Managing Change in a large Paperboard Mill
Pradeep Dhobale, MD of ITC Bhadrachalam Paperboards Ltd.: “I have a big challenge here. Every department and function has achieved its performance bonus. But the company as a whole has not achieved the financial goals. This is a big paradox. I want you guys to address this problem and help us achieve the corporate goals while achieving functional goals.”
Raghav and I had been interacting with ITC Bhadrachalam Paperboards Ltd (IBPL) since 1996 when we were working with Glaxo. We had met one of their senior commercial managers on a flight between Bombay and Hyderabad. He was sharing his experience of attending a workshop on BPR recently and was wondering how he could implement those ideas in his function. We shared our experience with Glaxo and emphasised that BPR had to be implemented across all functions of the organization for it to work.
He was sufficiently impressed with us to invite us to meet his boss, the VP Commercial, to discuss our approach. He in turn arranged for us to have a lunch meeting with his MD, Mr M P Malliwal at that time, which led to our being invited to conduct a half-day workshop for 55 senior managers of IBPL on BPR. This was around the end of 1996. Shortly after this, the company got busy with a major Rs. 600 crore project to upgrade their paperboard technology and told us they would get back later once this new project was established.
Around this time, we were also introduced to Mr Pradeep Dhobale, who was heading the manufacturing operations at the factory in Bhadrachalam. During our meeting, I found out he was from IIT Bombay, a couple of batches junior to me, and we warmed up to our relationship quite well. We thought that this postponement may not lead to an early assignment and parked ITC Bhadrachalam at the back of our mind to be approached later. In the meanwhile, through our first contact in this company, we heard that Mr. Malliwal had retired and Pradeep Dhobale had taken over as the MD.
Towards the end of 1999, we got a call from Pradeep saying that they had invited many consultants like Price WaterHouse, Ernst and Young, KPMG, etc. for a presentation on Change Management to the top management of their company and he wanted us also to make a presentation of our approach and experience. We told him that we were not in the league of the big names he mentioned and, unlike them, we worked with the organisation team to implement BPR and not to give a report. How could we be compared with them? His response: “Look, we have decided to invite you both, so you have no choice but to make a presentation before we can decide on whom to engage.” So we agreed, as we had nothing to lose and everything to be gained, pitted against the Big Five global consultants!!!
We quickly prepared a powerpoint presentation, sharing the insights gained by us till then, working for a few organisations mentioned in the previous posts, and ended with a strong pitch for why we would make a difference to actual implementation with our approach. And we left it at that, knowing that in a large corporation the traditional wisdom of hiring a consultant was to go for a well-known name and play safe. Who would take the risk of hiring two relatively unknown guys with only some recent experience in India, whereas the Big Five came armed with their global experience? So we went back to our work with our clients, knowing we never stood a chance here.
To our astonishment, around March 2000, Raghav got an early morning call from Pradeep asking if we wanted to work with ITC Bhadrachalam and, if so, to drop in the same day at 11AM. This blew our mind, since we had totally given up hopes of any work with the company!
We hurried to his office and met Pradeep at the agreed time and the first sentence from him was what I have quoted above. By this time, we had also got exposed to concepts of Lean Management and Theory of Constraints and we shared our perspectives on local optima and global optima and avoiding waste and aligning processes to customer needs. So, after a brief discussion, he arranged for us to meet the commercial team to finalise a contract and soon we started a major engagement with one of the big names in the Indian corporate world! We never really learned why we were chosen above the Big Five, but clearly Pradeep had put his head on the block with his belief in us.
Unlike our previous engagements, this assignment covered the complete supply chain from customers to factory to vendors. It was a big canvas and involved very complex operations from procuring to manufacturing to supply and payment collection. The details of this case would be a good case study in change management but, due to our Non-Disclosure Agreements with all our clients, I cannot go into the details here. I can, however, share some interesting insights which became a learning experience for us too.
On the market side, the company had both a strong dealer network who supplied to smaller customers as well as large customers who bought directly from the company. But even the large customers were relatively small players whose end customers were much bigger than them. For example, IBPL supplied high-quality paperboards to converters who made them into packaging materials to be supplied to large consumer products companies like Hindustan Lever, Colgate and many others. Apart from that, they also had their own internal customer in the form of the Paper Product Division of ITC, which was the biggest cigarette manufacturer in the country, apart from many other agro products for which paper packaging boards were used.
Traditionally, the paper mills worked on a model in which all customers had to give advance indents of their requirements and this would form the basis for production planning, manufacture and supply. However, as competition increased, the customers found that they had to make constant changes in their business plans and they wanted the paper mills to quickly respond to their changed needs, and this could not be fitted into the advance indent approach. This caused constant friction between the sales and manufacturing teams and we could experience this when our CFT met and there was constant conflict between team members from these two functions during our early deliberations.
While the end customers were big names for the converters, IBPL as a supplier also was a big vendor on the other side and these customers felt they were getting squeezed between two large corporates. This caused a lot of resentment towards IBPL which was not visible to any one till we took our team to meet them to get first-hand feedback from the customers, which normally gets filtered out when it comes through the traditional sales and marketing team. The most interesting finding was that even those customers whom the company thought were very happy with them had a lot of complaints. This was a major turning point in our approach to come up with a reengineered process.
When the company had expanded their capacity in the factory with a new technology plant, they had also invested in sophisticated automatic computer controlled machinery for cutting paper rolls and a huge storage facility which was totally automated to keep stocks and dispatch to customers. They found that, while they had huge stocks, the orders came for special items due to market changes which were not available in stock and needed to be produced for immediate delivery. The paper cutting facility was also causing a bottleneck due to computerised planning and someone had quietly disconnected the computer so that they could respond manually to sudden changes in the manufacturing plans.
The most important aspect was the IT system they were using. Only five years before we started our work, the company had invested in a large IT system which was a classic computerisation of their manual way of working. When the reengineering team took a look at the system, they found that it needed to be completely overhauled to become a system which would be aligned to the BPR recommendations.
It took us six months to finalise the redesign and get it accepted by the management. To give full credit to the top management team, they were very open-minded to understand the issues raised by the CFT and the redesign suggestions for all their processes. In fact, they went ahead with a decision to invest in a new IT system which would enable the smooth implementation of the BPR team’s recommendations. To their credit, they took charge of the implementation without much active involvement from our side. Our association with IBPL lasted for a year before we signed off, collecting our final payment. I met Pradeep Dhobale after a couple of years on a flight from Hyderabad to Delhi, when he told me they had implemented most of the recommendations and invited us to come visit them to have a look at the results of our work. That was indeed a very satisfying moment in my life!
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