As I started on this article, I was reminded of the “Kitna deti hai” (How much mileage?) advertisements of a leading car maker. In one advert, a Russian is seen offering the best tank and the only question the Indian has is “how much”. In another ad, a billionaire is seen shopping for a luxury yacht and the only question he is asked is the same. That sums up the Indian thought process. Not efficiency or horse-power or design or Quality, but Cost!Our government, as a buyer of projects and products, has always encouraged cost as THE parameter. This is famously known as L1 (Lowest cost).
This mentality has trickled down and across all business systems leading to Cost as the only strat-egy tool across all domains of businesses and even the Indian way of Life.
The Plastic industry is not an exception, rather a shining example of cost centric production and exports. Starting as an outsider in the industry 14 years ago, I was surprised to see the cut-throat competition down to a quarter of a Rupee!
Pranay Kumar , National Youth Executive Committee
Impact and Consequence of our Cost Centric Attitude
This goes without saying , but I will underline it. Quality has become our last priority. If we are given an Innovative solution or extremely efficient machine, the first question that comes nationally and naturally is “What is the cost? “. We have stopped being amazed by cre-ativity, innovation and efficiency. If for a minute, the Quality question comes to mind, we dis-miss the thought as soon as it gets into our grey cells.
As a biodegradable plastics pioneer, we have often faced a lot of questions on how any polymers biodegrade? Each time, we patiently explained that Nature has been biodegrading polymers in our body, vegetables, paper etc and across species for billions of years.
The Only hurdle we face with biodegradable polymers is the higher cost. As we dug deeper into the subject for years, the answer was very simple and highly obvious to any business enterprise.
Most such cost centric approach is to “increase shareholders value “. But then we would often ponder. What about the rest of the stakeholders? Did each of them garner any value or are we merely surviving? This brings me to the next biggest impact of a cost centric approach on Indian lives. Innovation.
Travelling across India, I was amazed to see innovations and innovative approach applied to daily life in India. I mean Innovation, and not Jugaad. And yes, I am proud and guilty of chest thumping for my fellow Indians.
We are the most talented country in the world. So why dismiss it so easily from our lives?
As most people in business, industries and production know Innovation is foundational. However, it cannot be produced at scale which makes it costly and unsuited to our low cost business model. The end result is that the innovative ideas wither away and are lost to the industry and India.
An example is India’s Pharma Industry. In 2013 drugs price control mechanism was brought in to control the prices of around 850 drugs. The unintended consequences have been
- Many companies going out of business due to low margin,
- Spurious drugs being sold in the market. United States Trade Representative claims that 20% of drugs available in India are fake*.
- And ultimately companies not having enough to invest in R&D, which is the main stay of pharma industry**.
Undoubtedly, there is a trade-off between price and quality and the ultimate victims are the citizens of India for whom the drug control policy was brought in to begin with.
In many cases, due to low profit margins, companies have either shut down, moved out of the industry or moved down to lower quality mass consumption products, which is already flooded with “me too” products.
The latest example is the non-availability of Spray pump system that was required for sanitisers when the Covid pandemic hit us. If the plastic industry cannot fulfil the requirement of a simple system like that, how can we be self-reliant in case of higher value products?
Increased Imports, Decreasing Exports:
We could churn out all the numbers we want but all data will support the fact that India’s share in exports vis a vis the size of its economy is al-most negligible. Even in products where India used to be the leader.
As stated above, spray pumps were mostly imported from China. 80 to 90% of APIs in pharma industry in India are imported from China. This is the reverse of what we want and need for India.
Non-existent Manufacturing diversity, competition and increasing unemployment:
The worst effect of Covid and which became acutely highlighted was how far away we are from actually being self-reliant even in the essential products segment. When the pandemic hit our shores, we are seen importing or creating “jugaad” for 3 layered masks, spray pumps, ventilators, Isopropyl alcohol, hospitals beds, etc. and which we strangely are very proud of! Building ventilators after stopping production of other items in the face of emergency can be a great spirit, but it reflects very poorly on our policies and planning.
Paradoxically we tend to have the most competitive, best quality rocket engines, like GSLVs and PSLVs, even in the face of bans. But is it a paradox? It is not. Because ISRO and the Indian government have invested heavily in people and innovations in the field, we have been able to export engines, send satellites of other countries and constantly increase the efficiency of the system.
A. Much more than product:
If Indians think that quality only lies in product attributes, they are mistaken. According to Harvard Business Review#, the perception of Quality lies in communication by sales people, performance in comparison to better or best products, service policies and service effectiveness, support programs, handling of complaints, response time, etc., as major factors.
Compare these to normal business practices in plastic industry that buyers or sellers often experience
- Curt responses or flat negative responses after sales
- Non-payment of dues, avoiding calls
- Compromise on quality due to increased pressure or insecurity due to stiff competition to quote lower price
- Delay in shipments
- No desire to hold a customer for long term (Short Sightedness).
B. Build quality into our products, systems and processes, rather than investing all our skills on cutting costs. As a company we can cut cost either by compromising on the quality or pressurizing the upstream supply chain to cut costs or build credits for long periods of time. If the upstream company is an Indian company then India any way loses. Building quality on the other hand will create value and bring in higher profits to the company (the mathematical and default approach to pricing by adding profits to Cost can be replaced by Value minus Price, leading to higher desirable profits. (More about this later).
L1 , Lowest Cost Policy:
If we can petition the Government for this trade barrier or that tax, why not reason with the government to emphasize on Quality, Innovation and Innovative methods rather than turnover, previous experience? What is stopping us, in a democracy, to discuss such topics, even if the very large corporates do not want to? After all Turnover only happens when products are sold first.
TATAs and Reliance also started small before they were big. Isn’t it that the “previous experience” restricts new and better or even revolutionary products? If ISRO can innovate world class GSLV without the previous experience of Liquid Oxygen then why can’t each and every industry? Though we can discuss and pontificate on Quality endlessly, why not start from the beginning and with small steps like Government is thinking on implementing Niti Aayog’s suggestions+ on working on different methods of procurement, where Quality is not compromised. When we see a call from a client, say from USA or Middle East or India after sales, we answer the call without delay and resolve their issues on priority. So why not adopt the same approach to every aspect of our business, whether domestic or international? I have seen that many successful entrepreneurs owe their success to communicating clearly and on time. Quality should be an attitude.
Reaching out to Importers directly using Export Councils like Plexconcil:
If one is reasonably confident of the product quality and commitment to time and communication, we should take the support of Export Promotion Councils (Plexconcil for Plastics) to communicate and negotiate with foreign buyers, understand their requirements, checking the payment terms (include banks) and then start exporting. Why struggle in a crowded market and bleed on margins when we have the whole world waiting!
If people can wait for hours in line to buy expensive Apple phones why are we thinking that there are no buyers of quality?
One may have heard this many a times, but our biggest stakeholders are our environment, employees, family and friends, the industry, organisation and then customers. Treat each of them with respect, include them in business plans and strategies and communicate with them. One may thus find new paths to sustainability and profits!
To conclude, Quality is the only way forward for India if we are to increase exports and uplift our domestic manufacturing. Quality is a wide encompassing frame including environment and people directly and indirectly involved in one’s business. Cost can affect you positively or negatively in short term, but Quality and Value will take India to a Higher Geosynchronous orbit from lower orbit of manufacturing that we are stuck in now.