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Crompton Greaves Limited

Context

This report is going to be submitting as partial assessment leading to MBA as the rules and regulations of Queen Margret University and The School of Information Risk Management

1. Objective

a) Analyse the steps taken by Crompton Greaves at its Nashik unit to improve operational efficiency. Comment on the advantages of the single piece flow (SPF) system adopted by the company?
b) Study the steps taken at the Nashik unit on the people and housekeeping fronts to supplement the overall “Value Added Management” initiative. In what way did they help the unit in improving efficiency

2. Literature Review
2.1 Introduction

According to scenario of Crompton Greaves Limited. Crompton Greaves Ltd. (CGL), is part of the US$ 3 Billion Avantha Group, a conglomerate with an impressive global foot print.

Crompton Greaves Ltd. (CGL), the flagship company of L.M.Thapar group was one of India's leading private sector electrical engineering companies. CGL manufactured a wide range of transformers, switchgears, control equipment, motors and related products and railway signalling equipment besides consumer products. CGL was incorporated in 1937 as a 100% subsidiary of the UK based Crompton Parkinson Ltd, (CPL), under the name of Parkinson Works Ltd. (PWL). In 1948 the L.M. Thapar group company, Greaves Cotton and Co Ltd. (GCCL), acquired a 26% stake, which was later increased to 50% in 1956. In 1966, a joint venture company between GCCL and CPL, Greaves Cotton and Crompton Parkinson Ltd. Was amalgamated with PWL. The company was renamed as Crompton Greaves Ltd.

Over the year, CGL evolved from being a single location company manufacturing ceiling fans and AC industrial motors, into a multi location, multi Product Company. In the late 1970s, CGL entered into various technical collaboration agreements with renowned companies from USA, UK, Europe and Japan. These activities were in related products, supplementing the company's main business. While many of these companies were amalgamated with CGL, some of them were divested as well during the following years. In 1987, CGL began its diversification moves and entered the telecommunication and industrial electronics arena. The company also undertook turnkey engineering projects and began providing information technology services. During the 1980's CGL was in dire straits with profitability at all times low. Falling demand combined with higher production capacity and employment levels resulted in declining productivity.

Today Crompton Greaves is India's largest private sector enterprise. The company is customer centric in its focus and is the single largest source for a wide variety of electrical equipments and products. With several international acquisitions, Crompton Greaves is fast emerging as a first choice global supplier for high quality electrical equipment.

2.2. Management

In 1980, the president of the American Management Association (AMA) used this definition of management; Management is working with and between people to obtain its goals of both the organisation and its members.
(Montana and Charnov, 2000)

2.3. Total Quality Management (TQM)

Total Quality Management is management come near to long term achievement through quality driven customer satisfaction. All members of organisation participate in to get better of processes, products and services in which they work.

TQM defined as:

TQM is a management approach for an organisation, centred on quality, based on to involve in the activity of all its members and intention at long term achievement through customer satisfaction, and helpful to all stake holders of the organisation and to society.

(ISO 8402:1994)
Removes the need for buffer inventory, which, in exchange kill both waste and inventory costs, a basic goal of TQM.
(Russell and Taylor, 2005)
TQM is a system for making competitive advantage by focusing the organisation on what is important to the customer.

It can be broken down as follows:

Total:

The whole organisation is involves and understand that customer satisfaction is every one job.

Quality:

The extent to which products and services satisfy the requirements of internal and external customers.

Management:

The leadership, infrastructure, and resources that support employees as they meet the needs of those customers.
(Shim and Siegel, 1999)

TQM needs that the company maintain quality standards in all of its business operations. That's how things done right in first attempt and defects and waste can be reduce from operations. And it provides long term success through customer satisfaction with quality.

2.4. Operational Efficiency

Operational Efficiency is - what happen when the right combination of people, process, and technology come together to improve the quality of productivity and value of any business operation, while driving down the cost of fix ways of operations to a desired level. The finish result is that resources previously needed to manage operational tasks can be redirected to new, high value initiatives that bring additional abilities to the organisation.

2.5. Steps Taken for improve operational efficiency

• Shop floors workers were sent to visit customers and get first hand responses on products.
• Cross functional task forces were created to look into rejections and deliveries began to be monitored closely.
• The biggest change was regarding the orientation of the production process itself. The company obtain single piece flow (SPF) system.
• Computerised system installed for inventory controlled.

3. Value Added

According to the US department of Commerce value added is
“The difference between raw material input and finished product output.”

On a practical level, it's everything you do to something from moment you buy it, sell it, and service it.
Sellers impose their definitions of value on the customer. When sellers are in love
with their own ideas and believe everyone should feel that excitement. They often dictate value to customers. Remember “it's not value until the customer says its value.”
(Reilly, 2002)

Value Added creates benefits like;

• Quality:

The product or service delivers quality according to customer expectations.

• Functionality:

The product or service delivers the unique functionality of it.

• Form:

The Company produce the product in useful form.

• Time & Place:

The product on the right time at the right place.

3.1. Single Piece Flow (SPF)

Single piece flow can be described as an ideal state of efficient operations. Where one group of machines arrange so that work proceeded in an anti clock wise “U” shape. Rather than one product being made at different points on an assembly line, one entire product make from start to finish by one cell. It combines with the concept of kitting, providing enough material to produce one item at a time. This means less wastage and better inventory control.

3.2. Advantages

• The inventory carried declined from 2.87 months in 1992-93 to 2.35 months in 1994-95.
• The inventory turnover ratio went up from 2 in 1992 to 7.5 in 1995.
• At any given point of time, the growth in sales was always greater than the inventory build-up.
• While production volumes were more or less the same, they now required only one fourth of the floor space.
• Released of space for new products.
• Turnover or rotation of space therefore increased by three times.
• Smaller batches offered more flexibility and therefore higher customisation.
• SPF also increased the pressure on processes by identifying problems and bottlenecks very quickly.

3.3. Steps Taken at Nashik Unit

• Material was organised do that no searching was required.
• All the items were allocated a place, close to where it was used with the date and inspection status marked on it.
• The layout was correspondingly changed so that minimum transport required.
• None of the machines were grounded, which meant that layouts could be changed easily.
• Several meters of pipe in different colours were put up so that problem lines could be easily identified.
• Fixtures were also coloured according to the product they were used to make.
• Detailed instructions in both English and the local language Marathi were put up at various spots.
• Charts displaying the cost of energy per machine per hour were put up to reduce energy wastage.
• CGL formed cross functional teams to identify and solve problems on the shop floors.
• To reduce setup times and ensure faster changeovers, teams were formed to work towards bringing the time elapsed in exchange of dies to a single minute.
• Andon4 devices were installed in automatic lines to warn of faults that would have otherwise been passed without being noticed and later rejected or reworked.

4. Conclusion

When in 1982 and 1983 the industry was gripped by recession. The CGL management realised that it is the right time to take steps to put the company back on track.
Company took steps towards operational efficiency and working towards an overall restructuring of the company. Company also focus on total quality management by improving quality. Put value added management in Nashik unit by launching single piece flow. Which enable control wastage and provide better inventory control. Company worked on housekeeping front as well for more efficiency.

In the late 1990s, CGL plans to split itself into three companies. Which to be headed by independent professionals. This was expected to enable to form separate strategic alliances to enhance competitive strengths. While maintain its quality and its efficiency level.

5. References

Operation management, Quality and competitiveness in a global environment (5th Edition) by. Russell, R. & Taylor, B. 2005. ISBN 0-471-69209-3

Operation management by. Shim, J. and Siegel, J. 1999. ISBN 0-7641-0510-8

Management by Montana, P. and Charnov, B. 2000 ISBN 0-7641-1276-7

Value Added Selling by Reilly, T. 2002. ISBN 0-07-140881-9
http://www.ensynch.com/sp_operational_efficiency.aspx
http://www.cglonline.com/overview.htm

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