My Factory Is Closed

The elderly gentleman was waiting at the gate even before the bank branch was opened on that Monday morning, forty four years ago. He was in an agitated mood and quite different from his usual self. A regular visitor to the branch and always dignified in his behaviour and dealings, he was tense that morning. He grudgingly acknowledged our greetings that day. As we entered the branch after the doors were opened, he came and sat in the customers area outside the counter. He did not come into the banking hall even when our Assistant Manager requested him to come in. His demeanour indicated that he was unhappy with something. It appeared a storm was brewing. 

Branch Manager walked in and went to his cabin. He had barely sat down in his chair when the elderly gentleman rushed into cabin. We could not see what happened in the cabin because the cabin was a separate room and not a glass covered enclosure we have nowadays. His raised voice could be heard outside the Manager's room. "Your people have joined hands with my competitor. My raw material has been delivered to him and his factory is working extra shift. My factory is closed and my workers idle. My loss is his profit. You are a party to this. I will certainly do something about this", he shouted and walked away like a comet.  

Within a few minutes I was called into the Manager's cabin. Verification of some records and little discussion helped us into getting a clear picture of what was the real issue. The elderly gentleman had indeed a genuine grievance and his anger was well justified, though the cause was not intentional. The challenge now was to sort out the issue before the matter got out of hand and resulted in a serious complaint.

*****  

Indian exporters have to compete with their counterparts from countries in the neighbourhood like Bangladesh, Sri Lanka, Pakistan, Malaysia, Indonesia, Korea, Jordan etc. for selling their products in the international markets. This is all the more true in respect of readymade garment exports. They have three main challenges in pushing their products in the competitive market; price, quality and delivery schedules. Production costs are to be kept at the lowest, but quality cannot suffer. Delivery schedules have to be strictly met as a few days delay may result in the rejection of goods by the buyer in the fast-changing fashion market. Summer and winter wear requirements of Europe and Continental America also influence the market. Readymade garment units work on wafer thin margins and some incentives given by the government is often the saving grace for them. Managing such units is indeed a tough task. Fast turnover of labour is another problem area in running such units.

Indian garment trade contributes nearly 4% to the country's GDP. It provides 4.5 million jobs to tailors, transporters and traders. Nearly a fourth of the production is for the overseas markets. The total share in exports percentage-wise was nearly the same four decades ago.

As per the industry practice, buyers of such garments in overseas markets employ quality professionals and place them in the hub of such garment factories. These buyer's representatives decide on the quality of fabric and other material used in production. They visit cloth manufacturing units and specify the type of cloth to be used in making the garments. The export units have to buy the cloth from these factories alone for the making of garments. Ensuring continuous supply of fabric is a key component for keeping the workers engaged and meeting delivery schedules.

*****

The two readymade garment export units dealing with us were supplying to common buyers abroad. The materials used in production, nature and style of garments manufactured and delivery schedules were the same. Both were required to use a certain type of fabric manufactured in a factory located on the outskirts of Bombay (Mumbai). The manufacturing company insisted on payment for the material supplied through a settlement called "Documentary Credit" (popularly known as Letter of Credit or LC). Buyers bank was required to issue these LCs in favour of the supplier. Goods were being sent through "Approved Transport Operators". Such operators are not to deliver the goods at the destination unless the original MTR (Motor Transport Receipt) or popularly known as LR (Lorry Receipt) is produced at destination. Goods were loaded on the trucks at the producer's factory and sent to destination. Documents were produced by the seller to their bank in Mumbai and payment received from them. The bank would send the papers to the buyer's bank. Buyers were required to pay the amounts, receive documents and then take delivery of the goods from the transporter. This is how the work flowed and goods moved.

Though the system was supposed to work like this, there were problems for the buyers and transport operators in this system. Goods loaded on the trucks would reach the destination in 2 to 3 days. Truck operators had to unload the goods and store in their warehouses until the buyer produced the relative documents. This entailed unloading goods from the truck at destination and again loading for delivery at the buyer's factory. Valuable space was used up at warehouse as well as additional costs were incurred for loading, unloading and transport till the buyer's factory. Documents given to the bank would take about 10 days to reach the buyer through the bank's route. Postal delays were common. Couriers had not yet made their debut. At any rate holding trucks with load on them was impractical. Transporters made their money only when trucks were running on the road and not when idling at either ends of loading and delivery.

Transport operator and buyer had arrived at a simple formula for solving this issue. The truck would go directly to the buyer's factory from Mumbai. As the truck arrived, buyer would obtain the document number and come to the bank. Bank would give an authorisation to deliver the goods to the buyer in the absence of the documents that were yet to arrive from Mumbai. Both the transport operator and buyer were happy with this arrangement. Trucks got free in a few hours for their next journey and transport operator did not need to store the goods. Buyer got the goods quickly and without additional loading, unloading and transport costs. As regards bank, the risk was of payment by the buyer when the documents were received from the seller's bank. This was taken care by the buyers by placing adequate funds in their bank accounts when obtaining authorisation letters for delivery. Working was smooth and everyone was happy!

*****

On a Saturday, one of the trucks from Mumbai arrived at destination. The truck driver went to one of the factory by force of habit and goods were unloaded. The factory representative came to the bank, gave document number and took authorisation letter and disposed off the truck. The only problem was that it was a truck meant to go to the other factory. As the goods were identical, nobody observed the details of the consignment. One factory got the extra raw material while the other was starved of its rightful quota. This led to the angry visit of the elderly gentleman to the bank on Monday morning.

Rest of the story was indeed simple. The matter was dealt with between the two partners of the two firms. The younger son of the elderly gentleman, who was a partner of the firm with his father, mother and elder brother handled the issue deftly. The goods on the next truck meant for the other factory was diverted to the starved factory. As all other consignment details were the same, not much of give and take was required.

*****

The case of exchanged trucks taught us a very important lesson - be extra careful when the systems are short circuited. All things may appear in order and simple. Yet, there could be complications and unforeseen mishaps. It also taught another lesson - that a problem could be solved with understanding, maturity and give and take attitude.

Inside the Boeing Factory

Boeing and Airbus aircrafts have ruled the skies and air travel is almost confined to using one of their planes.  They are leaders and rivals in aviation industry.  Who is the market leader?  The answer is difficult to find due to multiple factors that are used to claim market leadership.  Airbus claimed 53% market share in 2013. Boeing delivered 648 airplanes as against 626 by Airbus that year.  Boeing's earnings were 51 billion US Dollars as against 38 billion US Dollars of Airbus.  Due to the peculiar nature of the industry, it is difficult to pin point as to who is the leader. There are many factors for consideration; order book, revenues, aircrafts delivered etc.  To a dispassionate observer it appears that both are equal market players and fierce competitors.  Other aircraft producers are only fringe players. However, one distinct fact emerges from the comparison; Boeing is producing higher number of bigger planes whereas Airbus is producing more number of smaller planes.  Aviation industry needs both types, depending on the traffic in different routes and handling capacities of large, medium and small airports.

Boeing is the world's largest aerospace company since it also manufactures and sells satellite weapons, electronic and defense systems, launch systems and advanced technology solutions related to Aerospace industry.  The aggregate earnings of all these products accounts for the higher revenues. The company is one of the largest employers in the world; over 170,000 people work for the company.  55,000 employees work at a single location, Everett near Seattle in Washington State, USA. Incidentally, the very first Boeing-747 manufactured was named as Everett.  A visit to the Boeing factory in Everett is a wonderful experience to anyone interested in planes. Children simply love it.  And so do adults with a child's enthusiasm.

Boeing company provides an opportunity to visit its Everett facility and the tour is called "Future of Flight Aviation Center & Boeing Tour". Booking can be made on-line or over phone and there is a guided tour every hour, each tour lasting about 90 minutes.  Additional tours are provided to accommodate group visitors and peak time requirements.  Admission charges are about 20 US dollars with discount for advance booking and youth below 15 years. The tour starts with a ten minute introductory film about the company in the auditorium adjacent to the booking office.  Photography inside the factory is strictly prohibited.  Arrangements are available for wheel-chair visitors as well.

The Everett factory situated 25 miles north of Seattle city is spread over 98.3 acres which is 12 acres bigger than Disneyland in California.  Production area covers 472 million cubic feet.  Its 55,000 employees work in three shifts on 365 days a year.  The length of one production floor, through which the visitors are taken through, is nearly one kilometer and monthly production level is 10 planes in one floor unit.  The visitors are shown assembly of three models of aircraft from an elevated platform - Jumbo 747-8, 777 and 787 Dreamliner.  A Boeing 747-8 has 6 million parts in it and yet the final assembly in this product line is done in 3 days!  All activities are standardized and the name of the airline buying each of the planes is already painted on them during the assembly itself.  Each production floor has three aircrafts being assembled at any given time.  The planes being assembled are on slow moving pedestals and at the end of the third day the aircraft moves out and flies to the buyer's place. Each of these aircraft costs approximately 260 million USD to 350 million USD, depending on the model.

Boeing 747-8 is a wide bodied, twin aisled fourth generation jumbo jet and is a competitor to Airbus's A380.  The four engined aircraft can carry up to 460 passengers depending on seat configuration.  The aircraft with a take-off weight of 440,000 kilograms is used by airlines on long-haul busy routes like trans-atlantic and trans-pacific flights.  It can fly at a speed of 500 miles or 800 kilometers an hour and is more fuel efficient and less noisy than its earlier versions.  One such aircraft flies between Bangalore and Frankfurt.

Boeing 777 is a wide body twin engine jet that can fly non-stop up to 17,000 kilometers.  It can carry 300 to 440 passengers at a speed of 600 miles per hour (about 950 kilometers per hour).  It is Boeing's first fully computer designed aircraft.  It is also its first fly-by-wire aircraft with computer-mediated controls.

Boeing 787 Dreamliner is the latest aircraft from the Boeing stables.  Its body is made of hardened plastic and fibre glass as against the traditional Aluminum bodies for other aircrafts.  The material made of plastic and fibre glass is stronger than steel but lighter than Aluminum.  Its shining surface gives a pleasant look and the travel in them is more comfortable.  It is suitable for landing and take-off from mid-sized airports as well.  The twin-engine long haul aircraft can carry 200 to 350 passengers.  Air India was one of the earliest users of the aircraft but the experience was not that pleasant due to technical and other reasons.  Air India is now selling these aircrafts to repay long term loans.

The 90 minute tour through the Boeing factory last month was a thrilling experience and gave a true insight into aircrafts and aviation industry.  At the end of the tour, the guide asked us in the group of about 50, as to who has traveled in each of these aircrafts.  I was the only one who had traveled in all the three of them. Others too might have done so.  Only they might have not noticed them!