Financial Daily from THE HINDU group of publications
Friday, May 31, 2002
Beating the Recession -- I: Testing times, trusted production values
CHENNAI, May 30
The current industrial downturn has given Indian industry the time to pause and think about what it is going to do about the bigger problem of global competition.
The `thinking' seems to be giving rise to a number of ideas strategies for survival so that, next time the US economy slumps, the Indian industry would have a trick or two up its sleeve so that it would not go hungry.
The downturn has forced many companies to take a hard look at themselves. The result: A silent revolution across industry in terms of restructuring the way manufacturing is organised. There are many stories stories of how companies have achieved quantum leaps in cost reduction, just by thinking of how better to make the same product.
Here is one. Chennai-based CG Igarashi Motors, a joint venture of Crompton Greaves and Igarashi Motors of Japan, produces micro motors, mainly for use in cars. This company has managed to beat the slowdown, and has been showing rising profits quarter after quarter.
One key strategy the company adopts to get business is to give annual discounts to its buyers, voluntarily. Not at the cost of profits, but by producing cheaper. How? Continuous improvement in the production process. In one instance, just by changing the way the tools cut metal, the company was able to eliminate one whole department.
The tool earlier used to cut the metal, which generated heat, necessitating the use of an oily coolant. Later, to remove the film of oil, the product had to be put through a process of chemical cleaning. But after the cutting method was changed to shearing like a pencil being sharpened heat generation was so low that the use of coolant was not necessary, and consequently, the cleaning process itself could be done away with.
Apart from direct savings, CG Igarashi also got a lot of space freed. Now, for the proposed expansion of capacity, the company does not have to look for fresh space a significant saving in capital costs too.
Each plant traditionally manufactured a certain type of vehicle. But now, the plants have been modified so that any plant can produce any kind of vehicles.
The Ennore plant now also manufactures the multi-axle vehicles (which only Hosur-I did earlier), and the Hosur-II plant also produces aggregates for Army vehicles. This new flexibility enabled the company to produce what the market wants, which now happens to be more of multi- axle vehicles.
Multi-axles sell in fewer numbers, but give higher margins. But for the flexibility in manufacture, Ashok Leyland could not have turned in higher profits last year, when the recession drove down sales.
CG Igarashi and Ashok Leyland are but just two samples out of the crucible of restructuring.In hundreds of companies across the country, kaizen programmes are being put through.
These kaizen projects, where workers suggest and effect process improvements, save a company a lakh here and another there, but they are essentially the unsung heroes of efficiency enhancement. In a recession-year, the benefits of these projects lend unobtrusive support to the bottomline.
Advent of TPM
A quiet TPM/TQM revolution is taking place and the culture seems to be catching up. The TPM Club of India, (a part of CII), says TPM awareness is growing rapidly. The club infers this partly from the overwhelming response when it organises TPM seminars, and partly from its growing membership.
According to Mr Rajesh Parim of the TPM Club, last year, over 1,000 companies participated in TPM seminars, as against around 700 in the previous year.
The club's membership has doubled to over 250 in two years, and is seen growing by at least 15 per cent annually from now on.
The celebrated cases of Sundram Fasteners and Vikram Cements, both winners of TPM awards, are the best known examples of companies benefiting from TPM, but there are many others too.
Unfortunately, there seems to be no effort to collate and measure the (quantifiable) benefits arising out of TPMs/TQMs. Information available is sporadic, but what is available is revealing.
For example, the Birla group-owned Tanfac Industries is said to have achieved a Rs 3.37-crore annually recurring saving, after investing Rs 8.03 crore in implementing kaizens. Apart from the monetary savings, Tanfac has achieved zero quality complaints, and zero accidents, while productivity has gone up by 40 per cent.
Two-wheeler major Bajaj Auto began implementing TPM three years ago.
Says Mr Madhur Bajaj, the company's President: "Those implementing TPM have experienced cost reduction by 30 per cent and achieved overall equipment efficiency of 125 per cent of rated level even after 20 to 30 years of use."
Ashok Leyland gains about Rs 5 crore every year from the projects that its employees do, as a part of their company-sponsored graduate and post-graduate engineering courses, under a tie-up that Ashok Leyland has with the Birla Institute of Technology and Science, Pilani.
Some companies are going beyond TPM and TQM, to lean manufacturing.
Lean (the Western name to Toyota Production System) looks at aspects such as quick and unimpeded flow of products along the value addition chain. Therefore, it addresses issues such as matching production with the `pull' from the customer, reduction in setup and changeover time, ability to produce small batches, use of custom-built to-the-purpose machines rather than large sophisticated ones and keeping inventories low. Companies such as the Chennai-based Sundaram Brake Linings and Sundaram Clayton have reported dramatic increase in their productivity levels from lean techniques. Also, these companies do not have to turn down small sized orders, because they can economically produce in small batches a big help during recession.
One quick measure of changes on the shop floors, is the extent to which Japanese words have got assimilated into the engineering vocabulary.
Today, hundreds of Japanese words are spoken freely by production engineers they know they would be understood.
While simple words such as kaizen (continuous improvement) and kanban (pull) have become English, other words such as Jishu Hozen (planned maintenance), Jidoka (autonomous maintenance), Heijunka (levellised production) and muda (waste), have become common.
For sure, these changes were set in motion in some companies even before the recession set in.
The current economic slowdown has accentuated these changes, and more and more companies are now getting into this culture in response to the recession.
However, the restructure of manufacturing processes is not the only response of the industry to the recession, but one constituent of it. There are other responses too.
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