CII organizes engineering summit 2010 for future landscaping of engineering sector

Indian Engineering Sector: Key Issues Faced by the Sector,The Indian engineering sector is worth around Rs. 1,165.0 billion in terms of market value and it has been growing at a steady pace over the last one decade. The sector forms an important part of economy and intricately linked with several other core sectors for its demand. Indian engineering sector has long been dominated by heavy engineering market which contributes over 80% of the net engineering output in the country and is highly structured and technology driven.

An important feature of the sector in India has been its ability to spring off a whole sector of small and medium enterprises that are important part of the value chain due to their contribution to cost and employment generation factor. Though the value contribution between heavy and light engineering sector in India still remains staggeringly in favour of the earlier, light engineering sector is picking up rapidly signifying the entry level growth opportunities in the sector. Despite of the global financial challenges, Indian engineering sector has posted encouraging results. Though at some levels constraints do persists, companies engaged in engineering sector in India by and large have been able to leave behind the trails of slack order book and looking for aggressive growth. The growth momentum is expected to continue for the next few years primarily on account of government’s increased thrust on infrastructure development. The continuing growth of the user end manufacturing sector and the favorable regulatory policies would further strengthen the fundamentals of the sector.

However, the larger question that lies for Indian engineering sector is how do we take the next lead?
In terms of pure engineering talent and design innovation, Indian engineering sector is second to none. However, what we lack is a wider understanding of anticipating disruptive technologies and its management that writes new realm of business. What also mars the competitiveness of the sector is a continued quest for pursuing excellence in terms of execution. Abounding global opportunities in engineering sector has also put pressure on the talent pool of Indian professionals and workmen in terms of continuous skill upgradation. Among other things, challenges of technology management, quest for engineering excellence and talent management constitute important growth barriers that can pose serious challenge to the Indian engineering sector for moving to the next level of excellence.

Key Learning & Way Forward
With global recession setting in the developed world, Indian economy was also bound to witness the impact. However the engineering sector is now showing signs of recovery, reflected in IIP number which touched a 22-month high of 10.4 percent in August 2009. During the economic slowdown in western economies, engineering companies with diversified operations (in terms of businesses and geographies) showed higher level of resilience towards the downturn. Thought end user industries are still caution and slow in capex plans, engineering sector’s future outlook is promising, largely driven by industrial capital expenditure and investment in infrastructure, especially power and transport infrastructure.

The following SWOT analysis gives a glimpse of the sector’s emergence strength:
Strength

• Domestic demand to drive the Industry.
  
• Large planned infrastructure investment in India (approx. USD 500 billion)
  
• Capex plan for end user sectors like automobile, steel etc.
  
• Government keen on private participation in in frastructure
  
• Strong R&D capability
  
• Well established supplier base with adequate capabilities
  
• Large number of domestic and global players
  
• Low cost skilled labor Weakness
  
• Bureaucratic structure
  
• Long gestation periods of projects
  
• Shortage of domestic expertise for undertaking major projects
  
• Limited use of modern technology
  
• Inflexible labour laws
  
• Opportunity
  
• High demand growth across segments both in domestic and export markets
  
• Technology collaboration with leading global play ers willing to enter India but do not have suffi cient understanding of the Indian
• market
  
• Opportunities for Greenfield projects span across industries
  
• Large planned infrastructure investment to boost the sector - largely driven by strong demand from the transportation, power,
• urban infrastructure and irrigation segments
  
• Huge outsourcing opportunities in engineering services
  
• Threat
  
• Exposure to global markets
  
• Fluctuating raw material prices
  
• Recession leading to delay/ cancellation of proj ects
  
• End user industries still caution and slow in ca pex plans
  
• Aggressive spending going slow in engineering industry as a whole
  
• Industry is characterized by rapid change in cus tomer requirements and changing technology

In order to take forward the discussion on understanding the resilience and the way forward for the engineering sector in the country, CII and KPMG are working on a white paper to understand the key learning of the sector from the last one and half years and how the major engineering players in the country are working towards leveraging upon the key learning for devising the way forward.

A nation wide survey with major engineering companies in India by CII and KPMG has revealed the following areas as the key learning points:
Diversification: Companies with diversified operations (in terms of businesses and geographies) showed higher level of resilience towards the downturn
Human Capital: Focus on pruning wasteful expenses, hiring, increments and bonuses, rather than layoffs prevalent in western countries

• Flexibility in business models
  
• Shift from product focus to solution focus
  
• Focus on R&D
  
• Working capital management
  
• Raw material and foreign exchange volatility management
  
• Cost optimization

Based upon these key business experiences in engineering sector, industries feel that with strong fundamentals, Indian companies are better placed to turnaround their business models for sustained growth where cost leadership will play a significant role for expanding the global foot print. Focus upon process improvement, leaner organizational structure and developing an innovation ecosystem are also looked upon as the most critical business strategy as the way forward. In nutshell, the study has highlighted the fact that an engineering company will have to create a self driven eco-system that puts premium upon

• Effective innovation and technology manage ment for ensuring edge in sustaining competitive ness
  
• Focus on pursuing process and cost excellence for increased organic growth.
  
• Synergizing talent management with the busi ness model of the organization.

Engineering Summit 2010: The Way Forward
While on one hand the growth opportunities for the engineering sector in India has been established beyond any doubt, now the attention has shifted to ensuring installing the mechanisms for sustaining the growth over a period of time. Engineering summit 2010 schedule at Vadodara on 18 February 2010 is set in the backdrop of undertaking the industry wide deliberation on firming up the strategies for tackling the core challenges to the engineering industry in India in terms of technology, process and talent management. The summit being organized by Confederation of Indian Industry (CII) is chaired by Mr. Kunjal Patel, Convenor, CII Gujarat Manufacturing & Innovation Panel and Vice Chairman, Voltamp Transformers Ltd. The one day summit is supported by Engineering Review as the Official Publication Partner, KPMG and Bloomberg UTV as the Knowledge and Media Partners respectively. The summit will have two key plenaries: Contemporary Technology Management Practices in Engineering Sector and Talent Management in engineering sector. ‘While the first plenary will focus upon various aspects of technology management that the engineering sector has to look upon for retaining their competitiveness and creating their own unique selling propositions; the second session will deliberate way forward in terms of managing the people in engineering industry for taking the sector to the next level of excellence’ said Mr. Kunjal Patel, Chairman- Engineering Summit 2010 and Vice Chairman, Voltamp Transformers Ltd. ‘Gujarat being a leader in engineering sector has to set the agenda for the rest of the country as the issues faced by the industry in the state is very much representative of the larger challenges faced by the sector else where’ added Mr. Patel. The summit will also have a CEO’s interactive round table on engineering excellence. ‘Technology and its process of application are changing every day and they are demanding excellence in every step. There is a systematic and scientific way of understanding, learning and the practicing business excellence in an engineering organization. Various techniques and tools are required to be applied in the business process and its supply chain management. Engineering SMEs must get opportunity to have that facility on a regular basis to inch towards engineering excellence. It is not a process which can be completed overnight. It is a long draw process and it requires significant attention from both the learner as well as trainers side to bring in the change in the industrial sector and the CEO interactive session will strive towards identifying the ingredients that will go into setting up an engineering excellence system in the company’ said Mr. Kunjal Patel.

The importance of the summit can be gauged from the fact that all the major engineering companies based at Gujarat like ABB Ltd., Bombardier Transportation India Ltd, L&T Power, Siemens etc. have endorsed the broad agenda of the summit and are gearing up to contribute thematically and underline the major challenges to the sector along with their possible remedies. ‘Seasoned engineering professionals like Mr. Biplab Majumder, Managing Director & County Manager, ABB Ltd, Rajeev Jyoti, President and Managing Director, Chief Country Representative, India, Bombardier Transportation India Ltd, Carstene-S Berendsen, Vice President, Seimens Ltd., Gajendra Chandel, President - Human Resources, TATA AutoComp Systems Ltd. Will address various issues during the summit and the whole idea is to work out the a broad consensus for the sector in terms of addressing the critical issues of technology, process excellence and talent management’ sums up Mr. Patel. The one day summit scheduled on 18 February 2010 at Hotel Gateway, Vadodara will see the participation of over hundred delegates- CEO & Business Owners, Unit heads and technology managers and professionals working in engineering industry participate in the deliberation. Summit details and the registration can be found out on www.engineeringsummit.in.

Chairman Speaks (Can be put as a box item along with his photograph)
The summit is set in the backdrop of evolving characteristics of Indian engineering sector. While the sector is looking at wider opportunities, it is also important to identify the key enablers that can empower the sector to become globally competitive and at the same time also deliver domestically. This calls for a holistic look at the sector, the value chains that drive the sector, the constraints and imperfections that pose potential challenges and most importantly the future leverage points that can propel the sector. It is important to formulate a vision for Indian engineering sector for the coming few decades, so that processes of technology, opportunity and talent management get synchronized with the overall growth trajectory of the sector. The summit would aim at bringing out an outline of future of the Indian engineering industry which is world class in terms of output and cost and at the same time has the option of scalability.