Companies should be active during a downturn period - C P Rangachar, Managing Director, Yuken India
There is definitely a slowdown, with the actual production & demand going down to 30 per cent. In fact, there has been a 50 to 70 per cent drop in some sectors. This slowdown is temporary; but how temporary it depends on what action the government takes. As of today, I see the slowdown lasting for 12-18 months; but it could be a lot shorter if the government takes quick and the right action.
Companies should be active during a downturn period – they should look at restructuring the organisation, reorganising the shop floor, developing strategies with the team and training its people – because, ultimately, productivity depends on people; if a company works efficiently with its people, it can definitely lead to enhanced productivity.
During a slowdown, one should anticipate the customer demand, which has to come from the market. At the same time, if R&D has some good ideas, then it is a good time to test it in the market. The downturn period is also a good time to buy assets like, factories, land, machines, equipment, etc. However, a company must be careful that its cash flow remains healthy otherwise it will be bankrupt. Besides, it’s a good time to implement Industry 4.0 and one should work towards focusing on resources for product development and R&D.
During slowdown, the sales community must spend time on spreading technological advantages - B P Poddar, Sr Vice President, Fatty Tuna India (FEMCO)
An economic slowdown can be short-term, if corrective measures are taken in a timely manner. There is certainly a slowdown in the market for the last few months; the GDP growth rate of the economy has fallen to 5 per cent in the first quarter of FY2019-2020, the lowest in over six years. This is an indication of harder times ahead. The supply-demand ratio is also unfavorable; working on the supply side is not going to have a solution unless the demand side gets a boost.
The recent collapse of the automobile sector, the rising number of non-performing assets (NPAs) or sluggish consumer demand are all are contributing to the deceleration of growth rate. Besides, there has been a fall in expenditure, which will fuel the downturn crisis even more; it will have an adverse effect on industrial production and this will directly impact employment. Due to this, the economy will get stagnated and prices will drop down. If the dropped down prices are not enough to cover manufacturing costs, organisations will stop production that will lead to manpower layoff, and in turn, highly impact earnings.
Hence, policy decisions and market demand dynamics will decide whether we will sail through the rough waters. During slowdown, the sales community must spend time on spreading technological advantages and becoming stakeholders in efficient implementation of technologies. Also, by making strategic investments during downturns, companies position themselves well to outpace the competition when the economy improves. One needs to differentiate between core strengths/activities and less important/vital functions and short-term opportunities.
During a slowdown, one must invest time in development, improving overall manufacturing efficiencies and working on manufacturing constraint areas. One should study, analyse and work towards bringing in advanced manufacturing technologies. This will help in adopting technological changes and ever-changing market demands.
Use this opportunity to explore new markets during this recession period - K T Pawar, MD & CEO, Universal Precision Tools Group of Industries
I am of the opinion that there is a temporary slowdown in the market, especially in the engineering and automobile sector. This is because the automobile sector did not cope up with the international level and buyers are hesitant & are postponing their orders. So, the automobile and engineering industries need to level up to the international level in terms of quality & price. The present government has offered some tax concessions and increased the level of depreciation. This will slowly hike the confidence level among buyers and the market may slowly improve.
While the order position of automobile and engineering products is quite slow, this situation has to be utilised as an opportunity to make better the product quality and improve the development of new tooling for faster, quality production & improvement of advanced technology adoption. It is also necessary to use this opportunity to explore new markets during this recession period, as the present slowdown in the market is short-lived and may go further for only three to six months.
The downturn is not permanent; upswing has to follow the downturn - Vivek Nanivadekar, Executive Director, FIBRO India Precision Products
The GDP growth rate has gone down but it certainly is not negative and most certainly not a recession. It is more of a ‘wait & watch’ situation. Practically, the auto sales of all major OEMs have dropped down from 20 to 50 per cent, the reason being EV and BSVI norms. The government has initiated certain measures, like reduction in interest rates, extension of BSIV norms, double depreciation on vehicles for corporates etc. Therefore, the automakers have delayed their development projects, slowed down the production, started offering freebies to the customers. Secondly, the flood situation in most parts of the country has contributed to the slow down. Another reason is the trade war between the USA and China and also the introduction of EV. The one more dimension to this is the shift in the business models. For example, the reduction in private car buying would compensate in taxi business, like Uber, Ola, etc.
In any business, the growth comes from ‘product-market’ matrix. Innovation is the best strategy. Either one can innovate the new application/market for a product or offer the new product for existing application/market. If a business is solely dependent on the auto sector, then one needs to develop new markets, like aerospace, defence, etc. But unfortunately, this cannot be done overnight. One has to look into the future beyond 3-5 years and start
working in that direction from now itself.
Normally, the large companies undertake the maintenance work during such a slow down so that they are ready to face the upswing of the market. This maintenance activity throws an opportunity to the suppliers for supply of spares, components, modification, etc. Another opportunity is completing the development activity which is otherwise sidelined due to heavy production workload. This downturn is the right time to launch new products/ services to receive maximum attention from the target market. This situation also offers a good opportunity to interact with the customer to take his/her feedback on the past supplies and to understand the futuristic needs. Such interactions help one define the strategy for further business growth. This also happens to be a good time to invest in product development, productivity improvement etc.
The approach is very simple – the downturn is not permanent, upswing has to follow the downturn no sooner than later. So, be prepared to encash the upswing. Otherwise, one lags by the phase difference, i.e. when one is ready, the market is not and when the market is ready, one is not ready.
We need to concentrate more on effectiveness than efficiency - T K Ramesh, Managing Director & CEO, Micromatic Machine Tools
Things have definitely changed in the last 4-6 months, but it is not a change in the mindset. In the transportation industry now, there are multiple things happening together. Firstly, a lot of capacity has been built up which wasn’t available in the past. Secondly, with the vast technological changes happening due to the advent of EVs and strict regulatory changes by the government, even though it might be exciting for some, it is equally worrisome for others as they might not have the needed infrastructure, technology, finance, etc to adapt to the changes. The third aspect is about the fact that there has been a societal shift; people have become conscious and concerned, and because of better alternates emerging and productivity improving, the needs and demands are changing. Last but not the least, there has been a reformation in ownership patterns. Other alternates are emerging where you can travel from point A to B with minimal cost which is revenue expenditure rather than investing in capital and worrying about depreciation, maintenance, parking, etc.
We need to start getting comfortable with things where we concentrate more on effectiveness rather than efficiency. In a B2B space, it is essential to understand what the customer wants and what the customer’s customer wants. It is pivotal that we change with time because if we fail to do so, we will cease to exist in the industry. With new opportunities emerging, it is essential to understand them. The product may be only slightly different, but one may need to add a lot of services to up the customer experience. It is not only the product change, but it is also a change in service and customer experience. And, bundling services with the product is where the opportunity lies.