Companies that are looking to outsource manufacturing to Asia have numerous options. China is undisputed the largest economy in Asia and the second largest worldwide. However, many companies may find that partnering with suppliers in India makes the most sense. Since the beginning of the last decade, the government of India has made a concerted effort to shift their nation from a service-oriented economy to a manufacturing base. India has adopted crucial reforms to spur infrastructure investment which many economists say will make the country a major hub of global manufacturing. India also possesses demographic advantages which some analysts predict could lift this nation, historically mired in poverty, to become the third largest economy by 2030.

What are the advantages of manufacturing in India?

Global giants such as GE, Siemens, HTC, Toshiba, and Boeing have chosen to manufacture in India. If you’re wondering why, here is a brief overview of the advantages of taking your manufacturing needs to India:

• Ease of communication — English is a national language of India, so it can be much easier to communicate your needs and negotiate terms there than elsewhere in Asia.
• Business friendly government — Under the Make in India program, the government has instituted many reforms to make it easier for businesses to get up and running. Efforts have been made to simplify and rationalize the regulatory environment. Less red tape means there’s more competition for your business. This leads to better terms and higher quality.
• New and growing infrastructure — The national government and each state in India has committed to building industrial zones with new and rebuilt infrastructure to accommodate industry. This includes sector specific clusters of industrial parks for electronics, automotive and textile manufacturing, as well as other industries.
• Skilled workforce — India has a relatively young and educated workforce. Indian talent includes individuals with strong technical and engineering capabilities, as well as labor capable of performing precision tasks. The government is committed to skill development to encourage workforce mobility and enhance youth employability.
• Low labor costs — The average daily cost of a factory worker in India is less than 20 percent of the daily wage in China, and significantly less than the daily wage in Indonesia, Vietnam, the Philippines and Mexico.
• Abundant materials — Although India imports much of its raw materials from China, it also boasts abundant domestic production of materials ranging from cotton to steel.
• Stability — With more than one billion consumers and a burgeoning middle class, India’s domestic economy is stable, and the government generally has the support of the people.
• Transportation —India is closer to many Western markets than China and other Far Eastern nations, so delivery can be accomplished in less time and often at a lower cost.

All these elements make India a great source for quality products at a low cost.

Industries attracted to Indian manufacture

Which industries are most likely to benefit from Indian manufacture?

Major sectors include:

• Textiles and apparel — With domestic supplies of cotton, wool, silk and synthetics; easy access to China for supplementary materials, and centuries of knowledge, India is a leader in global textile production from fabric to finished garments to home textiles.
• Leather products — India is a leader in the production of leather apparel, shoes and accessories.
• Electronics — India has the world’s third largest pool of scientists and technicians, so research and design capabilities are advanced. The workforce is skilled and cost-effective.
• Kitchenware — Stainless steel is available in abundance at a good price allowing for high-quality utensils, vacuum bottles and other items.

Getting the most out of Indian manufacturing

Although the potential advantages of Indian manufacturing are huge, outsourcing your company’s supply chain thousands of miles away is not the easiest thing to do. All suppliers are not equally reliable, and a few are outright fraudulent. Fortunately, Umac-HMT can point you in the right direction. For decades, we have worked to develop a reliable network of Asian suppliers across numerous industries. We can help you protect your investment and obtain the highest quality products from our fully vetted and diversified supplier base in India.

Businesses thrive on stability and predictability, which simplify long-term planning. But since consumer habits are constantly changing, business owners must be prepared to take advantage of shifts in the market, from trending tastes to technology-driven disruptions. There is no denying the COVID-19 pandemic was a disruptor; businesses and consumers were forced to adapt to restrictions imposed on them. Now, as we begin to emerge from the crisis, there are two questions business owners must ask: How did consumer behavior change during the pandemic? And, which of these changes in consumer behavior are likely to having staying power?

We begin with an unscientific reflection on what we noticed in our own behavior and that of our colleagues:

A long hiatus from dining in restaurants and going to the cinema, live theatre, concert venues, or sporting events.
An increase in shopping online, streaming entertainment, and exercising at home.
Greater scrutiny of the source and hygiene practices behind the products we purchase
Less emphasis on brand loyalty, and more concern over availability and price

Our changing habits seem to track well with the general population, according to happi.com, which recently condensed a McKinsey study of changing consumer behaviors. Not surprisingly, digital shopping was up, especially on essentials such as OTC medicine, groceries, and household supplies. Consumers are trying new products at higher rates, and in many cases the switch is linked to availability and convenience. Premium brands are being hurt as consumers look for greater value. Consumers are becoming much more hygiene conscious, so contactless merchant services are on the rise.

Around 40 percent of U.S. consumers have reduced spending with heavy cutbacks in nonessentials. Americans are spending more time at home on activities they used to do away from home, and more than 70 percent are apprehensive about resuming regular activities outside the home. McKinsey also notes that consumer behaviors vary according to how affluent a person is, that person’s age, and whether they are working, unemployed or retired.

We think we can safely disregard changes based on a tightening of the purse strings. As the economy opens back up, people will have more money to spend and will feel more comfortable spending it. We have observed this ebb and flow through countless business cycles. Premium brands may struggle in the short term, but quality will once again be a major consideration in purchases.

COVID changes have largely benefited companies that market at-home activities, such as the exercise bike Peloton, streaming entertainment, and various online conference services and learning courses. As homeowners continue to cocoon, consumer products that make cocooning more comfortable are bound to do well:

• Home exercise equipment
• Home entertainment systems
• Consumer electronics
• Home furnishings
• Housewares and appliances
• Home security systems
• Health and beauty products

Certain forms of entertainment should rebound. The experience of live music, theatre and sports cannot be replicated in your living room. However, many consumers already have lavish home theatres for an authentic cinema experience without the high prices and hassles of going out. So, goodbye multiplex. Of course, this was a downward trend that existed before COVID and simply accelerated.

We also believe that hygiene will be a concern that lingers. Activist consumers who scrutinize a company’s ethical profile, labor relations, carbon footprint, and other “global citizenship” criteria are likely to make purchasing decisions based on a company’s hygienic practices. Consumers who have health issues or live with vulnerable family members will also keep up their guard.

But, what about products and services that have traditionally relied on brick-and-mortar outlets to get their products into consumer hands? One could argue that once restrictions are lifted, consumers will be eager to go out and about and touch, hold and assess products physically at point of purchase. This would certainly prompt levels of online shopping to ebb slightly. But the long-term trend is towards acceleration of online shopping, due more to demographics than COVID. Currently, about 32 percent of the world’s population is Generation Z. These young people were raised on the Internet and many have not yet entered the workforce, so their full impact is yet to be felt. It would be wise for businesses of all stripes to recognize that “demography is destiny,” and increase their direct-to-consumer efforts.

The coming Direct to Consumer (DTC) revolution will initially favor established conglomerates such as Kraft Heinz and PepsiCo that already have name recognition, consumer loyalty and immense resources. But many consumers value innovation and novelty, and everyone loves an underdog story. DTC can level the playing field for entrepreneurial companies who have been locked out of the large retail chains and big box stores. Thus, the post-COVID market is likely to be more dynamic, as consumers, freed from force of habit, begin to explore new possibilities.

The advantages of contract manufacturing, commonly known as outsourcing, are many and substantial. A company reduces overhead when it does not have to build and maintain its own facilities or train and employ its own workforce. The company can move production to a country where raw materials and labor are cheaper, and where competition for the contract within that country helps to reduce costs even further. However, there are challenges to contract manufacturing which, if not managed properly, can defeat the purpose entirely. Therefore, before committing to an outsourcing plan, you should understand the risks and develop strategies for mitigating those risks.

Below are the leading issues for outsourcing along with the solutions that Umac-HMT offers:

• Supply chain — As we are currently witnessing with the COVID-19 outbreak, outside factors can disrupt business operations and interrupt supply chains. While a pandemic is unpredictable and rare, you can and should plan for annual work slowdowns and stoppages for cultural events. It’s also important to be aware of any political or labor unrest that could erupt in the country you’ve selected. Finally, you should assess whether the raw materials are going to be available, whether the country has the infrastructure to get materials from point A to point B, and if a facility has the capacity to complete your order. Having a backup plan in the event of an interruption is essential.
• Quality control — Everyone wants to save on the cost of production, but not at the expense of quality. Quality materials, trained and capable labor, and efficient production processes are necessary for creating a finished product you are proud to market. Choosing a facility with effective controls at all stages of production is vital. Quality control is especially critical when you are introducing a new product.
• Distance from production process — When you are an ocean or a continent away from the locus of production, you lack moment to moment knowledge of what is happening on site. You may only have a general understanding of production techniques. It’s imperative that you can trust the managers who are overseeing production.
• Risks to intellectual property — Whenever you outsource manufacture, you have to hand over your product specifications to someone outside your company. This creates a security problem that can lead to counterfeiting in violation of your intellectual property rights. Two strategies are imperative. First, you have to understand that a patent in your home country won’t help you, since all patents are regional. Therefore, you must patent your product within the region it will be manufactured. Secondly, if your invention requires discrete components, you might consider outsourcing production to separate facilities, so that neither will possess the full specifications. Additionally, you must secure appropriate legal agreements concerning the use of your IP. Naturally, you can feel more confident in such agreements if you or someone you trust has a long-standing relationship with the supplier.
• Communication — Communication across great distances is a challenge under the best of circumstances. But when there are differences in languages and customs, articulating your needs, arriving at an understanding, and ensuring openness throughout the process are exponentially harder. Poor communication can result in deviations from your expectations, delays, and substandard quality. Anyone doing business with a foreign manufacture must have a plan in place to bridge the barrier of language and customs.
• Increased liability — When the quality of a product drops, consumers can be put at risk. Each year, tens of thousands of consumers are injured or killed by defective products, including adulterated drugs, exploding batteries, lead-tainted toys, collapsing furniture and flammable clothing, to name just a few. When a defective product harms a consumer, strict liability attaches to the company that placed the product on the market. You can go after the manufacturer, but if you didn’t address the issue of liability appropriately in your contract, you’re going to have a very difficult time, especially as a plaintiff suing in a foreign country. And, even if you prevail against the manufacturer, your company’s reputation could be irreparably tarnished.

Umac-HMT helps companies avoid pitfalls by providing detailed guidance and reliable processes, and by connecting them to vetted, reliable suppliers with a reputation for quality work. Our in-country product managers ensure quality control through every step of the process. Umac-HMT takes the worry out of overseas manufacture, so your company can prosper and grow.