How to Manufacture at Low Cost

We were researching market for some product - automotive - three wheeler. The product was assembly of 3 PC & weighed almost 100 gm. We could buy this unbranded product in Rs. 10/-. We thought how is it possible? The part is steel part & also hardened. We got to know that this is from Ludhiana. We heard a lot about Ludhiana after that. We thought that we have to visit the place to see for ourselves.

We set out for Ludhiana. We went around the place & found that at one small place 2/3 machines were there & they were machining some part. They were making a spherical shape. Then we met one person & told him that we are interested in buying. We also asked him how they manage to sell at so low prices. He told us that his main work was packing & marketing. He bought raw material & gave to some households or such small workshops which were entirely run by families. There was no time based job here. It was result oriented. When job is result oriented, they will be paid as per the production. Even the rejection was deducted. The result being responsibility. People worked with responsibility & worked hard. The whole family would work on one machine. The volume of work would be so much that they didn't have to change setting. They did only one part. Normally there are two cycles of heat treatment in steel- one hardening & other tempering (stress relieving). These people did only hardening for a solid pin. Cost saving.

I will not say that all people/ manufacturing in Ludhiana work like these. But I am making a larger point. First, high volume & only one type of job. This makes easy special purpose machines which can be operated by less skilled people. Margins less, but high volume. Second, contract manufacturing. Instead of employing people, if you give contract or buy from outside (even on job work), results will be better quality & lesser hassles.

I have been to China. Among other things that make cheap production possible, is cluster manufacturing. There are several industrial clusters, which develops an ecosystem and makes process costs lowest. High volumes help it.