Air as utility, not an expense
Compressed air is the fourth most important and expensive utility in a textile plant after water, steam and electricity. The biggest lifecycle cost of a compressor is towards energy. Elgi Equipments Limited, one of the leading air compressor manufacturers globally, recently addressed the issues through its IoT-powered air compressor solution, Air Alert. Anvar Jay Vardarajan, Head-Marketing & Corporate Communication, spoke to Hiral Oza on future technologies, energy conservation and marketing challenges in the business of air compressors.
What are the top disruptors in terms of air compressor technologies globally?
In terms of disruption in the air compressor industry, the technology has not changed in a long time. But if you look at the science of compressed air, it is not very efficient but still preferred because it is safe, a reliable form of energy, and easy to store. I think in terms of disruptions from an absolute technology perspective, I cannot mention anything that has transformed the industry. But I do think that there are some interesting developments on how customers are buying and how vendors are selling.
One example is that instead of buying a compressor, can a customer buy air? There is a lot of equipment that goes into producing electricity. So, for a factory can you have air as a utility? Based on the power consumption and budget, an air compressor manufacturing company should ideally be able to provide solutions. However, this model has not really caught on in India and it's still very minimal in the West. I think it is safe to say that this is something that will probably grow especially for those businesses and industries where the volume of compressed air is very high and the application is critical. They do not want to worry about maintaining a machine and changing a filter. They just want air at certain quality and certain volume and pressure. I think that is one disruption in terms of air as a solution.
Something that will be an emerging trend is the move more towards oil-free. Most industrial machines are oil-lubricating machines which mean that they use oil for cooling, lubrication, and sealing the screw compressors. This requires a lot of maintenance. Obviously, technology has moved to a point where the oil carry-over is minimal, but just for the general trend with oil-lubricating machines, a lot of maintenance is required. I feel that one of the big changes is that how do we make oil-free more accessible because currently this technology is certainly not energy-efficient or inexpensive. Hence, one of the challenges is to democratise oil-free technology because it has positive environmental implications, maintenance-wise it is better for customers, and provides a better quality air.
Tell us about Air Alert and the integration of IoT.
Air Alert is Elgi's IoT initiative to enhance customer service and product quality. A SIM-based system in the compressor transmits data on parameters such as power, volume of air, pressure, and temperature to Elgi's servers. Algorithms are built to highlight inconsistencies in these parameters that may indicate pending service, impending problems, or improve the efficient use of compressed air. With Air Alert, customers can rest assured that their compressors are under constant surveillance. Elgi will also use the data to improve its products' design and quality.
There is an increased focus on sustainable production in textiles. How do technologies incorporated in Elgi's compressors help achieve this purpose?
One thing is energy conservation. The second less-known fact is oil carry-over. So, one thing you can do is that you can highly engineer and oil-lubricate the machine to use and expel very little oil. One of our USPs is that because our machine tolerances are low, we are able to commit to the lowest carry-over in the industry. The reason it is important especially in textiles is that the compressed air is used in a machine that is actually producing a textile product. Oil being constantly thrown in that machine will disrupt its operation; which means you have to maintain that machine more often. But the long-term is to become absolutely oil-free.
What is the state of technologies being employed in India? Are they at par with global standards?
In terms of technology, Indian customers are still not as experienced or mature as our customers in the West. Most customers there entertain the thought of a variable frequency drive (VFD), which stabilises a compressor's power consumption when the compressor is not producing air. But in India, the focus is more on reducing the upfront cost of the machine, which is considered expense instead of investment and future saving. Indian customers are less aware of the total lifecycle cost of the machine. Getting customers to see that wholistic view and then consider products and accessories like VFD equipped machines and standalone VFD's is one of the big challenges for manufacturers.
What percentage of air compressors and accessories manufactured at Elgi are used in the textiles industry?
We are definitely one of the leaders. Giving an exact break-up will not be possible.
What are the challenges that this industry faces? How can those be overcome?
There is a marketing challenge. We need to take all the things available to make your operations more efficient and pitch them as an investment rather than an expense. Manufacturers will move to VFD when the cost is somewhat comparable and then possibly prefer oil-free over a lubricated machine. As young decisionmakers come to run companies, they will take up digital platforms as their first source of information for machines. The challenge for us is to ensure that how do we make sure that they are present in a meaningful way on these platforms and give them access to information in a way they are comfortable with. Providing information in a meaningful way is the key. It is also about packaging air as a solution as opposed to just a product. From a manufacturing perspective, India is not going to stay cheap to produce. Hence, we have to look for ways to reduce the cost of manufacturing. One dimension of it could be automation, a big dimension of it is, process. I think the biggest challenge we have in India is that we tend to be a bit complacent about our labour because our labourers are so cheap.
We never look at a process and say that this could be much simpler. I think that we have a lot of opportunity to innovate with process.
What is the annual budget allocated towards R&D? How big is the team?
We have well over a 100 people in our team, and we spend 3 per cent of our budget annually on R&D.
What is being done at Elgi for better movement of yarn and fibres through compressors and to improve filtration?
It is important to note that compressors do not directly move yarn and fibres, and rather produce the compressed air that powers machines that handle the movement. Elgi offers the lowest oil carry-over in the industry, which reduces the maintenance of yarn and fibre movement machines as there is less oil in the compressed air. Oil is used in compressors as a lubricant, sealant and coolant. As a result, trace amounts of oil are present in the discharged air. Better design and tighter tolerances within Elgi machines result in the lowest oil carry-over of less than 1ppm compared to industry standard of 3ppm.
What is the USP of Elgi air compressors?
Our USP is that we aspire to provide the lowest lifecycle cost. Lifecycle cost is the combination of the upfront price, the cost to maintain the compressor over its life, which include its spare parts, the service cost and also the energy consumption. Our vertically integrated setup lets us offer the lowest lifecycle cost. It allows us to be cost-efficient and yet provide high-quality products with the best warranty in the world. For instance, in the US we offer lifetime warranty on our machines which no one else has managed in compressors. In India, we have the longest warranty, which is of six years. All of this collectively allows us to aspire to the lowest lifecycle costs in the industry. That aspiration will be a combination of not just educating the customer, but also continuing to improve the quality of our machines to such an extent where the external environment is harmed less.
What is the annual budget allocated towards R&D? How big is the team? Please share the details of the last two fiscal years and your expectations for the next two?
We can't share the numbers, but we have been growing. By 2027, we want to be number 2 in the world which is a little over a billion dollars.
What are the future plans at Elgi wrt textile niche?
We are going to continue to push on energy consumption. We are going to get a big boost through IoT device Air Alert. Our goal is to have 500 machines installed by the end of the year across all industries. We have already installed Air Alert for 21 ITF members. We are going to bring awareness about the cleanliness of oil.
Why six years in India and lifetime in the US?
One of the challenges is that we do not have as much control in India over how the machines are being maintained and used. Right from the genuine parts to how the compressor room is setup and how often it's maintained.
How big or small is the market for second-hand air compressors? What about unorganised markets?
We are not involved in it; so I will not comment on size. It is not a huge influence. After 10 years, you look at better technologies.
Which are your major markets?
Tiruppur, Coimbatore, Erode and Pollachi belts are very big for us in southern India along with Ahmedabad in Gujarat, and a few spots in Maharashtra in the western region. In terms of abroad, one of the key markets is Indonesia apart from Vietnam. We are fairly young players in both these markets.
Any new markets that you are looking at tapping or seem like a good potential?
I think Indonesia is always a good market, but we would never enter a market purely just for one industry. It is the overall dynamics of how difficult is the industry to enter, what and how well our brand will be received, and how big is the market to make it worth our time.
What about spare parts and small parts (of the air compressors)?
The aftermarket is important from a company's perspective because it is a key driver of profitability. Mature markets like the US, Australia, Europe already have strong after-market business. They don't need to know the benefits of compressors, its accessories, etc.
