Innovators cross frontiers to scout for cooperation

AHMEDABAD/RAJKOT: On the face of it, small manufacturers in faraway lands of China, India and Japan have little in common. But, scratch the surface a bit and you’ll realise that small producers in certain sectors in each of these countries have unwittingly remodelled themselves in similar fashion.

The one common mantra that have helped these clusters - and in the process the respective economies - grow is: co-operation. It’s a network of small producers in certain sectors in each of these countries which have enabled them to flourish. Small companies in each of these clusters joined hands for technological innovations and sourcing that helped them sustain and grow
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Take the case of the dying diesel engine segment in Rajkot. “An interesting experiment in co-operation has starting to yield results for seven small producers,” says Pankaj Chandra, IIM-A professor, who has done a comparative study of three SME clusters of Rajkot in India, Tawa in Japan and Wenzhou in China.

Faced with some stiff competition from cheap, light-weight Chinese engines, seven producers in Rajkot agreed to conduct joint experimentation to reduce the weight of their engines dramatically while not compromising on the performance. Earlier this year, they developed a prototype engine that weighed 45 kg, had similar performance levels and provided fuel efficiency that is 10-15% better than the Chinese model.

Now, all these seven producers are gearing their capacities to soon roll out this new engine under their respective brand names at the same price as the Chinese models. Most firms in Rajkot started off with brass parts manufacturing and emerged as producers of machine tool and bearings for critical applications.

The entrepreneurs who never got together for business, joined hands only sometime back when Rajkot Engineering Association (REA) decided to jointly purchase coal and pig iron for their units. In the Wenzhou region of China, what started off as manufacturing of products for day-to-day use by individuals went on to become a profitable industry.

The population pressure at the infertile and separated region in China led to out-migration of people, which also made people carry their products outside. This created a supply chain which gradually became stronger with group efforts and government support.

Both Wenzhou and Rajkot have proved how teaming up of the small and marginal players helped them take on the global markets. The small firms in Rajkot’s machine tools industry, which had lost stem a couple of years back, today jointly procure raw materials and work on innovative practices together to improve their output.

“There are around 100 members in the association and all of us jointly purchase raw material from one source of supply. This not only helps us save input cost by 8-10% per unit but also helps ensure good quality,” says Rupesh Mehta, president of Rajkot Machine Tools Manufacturers’ Association.

The TAMA network in Japan has a high number of product processing firms with technological expertise. The teaming up of the small firms in this network helped them enhance capabilities. “In all these clusters most of the firms are product processing firms and focused on variety and not scale,” says Chandra “In all these clusters, most firms are product processing firms and focus on variety and not scale,” says Chandra.