The managing director of JCB India speaks to Murrali Thalor on how the construction equipment major drove out of the recent industry slowdown and on future growth plans.
JCB has an overwhelming 50 percent market share in the Indian market. What challenges do you foresee to further grow market share?
The challenge for JCB is to remain focussed on the customer and keep scouting for new opportunities. We continued to develop new products even during the recent slowdown phase. We went deeper into India, creating our presence through dealerships and sales points. Today we have 49 dealers and about 330 sales and parts outlets and these numbers have doubled in the last three years. We are now reaching out to the customer to ensure availability of parts and trained manpower, which is key for this segment. Machine availability is a vital parameter for our customers as it is directly proportional to profitability. This is a challenge for us and addressing this issue will continue to be an imperative for us to move forward.
What were the issues that called your attention during the slowdown?
During the slowdown we also focussed on our vendors, some of whom were tight on resources and were experiencing tough times. We supported them during the downturn but also removed some of the flab that is usually built when the going is good. We focussed on quality and costs. These initiatives helped JCB and our vendors to recuperate faster. A slowdown also calls for different approaches to HR and customer management. It is important for any organisation to keep people engaged and motivated during a downturn. For instance, our marketing team tried to understand customers’ requirements better. We introduced a concept to reach out to customers and organise machine demonstrations. Instead of customers coming to us, we went to them and showcased the product portfolio. For shopfloor personnel, we created cross-functional teams on quality and costs and took them across different departments within factories and across different units. So our workforce was thoroughly engaged during the slowdown. We also did not take the retrenchment route. Instead we focussed on utilising their ideas and talent to the maximum extent possible. We created teams to handle specific tasks. The teams came up with a concept called PACE – Programme for Accelerated Cost Elimination – which helped evaluate the waste.generated and work on eliminating it. The project involved every department including marketing, HR and finance. The outcome was improved communication within the company and everyone was better off for it. We also did not stop ongoing investments as an incomplete plant can only send the wrong signal to staff and also existing and potential customers.
What is your outlook for the construction industry in 2010?
We continue to live in a volatile environment as commodity prices and interest rates are going up again. Since our machines are funded, the increase in interest rates will have an immediate implication on our sales. The positives are that the momentum is gaining and there is an intent to build major roads, which will create demand for steel and cement and in turn propel the entire economy. It is important for the company to bag 10 or 20 major projects of national importance. The government should take up projects and periodically update people on the progress. This will help enhance the sentiment better. We see growth returning but in a volatile environment. There are bound to be dips but we hope that it will not be a crisis that we faced in the past two years. Hopefully, all these negative factors will not come together again. The construction industry is set for growth, albeit of a cautious type. The next 18 months are going to be critical for India in the way we actually balance growth with social objectives like fiscal deficit and interest rates. I believe growing at a 10 to 15 percent rate is healthier.
When do you see the full plant capacity being utilised?
At present we have capacity to make about 100 units a day. The assembly usually works single shifts and the feeding departments like fabrication runs two shifts. Thus, in a year, we can make 25,000 units. In about two to three years, we will be utilising our full capacity. Right now we are working on our plans based on performance during the current year, which will help us determine how and what kind of momentum the economy will take. At the end of this year, we will have better clarity which will help us take a call on our future expansion plans.
How do you plan to further increase sales?
In two ways – by reaching out to customers and second, by bringing in products which are useful in the Indian context. The rest is backward integration through product development and manufacturing capability. We reach out to our customers through sales teams and support them through parts and service teams. Finally, as India changes, the requirements of our machines are also changing and it is necessary for us to cater to the emerging requirements. For instance, now we offer many more attachments for the backhoe loader than we used to before. The versatility of the backhoe can be changed by simply attaching implements instead of the bucket. Therefore, we have to create newer applications for the same machines and also introduce new products. To support this, the dealership network has to be constantly enhanced. Besides, investment in training people at JCB and at dealerships is vital.
How do you go about training operators to handle JCB machines?
We have 11 operator training schools and so far we have trained about 10,000 operators since 2006. This process will intensify further as our machines are capital-intensive and utilising them to the maximum is essential for better profitability. When customers invest about Rs 40 lakh in the equipment, they obviously look for reliability. The machine uptime is the top priority and training will help them achieve this objective. Secondly, they look at the aftersales support in terms of mean time to repair. When the company addresses these issues, word of mouth helps build its reputation. Finally, due to the increasing cost of fuel, customers also look at fuel economy. So we have to ensure that the design is robust and sturdy.
Is there a planned increase in your sales network and aftersales support?
We have grown our dealerships and sales and parts outlets significantly during the past three years. We will have to increase the dealership outlets by 15 percent every year, mainly to keep pace with the same levels of growth. We have two major warehouses – in Faridabad and Pune – and distribution centres in different parts of the country. While the Faridabad centre takes care of the northern and eastern regions, the Pune unit supports the southern and western regions. The Pune facility also has a technical training centre which facilitates training of people working at our dealerships.
What is your new product planning strategy?
We introduce new products at the biennial construction equipment exhibition Excon. In the backhoe segment, we have a variety of variants which increase power. For instance, the standard one is 76 hp. At Excon 2010 held earlier this year, we introduced the 3DX Extra and Pick and Carry crane, reloading shoal and an excavator. We would like to launch around five new products every year. Currently we offer Kirloskar and Cummins India engines and our machines have 95 percent local content.
What about finance options for your customers?
We work closely with Non-Banking Finance Companies (NBFCs) as they are strong at regional levels. Due to operational reasons, many of the NBFCs withdrew from the market during the slowdown period. As a result, we tied up with nationalised banks starting with the State Bank of India. Now we have an MoU with eight banks in India. We would like the banks to be mainstream as we believe that our duty is to offer customers wide options
How much do exports contribute to turnover?
India being geographically located between the Middle East and Southeast Asia is strategically placed to drive exports. However, unlike software, made-in-India products have yet to develop a strong reputation and much work has to be done in the area. However, customer confidence can be gained by bringing them over to India and showing them around the facilities and showcasing our capabilities. We are doing that but it is a long process. We have made headway in certain African markets. Our exports are growing by 20 percent every year, mainly machines to neighbouring countries and components to the UK.
Do you see synergies among JCB’s plants in Asia?
JCB has 18 plants – one each in Brazil, China, India and the US and the rest in the UK. The footprint for the company is good as it is spread strategically to cater to demand from different markets. We see synergies in sourcing of components and are actively pursuing this activity at our facilities in different locations. We are also working on joint product development programmes; given a defined platform, we may build products based on the market requirements.
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