Walking the talk: CEO T.K. Balaji (second from right) stopping by the chat as he walks the Padi shopfloor

It's a Sunday morning, but nearly 200 uniformed workers are crawling all over Lucas-TVS' plant in Padi, near Chennai. The machines are silent at this 41-year-old electrical components manufacturer's factory, but that doesn't bother the enthusiastic "Sunday Club". Its members are here not to work the production lines, but to clean the machines and shopfloor, tidy the small landscaped garden, and plant saplings. Workers doing peripheral work that too on a Sunday? Unbelievable? Better believe it.

Lucas-TVS' is probably the only factory in the world where workers not just spend Sundays cleaning up their workplace, but actually take pride in doing so. The Sunday Club, for instance, is totally voluntary. There is no overtime paid or compensatory off-days given. So, what explains this extraordinary IR? The fact that in the last 17 years, not one worker has been laid off at Lucas-TVS, although market conditions have badly buffeted this TVS group company.

But that's only the most obvious reason. The bigger reason, revealed only to those who care to walk its shopfloor, is the 'Just In Time' journey Lucas-TVS embarked upon way back in 1985. Then, the Padi unit churned out components worth only Rs 61 crore, it had an incredibly bloated workforce of 3,105, and had a staggering rejection rate of 10 per cent. Still, Lucas-TVS was hardly an exception. Suzuki Motor had just come in as a joint venture partner of the government of India, and competition was unheard of in the passenger car industry. While Maruti Udyog rapidly ate into shares of erstwhile duopoly, Hindustan Motors and Premier Auto, it itself became a monopoly. Ergo, its suppliers could make do with poor quality and high prices.

That's probably one reason why most of Lucas-TVS' peers laughed when it said that it was not only going to clean up its manufacturing, but aim for Just In Time manufacturing-a concept first conceived by Toyota Motor Company in the late 50s

Seventeen years on, though, nobody is laughing. Lucas-TVS has made stunning gains in quality and productivity. Sales per employee has soared from Rs 1.96 lakh then to Rs 13.80 lakh today. The number of workers, courtesy only attrition, is down from 3,105 to 2,230. Rejection rate is down from 10 per cent to just 1 per cent; scrap has almost been eliminated at 0.8 per cent, compared to 3 per cent. And the Padi plant's sales have quintupled to Rs 308.6 crore.

Not surprisingly, in July this year, Lucas-TVS became the first company outside Japan and Korea to bag the prestigious Japanese award, JIT Grand Prix, from JIT Management Laboratory Co. JIT Grand Prix is awarded to a company that has successfully used and adopted JIT Management Techniques over the years. Says T K Balaji, CEO, Lucas-TVS: "Now, we are reasonably confident of surviving the carnage in the global auto industry, and in due course of time becoming global ourselves."

The Early Bird

When Lucas-TVS started out on its quest for just-in-time manufacturing (this is the heart of Toyota Production System) there were a number of issues to grapple with. First was employee buy-in. Balaji had to make a case for change at a time when none of the company's competitors was even aware of JIT. That itself took months. Step 2 (See The Change Chronicle) involved putting the house in order, using the 5s: Seiri, Seiton, Seison, Seiketsu, and Shitsuke-all Japanese terms that form the basis of efficient housekeeping.

Seiri, for example, focuses on sorting out parts and supplies on the shopfloor. The objective: keep only those parts and supplies needed on the factory floor. The second s, Seiton, is about assigning a permanent place for everything on the shopfloor, including the dustbin. Seison, or shine, urges operators to keep their machines and workplace clean and tidy. Once all this is done, the focus moves to manufacturing. The fourth s, Seiketsu, emphasises standardisation-there must be a set way of doing everything. Finally, Shitsuke ensures that there are continuous improvements in all the other four s's.

With the foundation laid, Lucas-TVS moved on to the real challenge: of creating a flow between processes. Traditionally, factories of mass production have been laid out according to 'shops': there would be a cutting line, grinding line, welding line and so on. This concept worked as long as demand was predictable and the variety of products manufactured limited (now you know why Henry Ford famously remarked "The consumer can have any colour as long as it is black"). But over the years, the marketplace has rapidly changed. Mass production has been replaced by mass customisation, and smaller lots of a greater variety of components is required not just every day, but several times a day.

Lucas-TVS' shopfloor, however, was laid out according to processes. There were several problems with this arrangement. For one, each of the shops would do its part of the work and stock up components. And since the components had to criss-cross the shopfloor, there would be in-process waiting time. Sometimes, the parts required would not be available because, say, the grinding machine was churning out only one kind of part. The result: precious capital was tied up in inventory, wastage was high and, most of all, the customer was unhappy.

EXPERTSPEAK "Lean does not mean zero inventory"

Lean evangelists: Jim Womack (left) and Dan Jones Their 1990 book on Toyota "The Machine that Changed the World" first introduced lean to the world. Ever since, co-authors Daniel T. Jones and James P. Womack have been the biggest champions of lean manufacturing throughout the world. In an interview to BT's Swati Prasad, they talked lean. Is lean spreading to other industries? Or is it still restricted to the auto industry? The theory is still practised more in the auto industry. That's because Toyota popped up in every other country...Thailand, Brazil, India...and it has proved that lean can be done everywhere. In the US, the aerospace industry had practised it quite successfully. Supermarkets are also practising it, and so are the Canadian and Danish post offices. Lean thinking is not just about factories, but also about services, hospitals and retail stores. Does lean mean zero inventory? No. But consider this: A brewery in South Africa finances the purchase of beer from the sales of the day before. Everyday they buy what they need. Demand is highly predictable. In a supermarket in South Africa, there are inventories at various levels because they just can't predict demand. However, we are not going to have an inventory-less business, ever. How popular has lean become since you introduced it to the world in 1990? Lean has grown quite fast over the last five years, because it helps you become a global manufacturer. Indian companies like SRF, Sundaram Brake Linings, and Sona Koyo Steering are also practising lean.

It took the company seven painful years to reconfigure its shopfloor into a "product-centric" factory. Under the new design, the shopfloor was laid out according to products manufactured. Therefore, starter motors, alternators, distributors, and wiper motors all had respective cells in which they would be manufactured.

Doing so had several advantages. By implementing a card-based material requisitioning system (called kanban), each process would "pull in" only the requisite amount of parts. For example, the wiper motor cell would receive parts like the motor and casing only when it sent a kanban card to the internal supplier. Eventually-this is the future- it is possible to trigger all manufacturing within the factory based purely on the end customer order.

As a result, today, there is no stocking up on parts-not even in between processes. When there's no order, no parts are manufactured. That saves Lucas-TVS crores of rupee every year in inventory. Besides, there's less rejection and scrap, since first-time quality is emphasised.

A leaner and more efficient operation means that the company is better prepared to absorb sudden changes in customer order, drop in demand or even price pressures. Says N. Ravichandran, Lucas-TVS' Vice President (Operations): "If we had continued with batch processing, we would have died".

A Potent Tool

Ravichandran isn't exaggerating. Almost all vehicle manufacturers today are faced with a decline in growth. To incentivise purchase, they are either cutting prices-like Maruti is on its 800 and Versa-or holding them. In either case, it is the vendor who is being asked to cut his component costs. And the only way the supplier can do this without bleeding to death is by improving his own cost efficiencies. Agrees Balaji: "Today, all roads have to lead to JIT or it is difficult to survive."

So, just what are the benefits of JIT? Broadly, there are four gains. One, it enables a mass manufacturer to produce a wide variety of products at low volumes. Two, it increases first-time quality by creating systems that catch defect at every stage of manufacture. Three, since equipment effectiveness goes up, more can be produced using the same capacity, thereby lowering the cost of production. Four, low set up time allows manufacturing to react faster to market changes.

Consider this scenario: Customer Hindustan Motor wants limited quantities of starter motors and places the order once a week. But Maruti Udyog wants different kinds of starter motors and places orders every day. Some other customer may have an even more complex order schedule.

For that reason, JIT is at once both a simple and difficult tool of change. Simple because becoming lean does not require any significant investment in hardware or software. Yet, it is difficult because it involves changing the organisational mindset. For example, quality control (which involves inspection of finished parts) has to give way to defect prevention (addressing root cause of quality problems). Operators who traditionally have operated only one machine, must be first convinced and then trained to work multiple machines. Also, the approach to equipment upkeep must move from repair to preventive maintenance.

Perhaps, the biggest challenge is to keep the organisation at it day after day. Two years ago, when Lucas-TVS thought it had done a reasonably good job with its cellular layout, a consultant from JIT Management Laboratory, Hirayoki Hirano, visited the Padi factory and raised the bar. He asked the company to move to the next phase of "Nagare cells", where closely-placed machines allow a high throughput.

The company has already implemented Nagare cells in the machining and assembly lines. Next on the agenda: integrate Lucas-TVS' 400-odd suppliers into JIT. Intially, though, only door-to-door supplies would be just in time. Thereafter, JIT would be implemented at the suppliers' own units.

Balaji is giving his men two years to do that. Simultaneously, he's upping Lucas-TVS' own targets. Currently, only about 400 suggestions are made by its workers every month. Balaji's benchmark: Toyota, where some 40,000 suggestions are said to pour in from workers every month. Currently, the defect rate is 100 parts per million; Balaji wants to halve that. Says he: "If Toyota is a university, then we are just a school. We have a long way to go."

If the enthusiasm of Lucas-TVS' Sunday Club is any measure, then Balaji may have no dearth of company on this road less travelled.