Even as plastics firms are learning to work with China, they can see India fast approaching in their rear-view mirrors.
Plastics growth in India is expected to average double-digit rates in the near future. China's industry is more established and its infrastructure is in better shape, but India's population is younger and its technology base is stronger. Both nations have populations of more than 1 billion, making them each a crucial target for multinational firms seeking growth.
``We're talking now with companies that are focused on India because they feel they were left behind by China and missed the opportunity,'' said Larry Hotaling, founder of Global Diligence Ltd., a Hong Kong-based consulting firm that began by focusing on China but now is very active in India, as well. Hotaling, a former executive vice president with contract manufacturer Flextronics International Ltd., spoke at the Plastics News China Forum, held Nov. 14-15 in Rosemont.
India is perceived as being about 10-15 years behind China because of its infrastructure, Hotaling added. Power failures now occur about 17 times a month in India, more than double China's monthly average of seven. Government regulations also are powerful in India, where companies with more than 100 employees need government approval to fire anyone.
Hotaling anticipates a future global production model that would start with product definition taking place in the United States or European Union before tooling and design work occurs in India. Tool building then would be done in India or China and final production in China, or another low-cost country such as Vietnam.
``It's not outsourcing as we understand it today,'' Hotaling said. ``It's sourcing talent and competencies at the best price, irrespective of location.''
International business veteran Jay Woerner has worked in both countries and agrees that each has its own set of advantages and challenges. Woerner now serves as vice president of Asia operations for Cincinnati-based machinery maker Milacron Inc. In that role, Woerner serves as chairman of two Asian joint ventures - Milacron Plastics Machinery (Jiangyin) Co. Ltd. in China and Ferromatik Milacron India Ltd. in India.
The road to establishing a presence in these giant markets was not always smooth. In India, Woerner said that Milacron underestimated the amount of working capital required, the time needed to get government approvals and the amount of supplier development needed for quality standards. Obtaining visas for training personnel also was more difficult than expected.
``It took us four years to get to break-even in India, but now the operation is very successful,'' he said at the Plastics News event.
In China, Milacron's applications were approved more quickly, but the company had to learn that localized sourcing is the key to profitability.
``Expect one to two years of sourcing preparation, supplier research and supplier qualification,'' Woerner explained. ``You also have to know what price you can sell your products at.''
Worker behavior also varies between China and India. Woerner said that, in his experience, workers in India ``tend to deviate from the system'' and are less productive, while workers in China generally are more disciplined, follow established systems and are more productive.
Woerner and Hotaling both agreed that getting up to speed on both China and India will be necessary for manufacturers and suppliers in other parts of the world.
``You don't have to choose one or the other - you'll have to deal with both,'' Hotaling said. ``Both have the capacity to become economic powerhouses of the 21st century. The financial global markets of the U.S., China and India are forever intertwined.''