the long term, not the short.

If you are made this CEO of India’s manufacturing for one day, where you don’t have to worry about any constraints, what are the top decisions you will make to transform India’s manufacturing into a global force to reckon with? 

SS:  The first thing would be [working on] the education. Particularly in terms of the knowhow of  technologies, making data available to the entrepreneurs in the manufacturing sector about what needs to be manufactured and where is the gap. 

The second factor will be that of the support, whether it is capital-based support or regulatory which helps entrepreneurs set up their businesses quickly and invest into capital goods and their manufacturing.

Thirdly, I would look at the marketing of our strengths. How those are very well known to the world. The fourth would be to make India export-oriented, doing it through knowledge-sharing and standardardization of manufacturing practices on the total quality management side. 

MD: In addition to points we have spoken about like access to capital and reforms etc., I want to stress upon this point, and request the industry to take it in the right spirit and humor, that the industry must stop overpromising and under-delivering. This is a uniquely Indian trait where somebody, say, from Europe who asks our manufacturers whether you can do this, and even if the manufacturer cannot do 60 percent, he will still say, yes, I can do it. 

This needs to change as personally I have come across this sentiment that people abroad have about us; they say that our experience in India has been negative because we were promised certain things, but the reality on the ground was completely different.  It’s probably a cultural issue where we feel that our guest is God (Atithi Devo Bhava), so we have that approach of doing all (and more than) what we can. But ultimately we need to be confident in what we can do well and do that well.  I would certainly say that there needs to be a little more straightforwardness from the side of Indian manufacturing.

In addition, I agree with Swapnil about marketing and communication. That is an area where a lot can be done. Our inherent strength as a country is the fact that we speak English. We need to capitalize on this benefit, get out there and communicate effectively to our customers; what exactly can you do, what you can not, who are you, use all the digital tools that are available today to us. I don’t think anybody today can make an excuse for not having an active MarCom strategy which should help us talk to our customers and keep them abreast of issues on the ground because let’s be honest, if you’re a foreign company from the US or Europe, and you’re looking at a manufacturing hub like China or India, you know what you are getting. You know you are getting better infrastructure & maybe price in China, and you can probably get better quality somewhere else.  Our key strength, on the other hand, is that we speak English. So we really need to use this more. And I think this context gives us a huge opportunity to do this. You know there is a lot of mistrust today towards China, and as a result there is a lot of supply chain networks  thinking of moving out of China, so I think this the perfect time for India to be in the fray, raise our hands and say that hey, look, we are democratic nation that speaks English, please work with us, partner with us, don’t just think about us as a low-cost base — that may the entry point and that’s how the business will start — but partner with us with a long term vision.

What would you like to convey to your industry peers about how to face this crisis and emerge stronger? 

SS:  During the past 30 days, I realized that businesses are not going to be the same now. The demand is going to shift. To borrow a leaf from the book called “Who Moved My Cheese“, the cheese has moved.  Now we all need to look at where it is moving. The world is not going to be the same, the modes of communication, job roles, processes, the way transactions will happen; everything will change. Taking all this into account we need to remodel our businesses. 

The businesses will now move from manufacturing normal products to life-saving and essential products. So we all need to keep an eye there, sit with the team, understand what all possibilities we have, and what all areas we can get into. The cash flow is very important: you should know where it’s going.

I’ve seen that even in my team and those of many of my friends with whom I discuss these issues — many of the teams are internally not ready to accept that this change is coming. A lot of them are still thinking that one fine day we will go back to the office and things will be normal.  I pray and wish that it should be the same, but at least for a year I don’t see going back to the same normal. 

Another point here is that synergy is the key. I was working on this project regarding the face shields and the robots, where I had to diversify my supply chain at a short notice to continue manufacturing these products and deliver. Synergistic alliances will help us move forward because you never know what’s coming. 

MD: To take it forward from Swapnil’s point, we really need to look at ourselves as agile machines that can be moved and corrected as per the situation on the ground, especially when it comes to collaborating with our competitors and peers in the industries, particularly in the SME sector. I can speak again for myself that we handle about seven different processes, out of seven, some we do in-house, and some are being outsourced. This is a win-win model for the industry to emulate where instead of two SMEs fighting for scraps, you’re joining hands together to increase the pie.  This will need a shift in mindset. 

Overall, I’m pretty optimistic. I think we as an industry will be able to bounce back.  To give you a crude analogy, in some ways this crisis is like chemotherapy for the economy. This is a painful therapy that is going to eliminate the weaknesses that have developed over the years.

For us at Wave, we are in fact planning to expand our capacity. We aim to continue servicing our international customers, and I don’t think this crisis can put a stop to that.

Industry Samurai: Executive Profile

Swapnil Sansare, CEO and Founder, Divide by Zero Technology

Swapnil is a robotics technology expert and an entrepreneur. He has a rich experience of automation and machine design. Products designed by him at Divide by Zero Technologies have won numerous Excellence Awards. He holds India’s first 3D printing technology patent. Divide by Zero Technologies is India’s largest industrial 3D printer manufacturer that works with partner networks in India, Malaysia, Germany and UAE.

Mayank Dalmia, Director, Wave Mechanics and Investor, KAHM Capital

Mayank leads business development and sales at Wave Mechanics. Wave Mechanics provides fully furnished precision mechanical components in assembly ready for further integrations for specialized applications into aerospace, electronics and the medical industry. He also manages Kahm Capital, an arm of the Kahm Group.