Indian manufacturers usually complain of high manufacturing costs due to activities like high inventory costs, lead time, etc. This is usually caused by delay in supply of components. But component traders fail to ascertain these reasons and to find a solution.
Component traders usually have complete stock of all electronic components, both active and passive. However, there are some hurdles that are creating unnecessary delay in suppling components to the manufacturers. Fearing this delay in sourcing components, manufacturers end up storing components more than what is needed, and end up bearing the cost of holding excessive inventory due to high lead time.
By Saurabh Sharma
Thursday, October 15, 2009: Ways of taking order
Component traders use various ways to supply components to the manufacturers. “We accept orders from a manufacturer through emails, through courier service and if the client is known to us then even verbal order is accepted. We always try to minimise the formalities in order to decrease the lead time,” says G S Sharma, director, Shri Ram Marketing, a leading component trader.
“Countries like China have very less cost of manufacturing although they offer more or less the same environment India offers to its manufacturers,” says Purushotam Nanduri, vice president, operations, India Renewables Ltd, a manufacturer of PV modules. If India has similar manufacturing environment, then what is it lacking in comparison to other countries? How can this situation be improved to make India a preferable place for manufacturing?
What are the problems?
Indian component traders have always been more focussed on the quality of components and also on the after sales support, which is no doubt, very important, but they are missing out on other significant factors like better supplying techniques. Lead time is very high in India because delayed deliveries. Indian manufactures do not get the facility of ‘just in time inventory’ as their counterparts in other countries get.
“In China every order is just one hour away. If you want to place an order just pick up the phone and call them and you will get the order in an hour’s time. It is so unlike India. Here, we have to wait for one to two weeks,” says D Malakar, director, Deepakshi Display Devices, a manufacturer of LCD screens.
‘Just in time inventory’ is a very efficient tool to decrease the costs of manufacturing significantly as the manufacturers do not have to store inventory at all. Whenever they need a certain amount of components, they can just call up the distributor and the components will be at their doorstep in an hour’s time. In India very few traders offer this service to the manufacturers.
The other problem that arises in the supplying process is ‘inventory management.’ Rather than component traders offering services that help the manufacturers to control the inventory costs, it is the manufacturers who have to manage it on their own. Avnet India, a leading component trader, offers services like ‘vendor management inventory’ (VMI) programmes to multinational and trans-national customers; global price support to contract manufacturers; and local warehousing to small customers. Initiatives like these are welcome more in number.
As holding inventory for a channel partner is relatively easy than the manufacturers, they can easily provide vendor management inventory programmes to latter. Servokon Systems Pvt Ltd, a manufacturer of voltage stabilisers, buys components worth Rs 1 lakh every month. “Price of these products can be decreased if we do not have to maintain huge inventory,” says Zakir, director, Servokon Systems Pvt Ltd.
Another bottleneck in the process is to find a proper way to place orders. Manufacturers have many options to choose from like sending enquiry through email, sending requirement details through courier service or rather just place an order verbally through telephone. These seems to be easy than done. If these efficient ways of placing orders are adopted by the manufacturers, it can cut down time and cost of manufacturing drastically. Less the paper work and formalities, less the time it’ll take to process the order. More complicated activities slow down the process of delivering components to the manufacturers.
Center for Promotion of Imports (CPI) promotes trade in developing countries like India. They rate various traders on the basis of their work at forehand, financial solidity, knowledge of international processes and smoother operations. These traders are then recommended by them to various manufactures. To be part of such associations, a component trader must work on the supplying options and smoother work flow activities. Indian transport infrastructure is also a hurdle in the faster flow of orders. Although a solution to this problem is not in the hands of the component traders, it do come up as an obstacle in the supply process.
What can be the solutions?
For every problem there is a solution. When other countries can have an organised process of supplying components by the traders, then why not India? Many solutions are available in the market like component and supplier management software. This software is a helpful tool in managing a company’s sourcing needs.
Indian component traders will also need to provide ‘just in time inventory’ to the manufacturers. For doing this,they will have to first streamline their process of supplying to the manufacturers. The most efficient way of implementing ‘just in time inventory’ technique is to get registered with the manufacturer. “When we have to order components from a registered supplier, we place the order verbally over the phone. This helps us to procure the components easily,” says Zakir. Component traders also prefer verbal mode to make the process more smooth reduce the lead time.
“We also take orders from the known companies over the phone and deliver them in time. The formalities are taken care of later by written communications,” says Sharma.
The other supplying facility that component traders can provide to the manufacturers is ‘vendor management inventory’ as being provided by Avnet India. Through this method, it is very easy for a vendor to manage the inventory as compared to the manufacturer, as the latter have to store finished products as well. This will also help component traders to provide ‘just in time inventory’.
“At Componix India, we provide timely deliveries to our clients because of the large inventory that we hold,” says Chetan Ajmera Director Componix India, a distributor of electronic components and LEDs. Infrastructure issue is something which neither the manufacturers nor the components traders can resolve. “Government will have to take some speedy actions to improve the infrastructure if they want Indian electronics industry to grow and become hurdle-free,” says Babu V Zachariah, sales manager, Naina Semiconductors, a manufacturer of resistors, diodes, thyristors, modules, etc.
Indian component traders have already started taking some steps to improve the supply process of component to the manufacturers. “We are offering online enquiry options, speedy deliveries to the registered partners and inventory support,” says Sharma. Many companies are adopting new IT solutions to resolve the various issues. Component and supplier management software is one of them. Opting for the right supplying method is the key to stay ahead in the competition. India needs better communication and understanding between manufacturers and component suppliers in order to decrease costs and increase productivity.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine