Getting better & better!
Indian manufacturing sector is undergoing a paradigm shift with regards to focus on continual improvement in the processes, products and services through lean production techniques. By Niranjan Mudholkar.
While the concept of lean manufacturing has its origins in Japan derived mostly from the Toyota Production System, the term was first coined by John Krafcik in an article titled ‘Triumph of the Lean Production System’ published in the Sloan Management Review. Essentially, lean manufacturing or lean production is a practice based on improvement through waste reduction; it focuses on reduction of the original Toyota seven wastes to improve overall customer value. Toyota’s rise from a small company to the world’s largest automaker through the implementation of this technique has made lean one of the most successful management principles for the manufacturing sector.
Realizing its importance as an important tool in a highly competitive atmosphere, the Indian manufacturing sector too has been influenced by the principles of lean. It too understands the significance of continuous improvement on all fronts like quality, cost, delivery as well as people. Several leading manufacturing companies have already implemented lean to their advantages. This includes companies of Indian origin as well as global players who have set up a base in this country. For example, NCR, a global manufacturer of automated teller machines (ATMs) has adopted lean quite successfully at its manufacturing plant in India. Says C Sivaramane, Plant Director for NCR in India, “Yes, NCR Puducherry has been practicing and widely implementing Lean Manufacturing principles in its operations since 2004.” The reason? “For Better customer experience, improving competitive advantage, continuous improvement towards manufacturing excellence and optimisation of costs to meet such a stiff competition, he explains. Not surprisingly, the plant not only addresses domestic demands in the fast-growing ATM market but also supplies components to NCR’s other manufacturing facilities around the world. “We do see a quantum change in the Indian Manufacturing environment with regards to focus on continual improvement in the processes, products and Services using Lean techniques. In addition, there is a gradual increment in talent pool within India and lots of awareness exists in every corner of the country about Lean Manufacturing and very need for it,” Sivaramane adds.
So is the Indian manufacturing sector generally well versed in its adoption of business performance improvement tools like lean manufacturing? “Generally speaking, while there is broad awareness, the quality of implementation is quite ordinary,” says K Kumar, Leader – Manufacturing, Deloitte in India. Kumar’s firm has consulted with companies who have implemented or practice lean manufacturing. “In most cases, lean manufacturing is looked at more a shop floor initiative that has limited impact on the company. The impact can be huge when these principles are applied on the enterprise supply chain as opposed to just the shop floor. It is quite common to see a 20-40% improvement in EBITDA (earnings before interest, taxes, depreciation, and amortisation) at the end of the first wave of implementation. Again, in most cases the first wave savings do not require capital investment or IT implementation and can occur well within a year. My experience is that there are huge opportunities for performance improvement even in ‘lean’ companies,” he says. Satyashri Mohanty, Founding Director, Vector Consulting Group points out that enhancement of flow (or lead time reduction associated with inventory reduction) is the fundamental objective of Lean. “However, most implementations do not have this objective. Companies selectively implement some techniques of lean only with the objective of cost reduction. There are very few implementations where lean has been deployed with an overall objective of enhancing flow. We find companies which claim to have successfully implemented lean but if you check their on -time delivery or inventory or lead times (indicators of flow), it is same as before. But yes they claim to have reduced manpower on some machine centres by using lean techniques,” he says. Mohanty feels implementing kanban (Part of lean – an inventory control system for tracking the flow of in-process materials) requires a fundamental paradigm shift by which people manage their shop floor. “They have to get away from the local efficiency syndrome (focus on maximizing efficiencies of every work center). In most cases, lean manufacturing is looked at more a shop floor initiative that has limited impact on the company
This requires an overhaul in thinking right from the top management. To implement Kanban in such environment, one needs to level load the demand. Not many companies are in a position to enforce the required levelling on their customers. So many who tried implementing kanban, gave it up soon,” he explains. The Vector Consulting Group specializes in Theory of Constraints (TOC). It has been working with many manufacturing companies like JK Files, Godrej Interio, Fleet guard Filters, who have used the theory of constraints as an overall flow management methodology and combined it with lean techniques to increase the plant output, reduce inventory and production lead times.
“We encourage our clients to only use lean techniques at the flow constraining work station rather than all over the place. Lean has its advantages if people know how to use it effectively. It is very popular in India, particularly in the discrete manufacturing environments. However, it is also the most misused concept in the country,” Mohanty adds.
First time right
Rohit Biddappa, Head-Marketing, Parametric Technology Corporation (PTC) India, underlines the importance of product lifecycle management (PLM) in lean manufacturing. “PLM is playing a growing role in lean manufacturing today. The reason being lean is all about reducing cost and manufacturing cost is determined right at the design stage where PLM can have a positive impact. PLM helps manufacturers getting it right first time. It ensures that production processes are well-engineered, there is 100% accuracy and there are no quality issues whatsoever. Thus, quality issues can be mitigated right at the design stage through proper implementation of PLM,” he explains.
Biddappa also draws attention to an increasingly important issue in this context – green product development. “Lean through PLM adoption can help companies develop products that are environmentally compliant right at the beginning. While becoming green is a critical social responsibility, manufacturers also need to realise that it also makes good business sense. PLM gives a bottoms-up approach to design and helps company take care of their manufacturing carbon footprint,” he says. Biddappa also identifies some more advantages of Lean through PLM. “A good PLM solution goes much beyond waste reduction and quality improvement. It readies lean companies for product improvement, change management as well as portfolio management,” he says.
At the forefront
While many India companies have gone for lean principles, it has been observed that companies from certain sectors have been at the forefront due to the extreme competition. “We believe Automobile industry rule the country when it comes to the application of Lean Manufacturing,” Sivaramane of NCR. Biddappa of PTC agrees. “Being a very competitive business, the automotive sector has been leading in the adoption of lean in India. Also, the very nature of this business demands lean principles. Automotive segment is very supply chain oriented. Lean manufacturing allows automotive OEMs to rationalise and maximise supply chain management,” he says. Biddappa also observes that after automotive companies, engineering firms as well as aerospace and defence companies have been next in line for adoption of lean. “Of course, the reason for the latter two segments is less about money and more about addressing the complexities,” he adds.
Kumar of Deloitte too feels that the auto sector has probably achieved the highest level of maturity in terms of lean adoption in India. “Capital goods/industrial product manufacture would be next. That said, there are big opportunities to do more even in these sectors. I know the BPO sector is looking at and has implemented lean manufacturing,’ he says.
Mohanty doesn’t deny the lead taken by the auto companies but he identifies certain flaws related to implementation. “Some auto companies claim to have implemented Kanban, but it is more of a transaction signal rather than a pull based flow control system. The manufacturing practices of suppliers are still on a forecast (push mode) rather than the pull of kanban. As a result the suppliers suffer from unavailability, frequent expediting at their plants despite having high overall inventory at their godowns (while the OEMs have low inventory with them). The unavailability of components in turn leads to frequent unplanned rescheduling in the OEM plants, which in turn makes production schedules highly unstable. This vicious loop makes Kanban implementation very difficult,” he points out.
Mohanty feels that there are few companies in India which have effectively used concepts of TOC and lean for high overall bottom line impact. “They have implemented the TOC solution for flow enhancement (the easier flow enhancement solution for environments having wide variety, low volume and fluctuating demand) and used the lean techniques (second aspect of lean solution) to guide the improvements at right areas , so as to further enhance the flow. These companies not only have the best parameters of flow (on time delivery, lead time and inventory) but also have the best overall cost reductions,” he says. Discussing the bigger picture, Sivaramane says that lean is just not implementation of flow lines, layout optimisation, material flow streamlining and so on. While it includes all these elements, lean is a ‘Culture’ that needs to be developed across the organisation in such a way that it reflects in every area of work within the organisation.
Kumar sums it up succinctly. He says, “Like in any initiative, top management commitment is a pre-condition for something like this to succeed and be impactful. I believe a financial goal and imperative is critical to mobilise support from all parts of the company as opposed to the initiative being an end in itself.”