How India Clusters Growth

By applying new management tools to traditional hubs of manufacturing—such as Tamil Nadu's leather trade—local firms boost competitiveness and quality

by Manjeet Kripalani

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In a neat industrial area on the outskirts of Chennai is the factory of export house Farida Group. Inside the spacious workplace are rows of women in uniform blue jackets and men in blue-gray polo shirts who quietly operate moulding and pressing machines. At the beginning of the rows are marked-up productivity and quality charts. The floors have markings in paint for the exact position of the tables and machines.

It has the look and feel of an efficient, modern auto parts operation, but Farida is in fact a leather factory that makes shoes for export to top brands like Timberland (TBL). About 80% of the workforce is composed of women who sit behind the tables, hand-cleaning and finishing the shoes, lacing them up expertly and then putting them into boxes, ready for the shipping container.

This factory is one of four that Farida has in the state of Tamil Nadu. Farida has three similar facilities in the town of Ambur, about 100 miles from the city. In Ambur, the company employs 4,000 people working two shifts to produce shoes for export to Britain, Germany, and the U.S. Every day, busloads of young women and men travel to Ambur from as far as 25 miles away. Their earnings start at $100 a month, a coveted, stable income in the poor rural area they come from, and enabling a measure of precious financial independence for the women. Apart from boosting the manufacturing of leather shoes, the Farida factories contribute to "rural development, women's [empowerment], and vocational training in a part of the region that had been virtually forgotten," says Farida's owner, Rafeeque Ahmad.

Tapping Natural Talent

These facilities are part of a slew of new manufacturing hubs, or "clusters," developing across India, from Chennai in the south to the hosiery and knitwear capital of Ludhiana in the north. These clusters take advantage of the traditional skills of a community, transforming local groups of workshops and small factories into a modern industry. For instance, the Ambur area has been home to leather workers for over a century, and the state of Tamil Nadu is India's leather capital: Of the $3 billion in annual leather exports from India, 40% to 45% comes from Tamil Nadu, and a total of $750 million comes from the Ambur area alone. The cluster strategy is one reason that India is in the middle of a manufacturing boom. (BusinessWeek, 10/04/07)

Farida is a 50-year-old family business founded by Ahmad's grandfather. At the time, the Muslim community ran the leather tanning and curing business, as Hindus considered the cow sacred. However the lowest-caste Hindus did work with leather. They, along with the Muslims, lived in and around Ambur, and their combined skills built the leather business in the area. As Farida grew from a tanning business into a sophisticated shoe design and manufacturing exporter, it found ready skills in the area and developed them, with some help from, of all sectors, Chennai's auto parts industry.

Farida's inspiration came from V. Narasimhan, the former president of Sundaram Clayton, one of India's top auto parts exporters and winner of the prestigious Deming Prize for quality in manufacturing. Narasimhan is the spiritual leader of the clusters program, an initiative between the public and private sectors. On behalf of the Automobile Components Manufacturing Assn. and the Confederation of Indian Industry, the modest man from Chennai travels once a month to different parts of the country, preaching his gospel to makers of autos and auto parts. He has helped upgrade the quality and productivity of 150 auto parts companies in India alone.

Striking a Chord

Two years ago, Ahmad and two of his U.S.-educated sons went to a conference in Chennai about quality management in manufacturing.