Crompton Greaves(CGL)

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OBJECTIVES

 Analyze 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?

 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?

1) Introduction:

Crompton Greaves (CG) is part of the US$ 3 bn Avantha Group, a conglomerate with an impressive global footprint.
Since its inception, CG has been synonymous with electricity. In 1875, a Crompton 'dynamo' powered the world's very first electricity-lit house in Colchester, Essex, U.K. CG's India operations were established in 1937, and since then the company has retained its leadership position in the management and application of electrical energy.

Today, Crompton Greaves is India's largest private sector enterprise. It has diversified extensively and is engaged in designing, manufacturing and marketing technologically advanced electrical products and services related to power generation, transmission and distribution, besides executing turnkey projects. 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.

1.1) Problem for CGL:

Kewal K. Nohria, CEO of Crompton Greaves said “In 1982 and 1983, industry in general and the electrical industry in particular was gripped by recession, and the scenario changed from seller's market to a buyer's market. Falling demand combined with higher production capacity and employment levels resulted in declining productivity during 1982-84 at Crompton Greaves.”

The CGL management realized that it would have to take steps soon enough to put the company back on track. Nohria believed that operational efficiency was one of the keys to organizational effectiveness and long run profitability. Besides working towards an overall restructuring of the company, Nohria decided to focus on total quality management to improve CGL's performance. Nohria began by talking about quality and response to customer demands and improving delivery
"When I became CEO of Crompton Greaves in 1985, the company was in bad trim. The wind had abruptly changed direction, catching the management unawares. It was my job primarily to set the sails right again and correct the course."
-Kewal K. Nohria, CEO, Crompton Greaves in 1998

2) Objective No.1

Analyze 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?

2.1) Operational Efficiency:

A term used to describe the characteristic of a secondary market for a financial instrument evidenced by low transaction costs and smooth execution of trades. The spread between bid and offered prices, brokerage commissions, and taxes are the three main types of transaction costs. One of the requirements for readily marketable assets.
As a part of the plans to increase resource productivity, the unit had its first Total Quality Management program..

2.2) Total Quality Management:

Total Quality Management is the organization-wide management of quality. Management consists of planning, organizing, directing, control, and assurance. Total quality is called total because it consists of two qualities: quality of return to satisfy the needs of the shareholders, or quality of products.
As defined by the International Organization for Standardization (ISO)
“TQM is a management approach for an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society.” ISO 8402:1994
TQM requires that the company maintain this quality standard in all aspects of its business. This requires ensuring that things are done right the first time and that defects and waste are eliminated from operations.
Total Quality Management continues to evolve in the form of the Criteria for Performance Excellence which was first published in 1988. The criteria provide the basis for the Baldrige National Quality Program (BNQP) that is administered by the National Institute of Standards and Technology (NIST). Organizations benchmark against the criteria to assess how well their actions are aligned with their strategies. Results are examined to determine the effectiveness of their approaches and deployment of these strategies. Dr. Juran once stated that the Criteria for Performance Excellence are the embodiment of those philosophies and practices we call TQM.

2.3) Steps taken by Crompton Greaves to improve operational efficiency

Kewal K. Nohria, CEO of Crompton Greaves began by talking about improving quality and respond to customer demands and improving delivery.
• Shop floor 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 reorientation of the production process itself . the unit began using the concept of Single Piece Flow (SPF).
• Inventory turnover was increased due to computerized model installed for inventory control.
• CGL also worked on the housekeeping front as well to make the unit more efficient. Material was organized so that no searching was required.
• All items were allocated a place, close to where it was used.

2.4) Single Piece Flow

2.4.1) What is it?

a. Single piece flow is the ideal state where parts are manufactured one at a time, and flow throughout the manufacturing and supply chain as single unit, transferred as customer's order.
b. Manufacturing large batches of parts simultaneously, or accumulating parts in a bin for shipping or transferring 2 or more parts at the same time is opposite or contrasted to the definition of Single Piece Flow.
c. Single Piece Flow (SPF) supports Just-in-Time, Toyota Production Systems, Lean Manufacturing, Theory of Constraints (Drum, Buffer, Rope), and similar types of philosophies and systems

2.4.2) How Does it Work ?

a. Batch sizes are recorded for historical system (baseline).
b. Optimum batch size and transfer sizes are calculated, starting with:

i. The most critical work centres
ii. The largest inventory carrying costs
iii. The highest risk processes
iv. The most unpredictable process
v. Other controlling factors
c. Action is taken for improvement at the work centres, rules, methods that have the greatest impact on the throughput, customer satisfaction, risk, cost, or inventory carrying charges. These actions can include:
i. SMED
ii. Kanban
iii. Process re-design
iv. Production sequence
v. JIT
vi. Etc.


2.4.3) Advantages of Single Piece Flow

The unit began using the concept of single piece flow, which had been successfully used by different industries abroad.
• One group of machine was arranged so that work proceeded in an anti-clockwise, ‘U' shape.
• One entire product was made from start to finish by one cell.
• Less wastage and better inventory control.
• Production volumes were more or less the same; they now required only one-fourth the floor space.
• Turnover or rotation of space therefore increased by three times.
• SPF also increased the pressure on processes by identifying problem and bottleneck very quickly.
• If there was no material or no order, a red bulb lit up; if the basket was full, a yellow bulb lit up, and so on.

3) Objective No. 2 :

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?
In context of academically

3.1) Value Added Management:

3.1.1) what is “value added?”

Value added means adding value to a raw product at its present stage of production and possibly taking that product to the next stage of production.
This can be as simple as pre-conditioning your calves for sale, retaining ownership of your calves and wintering them on wheat pasture, or placing them in a feedlot. Or, adding value may be as elaborate as going all the way to the consumer with a “case-ready” food product.
Think of your calves as a value-added product. If you are considering a value-added enterprise, there are two key questions to answer: 1) what attributes of your product does the customer value? and 2) what creates a value-added product?

3.1.2) What creates added value?

The benefits from these criteria usually create value:
• Quality — Does the product or service meet or exceed customer expectations?
• Functionality — Does the product or service provide the function needed of it?
• Form — Is the product in a useful form?
• Place — Is the product in the right place?
• Time — Is the product in the right place at the right time?
• Ease of possession — Is the product easy for the customer to obtain?

3.2) Ways to improve efficiency at the Nashik unit on the people and Housekeeping fronts.

CGL worked on the housekeeping front as well to make the unit more efficient.
Following are the ways to improve efficiency:-
• Material was organized so that no searching was required.
• All of 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 was required.
• 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 instruction in both English and the local language Marathi were put up at various spots.
• Chart displaying the cost of energy per machine per hour were put up to reduce energy wastage.
• A malfunctioning magnetic sensor was fixed for just Rs 440.
• ‘Andon4' devices were installed on automatic lines to warn of faults that would have otherwise been passed without being noticed, and later rejected or reworked.

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