International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online), INTERNATIONAL JOURNAL OF MANAGEMENT (IJM) Volume

e 4, Issue 6, November - December (2013)

IJM
IAEME

A STUDY ON EMPLOYMENT GENERATION VIA OUTSOURCING AND AREAS OF CONCERN FOR SUSTAINABLE DEVELOPMENT OF SSI UNITS
Dr. Dattatry Ramchandra Mane Professor, Department of Management Sciences, University of Pune, Pune.

ABSTRACT Outsourcing is the act of one company contracting with another company to provide services that might otherwise be performed by in-house employees. Often the tasks that are outsourced could be performed by the company itself, but in many cases there are financial advantages that come from outsourcing. Many large companies now outsource jobs be it in service sector or manufacturing. These jobs are handled by separate companies that specialize in each such services or operations. Since Independence, there has been a widespread recognition in India that small enterprises could be engines of economic growth, job creation and relative prosperity. The component industry is undergoing a major structural change and is now becoming a Tiered Industry. The Tier 1 is the complete system supplier, followed by the lower Tier companies that supply sub-systems and single parts. The industry has a very large number of SMEs. In order to promote the development of SMEs, it is crucial to effectively integrate them into the supply chain as Tier 2 and 3 suppliers. The most critical enabler for the huge growth envisaged for the Indian Automobile Industry shall be adequate availability of trained manpower. Based on the current pattern of employment it is estimated that automotive industry would require huge numbers of trained personnel to work at various levels. It is pertinent to mention here that only specialized and industry specific inputs can improve the competitiveness of the industry. Hence the researcher has tried to concentrate on the auto component manufacturers and collected the data through a structured questionnaire from about 46 tier-I and 112 tier-II suppliers. The researcher has tried to find out whether outsourcing has increased the employment opportunities, had it in true sense increased the quality of manpower employed by these units and had it contributed to the development of the industry and if not so the researcher had tried to identified the areas of concern where the suppliers should concentrate. The researcher has focused on certification of the suppliers, quality of man power employed and rejection, their perception on process control, machine maintenance policy etc and tried to identify the areas where these suppliers has to focus to meet the competitive requirements of these industry.

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 6, November - December (2013)

INTRODUCTION Small firms, with limited opportunities, limited markets and limited resources, must use every means available for improving performance and insuring survival. Although many human resource management (HRM) practices are advocated as leading to firm improvement and/or survival, little research in this area pertains to small businesses. The future success of any organization relies on the ability to manage a diverse talent that can bring innovative ideas, perspectives and views to their work. The challenge and problems faced of workplace diversity can be turned into a strategic organizational asset if an organization is able to capitalize on this melting pot of diverse talents. When Total Quality Management (TQM) first broke onto the management scene, it was hailed as a revolutionary idea that would speed up production, increase efficiency, and generally bring success to any organization that pledged allegiance to it. TQM was supposed to bring quality to the whole organization, changing cultures and breaking down departmental barriers. And for some organizations, this did indeed turn out be the case. TQM was introduced, adopted and sustained to create tangible business results. However, for many more this concept simply failed to deliver. Why? Because in their haste to introduce this culture or mindset to their businesses, senior managers forgot about the key factor that would make or break this initiative; people. Many executives simply did not grasp the fundamental ethos behind TQM that you could not introduce systems and procedures to overcome resistance and that diagrams or flow charts would not equate to culture change. TQM is all about empowering people to make the necessary changes towards quality and to incorporate this way of working into their everyday tasks. Whilst it is relatively easy to introduce TQM to a business, the real test comes in sustaining these practices and making them part of a culture rather than something people feel they have to do. In other words moving from obligation to willful participation. In todays era of outsourcing it has been more important to see whether outsourcing has helped to increase the job opportunities as number of tiers involved in the process increases. Small units in developing economics are known for technologically backwardness and India is not an exception. In majority of Indian SSIs there is lack of competitive strength which is due to use of outdated technology. It is observed that Indian industries are almost the last imitator when it comes to adaptation of technology. And due to low technology and small scale units the machines and no hi-tech machines and thus it requires large number of labour force hence the researcher had decided to probe into this that whether multi tier outsourcing increased employment opportunities and if so due to large human intervention in the process had it affected the quality adversely. APPLIED METHODOLOGY Idea Generation The automobile industry has seen phenomenal growth during last two decades or so. It was observed that there was a tremendous pressure on the giants in this field to produce vehicles and fulfill the production processes carried out by these companies. These changes are distinct from the changes forced by the technological development. Further, these changes have added different dimensions to the traditional approaches in almost every function of the business. Certain new concepts have emerged, such as, Vendor Development, Supply Chain Management, forward and backward Integration of the production processes, outsourcing etc. While introducing each of such new concepts, it has been stated that these concepts will lead to reduction of cost with high quality and greater speed in the production processes.

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 6, November - December (2013)

OBJECTIVE OF THE STUDY 1) 2) 3) 4) To study the impact of outsourcing on employment generation. To study the quality of workforce employed at each tier. To study the impact of human resources on quality of the product. To study the impact of experience and qualification on the quality of the output.

Universe There are close to 400 players in the organized sector i.e. tier-I and over 5,000 in the unorganized sector i.e. tier-II and tier-III. Players in organized sector supply to organized vehicle manufacturers directly. The unorganized sector, on the other hand, mostly has small units, producing low-technology components and supply to tier-I organized supplier and predominantly competing in after-market spare. Sample size 1) 114 number of tier-II manufacturer who falls under unorganized sector and who are suppliers to tier I manufacturer. Sampling technique used It was not possible, nor it was necessary, to collect information from the total population. Instead, a smaller subgroup of the target population or a sample was selected for the purpose of study. Sampling is the strategy of selecting a smaller section of the population that will accurately represent the patterns of the target population at large. The main purpose of the sampling was to improve quality of data by focusing on a smaller group. The research is about Automobile Sector in Pune region. Pune region has been selected as there are plenty of SSIs in this sector and secondly, the researcher found it convenient to focus on the region on the grounds of vicinity. Tier-I- who are direct vendors to the giants vehicles manufacturer. Though multi stage sampling is a part of random sampling the researcher has used multistage sampling for non random sampling for Tier-II vendors. Sampling design for Tier-II vendors N=1000 approximate n=114 sampling ratio 11.4% Sampling technique- Non random- Combination of convenience and Judgmental sampling. Data Collection Taking into consideration all the facts the researcher has used. 1) Questionnaire: A structured questionnaire was prepared. 2) Records: Information, data specifically related to the rejection rate and outsourcing tendency was taken from the records. 3) Individual interviews: Individuals responses, opinions and views were considered.

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 6, November - December (2013)

Data analysis 1) Certified Units and their turnover: Proportion of Certified units and there turn over

Percentage of Certified Units and their Turnover

Observation: From the data analysis it is found that majority of the certified units has turnover of 1Crore and above followed by 50 Lakhs 1Crore. 2) Non Certified Units and their turnover: Proportion of Non Certified units and there turn over.

Percentage of Non Certified Units and their Turnover

1 cr and above 46%

Observation: From the data analysis it is found that majority of the non certified units has turnover of 1Crore and above followed by 50 Lakhs 1Crore. 3) Employment in certified units Permanent Operators 20 45 151 560
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Turn over 25L 50L 1CR 1 CR+

Managers 2 8 23 119

Contractual Operators 46 82 75 730

Total 68 135 249 1409

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 6, November - December (2013)

Observations: From the analysis it is observed that increase in turnover increases employment. It is also observed that there is more employment generation in companies whose turnover is greater than 1 Cr. Comments: It is observed that the proportion of contractual operators is greater than that of permanent operators when the companies turnover is higher than 1 Cr this is due to the technology which is installed as the company goes for hi-tech machines and automation where human interference in the process is reduced to a considerable extent and the operator has not much control on the machine and hence quality of the product is assured due to automation. 4) Employment in non certified units: Managers/ Permanent Turn over Supervisors Operators 6 31 25L 12 98 50L 36 137 1CR 43 249 1 CR+

Contractual Operators 50 39 69 234

Total 87 165 287 626

Observations: It is also observed that there is more employment generation in the companies whose turnover is greater than 1 crore. Comments: It is revealed that in the initial stage i.e. when the units are small in terms of turnover the proportion of contractual operators is more but as the turnover increases the proportion of permanent operators to contractual operators increases which is because of constant growth and assurance of business and also these units has to maintain quality and the delivery schedules as these units are not preferred by the OEMs as they are not certified hence to be in the business they have to focus on quality and delivery schedule to remain in the business hence the proportion of permanent operators increases as the turn over increases as from the analysis it is observed that permanent operators are better in quality and rejection is less as compared to contractual operators. It is also found from the discussions that non certified units are not technology oriented they use conventional machines and dont go for hi-tech machines and also automation in the process is not at a larger scale hence the operators are the key factor for success and hence these operators are made permanent so that they will remain with them for a longer period. 5) Comparison of Employment in Certified and Non Certified units Turn over 25L 50L 1CR 1 CR+ Certified 68 135 249 1409 Non Certified 87 165 287 626

Observation: it is revealed that there is growth in employment as the turnover of the company increases. Conclusion: it can be concluded that irrespective of the certification there is increase in employment in both the case due to increase in turnover.

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 6, November - December (2013)

6) Average employment

Average Employment
Certified 14.5 22.520.62 Non Certified 22.619.13 36.12 25.04

25 lakhs

50 lakhs

1 cr

1 cr and above

Observation: it is revealed that there is growth in employment as the turnover of the company increases. Conclusion: it can be concluded that irrespective of the certification there is increase in employment in both the case due to increase in turnover. 7) Category wise manpower employed by certified units

Category wise Manpower Employed by Certified Units in %

51.8 39.7

50-1 Cr

Observation: From the analysis it is observed that there is increase in the proportion of Managers and Supervisors with increase in turnover which has compensated by reduction in operators. Comments: Increase in the percentage of managers and supervisors and reduction in operators is seen with increase in turnover of the company is the result of technology installed by these units. The turnover increases due to the demand increased as once the company is tried and tested and if they had delivered the quality products and the scheduled is maintained they are loaded with more jobs (load) which increases the volume of production. This volume will allow the units to go for SPMs (special purpose machines) and hi-tech machines which further increases the output without increasing the manpower (operators). And hence for managing this technology qualified and trained people are required this resulted in increase in managers and supervisors proportion.

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 6, November - December (2013)

8) Category wise manpower employed by non certified units

Category wise Manpower Employed by Non Certified units in %

47.7 24 6.9

39.7 37.4

25-50 Lakhs

1Cr & above

Observation: From the analysis it is observed that there is increase in the proportion of Managers and Supervisors with increase in turnover which is compensated by reduction in operators. 9) Tier-II certified and non certified in house and outsource rejection in PPM
Tier-II Certified & Non Certified Rejection per process in PPM
7000 Rejection in PPM 6000 5000 4000 3000 2000 1000 0 In house Rejection Outsource Rejection 2740 2309 4788 Certified Non Certified 5941

Observation: After comparing the data for both the groups it is observed that rejection is higher in case of operation which are outsourced in both the groups. It is also observed that proportion of rejection per process is more in case of non certified suppliers in both the categories i.e. in house and outsource operations. Comments: In house higher rejection by non certified suppliers is due to non standard component which requires different skill sets and learning. It is also observed that as these orders are non uniform and in less volume and many times non repetitive in nature, it is not possible for these suppliers to design a standard process and go for special purpose machines which is designed for carrying out a specific operation with higher productivity, less chances of rejection and at lower cost. It is also not possible to do any modification on the machines and also design a measuring instrument to measure the performance which will reduce rejection and save inspection time if required by that particular job. The reason is that the order is not of repetitive nature (i.e. assured business) and volume is also not that high and ensured.

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 6, November - December (2013)

10) Further analysis Factors Rejection (per process) in PPM ( Parts Per Million) Rework (total) in PPM Manager to Operator ratio Permanent Operators Technically qualified Managers Rejection Technically qualified supervisor Rejection Experience of Supervisor Technically qualified Operators Rejection Experience of operator FINDINGS 1) 2) 3) From the data analysis it is found that majority of the certified units has turnover of 1Crore and above followed by 50 Lakhs 1Crore. From the data analysis it is found that majority of the non certified units has turnover of 1Crore and above followed by 50 Lakhs 1Crore. From the analysis it is observed that increase in turnover increases employment. It is also observed that there is more employment generation in the companies whose turnover is greater than 1 Cr. From the analysis it is observed that increase in turnover increases employment. It is also observed that there is more employment generation in the companies whose turnover is greater than 1 Cr. It is revealed that there is growth in employment as the turnover of the company increases. From the analysis it is observed that there is increase in the proportion of Managers and Supervisors with increase in turnover which is compensated by reduction in operators.
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Tier-II Certified 2309

Tier-II Non Certified 4788

Comments Rejection per process is higher in case of non certified suppliers and average operation on a component come out to be 8 operations per component. Rework is more than double in case of non certified suppliers Better in case of non certified suppliers Ratio of permanent operators is better in case of non certified suppliers. Larger number of technically qualified managers is employed by certified suppliers. It is found that employing technically qualified managers reduces rejection. Larger number of technically qualified supervisors is employed by certified suppliers. It is found that employing technically qualified supervisors reduces rejection. Higher the experience, lower the rejection Larger number of technically qualified operators is employed by certified suppliers. It is found that employing technically qualified operators reduces rejection. Higher the experience, lower the rejection

10646 8% Managers 45% 98%

22175 10% Managers 57% 85%

11823 71%

13780 57%

11455 High 33%

17188 Low 26%

11525 High

14365 Low

4)

5) 6)

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 6, November - December (2013)

7)

8) 9)

10)

11)

12)

13)

After comparing the data for both the groups it is observed that rejection is higher in case of operation which are outsourced in both the groups. It is also observed that proportion of rejection per process is more in case of non certified suppliers in both the categories i.e. in house and outsource operations. It is revealed that there is growth in employment as the turnover of the company increases When we distinguish managers into technical and non technical educational qualifications, it is found that there is not much difference between non certified suppliers and certified suppliers. It is also found that qualifications of managers have positive impact on quality i.e. technically qualified managers reduce rejection levels. In case of supervisors, it is found that non certified suppliers employ less number of technically qualified supervisors than those of certified suppliers. When we compare the data for rejection with the qualification of the supervisor, it is found that suppliers employing more number of technically qualified supervisors have less rejection levels than the supplier employing non technical supervisor. Hence the researcher can conclude that the technical qualification of supervisors play an important role in reducing rejection. It is found that tier-II certified suppliers employ supervisors with higher experience. It is also revealed from the data that higher the experience, lesser is the rejection. (Certified companies need to have necessary organization and infrastructures, besides many of them are well established, growing, large and providing relatively better packages and facilities. Such companies are able to retain experienced persons). When we compare the rejection with the qualification of the operator, it is observed that suppliers employing large number of technically qualified operators have less rejection than suppliers employing less number of technically qualified operators. From the analysis, it is also found that percentage of supplier employing technically qualified operators is less in case of non certified suppliers, hence rejection is higher. Hence the researcher can conclude that one of the reasons, behind higher rejection at non certified suppliers is employment of larger number of non technical operators. (Role of skill, education and experience on quality and productivity is yet to be fully appreciated by many tier II and III vendors). It is observed that operators employed by non certified suppliers are less experienced than those employed by certified suppliers. It is also revealed that rejection is higher in non certified suppliers. (Causes of high employee turnover in non certified company need further investigation).

REFERENCE 1) 2) 3) 4) http://www.scribd.com/doc/13653138/Importance-Of-HRM TQM and HRM The Human Side to Quality http://shop.emeraldinsight.com/product_info.htm/products_id/71 Study of Technological Change in Small Enterprises of A Developing Nation: Analytical framework and empirical examination Institute of economic growth Delhi- India T.A.Bhavani http://www.iegindia.org/adipub.htm: 5) Dr. Dattatry Ramchandra Mane, To Study the Impact of Multi-Vendor Outsourcing on the Performance of the Suppliers and Rejection Levels, International Journal of Management (IJM), Volume 4, Issue 2, 2013, pp. 273 - 284, ISSN Print: 0976-6502, ISSN Online: 0976-6510.

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