Mahendra Sanghvi's injection molding company in Gujarat, India, sits at the crossroads of India's development.
Shaily Engineering Plastics Ltd., with 65 presses and 550 employees in four factories, uses low-cost India as a base to export precision components to the North American plants of appliance makers like General Electric Co. and AB Electrolux, and to make medical and pharmaceutical products.
Sanghvi, the firm's managing director, launched Shaily with just two presses in 1987, after spending 17 years working in the plastics industry in the U.S. and Canada.
But his company isn't focused on winning price wars with cheap labor, even though India's skilled workers can be paid one-tenth of what they're paid in the U.S., Sanghvi said. Instead, Shaily plans to win business with its technology and design skills.
The company, for example, helped design and manufacture India's first all-plastic insulin pen, eliminating metal components common in those devices, he said. Shaily's joint venture with design house Industrial Design Consultancy Ltd. of Datchet, England, was instrumental in that project.
Shaily uses technology that is unusual in India, such as a fully automated system on a seven-second cycle with Husky injection presses, to make other drug-delivery devices like plastic encapsulates that dispense blister-pack pills. The system uses stack molds, uncommon for an Indian plastics operation, Sanghvi said.
In other ways, Shaily doesn't fit the profile of a typical Indian molder.
About two-thirds of the firm's US$22 million in 2008 sales were exports, while most of India's plastics molders serve the domestic market because the country has not developed a significant plastics export base.
As a result, Shaily is taking a hit from the world's economic problems. The business was running at full capacity in August but is operating at about two-thirds now, Sanghvi said Feb. 4 at the PlastIndia trade show in New Delhi. However, he said that new projects expected to come on-stream in July should boost capacity back to full. The company's sales grew about 30 percent a year in 2006 and 2007, but the growth rate fell to about 10 percent last year, he said.
Right now, you can imagine auto is down, and appliance is down, so our business is suffering, he said.
Still, he said he continues to target 2010 for a capacity expansion after the new projects start, and is looking at adding technologies such as reaction injection molding and nanocomposites.
Some of India's growth, he believes, will be driven by companies like his appliance customers, which are looking to be more globally competitive by making cheaper models of their appliances.
Customers in North America usually want a 15 percent net savings which is possible with lower costs for labor, operations and raw materials, Sanghvi said. He estimates that India and Southeast Asian countries, like Malaysia and Thailand, can supply resin at lower costs, perhaps 5 percent less than developed economies, because they have lower operating costs.
India is also an inexpensive place to do detailed engineering about one-third the cost of similar engineering in the North America or the United Kingdom making it easier to implement conceptual design work done elsewhere, he said. That was the case for the division of labor in manufacturing the insulin pen for Mumbai-based pharmaceutical company Wockhardt Ltd.
Shaily worked with U.K. design firm IDC to come up with a model made entirely from engineering plastic, Sanghvi said. Most traditional insulin pens use metal components inside and most of those designs are patented, according to IDC.
It's not actually replacing metal because the design is different, Sanghvi said. We wanted a completely plastic solution.
Indian-born Sanghvi is also vocal about challenges facing India. He is critical of the poor state of roads, ports and logistics.
My customers don't worry about my ability to do the work, they worry about what happens when goods shift out of the Mumbai airport, he said Feb. 3 to a summit of Indian and Chinese plastics industry business leaders in New Delhi.
India's [infrastructure] is getting better, but we need to move in leaps and bounds and we seem to be moving at a snail's pace, Sanghvi said in a separate interview.
He added that India does not innovate as well as more advanced economies: Europeans are very good at coming up with new concepts. Indians and Chinese, they are not good at innovation.
Although he's targeting an expansion at Shaily next year, Sanghvi thinks his company may need to trim its workforce to improve efficiencies and eliminate waste. He questions the cheap-labor model for everyone in India.
People think that labor is cheap, but I think it's not a question of whether labor is cheap or expensive, he said. In spite of what everybody says, I think the American model is a very productive model.
Granted American costs are very high but if I look at productivity across the world, American productivity is very high, he said.