Supply issues in ACPL – an electrical
manufacturing company
Hari Narain Singh
Hari Narain Singh is based
at IMS, Noida, India.
Disclaimer. This case is written
solely for educational purposes
and is not intended to represent
successful or unsuccessful
managerial decision making.
The author/s may have
disguised names; financial and
other recognizable information
to protect confidentiality.
DOI 10.1108/20450621211292373
The manufacturing industry – history and development Indian manufacturing
sectors
In its earliest form, manufacturing was usually carried out by a single skilled artisan with
assistants. Training used to be by apprenticeship. The wave of Western Industrial Revolution
is reviewed first. Focus is then shifted to the Indian manufacturing industry, from ancient to the
recent decade. Its current status is compared with others in a global scenario.
Before the Industrial Revolution, most manufacturing occurred in rural areas, where
household-based individuals turned into entrepreneurs manufacturing certain products,
served as a supplemental subsistence strategy to agriculture. Such entrepreneurs organised
a number of manufacturing household products into single enterprise through the putting out
system:
B Manufacturing for wealth – manufacturing is defined and classified into different types of
products. Then manufacturing can be studied by its relation with other sectors of
economy and with different types of wealth: material, natural, intellectual and cultural.
B The history of manufacturing begins with the word itself, to manufacture, meaning to make
by hand. It spans the cottage industry of individual artisans and ends with today’s mass
production, established well by Henry (1922) for mass consumption. Manufacturing is not,
however, a simple matter of supply meeting demand, but a history filled with technological
achievement, political struggles and social ills.
The Industrial Revolution
B Divided into two nearly seamless periods of productivity, the Industrial Revolution lasted
almost a century, from 1760 to 1850. Machine-based manufacturing, steam
power-invented by James (1778) and the development of pig iron and coke-fired steel
provided a quick production of items at a profit.
B Manufacturing was transformed through improvements to the steam engine and the
invention of the jenny, a large loom that increased clothing production. Agriculture vastly
improved through better farm implements, soil conservation, increased food output and
the ability to keep large livestock herds. These advances meant fewer farms could feed
booming city populations. Transportation was enhanced through a network of canals and
railways.
B Perhaps the most important development of the Industrial Revolution was interchangeable
parts. Developed by Honoré (1778) and brought to the USA by Eli Whitney in 1798,
interchangeable parts finally became a reality in 1816 when machines managed to make
the pieces identical.
VOL. 2 NO. 8 2012, pp. 1-19, Q Emerald Group Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
 Development of assembly lines – Henry Ford way
B Automaker Henry Ford made his factories as efficient as possible in the early 1900s. Ford
developed assembly lines, repetitive motion and the division of labour, giving workers
specific tasks to complete along the line. He paid higher wages than his competitors so
his employees could become consumers of his cars.
B Ford’s first moving assembly line in 1913 reduced chassis assembly time from 12.5 h to
1 h 13 min.
B By 1920 Ford was making 50 percent of cars made in the USA and 40 percent of all British
cars.
B Post Second World War Ford bought Jaguar and Land Rover, by year 2007 Ford reported
loss of $12.7 billion and sold off Land Rover and Jaguar to Tata Motors.

Automation and lean manufacturing – Toyota way

B In the 1960s, the Toyota Motor Corporation improved Henry Ford’s ideas by further
reducing waste, increasing efficiency and seeking employee input to improve
manufacturing. This led to a heavy reliance upon automation to trim costs, because
machines work without breaks, shift changes, pay or benefits. Toyota depleted inventory
overstock by selling products shortly after they were built, lowering storage costs and
creating flexibility in meeting consumers’ changing demands.
B Just in time (JIT) production strategy strives to improve an organisation reducing work in
progress (WIP) inventory, hence carrying cost. JIT method is also called Toyota
Production System (TPS) introduced in 1950s by Taiichi Ohno as per Hirano, Hiroyuki et al.
(2006) and Motwani (2003). JIT heavily relies on KANBAN tickets for visual controls.
B Main benefits of JIT could be, reduced set up time, multi skilled labour, lean inventory by
synchronising demand with production schedule using enterprise resource planning
(ERP), increased emphasis on supplier relationship ensuring supplies in small lots at
regular intervals with minimum storage space.
B TPS has adopted Piggly Wigglys supermarket replenishment system and working
backward till controlling output of mini steel plant using electric arc furnace – starting,
stopping, changing steel grades rapidly.

Entrepreneurship: history
Entrepreneurship as per Joseph (1942) is the act of being an entrepreneur, which can be
defined as ‘‘one who undertakes innovations, finance and business acumen in an effort to
transform innovations into economic goods’’. This may result in new organizations or may be
part of revitalizing mature organizations in response to a perceived opportunity. The most
obvious form of entrepreneurship is that of starting new businesses.
According to Reynolds (2007), entrepreneurship scholar and creator of the Global
Entrepreneurship Monitor:
[. . .] by the time they reach their retirement years, half of all working men in the United States
including developing economy, probably have a period of self-employment of one or more years;
one in four may have engaged in self-employment for six or more years. Participating in a new
business creation is a common activity among Indian, European and US workers over the course
of their careers.

Over past three centuries it has been documented by scholars such as Audretsch (2008) that
entrepreneurs happen to be a major driver of economic growth in developing as well
developed world. Also, entrepreneurship may be defined as the pursuit of opportunity
without regard to resources currently controlled (Stevenson, 1983). Peter Drucker’s
Innovation and Entrepreneurship (1985) describes it as systematic innovation consisting of
purposeful and organised search for changes and in a systematic analysis of the
opportunities such changes might offer for economic and social innovation. As per Smith

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PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 8 2012
((1977)[1776]) entrepreneurship is an individual who undertakes the formation of an
organisation for commercial purposes by recognising the potential demand for goods and
services and thereby acts as an economic agent and transforms demand and supply.
For Knight (1921) entrepreneurship is about taking risk. The behaviour of the entrepreneur
reflects a kind of person willing to put his or her career and financial security on the line and
take risks in the name of an idea, spending much time as well as capital on an uncertain
venture. Richard ((2010)[1755]), a French economist was first to use entrepreneur to refer
economic activities and bearer of risk and uncertainty quoted in Entrepreneurship
Development by Chhabra (2010). As per John and Howard (1985), entrepreneurship is the
attempt to create value through recognition of business opportunity, the management of risk
taking appropriate to the opportunity and through the communicative and managerial skills
to mobilise human, financial and material resources necessary to bring a project to fruition.
Thus, entrepreneurship means undertaking innovation, risk, value creation, economic
growth, and transformation of demand and supply.

India and transformer manufacturing industry

Instrument transformers (ITs) proportionally step down or reduce large voltage and current
values so that they may be safely used on sensitive instruments and components. These
instruments and components include ammeters, voltmeters and over current protection
relays. ITs fall into two distinct categories: potential and current transformers (PTs and CTs).
A PT is used to supply a low voltage to voltmeters, and a CT supplies manageable current
vales for ammeters and over current relays.
High-tension power supply installations may carry voltages as high 33 kV with common
distribution voltages in excess of 13 kV. Three phase equipment such as electric motors in
industrial installations commonly run on 440 V and often draw several hundred amps during
operation. The average voltmeter has a maximum rated voltage of 220 V and could never
directly measure these voltages. To allow for the use of these components, precision
instrument transformers proportionally reduce the high voltages and currents to safe values.
ITs also allow the installation of all required instrumentation in control rooms and monitoring
facilities with only low voltage cabling present.
The primary reason for setting up the instrument-transformer interface is to provide analog
information at low voltage levels, insulated from the higher system voltages. CTs are
connected in series with the power conductor. In many cases this conductor serves as the
one-turn primary. The principal types are the window type, where the power conductor is
passed through a hole in the center of the CT; the bar type, where the power conductor is
fastened to a one-turn bar which is part of the CT; and the bushing type, a toroidal core and
winding that is slipped over the insulating bushings of circuit breakers, transformers, and so
forth.

Indian Electrical and Electronics Manufacturers Associations

Indian Electrical and Electronics Manufacturers Associations (IEEMA) has established SME
quality certificate – for strong commitment to quality systems in electrical and electronics
industries. IEEMA is an association of electrical and electronic products manufacturing
companies in small, medium, and large enterprise category. Since institution of ISQA in,
2008, 30 small organizations and 13 medium organizations had been felicitated under
various levels of recognition.
Member organizations like ABB, Crompton Greaves, CTR Manufacturing Industries Ltd,
Emco Ltd, Gilbert & Maxwell Electricals, Indo Asian Electricals, Leroy Somer, L&T, Legrand
(India), Schneider Electric, Secure Meters, Siemens, W.S. Industries, Havells nominated
their experienced officials to be a part of panel of examiners who were trained through four
sessions of induction which demanded a good portion of their precious time apart from their
normal work.

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VOL. 2 NO. 8 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3
 Members of the Jury of this year’s (2010) ISQA Award Process, Mr S.K. Kakkar – Chief
Mentor, Organisational Performance Excellence Consultants, Mr J. Sridharan – President,
World Class Manufacturing, Aditya Birla Group helped the ISQA Committee in not only
finalizing the list of winners under various categories but also for imparting a few vital points
for future award based on their vast experience.

Geographical distribution of electrical industry

There are over 1,300 electrical and electronic manufacturers in India mostly in part of
Maharashtra, Madhya Pradesh, Gujarat, Tamil Nadu, Karnataka, Andhra Pradesh,
Uttar Pradesh, Punjab and Haryana. The paces of industrialisation in certain geographical
areas have been faster than the rest. This necessitated the need of electrical power in such
areas to keep pace with industrialisation. In addition to power generation by power plants,
the transmission of power, distribution of power, measurement of power are few other
aspects which require variety of electrical and electronic products for arriving at customised
solutions at each end. Eventually state governments, central government, have set up their
own power boards. The projects are sanctioned by state and central boards and awarded to
bidders, large companies which include public, public private partnerships (PPPs) models
and private sectors. The manufacturing companies including micro small and medium
enterprises (MSMEs) are suppliers to these large companies.

Why electrical industry

Aurel Controls Pvt Ltd (ACPL) is manufacturing ITs, part of electrical solution for power
measurement. In the back drop of nature of product of this company it was thought
necessary to explain the electrical industry sector that this company is associated with.
There are many variety of transformers required for specialised solution in power
generations, distribution, measurement, etc. The author has tried to limit the scope of study
to ITs-product made by ACPL.

Consumers – who would buy?

The power line is connected to group of consumers be it industries, houses, shops, etc.
Between line transmission and group of consumer there comes the methodology of
distributing and measuring power to each user or consumer. This methodology requires use
of various transformers for stepping down from transmitted line power at 33 kV/11 kV to
440 V/220 V and finally feeding to individual consumer via energy meters. Sometimes the
consumer requirement may be very large requiring independent feeder, PT and CT.

Story of ACPL saga-beginning, setting up, background

Mr Munish Kumar, Chairman, BSc (Elect. Engg, BHU) worked for over 37 years in
Government of India, as Chief Engineer. Mr Munish Kumar belongs to family of entrepreneurs
engaged in business of trading of household items at Merrut, UP. He had dream to set up a
small-scale industry which could be nurtured after his governmental assignment. He started
electrical items trading organisation in 2001 with the help of his elder son Mr Samarth.
Mr Munish Kumar did not involve himself routinely in business till his retirement.
Mr Samarth Kumar, MBA, Director started his career in year 2000. Soon he got inspired by
his father to start the trading organisation in 2001. He actively involved in all activities
including applying for land, getting power and water connections, no objection certificates
from all regulatory authorities. He played key role in setting up manufacturing enterprise
ACPL in 2004, in Sahibabad industrial area, Ghaziabad. Mr Sajal Kumar, MBA, Director,
younger son of Mr Munish Kumar, started his first job in 2003. In year 2004 he joined his
brother to lend support in establishing the manufacturing infrastructure (machines, testing
jigs, instruments, utilities, etc.) and taking up internal operations of production.

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PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 8 2012
In addition to directors, ACPL has seven managerial staff, two research and development
engineers, 51 regular workmen, 12 workmen on contracts (as per need). ACPL
manufactures instrument transformers (ITs) of various current rating, and as required by
power utilities in India. The comprehensive range of products is approved by ERDA,
Vadodara and CPRI, Bhopal and or Noida.

What is IT?
ITs are designed to transform voltage or current from the high values in the transmission and
distribution systems to the low values that can be utilized by low voltage metering devices.
There are three primary applications for which ITs are used: metering (for energy billing and
transaction purposes); protection control (for system protection and protective relaying
purposes); and load survey (for economic management of industrial loads). Depending on
the requirements for those applications, the IT design and construction can be quite different.
Generally, the metering ITs require high accuracy in the range of normal operating voltage
and current. Protection ITs require linearity in a wide range of voltages and currents. During a
disturbance, such as system fault or over voltage transients, the output of the IT is used by a
protective relay to initiate an appropriate action (open or close a breaker, reconfigure the
system, etc.) to mitigate the disturbance and protect the rest of the power system. ITs are the
most common and economic way to detect a disturbance (variations in I, V). Typical output
levels of ITs are 1-5 A and 115-120 V for CTs and VTs, respectively. There are several classes
of accuracy for ITs defined by the IEEE, CSA, IEC, and ANSI standards. ACPL is approved
supplier for over 12 power utilities and private power companies and fast expanding its wings
into export. ACPL could achieve annual turn over of Rs 7 crores.

ACPL – a trading venture

From humble beginning in 2001, along with his elder son Mr Samarth Kumar, as a trader of
various brands of electrical cables, switches, starters, changeovers of L&T, Finolex,
Mr Munish Kumar could establish the dealership over next three years successfully. About
four years later Mr Munish Kumar wanted to become entrepreneur in true sense by venturing
into manufacturing operations to use his technical knowledge and work experience which
may eventually increase margin of profits. Subsequent to this trading achievement, he
planned of establishing manufacturing unit of such items in 2004 in Delhi. By this time he had
acquired the practical knowledge of marketing, finance and materials.

An entrepreneurial manufacturing venture – ACPL creating-crisis ahead

ACPL was established in 2004 in Sahibabad (Ghaziabad), with factory space of 5,000 sq. ft.
Requisite manpower were recruited and minimum machines were bought and installed. This
financial strategy was adopted to keep investment low and reserve the fund for working
capital requirements such as raw materials, wages, and maintenance and government
duties. Initially company depended more on vendors for sourcing materials and
components.
ACPL working capital was high compared to turnover and large amount of money remained
blocked in inventory of raw materials and as also in finished goods. In early 2007, it was seen
as a brand to be reckoned with. It was popular in Northern India for electricals – ITs. This unit
is equipped with advanced machines and plants that ensure our smooth production
process. Some of the machines installed at this unit include:
B heating oven with vacuum T/F oil filling arrangement;
B drilling machine;
B DG set (50 kVA);
B welding machine;
B oil filtration plant;

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VOL. 2 NO. 8 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5
 B impregnation plant;
B vacuum cum casting plant;
B computerized CT-winding machine;
B PT winding machines; and
B computerized PT and CT testing bench.
These machines are highly upgraded by internal personnel and capable of offering various
range of transformers having specifications as per client’s requirement.

Marketing
Marketing is multimedia effort with advertisements in IEEMA, Indiamart, Indian Industries
Association, mailers, posters, tenders and personal contacts being major means of
marketing. Prospective customers can reach out company web site, e-mail enquiries, or talk
to ACPL executives on phone. Besides on line booking and payments facility available
conventional means of cheques are also accepted. ACPL is approved vendor with more
than ten state electricity boards (SEBs)/power utilities including Indian Railways.

Product profile-pricing-place-promotion
B Product. Capitalizing on their in-depth industry expertise, ACPL is offering a wide
assortment of ITs such as 11 and 33 kV CTs/PTs, CTs, CT-PT combined units. Indoor
metering cubicles PT and CTs. Their wide range of transformers is based on latest
technology, which meets the various requirements of domestic as well as commercial
industry.
B Price. ACPL products price is based on internal costing with emphasis on quality
conforming to contractor/power boards bidding process norms.
B Place. Expanding the customer base in more states and with many turnkey contractors in
power sector.
B Promotion. ACPL is approved supplier with power utilities, hence does not require any
special vehicle for promotion. Moreover, with the support of their wide distribution
network, ACPL meets the bulk requirement of govt/private power utilities of different
states all over the country within a stipulated time frame.
B Packaging. Specifications for all products are as per national standards and also it is
customised.
B Positioning. ACPL is second unit in country approved by RDSO. Other company is
LAMCO, Hyderabad.
B People. ACPL team of quality expert ensure that its range of products is free from any
defects, which meet the industry standards and norms. ACPL constantly focuses on team
building in the organisation. Moreover, ACPL’s ethical business policies, client centric
approach and industry leading prices have helped company to gain a vast client base
across the country.

Business done by ACPL

Company purchase policy of ACPL is to source raw materials of high quality from A class
vendors of national repute. Constant R&D and reengineering is done for development of
product using latest techniques. Company test lab has built in testing facility for copper
purity (resistivity). Product accuracy varies as per customer requirement, e.g. three stages
testing from core initial winding to final assembly. ACPL business data of last three years are
placed in Table I. Initially ACPL started its operation with UP Power Corporation and slowly
entered in business with all major state utilities. Major customers, with code names in
parentheses, as used in Table I, are shown below:

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PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 8 2012
Table I Order execution – tender to payment cycle (consolidated 2009-2010, 2010-2011, 2011-2012)
SN SCC TN AP UP MA KA UK MP PU OT Days grand average

Utility company
1 ENQ 0 0 0 0 0 0 0 0 0
2 BID 7 7 7 7 7 7 7 7 7
3 NEG 10 10 12 8 9 8 8 9 10
4 POR 15 15 12 13 13 15 13 12 15
5 PLG 7 7 7 7 7 7 7 7 7
6 PUR 15 15 15 15 15 15 15 15 15
7 QA 2 2 2 2 2 2 2 2 2
8 PRD 15 15 15 15 15 15 15 15 18
9 ICL 3 3 3 3 3 3 3 3 3
10 INS 7 10 8 7 12 11 10 7 11
11 DA 15 12 13 15 13 14 10 11 15
12 DI 15 15 13 15 14 13 13 15 18
13 RP 7 6 0 7 7 8 8 9 6
14 EDE 10 6 6 7 6 8 7 7 9
15 SHP 3 5 5 5 5 5 5 3 5
16 BEX 7 8 7 7 9 8 7 6 7
17 DBX 3 3 3 3 3 3 3 3 3
18 OKM 10 12 12 10 12 13 10 9 9
19 PMT 15 12 12 7 8 7 12 15 15
20 Max. 166 163 152 153 160 162 155 155 175 160
21 Min. 135 140 140 140 144 150 145 140 150 142
22 Average 104 117 128 127 128 140 135 125 135 127

B IL, Kota (a Government of India enterprise).

B BSEB, Patna (BR).
B PVVNL, Meerut, UP (UP).
B DVVNL, Agra, UP (UP).
B VPVVNL, Varanasi, (UP).
B MVVNL, Lucknow, UP (UP).
B UPPCL, Lucknow, UP (UP).
B KESCO, Kanpur, UP (UP).
B IVRCL, Hyderabad (AP).
B UPCL, Dehradun (UK).
B UB Engg, New Delhi (DL).
B Sterling Wilson Ltd, Mumbai (MA).
B MPPKVVCL, Indore (MP).
B MPPKVVCL, Jabalpur (MP).
B MPM KVVCL, Bhopal (MP).
B APCPDCL, Hyderabad (AP).
B APSPDCL Tirupati (AP).
B RITES, Gurgaon (HR).
B UPPTCL, Lucknow (UP).
B MSEDCL, Mumbai (MA).
B Fedder Loyd Corp. Ltd, New Delhi (DL).
B Kasmirilal Const. (P) Ltd, Ranikhet (UK).
B JSP, Ghaziabad (UP).

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VOL. 2 NO. 8 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7
 B UB Engineering Ltd (OT).
B Ramky Infrastructure Ltd (OT).

Interview with Chairman, ACPL (crisis addressed)

The brief of Chairman’s interview (in teaching notes), is reproduced below for understanding
his view point on industry in general, issue of raw material to cash conversion cycle time
in particular. Mr Munish Kumar has replied to many questions and expressed his views on
the future of IT industry in India:

Excerpt of interview
1. Customer satisfaction is achievable at reasonable quality level and price. ACPL product
commands premiere position due to rejections/failure being negligible (0.1-0.2 percent) at
customer site.

2. The customer complaint (if any) and after sale service is prompt, normally attended
to/product rectified/corrected within 48 h.

3. ACPL believes in working together even with competitors for healthy competitive industry
environment.

4. Has reiterated that the Indian transformer industry has few major bottlenecks in supply
chain (SC).

Non-availability of trained power

4.1. Due to non-availability of trained man power the production volumes are not reached
in desired time affecting supplies and profitability. He has message on behalf of other
manufacturers: Government of India/state government should have plan/system for
provisioning of availability of trained manpower for production operations in power sectors.
That is institutions be created to impart education, training and skill development in
transformer manufacturing.

4.2. Has taken up the issue of non-availability of trained manpower and high attrition rate with
trade associations, e.g. IEEMA, FICCI, MSME (Government of India), and other institutions.

Shortage of facility for tests or incorrect interpretations of international standards

4.3. ITs are made as per Indian Standards (ISs), i.e. IS2075 for CT and IS3156 for PT.
Conformance type testing is must as per various state/central power boards. There are two
institutions – CPRI, Bhopal/Noida and ERDA, Vadodra. Every state power board have
varying specifications for quality acceptance, e.g. current ratios of CTs.

Issues and challenges in business

SCM process cycle time – concerns
The typical supply chain cycle (SCC) in IT industry can be summarised, as briefly coded in
bracket, in chronological order as below:
B Utility company or power board initiates enquiry through tender or approved suppliers
(vendors) list (ENQ).
B The technical cum commercial offer (BID) is submitted by the IT manufacturer to the utility
company (BID).
B Tender opening date and negotiations (NEGO).
B Purchase order (PO) receipt, along with specs, despatch schedules, site address, from
utility company (POR).

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PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 8 2012
B Materials planning as per utility company order, bill of materials (BOMs) and spec, taking
care of raw materials and finished goods in stock (PLG).
B Purchase of materials as per s. no. 5 – release of POs, follow up with vendors (PUR).
B Quality check of materials after receipt as per quality assurance (QA) plan (QA).
B Production of sub-assemblies, final assembly, routine test (RT) conducted and report
enclosed (PRD).
B IT manufacturer gives inspection call along with RT report (ICL).
B Wait and follow up for inspection till arrival of Inspector from utility company/third party
and get IT inspected and approved (INS).
B Get despatch authorisation from utility/third party inspector (DA).
B Send despatch authorisation for dispatch instruction (details of site address, quantity,
etc.), wait till received from utility company (DI).
B Arrange, wait till road permit (other than home state) is received (RP).
B Arrange ED exemption (AsianDev bank/as applicable), wait till received (EDE).
B Bill and ship finished goods (ITs) with required documents (SHP).
B Get acceptance/bill of exchange (BEX).
B Send dispatch document copy (BEX) through designated bank for letter of credit (LC)
payment terms (DBX).
B Wait till OK material (ITs) receipts received from site. (OKM).
B Wait till receipt of payment though LC period is exceeded mostly (PMT).
The company data of SCC activities of all customers (coded in two alpha letters) has been
compiled in Table I. Maximum and minimum supply cycle time (in days) of all customers
depending on each activity are calculated and average has also been tabulated.

Scientific analysis and reasons of poor supply performance of ACPL

1. Long SCC
The state government policies and therefore working of utility boards have major impact on
performance of suppliers in particular in transformer industry. The time taken from tender
opening, release of order till payment received is varying from one utility board to another.
Minimum and maximum time taken by utility boards from tender opening to order to supply,
installation and payment have been summarised in the Table I above. M/S ACPL supply
cycle performance data covering three financial years 2009-2010, 2010-2011, and 2011-
2012 for ten utility boards in India have been compiled in Table I.
The promised time for payment to suppliers as per PO terms range from 60 to 90 days which
is not achieved as interpreted by data appearing in Table I. The maximum and minimum time
taken from tender opening to acceptance of goods (ITs) including payment is 160 and 142
days, respectively. Instead of SCC time, ‘‘total cycle time’’ word was used by Towill et al.
(1998) to express how short cycle times can be applied productively to all segments of a
business, not just manufacturing areas.
After analyzing the data and consulting the Chairman, Mr Munish Kumar, and directors, it
was argued that the total supply cycle time of production to receipt of payment can be
compressed at first stage from maximum of 172 to 140 days by taking series of actions in
consultations with author and other core members. Beyond 140 days of supply cycle time to
around 120 days in second stage and then to 90 days in third stage can be thought about
through interactions with various industry organization, e.g. IEEMA, CII, FICCI, etc. and
power utilities. A separate plan of actions will be generated in future. Mr Munish Kumar
expressed dissatisfaction with the utility companies for their apathy towards suppliers (ACPL
and others), during interview with author for their policy paralysis, dictatorial, unethical
practices, under the pretext of larger public interest and governmental accountability.

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VOL. 2 NO. 8 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9
 2. Unreasonable and demanding product specs (specifications) by power utility company
All type tests mentioned in IS2706 and IS3155 for CTs and PTs are mandatory for a
manufacturer from government approved laboratories like ERDA, Vadodra or CPRI,
Bhopal/Noida. Necessity of type test has been highlighted in IS2706 and IS3155 to ensure
the capability of manufacturer to develop the equipment up to/in accordance with the
required standard. CTs may be of different ratios, i.e. primary current may vary from 5 A to
1,000 A. Secondary current value constant, i.e. 5 A ratio of CTs may be 5/5 to say 1,000/5.
Technically only number of primary turns are to be changed to get the desired ratio. That is
why IS2706 signifies that the primary current, i.e. ratio of CT, the burden and class of
accuracy are insignificant particularly for short-time current (STC withstand ability) test with
out mentioning any thing about other remaining tests as current plays no role in them. STC
test is a very costly test amounting to more than Rs 1.0 lakh per ratio, besides spending huge
time. Will it be possible for any small or medium scale industry to get this test on varying
different ratios of CTS? Ultimately it is likely to tax the end consumer too. The input BOM cost
of ITs has thus increased adversely affecting profitability of ITs companies.
Different SEBs or power utility companies are following different practices and asking
bidding suppliers to make available STC tests on the ratios they need despite the above
provision of IS. This compulsion leads to undue exploitation of manufacturer.

Reasons
Why is it happening so? Mr Munish Kumar expressed during interview that reasons seems to
be due to:
B Lack of technical knowledge, and knowledge of IS provisions by power utilities.
B Unfairness of some suppliers.
B Not having courage to change specs if prevailing since earlier times.
B Similarly some utilities talk of STC and other tests for different values of burdens as also of
different class of accuracies. This type of approach is really amazing and unwarranted.
B Lack of planning, coherence and transparency in power utilities in issuance of in section
delivery and payment instructions.

Recommendations and solutions

The challenge for manufacturing units was more complex in view of low internal rejections
and equally low production volumes, low warranty returns. Cost of production was rising due
to low volume of production. This was reflecting adversely on working capital requirements
thereby affecting profitability of company. The chairman along with directors, senior
managers, and consultants were looking for breakthrough by means of using modern
concepts of total quality management. The alternatives emerged out of brainstorming was
as under:
B In one or two SEBs Mr Munish Kumar had forcibly raised the issue of STC and tests for
different values of burdens and problems were sorted out.
B Issues need to be taken up with ministry of power, Government of India to make the above
IS provision (single current ratio at required secondary ampere rating) mandatory to all
Government/private power utilities.
B Programmes of training on IS should regularly be organised to train the people engaged
in material management and purchase.
B Bureau of Indian Standards (BIS) also needs to act as watch guard to properly guide and
monitor the government approved testing agencies/laboratories as these are commercial
organizations who have primary concern of their profitability than serving the cause of
standardization in the country.
B IEEMA, observed recently in its one of the meeting that the medium voltage (MV) and high
voltage (HV) segments are suffering from overcapacity due to lack of orders. Inadequate

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PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 8 2012
 demand could be due to insufficient planning by the users and delay in finalizing tenders.
Unfortunately bunching of orders also creates supply-delivery problems.
B IEEMA also observed that L1 (lowest no one) procurement system in utilities, i.e. procuring
products at lowest price creates a hurdle for bringing good quality material in the system.
Further insistence on repeated type testing of products inspite of inadequate type testing
laboratories poses additional delays and harm to the equipment.
B That central and state power boards be instructed by some regulatory authority to
standardise the quality acceptance norms so that cost of testing be reduced. Class of
accuracy, burden, primary current are insignificant for STC which is mandatory. The
primary current (e.g. ratios – 200/5) is insignificant as per IS.
B It should be made mandatory by BIS, India to have type tests done as per specifications?
That is capability to develop a PT/CT by a manufacturer. This should be (primary current
and ratio) made regulatory through a central act not left as optional as it is in present form
in specification IS2075 and IS3156, respectively.
B At national level – there will be lot of saving of money as a result of above actions, in terms
of reduced costing of ITs thus reducing BOM cost and Indian products will be competitive
to be export worthy.

The current status and outlook

1. Supply issues-related to power utilities, BIS and skilled manpower are pending except
that case to case basis at few stages of SC, the solutions have been found. Noticeable
improvement in SCC time reduction by using various methods including Markov chain model
by Fu Qiu-Fang, Zhi – Young and Zhang (2007) for calculating and managing the total cycle
time of SC was possible. It can identify the activities that represent the largest components of
total cycle time. Those activities are then targeted for cycle time reduction. It has given
advantage of using working capital and surpluses for new order execution thus enhancing
quarter wise growth on year to year basis.

2. The quality improvement programmes-initiated by ACPL have resulted into internal

rejections coming down to 0.18 percent and warranty returns also becoming negligible to
less than 0.2 percent. Two directors and team members have implemented Dr Demings’
(1986) TQM principles including world class manufacturing concepts of JIT, Pokayoke
(fool proofing), lean manufacturing, few automations, kaizen, 5S. These concepts have
improved employee involvement, reduced non value added activities significantly reducing
internal SC process time, thereby reducing inventory, also practised in small sector
company in Sri Lanka quoted in an article by Perera and Kulasooriya (2011). Many ACPL
vendors have agreed to have sub-assemblies and parts ready with them and supply as soon
as new power utility company’s POs are received and thereafter ACPL orders are released
thus reducing in house inventory of materials using JIT and lean manufacturing concepts.

3. Future outlook of the company – it is overbooked for orders for next two years. Board of
Directors have taken decision to augment further production operations, quality and
Keywords: services capabilities. Hence the new production unit set up is in progress at Masuri,
Manufacturing, Ghaziabad. This strategic decision of facility and capacity increase will take ACPL to newer
Entrepreneurship, heights in operational capability of INR 300 million in financial year 2013-2014 and to INR
Supply chain cycle, 600 million by financial year 2019-2020. ACPL is also planning to come with IPO with the
Supply chain management, cooperations of few partners and financial institutions. ACPL may look outwardly to joint
Instrument transformers, venture with foreign technology partners to increase its global presence in next two to three
Vendor management, years. Such innovative actions will bring ACPL at par with large multi national companies
Total quality management operating in India for many decades.

References
Audretsch, D.B. (2008), ‘‘Die Entrepreneurial Society imZeitalter der Globalisierung’’, in di Mauro, W. (Ed.),
Weder di Mauro, Beatrice, Chancen des Wachstums, Campus Verlag, Frankfurt.

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 Chhabra, T.N. (2010), Entrepreneurship Development, pp. 1-3.
John, K. and Stevenson, H. (1985), Innovation and Entrepreneurship, Harper & Row, New York, NY.
Knight, F.A. (1921), Risk, Uncertainty, and Profit, Houghton Mifflin Company, Boston, MA.
Motwani, J.G. (2003), ‘‘A business process change framework for examining lean manufacturing: a case
study’’, Industrial Management & Data Systems, Vol. 103 No. 5, pp. 339-46.
Perera, H.S.C. and Kulasooriya, D.M.A. (2011), ‘‘Lean manufacturing: a case study of Sri Lankan
manufacturing organisation’’, South Asian Journal of Management, Vol. 18 No. 1, pp. 149-58, 10 p.
Reynolds, P.D. (2007), Entrepreneurship in the United States, Springer, Berlin.
Richard, C. (2010[1755]), An Essay on Economic Theory, Ludwig von Mises Institute, Auburn.

Smith, A. ((1977) [1776]), An Inquiry into the Nature and Causes of the Wealth of Nations, University of
Chicago Press, Chicago, IL.
Stevenson, H.H. (1983), ‘‘A perspective on entrepreneurship’’, Harvard Business School Working Paper
No. 9-384-131, Harvard Business School, Boston, MA.

Further reading
Aurel Controls Pvt Ltd (ACPL) (n.d.), available at: www.aurelcontrols.com
Deming, W.E. (1986), Out of the Crisis, MIT Press, Cambridge, MA.
Henry, F. and Crowther, S. (1922), My Life and Work: An Autobiography of Henry Ford.
Honshell, D.A. (1984), From American System to Mass Production, pp. 1800-932.

IEEMA (n.d.), available at: ww.ieema.com (accessed 21 April 2012).

Interview with Chairman of ACPL (n.d.), Interview with Chairman of ACPL – text and permission
attached.
James Patrick Muirhead (1958), The life of James Watt, p. 521.
Mason, J., Rachel, T. and Denis, R. (1998), ‘‘Time compression in the supply chain’’, Journal of
Entreprise, pp. 93-104.
Qiu-Fang, F. and Zhi-Young, Z. (2007), ‘‘Calculating total cycle time of supply chain based on Marcov
chain’’, Management Science and Engineering, KMSE 2007.
Schonbergers, R.J. (1990), World Class Manufacturing Summed Up, The Free Press, New York, NY.
Schumpeter, J.A. (1942), Capitalism, Socialism and Democracy.

Towill, D.R. (1996), ‘‘Time compression and supply chain management – a guided tour’’, Logistics
Information Management, Vol. 9 No. 6, p. 41.

About the author

Professor Hari Narain Singh has 35 years’ rich experience in industries in production, TQM,
SCM, projects as business head in automobile and engineering sectors and seven years’
academic experience teaching management – ethics and corporate governance,
production operations, TQM, entrepreneurship, projects, SCM, and management
principles. He has a mechanical engineering degree from IIT-BHU, and MBA from IGNOU,
He also works as freelance consultant in TQM, training and placement. Hari Narain Singh can
be contacted at: corporaterelations.hn.ims@gmail.com

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