Outsourcing: India is not for everyone

Electronics purchasers involved in outsourcing decisions need to take a hard look at India before recommending it as a low-cost manufacturing location. While labor rates are low, they are often offset by higher costs of logistics because of poor infrastructure and a limited supply base, resulting in the need to import many materials needed for production.

Buyers should not be unduly influenced by the fact that other large OEMs have set up operations in India and that India gets written about in many newspapers and trade publications, according to Charlie Barnhart, senior consultant for Technology Forecasters in Alameda, Calif. Often there is a “me too” thinking in deciding to move manufacturing to India because the list of companies in India reads like a who’s who of the electronics industry. Motorola, HP, Cisco, Flextronics, Jabil Circuit and Celestica are some of the major electronics companies in India.

But just because major companies are in India, it doesn’t mean all electronics companies should manufacture in India. Barnhart says before deciding to build in India, OEMs need to understand what their needs are, what they want to accomplish, what their expectations are and the level of resources they want to commit to support their expectations.

He says buyers involved in outsourcing have to carefully weigh the advantages and the challenges of manufacturing in India.

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