The manufacturing sector has become one of the fastest growing segments of the Indian economy. India is expected to become the 5th largest manufacturing country by 2020 with some of the most profitable manufacturing businesses in India driving the growth. The Gross Value Added from the manufacturing sector grew at a CAGR of 4.34% between FY12 and FY18.

Small and medium enterprises form the crucial driving force of growth. SMEs contribute to 45% of the total industrial output of India and have maintained a growth rate of over 10%. Together, it creates the perfect time to start a manufacturing business.

However, starting a new firm requires considerable planning and taking care of some crucial aspects. Let’s look at the most important things one should while starting a manufacturing business.

     1. Thorough Market Research – Market research is vital to start and operate a manufacturing firm as it shows both demand and target customers for that particular product. Thorough market research will also provide with valuable insight into the demand graph of the product. Very few companies enjoy a stable stream of revenue throughout the year. Therefore, a detailed market survey is essential to point out the times when demand for a particular product is high. It will allow an entrepreneur to modify his supply chain management accordingly to keep pace with the demand.

     2. Setup Costs – The cost to set up a manufacturing business can reach a significant amount. Companies that want to tap into the most profitable manufacturing businesses in India have to invest a large sum in infrastructure, necessary equipment, manpower, etc.

These expenses can be divided into two categories:

  • Infrastructure and Equipment Cost – It involves costs of infrastructure and equipment. These remain constant despite an increase in production volume.
  • Working Capital – Expenses required to pay for day to day overhead costs are considered as working capital.

However, the issue of insufficient funding is somewhat mitigated, thanks to the availability of various financing options. Moreover, an established organisation can later avail loans to finance its growth effortlessly.

Multiple lending institutions offer loans to entrepreneurs for that purpose.

     3. Location – The location of a business is an equally important factor to consider. Ideally, the infrastructure should be well-connected by roads or any other means of transportation. Manufacturing businesses require a constant flow of raw materials and need to send the finished products to dealers with minimum delay. A profitable manufacturing business in India should be well-connected so that the inflow and outflow of raw materials and products remain constant.

The enterprise should also be accessible to the workforce and have utilities like water and electricity in place. These are some of the essential criteria one should consider while choosing a location for a manufacturing business.

Certain businesses cannot be located too close to a populated place. For example, chemical manufacturing plants, insecticide plants, battery factory, etc. should not be near a locality as these often create gasses and fluids that can cause severe health risks if came in contact with drinking water sources.

     4. Regulations – A manufacturing business has to abide by several rules and regulations enforced by both the State and the Central Government. These regulations apply for even the most profitable manufacturing businesses in India.

Such regulations range from a restriction on infrastructures and transportation system to health and safety rules for the employees. It is essential that a businessman considers whether his firm meets all those regulations imposed by the law.

The above-mentioned factors are the most important things one should consider while stepping into manufacturing businesses that are booming at present. With the growth of the Indian manufacturing industry, opening a production line is sure to prove beneficial in the long run. Also you have the options that you can start your lean manufacturing projects with great benefits and returns.