Sourcing from India: Here's How to Do It
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Due to political tensions and rising labor costs in China, more and more companies are switching to India as a sourcing location. After all, India offers access to a large availability of raw materials, high-quality producers and the costs are lower than in China. But what is the best way to approach sourcing from India?
India has become one of the world’s most important production centres in the past decade. The Indian government has invested heavily in the development of the industrial sector, with the result that the Indian automotive industry, aerospace sector, IT industry and pharmaceutical sector (think of vaccines) now produce for the entire world. Indian exports have grown in recent years from 226 billion dollars in 2010 to over 400 billion dollars in 2021. This growth is based on a few pillars:
Availability of raw materials
India is one of the largest producers of raw materials worldwide. A wide range is available, such as steel, metal, wood, bamboo, marble, cotton, silk and jute.
Attractive labour costs
One of India’s strengths is its low costs, because wages in India are much lower than in competing countries.
High level of education of personnel
Indian companies invest heavily in training their employees to ensure that they can meet the quality requirements of international companies.
Stable government and supportive policies
India is relatively stable economically and politically. In addition, the Indian government encourages the development of the manufacturing sector with favorable regulations for exports from India and for foreign companies that want to produce in India.
Advanced infrastructure and technology
India’s development in the field of IT, aerospace and the automotive industry benefits the other sectors in the country. The new advanced technologies that are developed in these industries quickly find their way into the other parts of the manufacturing sector.
Convinced? Get started with sourcing from India
Step 1: Start with good market research
Many companies see India as one country, but it is better to approach India as a continent such as Europe. The different industries are therefore often located in a specific cluster in a state where the best materials, infrastructure and personnel can be found for this specific sector. For example, the automotive industry has four large clusters in Gujarat and around the cities of Chennai, Pune and New Delhi.
Do not focus blindly on these clusters, but take a closer look at all the possibilities throughout India. Sometimes, options outside of these clusters are more advantageous, for example because wages are lower outside of the cities. Once you have determined which locations meet your needs, you can create a list of potential suppliers and manufacturers in these regions.
Step 2: Evaluate potential manufacturers
To ensure the desired specifications and quality, your potential supplier must have the right expertise and experience in your sector. In addition, you want to be sure that quality systems are in place, what the annual output is and whether the supplier has sufficient experience with exporting the product.
If you have little experience doing business in India, it is advisable to hire a local consultant for this step. They know exactly which legal requirements products must meet and which permits are required to produce and ship your products. Our experts have the know-how to guide your organization smoothly through this process.
Step 3: Schedule a visit or call
From your list of potential candidates, after evaluation, select the three to five best options. With them, you will delve deeper into your wishes and the possibilities that the producer can offer you. In this step, it is advisable to plan a visit to the facility, or, if a visit is not possible, a video call to get an even better idea of the working method and the quality of the products that are manufactured there. If you are satisfied, request a quote so that the price and conditions can be negotiated.
Please note that a factory in India usually looks different from what you are used to. This does not mean that the products that are delivered are of lower quality. Often the factories in India are simpler, and there is no air conditioning, for example, but the machines are of the same caliber as in Europe.
Step 4: Samples and quality control
As soon as you have agreed with the producer on the price and conditions, samples can be made. It is important that you have people available in India who can check the manufacturing process and the quality, before you do this again in Europe. If everything is to your liking, the first batch can be manufactured. Even though you have already screened your new supplier in various ways, it is still advisable to have quality checks carried out annually or even more frequently.
Sourcing in India is a great way to get to know the market
India is one of the largest and fastest growing consumer markets in the world. Even though you may ‘only’ start sourcing products or raw materials in India, your presence and local contacts will give you the opportunity to explore the market further. India is expected to have the largest population in the world in 20 years and you will not be able to ignore this important market in the long term. Start your sourcing adventure in India with an open mind and a long-term strategy, because India has an incredible amount to offer European companies.
