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Risky Business in India?

September 25th, 2008 · by Justin Fogarty · 1 Comment · LCCS and trade, automotive sector, outsourcing, sourcing, supply management, supply risk

In case you missed the story (and that’s a forgivable offense since you’re likely watching the response of your supply chain, company and 401k to the financial situation this week), sixty-three formers employees of an Indian auto-parts manufacturer are under arrest for murder after beating their former CEO to death Tuesday. The workers were set to meet with the CEO of Graziano Transmissioni India, a subsidiary of an Italian firm, over an ongoing dispute after 200 people were fired last month. Then things went horribly wrong, they beat the man to death and terrified the visiting foreign execs who hid from the mob in offices (video of a news report below).

As some news sites are now pointing out, this horrendous incident is only the latest in what seems to be rising tide of discontent in India. And with that discontent, comes potential risk that companies with current or potential supply chain interests in the area will need to watch closely.

The big questions is, how everyone will react. In India, will there be a crackdown on labor - particularly around disputes and strikes? Will this incident be a wakeup call for all parties involved to cool off and return to their contentious, yet peaceful state of labor vs management? Or will this be additional fuel for a populist workers’ rights movement?

And how about the reaction in the rest of the world. In the US, it seems as if this incident and nearly anything else in the world has been buried under a wave of financial and political news. But while there’s growing interest in the merits of nearsourcing, more reasons not to do business abroad certainly don’t help. Will perceptions of India as a low-cost country begin to shift and an image of danger take hold?

If there is a lesson to be learned from this incident, it’s the importance of having good, reliable information from the ground where your supply chain or facilities are. I’m not saying the management of Grazanio Transmissioni should have seen this violent outburst coming. But in many cases, surely there are indications that trouble - with labor, quality, safety, or finance - is brewing. Without reliable, trust-worthy “boots on the ground” it will be far more difficult to proactively alleviate risks.

Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.

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1 response so far ↓

  • 1 Kay // Dec 18, 2008 at 9:21 pm

    This horrific episode @ the Graziano Transmissioni India plant is tip of the ice berg, Justin rightly pointed out to the dark side of the Socio political side of the problems in Low cost countries like India, which is ripe with corruption, Knowing India I can bet that the 63 persons charged with murder will get out scot free or with minimal sentences, because of authorities pro union stance, even if they are sentenced they will share the burden that means within a year or most in couple of years they will all be out.

    I have been involved in outsourcing deliberations and it is always the witty argument of the Finance people justifying on basis of superficial cost benefits, ignoring the other important factors that eventually the operational or business managers tend to in operational stage.

    Many decision makers do not understand the political and cultural aspects and the problems arising out of it, before making their investment decisions, one has to understand that almost in all low cost countries the labor unions are dominated by socialists with anti globalization and anti videsh “foreign” investments, In India the situation is worst in many states like Maharashtra, Assam, West Bengal, Bihar, Kerala,Gujrat and others where the labor unions are known to be violent and supported by local political parties.

    There are scores of cases like these either unreported or unnoticed, foreign investors have to be very careful not to get mislead by the magic figures or unscrupulous agents in India who pretend to provide professional services facilitating foreign investors, but in fact they are profiteers who work on self interests, there are several investors who got stuck in bad deals or fighting never ending legal cases in courts because of bad misguided investments.

    Now this does not only relate to direct investments, but also huge scams in outsourcing of Call Center, BPO, KPO’s businesses where quality and confidentiality were both compromised. Lately several UK companies have started pulling out their call centers back due to these huge issues. Remember outsourcing is about Cheaper and Better, and its important you have the strategy and tools in place to ensure quality and value.

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