A few years back I had a chance to visit Toyota in Nagoya, Japan. We were allowed to go on to a ramp that goes on top of the Manufacturing Line across the factory. You could stand there for about an hour and observe the Manufacturing process at various places on the shop floor. It was a Car assembly line running in the shop floor with all the support functions available right next to the line. 

Typical to Toyota Culture, the line was stopped frequently to fix problems. The problems were so small, and the response was so swift that each of the stoppages was for not more than a few seconds! The relevant team would run to fix the problem. We understood that the line was running so well that they had only problems that can be fixed in a few seconds. But they were still encouraging their employees to stop the line and fix them. The line had the traditional Andon String running the length of the line. 

It was obvious that the Assembly Line is the center of the whole Factory. Everyone was focused on the Assembly Line and supporting it. They were all clear that they are there to ensure the Line is being run continuously without stoppage. The Support to Manufacturing was overwhelming. 

Status in many of our Manufacturing Companies

There are few Companies in India that run like this. I am sure all the Vehicle manufacturers run like this. Automotive Companies have evolved this way. One helpful factor is that huge moving line in the Shop floor. 

The Status even in the Auto Parts Companies is not as good. The status in non-Automotive sector is worse. The focus on the manufacturing is simply missing. Everyone is worried about the Production and if it is not coming, everyone is preoccupied with that worry. No doubt about it.

But the Companies do not work with the Manufacturing at the Centre. The Manufacturing would be suffering for want of attention in the midst of the ‘Worry for Production’. It sounds like I am talking about opposites! It is true. In the midst of their Concern for Production, the Companies are not positioned to support Production.

In fact, I have seen a Company where the Top Management target the Plant teams regularly as they feel the Plant Team is not performing! All the Corporate Functions regularly target the Plants for their ‘inefficiency’. The heads of Plant Heads roll regularly due to their ‘non-performance’. This type of Top Management and a Corporate team is a nightmare to all Manufacturing Plants!! 

While the above Problem of Top Management targeting the Manufacturing Plants is not very rare, there are several other happenings in these Companies where the Manufacturing does not get good support. 

01.  People: The Work of the Supervisor Engineers and the Manager in charge of the Shop starts with running for the Workmen. Almost on every day, they lose some of the NEEM Trainees or the Contract Workmen and they can’t run the lines right from the beginning of the Shift. They run to HR department to plead with them to give them more people. Then, there will be usual rush to get more people and HR pleads with the Contractors to get them more hands. It is not overstatement to say that most of Indian Manufacturing runs at the mercy of these Contractors!! The first 90-120 minutes in every shift is spent by the Supervisor running around to get people! Who is worried about the Shift Startup procedures!! 

02.  Material: In most of the Companies the Production Plan simply does not work as there will be Material shortages almost on a daily basis. The Production Plans have to be changed. If changing is not possible, then the Shop will idle till the material comes. The Supervisor Engineer is again running around to Stores / Materials Department to plead with them to get him the Material. Most of the times the Production team Produces the Product for which the material is there. Not what is planned and not what is needed by Customer today! 

03.  Quality: Next task to the Supervisor Engineer is to run after the Quality Inspectors / Quality Managers to take their help in resolving the Quality Problems. The Supervisor Engineers are conditioned in such a way that they have forgotten that they are Engineers and even for a small problem, they search for ‘Quality Engineers’. The Quality Engineers / Managers have to take a call about the Quality issues either about Incoming material or about the Process. 

04.  Maintenance: Suddenly there may be a Breakdown of a Machine and the Supervisor Engineer has to run for the Maintenance team. These guys may be available mostly on the Shop floor. But they may be busy in something else! This Supervisor Engineer has to go to them and impress upon them about his line/machine. 

05.  R&D: Most of the days there will be a few New Products that are running on the Shop floor. They don’t behave in a predictable manner. The Parts are not settled, and Process is not settled. So, the Supervisor Engineer can be seen running to the R&D to get the experts to handle the problems with the New Products. The Production Manager also will get involved in this as he has to handle some Big Shots! 

This way the Production Supervisor and the Production Manager have to run around the whole day to various people to seek their help! Sometimes the Top Management will get angry with them that they are not coordinating well with all functions!! 

In fact the HR would recruit the Supervisors who are good at coordinating. The demand for Problem solving skills, Product / Process Knowledge etc in Supervisor Engineers may not be even asked about. It is decided in most of the Manufacturing Companies that the role of Production Engineer is to go around pleading with the various Powers in the Company to help him run the Production! 

As the whole Company’s focus is on the Production numbers (?!), the Supervisors / Managers in Production have to ‘Perform’ and they dance the whole day.. all around the Company!! 

This has to change. In Manufacturing Companies, the Manufacturing has to be at the center of the Company along with the Customer. If we do not have a stable Manufacturing, then the whole company right from the Managing Director has to focus only on that. This is good enough reason to change this set Paradigm of Supervisor Engineers / Managers running around the whole organisation!! 

How it should be?

Settle the Age old problems: A Manufacturing Company has to settle the traditional problems of Material Shortages and ensure the Manufacturing runs as per a Plan ! This is not impossible. Every Supplier wants to maximize his Business with you. So, if someone tells you that Suppliers are not supplying, read it as ‘the Supplier engagement’ is not okay in your Company. 

Should be Available on the Shop: All the People who directly contribute to the Manufacturing should be available on the Shop floor. The Andon signaling is a simple system that can be used to alert the concerned persons when there is a stoppage of a machine or a line on the shop floor. All concerned persons should be able to see the Andon light physically. 

-       A HR Officer should go to every line in the morning and check about availability of manpower and take care of problems if any. 

-       A Maintenance Engineer should have a simple system of getting notified about a Breakdown and he should be measured on his response time. 

-       A Material Buyer should be going to every line and looking at the Kanban cards. He should be held accountable to any Shortages. 

-       An R&D Engineer should be held accountable to occupying the shop floor beyond the time agreed. 

-       A Production Engineer should be encouraged to own the Quality. He need not be running around to fetch Quality Engineer/Manager. 

Restrict the Meetings: The team who are on the Shop floor cannot be called for meetings. If they are required for a Meeting, then someone has to step into that role while the person is away from Shop floor. This has to be implemented strictly. If you are not allowing the Engineers to do their job, then how do you expect them to deliver? 

Review of Losses: The Losses on the shop floor should be given utmost seriousness at all times. The Plant Management has to treat the Production Losses as a very serious issue. They need to minimize the losses continuously. There can be no other priority to the Plant Management till the Losses are addressed squarely. The Top Management should support this approach. Many Companies try to do too much on the shop floor without these fundamentals. Top Management wants to implement every fancy concept before they settle this. That is the main reason why the new initiatives do not work on the shop floor. So, we have to be patient with Manufacturing Plants. Build the Foundation first. 

Accountability: The various Functional Heads should be held accountable to the Production line stoppages. This should be the biggest focus of the Functional Heads. Someone who is not focused on this has to be corrected firmly. If they are held accountable to the losses, I am sure the Functional Heads will deliver. 

Manufacturing should be the focus: The Manufacturing Team has to be given very high focus and support. They should be treated as very important people and they should have the ear of every Senior person in the Company. We are not talking about individuals. We are talking about giving priority to the function. When you do it, the focus on the Manufacturing will improve. 

Change the Paradigm

Change this existing / outdated Paradigm of Manufacturing running around everyone else in the Company to take care of daily Production. It makes Business sense. 

A Company where the Manufacturing is not settled, cannot do anything else. Right from Managing Director would be preoccupied only with that worry! 

It makes a lot of Business sense to settle this problem here and now!! 

When you look at a typical Manufacturing Company in India, the usage of IT is very limited. A small percentage of Big companies use IT in an effective manner. While a great majority do not use the Quality, Manufacturing and other Modules in ERPs like SAP even though they would have paid for it and they lie unutilized in their servers. 

Resultantly, most of the Important work in Manufacturing happens off line. We don’t try to control the Manufacturing process as it is happening. Most of the controls are off line. We seem to be letting defects / problems happen and then we are reacting. 

Can we go more online? 

I think we should go much more online than what we are right now. I would recommend using some Apps for specific purposes. I would recommend using IT in two areas to begin with:

a)     How Employees Learn 

b)     How Employees pursue Routine

Let us examine how we can use I.T effectively in these two areas. 

How Employees Learn

Objective of this exercise can be to reduce losses on the shop floor and improve efficiency by bringing a focus on to the Skills and Knowledge of every employee in the Shop floor.

Today in most of the Companies there is some focus on the Skills of the Workmen. In most of the Companies this focus is very weak. There is no effort to continuously improve their skills. Focus on the Skills and Knowledge of Staff is much lesser. Only a very small percentage of the Companies the Staff are getting trained in a systematic manner.

We can’t afford this anymore. We need to become very efficient if we want to grow our top and bottom lines.  Let us act on this ! 

I would suggest defining the Competencies that all the employees need. These competencies may cover:

a)     Product Knowledge:The employees need to have good knowledge of the Products that they produce. 

b)     Process Knowledge: The Manufacturing Process and the process in every function can be another focus area. 

c)     Systems Knowledge: The Systems that the company may be following can be another focus area as this will ensure employees know the way of working in the company. Eg. Manufacturing system, Daily Work Management System , Policy Deployment system etc. 

d)     Functional Knowledge: This covers the knowledge that each Staff member needs to have respective to her function. Eg. APQP / MSA / Problem solving knowledge for Quality Engineer. 

Bring the Training online

You can bring the Training on these topics online by doing the following:

-       Define the Training agenda for each employee covering topics from the above 4 fields. 

-       The topics defined should have close link with the requirement of Knowledge and Skills to achieve the goals for that year / Quarter. 

-       Divide each of the Competencies in to several Micro Competencies / Skills as applicable. We should go really micro so that the topics become small enough for easy consumption. 

-       Have Learning hours every week. I would recommend at least 2 hours every week. 

-       Make the Learning content available on line on the cloud. 

-       Define Certification Standards for every Micro Competency / Skill in terms of Knowledge, Implementation and Results. 

-       Certify the employees continuously for the Micro Competencies. 

This will ensure that the Employees will have continuous focus on Skills, Knowledge. This will ensure the efficiency on the shop floor improves. 

The Training and Development has to be owned by the Functional Leaders. They will be the Sponsors of the Training as they will have to show the ROI. 

By bringing focus on Skills and Knowledge, the Functional Leaders can make huge progress on the efficiencies in the shop floor and that will more than pay back their investment on the Training. 

How Employees pursue Routine

Routine is something that is not very exciting in a Manufacturing facility. But, without a strong and consistent routine, the heart beat of the facility can not be consistent. Most of the problems that Manufacturing Companies face is usually related to a violation of Routine. 

Defects happen as the SOP is not followed, High Break downs of machines happen as the Preventive Maintenance does not happen, New Products do not perform better as the New Product Development process is not followed well. The list can be very long. 

Strengthening the Routine in a Manufacturing Company can give very high returns. 

If you look at how the routine is being followed now, it is mostly offline. 

-       Quality System is verified off line.

-       Machines Preventive maintenance happens offline.

-       The Production Routine of a Supervisor happens offline. 

-       Safety checks happen online if they happen.

How do we bring the Routine of the Shop floor online? I have some suggestions.

01.  Online Quality Checks: Develop a Software that will work on hand held devices (may be smart phones) that can do the following:

a.     Trigger Quality checks on the basis of the Product that is running on the line. 

b.     The triggers may go for People across the hierarchy to take care of the ‘Layered audit’ principles making Quality the Collective responsibility of Employees at all levels and not just the responsibility of that Junior Inspector of Quality on the Shop floor. 

c.      The Data will be accepted in various ways by the Software:

                                               i.     Physical data entry by the person to whom the check is triggered. 

                                              ii.     A Photographic input for Visual Checks.

                                             iii.     An electric pulse from an Instrument having capability to give output. 

                                             iv.     There can be more ways in which we can collect actual data on Quality. 

This will ensure that the Quality System becomes online and the checks that are happening and not happening will be clear. Quality can be controlled online.

02.  Online Safety system: Similar to the above Software, one can use the concept for Safety checks too. The input can be similarly taken. In addition to the inputs mentioned above, the CC TVs that are available in Shop floors can be used to identify unsafe acts and alert the concerned employees. 

03.  Online Maintenance Checks: Again, the approach is same as explained in s.no 1. The Supervisor / Operator will check the Maintenance points on line. The machines that have Breakdowns and Machines that already have Zero Break downs can be treated differently in terms of the checks that you do. 

04.  Online Assembly line: The Assembly Lines can connected to Internet and following actions can be brought online:

a.     Start up procedure. Many of the Start up procedures can be automated where the Software will sense the presence / absence of certain parts / resources. The Pressure in the airline can be sensed by a Transducer and recorded. 

b.     Running Status recording. The Line may stop for various reasons. The losses may be entered by the operators to ensure we capture the losses. The Software can ensure this. 

c.      Who is working at the Station. This is quite easily captured by the Software for traceability purposes.

d.     No Fault forward. The Defects that can happen at each station can be defined, Quality checks to capture these defects can be available at every station and using a RFID / Barcode system we can prevent a defect going to the next stage. 

e.     Line Work Management. The Line can display the data on Production / Losses and escalate the information in case of Line stoppages and other inefficiencies. 

There can be several more ways in which the work on a Shop floor can be brought online. When we do it, we have tons of data coming up from the shop floor.

Analytics: We need to have our Engineers trained to analyze this Data and take learnings from the data. The learnings may include:

-       The Quality checks that are getting missed out and address some practical issues that may be there in carrying out these Quality checks. 

-       The Engineers who may be missing Quality checks at a certain time of the day and this data can help us to understand the way of working of the Production Engineers and help them to arrange their work much better. 

-       The Safety points that are getting violated frequently and what needs to be done to avoid these violations.

-        The Breakdowns that have relation to running a specific product and specific operation.

-       Relating the defects to the people / conditions / time will become easier. 

There should be a small team who does these Analytics, takes the learning and does something about it. 

When you go online, the Team has to become more Disciplined and more knowledgeable about everything around. The training discussed earlier will ensure this. The Online working will also highlight the absence of Knowledge and Skill of People much more. 

Indian Companies have to shift to working Online earlier than what we think. 

Are you getting ready?

Every Manufacturing Company always has Cost Reduction Agenda. While they try to improve their Product Design using Frugal Design principles, they always have Cost reduction agenda in the Product too. 

The Business situation is becoming tougher and tougher for companies. The Topline and Bottom line Growth cannot be taken for granted! It has to be earned in the hard manner. 

Automotive industry is going thru some tough phase. The Industry may get fragmented due to Electric Vehicles coming in. It is no longer left to a few Big companies. Few more Bigger companies like Apple, Google are entering this space. Some smaller / new Players are also entering the fray. 

Manufacturing Companies across the world are trying to become more efficient using Industry 4.0 elements. The struggle to become more efficient is continuous for Manufacturing Companies. 

Much like Individuals developing capabilities to do more things, Companies also need to develop Capabilities in their Companies. These Capabilities may be built around a few Practices in the Company. 

Every Company needs to develop the Capability of ‘Continuous Cost Reduction’ on active basis. 

I have seen many companies who get substantial Cost Reduction when they start it off for the first time. But after one /two years, the effort tapers off. They say it is no longer possible! I don’t think the Cost Reduction possibilities will dry up. The ideas to access new Possibilities may dry up. 

I would like to highlight some Best Practices that can ensure Continuous Cost Reduction in a Company. Companies need to pick up a few or all of these elements and formulate their own Process.  Following are some important elements in this process. 

01.  Cost Reduction Target: Every Company needs to have a Challenging Target for Cost reduction every Year. This Target may be there at the Company level in terms of Profitability improvement. This would be naturally broken down in to Targets for reduction of various expenses and will flow down to Various Functions in the Company. Some of the Cost Reduction Projects may be led by Cross Functional Teams. It is important to involve ALL functions in Cost Reduction effort. It should not be left to few Functions only.

02.  Price Recovery: Companies need to have great focus on recovering the escalation of Expenses from Market. If there is a Raw Material price increase, if there is Power tariff increase, if you have given increments to your team, it is ideal if you can recover from the Market. The Market may comprise of individual Big Customers as well as After Market where you are addressing a bigger Market. Every Company would have its’ own constraints to recover full amount of Cost Escalation from the Market. The Competition and Customer Power will not simply allow this to happen. But still every Company needs to have a good mechanism to capture the Cost escalation and throw up information to Sales & Marketing to recover the higher Cost from the Market. Many a times a Good Software support is needed for highlighting the escalation of Costs and how much of it is being recovered from Market. This information has to be available. After this the Company will take a call as to how much it can recover from Customers and how much it cannot. I have seen many companies who simply do not know how much the Costs have gone up and how much is recovered. Resultantly they do not have control on their Profitability.

03.   Cost Reduction as a KPI: Every Senior person in the Company needs to have Cost Reduction as a KPI and he has to deploy the Measures to achieve the Cost reduction to his teams. This KPI should have a reasonable weightage so that everyone takes it seriously. 

04.  Cost Reduction Projects: Every HOD should identify Projects to an extent of 150% of the Target that he is given. Companies may have a Guide line that at any point of time each HOD should have Projects for next 6-8 months. The Projects should have detailed Plans. This is essential to ensure the Projects are practical. Companies create some simple formats to have these details and have a sign off from all Stake holders that it is doable. 

05.  Brainstorming sessions: Every Company needs to have a structure for Brain Storming sessions to identify Cost Reduction Projects. Many of the Subjects may require a Cross Functional Participation. So, each HOD should work out a schedule for Brainstorming Sessions. Each Brain Storming session should have:

a.     A Target for Value of Cost Reduction Projects that need to be identified in the session.

b.     Advance information to Participants to come prepared. 

c.     Analysis of data to be sent to the Participants that will help them to understand the Cost Structure of the Product / Part.

d.     Involve Supplier Partners  as appropriate. 

06.  Involving SMEs: Every Company needs to have a hierarchy of Cost Reduction methods. While the Buyers would be pushing for Volume discounts, there should be some effort in challenging bigger things in the Company. May be Design of the Product may be redone to cut the costs by 1/3^rdor the Dealer Model may be challenged in some areas to sell directly to the Customers. Every Company should have their own share of these Big Bang ideas and they may decide to involve some Subject Matter Experts (SMEs) from outside. These Brain storming sessions may be conducted with some notice and may carry on for a few sessions. Involving outside agencies like IITs / Technical Universities across the world in this effort is a good idea. These efforts will ensure that the Cost reduction effort will continuously happen in a company and it will not dry up after couple of years. 

07.  Involving Supplier Partners: The Cost Reduction has to be driven along with the Supplier Partners. Companies that want to take the ‘full benefit of a Supplier’s effort’ will not get much cooperation from the Suppliers. The Company needs to behave in a mature manner and look at the Medium-term benefit. Supplier Partners should be supported by the Company by training them, exposing them to new practices in technology and process. Companies who invest in to this will reap the Benefits from this type of philosophy. 

08.  Training of the Teams: If a company wants to do some serious Cost reduction, then it should identify the Competencies that its’ staff need to have and Train them to develop these competencies. Some examples of Competencies that are required are:

a.     Ability to understand the Cost Sheets. 

b.     Product knowledge

c.     Manufacturing Process Knowledge

d.     Lean Principles 

e.     VA / VE

f.      Frugal Engineering

It would be good to develop E-Learning material on these topics and keep training the Team members continuously. Training and Re-Training is needed in this area. 

09.  Involvement of All Employees: There should be processes in the Company to involve all employees in the effort of identifying ideas for Cost reduction. It would be good to develop a Mobil app for this and encourage all employees to keep contributing on a continuous basis. This type of Ideas Database can help a Company to maintain a Continuous flow of ideas and Cost Reduction. 

10.  Motivational means: Companies need to be liberal in rewarding the Employees for implementing great Projects. The practice that Facebook / WhatsApp etc. follow in this regard is a good example. Facebook rewards anyone who finds a bug in a handsome manner. Due to this incentive, there are always lots of committed hackers who are searching for a bug in Facebook. This is a win /win situation. 

11.  Spend time every day: All important Functions that are involved in Cost reduction should set up a War room for Cost reduction and ask the Teams to meet EVERY DAY for 45 minutes to push the Cost reduction Projects. Teams have to meet every day to ensure focus on the Cost reduction. This is a very important practice, if you want Cost Reduction to gain focus in your Company.  The War room should have all the Parts, facilities to strip down the parts / products. 

12.  Bench marking: It would be good to encourage a practice of Bench marking the Products / Parts / Processes across the world. Every company can learn from others if the companies are open to let others in. It can’t happen with competitors. But, you can learn from Customers and Suppliers. Many companies get the Parts / Products and conduct a Strip Down Analysis to gain more insights. 

13.  Continuous activity: Cost reduction has to be looked at as a perennial activity in a Company. It has to go beyond the Annual Target. There should be Quarterly Target and the activity has to go beyond a Financial year as the Company may want to have Projects ready and identified for next 6 months. 

14.  Metrics: The Cost Reduction should have Lag and Lead indicators. While Department wise and Companywide target may be the Lag indicators, Practices like Brain Storming sessions, Daily War room meetings, Benchmarking, Strip down analysis etc. can be the Lead Indicators. It is very important to monitor the health of the Process of the Cost reduction. 

15.  Cost Council: It is good to formulate a Cost Council in the Company with senior people in it. This Council should set Bench marks with the Competition and Market for Price, Costs. This Council should formulate ideas for achieving Cost Competitiveness on a continuous basis. This Cost Council should be there at all levels in the Organization with its members conducting reviews at all levels. The CEO or Finance Head can become the leader for this Council. 

There can be more ideas. 

Individually the above ideas may be in practice in many companies. But what is needed is to put them together and formulate them in to a Competency for the Company. It will become a Competency for the Company if the individual elements are practiced regularly and a good result is coming regularly.  Cost Competitiveness is very important for every Company. By putting together your own way of managing the Cost Reduction in your Company and practicing it continuously, you develop it in to a Competency for the Company. 

Is Cost Reduction a strong Competency of your Organization?