“Danfoss seeks to provide the enabling technology that sustains the farm-to-fork process, ensuring food safety, freshness and hygiene all along the way,” remarks Ravichandran Purushothaman, President, Danfoss Industries Pvt. Ltd. In this exclusive interview, Ravichandran shares with us the future of cold chain infrastructure in India and how is Danfoss going to play an active role in this ever evolving growth journey with energy efficiency at its core. Excerpts…
Drives are an integral part of any industry vertical. How is the segment shaping up as far as the performance is concerned?
Energy Efficiency in enterprises is now a boardroom topic, driving increased demand for drives. Electric motors along with variable frequency drives are extensively used in industrial, HVAC, water, F&B, and several other applications. Drives play a key role in enhancing process and energy efficiency in most industries, right from air handling units to conveyer belts to energy storage to chemical centrifuges to elevators & escalators. AC drives control the power supply to electric motors and typically save 15-40% of energy consumed. 40% of electrical energy consumption in the world is by electrical motors.
Global electrical energy consumption could be reduced by 10% if AC drives were used in every suitable application. This spurs the global demand for variable frequency drives (VFD), which is expected to increase at over 7% CAGR during the period 2016-2026. The scope of this segment is ever growing with a constant demand for quality driven energy-efficient technologies that Danfoss focuses on. This is a consequence of individuals as well as industries understanding their commitment towards the planet.
How complex is the supply chain and how is Danfoss managing it efficiently?
Since the beginning of our operations in 1999 in India, we have transformed from being a sales company selling international products to a company that is focused on creating and customizing its technology to suit the requirements of diverse industries. It has been a pleasure to witness our steady growth and evolution into being a full fledged facility that is facilitated by a strong R&D team with a manufacturing unit which develops products not only for India but also exports products to other countries.
Earlier, 100% of our products used to be imported from other countries. However, now close to 25% of all technology products come from within India. We have created a strong ecosystem of supply base, which will contribute to increasing sourcing within India five times compared to the previous year, over the next three years. While the general trend is to import products from China, we can proudly say that Danfoss India is exporting to China. We follow a ‘One product one location strategy’ across Danfoss and revel in our global supply chain footprint and strong local sourcing expertise. Scale is also an important driver for growth. Our success was adopting and being a pioneer in ‘mass customization strategy’.
Energy efficiency has been taking center stage these days. How is Danfoss taking a step in this direction?
Individuals and industries are beginning to realize their responsibility towards the planet and reducing their carbon footprint. Rather than buying our way to carbon neutrality, we have undertaken a practical approach to show that we can reach the heights of energy efficiency and climate conservation with our own existing technology.
Energy Efficiency is the core & DNA of Danfoss and we focus on doing more with less. If you take the case of some of our 4th or 5th generation products, you will find that the main differentiating factor has been energy efficiency across generations... Danfoss is a member of COP 21 and UN Global Compact. The Danfoss Climate Strategy 2030 seeks to halve the amount of energy used and CO2 emitted by 2030. This means that while we already have some of the most energy efficient factories, but we will further reduce our energy consumption by 50%, as also the CO2 emitted from the energy consumed by 50% while continuing the growth momentum. This we believe is the way we walk the talk.
Even when it comes to our R&D and production facilities, we have kept energy efficiency as a key focus. We are proud to share that the Danfoss India Oragadam Campus is acknowledged as the first LEED Platinum rated constructed manufacturing campus in India, thanks to the several green and energy efficient initiatives installed at our campus, including a 1mw solar power plant.
How can energy efficiency be brought into supply chain spectrum?
An effective supply chain is one that is energy efficient. It is also a key driver for cost. Even small steps undertaken by companies can contribute to reducing their carbon footprint. Danfoss has adopted a zero waste environment philosophy, which not only contributes to a better environment but also has multi-faceted business benefits.
Our deep localization in supply chain focuses on keeping the carbon footprint of our supply chain low. One example, I can quote here is from our own experience in India where we were having multiple deliveries being done to multiple clients at multiple cities. Our supply chain team worked on this and adopted a ‘Milk Run’ model, wherein our customers in different cities agreed to a fixed delivery model, with pick-up and delivery only on specific days. This not only helped bring in efficiency in our system but also reduces our costs and carbon footprints. Our customers were also delighted as they had a clear schedule of deliveries and contributed to creating a greener planet.
How do see the Indian economy dynamics shaping up with the Central Government’s recent initiatives?
Around 60% of Indian economy is consumption driven and with the growth of our services sector and urbanization, we would continue to see opportunities being created under ‘Digital and Make in India’initiatives. As you know, 2/3rd of India is yet to be built and this offers a great opportunity for investments in infrastructure, which will in turn drive the growth of core sectors of Indian economy.
In line with government’s ‘Make in India’ initiative, Danfoss also kick started its own version of the same with a new manufacturing campus in India. Danfoss has a three-step approach to ‘Make in India’: First – to make in India for the Indian market, second – to make in India for the rest of the world and third – to make components in India for application in global innovations. Furthermore, our promise towards Engineering Tomorrow’s India in a sustainable manner holds true by way of providing energy-efficient solutions to diverse industries. With regard to GST, I foresee transparency in the business chain, which will enable significant value creation for the Indian economy.
How complex & challenging is it to work in India vis-à-vis other countries as Danfoss is a global brand?
The Indian manufacturing sector has the potential to grow six-fold by 2025 up to $1trillion, creating up to 90 million jobs. With the current Government’s Make in India initiative, this sector is set to grow further. The fact that India is a developing country gives us an added advantage that we are at the ‘start’ line. This gives us the opportunity to apply knowledge that has been proved successful in similar societies and also learn from their mistakes.
However, there are some challenges that need to be overcome to help India leapfrog to a leadership position. Our government needs to focus on improving the ‘Ease of doing business’ and ‘Skill Development’to help India be more competitive and supportive in our ambitions to be a ‘manufacturing powerhouse’ for the globe. However, at Danfoss we look at India as a promising land of opportunities rather than focus on its’ challenges.
Where does India stand when it comes to Danfoss Group strategy?
India is an important growth region for Danfoss and we have a successful ‘Core & Clear’ strategy in place for future growth. Danfoss India is currently a 1000 crore company with strong double-digit growth. We are amongst the top five markets in terms of profitability and within top ten in terms of overall sales across Danfoss Global. We aspire to be in the top 5 within the next 5 years and aim to reach 2000 crores by the year 2020.
What are the major initiatives & advances shaping up in cold chain industry in India?
Agriculture plays a significant role in serving as a key contributor to the growth of GDP and the socio-economic sector in India. In total farm output, India is the second largest in the world. India also ranks first in the production of milk, jute and pulses, and half of the agricultural workforce is employed in forestry and fishery. All of this proves the immense potential of India's agricultural sector contributing to the economy as well as exports through the trade of food and farm produce. However, in the present scenario, only around 10% of the food produced moves through cold chain and there are substantial food losses with varying figures, with some indicating as high as 35 to 40%!
Indian farming sector is undergoing a dramatic transition through process innovation and technological advancement for enhancing the quality of our produce from farm to fork! These two drivers increase the need for a reliable supply chain logistics, which is helping to drive growth in cold chain.
The safety and longevity of perishable farm produce and processed food is critical for our trade and commerce. Therefore, Danfoss seeks to provide the enabling technology that sustains the farm-to-fork process, ensuring food safety, freshness and hygiene all along the way. Furthermore, improving the socio-economic status of our farmers and earning the confidence of our customers is a milestone that we cherish the most!
You have been quite vocal about industry-academia tie-up to enhance skill sets. This stands all the more crucial when it comes to supply chain & logistics. Kindly enlighten as to how we can eradicate existing gaps.
I think industry needs to engage more with universities and build a strong ecosystem for innovation. To foster the engineers of tomorrow, Danfoss has a comprehensive university engagement program that connects with student community in campuses across India. A unique partnership between industry and academia, the Danfoss university engagement initiative plays a key role in imparting industry-specific knowledge and the latest technology in climate and energy to engineering students, besides encouraging them to think innovatively.
‘Insight 360’ is another initiative whereby academicians from select engineering institutions across India are provided clear insights into the dynamics of engineering and design, latest developments in the industry, and help guide students in their research projects. Through the university engagement program, Danfoss promotes an intensive transfer of knowledge that creates awareness about its product offerings and technology to the future generation of influencers, decision makers and users. We believe that industry and academia should work together to enhance skill sets and incidentally, the steps that government is taking along with NSDC will be of help, in this journey.
With the proposed GST rates out by the government, how do you think is it going to impact businesses?
The GST regime will cause a tectonic shift in India’s taxation history. I foresee transparency in the business chain, which will enable significant value creation for the Indian economy and this works well for us at Danfoss as well. While this might require a shift in the mindsets of companies – from the way they do business, to the fact that all channels will have to be digitalized at every stage – the goal is perfection in execution to achieve transformation.
GST on power & renewables
When one looks GST’s impact sector-wise from the view of Danfoss, the power sector is likely to see a positive impact. This is largely because of the thermal power sector where coal has been categorized under 5% vis-a-vis previous 11.7%. Additionally, capital goods have been put under the 18% slab. This will lead to a reduction in power project development costs. However, it is important to keep in mind the adverse effects on the environment due to coal usage.
GST on manufacturing
While the ‘Make in India’ initiative was started with the intention of making India as one of the top 10 manufacturing hubs in the world, there have been several hurdles that companies face in terms of cascading taxes. However, with the introduction of GST, we believe that it will help streamline the sector, creating a cooperative synergy in the country. Some positive ways in which we see the impact being felt include reduced cost of production, supply of goods with ease where we hope to see decreased state-border checks. The other side of the coin is of course, increased compliance requirements and supply chain restructuring that might be required from the company’s side. Overall, we feel the introduction of GST will have a positive impact on the Indian economy, though at present, it looks like a white elephant to most people!
What’s your growth strategy ahead?
Staying closer to customers, understanding their needs better and thereby creating innovative solutions will be our growth strategy. Our aspiration is to reach 2000 crores by the year 2020. We expect this to be met with both organic and inorganic growth. We will be leveraging on the three key mega trends in India, capable of driving growth across our entire product portfolio: Urbanization, Cold Chain, Power and Energy. Across the Danfoss globe, we are on a digitalization journey and our customer service solutions are also being revamped through an integrated approach to deliver more with less!
UP, CLOSE AND PERSONAL
What’s your success mantra? Focus on planning, prioritization and execution!
What’s your leadership style? Enhanced engagement & empowerment of employees
Who’s your mentor? I have had several mentors over the years and they have created an open learning and sharing path for me, conducive for my continuous development.
Which book have you read recently and how have you implemented those learnings in your business? The Founder’s Mentality by Chris Zook and James Allen. The 3 main ideas presented in this book – Insurgent mindset for customers, unambiguous owner’s mindset and relentless mindset to front line are under implementation in our business.