The Hindu : Business : IT, auto sectors get global recognition

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Saturday, Feb 09, 2008
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IT, auto sectors get global recognition

Special Correspondent

Indian economy shows ability to adapt and remain competitive, says Kamal Nath

Companies in the West cut jobs and relocate
Source materials from low-cost economies

— PHOTO AP

EMERGING HUB: Union Commerce Minister Kamal Nath addressing the India Sourcing Summit 2008 in Bangalore on Friday.

BANGALORE: Business executives from major industries representing Indian as well as foreign companies gathered at the two-day India Sourcing Summit 2008 in Bangalore to discuss issues in sourcing and supply chain management in India. The theme of the summit is ‘India as an emerging hub for global sourcing’. The international event has been organised by the Indian Institute of Management Bangalore and the Supply Management Institute (SMI), in association with the Indian Institute of Materials Management and the European Aerospace Defence and Space Company (EADS).

Indian capability

In his address, the Union Minister for Trade and Commerce, Kamal Nath, said, “India is no longer an introvert on the global stage.” Different sectors of the Indian economy, notably the automobile and IT industries, he said, had shown the ability to adapt and remain competitive and be part of the global supply chain. He pointed out that by choosing India as the base for the “world’s small car”, international automobile companies had recognised Indian capability.

In his keynote address, Prof. B. Mahadevan, EADS-SMI Endowed Chair for Sourcing and Supply Management at IIMB, said companies in the industrialised countries, across sectors, were increasingly sourcing materials, components and services from low-cost economies in Asia, Eastern Europe and Latin America in order to cut costs. He pointed out that there had been no conclusive evidence yet to show that one country or region was decisively more competitive than another country or region.

‘Strategic importance’

He observed that global sourcing had acquired “strategic importance” as companies in the West slash jobs and relocate to developing countries.

For instance, the aerospace industry in Southern California has, since 1989, cut four lakh jobs and relocated them elsewhere. Meanwhile, as developed country markets get saturated, there is an increasing tendency to ‘Look East’. “It is inevitable that traditional channels will disappear as the supply chain is restructured in the years ahead,” said Prof. Mahadevan.

Mr. Ravi Bhamidipati, Executive Director, PricewaterhouseCoopers, said global captains of industry realise that global sourcing is “omnipresent”, was growing both in depth and breadth and had “potent potential for the future.”

He said that their expectations were evolving as they shifted their gaze from mere cost arbitrage to increasing value. Foreign companies investing in developing markets, he said, were not merely considering developing country bases as a source for components or services; they wanted to participate in these markets.

However, he warned that global sourcing need not always be successful because of the many risks associated with the practice.

James, B. Rice Jr., Deputy Director, Centre for Transportation and Logistics at the Massachusetts Institute of Technology, spoke about the need to build contingency plans to safeguard against risks of disruptions along the supply chain. “Supply chains,” he said, “are linked in a complex way, and are therefore also vulnerable.”

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