Supply Excellence — Risky Business in India?

Risky Business in India?

September 25th, 2008 · by Justin Fogarty · No Comments · 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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