Ellora Time's Manufacturing Woes

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Themes: Production management/ manufacturing
Period : 1991 - 2002
Organization : Ellora Time Pvt. Ltd. (Ellora)
Pub Date : 2002
Countries : India
Industry : Manufacturing

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Case Code : OPER013
Case Length : 10 Pages
Price: Rs. 300;

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Why China?

Ellora and the Patels were not the only ones to succumb to the pressure from Chinese imports. Many manufacturing units in India had to close shop because they could not withstand competition from the extremely cheap Chinese imports. A leading manufacturer of fans, Ortem, closed its manufacturing unit in Delhi after it decided to rely on imports. Many other companies including consumer electronics major BPL had to either cut back production or sell at prices below the cost of production. Another company manufacturing fans, T-Series closed its plant in Noida, Uttar Pradesh after it realized that it could not compete with Chinese imports. Bajaj Electricals also began to import fans and toasters from China instead of manufacturing them.

A major player in the battery business, Eveready, was forced to close its subsidiary, Eveready Energiser Miniature Ltd., which manufactured miniature batteries. This was because similar batteries from China were being sold for just Rs 2 as compared to Eveready's product, which retailed at Rs 7. Leading tire manufacturers Ceat and JK Tyres were forced to offer bigger discounts to their dealers, as Chinese tires were around 25% cheaper than Indian radials.

Besides these, chemicals, textiles including synthetics and silk, ready-made garments, steel and rubber products were the other industries, whose business was affected by imports from China. Explaining the benefits of manufacturing in China, Patel said that the Chinese policy framework encouraged export promotion. It had subsidies for export production, cheaper power and labor costs, a highly regimented labor pool, fewer public holidays and low costs of finance, which are some of the major positive features of the Chinese economy. The tax structure and infrastructural facilities are much better and manufacturer-friendly in China than India.

China has a large number of production units manufacturing raw material, spare parts and components. Hence there is no need for importing these things unlike in India, where most companies either import or start a small unit to ensure regular supply of raw material and components. This puts pressure on the company's manufacturing efficiencies as well as finances. Many factories in China operate on a 'zero-inventory' basis which means the raw material arrives in the morning and the finished product leaves the factory in the evening. This was reportedly almost impossible to duplicate in India, with a typical factory owner having to stock almost three months of inventory.

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