02 October 2017

Sourcing in India: Focus on Machining Sector

The machining suppliers in India are globally competitive and machine various types of materials

The Indian machining suppliers market is highly fragmented and spread across India. Though the growth has slowed down in last year however the machining sector CAGR (compounded annual growth rate) growth has been ~ 10% since last 5 years. There are more than 10000* suppliers in India out of which 85% can be classified as Small Scale units and 10% as Medium and 5% as Large Scale units. Approx 40% units are having International Quality Accreditation like ISO 9000. (*Ayming internal analysis)

Highlights

  • The machining suppliers are globally competitive and machine various types of materials Ferrous, Non-ferrous, complex Alloys and exotic material like titanium
  • The suppliers machine all kind of complex engineering parts produced with forgings castings, bar route, slabs etc
  • Most of the suppliers use CNC machines. VMC’s are most common followed by Lathes and HMCs (CNC=Computer numerical control, VMC =vertical machining center, HMC=horizontal machining center)




  • The end users are mainly from Automobiles, Consumer durables, Pumps Compressors & Valves, Diesel Engines, Railways, Cement/Electrical/Textile sector
  • New emerging sectors for machining are Aerospace, Defence, Renewable energy, medical devices et al
  • India stands 13th in production and 10th in the consumption of machine tools in the world
  • India is highly competitive in complex precision engineering machined components (even compared to China)
  • Exports are more than 5% of the total machined parts  and roughly amounts to $2 billion* (including auto components)
  • Main markets are Europe, Asia and North America*

 

Growth drivers 

  • Strong growth in domestic sector like automotive, consumer durables, infrastructure, railways, defence et al
  • Focus on manufacturing sector with “Make in India” initiative 
  • India is expected to become the fifth largest manufacturing country in the world by the end of year 2020 (as per the Global Manufacturing Competitiveness Index published by Deloitte)

 

Main manufacturing locations across India

The suppliers are spread across India around the cities highlighted in the below map:

Main cost drivers/components for machining

  • COST OF INPUT PART TO BE MACHINED : depends on a) Material (grade) + b) Process (Forging, casting, slab, bar etc) c) Weight/Size
  • MACHINING PROCESS (Turning, milling, Grinding, Drilling, Broaching etc): based on the process and tool cost, the machine hour rate* is decided. 
  • NUMBER OF STEPS AND PART COMPLEXITY: i) Will decide cycle time required for machining the part and ii) tool cost (this will decide the total process cost for machining the part based on machine hour rate*)
  • OVERHEADS & PROFITS
  • PACKING 
  • SHIPPING

NOTE: *machine hour rate in India is very less as the labour cost (operator) is very low in India compared to UK/Europe. It could be as low 1/6th compared to UK/Europe and is the main reason for cost savings from India sourcing. 

For example below is the machine hour rate for some of the machining processes from a mid-size company:

So there is approx. cost savings of >10% (on TCO-Total cost of ownership) basis. Assuming for a part there are 4 machining steps viz Turning. Milling, Drilling and Grinding with CT for each step as 10 secs then the total cost difference between India and UK (purely machining cost) would be as below with savings of € 10 on each part.

SWOT analysis of machining sector

 

Stay tuned for further Sourcing Reports on Indian market!

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