A new engine of growth

How the Kirloskar group used TPS to revamp manufacturing

Vikram Kirloskar

On a sunny day in 2000, a group of 24 employees of diesel engine manufacturer Kirloskar Oil Engines Limited (KOEL), left for the Sinhagad fort, Maharashtra. Over the next three days, they were subjected to all manner of physical challenges "" from long treks to rappelling and even perilous trust exercises. Surprisingly, no one in the group "" all shopfloor workers at KOEL "" was told the reason for this outward-bound trip. "We kept the suspense on and on," recalls a company executive.

Strange, but it worked. Actually, the object of the exercise had been to build acceptance to KOEL's adoption of a world-class manufacturing approach modelled on the lines of the Toyota Production System, or TPS. So, when the 24 shopfloor employees returned to Pune, they were asked to work on a model production line named the Millennium line.

In the first seven months of operation, productivity at the Millennium line jumped 30 to 50 per cent compared to the other lines. That now holds true for the rest of the organisation as well. In specific cases like the small engines manufacturing capacity in KOEL, the increase in productivity has been 57 per cent. And the improved productivity has meant lowered inventories. The inventory of raw materials and components has dropped from Rs 53.38 crore on March 31, 2000 to Rs 34.74 crore in March 31, 2003 "" a decline of 35 per cent. Even working capital requirements are down from Rs 350 crore to a little less than Rs 35 crore.

For KOEL, this was critical. In the late-1990s, when almost every Indian manufacturer was hit by the double whammy of globalisation and recession, KOEL found itself in a tight spot. Between 1995-96 and 1998-99, even as sales jumped from Rs 613.89 crore to Rs 713.37 crore, profits before tax fell from Rs 21.3 crore to Rs 15.9 crore.

The Sinhagad excursion, then, had been put to good use. But it had taken a lot of careful planning. The TPS process got a kick-start at KOEL because of the Kirloskar group's joint venture to manufacture automobiles with Toyota in India. But when the company decided to adopt TPS, it anticipated resistance to the idea "" and with good reason. The average KOEL employee was between 48 and 50 years old and of the 1,600 workers, only 200 were below 32. Most of the older workers had been performing the same function in the company for close to 30 years. To persuade these workers to work on five machines instead of one, to operate as well as maintain their machines and so on would, therefore, take some effort.

Hence the Sinhagad trip, for which KOEL deliberately chose employees between 27 and 54 years, to prove that at any age, people could be achievers and change.

As Vikram Kirloskar, vice chairman, Toyota Kirloskar Motor, who also heads the group manufacturing committee of the Kirloskar group, says, "We had to involve every employee in specific improvement processes."

Since 2000, nearly 700 workers from KOEL's medium engines' shopfloor have been sent on the excursion.

But how was the Millennium line different? The model line was created near the entrance of KOEL's medium engines assembly line in Pune, so that no employee walking into the floor missed it. The differences in the model line were noticeable. It had a raised metal platform on which workers could stand and operate all machines from the same level.

Then, instead of arranging machines in a straight line, they were arranged opposite each other so that the same operator could operate two or more machines without having to walk any distance.

Understandably, the improvement in productivity was almost instantaneous: up 30 to 50 per cent in just seven months. And considering the jam KOEL was in at the time, that was essential.

In the late-1990s, tractor sales were declining at about 7 per cent a year "" and KOEL supplied diesel engines to tractor manufacturers. At the same time, competition was increasing. For instance, in segments like tractor engines or diesel engines used for power generation, the number of players had gone up from four or five in the early-1990s to as many as 11 or 12 by the end of the decade."We knew that unless we became internally efficient, we would not be able to survive," says D R Swar, director, engines and auto components business groups, KOEL.

The adoption of TPS was not KOEL's first effort at improving manufacturing practices: it had dabbled in quality circles back in the early-1980s. But that failed to gather steam because, as Swar points out, "The external environment was not compelling enough to do it."

This time, however, the company had to ensure that the change in the shopfloor was permanent. To make it top-driven, a quarter of the company's 400-odd engineers were sent to work with Toyota Kirloskar's factories ""Toyota Kirloskar Motors and Toyota Kirloskar Auto Parts ""which had implemented TPS on their shopfloors. "Until then, utility of machines was a concern. From then onwards, the focus shifted to optimum utilisation of man and machine," points out one manager.

The company also invested about 4,900 manhours in training its employees. And to ensure that training expenses were within control, it roped in expertise from suppliers as well as from within the company. For instance, in sessions like training on cutting tools, equipment supplier Widia trained employees on using tools optimally and gave them tips on reducing wear of tools. This helped bring down tool costs by 15 to 20 per cent.

To ensure that the quality circles "" with seven to eight employees in a group "" gained momentum, the company put up white boards at the plant entrance, which listed all the activities of each group and the overall impact on the plant. But as with all new processes, people were the change drivers.

Therefore, one of the basic steps in changing the manufacturing process was getting employees accustomed to the 5-S process""Seiri (sorting), Seiketsu (standardisation), Seiton (systematising), Shitsuke (self-discipline) and Seiso (sweeping). "The Japanese believe that if you get the man, method, machine and material combination right, then money will automatically come in," explains one employee.

Employees soon became adept at using methods such as root-cause analysis, the five-whys and so on to analyse problems and address defects on the production line and improvements followed.

An apt example would be the connecting rod for diesel engines. It takes 23 operations to manufacture a connecting rod and any operation beyond specification means a rejection. Before TPS was implemented at KOEL, the rejection rate was so high, "it would be calculated in percentage terms," says one employee.

From 50,000 parts per million (PPM) in the late 1990s, the rejection rate is now down to 3,800 PPM. That's still higher than the industry-best of 2,000 to 2,500 PPM, and KOEL is working on surpassing that.

KOEL also had to make sure that employees worked the maximum possible out of the nine-hour shift. Internal research showed even one break to drink water meant a work-time loss of at least five minutes, since the water cooler was kept at one corner of the shopfloor. If other workers were already near the cooler, the work-time loss would only increase. Instead, a water fountain, tea tables and chairs were installed in the middle of the shopfloor near the Millennium line.

Time and effort apart, some of the changes on the shopfloor also helped save space. For instance, the medium engines' assembly line used to have 98 trolleys with 40 different materials moving on it. The assembly line was realigned so that a single trolley carrying all 40 materials moves along with the engine that is being assembled. That helped achieve a space saving of 2,080 sq ft. The space saved from this line (called S-line) helped add three more machines, apart from creating storage space for nuts close to the assembly line. Kirloskar points out that the S-line will soon be replicated in other group companies.

According to him, the definition of TPS is "common sense used meticulously". Should we also add continuously?

What is TPS?
Toyota Production System (TPS) is the core of the manufacturing operations for Japanese auto major, Toyota Motor Corporation. However, even as TPS has gained an enormous reputation, with shopfloors across the world following TPS at least in part, it was never put down on paper comprehensively.

"TPS is not a system but a philosophy. Its success depends on how you involve people," says an employee at Kirloskar Oil Engines Limited (KOEL).

Even as TPS shares its vocabulary with other management concepts, such as Just in Time (no inventory in the production line), Kanban (cards to keep records of materials) and Kaizen (continuous improvement), there are cultural and regional differences.

For instance, the motivational exercise conducted by KOEL in Sinhagad was developed by the company to drive home a "you can do it" message.

Vinayak B Marathe, director, Toyota Kirloskar Auto Parts (TKAP), a joint venture for auto components, agrees that TPS has to be localised.

"TPS has to be suited to the local condition and a key point here is training," he says. He quotes the TKAP example, where most employees had worked in factories with a single man-single machine norm. The had to be trained on standard work procedures and work combination.

Ultimately, team members could take care of four to 14 machines each. The two prime considerations in TPS are safety and quality. TPS believes that the safety of workers is the foremost pre-condition for good processes and good products. At KOEL, blue flags dot the shopfloor, declaring there have been no accidents in the last quarter and the same must be continued.

And safety will lead to quality: daily production volumes will increase only as the company and its members consistently achieve quality targets. This means companies have to be courageous enough to stop production if there is a quality problem. At KOEL, an alarm is sounded if a problem is spotted and an attendant arrives in three minutes. And when employees become veterans in practising TPS, they prefer to solve problems themselves.

Note the use of the phrase "veterans practising TPS". That's because in TPS, training is an ongoing process. The Japanese call it ikusei "" "nurturing" rather than "training". That also means it is impossible to become a TPS expert. Vikram Kirloskar, vice chairman, Toyota Kirloskar Motors, offers an interesting analogy: "It is a bit like trying to lose weight. It takes time to get results."