Ravi Uppal, Vice Chairman & MD, ABB India: Moving from Made in India to Made by ABB

Usually, Ravi Uppal isn't a man given to immodest bouts of exultation. But on a recent hot May afternoon in ABB India's Vadodara plant, the company's 51-year-old Vice Chairman and Managing Director can't stop beaming. Like a proud parent, Uppal is strutting around the 110-acre plant, hopping from one shed to another, in between stopping to chat up workers on the shopfloor.

What's adding that extra bounce to his steps? Early this year, the power and automation technologies company bagged its largest export order to date: a Rs 168-crore deal with Syria's Public Establishment of Electricity for Generation & Transmission (PEEGT) for supply of six substations. Apart from the magnitude of the order, what Uppal is kicked about is the fact that his company trounced 15 international bidders in a market where even ABB (Europe) has traditionally had little luck. So what did the trick? "As a member of the Syrian delegation put it, Swiss panels at Chinese costs," says Uppal, who recently received the Swedish knighthood "Royal Order of the Pole Star" for his contributions to Swedish businesses (he was earlier the CEO of Volvo India).

Uppal's pride is understandable. After all, the Vadodara facility is one of the only two "global factories" in India of the Swedish engineering giant (the other is in Nasik). That means for 72.5 KV and above circuit breakers, the 39-year-old plant is the single source world wide. Similarly, the Nasik facility is the ABB network's sole supplier of medium voltage outdoor circuit breakers and magnetic actuators. Together they are worth an estimated Rs 588 crore in annual business world wide.

That's quite a leap for a company that until recently did not sell anything directly in the global markets. Now though, it is targeting markets such as New Zealand, Australia, South America and Asia Pacific. The interesting bit, however, is that ABB India is also responsible for the marketing. Not surprising, then, to see the marketing honchos at Vadodara working late into the evening, making cold calls, lining up meetings, and working on power-point presentations.

The hardwork seems to be paying off. Two years since the export initiative was unveiled, ABB India has managed to corner around 17 per cent of the Rs 100-crore global market for its two products (circuit breakers and magnetic actuators). Through a combination of ace switchgear products and turnkey projects like that of Syria Electricity, Uppal wants to up exports to Rs 400 crore by 2005.

Change In Philosophy

The sourcing saga started with the headquarters in Zurich launching a "global resource optimisation search". The objective: To identify factories that could produce world-class products at internationally competitive prices. Besides other things, the factory needed to have domain expertise and a high level of technical capability. China and India, not surprisingly, emerged as the best bets. Says Peter Smits, Chairman, ABB India and global head of Power Technology division: "By leveraging our global optimisation philosophy we're moving from the traditional Made in India or China to Made by abb."

A small change in label, but a huge transformation in mindset for the organisation. As ABB India's Senior Vice President and Head of Power Technologies Products, Amresh Dhawan, points out, world-class quality is only an entry-level requirement. From controlled environments to layouts, from materials flow to tools, from documentation to even packing, everything has to be in line with global standards and stipulations.

Neither is the process of manufacturing high-voltage circuit breakers (HVCB) uncomplicated. While, in principle, these are switches not very different from the ones in an average home, making them is a tricky business. For example, there are 200-odd mechanical operations and assorted electrical tests that each HVCB goes through. The "drying process" involves putting a transformer in a vacuum oven at 170 degree for anything between 10 hours and eight days. The process is not just time consuming, but needs specialised skills. Or take the winding of the coil, which sits at the heart of each complex transformer. Each transformer takes nine different kinds of winding, which must be done in a dust-proof environment, requiring anything from five to 15 days. "One can't overemphasise how crucial it is to get it exactly right," says Dhawan. "Otherwise it may just blow up during testing."

Bringing the quality up to scratch involved extensive worker retraining and internal communication. At the Nasik plant, technical courses were offered both on the job and in classrooms. At each workstation there are detailed graphical instructions on how the concerned process should be carried out. That apart, workers are briefed on the end use of the products they make. To minimise variations between different product batches and to ensure standardisation, a "process centring" methodology is used. This checks quality at each stage of production rather than just the finished product.

Amresh Dhawan, Senior VP, ABB India: The benchmark is global

Quality checks are done at three independent levels: At the raw material stage, semi-finished stage, and the final product stage. At the backend, a "green channel" system was introduced, whereby pre-certified vendors can directly replenish raw materials kept in special plastic bins next to every workstation on the shopfloor. Ergo, there are no stores and no inventory planning. Even topping up of supplies is the responsibility of the vendor.

The formidable task of getting the global factory concept across to workers, about 600 of whom are employed in the Vadodara plant, was done through informal meetings, workshops, even specially printed vernacular booklets. The company's pitch to workers: You are playing an important role not just in the Indian operations, but globally. The communication exercise seems to have reaped handsome dividends. During the recent truckers' strike, the workers voluntarily put in 16-hour shifts so that a shipment could make to the port on time. And that too without demanding any overtime. "They had to feel they were doing more than just tightening nuts and bolts," says Dhawan.

The result: the Vadodara plant has significantly increased its cost competitiveness. The insulators that it locally sources are 15 per cent cheaper than those manufactured anywhere else in the world. Machined components can cost as much as 20 per cent less. But ask Uppal and he'll take pains to point out that while cost is a factor, it is the subsidiary's pool of technically savvy managers and intellectual capital that are its real strengths. It was that knowledge, Uppal points out, which helped bag the Syrian order, where ABB India is responsible for design, procurement, manufacturing, and supply of equipment for the substations.

So far the global factory concept seems to a win-win situation for the parent and the Indian subsidiary. While Zurich gets access to world class products at competitive rates, ABB India gets to focus on making a few, high-volume products that can be hawked profitably in the global markets. Already, Uppal's focus on global markets is showing up on the balance sheet. Order book in the first quarter of this year rose 35 per cent to Rs 380 crore compared to the same period last year. Revenues climbed 19 per cent to Rs 290 crore and net profits soared an impressive 41 per cent at Rs 8.7 crore.

Buoyed by its success, the company recently invested Rs 25 crore in expanding its transformer capacity from 4,500 MVA to 6,000 MBA. It is also getting into a new line of high voltage (above 220 KV) and HVDC (High Voltage Direct Current) transformers, which have found buyers in international utilities like Florida Light & Power. Says Uppal: "Focus on exports is an integral part of ABB India's strategic business thrust. Our growing international presence is clearly indicated by the surge in exports."

But running a global factory is no cake walk. A good 70 per cent of ABB India's revenues still comes from products less than five years old. To stay on top of the ball, it will have to walk the bleeding edge of technology. Uppal for one plans to make use of his company's soft skills in a wide range of industries including metals to paper to petrochem to bag consultancy and advisory assignments. By 2005, the company hopes to get 15 per cent of its revenues from services and a quarter from products (See The Revenue Pie). Says Smit: "I see the Indian operations playing a more pronounced regional and global role within the group in the form of international projects, product sourcing and as service providers." Doesn't look like Uppal's going to stop beaming anytime soon.