Capacity Ahead of Demand

What a nice vendor conference we had at Cummins today. I can't resist the tempetation of posting in my blog so that the various takeaways get permanently printed in my memory.

The theme of the conference was build your "Capacity Ahead of Demand".

We were presented with a great deal of information by the MD of Cummins - Mr. Anant Taulikar - who explained that how Cummins focus shifted from the "Technology obsessed company" to "Right technology at right cost". He also presented how North America dominance is ending in Cummins business and action is shifting towards India and China.

Kudos to their leadership also for targetting to keep 1-1.5% of their earnings parked for education and social justice for the community.

He also captured the following Macro Trends in the automotive industry:-

a. Emission Standards - Getting stringent and stringent
b. Energy Availability - Getting scarce & scarce and hence fuel efficiency will always be in great demand
c. Globalization
d. Infrastucture Growth

He related how all these above trends throw opportunities for their company but the same is true for all the players of auto industry. He focussed on bringing Acceleration to:-

- Growth mindset
- Opportunities abound
- Be ready for future
- Execute well
- "what we have been" to "what we will be"

He forecasted that in India their growth will be at CAGR of 22% from 2010-2015. Minor hiccups will be there but the overall scenario will be like this. Hence there is an urgent need to make the capacities of vendors in line with the growth demand. Mr. Ignacio also highlighted that invest in capacity and capability. Further everyone said that capacities need to be calculated on 5 days/week basis. Sweating the assets is not desired.

Their CFO - Mr. Ravi Batra presented few very interesting slides that how Indian Economy growth is going to be in region of 9.0-9.2% from 2012 to 2017. He concluded that "Business is not entitled to anyone, but has to be earned"

As expected the panel discussion was the icing on the cake, in which the favourite topic was foundry industry to expand due to its wafer thin margins, long gestation periods, high rejections, highly uncertain business environment etc.

Mr. John Flintham of Amtek highlighted the challenges in expanding the capacities ahead of demand due to high cost of finance; high inflation; uncertainity; manpower availability; power shortage etc. People also suggested some kind of partnership between the company and vendors, but as expected no customer will be willing to come forward and share the business risk of the suppliers.

Lot of learning for Auto Guys.