The role of India’s forging sector is essential in supporting a number of related industries. Small and medium-sized forged component producers have added to the industrial output of India by producing quality forged components for both domestic and export markets. However, forged components are in very high demand both nationally and internationally and therefore, smaller and medium-sized producers of forged components face many operational, financial and technological challenges that hinder their ability to grow and remain competitive in the production of forged components.
Rising Raw Material Costs
Small and medium sized forging manufacturers in India face an ongoing challenge with constantly changing prices for raw materials used in the production of forged products. The materials that these manufacturers use—steel, other alloys, and other forging-grade type materials—are subject to fluctuations in price based on changes in the global market; taxes on imports; and disruption of the supply chain. Smaller manufacturers are often unable to maintain non-variable profit margins, as they do not have large company’s purchasing power.
Often, customers request fixed pricing contracts when, at the same time, raw material prices are increasing and putting additional financial pressure on forgings businesses.
High Energy and Production Costs
Forging process consumes a large amount of energy to heat parts, perform machining operations on parts, and add finishes to parts after they are produced. Electricity rates and fuel costs are both rising, which will generally lead to increased costs for manufacturers operating forging operations. In addition, small forging companies using older equipment (machinery) are usually much more energy inefficient, which makes it difficult to compete against more technologically advanced forge manufacturers. Ongoing costs associated with maintaining furnaces, hammers, presses, and CNC machines generally create continuous investment requirements that can be a financial challenge for medium and small manufacturers.
Limited Access to Advanced Technology
Top forging manufacturers India is rapidly adopting advanced technologies such as automation, robotics, simulation software and Industry 4.0 in order to improve productivity, precision, and efficiency. Small and medium sized forging manufacturers in India are relying on traditional manufacturing methods because of limited access to funds however there is a significant number of large manufacturers that have made the significant investment necessary to implement modern manufacturing way (CNC forging equipment, automatic handling systems, advanced quality inspection technologies, ERP or digital monitoring systems) and upgrade their plants to improve production capabilities to compete with their larger competitors.
Skilled Workforce Shortage
Technically competent personnel are needed for the various processes of a forging facility, including machine operation, die design, heat treatment, and inspection of product quality. But many manufacturers are having trouble finding and keeping trained personnel.
Many young workers are moving into IT and service jobs, leading to less technologically qualified employees with manufacturing industry experience, including machinists and technicians. The absence of ongoing training programs has a negative impact on operational efficiency and product quality.
Intense Market Competition
Small to midsize forging makers compete against extremely large domestic competitors as well as against affordable cost international suppliers and imported forged parts. While larger companies take advantage of economy of scale, highly automated processes, and a well-structured supply chain, smaller suppliers often find it very difficult to compete with larger organizations on price, delivery efficiency and production capacity. Global competition has put additional pressure on Indian forging manufacturers to maintain international standards of quality while keeping costs down.
Quality Compliance and Certification Challenges
The quality certifications and compliance requirements imposed on forging manufacturers are very important in high-demand industries like automotive, aerospace, and oil and gas. Examples of these types of certifications include ISO, IATF, and environmentally compliant approvals. These types of certifications can be extremely costly to both implement and maintain long-term, especially for smaller manufacturers. The additional costs associated with being audited on a continuous basis, maintaining adequate documentation, testing products, and monitoring processes also create significant financial and operational pressure on smaller forgings due to their need for dedicated staff and funding.
Supply Chain and Logistics Issues
Manufacturers in India who produce forged components are primarily focused on how disrupted supply chains due to delayed shipments on raw materials or transportation congestion and increased logistics costs will affect production schedules and their obligations to customers. Export-focused forging manufacturers face an added set of challenges including port congestion, unpredictable international freight rates, rigid customs regulations, and delays in shipments. The combination of these types of disruptions will impact the overall performance of business operations by delaying many product deliveries and increasing customer dissatisfaction; and ultimately causing reduced perception of reliability for domestic/international purchasing.
Financial Constraints and Limited Credit Access
Accessing affordable financing is an ongoing challenge for small to mid-sized forging manufacturers; they do not have sufficient amounts of working capital available to obtain a loan, finance machines, or obtain funds to expand their operations. Interest rates are high and collateral requirements are stringent, preventing small and medium-sized manufacturers from investing in technological upgrades and/ or growing their business through expanding capacity. Moreover, the delayed payment from customers creates additional challenges regarding cash flow; this is especially important for micro, small, and medium-sized forging manufacturers that serve larger industrial customers, as these companies would adversely impact the companies’ ability to be financially secure and develop.
Environmental and Regulatory Pressures
As environmental regulations on emissions, waste disposal, and energy usage tighten across many manufacturing industries, many small forging manufacturers will face increased operating costs as a result of complying with these regulations. Investments into pollution control systems, waste management facilities, and energy-efficient equipment will require significant capital outlay to allow for compliance with environmental regulations.
Need for Innovation and Product Diversification
Manufacturers face a constant challenge from the evolving requirement for lighter, stronger and precision manufactured forged components. Therefore, manufacturers need to be aware of the current industry standards which continue to change.
Most of the smaller forging companies have either not developed their r&d, making it difficult to create new forging solutions, expand their product ranges, or enter into more lucrative export markets; without a high level of innovative thinking and ongoing development with regard to technology, these companies will find it difficult to remain competitive for the long term in the global forging marketplace.
Government Support and Future Opportunities
India’s forging sector has many difficulties operationally and financially, but continues to have an exciting future from India’s rapidly developing industry, infrastructure, and demand for automotive and alternative energy sources. The government of India’s initiatives like “Make In India,” MSME schemes of support, production-linked incentives, and skill-training programs give small/medium sized manufacturers new growth opportunities with improved competitiveness, upgraded technology, and advanced manufacturing systems.
Conclusion
The manufacturing sector of India is highly dependent on the small and medium-sized manufacturers of forgings to support the overall manufacturing ecosystem. Manufacturers in the forge industry face various operational challenges resulting from factors such as increased production costs, a shortage of qualified workers, limited access to technology, inadequate funding, and increased competition from global manufacturers.
Forging manufacturers will need to modernize their operational processes and improve their supply chains and production processes through the use of digital technologies for continued sustainable growth and profitability. Assuming the industry receives sufficient government support, and the necessary strategic planning is in place, the MSME sector of the forging industry can continue to play a significant role in the growth of the manufacturing sector of the country and in supporting the potential for exports.
