Surat Diamond Industry tranformed by tech

BANGALORE, INDIA: Surat is undisputedly the worldwide hub of diamond manufacturing and trading; we travelled to the city to find out the technological implementations and advances that is helping the industry maintain and grow in this position

For the uninitiated, Surat is largely recognized as the diamond capital of the world. According to Wikipedia, “It is at the heart of the world's diamond-polishing industry, which in 2005 cut 92% of the world's diamond pieces and earned India $15 billion in exports. Gujarati diamond cutters, emigrating from East Africa, established the industry in 1901 and, by the 1970s, Surat-based diamond cutters began exporting stones to the US for the first time. Though much of the polishing work takes place on small weight stones, Surat's workshops have set their eyes on the lucrative market for finishing larger, pricier stones in the future.”

We thought it would be interesting to do a quick study of what technologies are driving this industry. Most of the businesses out here are family-run, and it is difficult to solicit information that can be deemed to be accurate. However, what can be better than hearing it from the horse's mouth? We met up with various people from the industry — the president of the diamond association, the most sought after technology vendor, and ISVs (Independent Software Vendor) who cater to the technology needs of the diamond industry. We wanted to find out how exactly the diamond industry operates, what all technologies are being implemented, and also identify what more technologies can help the industry to become even more robust.

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Quick overview of the diamond industry

“According to a latest report, out of every 105 pieces that are made worldwide, 102 pieces are processed in Surat,” claims Dinesh Bhai Navadiya, President, Surat Diamond association. Apparently, the communities from Saurashtra, (a region that consists of 7 districts of Gujarat, including the district of Rajkot) such as the Patels, operate in the manufacturing segment; whereas the Jain communities from Northern regions of Gujrat are the ones who have a strong foothold in the trading business. The Surat Diamond Association has about 2,600 registered companies; apart from this, there might be around 2000 more companies that operate in fragmented markets.

Around mid 1970s, when the industry was in the developing stage, the usage of machinery and technology was minimal and most of the work (cutting and finishing) was done by hand using developed skill and judgment, using the hand-operated instruments that were available. “One of the specialities of Surat is that most of the cleaving based cutting of diamond roughs (breaking down diamond roughs into smaller stones) is done here,” says Navadiya, “Because diamond is carbon based and is tough to break, rejected diamond pieces were used to do this handiwork. The flip side of this system was that only 5-6 pieces could be processed per day by each worker.”

Next up, the raw material processed here were sent to Saurashtra, where the manufacturing process was carried out. Then the finished material was handed to the Jain communities for trading in the markets of Mumbai, where they had established themselves as importers and exporters of diamonds, dealing with various countries, mainly Holland (specifically, Amsterdam).

“Till about 2005-06, the demand for the raw material (i.e. polished diamonds) in India was only about 5-6%, the rest were exported. Since the 1960s till about the early 2000s, The Diamond Trading Company, London had about 80% control on supply of raw material in the market,” according to Navadiya. After the year 2000, the industry worldwide saw the expiry of agreements between the countries that mined diamonds (i.e. Africa, Russia, Canada, and Australia) and the DTC. The countries started operating independently in the world markets. Currently, the DTC might have about 40-45% control over the supply of raw material.

{#PageBreak#}Now the businesses from Surat make direct contact with these countries, and procure raw material based upon the specialty that they have to offer (cleaving, sawing, etc). The traders from Gujrat steadily made their presence felt in worldwide market with their own offices being set in countries such as the US and countries in Europe, and basically wherever there was movement of polished diamonds. “For me, before the year 2000, America was the country where 65-70% of polished diamonds were exported. Currently though, it has come down to 40-45%, owing to the fact that markets are emerging in smaller countries in Europe and the Middle-East. Even in India, the consumption has gone up from 5-6% to 10-13%,” informs Navadia.

In terms of competing countries, the word out in the market is that China is posing as a threat. But as per Navadiya, the threat is farfetched, as the skill and technique required for cleaving of diamonds is something that no other country has been able to excel; however, what is known as makeable diamond roughs is a segment of the market that China is slowly establishing itself in. For Surat to compete with China in this segment, stability of skilled laborers is absolutely crucial. However, in Surat, it is the skilled laborers who choose the company they want to work for, because their special skills assure them of being accepted by any manufacturer for a better pay.

 The advent of technologies in the diamond industry

Around the 1980s, slowly but steadily, the Surat diamond industry witnessed the introduction of new technologies, mainly coming in from Germany and Israel, such as the laser based systems. This brought about a huge spike in the number of pieces being processed from a meager 5 pieces per worker per day to 100-200 pieces being cleared every day by each worker. Besides this, due to the laser technology, the industry also saw a huge reduction in margins of weight loss that happens while processing diamond roughs, which results into an increase in the number of pieces and hence the profit margin.

The industry also saw technology advancements in the process of bruting or girdling (whereby two diamonds are set onto spinning axles turning in opposite directions, which are then set to grind against each other to shape each diamond into a round shape). With both these technologies in play, the industry started to flourish.

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Previously the industry was completely dependent on skilled laborers, and small businesses who did not have a large workforce could not make much in the business. But with the introduction of these machineries and technologies, even the small and medium businesses in Surat started benefitting in terms of higher production with lesser dependencies.

The pivotal role of educating the industry and making them understand the benefits of technologies, and accept them was done by several companies, but Sarin Technologies is the name that every business in Surat gives due recognition to.

Sarin Technologies, Israel was established in 1989. This company is a worldwide leader in the development and manufacturing of advanced planning, evaluation, and measurement systems for diamond grading & gemstone production. Sarin products include diamond cut grading tools (for round and fancy shapes), rough diamond optimization systems, gemology tools, diamond color grading, and laser marking machines. It first came to India with proportions machine in 1986. In 1998, it brought in the first diamond planning machines into the country. In 2000, the company came up with marking machines.

There are Indian players too, who have contributed in this area, such as Sahajanand Technologies, by introducing machineries used for processes such as laser cutting and stone shining, at about 50% lesser price. However, most of the technologies and machineries are monopolized by the foreign players who are privy to sensitive business details and also get royalty for usage of the machines.

Current state and future of technology adoption

When trying to find out about the new technologies, IT specific, that are being adopted by the industry, it seems that off late Surat manufacturers have taken to the internet. Even the smaller players have created portals where all the information pertaining the sale is presented online i.e. design, size, purity, clarity, and price. The industry has witnessed 30-35% orders, based out of South India, have been procured through these portals. According to us, there is a huge opportunity here for technology players to help them create state of the art websites. There are, of course, several open source CMS such as Joomla, Drupal, Wordpress, etc that can be utilized by the companies in Surat.

IT solutions are also used to track the processing right from the stage of rough diamonds to the final output of polished diamonds. There is software that lets them monitor, record and later extract analytics about weight at the beginning, number of stones being processed, weight loss at intermediate stages, final weight, etc. These implementations have helped the manufacturer identify problem and loss areas and thereby workaround these areas. . What we have noticed is that the acceptance of proprietary software for ERP, CRP, HRM, etc is fairly low in this industry; the dependency is mainly on the local software providers.

{#PageBreak#}So who provides them with these software? Apparently there are lots of home-grown technology companies who approach the manufacturers with their programs for diamond inventory, diamond accounting, manufacturing process, sales process, sales and marketing analytics, etc. The flipside of this approach is of course support and upgrades. For instance, there are some software providers who we spoke to, who are slowly pulling themselves out of the diamond industry and focusing more on developing hospital software, as they find that market to be emerging and more lucrative. Such movement leads to the manufacturers not being able to upgrade or get support on the applications implemented in their units. This is where the proprietary software vendors can hugely benefit the industry.

About other challenges pertaining IT, Suhas Arora, Director, NetSol IT Solutions says, “ The machines that are used in the diamond industry need the computer to connect via parallel and serial ports. Most of the computers available today don't come with these ports.” He adds, “So, the diamond industry either opts for assembled computers or simply void the warranty of the computer, by opening it up to slot in the parallel and serial ports. The technicians in the manufacturing units too need laptops that have parallel and serial ports that will let them connect it to the machine for any tweaking or troubleshooting required.”

However, we got a different take on this when we spoke to Jatin Jolapara, Manager - Technical Operations, Shree Ramakrishna Export (one of the top diamond manufacturing companies operating in Surat. Jolapara claims that his company has several hundred PCs deployed in his company, which use network ports to operate on the same diamond machinery that previously used parallel and serial port connectivity. “All PCs operating on Galaxy Station and about 50% of the PCs operating on Sarin Planner machines are working on PCs that we have bought from a reputed computer manufacturer has the latest configuration; and no dependency on LPT1 as such,” adds Jolapara.

 Some other IT based technologies adopted by the industry are products such as access cards, finger print access, etc. Typically, all manufacturers also seek the services of ISVs for requirements such as database backup .

IT technologies aside, there are diamond industry specific technologies that have helped the manufacturers in Surat to improve their business drastically. “For instance, Sarin has developed an equipment for diamond scanning that shows inclusions (impurities) in a fully automated procedure. We have also come with laser sawing machine, machines for manufacturing stages,” says Oded Ben Shmuel, CEO, Sarin Technologies, “Beyond equipment, Sarin provides services around the clock; have an education center which trains people in groups of 20 to use latest technology. We also have a service center for 3D scanning of diamond roughs for manufacturers who don't own machines such as the Galaxy and Solaris.”

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Here Shmuel is talking about the machines that are widely used in the diamond industry for the planning process. The planning process in diamond manufacturing is one of the most crucial phase. For manufacturers to be able to make the most out of the planning process there are machines like Galaxy and Solaris that lets them capture a three-dimensional scan (static images, as well as video) of rough stones. These machines actually provide an inside out scan that shows inclusions (impurities) that is inside of the stone, so that the manufacturer can take a call on how to plan cutting of the stone.

The software called Advisor which processes these 3D scans for planning is heavily processer intensive. For instance, it requires massive processing power from the computer to process the scans of large stones, or experiment with numbers of shape allocation (for best value, the manufacturer might check out 20 different shapes). There are times when it takes a good 36-48 hours to process these scans. To reduce the time taken for such scans, Sarin Technologies has developed a new technology called 'Cloud'. When required, this technology collates the computing power of workstations of the entire factory into one process.

Apart from this, Sarin Technologies provides software and hardware tools to track and control the complete manufacture process so that whatever is planned by the manufacturer is what is produced in the end to the precise accuracy expected. For instance, a manufacturer might want to process a 4 carat stone into 2 stones; one of 2 carat and another one of 1 carat. These tools help them cut and manufacture polished stones with precise clarity, color, orientation, etc.

On asking about what is the current most demanded requirement of the industry, Shmuel says, “The new demand is inter-connectivity between the different offices of the manufacturers (to monitor and plan on inventory, stock in process, finished stock, etc).”

Conclusion

We have observed that the adoption of technologies that are specific to the diamond industry is very high in the Surat diamond industry. However, when it comes to IT-based technologies, the industry, even though not averse to adoption, is fairly dependent on local software vendors to meet their requirements. There is a huge scope for the industry to be more open to usage of products and services such as ERP, CRM, HRM, etc. We will be heading to the city for a seminar at the end of this month and try and understand their IT requirement in more details. A report of this will be published in the next edition of PCQuest i.e. September 2012.

Source: www.pcquest.www.ciol.com