Systems; Manufacturing: The new Smart Shopfloor

TRIMILLENNIUM MANAGEMENT: MANUFACTURING
The new Smart Shopfloor

By N.Venkataramani

The shopfloor of tomorrow will be shaped by a variety of forces: increasing competition, a more demanding customer; a quantum change in technology; tumbling tariff-barriers; and the inexorable march towards globalisation. Until recently, Indian companies operated in a protected market. Most companies led an assured existence: the only challenge they faced was related to production, not marketing. That is no longer the case. In this millennium, a manufacturer must match, or exceed, global benchmarks of cost, quality, and service.

I expect the changes arising out of these to be fundamental, yet profound. Take simple things like shopfloor cleanliness and orderliness, proper production planning, zero machinery breakdowns, close-to-zero internal defects, and better customer service. While these may be the norm in more developed markets, in India they are still issues that companies need to address. The reward for those who do manage to do this is, expectedly, high: greater competitiveness and profitability.

Companies will increasingly merge new techniques and systems with the power bestowed upon them by infotech to deliver superior products and service to customers. I am not saying that Enterprise Resource Planning (ERP) will be the infotech solution to all problems; it could well be something else that seamlessly ties the customer's needs with a company's internal processes to deliver value to the customer. Clearly, in the race to be competitive, innovation will be a key driver.

A bane of manufacturing companies today is the high levels of inventory they need-or are compelled to maintain-throughout the value chain: in their factories and warehouses, and with their distributors and retailers. This is forced, in part, by the poor quality of infrastructure. Issues such as frequent disruptions in power supplies, delays in raw material supply, and labour strikes encourage companies to 'make to stock' before any of these problems crop up. In my own experience, I find that a lot of our time is taken up in just resolving these issues. A company in the US, for instance, does not have to worry about power-cuts or shortages; when you set up a factory, it is taken for granted that there will be uninterrupted supply of power without fluctuations. The price of poor power supply is not just additional cost: expensive machines are at risk of serious damage. Companies will need to find innovative solutions to these problems.

While poor infrastructure is a cause for economically-unviable levels of inventory and wastage, it cannot be an excuse for all ills that plague the manufacturing sector. To survive and compete effectively, companies need to rein in their inventories. I estimate that inventories can be brought down to just one-third of current levels, across industries and across companies. To be more specific, manufacturers will have to get used to producing against firm market-orders, and not merely to utilise their machines, material, and men. At a time when flexibility has become a key issue, they cannot afford to tie up their expensive resources in idle assets.

What is driving this new paradigm? In a word, it is the customer. In the past, companies chose their customers; today, the customer decides whom she wants to buy from. Given that, the issue is not just about delivering a specified product at an agreed price. Rather, it is about thoroughly understanding the customer's requirements. Companies need to constantly ask themselves: what can I do that enhances the value for my customer? How can I create a better experience for her? Companies, as manufacturers, cannot exist in isolation: they are either part of the value-creating chain, or they aren't.

Many of us are preparing for this. I can speak for the auto-components industry, where I am witness to several initiatives. The objective of these initiatives is straightforward: what you manufacture must be world-class. Companies do not have the luxury of choosing whether they wish to be world-class or not; it is a pre-requisite for survival. I cannot expect to be part of a global supplier network if I am not as good as any other company in it. Indian companies need to establish new markets abroad. That will not come if you are not world-class.

To this end, companies are using-and will continue to use-a range of techniques. Total Productive Maintenance (TPM), Total Quality Management (TQM), and Lean Management are some of these initiatives. These are different routes to the same objective: a continuous improvement in quality, cost, and service. The choice of tools and techniques will vary from company to company, depending on the company's strategic objectives and the dynamics of the industry in which it operates. Some may be more amenable to the zero-breakdown and zero-defect philosophy of TPM; others may be better served by an organisation-wide TQM effort; still others may rely on lean techniques to optimise available resources.

Across initiatives, the key ingredient is the commitment of the top management and continuous training of workers. Indeed, I would say that training is more important than technology itself. The point is that the change in mindset that these techniques involve must be made permanent and, at the same time, dynamic. Since competitive situations keep changing, the organisation must, at all times, be on its toes. The process of learning, then, must be part of the technology itself. Indeed, this is why concepts like quality-circles are so effective.

We have been witness to the benefits of training. It not only leads to increased worker awareness, but also to ownership of quality. There are dramatic reductions in scrap-levels and improvements in quality-levels. Workers themselves are motivated by these results, and they-not senior managers-have made presentations on their operational-improvement efforts in various fora. In the past, most Indian corporations were top-driven-a strong leader always decided the course of action. While the need for a strong leader at the top still remains, it must be complemented by higher empowerment across-the-board.

At the end of the day, everything boils down to the issue of relevance. Only those companies which change with the times will stay on top; others will be overwhelmed and quickly obliterated from the fiercely competitive marketplace.

N. Venkataramani is the CEO of India Pistons

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