Caterpillar's suppliers seek business outside state | SupportBiz

Managing Growth

Caterpillar's suppliers seek business outside state

Hosur saw mills providing packaging solutions for large manufacturers such as Caterpillar, Tenneco and Ashok Leyland, are banking on volumes growth given fluctuating profit margins amid rising costs.

Power outages, rising fuel prices, a depreciated rupee and ever-increasing labour costs have taken a toll on margins that are declining and drop by almost 50 percent on certain orders, said Kamlesh J Patel, the proprietor of Limbani Saw Mills. Adding new customers from beyond the confines of this industrial zone and cutting costs within are the only ways to keep growing the business, he said, adding, “it is a buyers’ market and customers will not pay more overnight. Many ask us to cut costs by reducing the thickness of a wooden pallet.”

Limbani Saw Mills and Krishna Saw Mill and Wood Works are old names in this business in Hosur. Making and supplying wooden crates is their main activity.

Wooden crates are made to order and used to move heavy machinery and products that need sturdy packaging during shipment. Both companies continue to have a steady flow of orders from industrial units in the Hosur belt.

But the lack of continuous power supply, key to cutting logs of wood, including imported pine wood, to make wooden pallets, forces saw mills to rely on expensive diesel generators, said Gaurav Patel, who runs Krishna Saw Mill and Wood Works.

And running generators is a blow to business because diesel costs work out to INR1,000 a day, added Gaurav Patel.

Till recently, Hosur, like many other industrial zones in Tamil Nadu, was plagued by 10-hour blackouts, according to a SupportBiz report, forcing timber units to run diesel generators for several hours a day, Kamlesh Patel mentioned.

Any increase in petrol prices pushes up costs too – in hauling plantation rubber wood from Kerala; or imported pine wood from the various seaports, said Kamlesh Patel.

Fluctuating prices of imported timber amid the rupee’s volatility adds to these unit’s woes --  Timber imports into India, the second largest importer of the raw material after China, have already fallen by about 40 percent owing to a weak rupee, SupportBiz reported in May.

The best way to reduce costs, in Kamlesh Patel’s opinion, is to set up timber yards and saw mills in close proximity to the source of the raw material, which is the case with most industries in China.