CHAPTER - 6

STRATEGIC ISSUES FOR BUSINESS

EXCELLENCE CASE STUDY OF

SUNDARAM CLAYTON LTD.

 Chapter 6

Sundaram Clayton Case Study

Overview

Sundaram-Clayton Limited (SCL) is amongst the leading players in the automotive

component industry. SCL is the only total solution provider of air brake systems for
commercial vehicles OEM’s in India with a market share of over 90%. SCL also
supplies machined aluminum castings to major automotive OEMs in India and several
Multi-nationals. The year 2003-04 has been a landmark year in the history of the
company. The company recorded its best ever-financial results, and its revenues and
profits reached an all-time high. SCL’s strategy of transforming itself into an export-
driven, internationally cost competitive company has yielded impressive gains, during
the year under review. The company recorded a sales of Rs.417 crores during 2003-04
as against Rs.299 crores in 2002-03, a growth of 39%. Profit before tax improved to
Rs.66 crores during 2003-04 from Rs.48 crores in 2002-03.

I. Industry Structure and Development:

The automotive industry showed a remarkable growth in all the segments during 2003-
04 on the back of robust economic growth. While the commercial vehicle segment
grew by 36%, two wheeler and passenger car segment grew by 11% and 32%
respectively. With development of road infrastructure namely - the Golden
Quadrilateral & North-South-East-West projects, the demand for commercial vehicles
is increasing. Sales of multi-axle vehicles and tractor trailers, which offer higher
payload carrying capacity and better operating economies for fleet operators, are on the
increase. As the sourcing of components by Global OEMs increasingly migrate towards
low cost countries, the Indian automotive components industry is uniquely positioned
to benefit from the trend. During 2003-04 exports of automotive components from
India crossed $ 1 billion, a target that was forecast to be achieved only by 2005.

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II. Business outlook and overview:

The Indian economy is estimated to grow by around 7% during 2004-05. Indications

are that the monsoons will be normal and hence agricultural output is expected to grow
in the current year. This will benefit the commercial vehicle and two-wheeler industry.
The passenger car segment is expected to continue its growth mainly on account of
exports. With the expected growth in automotive sales and increasing outsourcing of
components from India, SCL is expected to improve further on, its performance during
the year 2004-05.

III. Opportunities and threats

SCL caters to the requirements of commercial vehicle, passenger car and two wheeler
segments of the automotive industry and also to the diesel engine segment.

The development of the road network is creating a demand for higher horse powered
and higher tonnage vehicles. Manufacturers are responding to this demand through new
models / platforms, which are expected to be on road by 2005-06. SCL has offered
upgraded products meeting international benchmarks on product performance and
reliability to these OEMs.

Intermediate commercial vehicles that were using air over hydraulic braking systems
are being converted into full air brake systems. The Government’s initiative to
withdraw the golden pass - making overloading of trucks as an offence - and scheme to
replace vehicles more than 15 years will also trigger demand for commercial vehicles
and hence for SCL’s braking products.

Product development is also being undertaken for the export market for catering to the
global requirement of our collaborator as well as for the North American after market.
These are expected to bring in additional sales opportunities for SCL.

With a view to enhancing the efficiency of service and the reach of genuine parts to end
users, SCL continues to open authorized service centres at strategic locations across the
country. These centers, apart from providing quicker and better service quality, would
help in reducing the influence of spurious parts and also generate additional revenue to
the company.

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The projected growth of the car segment in the domestic market and their ambitious
export programme is likely to benefit the growth of SCL’s aluminum casting business.
The company has bagged new orders from Visteon, TATA Holset and Ford India,
which would enhance the sales in the domestic segment.

The consistent business development efforts are expected to pay dividends through
increased export sales in the coming years. The company has already been selected as a
strategic source to the Volvo group for the long-term supply of engine and transmission
castings. The company is also developing new products for its existing overseas
customers.

There is a distinct possibility of another multinational air brake system manufacturing

company entering the Indian market. This development might pose a threat to SCL’s
share of business.

With the increasing opportunities on casting exports from India, many captive Indian
foundries are foraying into this market. There is a distinct possibility of new
manufacturers setting up facilities to cater to this market. These would result in
increased competition for SCL’s castings exports.

SCL is also likely to encounter continued price pressures from its customers. The
OEMs are constantly looking at price reduction in their inputs to improve their
competitiveness. Besides, customers from the western world are looking at India and
China as potential low cost alternatives to their existing supplier base. This would
compel SCL to lower prices in order to retain the cuiTent market share.

IV. Risks and concerns:

SCL’s growth in 2003-04 has been mainly driven by good performance of the
commercial vehicle industry. If the growth rate comes down, due to the cyclic nature of
the industry, it will affect the capacity utilization. The stagnant freight rates also seem
to indicate excess capacity in the market.

SCL’s export performance continued to be encouraging during 2003- 04. The order
book is healthy, and the company is following a de-risked business model by tapping a
wide spectrum of customers. Delay in execution of project at customer end might lead
to short-term excess capacity resulting in lower utilization of equipment. Moreover,

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while some geographical markets may appear lucrative in the short-term, changes in
their market dynamics, macro-economic environment, regulatory framework, and
political landscape may make these countries less attractive in the coming years.

Currency fluctuations also constitute a risk factor. Another risk is the appreciation of
the rupee. Much of our costs are in rupees; our exports prices are in US dollars or in
Euro. If the rupee appreciates, then there may be adverse effects both on margins and
on account of exchange rate differences. The possibility of rising energy prices
constitutes another concern area.

The die casting business calls for investments much ahead of commencement of
deliveries, and investments are generally planned with medium term return basis. If
during this period there are design changes, there may be possibility of investments
becoming unproductive. Care is taken therefore, to provide for compensation from the
customers for such an eventuality.

V. Internal control system and their adequacy

SCL has a proper and adequate system of internal controls to ensure that all assets are
safeguarded and protected against loss from unauthorized use or disposition and that
transactions are authorized, recorded and reported correctly. Our internal controls are
supplemented by an extensive programme of internal audits, review by management
and documented policies, guidelines and procedures. The internal control is designed to
ensure that financial and other records are reliable for preparing financial information
and other data, and for maintaining accountability of assets.

VI. Operations Review

a. Quality

The quality system at the factory aims at achieving total customer satisfaction through
its focus on improving product quality to world standards. This is achieved through
total employee involvement and continuous improvement culture. The quality system
for new product development ensures design quality by better understanding of the
customer needs and usage conditions of the products at the customer end.

Structured design reviews are conducted to ensure the deployment and delivery of
quality targets through different phases of product development. Rigorous usage of

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poka-yoke’s, utilization of DOE’s for process optimization and control also contribute
towards improving the product quality.

Total quality management (TQM) is permeated throughout the organization. The

participation in total employee involvement (TEI) activities continues to be 100%.
Employees have completed more than 310 projects by applying statistical tools through
QC Circles in 2003-04. The average number of suggestions implemented per employee
in 2003-04 is 34.

b. Cost management

A rigorous system of cost deployment, which is monitored on a continuous basis and

owned by everyone across the organization, is in place. SCL continues its thrust on cost
reduction for the year 2004-2005. Value engineering, Total Productive Maintenance
(TPM) and Lean Manufacturing implementation are the main focus areas of 2004-05.
SCL has started deploying these best practices to suppliers by forming “supplier
clusters”. It has also initiated ‘e-buying’ to reduce cost of procurement

c. Information Technology

Enterprise Resource Planning (ERP) has been implemented with SAP R3. SAP system
integrates all processes of manufacturing, materials, finance, sales, quality and plant
maintenance across the company’s manufacturing plants and warehouses across India.
In continuation of the CRM initiative, the company has established B2B portal for its
dealers, which addresses all daily routine processes and reports between the company
and its dealers.

VII. HRD

SCL believes that attracting, developing and retaining the best talent is the key to the
success of the business. Therefore it focuses on attracting the best talent from all over
the country, then developing them through skill enhancement and retaining them. The
company enjoys good brand image in leading technical institutes and business schools,
which enables it to attract and internally groom the best talent.

SCL provides systematic training to all its employees. Executives are also sponsored
for continuing education programmes in some of the best universities in the country
and abroad. In-house learning center provides several job related training modules.

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SCL engages highly qualified and experienced consultants to train employees and
continuously improve all business processes.

Steps have been initiated to use performance appraisal system as a methodology to

identify personnel for development. Rewards have been linked to appraisals and
performance resulting in improving the performance ethics. SCL is committed to the
welfare of its employees and their families. Several programmes for employee families
such as computer awareness programme, personality development workshop and career
guidance workshop for employees’ children are part of the company’s annual agenda.

Employees and their families actively participate in the Founder’s day and Family
Sports day, which are celebrated annually. As of 31st March 2004, SCL had 1050
employees on its rolls.

VIII. Safety

Safety management is integrated with the company’s overall environment, health and
safety (EHS) management system and “zero accident” is taken up as the company’s
goal. Based on OHS AS 18001 guidelines and TPM methodologies following measures
have been taken:

• Identification of hazard and risk present in work environment and rectification

through QCC, SIT and CFT.
• Incorporating the findings of accidents and near miss incident findings in the new
equipment and facilities to prevent recurrence.
• Continuous monitoring of unsafe condition and unsafe acts through safety
inspection and audits by safety professionals and plant safety committees.
• Safety induction training for all employees and specific training programmes in first
aid, fire fighting and job related safety topics on a continuous basis.

Over a period of time, with employee education and awareness, accident levels have
significantly reduced.

IX. Environment:

SCL is committed to protection and continuous upgradation of environment through

adaptation of new processes and elimination of hazardous materials and operations.

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Manufacturing facilities are provided with modem effluent treatment facilities and air
pollution control measures.

SCL has implemented ISO 14001 environment standards to provide clean and safer
environment in work place and is working for Occupational Health and Safety
Assessment series (OHSAS) 18001 certification.

X. Community Development and Social Responsibility

As a corporate citizen, SCL believes in its social responsibility and has involved itself
in several community development activities. With the company’s active support ‘Self-
help groups’ have been started in villages and various programmes have been
undertaken towards economic development of people living below the poverty line.
The company also conducts literacy programs, medical camps, health check up
programs and nutrition program for primary school children and adults periodically.

The TVS Group

The TVS group, India’s leading supplier of automotive components originated as a

transport company in 1911. Today it has grown to more than twenty nine companies
and employs a workforce of over 30,000, grossing an annual aggregate sale in excess of
US$ 2 billion, with diverse range of operations that includes manufacturing and
distribution.

The TVS Group includes companies like Sundaram Fasteners, Lucas TVS, Brakes
India, Wheels India, Sundaram Brake Linings, TVS Motor Company and TVS
Electronics. These companies with their ability to deliver products of the right quality,
at the right price and at the right time have made a mark in the Indian and global
markets.

Underlying the success of the group is its philosophy of Trust, Value and Service.

TVS believes that the success of any enterprise is built on the solid foundation of
customer satisfaction. Continuous innovation and close customer interaction have
enabled TVS companies to stay ahead of competition. The group endeavors to be
competitive without compromising on quality. Quality at TVS determines not only the
end product but the systems, processes and operations at all levels.

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Commitment to its people is a fundamental principle of the TVS management
philosophy. The group’s concern for the development and welfare of its employees is
deep rooted. From providing drinking water to villages to setting up schools and
hospitals, TVS contributes actively to the development of local communities.

About SCL

Sundaram-Clayton Limited (SCL) is part of the $2b TVS group of companies, the
largest automotive component manufacturing and distributing group in India. SCL
began its operations in Chennai in 1962, in collaboration with Clayton Dewandre
Holdings Pic, UK, (presently WABCO Vehicle Control Systems, UK) which is a part
of the $7500 million American Standard Inc. SCL has pioneered the manufacture of
air-assisted and air brake systems for commercial vehicles in India. With a commitment
of total satisfaction to customers, our company has achieved a share of business in the
OE (Original Equipment) segment greater than 85% and a market share in the after­
market greater than 75%. The two ventures promoted by SCL viz. TVS Motor
Company Ltd. for the manufacture of two-wheelers and TVS Electronics Ltd. for the
manufacture of computer peripherals, have already made a mark in their respective
segments.

SCL established its Die casting division in 1968 for quality and high precision
aluminum castings. The division’s two plants, one at Chennai and the other at Hosur
are equipped with the latest technology in Pressure Die Casting, Gravity Die Casting
and Low Pressure Die Casting.

Our Research and Development center is full-fledged and state-of-the-art to facilitate

design, development, simulation and testing. A team of professional engineers powered
with the best production facilities gear us up to translate design competence into
excellence in manufacturing through concepts such as cellular manufacturing and
operation standards.

Sundram Clayton Forte

TQM

SCL has a solid foundation in its domestic market leadership and pioneering R&D
efforts. Comprehensive TQM (Total Quality Management) practices enables SCL in

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being a competitive world-class manufacturer in terms of quality, cost and timely
delivery of products.

Process Management

At SCL, we are committed to total customer satisfaction. Cellular manufacturing gives

us the flexibility to respond in tune to customer needs. Comprehensive integration of
the supply chain through implementation of ERP (Enterprise-Wide Resource Planning)
programme has further enhanced SCL’s responsiveness.

Employees

TEI (Total Employee Involvement) forms the base of SCL’s quest for excellence
through TQM. At SCL we are poised to achieve breakthroughs by realising the
importance of the need to continuously honing the expertise of our human resources
and learning from the best practices across the world. Training is imparted not only to
our employees but also our suppliers.

Sundram Clayton Care

SCL is responsible for

• Adopting Govemment-run-schools near the manufacturing plants

• Awarding scholarships to deserving 11th and 12th grade students from low-income
families

• Conducting a two-year apprentice-training course that importance to employment

oriented education.

• Adopting Primary Health Centres to provide free medical aid in rural areas.

• Conducting free eye camps, dental camp, blood donation camp, leprosy treatment
and other similar projects that lend a helping hand in improving the health of
mothers and children are also conducted.

• Providing relief to families affected during heavy monsoon floods in Chennai.

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Mission Statement

We are committed to being a profitable and socially responsible leading manufacturer

of environmentally friendly auto components and sub-systems for customers in markets
and to provide fulfillment and prosperity for customers, employees and suppliers

Milestones

A commitment to enhancing customer satisfaction through continuous improvement

and total employee involvement has led SCL to the following significant milestones so
far.

The Japan Quality Medal.

Union of Japanese Scientists and Engineers (JUSE) has awarded the ‘Japan Quality
Medal’ to Sundaram-Clayton Ltd., Brakes Division for the year 2002. SCL-Brakes
division is the first Indian company and the second outside Japan to win this honour.
The Japan Quality Medal is an annual award presented to a company or a division of a
company that received the Deming Application Prize three or more years ago
(including the award year), that has continuously applied TQM to priority issues and
has been achieving its objectives steadily and effectively in a changing business
environment. Japan Quality Medal is the highest Honor in Quality Control - A
Validation of Long-Term Practice of TQM. The medal is given to recognize that the
company has substantially improved its implementation of TQM since the time it won
the Deming Application Prize.

The Deming Prize

SCL Brakes division was awarded the prestigious Deming Prize by the Union of
Japanese Scientists and Engineers (JUSE) for having “achieved distinctive performance
improvement through the application of company-wide Quality Control”. The
examination procedures and selection process being exacting and elaborate, SCL
considers it a matter of pride that it is the fourth organization in the world outside Japan
to win this prize and the very first in India. Notwithstanding, SCL believes that the
Deming Award is still only the beginning of a conscious and continuous search for new
levels of excellence.

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SCL-Brakes Division is certified for QS-9000 / ISO 9001 Quality Management
Systems.

SCL-Brakes Division is certified for ISO 14001 Environmental Management Systems.

Environmental Policy

Environmental Policy
Sundar&n-Ciayton Ltd, Padi, Chennai is engaged in the
manufacture of air and air-assisted braking systems and
aluminium castings for the automotive industry.
We are committed to develop, produce and market products
and services meeting or exceeding customer expectations, in an
environmentally responsible manner.
In doing so, we shall strive to :
• Conserve resources such as aluminium, energy and oils
• Optimize utilization of key resources such as water,
electricity, compressed air and other manufacturing inputs
such as aluminium, fuel and lubricants by minimising waste
generation and maximising recycle and reuse
• Adopt measures to control generation of effluents, waste,
noise and emissions and remain in compliance with
legislation
• Improve work environment through better house-keeping
and safe work practices
• Build environmental awareness among employees
• Encourage our suppliers to become environmentally
responsible

This policy shall be communicated to all concerned.

President
15-August-2000

Anti-lock Brake System (ABS)

SCL-Brakes division manufactures an entire range of air brake actuation components
comprising wide range of compressors, reservoirs, air dryers, controlling and regulating
valves, brake chambers, spring brake chambers, slack adjusters and a host of auxiliaries
such as hoses, couplings and switches. SCL-Brakes division manufactures a growing
range of vacuum brake equipment for light commercial vehicles. SCL also offers a
range of repair kits to service its products in the after-market. (Fig. 6.1)

ABS
ASR

Electronic Control Unit ■ABS,ASR p"'um,tic «•*«

Input Signal From Sanaor
Proportional Valve —Output Signal To Vahrea

asr cylinder Anti-lock Brake System with

Anti-Spin Regulation

Figure 6.1

SCL-Brakes division is the first Indian company to manufacture the next generation
braking system-Anti-Lock Brake System (ABS) and Anti-Spin Regulation (ASR)
developed with total in-house design technology. Anti-lock Brake System (ABS) is a
result of years of extensive research and it dramatically improves vehicle stability under
adverse road conditions, thus enhancing safety and steer ability.

Deming Prize for Business Excellence Journey at Sundram Clayton

Many Indian Auto companies in India have been doing exceptionally well since early
1990’s by learning from each other and following the philosophy of Total Quality
Management (TQM) as a way for their corporate strategy to achieve Business
Excellence. Many Indian companies especially in the automobile- component sector
have been applying the principles of TQM or Business Excellence for competing in this
very competitive market. With help from Prof. Osada of Japanese Union of Scientist
and Engineers (JUSE) and the Confederation of Indian Industry (CII), these companies
have been applying the Deming Model for TQM Implementation in their companies for
achieving competitive advantage.

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Many of the companies like Sundaram Clayton, Sundram -Brake lining, Sundaram
Fasteners, TVS Lucas of the TVS group and Sona Koyo Steering Limited, Mahindra
and Mahindra Tractors Division and other such companies have been applying the
principles of Total Quality Management and Business Excellence. They are applying
the Guidelines for the Deming Prize instituted by the Japanese Union of Scientists and
Engineers (JUSE).

1.1 The Deming Prize (Japanese Model for Excellence)

This best known prize with the longest history was first awarded by the
Japanese Union of Scientist and Engineers (JUSE) in 1951 to a Japanese
company which excelled in Total Quality Management. This prize is given for
an overall performance of a company. Till 1991 this prize was given to only
Japanese Companies but from 1992, any company outside Japan could apply for
Japanese - Deming Prize.

1.2 The 10-point content of the Deming Prize is as follows

1. Policy
1.1. Quality and control policies and their place in overall business
management
1.2. Clarity of policies (targets and priority measures)
1.3. Methods and processes for establishing policies
1.4. Relationship of policies to long-and short-term plans
1.5. Communication (deployment) of policies, and grasp and
management of achieving policies.
1.6. Executives and mangers leadership
2. Organization
2.1. Appropriateness of the organizational structure for quality control
and status of employee involvement
2.2. Clarity and authority and responsibility
2.3. Status of interdepartmental coordination
2.4. Status of committee and project team activities
2.5. Status of start activities

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 2.6. Relationships with associated companies (group companies, vendors,
contractors, sales companies etc.)
3. Information
3.1. Appropriateness of collecting and communicating external
information
3.2. Appropriateness of collecting and communicating internal
information
3.3. Status of applying statistical techniques to data analysis
3.4. Appropriateness of information retention
3.5. Status of utilizing information
3.6. Status of utilizing computers for data processing Standardization
4. Standardization
4.1. 4.1 Appropriateness of the system of standards
4.2. 4.2 Procedures for establishing, revising and abolishing standards
4.3. Actual performance in establishing, revising and abolishing
standards
4.4. Content of standards
4.5. Status of utilizing and adhering to standards
4.6. Status of systematically developing, accumulating, handling down
and utilizing technologies
5. Human Resource Development and Utilization
5.1. Education and training plans and their results
5.2. Status of quality consciousness, consciousness of managing jobs,
and understanding of quality control
5.3. Status of supporting and motivating self-development and self-
realization
5.4. Status of understanding and utilizing statistical concepts and
methods
5.5. Status of QC circle development and improvement suggestions
5.6. Status of supporting the development of human resources in
associated companies Quality Assurance Activities

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6. Quality Assurance Activities
6.1. Status of managing the quality assurance system
6.2. Status of quality control diagnosis
6.3. Status of new product and technology development (including
quality analysis, quality deployment and design review activities)
6.4. Status of process control
6.5. Status of process analysis and process improvement (including
process capability studies)
6.6. Status of inspection, quality evaluation and quality audit
6.7. Status of managing production equipment, measuring instruments
and vendors
6.8. Status of packing, storage, transportation, sales and service activities
6.9. Grasping and responding to product usage, disposal, recovery and
recycling
6.10. Status of quality assurance
6.11. Grasping of the status of customer satisfaction
6.12. Status of assuring reliability, safety, product liability and
environmental protection
7. Maintenance and Control Activities
7.1. Rotation of management (PDCA) cycle
7.2. Methods for determining control items and their levels
7.3. In-control situations (status of utilizing control charts and other
tools)
7.4. Status of taking temporary and permanent measures
7.5. Status of operating management systems for cost, quantity, delivery,
etc.
7.6. Relationship of quality assurance system to other operating
management systems 8. Improvement Activities
8. Improvement Activities
8.1. Methods of selecting themes (important problems and priority
issues)

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 8.2. Linkage of analytical methods and intrinsic technology
8.3. Status of utilizing statistical methods for analysis
8.4. Utilization of analysis results
8.5. Status of confirming improvement results and transferring them to
maintenance / control activities
8.6. Contribution of QC circles activities
9. Effects
9.1. Tangible effects (such as quality, delivery, cost, profit, safety and
environment)
9.2. Intangible effects
9.3. Methods for measuring and grasping effects
9.4. Customer satisfaction and employee satisfaction
9.5. Influence on associated companies
9.6. Influence on local and international communities
10. Future Plans
10.1. Status of grasping current situations
10.2. Future plans for improving problems
10.3. Projection of changes in social environment and customer
requirements and future plans based on the projected changes
10.4. Relationships among management philosophy, vision and long-term
plans
10.5. Continuity of quality control activities
10.6. Concreteness of future plans
Strategic Management by Business Policy (SMBP) for TQM
Implementation
Prof. Osada, the Japanese Guru for JUSE emphasizes the concept of Strategic
Management by Business Policy (SMBP) for TQM Implementation.
Excellent companies in 21st century will have to focus on
(a) Sustainable growth
(i) Looking at all stakeholders’ satisfaction which implies value for
customer, employee, society, business partner and shareholders.
 and be
(b) Able to face the mega competition and win the competitive advantage
by
(i) Differentiation strategies
(ii) Tapping of creativity and innovation from all its employees for
coming out with creative and innovative products.
(Hi) And having optimum resource allocation.
View points needed for strategic planning, as per Osada should certain the
following:

(a) Innovation: strategic & future orientation

(b) Improvement in processes : problem solving

(c) Forecasting business environment clearly & comprehensively

(d) Product business lifecycle

(e) Positioning, benchmarking

(£) And focus on optimum resource allocation

(g) Concentrate on key success factors / failure factors

(h) Practical strategy looking at product, market & strategic elements

(i) Participatory type of strategic planning

(j) And finally strategic planning implementation.

By applying this framework and the concerns for the Deming prize, companies in the
TVS Group like, Sundram Clayton, Sundram Brake lining, TVS Motors, have achieved
excellence. Other companies in the auto component manufacturer like Jay Bharat
Maruti a subsidiary of Maruti Udyog Limited, Sona Koyo Steering, Minda Huf Ltd. in
India have established a level of excellence by which they are able to supply their
products to the top automobile manufactures in India. They are also able to export to
foreign countries facing the challenges of global competition successfully. Two
examples of Indian auto component industries would be highlighted in the next part of
the paper:

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Sundaram - Clayton Limited Brakes Division (Chennai)

This company was established in 1962 as a joint venture with Clayton Devandre, UK
(Now WABCO Automotive UK). WABCO Automotive is part of American Standard
Inc. - a fortune 500 company.

Sundaram Clayton - Brakes Division is located at Chennai and is part of the TVS
group, which was established in India in 1911.

SCL Products:

• Air brake systems for medium and heavy commercial vehicles

• Vacuum brake products for light commercial vehicles.

• Anti-lock braking systems (ABS) and Anti-spin Regulation Systems.

In 1983-87 there was a recession in the Automobile Industry and Emergence of

Competition in Sundaram Clayton Business. There was a drop in market share and
profitability. Thus in 1987-88 there was a wake-up call for the company to gear up and
faced competition. Sundaram Clayton embraced the TQM philosophy and the Deming
model for improving performance and manufacturing excellence.

1987-90phase the Introduction phase

The first issues was to be tackled in this phase was bringing about a cultural change in
the organization by having common uniform for all employees, open offices, total
employee involvement, where quality circles and suggestion schemes were encouraged
among the employees.

Restructuring Manufacturing process was done to have product layout, self-contained

units, and operator’s ownership of Quality,

1990-1994: The Promotion phase

The Policy Management philosophy was employed to have goal congruence among all
the levels of management. Measures and targets were fixed and monitored / reviewed
and achieved. The audit reviews were carried out throughout the organization.

The concept of cellular manufacturing - emphasizing Productivity Improvements, Lead

- Time Reduction, settings up of operation standards for all key processes were done.

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Massive efforts towards Education and Training where problem solving skills were
imparted to company wide employers at all levels.

1994 -1998: Deployment Phase

Standardization was adopted for all processes and operating procedures were written
for every activity specially all manufacturing activity & related activities. Poka-Yoke
(Mistake Proofing) was implemented for various machines in the manufacturing
process.

New Product Development was taken up very seriously applying a multidisciplinary

task force fiill time and New Product Development (NPD) process was well defined
and all the tools and techniques were applied for New Product Development.

Supplier Development was emphasized for the whole manufacturing function.

Manufacturing cells were created at the suppliers’ sites and training of suppliers or
vendors of the company was done by the specialists.

In 1998 Sundaram Clayton - Brakes Division was awarded “Deming Application

Price” for distinctive performance improvement through the application of Company­
wide Quality Control. This company became the forth company outside Japan and the
very first in India to receive this prestigious award.

Continues Improvement phase (1998- Present)

Responding to the External changes and the Internal changes, the Deming examiner’s
feedback with TVS corporate values in mind, efforts began to own new products,
sustain product quality and productivity with social responsibility for improved
customer satisfaction and business results.

Concepts like Total Productivity Maintenance (TPM), Lean Manufacturing,

Application of IT as enabling processes Productivity Improvement, Establishing
Environmental Management Standards (EMS) as per ISO 14001 standard were taken
up. Development work for electronic control system for air brakes was taken up during
this period. Development of new customers has also being given importance. For
sustaining profit, product mix optimization and cost management have been made very
effective throughout the company.

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The Road map for competitiveness as applied by SCL is given below in Figure 6.2.

Road map for competitiveness

Input Process Result Impact
^ Stability in process
Kanban SntogofS^ Lean 4 Reduced leadtime
_____ Customer satisfaction
Autonomous ^ Zero breakdown
Piannsdmairrtenancs TPIUI ^Zero<tefect
Quality maintenance i '1*1 ^ Production Increase
Kobetsu Kaizen
________ M OEE increase
Cell layout 0^
Productivity jf V^u# a,kted employee cost
Single component flow Productive
Improvement Work culture
Mutti machine manning
W Process ownership
T
B#dta3^. Inventory 4. High
. ITK
oaarnfSN *
improved
Management 4 Working capital mgmt
Containeffsatiofv Cashflow
X_
j Quality *4 tnhouse rejection*
’Jjj Management 4 Warranty claims* Quality
J>4 Customer complaints i Excellence

Vfy Daily management discipline

4 Waste elimination Improvement
J&k Aerator ownership culture

Figure 6.2: Roadmap for Competitiveness

With the above two case study, from the auto component industry in India, we have
seen how policy management as part of the Deming way of implementing Total Quality
Management (TQM) for achieving business excellence has been implemented in the
two case studies.

Now we look at some common issues emerging, which any innovative company should
apply for their strategic priorities for manufacturing Excellence to be competitive in the
market place.

4. Strategic Priorities for Manufacturing:

Manufacturing strategic provides a powerful framework for creating and sustaining

competitive advantage. Manufacturing should be meshed with business needs rather
than be viewed as an isolated function and policy. Such an approach is invaluable for
long term planning for an organization. Once the strategy or policy is developed then
the next step is articulation of strategic priorities. These priorities indicate the areas in
which manufacturing must focus if it is to provide a competitive edge for the company.

The strategic priorities for manufacturing should focus on Cost, Quality, Delivery,
Flexibility and Service as illustrated below:
Cost
• Initial Cost. The price or cost of purchasing a product.
• Operating Cost. The cost of operating of using a product over its lifetime.
• Maintenance Cost. The cost of maintaining a product over its lifetime. Includes
minor repairs and replacement parts.
Quality
• Performance. The primary operating characteristics of a product.
• Features. The secondary characteristics of a product or service.
• Reliability. The degree to which a product or service meets pre-established
standards.
• Durability. The amount of use a product can sustain before it physically
deteriorates or until repair is no longer economical.
• Serviceability. The speed, courtesy and competence of repair.
• Aesthetics. The look, feel, and sound of a product or service.
• Perceived Quality. The impact of brand name, company image, and advertising.
Delivery
• Accuracy. Whether the correct items were delivered, and in the correct
quantities.
• Completeness. Whether shipments were filled completely the first time, or
whether certain items had to be backordered.
• Dependability. Whether the product was delivered on the agreed upon date
• Availability. The probability that items will be in stock at the time of order.
• Speed. The elapsed time between order placement and the time that the product
reaches the customer.
• Information Accessibility. The degree to which real-time information is
available about a shipment.
• Quality. The condition of the product after shipment.
• Ease of Ordering. Whether a company provides order preparation assistance,
receives orders electronically, or provides immediate notification of items that
are out of stock.
• Ordering Flexibility. Whether there are limits on the minimum permitted size of
orders and the assortment of items in a single order.
• Shipment Flexibility. The ability to reroute delivery in order to accommodate
special circumstance.

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 •Ease of Return. The willingness to absorb the cost of returning a product and
the speed with which returns are processed.
Flexibility
Product Flexibility
. • New Products. The speed with which new products are created, designed,
manufactured, and introduced.
• Customization. The ability to design a product to a particular customer’s
specifications.
• Modifications. The ability to modify existing products for special needs.
Volume Flexibility
• Uncertain Forecasts. The ability to respond to sudden changes in the volume of
a particular product required by the market.
• Ramp-Ups. The speed with which new manufacturing processes can go from
small volumes to full-scale production.
• Mix-Flexibility. The ability to manufacture a variety of products, over a short
time span, without modifying existing facilities.
• Changeover Flexibility. The ability to adjust smoothly to changes in product
mix over the long term.
• Rerouting Flexibility. The degree to which the fabrication or assembly sequence
can be modified if machinery. The ability to accommodate variations in raw
material and raw material substitutions.
• Sequencing Flexibility. The ability to rearrange the order in which parts are fed
into the manufacturing process, because parts and raw material deliveries are
uncertain.
Service
• Customer Support. The ability to provide customers with quick replacement of
defective parts or quick replenishment of stocks to avoid downtime or lost sales
• Sales Support. The ability to enhance sales and marketing by showcases, in real­
time, the technology, equipment, or production systems the company is trying to
sell-
• Problem Solving. The ability to assist both internal groups and customers in
problem solving, especially in such areas as new product development, design for
manufacture ability, and quality improvement.
• Information. The ability to furnish critical data on product performance, process
parameters, and cost to internal groups, such as R&D, and to external customers,
who then use the data to improve their own operations or products.

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4*
This can be illustrated by the Figure 6.3 highlighting gaining strategic resonance from
plant processes.

Business strategy

If the plant has this....
• Focused plants
• Excellent layouts
• Current process technology
• A highly skilled, trained and
dedicated workforce
• Superb process quality
• Strategic partnerships with
suppliers
• Excellent in-house inventory
management
Then...
The plant can satisfy a range of customer
requirements including...
• Volume
• Variety
* Customization
• Delivery speed
• Delivery reliability
• Competitive costs
• Assumed excellence in quality.
All will satisfy customer and will enhance
the firm’s reputation. In other words,
strategic resonance has occurred.

Figure 6.3: Gaining Strategic Resonance from Plant Processes

5. Conclusion

Applying the rigor of the Deming Application Prize, and following the process of
Policy Management principles as advocated by Prof. Osada of JUSE, the auto
component companies especially as mentioned in the paper i.e. Sona Koyo Steering
Ltd. and Sundram Clayton and have truly become world class companies. They have
applied the Deming philosophy with policy management integration and Japanese
Manufacturing Strategies with various tools & techniques to become competitive and
world class in a highly competitive environment in the auto-component industry. Two
companies mentioned in the paper have been able compete and establish leadership

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position in a very competitive market. They have been able to apply improvement in
the whole value chain starting with

• Design & Development which includes OEM Design requirements, product Design
Development, Manufacturing Process Design.
• Procurement involving vendor Management, Inventory management,
• Manufacturing involving shop floor management, Process improvement and
product improvement,

• Distribution involving logistic management, schedule & delivery management and

• Marketing involving dealer management, customer management and Transactions
management.

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