As OEMs in America have been actively scouting for viable supply alternatives to China, India has naturally been on the radar for several reasons. Favorable diplomatic relations and low costs being two.
But as many companies have discovered, it’s not straightforward to build your supply base from India. Not yet.
The sourcing head for one of our present clients tried sourcing from India on their own before they came to us. Here’s what he remarked about his earlier experience:
“The supplier was very hard working but I feel they didn’t have the same sense of urgency. The deadlines are sometimes missed and what’s worse is that we don’t get any information until the last minute.”
Another person in a similar position at another company had this to say:
“I felt that I was always micro-managing my suppliers in India. Everything took so much more time than expected. They are very good at taking directions but we want them to take more initiative.”
They are not the only ones to have faced this. Business is not just about Finance, Operations, or Logistics, it’s about Culture as well. And when you navigate an international supply chain, cultural differences need to be navigated with as much care as logistical details.
Know About Challenges of Traversing the Indian Manufacturing Landscape
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Background
When Boston Consulting Group (BCG) surveyed North American companies across multiple industrial sectors in 2023, more than 90% of respondents said that they had relocated production or some of their supply base to other countries over the previous five years. Of those, half reported that they had shifted more than 20% of their manufacturing and supply chain spending. More than 90% of surveyed executives indicated that they will make similar moves over the next five years.
The redistribution of manufacturing is evident in trade data. While US goods imports from China declined by 10% from 2018 through 2022 in inflation-adjusted terms, they rose by 18% from Mexico, and 44% from India.
Once overlooked, India’s manufacturing industry is undergoing a significant transformation, poised to capture a larger share of global demand. Amid geopolitical tensions and a search for alternatives, India’s emerging strength in manufacturing provides a promising opportunity for companies to diversify their supply chains.
Despite global challenges, India’s manufacturing sector has seen impressive ~12% year-on-year growth, fueled by liberalized Foreign Direct Investment (FDI) policies and simplified compliance procedures. Rapid export growth is attributed to ongoing reforms and regulatory simplification, enhancing business efficiency. The ‘Make in India’ initiative, launched in 2014 with an outlay of over $25 billion, marks a pivotal moment in India’s manufacturing history, setting the stage for the current industry boom.
Another critical change that is worth mentioning is the Foreign Trade Policy. This policy has been carefully reshaped and redesigned to support the rapidly growing manufacturing industry, which is a crucial aspect of the nation’s economy.
In this way, North American companies must diversify their supply chains, turning to India and Southeast Asia to meet their increasing manufacturing needs.
The Role of Culture in Business
In companies where everyone is located in the same country, passing messages implicitly is frequently the norm. The closer the space we share and the more similar our cultural backgrounds, the stronger our reliance on unspoken cues. In these settings, we communicate in shorthand, often without realizing it—reading our counterparts’ tone of voice, picking up on subtext.
But when companies begin to expand internationally, implicit communication stops working, and cultural differences start becoming apparent in different styles of working across cultures. While most North American corporations are aware of the prevailing Indian laws and can navigate them with ease, cultural differences between the US and India can often lead to a difficult business relationship.
Many of you might have already experienced it. Miscommunication becomes more frequent, and trust erodes, especially between the head office and the regional units. In their efforts to fix these problems, companies risk compromising attributes that underlie their commercial success.
That’s because people in different countries react to inputs differently, communicate differently, and make decisions differently.
It’s hard to feel the same bond with people we don’t see regularly, especially when they speak an unfamiliar language and have experienced the world differently. For example, when one New York-based financial institution opened offices in Asia, it struggled to export its highly collaborative culture, in which key decisions involve a great deal of consultation.
Despite management’s best efforts, the local offices created what one executive described as “overseas cocoons,” in which employees shared work and consulted with one another but remained isolated from their colleagues in the United States. And this was within the same company. Imagine a similar situation but with an overseas supplier. It could cause absolute chaos with your supply chains.
India is a multilingual, multi-ethnic society, with notable cultural differences between the north and south. North American companies could see better results with India-based outsourcing engagements if they take culture into consideration. A thorough understanding of the underlying values and beliefs of the local culture is crucial to the success of your business.
The best way to navigate local culture differences is to take the help of experts who are well-versed in both Indian and North American business practices and cultures, ideally with employees and infrastructure present in both countries, such as Zetwerk focused on make-to-order custom manufactured products delivered right to your doorstep for Just-in-time manufacturing, and having a solid footprint across USA, Mexico, Vietnam, China, and Spain. Zetwerk’s US-based team has an excellent cultural context of dealing with Indian suppliers and can help you navigate all the intricacies related to sourcing from India.
Primarily, Zetwerk normally assigns projects to Indian suppliers (rather than big MNCs) with expertise and experience in international operations. There are two reasons for this, the first is that Indian vendors are more price-competitive, and the second is Zetwerk’s extensive know-how of the Indian supplier landscape.
The Cultural Differences
India is one of the fastest-growing countries in the world. It also has huge economic potential. The work culture in the USA and India, particularly in the manufacturing sector, can vary in several aspects. Here are some key differences:
- Hierarchy and Communication Style:
- USA: The work culture in the USA often promotes a more egalitarian approach. Hierarchies are usually flatter, and there is an emphasis on open communication. Employees are encouraged to share their opinions and ideas.
- India: Traditional Indian work culture tends to have a more hierarchical structure. Respect for authority is emphasized, and communication may be more formal. Indian communication generally leads them to overcommit and under-deliver on projects, with not enough emphasis on regular communication or updates.
- Both cultures enjoy what others may see as over-inflated job titles; to an Indian, a fancy title brings status to their family. To an American, it signifies personal success.
- Decision-Making Process:
- USA: Decision-making in the USA tends to be decentralized, with decisions often made at various levels within the organization. There is an emphasis on data-driven decision-making.
- India: In India, decision-making can sometimes be more centralized, with key decisions made by higher-ranking executives. However, as with communication, this is evolving, and many companies are adopting more decentralized approaches.
- Approach to Innovation:
- USA: The USA is often seen as a hub for innovation. There is a strong emphasis on research and development, and companies are generally open to adopting new technologies and methodologies.
- India: While India has made significant strides in innovation, there may be a historical preference for stability in certain manufacturing sectors. However, with the rise of technology and globalization, there is a growing focus on innovation and efficiency.
- Approach to Time:
- USA: Time management is crucial, and meetings and deadlines are expected to be adhered to strictly. Punctuality is highly valued.
- India: While punctuality is important, there may be a more relaxed attitude towards time, with some flexibility in meeting schedules.
- Misunderstandings regarding time and deadlines can be overcome; Americans can be very clear about deadlines and communicate their priorities better. Indians can learn to understand different priorities and to respect the American need for rigid schedules.
- Employee Relations and Team Dynamics:
- USA: Team dynamics often emphasize individual contribution within a collaborative environment. There is a focus on recognizing and rewarding individual achievements.
- India: Teamwork is highly valued, and the emphasis may be on collective success. Loyalty to the team and the organization is often strong.
- Business Relationships:
- USA: Typically, Americans would meet and “get right down to business” and discuss more personal topics when business is finished — which often doesn’t happen because there is another business function that becomes more critical to the U.S. worker. Small talk is considered a waste of time, which Indians may find rude.
- India: A traditional Indian gathering of managers and employees or business partners might put more emphasis on interpersonal relationships upfront and address business as a secondary priority.
- Failure to understand cultural differences between the US and India creates a risk of misunderstanding; Indians may find Americans dismissive, or curt, while Americans consider Indian colleagues to be time-wasters or poor communicators.
- Flexibility and Adaptability:
- USA: Work environments in the USA often prioritize flexibility and adaptability. Employees may have more autonomy in managing their work schedules, and there is a focus on results rather than rigid work hours.
- India: While flexibility is increasingly valued, there may still be a greater adherence to fixed working hours in certain Indian manufacturing settings. However, this can vary based on the industry and company policies.
- Work-Life Balance:
- USA: Work-life balance is often highly valued in the USA, and companies may offer benefits and policies to support this. Overtime is usually compensated, and vacation time is encouraged.
- India: Work-life balance is gaining importance in India, but it can vary. In some manufacturing sectors, especially during peak production periods, long working hours may still be common.
- A Sense of Face:
- USA: Speech is much more direct and in high-pressure work environments, shouting at subordinates is not unheard of. Conflict is seen as constructive. Feedback is direct and critical, while in India, negative feedback needs to be delivered more as constructive criticism.
- India: Indians have a strong sense of face and will use indirect communication to preserve this. Saying an outright ‘no’ to someone is considered rude, as it causes them to lose face; there’s a tendency to say whatever the other person may want to hear. Criticizing an individual in front of their co-workers is taboo and will certainly cause them to lose face. Feedback should be delivered in private instead.
About Zetwerk
Zetwerk, founded in 2018, offers the place to industrial and consumer enterprises for contract manufacturing. They operate across diverse industries including oil and gas, renewables, aerospace, infrastructure, apparel, electronics, and retail, as well as solar and renewable energy.
Backed by some of the world’s leading venture capital firms including Sequoia, Kae Capital, Accel Partners, Lightspeed, and GreenOaks, Zetwerk has grown in valuation from US$ 4.4 Mn in July 2018, to a whopping US$ 2.8 Bn in 2023. What’s more, Zetwerk became a unicorn within 3 years of its humble beginnings when it raised $150 million in a Series E round led by D1 Capital Partners.
They work with original equipment manufacturers (OEMs) in North America and worldwide, fulfilling their manufacturing requirements for customized components and assemblies. Rather than just being a sourcing company, they act as a second brain to the OEMs, helping them not just simply execute the customer’s manufacturing strategy, but add tangible value at every step of the process.
For example, Zetwerk has an in-house DFM team with CNC prototyping capabilities in the USA, to help their clients in the design and prototyping phase itself, before making detailed plans and moving to mass production.
Zetwerk executes these projects through its network of partner suppliers spread across the USA, India, China, Vietnam, and Mexico. These world-class facilities provide practically unlimited production processes, capacities, materials, part sizes, and weights as well as secondary operations, surface finishing, assembly, and related services.
Zetwerk has recently acquired a US-based Solar equipment manufacturer, providing further impetus to its commitment to serve North America as a primary market. It has more than 2,000 customers across North America, Asia-Pacific, and the Middle East, and a network of more than 10,000 manufacturing partners worldwide.
Our manufacturing facilities employ the latest techniques and maintain all relevant certifications to ensure the highest quality control for our customers as well as compliance with all regulatory requirements, and legal practices. You can view our certifications here.
To know more about how we function, check this.
If you are looking for a global sourcing partner, look no further.