India's competitive edge

India is known in the world till the recent times as the most competitive country for outsourcing due to currency and labour arbitrage.

But how long can we sustain this advantage is the key question that I have today.

Today India is fired by the passion of Entrepreneurship, which is a good sign of the growth for the society as more and more jobs are created and people become employed sooner. Lets see below the scenario one such entrepreneur faces.

I had a visitor today whose cousin is having a manufacturing ancillary unit for automobiles and this person was sharing the how his cousin's entrepreneurial venture is going.

This young man has lot of orders and he has his customers - all leading brands - picking his company for specialized services that they require. Oh! what a enviable position - was the first thought I had. I wish I could be in his shoes - here I run or rather fly ( already crossed 100,000 miles with Lufthansa since this year beginning) burning up a lot of air travel time, money, physical strength and run behind my clients for just a small order....... But look at this company being pursued by the clients.

Immediately, my visitor said STOP. STOP.. Dont start your envying act. Just wait to hear the true situation. So saying he continued .....

To meet up the extra demand, this entrepreneur went in for 2 more expensive set of machinery. and the eager question from me was - That's great So capacity expansion in answer to demand - What a way to Go!!!

Once again, my visitor cried STOP....

The machines are lying idle gather dust!!!!!

What ???????? I asked. He answered

My cousin dreads to go to his plant on Monday morning as all the customers procurement managers will be waiting there for me and there will be lot of calls from the Production manager because I cannot deliver on time.

Why??? When you have extra capacity - was the next question. He answered......

Because of 2 things ..........

1. Power Problem - I interpreted he can always go in for Generator ... Ha..Ha... came the reply. Doesnt he know this. My cousin cannot run these machines with generator because the output that comes out from the generator does not sit well with the imported machinery and the precision is lost in the final product.

Then he can go for another shift .. This was me... with all my eagerness. My visitor replied... Sarada - he is already paying a penalty for drawing excess power and so the question of another shift is ruled out.

I didnt have any answers.

My visitor continued........ Sarada you haven't asked what is the other problem. Now I know better than to preempt and kept my quiet allowing him to continue. He said

The second important constraint is the Labour problem. My cousin is not sure whether the people who operate the machines will come on Monday and it is becoming difficult to get new people.

Now I can nod very wisely, because we are all facing the same problem. Only thing is we are working with different collar - white or blue - today the demand is more than supply and that is where the problem arises.

From this year beginning, I am fighting for my survival, because of attrition and mind you I am not alone in this. It is with regret that I have to say that I have lost few projects because of No shows & attrition. In fact, during the downturn, we made a policy decision not to let go any body for the sake of downsizing, but see now how these people are hurting us when we need them most. The whole media was making a hue and cry of the downsizing effect that had affected so many people - how they were treated, etc. But the same media is silent about the pains of the companies when people switch jobs putting the companies into jeopardy.

This is where our labour arbitrage goes down as we need to incur cost to fight attrition, which makes our cost go up. In fact, the eastern countries are growing faster than India, because they have no overheads in terms of attrition control, accent training, transportation cost, etc. There are lot of opportunities that have gone their way away from our country, because they are able to give the services at half our cost. It definitely hurts.

So how do we overcome these 2 problems which are beyond our circle of influence is what the thinking that I was left with when my visitor finally left.

Anybody have any answers?