Rome was not built in a day.
Building great things, like suppliers capable of delivering precision manufactured industrial equipment at scale, is not a short process either. It takes time, transfer of technology, and capital infusion to scale up a supplier and their facilities. India has a large geography, growing infrastructure and capabilities, a supportive government, and a tremendous volume of human resources that makes it a potential manufacturing hotbed. But there are many tall challenges as well. To become an able successor to China, much work is needed to build India’s still nascent supplier capability.
Before we dive into the supplier capabilities in India and how we develop them, let’s take a look at the current scenario in terms of manufacturing and precision fabricated parts.
India is projected to be one of the fastest-growing economies in the world which is in line with India’s ambitions of becoming a $5 trillion economy in the next few years. While the Covid pandemic slowed down India’s growth story, just like the rest of the world, it did cause businesses to create new opportunities for India to become a global manufacturing hub.
According to Global Ratings Agency Fitch, the Indian GDP growth rate remains robust at 6.9% in FY24, one of the world’s fastest-growing economies, with China forecasted to grow at 4.8%.
Not just that, over the last decade or so, India has emerged as an entrepreneurial hub; technology, e-commerce, and financial services have accounted for the bulk of the money flow.
Supply chains around the world are undergoing major transformation due to the geopolitical realities of our times, and the rapid adoption of e-commerce presents a unique opportunity for India to become a leading manufacturing and supply chain hub.
The Covid-19 pandemic caused several bottlenecks in global supply chains, leading to logistical delays, export restrictions accentuated by trade conflicts, and the Ukraine war, prompting a new wave of manufacturing localization, reshoring, and diversification of supply routes.
While China continues to be important to global value chains, OECD countries are gradually shifting their focus to countries like India, which is ahead of China in terms of attracting new foreign direct investment (FDI). In 2019, India was the largest recipient of FDI flows in South Asia, after China.
Manufacturing Landscape: China vs India
- China’s Strengths
Each province in China specializes in manufacturing certain commodities. For example, Chongqing focuses on automotive parts, while Ningbo is known for die-casting. This specialization means the entire ecosystem becomes concentrated in these areas, saving both time and money. If a task can be completed in 60 days elsewhere, it can be done in 25-30 days in these provinces. The government provides significant support with loans, eliminating the need to rely on external parties. With everything in-house, processes are quicker, making it more cost-effective.
Moreover, most Chinese factories maintain 40% spare capacity and will start investing once it reaches 60% or more. This is not a common practice in India. The readiness of machines for immediate trials also contributes to faster production times.
But due to geopolitical tensions, over-reliance, and tariffs, companies across the world are looking to reduce their dependence on China and find alternative sources for manufactured parts.
Enter India, Vietnam, Mexico, and some other countries, which are at the right spot at the right time to take advantage of this shift.
- India’s Opportunity
India excels in fields that require high levels of engineering and medium-level sophistication. In contrast, Chinese manufacturers excel in delivering high volumes of standard parts.
Zetwerk helps you find the right suppliers at the right price. In India, apart from working with established suppliers, we put considerable effort into helping our tier 2 and 3 suppliers and getting them up to global standards through expertise and investments. We have strategically helped them create world-class facilities out of modest beginnings.
However, finding these tier 2 and 3 suppliers is a challenge. We can reliably do this only because our team has hands-on local experience and knowledge about different processes. We leverage our contacts in this process and target suppliers who are looking to move away from the automotive sector due to wafer-thin margins. We have supported many suppliers to successfully transition from being exclusively auto-parts focused, to manufactured goods further up the value chain with higher margins.
Specialized industrial clusters also exist in India. Belgaum and Coimbatore are good for castings, while Rajkot provides larger castings. Ludhiana has forging suppliers, and Jamshedpur has copper fittings and copper-based suppliers. However, these zones are not very concentrated. India currently has an inventory of approximately 22 mn Sq Ft of ready-built industrial space ready to be occupied in 6 to 8 weeks (including a rent-free fit-out period) in all major manufacturing clusters. Institutional industrial built space by developers spread across the country is well poised to cater to manufacturing needs apart from a host of other regional players.
We can ship from different locations to cater to our diverse customers. We have hundreds of customers, necessitating multiple RFQs to different suppliers. If we don’t end up working with a particular supplier after multiple quotes, they might be displeased. So, we ask them to consider us as an extended sales team. Many suppliers, primarily serving the automotive industry, have never worked with people like us before.
Our biggest business advantage is our robust supply chain, which is significantly stronger than our competitors. This strength is built on the relationships we have fostered over time. Suppliers cannot bypass us without losing out considerably. Even when customers attempt to do so, suppliers direct them back to Zetwerk.
Improving supplier capabilities + Expanding supplier base ⇒ The Zetwerk Way
- Improvement
The Indian manufacturing industry, no longer in the shadows, is now undergoing an unprecedented transformation. It is poised to seize a substantial portion of global manufacturing demand. Amid a world riddled with geopolitical unrest and in active pursuit of alternatives, India’s burgeoning prowess in manufacturing emerges as an undeniable opportunity for global enterprises aiming to diversify their supply chains.
India’s Engineering Exports growing continuously since FY’16
Supply chain partners’ success is an essential element in the survival and growth of any business. Therefore, it is important to ensure that the suppliers understand the expectations and supply the materials to the manufacturers in the right quantity at the right time and with the requisite quality.
The purpose of improving suppliers’ capabilities is to develop and improve suppliers’ capabilities so that large manufacturers realize their business goals.
And Zetwerk is right here to make that happen in 4 simple stages.
- Expansion
In India, the search for good suppliers is a continuous process, as is in Vietnam, particularly for precision parts.
We’re also exploring South Korea for extrusions, Taiwan for molds, and Mexico as well. The challenge lies in India’s comparatively lower prices, which necessitates hard negotiations. However, we are looking forward to successful deals.
Taiwan is renowned for its precision tools, professionalism, and strong work ethic, which positions it as a high-quality supplier base. We are currently exploring the market there.
Having more suppliers broadens our capabilities and delivery capacities. As we onboard new customers with varied needs, our requirements vary with time. So, our search for suppliers & pricing negotiations has to be a continuous process.
To get you the best materials in a time and cost-optimized manner, we take great care in choosing our suppliers. We invest not just time, but capital too, to jointly scale a supplier to be able to handle big orders. Sometimes, our requirements may include additional services like painting and plating. We have a variety of suppliers, some owned by us, some contracted with ironclad agreements, to ensure that our customers are always satisfied with our services.
Companies simply don’t need to invest in manpower anymore if they’re expanding to a China+1 strategy, as we have numerous suppliers across the globe, in China, India, Vietnam, the USA, and Mexico. Suppliers frequently pitch to us, and we onboard them based on a few key parameters. We have an audit checklist featuring:
- Production capabilities and scale
- Production process orientation – checks and validation
- Financial due diligence (working capital, past orders, bank guarantee, etc.)
- Turnaround time for previous orders
Initial checks are conducted, followed by final checks to decide whether we want to onboard the supplier.
Expected outcomes
Zetwerk’s process-oriented approach is the cornerstone of our superior supplier management and Just-in-Time capabilities. We don’t just give promises, we deliver the product too, on time and in full quantity.
About Zetwerk
Zetwerk works with original equipment manufacturers in North America and worldwide, fulfilling their manufacturing requirements for customized components and assemblies. We act as a second brain to the OEMs. Our team of experts not just executes the customer’s manufacturing strategy, but adds tangible value at every step of the process, right from vetting designs to finding and managing the suppliers to quality control and logistics. Our customers regard us highly for our transparent and hands-on approach to manufacturing.
Zetwerk executes these projects through its network of partner suppliers spread across the USA, India, China, Vietnam, and Mexico. These world-class facilities provide practically unlimited production processes, capacities, materials, part sizes, and weights as well as secondary operations, surface finishing, assembly, and related services. Importantly, we have our teams established in all these countries with a particularly large presence in the US.
Zetwerk recently acquired Unimacts, a US-based manufacturing services company, providing further impetus to our commitment to serve North America as a primary market. We have more than 2,000 customers across North America, Asia-Pacific and the Middle East, and a network of more than 10,000 manufacturing partners worldwide. Founded in 2018, we are backed by some of the world’s leading venture capital firms including Sequoia, Kae Capital, Accel Partners, Lightspeed, and GreenOaks. As of 2023, Zetwerk was valued at US$ 2.8 Bn.
Our manufacturing facilities employ the latest techniques and maintain all relevant certifications to ensure the highest quality control for our customers as well as compliance with all regulatory requirements, and legal practices. You can view our certifications here.
To know more about how we function, check this.
If you are looking for a global sourcing partner, look no further.
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