Anand Group aims to delight customers

In a radical effort to focus the attention of its plants across India on quality, components major Anand Automotive Systems has entered into a three-year Customer Delight Contract with each of its five wholly-owned companies and 12 joint ventures at the beginning of last year.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 08 Jan 2008 Views icon2926 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Anand Group aims to delight customers
But the need for a disruption was brought home to the leadership a year and a quarter back during a discussion with Prof. Shoji Shiba of MIT at which issues the group had with its customers came up. He told them that given the pace of change in the external environment, quality improvement could no longer be progressive; it would have to be disruptive.

“Prof. Shiba told us that living in India, we didn’t realise the pace of change here is 10 times that in Japan. We may be changing at three times, but India is changing at 10 times. If you don’t change as fast as your customers’ expectations you will be left behind,” says Pravesh Srivastava, who has just stepped up from MD of Mando Brake Systems to the corporate group with a primary responsibility for quality.

His advice was that unless there was an internal emergency, every effort at improvement would be seen as dull routine, rather than imperative. Focusing the attention of all the 7,000 employees in 43 plants across nine states on improvement would require time, but how long? After all, emergencies cannot last forever.

This was the spark for the Q90 (Quality in 90 days) programme. Anything important that involves a large number of people should be put into action in 90 days, Shiba advised; people must see an impact in 90 days or you will lose their attention. Accordingly, the Anand Automotive top management selected 14 plants whose progress CEO C S Patel reviewed once a week. Between five and 10 people in each plant took part in a teleconference for up to four hours every Friday morning, sharing data that had been sent to them ahead of time and discussing plans for the next week. This exercise carried on for 15 weeks and ended in December 2006.

That got the group moving, according to Saideep CV Rathnam, senior director and dean of Anand University. “But you cannot have emergency indefinitely; you run out of steam. So we hit upon the Customer Delight Contract (CDC). Now we’re binding the plant head and the COO to a contract with the central corporate. Now there is a buy-in right at the plant manager’s level.”

Wastage under scrutiny
At the same time, while the benefits of Q90 were apparent, a growing pressure on margins brought wastage across group companies under scrutiny. “Across the group we found that the quantum of wastage was equal to our profit,” says Srivastava. In order to drive the gravity of the situation into the consciousness of the entire organisation, the leadership first decided to define the cost of poor quality (COPQ)for the group as a whole. One of the challenges here was that the multiplicity of joint ventures, factories, and customers, and this definition might be very different in different companies.

“For example Behr has the Behr Production System, Haldex has the Haldex Way, and Bajaj Auto wants one of our plants at Ambad, Nashik, that supplies them shock absorbers to follow TPM. So we had to assimilate all of these,” he adds. This eventually distilled into a very simple definition: internal defects, or scrap; and external defects, or warranty.

It was then decided to cut the wastage across the group by half. This effort was begun in early 2007. “Our focus right now is to ensure our internal wastage comes down, which in turn will ensure that the quality of product delivered to the customer is much better. And that in turn reduces warranty,” Srivastava points out.

And the group has been able to achieve that 50 percent target, Rathnam adds proudly. While a few of the Gabriel plants may have achieved just 28 percent, others achieved up to 65 percent. “Admitted, in some areas the measurement system was not very strong. But this contract has helped the group achieve the improvements we were aiming at.” Because different plants are at different maturity levels, a goal was fixed for each. In 2007, the first year of the contract, the emphasis was on COPQ, APS, and people. The stakes of employees were increased, and rewards were very strongly linked to results. The flip side, of course, is that if any employee does not meet the plant-level goal he or she could also lose a substantial portion of their remuneration. In the entire organisation, bonus has been linked to results, irrespective of level and job. “Those who meet their goals will get more than they otherwise would have got. Instead of 100 percent they will get 125 percent,” says Patel. At the same time, performance appraisals have been linked to KRAs. At the same time there has been a lot of effort at reducing attrition at the shopfloor and management levels. “You can’t have quality and attrition together,” president (HR) K S Bhullar emphasises. To address this, Anand has instituted a separate development appraisal besides the performance appraisal as well, and is also examining the role supervisors play in attrition. In 2008 the entire focus will be on COPQ and systems. People will continue to be a part of it, but for the purpose of evaluation the emphasis will be on COPQ.

Group effort
The 12 joint venture partners have been actively involved in the effort to cut down the COPQ. Their role is to provide the knowledge backing. “The pressure we face today to continuously improve our prices they have handled in Europe and the US for the last decade. Our foreign partners are steeped in methodologies of how to cut wastage,” Srivastava says.

One example here is the unique brazing furnace at Behr India. With the assistance of Behr GmbH it has been able to reduce the scrap rate in the brazing process to below the global level. Behr provided the technical knowhow and trained the local operating engineers at its plant in Spain.

For businesses that have no foreign partners, the corporate group provides the lead. “The advantage of our system is our ability to use the knowledge we gain from every JV and horizontally deploy it for every other group company’s benefit,” Srivastava says. While all measures taken in 2007 were internal, in 2008 Anand is going to take the campaign to its suppliers. “Our manufacturing depends significantly on supplier quality, and we have significant quality issues here. Of the 1,200 suppliers we have all over the country, some are bigger than we,” says Patel. “The logistics are daunting.” One simple rule of COPQ is to first arrest a bad product going out of the door. So the group decided to internalise the cost, so at least the vehicle manufacturer or the ultimate owner of the vehicle did not get hit by quality issues. “Initially the cost even went up in some cases, because what we hadn’t arrested till then was leaking out,” he adds.

This was a dire imperative because a large part of the group’s production goes abroad to its partners, ether as parts or subassemblies. “In fact, Jaguar has some parts made by the Gabriel plant in Chakan. With that brand and prestige, if one part has a problem, we have a huge problem, maybe 10,000 times the cost of that part. And the damage to our reputation, which you can’t put a value on.” In his new role Srivastava has been tasked to put together a group that will work on supplier quality, apart from each company’s own groups. This will be a central team with leadership based in Chennai, and supported with staff and engineers regionally. Given that 80 percent of the quality problems originate from 20 percent of the suppliers, the ‘supply chain council’ will develop a process to identify vendors who need assistance, and what kind of assistance. Experts are being deployed for each company, such as for example a senior operations head from Tata Motors who will work with some of the key vendors of Spicer.

Srivastava explains that if it was the companies themselves doing it, they would take a more short-term approach. But now, with volumes picking up at a rapid pace, the individual Anand companies’ ability to make corrections with the suppliers by means of knowledge backing – and indeed their willingness to do this – is not what it should be.

“Of course, while the primary responsibility rests with the company, we will still develop a core group that provides assistance and also a panel of domain experts,” he adds. The suppliers too will have to invest, but the group will provide that initial spark. Here too the JV partners will be involved. As an example, Srivastava cites ICML in Vadodara, which is a big supplier to Behr for exports. “Behr India has a global sourcing team that will help them improve, using our processes and methodology — the Anand Production System . The strategy is long-term and not certificate-driven, he points out. Whatever gains are won must be sustainable over an extended period. “As a group we’re saying we should see significant progress at the end of three years. Results won’t come overnight, but we believe that in three years it will become ingrained, it will have caught on in the full supply chain,” Srivastava says.

The Anand Group is among the best in the component industry in delivery and partnership, he declares. “Our vision is, over the next few years, when people think Anand, regardless of which company, they think quality.”
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