“Our equipment has long life – it lasts for 10 years”
Milind M. Shahane, Deputy Chief Operating Officer, Voltas Ltd, shares the triumphs and traumas the company has experienced with Dilip S. Phansalkar
How has the MHE industry evolved over the years to keep pace with growing construction activity?
With regards to material handling, we call it ‘discreet material handling. There are two parts to material handling – one is bulk commodity such as cement, ore, fertilizers, etc. But we’re not into that. We’re into equipment which handles loads – things that can be put on pallets or in containers. So that’s our area of activity we’re involved in.
When you look at material handling, generally it can be in both parts. Discrete material handling is known as unit material handling. This consists of forklifts, cranes and other warehousing equipment, and handles packages and pallets, etc. This industry has really evolved over the past 10-15 years or even over a longer period than that. It has kept pace with changing trends of the Indian market.
More and more types of equipment are coming in. Ten years ago warehousing equipment didn’t even exist. The difference between warehousing equipment and forklifts is that these are more electric-driven and used inside warehouses for stacking on racks. Also, more automation handling is being put into practice nowadays. So it has kept pace with the needs of modern times and the industry is still being evolved. However, significant growth has taken place only in the past 4 to 5 years when the Indian industry started making rapid strides.
What have been a few landmark achievements by Voltas in the industry?
We have had a long string of achievements. Voltas has been one of the pioneers in the material handling equipment industry in India. We began manufacturing in 1967, and were the first to enter the forklift business in the 1960s. We’ve been inthe business for nearly 50 years. We’re the first to get certification for ISO; the first manufacturer to obtain ARAI certification for road worthiness of the equipment; we’re the first to launch warehousing products 10 years ago. We also have the highest number of machines (between 9,000 and 10,000) active in the field. So these are some of our significant landmark achievements.
What are some of the bottlenecks the company comes across when undertaking projects in India and abroad?
The main bottlenecks are in executing projects and supplying machines. Also, there are a lot of administrative hurdles in terms of transportation, clearance permits, octroi, local taxes – these are some of the issues we face. Similarly, when we import items for making equipment, we sometimes obtain material from our partners. Then there are delays at ports and customs. For export projects, we send MHE to Africa, South East Asia – there again we’ve problems in export documentations. If only the government simplify these procedures, we’d be more competitive than other countries like China.
What changes has conventional material handling undergone in recent years?
Over the years material handling has become more automated. Secondly, more and more electronic-controlled systems have been introduced – such as in terms of cranes. These systems have added to the safety of equipment and the operator. The third area is the design – making MHE more ergonomic, in terms of improving efficiency. The emission and fuel consumption area has also improved – from diesel-driven to electric-driven equipment. Our equipment now comes under Euro norm.
What impact does competition have on the business?
One cannot deny that competition is very high. There are different competitors for different product segments. In India, for instance, there is Godrej; then there are European, Japanese and Chinese companies coming to India to supply the equipment. In areas like cranes, we’ve competitors like TIL. Besides, we’ve international competitors, too. As a result, we compete on prices which affect our profit margins.
So we keep our cost under control, and we upgrade our products regularly.
Some foreign companies have sophisticated, electronic-controlled equipment which, in terms of design also, is better. We’ve strong competition from China, and our margins come under pressure.
How has logistics brought about changes in the MHE industry?
Logistics has played a big role in changing the MHE supply chain and in terms of handling material. Warehousing is one part of logistics. Some players are trying to improve their technique of handling the equipment. Nowadays there’s more automation. For instance, in warehouses we use automation for more efficiency, rather than use a forklift. Warehousing equipment which is electric-driven moves at a faster speed or stack material more high.
There is a difference in handling material – not everything can be moved vertically; it also moves horizontally on ground. So for that there is different equipment, like pallet trucks which efficiently do horizontal handling. A lot of new technology has come into logistics, like bar coding, ASRS. All these can be linked together by automation to give more control over the entire operation of supply chain.
What are the company’s key strengths that help deliver quality products?
We’re able to offer product service package to customers. In terms of products, we’re very reliable. In performance we’re equal to foreign ompanies, but we don’t have their level of sophistication. That’s because pricing is very low for Indian customers. Not that we cannot offer more sophistication, but then an average Indian customer won’t want that level of sophistication. So we offer products which are less sophisticated. But as I said, performance-wise we can do the job equally good. Our equipment has long life; it lasts for 8 to 10 years, and we give reliable and cost-effective products. We also back it up with excellent service. We’ve warehouses all over the country, and we’ve dealer network to service the equipment. We’ve 24 locations with dealers, plus our chain of offices. Another key strength is our designing manufacturing facility to upgrade our products to international standards.
How deep is the impact created by global recession on the industry?
The impact has been quite severe for the entire engineering and capital goods. MHE being part of the industry, it impacted us also. The main impact was in customer Investment, because whatever plans they had, they put them on hold. As a result of investment crunch, there was downturn. The impact was from April onwards, but more severe after October. In 2008-09 the market further came down, but now there’s some stabilization. The impact created severe pressure on the margin. In our case, we’ve curtailed our operations. We’ve stopped our expansion plans, and we also had to cut down our operation costs. Our strategy was to go in for cutting down cover costs – instead of two shifts we saw if we can run on one shift since the volume of operations has come down. In terms of market, we’ve tried to improve our service support to customers by giving them more comprehensive service packages, because customers are trying to downsize their operations. So we offer to take over maintenance, and appoint more distributors. So these are some of our strategies.
What are some of the new products Voltas recently launched?
We’re upgrading our products. We’re also going in for more electric forklifts, and launching more warehousing equipment – like stackers, different types of cranes, launching yard cranes and also truck pallets, new service packages, and the latest one is the pick-n-carry cranes.
What are your expectations for revival of the economy in general and your industry in particular?
It’s still at a stage where it is not clear how soon the economy will bounce back. If you traditionally see capital goods in India, most of the business happens in the second half of the financial year. As financial year comes to a close, people will see their budget availability. We’re hoping that in the second half, improvement will take place, but not a major one. However, in 2010-011 onwards the situation will stabilize. But it will take another two years for the economy to really bounce back. Government activity such as infrastructure spending in terms of large projects – airports, railways, ports where MHE is required in large volumes. So if government pushes infra projects, it will further boost the MHE industry. Construction of power plants will also technically help the industry. Railways need a lot of MHE, whereas roads require only construction equipment, like excavators and so on. Between 2005-07, MHE industry grew very fast, almost at 20-25 per cent per annum. Then it sank after that – so we wait till 2011.
How can the downturn be prevented in future?
I’m not an expert in this field, but what little knowledge I’ve, I’ll share. India has been relatively insulated from the financial crisis, when compared with US and Europe. That’s because we’ve strict regulations in the financial sector, more strict than those in the west. So in India we didn’t feel much impact.
Whatever impact was there was due to global slowdown, and it impacted Indian manufacturers. There were no financial crisis in the banks, they all did well. Today we can say that we’ve zero impact. But the way to prevent the situation is to have more regulations. But I believe the leaders at the G20 Summit in Pittsburgh are working towards that. They’ll discuss these issues.
“Our equipment has long life – it lasts for 10 years”