CEOs Handbook Volume 1

CII Mission for Innovation in Manufacturing

CII realises that for India's manufacturing sector to surpass the 14% rate of growth and contribute at least 35% to the GDP, the only strategy is to become innovative; to find sustainable solutions to meet the unserved needs of millions of Indians.CII set up the Mission for Innovation in Manufacturing under the Chairmanship of Dr. Surinder Kapur. It is our belief that every individual has the capability to be skilled and innovative and find solutions to complex situations and challenges.The Mission aims to achieve the following Super Goals: 1. Develop a culture of innovation to accelerate the process of turning India into an innovation led country 2. Unleash Indias immense human potential and capability to innovate 3. Develop the Indian way of innovation through the practice of innovation in at least 100 companies over the next two years

12
STEPS
TO INNOVATION IN MANUFACTURING

The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the growth of industry in India, partnering industry and government alike through advisory and consultative processes. CII is a non-government, not-for-profit, industry led and industry managed organisation, playing a proactive role in India's development process. Founded over 111 years ago, it is India's premier business association, with a direct membership of over 6300 organisations from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 90,000 companies from around 336 national and regional sectoral associations. A facilitator, CII catalyses change by working closely with government on policy issues, enhancing efficiency, competitiveness and expanding business opportunities for industry through a range of specialised services and global linkages. It also provides a platform for sectoral consensus building and networking. Major emphasis is laid on projecting a positive image of business, assisting industry to identify and execute corporate citizenship programmes. CII's theme of Competitiveness for Sustainable and Inclusive Growth reflects the Confederation's commitment to balanced development that encompasses all sectors of the economy and all sections of society, at all levels - Global, National, Regional, State and Zonal. With 57 offices in India, 8 overseas in Australia, Austria, China, France, Japan, Singapore, UK, USA and institutional partnerships with 240 counterpart organisations in 101 countries, CII serves as a reference point for Indian industry and the international business community.

249F, Sector 18, Udyog Vihar Phase IV, Gurgaon 122015, Haryana, INDIA Phone: +91-124-4014060-67 Fax: +91-124-4014080 E mail: sarita.nagpal@ciionline.org Web: www.ciionline.org

CEOs Handbook Volume 1

12
STEPS
TO INNOVATION IN MANUFACTURING

CONTENTS

MESSAGE FROM THE PRIME MINISTER

Message from the Prime Minister Foreword Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Step 8 Step 9 The 5S The 7QC Tools Transforming India into an Innovation-led Country Constructive Disruption Continuous Improvement The Deming Advantage Hoshin - Managing for Objectives Kaizen Must be a Way of Life Mistake-Proofing

03 04 05 09 13 17 21 25 29 33 37 41 45 49 As our economy becomes more open to global competition, future growth will depend on our ability to innovate. Innovation has been the main engine of growth for developed countries and will also be so for emerging economies. I am therefore happy to note that CIIs mission is focused on building a manufacturing sector focused on innovation within a framework of inclusive growth. I congratulate CII on their Mission to create at least 100 innovative companies over the next three years. I extend my greetings and good wishes to CII and wish them all success in their Mission. I am glad to know that the Confederation of Indian Industry has launched a Mission on Manufacturing Innovation. It is necessary to foster a culture of innovation and enhance the competitiveness of our manufacturing sector.

Step 10 One Step at a Time Step 11 Understanding Exactness Step 12 Who is Accountable?

Dr. Manmohan Singh Honourable Prime Minister of India New Delhi February 19, 2007

These articles were written by Dr. Surinder Kapur, Chairman, CII Mission for Innovation in Manufacturing, and have been published as a series in The Strategist, Business Standard.

FOREWORD

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The Indian manufacturing sector has now been on a high growth trajectory for sometime. However, sustaining this growth or taking it to the next level will require a focused effort, especially on innovation. India has to leverage its intellectual capital, be creative and integrate innovation into manufacturing. Against this backdrop, the CII Mission for Innovation in Manufacturing was launched in May 2006, and has set itself the target of building 100 innovative companies over the next 3 years. I am pleased to state that we have taken great strides since the launch of this Mission and are committed to unleashing India's huge creative potential. As a part of our concerted effort to disseminate learnings amongst Indian companies, we bring to you the first of a series of publications titled 12 Steps to Innovation in Manufacturing. Going forward, it will be our endeavour to bring more value added publications in this series. I wish the Mission for Innovation in Manufacturing great success.

START WITH THE 5S

R Seshasayee President Confederation of Indian Industry

STEP 1

The 5S

5S is the acronym for five Japanese words, seiri, seiton, seiso, seiketsu and shitsuke, which signify order, cleanliness, purity and commitment. The 5S philosophy focuses on effective workplace organisation, helps simplify the workplace environment and reduce waste, while improving quality and safety. Seiri (sort) means to put things in order. Seiton (systematise) means proper arrangement. Seiso (clean) implies keeping things clean and polished in the workplace. Seiketsu implies purity and focuses on maintaining cleanliness and perpetual cleaning. Shitsuke is commitment. This is a typical teaching and attitude towards any undertaking to inspire pride and adherence to standards established for the four components. The principles underlying a 5S programme appear to be common sense and they are. But until the advent of 5S, many businesses ignored these basic principles. There is an order and logic to how 5S is carried out, which is:

Practising seiri at Sona Koyo, for instance, led to the freeing up of an 8x6 ft space by removing unwanted rakes.

Seiton or systematise
This is the next step. It requires organising, arranging and identifying everything in a work area for efficient retrieval and return to its proper place. Commonly used tools are readily available; storage areas, cabinets and shelves are properly labelled; floors are cleaned and painted to make it easier to spot dirt, waste materials and dropped parts and tools; spaces are outlined on the floor to identify work areas, movement lanes, storage areas, finished product areas and so on; and shadows are drawn on the tool boards, making it easy to quickly see where each tool belongs.
CEOs HANDBOOK | 12 STEPS TO INNOVATION IN MANUFACTURING

In an office, bookshelves are provided for frequently used manuals, books and catalogues. There are two important parts to systematic organisation - putting everything in its proper place and setting up a system so that it is easy to return each item to its proper place. The second part is where labelling and identification practices are important.

Seiri or sorting
CII Mission for Innovation in Manufacturing

Seiri means sorting through everything in each work area. It requires keeping only what is necessary. Materials, tools, equipment and supplies that are not frequently used should be moved to a separate, common storage area. Items that are never used should be discarded. This makes it easier to find the things needed and frees up additional space. Tagging items is a common approach when deciding what is to be thrown away. An area is targeted; items likely to be disposed off are tagged with a red tag and a date. If the item is not used after a certain period of time, say, between one and six months, it is disposed off.

Seiso or shining
Once everything from each individual work area to the entire facility is sorted and organised, it needs to be kept that way. Regular cleaning and inspection makes it easy to spot lubricant leaks, equipment misalignment, breakage, missing tools and low levels of supplies. When done on a regular, frequent basis, cleaning and

STEP

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inspecting does not take a lot of time and in the long run, actually saves time.

Seiketsu or standardise
Seiketsu ensures that the first three steps of the 5S programme continue to be effective. The good practices developed in the first three steps need to be standardised. Therefore, organisations must develop a work structure that will support the new practices and turn them into habits.

THE 7QC TOOLS

Shitsuke or self-discipline
This implies continuous training and maintenance of standards. The organisation must build a formal system for monitoring the results of the programme. A follow-up is a must for the above four steps to be continuously practised. There will have to be continuous education about maintaining standards. When there are changes that will affect the 5S programme - such as new equipment, new products or new work rules it is essential to make changes in the standards and provide training. A good way to continue educating employees and maintaining standards is to use the 5S posters and signs.

CII Mission for Innovation in Manufacturing

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The 7QC Tools

The Japanese began applying the thinking developed by Walter Shewhart and W Edward Deming during the 1930s and 1940s. Japans progress in continuous improvement led to the expansion of the use of these tools. Kaoru Ishikawa, the then head of the Japanese Union of Scientists and Engineers (JUSE), thus, decided to expand the use of these approaches in Japanese manufacturing in the 1960s with the introduction of the seven quality control (7QC) tools. 7QC tools are fundamental instruments to improve the quality of products. They are used to analyse the production process, identify major problems, control fluctuations of product quality and provide solutions to avoid future defects. These tools use statistical techniques and knowledge to accumulate data and analyse them. They help organise the collected data in a way that is easy to understand. Moreover, by using 7QC tools, specific problems in a process can be identified. The first is the check sheet, which shows the history and pattern of variations. This tool is used at the beginning of the change process to identify the problems and collect data easily.
CII Mission for Innovation in Manufacturing

The Pareto chart is used to define problems, to set their priority, to illustrate the problems detected and determine their frequency in the process. It is a graphic picture of the most frequent causes of a particular problem. Most people use it to determine where to put their initial efforts to get maximum gain. The cause and effect diagram is also called the fishbone chart because of its appearance and the Ishikawa chart after the man who popularised its use in Japan. It is used to list the cause of particular problems. Lines come off the core horizontal line to display the main causes; the lines coming off the main causes are the subcauses. This tool is used to figure out any possible causes of a problem. It allows a team to identify, explore, and graphically display, in increasing detail, all of the possible causes related to a problem or condition to discover its root cause(s).
CEOs HANDBOOK | 12 STEPS TO INNOVATION IN MANUFACTURING

The histogram is a bar chart showing a distribution of variables. This tool helps identify the cause of problems in a process by the shape as well as the width of the distribution. It shows a bar chart of accumulated data and provides the easiest way to evaluate the distribution of data. Then theres the scatter diagram, which shows the pattern of relationship between two variables that are thought to be related. The closer the points are to the diagonal line, the more closely there is a one-to-one relationship. The scatter diagram is a graphical tool that plots many data points and shows a pattern of correlation between two variables. Graphs are among the simplest and best techniques to analyse and display data for easy communication in a visual format. Data can be depicted graphically using bar graphs, line charts, pie charts and control

The team using it can study observed data (a performance measure of a process) for patterns over a specified period of time. It is also used at the end of the change process to see whether the change has resulted in permanent improvement. The Pareto chart is named after Wilfredo Pareto, the Italian economist who determined that wealth is not evenly distributed. The chart shows the distribution of items and arranges them from the most frequent to the least frequent, with the final bar being miscellaneous.

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charts. While the first three are commonly used, the last is a line chart with control limits. By mathematically constructing control limits at three standard deviations above and below the average, one can determine what variation is due to normal ongoing causes (common causes) and what variation is produced by unique events (special causes). By eliminating the special causes first and then reducing common causes, quality can be improved. Control chart provides control limits that are three standard deviations above and below average, whether or not our process is in control. This tool enables the user to monitor, control and improve process performance over time by studying variation and its source.

TRANSFORMING INDIA INTO AN INNOVATION-LED COUNTRY

CII Mission for Innovation in Manufacturing

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Transforming India into an Innovation-led Country

There is a need to look at innovation in the wider sense. We must consider the "flat world" as our market place and countries and companies must ensure that an ecosystem is built to support innovation. The academia must participate and benefit, the venture capital market must thrive and a strong intellectual property rights framework must be in place. Companies, however, must be careful to not think they can jump into a state of innovation unless they are of world-class quality. Research by Sumitra Dutta, the Roland Berger Professor in Business and Technology and dean of External Relations at INSEAD shows that countries make migrations across three phases - from low-cost manufacturing to high-quality manufacturing - in their bid to become innovative. There is huge potential for India to follow the same path. The country has the opportunity for creating new business models, products and services for the poor not just at home, but also for countries in Africa and Latin America. Often, companies go for the easier route of capturing the high-paying foreign market customer. The winner in the current scenario could be disruptive innovation: developing low-cost products for the bottom of the pyramid. These products could be taken to the other developing economies of the world in stage two. The innovator could then bring in higher-end features in the product to enter the higher level of the domestic market and, subsequently, launch the product in global markets. But most people understand innovation as product innovation and confuse it with invention. Few understand it in terms of business processes, organisations issues or new businesses. A company is perceived to be innovative only if it can develop a product that is saleable and replaces an existing product. However, innovation includes services, manufacturing processes, customer facing and back-end process in services. To me, Bharti Airtel is the most innovative company of our times for the way it has created a successful business model. The company has outsourced everything but its customers, thus

being able to offer mobile telephony at 10 paise a minute; nowhere in the world can you get such rates. Maruti Udyog Limited (MUL) is another great marketing innovator of our times. It launched innovative schemes to widen its market base. In September 2004, for instance, MUL launched a scheme aimed at teachers, in association with State Bank of India. Almost 10,000 teachers benefited from the scheme. Manufacturing companies can also innovate in marketing and customer services. For instance, Toyota and Lexus innovated in customer services by building their showrooms such that the salesman could read the licence plate of the car driving in. The salesman could feed the number into his laptop and obtain information about the customer. By the time the customer walked into the showroom, the salesman was able to ask the customer about the performance of the car with reference to the last time it was at the showroom. The generation of ideas is the critical aspect. There are those who get ideas, are able to build on them and implement them. There are others who look for customer pain points and come up with solutions. To get others to ideate, there are well-defined ideation processes defined by experts; synectics and brainstorming being two instances. Synectics, developed by Willaim Gordon, stimulates thought processes of which the subject is generally unaware. The central principle of the process is Trust things that are alien, and alienate things that are trusted. It encourages fundamental problem analysis and alienation of the original problem through creation of analogies, which sometimes lead to new solutions. The brainstorming approach to innovation requires groups of people to ideate together and arrive at solutions. Brainstorming is a deeply engaging creative thinking session that helps people originate and develop breakthrough ideas. The process of brainstorming could lead
CEOs HANDBOOK | 12 STEPS TO INNOVATION IN MANUFACTURING

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to new solutions for existing or unknown problems. CIIs Manufacturing Innovation Mission has been working with innovation and breakthrough management experts such as Shoji Shiba, Clayton Christensen, Whitney and the Blue Ocean Strategy Network to help companies follow the process of ideation.

START CONSTRUCTIVE DISRUPTION

CII Mission for Innovation in Manufacturing

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Constructive Disruption

In a competitive global marketplace, a sustainable strategy is based on the organisations capability to continually generate innovative business models, value propositions, products, and services. Such organisations almost always encourage the process of ideation. Processes of ideation propounded by experts include the five-step discovery process, blue ocean strategy and disruptive innovation. Clayton Christensens Disruptive Innovation (DI) process says that disruption is good if it enables a larger population of less skilled or less wealthy people to do something that could historically have been done only by experts or the rich. For instance, transistors are considered a DI. They enabled development of products that made life easier or more enjoyable as compared to products possible with vacuum tube-based technology. They were also much cheaper. DIs could be either low-end or new-market disruptive innovations. Low-end disruptions target customers who are not looking for full performance, which is valued, by the high-end customer. New-market disruptions target customers who could not be served profitably by the existing product. Thus DI competes with non-consumption and/or leads to creation of a new market. In every case of DI the distinguishing characteristics remain the same: finding products for under-served or non-consuming customers, then delivering a series of improvements eventually displace market dominant products. Innovative products that will serve the needs of the bottom of the Pyramid really mean low-end disruptions. Low-end disruption occurs when product improvements take place faster than the pace at which customers adopt the new features. At some point, product performance exceeds the needs of a certain customer segment. This is when disruptive technology enters the market by providing a product with lower performance than the incumbent but that which exceeds the requirements of certain segments, thereby gaining an

advantage over the existing product. Once a disruptive product is well established, the disrupter works towards enhancing profit margin. The disrupter enters the segment where the customer is willing to pay a little more for higher quality. To ensure this quality in its product, the disrupter further innovates. The incumbent will not do much to retain its share in a less profitable segment, and will move up the market to focus on more attractive customers. Now the leader is squeezed into smaller markets that it was previously serving. The disruptive technology meets the demands of the most profitable segment and drives the established company out of the market. To get the first-mover advantage disrupters normally create products with open and modular architectures. Companies are then no longer vertically integrated and can outsource a number of aspects to maintain the first mover advantage. This enables them to expand markets, offer products/services at a lower cost and capture a larger share of the pie. Bharti, for instance, has done this successfully and has been able to assume leadership position by meeting the unserved needs of a large section of Indias population. However, this strategy could prove harmful for an incumbent company, as it happened in Compaqs case. Compaq outsourced pretty much everything to the Singapore based Flextronics, except for their brand. Starting with the circuit boards, to motherboards to the computer assembly to the manufacturing of the computers, Compaq slowly outsourced everything. Each time it outsourced, Compaqs bottomline improved by almost 20per cent, without impacting the revenues. Flextronics on the other hand, continued to get into value added services and improving their revenues. This process trivialised Compaqs value

CII Mission for Innovation in Manufacturing

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and enhanced the value at Flextronics. What outsourcing did for Compaq was to defer its impending death by a couple of years. Most large companies however find it difficult to come up with DIs because their most demanding and paying customers are not interested in disruptive products. Moreover, the profit margins on disruptive products are squeezed and may not fit into the business models of large companies. Their interests consequently lie in enhancing their current products having an established market through sustaining innovations. The mantra for success lies in companies giving a level of freedom to those groups pursuing creative ideas. They need to set up autonomous organisations charged with building a new and independent business around the disruptive technology. Such autonomous organisations are termed by Prof. Shoji Shiba, as ambidextrous organisations. Needless to say once this ambidextrous organisation develops a disruptive product, marketing it to the correct customer is equally critical.

START CONTINUOUS IMPROVEMENT

CII Mission for Innovation in Manufacturing

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Continuous Improvement

Contribution to quality improvement has taken place not only due to the implementation of best in class quality tools but also due to the top management developing the right vision for building global businesses. Prof. Tsuda, the Japanese Professor of Quality Management believes that top Indian management has the right vision for the business and the Indian worker is very good, and is doing his task very well. Indian workers are open to suggestions and improvement. There are however performance gaps at the middle management level. The production manager operates in a confined environment of rules and regulations and is far too involved with his supervisory role. The problem lies with the managers not being able to keep up to the plan of the day. Prof. Tsuda has defined the functions of management based on their level of seniority in the organisation and the way an individual needs to schedule his/her day to attain best results. For instance, an operator, supervisor or a person at the shop floor level must spend 90 per cent of his time attaining exactness. The middle manager must spend at least 50-60 per cent of their time on Continuous Improvement activities and the rest of the time should be spent on regular activities. The top management i.e. the Chief Executive and the Divisional Head must focus 60-70 per cent of the time on attaining Breakthroughs. For example, from 1990 to 1993, Mr. Alex Davelof, CEO, Teradyne devoted most of his time to TQM implementation to attain Organisation Break Through. From 1993 to 1996, he devoted most of his time to developing a new product which opened Teradynes new market Market Break Through. However, this is not how most managers schedule their day. 80-90 per cent of the times managers spend their day fire fighting or managing their customers instead of following their days plan. Their time is spent on tasks that are urgent but may not be important. Daily Work Management (DWM) will help organisations become more

efficient, achieve better results, improve employee morale. With DWM in place the middle manager will be able to focus and spend more time on Continuous Improvement activities. Continuous improvement (CI), in regard to organisational quality and performance focuses on improving customer satisfaction through continuous and incremental improvement to process, including the removal of unnecessary activities and variations. This can be termed as elimination of waste material, time and effort. CI is not a tool or technique as such; it is more a way of life or at least a cultural approach to quality improvement. The concept has to be set in the context of quality movement. The essential principles of CI are: Human resource is the most important company asset Process must evolve by gradual improvement rather than radical changes Improvement must be based on statistical/quantitative evaluation of process performance

CII Mission for Innovation in Manufacturing

CI leads to Kaizens and two good examples of it are explained below:

Example 1
In a heavy pneumatic press there was every possibility of accident by injury to the operators hand. Therefore, it had to be ensured that machine did not operate if the operators hand came in the machine. An optical sensor was identified and placed in the press which ensures that the machine would stop if the hand accidentally comes in the machine. Such small ideas (Kaizen) on fool proofing (Poka-Yoke) help

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in improving the operational efficiency and add to safety through a process of continuous improvement thinking.

Example 2
The second example relates to the lapping machine of an Axle plant. It was found that the tool change time was as high as 19 minutes, because operator had to remove the tap holding mandrel which was 1050 mm long every time there was a change of the model he was working on. To save time, the tap holding mandrel was split into two and the component locator and tap locator were separated. Thus, only component locator had to be removed for tap change that now took only 8 minutes. Such thinking happens when the management encourages continuous improvement as a business strategy. The human mind at the worker or engineer level is capable of doing this, but it is the management that has to create and nurture such an environment.

BANK ON THE DEMING ADVANTAGE

CII Mission for Innovation in Manufacturing

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The Deming Advantage

Dr. W. Edward Deming was a professor, a writer, a lecturer and a statistician, who helped improved production in the US during the Second World War. But he is best known for his towering body of work in Japan, where on invitation from the Japanese Union of Scientists and Engineers, he taught senior managers the principles of Statistical Process Control (SPC), a forerunner to Total Quality Management (TQM). Under his stewardship, Japan became synonymous with quality of the highest standard. Today, the Deming Prize, especially the Deming Application Prize that is given to companies, that have achieved distinctive performance improvement, has exerted an immeasurable influence directly or indirectly on the development of quality control and management. The Deming Prize is like the Nobel Prize or the Booker of manufacturing industry. Till 1997 not one Indian company had received this prize. But since 1998, Indian companies started figuring in the Deming prize list with Sundram Clayton's Brakes Division claiming the honors first. 8 years on India boasts of 15 Deming Award winners. Following Demings theories require a paradigm shift from the traditional control and command methods of management. According to him, the normal management practice of problem solving leads to short term improvements that gradually deteriorate and achieve less and less. If management continues to work as hard, if not harder than before, but without improving the process the results are worse. Process control is important, since the process once set will yield the same results. For instance at a Sona Group company we tried to reduce the customer end rejection by tightening inspection in-house, the in-house rejection went up to a level that we had a problem managing the inventory of defectives. The rework cycle was so cumbersomethat it took us a year to overcome the backlog. Therefore making improvements in process is fundamental. It is the responsibility of the senior management to conduct an analysis of the variations in the process.

Sundram Clayton started its Total Quality Management journey under extremely difficult circumstances in the late eighties. The company integrated Deming's 10 parameters into its policies, people, processes, and products ensuring Total Employee Involvement, Policy Deployment, Standardisation, Kaizen, and Training, besides promoting employer employee relations. Sundram Clayton felt the positive impact of these practices in terms of their market share, profit and sales index, sales per employee, value added per employee. Sona Koyo, another Deming Prize winning company, has created a model for becoming a world class company is built upon a strong base of retainership, improvement and breakthrough. With the use of tools like exactness, visualisation, Poka Yoke, operations standards, PDCA, TPM, Group Kaizen, Deep Analysis and Management for Objectives, Sona Koyo has built a quality driven organisation. During the period when these initiatives were launched Sona Koyo experienced an increase in its Operating Profit Margin from 8 per cent (2002) to 12.1 per cent (2004) due to an aggressive cost reduction programme. The Return on Net Worth during the period was up from 12.6 per cent to 21.2 per cent and is expected to touch 27.5 per cent in 2005; Return on Capital Employed, rose from 15.9 per cent to 21.3 per cent and is expected to touch 24 per cent in 2005. Sona Koyos total revenues increased from Rs.175.50 crores to Rs.234 crores during the same period. Continuous Improvement and complete involvement of the company leadership have been the hallmark of companies that have received the Deming Award. At Brakes India for instance, Continuous Improvement in Business Processes has been institutionalised and the company has been reaping the benefits of implementing this practice. The company was able to reduce customer returns to one-third. These reduced concerns of high intensity to zero and the number of concerns to one-sixth of the original frequency. Brakes India Limited-Foundry Division (BIF)s focus on New Product Development and application

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of CAD/CAM technology helped it to reduce lead times to almost 25 per cent of the original. The Company benchmarked itself against the best practices, which revealed that while they were at par with the best with respect to external failures, product life cycle management, process control, productivity and surface utilisation, they needed to improve in the areas. The companies that won the Deming have all focused on 100 per cent employee involvement, improving their processes and have had complete dedication of the top leadership to the purpose and objective of implementing TQM practices in order to become global companies. They have created truly global companies and have proven that quadrupling the number of such companies over the next two years is completely within the realms of reality. We will in the next article discuss the benefits of Daily Work Management. We would share with you our experiences for bringing process control through a set of tools applied in a systematic way to achieve stability. This is the basic of a manufacturing culture.

ADOPT HOSHIN - MANAGING FOR OBJECTIVES

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Hoshin Managing for Objectives

How is Indian Industry managing quality?

With Indian economy becoming increasingly globalised, remaining competitive, highly productive and customer-oriented is critical. These objectives can be achieved if the entire organisation is mobilised to work towards a common goal of strategic importance. This process of aligning the organisations goals is called Hoshin or policy deployment or policy management. Hoshin is a combination of Ho (method or form) and Shin (shiny needle or compass) and means a way of setting the direction or management for objectives (MfO). The Hoshin process and the action points decided at every level are crucial for the success of policy deployment. The five phases are: Presidents diagnosis of previous year Strategic planning and setting the policy (proactive) Policy deployment Implementing the policy; controlling with metrics Check and act (reactive)

analysis of medium-term, long-term and noble goals. It requires taking into account the companys vision and mission. Based on these parameters, the CEO defines the guidelines under which the softer aspects of the organisation are defined. For instance, whether the organisation should use more IT, if more training is needed, improvements in HR practices and so on. The MfO consists of statements of the desired outcome for the year (objective and target), the strategy for selecting means, plus the means of accomplishing the desired outcome (action plans). The organisation objectives having been defined, the Hoshin process is set into motion. MfO aligns the activities of people so the company can achieve key goals and react quickly to the changing environment. It uses indirect rather than direct enforcement by creating a sense of urgency. It involves all the managers in a co-ordinated way in the companys annual planning cycle. It provides an important strategy for total participation as well as fulfilling its obvious purpose of company alignment. Thus, even workers are influenced to choose activities with strategically important objectives. It aims to align all jobs and tasks, whether routine work or improvement work, focusing and co-ordinating efforts and resources toward the key company goals in order to create breakthroughs. Hoshin, if implemented effectively, can bring the companys goals and activities quickly and effectively into alignment with rapid societal or environmental changes. The top-level MfOs are deployed downward through the organisation using a common language of effective change: Facts: using measurable data. Process: using Ishikawa and Tree diagrams to understand what is really happening. Focus: using Pareto diagrams to be sure to address the vital few.

CII Mission for Innovation in Manufacturing

While setting the Hoshin or direction for the organisation, the CEO decides on a few strategic issues on which the organisation must focus. These are based on the organisations mid-strategy. At times, there is a need for rapid response to a changing environment. For instance, economic, political and technological changes force an organisation to change. Thus, the top management team studies the organisational and environmental events of the past year, such as economic factors, competition, market growth, market productivity and societal changes as well as organisation-specific factors. Based on a reflection on what has been done in the past, strength/weakness analysis of the prior years plan, environmental factors and medium-term plans, the CEO decides the objectives or the policy for the organisation. Setting the Hoshin also includes an

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The X-matrix methodology works well in executing Hoshin. It is used at the time of formulation to see and check that deployed objectives by each division will result in the realization of the companys policy; when deploying action plans in each division; during consolidation of actions; management of progress in the years policy, monthly and quarterly to check the gap of target and actual of policy realisation in terms of the progress of actions in each division, as the method of C in PDCA (plan, do, check, act) cycle. The advantage is that while it takes some time to plan, it also ensures that the plan works well. Hoshin allows and requires you to review the plan once a month. Thus, the manager has the opportunity to change or adjust the action plan. It is not the result that is incorrect but the action plan that is not aligned to yield the desired results.

MAKE KAIZEN A WAY OF LIFE

CII Mission for Innovation in Manufacturing

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Kaizen Must be a Way of Life

In the maintenance department of an auto component company, the original grinding wheel motor was drawing 18 amp current using a delta connection. Considering the motors function, this seemed high to the motor operator. He analysed the issue and concluded that the motor was drawing more power because of the delta connection; instead, he suggested that the delta mode be changed to star mode: a small change, but one that would reduce the energy consumption to 6 amp. The suggestion was implemented, leading to a saving of Rs 87,285 a year. This is an example of complete employee involvement leading to small but continuous improvement, or Kaizen activity. This activity of carrying out small improvements in large numbers with total employee involvement, on a continuous basis, is known as Kaizen. To be effective, Kaizen needs 100 per cent participation from everyone involved. It is better implemented by a person who has created the improvement idea. It is still better if the idea is carried out in his/her own department. Making investments, borrowing technology or engaging consultants can lead to improvements. But making improvements with ideas provided by employees on a continuous basis helps create an asset that cannot be purchased. It creates a unique lasting culture in an organisation. Moreover, the operational environment today is highly constrained with costs going up and prices on the downswing; the customer is demanding, operating margins are getting depressed and obsolescence of products and processes is speeding up. If we change, the situation can improve. If we dont, it wont. It is essential here to understand the meaning of improvement in the

context of Kaizen. Improvement means making changes towards better value for the customer by focusing on quality, cost reduction, delivery to customers, morale of employees and safety. Requiring little or no investment, Kaizens can be implemented in the industry for improving every aspect of the business process in a step-by-step approach, while gradually developing employee skills through training and increased involvement. Its basic principles are: Human resource is the most important company asset The process must evolve by gradual improvement rather than radical changes Improvement must be based on evaluation of process performance By practicing Kaizen culture, managers demonstrate commitment to quality. Also, workers, with adequate support from managers, become a major source of improvement. The Kaizen system is simple but its implications are far reaching. In the initial stages of implementing Kaizen, any organisation is likely to face problems. However, it must be implemented in a manner such that it becomes a group activity and finally a movement within the organisation. For instance, when Sona Koyo started the Group Kaizen Activity, it formed a team of eight people who met once a week and discussed a particular problem. They were given a maximum of three months to find a solution. Once these eight people understood the concept, they further made and led eight other groups comprising eight people each, who further made groups of eight persons each. Slowly, every individual working in the

CII Mission for Innovation in Manufacturing

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organisation was involved in the process. A set of useful steps to start a group Kaizen activity are: Think, rethink and attempt kaizen, with 100 per cent clarity and understanding Collect all relevant data, analyse and think of a solution thereafter Use only appropriate tools while implementing Verify the results for consistency with EJO (experimental job verify order) procedure Apply Quality Proving procedures (QP1, QP2 and QP3) before freezing the implemented solution The Confederation of Indian Industry (CII) is committed to making Kaizen a movement in India. To this end we have committed to the prime minister that we will submit to him 100,000 Kaizens that can be replicated in various organisations. CII has also set up a website, www.kaizeneye.com, for this purpose, where it has uploaded 1,971 Kaizens over the past six months. There are 130 Kaizens from Bharat Seats, 127 from Vikrant Auto Suspension, 112 from Sona Koyo Steering Systems and 70 from Inspros Engineers. The website is open to all companies to contribute their Kaizens.
CII Mission for Innovation in Manufacturing

MISTAKE PROOFING

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Mistake Proofing

The term Poka Yoke was coined in Japan during the 1960s by Shigeo Shingo, an industrial engineer at Toyota. Dr Shingo is also credited with creating and formalising Zero Quality Control (poka-yoke techniques to correct possible defects + source inspection to prevent defects = zero quality control). He also contributed to the Toyota Production System and developed the SMED (Single Minute Exchange of Dyes) and the Just in Time (JIT) concepts. Poka Yoke is Japanese for mistake-proofing: yokeru is to avoid, while poka means inadvertent errors. Poka Yoke devices thus enable avoiding inadvertent errors through behaviour-shaping constraints. They are a way of preventing errors by placing limits on how an operation can be performed in order to force its correct completion. People cannot function like machines, with the same result every time. A small distraction can lead to the work going wrong. It is not necessarily the workers fault, as poorly-designed processes that require a great deal of attention can contribute severely to problems. The basic principles of Poka Yoke, therefore, advocate designing or developing tools, techniques and processes such that it is impossible or very difficult for people to make mistakes. Poka Yoke is based on the premise that everyone must work together to achieve zero defects. It assumes that the quality of products starts from product design and must be built into the manufacturing process. Traditional engineering processes are designed to increase the efficiency of an operation by enabling people and machines to work faster. Poka Yoke doesnt violate or negate good engineering practices. Instead, it expands on those practices to include ways to help people and machines do the job right as well as quickly. Error proofing must be implemented to prevent human errors.

In a weld shop at Rojee Tasha Stampings, during the welding of a bracket, it was observed that the nut plate was welded in the reverse direction. This problem was highlighted by a customer complaint. A fixture was then designed with fixed locations, thus avoiding reverse/opposite side bracket welding. While this was a small improvement, it led to error proofing, saving time and reduction in customer complaints. Poka Yoke relies on source inspection, detecting defects before they affect the production line and working to eliminate the cause. Statistical quality inspection will ultimately no longer be required, as there will be no defects to detect zero defects. When a Poka Yoke is designed in a way that it helps the operator recognise the defects before it is about to occur, it is called prevention or prediction type of Poka Yoke. Prevention-based mechanisms sense an abnormality that is about to happen, and then signal the occurrence or halt processing, depending on the severity, frequency or downstream consequences. In many situations, it is not possible or economically feasible to prevent defects, particularly where the capital cost of the Poka Yoke mechanism far exceeds the cost of prevention. For these situations, defects are detected early in the process, preventing them from flowing to downstream processes and multiplying the cost of non-conformance. Such Poka Yoke is called detection type Poka Yoke. Following the Poka Yoke philosophy requires an organisation to build a strong foundation in total quality management. Organisations must learn to place the customer before everything else. They must promote quality ownership at the source, and need to ensure that their people are truly empowered.

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They must adopt pre-, self-, and post-inspection at source. Poka Yoke requires real-time feedback and corrective action. All these are the building blocks of an effective Poka Yoke effort. After installation, the functioning of the Poka Yoke must be verified according to the prescribed standard method and predefined frequency using a Daily Poka Yoke check sheet. Mistakes happen in organisations for many reasons, but almost all of them can be prevented, if people make the effort to identify when problems happen, define root causes, and then take the proper corrective actions. The objective is to prevent, or at least, detect and weed out defects, as early as possible in the process. The use of simple Poka Yoke mechanisms and other safeguards can also prevent mistakes from becoming catastrophic events.

TAKE ONE STEP AT A TIME

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One Step at a Time

In the early 90s apart from the problems as a result of the foreign exchange crisis, India was also battling image issues: the Made in India tag was not exactly a sought after tag. Today, 14 years later India boasts of 15 companies that have won the Deming Awarded from Union of Japanese Scientists and Engineers, 92 companies that have been awarded the TPM award from Japan Institute of Plant Maintenance and 21,313 ISO certified companies. In the auto components industry, amongst China, India and Thailand, India is number one on quality of products supplied and multinational companies have begun to see the benefits of sourcing from India. General Motors (GM) and Caterpillar source radiator caps from Sundram Fasteners - the company has won GMs best-supplier award for three years. GM sources light equipment from Lumax. Mitsubishi of Japan sources front-axle beams from Bharat Forge and Federal Mogul of the US sources components from India through a tie-up with the Anand group. This is a reflection of the increasing quality consciousness of India Inc. Today, our aim is to quadruple the number of such award winning companies over the next two to three years. But what led to such a transformation in the Indian industry? Through this column I hope to share the Kaizens (incremental changes) that Indian manufacturing firms, both big and small, are doing on a continuous basis to achieve global excellence. In January 2006, I met the Prime Minister and presented to him 1,000 Kaizens that have been implemented in India. At the Confederation of Indian Industry (CII) we are committed to submitting 1 lac Kaizens to the Prime Minister over the next one year thus building a knowledge base in the nation and contributing to Indias journey to becoming the global factory. These achievements are a result of a Total Quality Movement launched by the CII in 1988 that gained momentum as many Small and Medium Enterprises too bought into the concept. TQM and TPM are now extremely popular models amongst the Indian companies. CII has also

invited quality gurus such as Prof. Tsuda and Prof. Shoji Sheba to train Indian industry in the implementation of these quality initiatives. To take India to the next leap of manufacturing revolution, individual organisations need to build abilities to acquire, assimilate and develop new technologies, reduce production costs, cut down delivery time, practice Total Quality Management and enhance productivity and customer service. Achieving high levels of competitiveness and quality standards is really not rocket science. A large number of tools and techniques for problem solving are available. What is required fundamentally is managements willingness to adopt good manufacturing practices. The first step in doing so is to follow the PDCA Cycle (Plan, Do, Check, Act cycle) propagated by the proponents of Quality. PDCA helps in improvement every time a Gap Analysis the analysis between planned and actual results is done, by helping to devise counter measures that by eliminating the root cause of the problem prevent recurrence. The analysis of the gap and determining its root cause is the most important step in the PDCA Cycle, since it helps in defining the appropriate counter measure for the root cause. Standard Radiators, a Bhopal based Radiators manufacturing company was able to reap the benefits of following the PDCA cycle. The Company was facing a problem of constant inventory pile up due to non availability of parts for various types of radiators it manufactured. Standard Radiators manufactures 30 different types of radiators, each with 10 different components. What was required was complete co-ordination between the purchase, production and sales functions. But there was a clear communication gap: production was not meeting sales requirements and was able to manufacture only 24-35 radiators in a day. The company was taking 20 days to complete one container load of (approx. 600) radiators. Standard had to hire space to stock the manufactured radiators and at times the container had to be shipped to the US at less than full capacity.

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The company then decided to start following the Daily Work Management process, which enabled them to plan the activities of the day and deliver according to those, conduct a check every hour on the schedules and take care of any breakdowns in machine, non availability of material and so. As a result it was able to increase production to 70 radiators a day, reducing the container load production cycle to just 8 days and freeing up the stockyard. Standard was able to save costs, make 100 per cent on time delivery to their customers and just as important, increase employee morale.

UNDERSTANDING EXACTNESS

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Understanding Exactness

The concept of Exactness propagated by Yoshikazu Tsuda, professor of quality, is a highly effective concept for controlling process variations. Prof. Tsuda, who transformed clustering in India drew a plan for companies to start the Cluster journey with exactness followed by Daily Work Management. Exactness is the starting block of quality. It requires that each company pursuing quality practices Daily Work Management. Exactness of operations comes through exactness in man, method, material, machine and environment. These conditions must be exact enough to achieve daily targets consistently. While Daily Work Management is important, for Exactness, an organisation must distribute the responsibility for 3 performancemanagement objectives appropriately. The first of these, retention of the existing levels of performance, to ensure that there are no drops from current standards, should be left to shop floor workers who can use techniques of TQM, such as the 5Ss, Daily Work Management, and Poka-Yoke, for the purpose. The second and third objectives, improving performance levels, and effecting quantum jumps in them, should be the responsibility of the middle-manager, taking 40 and 50 per cent of his time, respectively.
CII Mission for Innovation in Manufacturing

at the design stage. They educate their suppliers on problem solving, ISO-related activities and the 5S. 5S are actually 5 Japanese terms: seiri (separating the required tools from the rest) seiton (neatly arranging tools and markings for easier identification) seiso (clean-up campaign) seiketsu (to conduct the above three regularly) and soitsuke (forming the habit of following the first four). In a manufacturing environment machine set-up and changeovers, tool setting and monitoring condition, exactness of input material and its feeding, accessibility of tools and consumables, appropriate information, appropriateness of handling system all contribute to Exactness. Thus, parameters that affect machine condition must be known. Manuals must define the methods to carry out maintenance and how to react when parameters go out of control. These must continuously be updated to improve performance and reduce breakdown and downtime.
CEOs HANDBOOK | 12 STEPS TO INNOVATION IN MANUFACTURING

Exactness in checking, measurement, feedback given to each workstation, method of maintenance and the skill level of operator play an equally important role. For example if certain process parameters need to be measured, such as temperature of oil, the location where the sensor is planted in the system and made available to the operator must also be exact. Operator safety is critical in attaining exactness. High noise level, slippery floors, metal chips on floor, and the possibility that they may lead to hazardous situations must be avoided. Another aspect of safety is related to housekeeping or 5S. There are two facets of housekeeping to be kept in mind - One is the cleanliness of the product itself, while it is in process, in a handling container or being received or packed for delivery. To that extent housekeeping is essential to make a conforming and clean product. The second relates to carrying out safe operations. Metal chips on floor or on motors, oil on floor, are hazardous and must be stopped by maintenance activity and design of suitable handling

These TQM tools have been effectively implemented by a large number of companies to achieve targeted results. At Hi Tech Carbon, a Birla Group Company, the TQM movement was successful due to the complete involvement of the employees in cleaning, maintaining and improving the plant and office areas. Cleaning events were organised for the employees to demonstrate 100 per cent involvement in pre TPM activities. Cleaning up the work area leads to increased safety, hygiene, better productivity; it also frees up valuable floor space. Some of these such as freeing up space result in monetary savings as well. At Rane Brake Linings, even suppliers are involved in the TQM activities

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systems and guards. Housekeeping is a cost, but if it helps people find what they need, when they need, from where it should be, it is advisable. Central to maintaining Exactness is the handling of exceptions. The person to decide on action in case of crisis such as sudden changes in the product or unplanned quantity, quality to be produced, changes in inputs, etc. must be identified. Experience of dealing with crisis should lead to more flexible and responsive systems.

WHO IS ACCOUNTABLE?

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Who is Accountable?

Quality guru and evangelist Y Tsuda, who has driven the total quality management (TQM) learning in many Indian companies, emphasizes the involvement of people at every level. However, this involvement is different at different levels. Although a common mission and vision guides every employee, there is a difference in the level of accountability, responsibility and authority. Authority is the right to take decisions, which is the highest at the top management level. Responsibility is the liability of a person to perform the role as defined in his job description. Accountability is about taking responsibilities that go beyond a persons job description. It is highest at the top-most level and the least at the lowest level. Most people normally do not think beyond their department. Consider a purchasing manager in a manufacturing company. He has the authority to decide which supplier to buy from and at what price. His responsibility is to supply parts and materials to sustain production and to implement purchasing operations. His accountability is to feel responsible for poor quality of material, profitability of the company and so on. If he believes that he is only supposed to order the material and that it is the suppliers responsibility to deliver the material on time or to ensure its quality, the range within which he feels his responsibility is too narrow. Responsibility can be written down as a job description - accountability is about commitment.

the largest - more than its responsibility. For others, authority and responsibility are the same. If a common employee thinks about how to improve his work or improve the quality, he is assuming accountability larger than his responsibility. In that sense, the common employees and the CEO are in a similar situation. Their accountability is well defined. It is at the middle management level that reforms are necessary. If a manager desires that his authority, responsibility and accountability be equal, he better be made a common employee. If, on the other hand, a common employee wants to extend his accountability, he must be recognised.

How accountability helps

Accountability leads to sharing of responsibility. As more and more people in the organisation start thinking beyond their daily jobs and think of the organisations benefit, it helps in the achievement of the organisations goals. People set their personal objectives in line with the objectives of every department. For instance, if the production manager has set himself the target of reducing costs by 20 per cent, it becomes his responsibility to optimize the cost of raw material or of his people. But if he feels accountable, he would start considering how to reduce the cost of power - which might be the job of the maintenance department - or he might provide inputs to the tools department on which tools might improve productivity. Every organisation must have a process to develop people to feel accountable. It would enable the top management to focus their time and energy on issues that will keep the organisation going or develop a better business model. In an organisation where accountability levels are high - an ambidextrous organisation can survive without much ado. An ambidextrous organisation is an organisation within another, set up to implement innovative or breakthrough ventures of the organisation.

CII Mission for Innovation in Manufacturing

Division of authority, responsibility and accountability

Consider the division of authority, responsibility and accountability amongst various levels in a company. The CEO has all the authority. His accountability is equally big. His responsibility is little - most of it is delegated to his subordinates. The middle management has a responsibility that is larger than its authority. Its accountability is

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While working on product innovation or on a business process innovation, employees will not focus on finding fault with others, but will enable each other to be more productive. In organisations where there is a process of accountability, idea generation for innovation is more common. Also, organisations that have broken the barriers of departmental silos can test their ideas on each other and implement innovative ideas faster.

CII Mission for Innovation in Manufacturing

Dr. Surinder Kapur Dr. Surinder Kapur is Chairman of the CII Mission for Innovation in Manufacturing and Founder Chairman and Managing Director, Sona Group. He also represents the SME Sector on the National Manufacturing Competitiveness Council. An Engineer by qualification, Dr. Kapur has led quality and innovation in Indian industry through the various Committees and initiatives of CII. He is leading CII's initiative of SME Clusters under its TQM program as well as advanced clusters on Breakthrough Management (Innovation). Under Dr. Kapur's Chairmanship, the CII Mission on Innovation in Manufacturing, will develop 100 innovating companies in the Indian industry with global processes on innovation and product development over three years. Dr. Kapur also chairs the ACMA Centre for Technology (ACT). As a Member of National Automotive Testing and R & D Infrastructure Project (NATRIP), an initiative by Government of India to address the critical gap in testing and R & D infrastructure in the country. He is leading the Automotive Component Manufacturers' efforts to support Government funded R & D activities through Technology Information, Forecasting and Assessment Council (TIFAC). As a member of the Technical Advisory Committee on Automotives, DGTD and the Development Council for Automobiles & Allied Industries GOI, Dr. Kapur has made a number of policy recommendations. Under Dr. Kapur's stewardship, the Sona Group has received a number of awards and recognitions in the area of quality, manufacturing excellence and leadership. His pursuit of quality led the Sona Group to winning the Deming Award from Japanese Union of Scientific Engineers (JUSE) and the Frost & Sullivan's Corporate Gold Award for Excellence in Manufacturing. Dr. Kapur has been instrumental in Sona Koyo receiving the 'Technology Award' from Automotive Component Manufacturers of India (ACMA) in 2004 due to 6 patents filed by Sona Koyo. Dr. Surinder Kapur has endeavoured to integrate quality in Indian industry as the chair of CII - National Committee on Quality & Training Services, the TPM Club of India and Automotive Components Manufacturers Association. His mission is now to build a culture of innovation amongst Indian companies. Born on 10th October 1943, Dr. Surinder Kapur studied Mechanical Engineering at the University of Michigan. He was the Vice Chairman & Managing Director of Bharat Gears from 1972 to 1990. He established Sona Koyo in 1990 and has since been leading his company from one success to another.