Emerson is a US$ 25 billion company spread over 150 countries in seven verticals. It manufactures process equipment as well as equipment for cooling, tools, data centres, etc. Sneha Ambastha from Electronics Bazaar spoke to Sanjay Jain, senior GM – operations, Emerson Power India Private Limited
EB: Why have you started purchasing raw materials that are made in India?
Emerson is an MNC and we have around 25-30 per cent of imported content in our products. We want to reduce imports to be competitive, as today’s environment asks for faster lead times, lower inventory and more customisation at lower costs. So this is the prime factor for most of the companies to localise, which is in line with the government’s ‘Make in India’ initiative.
EB: Is cost the primary factor forcing the localisation of electronics?
Suppose we import some product from China, the suppliers there will take one-two weeks to manufacture and another three weeks to ship, which comes to a total of five weeks. Besides, we need to give forecasts, which can have errors due to the changing market and product types. Whereas, if we localise that product, we will get it in one week and will not need to carry inventory or face the risks associated with this. Thus, the lead time is the primary factor driving the localisation of electronics in India.
EB: What are your views on vendor development?
When talking of vendor development, we sometimes get the feeling that we are discussing people who are unaware of the market or of technological requirements. But we are also vendors to our customers and the whole supply chain has got this vendor-customer relationship. We have been working with manufacturers of sheet-metal, transformers, PCBAs, etc, and have been talking about the development part. We do not feel that there is any issue related to a lack of product knowledge. They know how to manufacture any product, whether it is a PCBA, transformer or switchgear.
Development means that they should be able to tell how the market is changing and stay one step ahead. Today we cannot sit back and say that we are producing this particular type of product and if we want to change it, it will take six to eight weeks. This turnaround time is not acceptable and has to be reduced to about one or two weeks. This is the type of development required.
EB: How does market understanding affect vendor development?
Today, major customers are setting up huge projects, and a lot of it is in electronics. Our supplies also have some import content. The customers today are ready to give a maximum of two weeks’ time for design and another two to four weeks for execution. Now, traditionally, we in India are not used to these timelines and demands from the market. Somehow, our vendors don’t get the message that if we do not supply to our customers, they will import. Talking about vendor development, we are looking at speed—understanding today what the customer’s future requirements could be, and being prepared for that. So keeping in close touch with customers and adapting internal teams to deliver designs and products in compressed timelines is the key.
EB: How is the electronics market leading to increased demand amongst vendors?
In electronics, often when we feel that something that has been developed will continue for the next one year, it does not happen that way. The speed at which people want a new design is phenomenal and the rewards are also huge. There is a huge number of ready-made orders and, at the same time, there is demand and vast potential but all vendors are not able to tap this. Which is why major manufacturers are still importing.
EB: What are the challenges in the supply-chain with respect to the electronics industry?
Today, most of the customers are saying that the lead time and service are the two major drivers of the supply-chain. In fact, these are as important as cost. Customers have deadlines, so orders placed are given four to six weeks, with the time required for design and supply included. If these are not supplied within this time frame, you are out. Thus, we need to understand that the pressure here is not the same as in a stable market.
EB: What is the supply-chain scenario in a stable market and how is it changing now?
In the early 90s, I worked in the TV industry, specifically in the picture-tube segment. It was a very stable market then, and the supply chain needed to be just efficient with high productivity and quality. Today’s products and the way we deliver them keeps changing in the same way as the mobile devices change. We all know how mobiles and their design/features change, but we don’t seem to understand that each and every product is changing the same way. Somehow we think that with mobiles, it is possible to deliver fast, but we in the electronics industry cannot do it. But believe me, we will have to do it, otherwise companies from various other manufacturing bases will come to India, and start developing and delivering products to meet our customers’ demands, unless we start changing as per the present industry needs.
EB: What do the customers demand from their vendors?
When we talk to our supplier base and new vendors, we have realised that there are three things to be looked at as urgent customer requirements. They want a quick turnaround time, require a lot of surge capacity available with the vendors, and they need configurability. They want to know how far their vendors will be able to configure products such as PCBAs, transformers or any other electronics required by them, reliably. So when we talk about expectations, it is mainly with regard to lead times, reliability, surge capacity and speed in developing products
EB: Do you have any specific process that companies need to undergo to become your vendors?
There is an elaborate process in Emerson to qualify as a vendor. Vendors can directly contact us and we will work with them. We have a laid-down process, which includes quality and process audits, before we go into the commercial aspects. We can assure vendors that we will help them to develop and go along with them to improve their process, and will definitely source from them if they are competitive in terms of cost, quality and lead times.
