Category — Sourcing

German car major Volkswagen AG aims to triple its annual component sourcing out of India to over €300 million euros over the next 3-5 years. The carmaker looks to double the number of component suppliers to over 200 to expand its range of spare parts made for global markets. Mahesh Kodumudi, executive director for components purchasing for Volkswagen group India, told Economic Times newspaper in India : “We are still seeing India as a very competitive sourcing base – there’s a cost advantage of at least 10-15% over Western Europe.

Volkswagen plans to invest close to €250 million over the next few years on tooling and vendor development  in addition to a similar amount already deployed in India.

The German company today sources power train components, engine and transmission parts, metallic parts, sheet metal and a lot of small plastic parts. The company will be sourcing close to 50 million euros of plastic parts annually.  This is part of an overall plan to source close to €1 billion worth components from India, both for domestic and global operations.

Nasdaq-listed Truck maker Paccar  is tapping India for component sourcing and developing technology for its global operations, but has no plans now to sell or assemble products in the country. The work at the technical centre has already begun and the company will hire 200 employees by the end of this year. “Our focus in India right now is to successfully launch the technical centre in Pune to develop solutions for global requirements and introduce ourselves to the supplier base here,” Paccar Inc Managing Director (India Initiative) Donald J Schulte told the Business Standard newspaper.

What this means

India’s automotive capabilities are expanding to heavier vehicles on side as visible from the action of the owner of the Kenilworth truck brand above. But simultaneously the automotive capabilities can be extended to many other industries that utilize similar manufacturing skills.

Timex  is considering making India a global sourcing base to reduce manufacturing costs, a senior executive said. Currently, Timex has its global manufacturing hubs in Hong Kong, China and Japan. “A high-level team is working on a project to identify what all can be imported from India and what will be the cost benefit,” said V.D. Wadhwa, managing director, Timex Group India told the Daily Mint.

For Middlebury, CT based Timex, which operates across 100 countries, India is the only geography where it has a design center and a manufacturing base catering to the local market. Wadhwa said it is important to manufacture in India and meet part of the global requirement with the appreciation of dollar and higher wage costs. Manufacturing in China is no longer cost-effective.

What this means

For supply chain executives,  who wish to diversify beyond China, India is becoming increasingly interesting.

Jones Apparel Group is a $3 billion company, whose brands include Nine West, Gloria Vanderbilt, AK Jeans and more. While 80% of the sourcing for its $800 million  Jones Jeanswear Group is in jeans, the remaining 20% is for women’s tops. Within the top section, of which Vikram Rawal, Director of Production, is the head, India scores high with 80% share in total business. “Ladies blouses are a strong category from India and with the type of value addition that Indian exporters can do, the country is certainly a major sourcing destination for us,” says Vikram. Sourcing from India for the past 10 years, the Division is doing business worth  $85 million from the country of which 80% is in tops. He expects to increase India sourcing by 25 percent according to a story in Apparel Resources.

Vikram’s division is sourcing a major chunk in woven tops, mostly working with exporters from the Delhi-NCR region.  The division also sources some knitwear for its Erika and Energie brands. The quantities which the company offers is good – for brands the average quantities are 5,000 – 7,000 pieces per style and for private labels they are between 20,000 – 40,000 pieces with some orders as high as 200,000 pieces.

German automaker Daimler AG plans to buy more components from India for its global operations and expects growing demand for luxury cars to drive sales higher in India Chief financial officer, Uwe Jarosch, said recently. “Currently, our sourcing from India is €40 million to €50 million.”

Mr. Jarosch said the company is in talks with Indian vendors to contribute to a new global platform, Mercedes Front-wheel Architecture,  for passenger vehicles, including  hatchbacks and compact sport-utility vehicles.