My Journey As A Consultant - 12

 Early Engagements and Insights Gained

“So, out of 100 tenders for which you quoted last year, how many became orders?”

“About 10, sir.”

“H-m-m. So, ten percent strike rate. And how much money did your company make on these orders?”

“None. We made a loss. And one of the main reasons was we missed the delivery deadline of six weeks by several months and incurred cost increases and penalties!”

“I see. So, in place of winning ten percent of the orders we quote for, shall we aim for HUNDRED percent? And let’s ensure we deliver ALL orders in, say, THREE weeks…”

When we started working on our first assignment at Hyderabad Batteries, and subsequently with other early clients, we were honestly not prepared for the kind of insights we got of the nature of problems faced by the client organisation and the types of solutions that emerged post implementation of Business Process Reengineering (BPR) concepts as adopted from the book by Hammer and Champy (referred to in the previous post). In order to ensure a proper framework, we literally followed the guidelines given in the book on how to go about implementing a BPR exercise. We formed cross-functional teams (CFT), set up Steering Committees (SC) consisting of senior managers, and identified a main sponsor at the top management level who, along with the SC, would be responsible for implementing the redesign recommendations made by the CFT and ensuring that the new processes were sustained as a way of life in future.

The first project we took up in the Power Systems Group was what we called the Order Fulfilment Process. Before we identified the name for this process, there was no recognition of this set of activities as a process in the company. The whole process was fragmented around various departments which were working in their respective silos, like any traditional company. The CFT we created had a member from each of these individual functions and they had a good working knowledge of the day-to-day operations. All of them agreed that, when they quoted for a tender, they always provided for a 60 percent gross margin; in practice, however, they were losing money on every order they executed. As usual, each member put the blame on the other functions for not doing their job properly, as is typical in most organisations.

So we asked the team to track a sample of 20 orders at random, starting from getting the tender document till the final payment was received, post the guarantee period. We also got them to collect various statistics of the number of tenders they participated in, etc., to get a feel for how effective they were in getting orders against the number of quotations. The team was shocked to find that, in a typical year, they had quoted for nearly 100 tenders with a strike rate of less than 10 percent. When we asked why this was so, the sales team member said they were not sure which order would  come their way, so they simply quoted against all enquiries. This, despite the fact that each tender called for a unique system design, with dozens of components to be put together. With such a large number of quotations to be prepared, every tender ended up involving making last-minute guesses by the sales team and the estimation team to meet the tender deadline. As a result, in every case where, luckily, they actually got an order, there was a lot of to-and-fro between the design and manufacturing teams, along with the purchase executives, and they usually had to approach the customer for several amendments to the order. 

Though the sales team usually quoted 16 weeks as the delivery period, nearly 12 weeks would pass before the order was clear in all respects and available for purchase and manufacturing to execute. Invariably, this resulted in  the actual order getting executed after anywhere between 24 to 32 weeks, leading to penalty clauses and cost escalations and wiping out the entire assumed margins. So while, in the beginning, everyone was blaming manufacturing for the delay and the cost increase, the realisation dawned on the CFT that the problem started with how the tenders were handled in the first place. 

We therefore asked the team to first set goals which looked impossible and crazy at the present moment. We pushed them to agree that the strike rate should be 100 percent and all deliveries should be done within 4 weeks. Having read the book together, they realised that, unless such “unrealistic” goals were set, no meaningful  reengineered process could result. 

The details of the reengineered process they came up with is a textbook example today, we even presented a paper based on it in a Manufacturing Excellence Conference later and half the audience responded saying they have similar problems in their own organisation. I am not going into the details of the redesign here. However, it is important to mention here that the 80-20 principle, along with aligning the supply chain right through from the customer requirement to the vendor before an offer was made, was the most important dimension of the reengineered process. The existing departments were disbanded and new teams focused around customer clusters were created around this supply chain. Very soon, the strike rate started improving to 80-plus percent and deliveries were getting made within 2 to 4 weeks from the acceptance of the order. The teams also noticed that, without adding more manpower or manufacturing facilities, they were able to handle three times more orders than before, and the volume of business started increasing steadily. 

I happened to meet the marketing manager of the company a couple of years later at Bombay airport and I asked him how things were at the company. He said that he was on his way to Kuwait to participate in an international tender for the Power Systems Group. He made a pointed comment that earlier he was always chasing the manufacturing for orders to be executed on time, and now the manufacturing team was chasing him to get more orders, as they had more capacity than they earlier estimated.

This was a very satisfying experience indeed. The Power Systems Group, which was struggling to make a profit on a  turnover of ₹15 crore long ago, is today doing several hundreds of crores of business and driving the growth of the Hyderabad  Batteries group.

The other project we undertook involved classic manufacturing improvement using concepts of SMED (Single Minute Exchange of Dies) and OTED (One Touch Exchange of Dies) in their battery manufacturing unit. Here the problem was that the manufacture of all batteries involved, as the first step, making the cells of the battery using a die press followed by a sintering process. Once the cells are made, they need to be encased in metal containers which involve cutting smaller sections from a large sheet before they are formed to hold the cells. These cells are then assembled to form an appropriately rated battery. 

A major problem they faced was a mismatch between the stock of these components and the requirement for manufacturing. This in turn was because of the large batch sizes programmed for these machines; and these long runs were necessitated by the long machine time lost in changing the machine set-up from one component to another. Naturally, everyone was blaming everyone else. 

So we formed two teams, one for the die press area and another for the sheet cutting. The first team consisted of engineers who were working as supervisors at the press section and the other team consisted of the workers manning the cutting machine with the supervisor as one of the team members. 

For the die press, we asked for data on the setup change method and how much time it took to make the change. My associate, Raghav Rao, who had good experience in this area, used a video camera to record the actual process, to show to the team what was the real value-adding time and how many activities they were performing which were not adding value but incurring a lot of time to complete the change. The current method involved a very complicated process which eventually took nearly 8 to 9 hours to change the set-up for different dimensions of the cells. Using the SMED principles, we challenged the team to come up with design changes in the machine set-up, to bring the whole process down to less than 10 minutes. Obviously, everyone balked at the idea and said it was crazy. Even the supplier of the machine from abroad has not done it. We said this was all  the more reason they should do it! 

Without going into the technical details of this project, with some probing and questioning on the current method, and forcing the young engineers to think outside the box, Raghav got them to come up with a new design for the dies which made it possible to reduce the set-up time from 9 hours to 30 minutes. We said we had agreed it should be less than10 minutes, so they had to work on improving this further to reduce the time. Once they realised that they were able to reduce the time to 30 minutes, which had looked impossible to begin with, now the young team took it up as a challenge and came up with a new design which achieved the set-up change in 9 minutes. 

In the second case, where the sheet metal needed to be cut to different sizes, the set-up time was taking anywhere between 30 minutes to one hour for different dimensions of length required. It also involved some waste due to trial and error during the set-up. Instead of telling them to think of a new design, we took the workers’ team to a marble vendor where, using a similar machine, a young boy was cutting different lengths of marble using a back stopper, and changeover from one length to another took less than 1 minute. One look at that, and all the workers unanimously said they could do the same in their factory and implemented a solution which achieved OTED at the sheet cutting section.

Having completed our engagements at Hyderabad Batteries group, we noted down what lessons we had learnt from these projects. One of the most important lessons was that the apparent problem seen by everyone was not the real problem, but only a symptom of something more deep-rooted in the organisation. And when we apply new concepts of Reengineering and Intelligent Manufacturing and get the people in the organisation to work on adopting them, the real solutions come, which now becomes owned by them and implementation happens.

In the next post, I shall share our journey further into other organisations, how we first got management buy-in and then worked on a pilot project to demonstrate how these ideas could be adopted in any organisation.