Rohit Saboo, president and CEO, National Engineering Industries, on winning the prestigious Deming Grand Prize 2015, the efforts that went into achieving it and what it means for future business. An interview by Shobha Mathur.
Congratulations on winning the Deming Grand Prize 2015. When did the preparatory work for it start and what all went into winning this award?
The Deming work started long back, maybe 2005, when we started striving towards productivity gain and won the Total Productivity Maintenance award from the Japan Institute of Plant Maintenance in 2008. Subsequently, we went for the Deming Prize which we won in 2010.
Thereafter, we took a break and enforced the TPM Deming philosophy in our company. As the requirement of the customer started moving higher and higher, we began to think of the next level of quality. Also we need to attract international buyers, so in 2011 we decided to compete for the Deming Grand Prize. In 2012 the Union of Japanese Scientists and Engineers, the Japanese authority that selects the Deming Grand winner, did a diagnosis of our company. So we started this journey in 2012, preparing ourselves for it across the organisation starting with the Jaipur plant.
Which technology was harnessed to achieve the TQM standards for the Deming Grand?
We already had all the quality systems in place when we bagged the Deming award. The Deming Grand is just a tad stricter and they go into a little more depth than the Deming Prize. If earlier the passing mark was 60, now it is 90. What was predominantly required was a cultural change in our people which meant all the staff and workmen. We already had a TQM secretariat which was handling the Deming and they were already undertaking regular audits in all our plants and feeding us with inputs on it. We took it a step forward by finding out where we were lacking. We started training our employees and in some cases also removed people where they were not placed in the right slot to have the right cultural shift towards TQM. We are a 55-year-old company and some of the employees have been with us since the last 20 to 33 years, so changing the mindset of employees towards TQM was our key priority. We undertook a huge training programme to implement it.
What kind of a worker training programme was implemented?
We currently have about 700 staffers and 1,800 workmen which means about 2,500 permanent employees with a few contract workers. The training for them entailed basic TQM processes related to the Do’s and Don’t’s. Safety and legal processes are also monitored in the Deming Grand Prize, so we took care of safety aspects directing workers not to put their finger in the machine while it was running and overall became a little more stricter. As a result, accidents in the plants reduced to zero and our quality levels improved further. Earlier accidents stood at 12 in the Jaipur plant, 4 in the Newai facility and zero at Manesar and they are all down to zero now.
At my level, I used to take a class of 200-250 workmen in the auditorium on the requirements of the day and what the customers require. In 2010, 200-250ppm was acceptable to the customers but now it is zero ppm –this had to be explained to them. Earlier everyone was concentrating on the numbers that required production to be higher. We told people that if you improve quality, production will automatically increase. With the cultural and mindset changes, there were continuous training sessions at various levels organised by our staffers followed by a behavioural training of all the employees by an external agency. We also strengthened our processes and identified the gaps and filled them in and raised them to a much higher level.
How was TQM enforced across all the plants?
Earlier during the Deming time, we created a TQM secretariat with a GM level senior person heading a team of 5 people. They used to visit all the plants in a timely manner, educate, audit the plant, then check what actions were taken post the audit and whether training was being undertaken across all the plants. Training involves both theoretical training about processes and practical training on safety and maintenance of machines.
What does the award mean to you personally and what is your perception of quality?
Quality is simply what the customer wants and that he should get it at the right time, at the right place, in the right quantity and at the right quality.
Since NEI is the only bearings company in the world to get the Deming Grand Prize, what are the gains that you perceive accruing from it?
The gains can be both internal and external – right now all the company employees are highly motivated and charged up so we can introduce a lot of new things. The concept of quality is understood by the youngest person in the company. All our quality systems have tremendously improved and we have become consistent in our quality.
Definitely people will recognise us post the Deming Grand and consider us at par with the best in the world. All the automotive companies used to conduct extensive audits about 5 years ago. We had to prepare for these audits but now we are perpetually prepared. We don’t have to do anything special.
How will the award drive exports in global markets?
Since 2010 we are focusing on exports and they have increased from less than Rs 10 crore to Rs 250 crore at present. All our customers are marque ones based in Germany and in the US; we are also supplying to the Railways in the US and South Africa. We are targeting Rs 350 crore in FY’16 with a 29 percent share contributed by exports growing at 40 percent from the current 22 percent share of sales. By 2020, 35 percent revenue will come from exports. Over the last 5 years, quality has been improving and the Deming Grand is proof and a certificate for it. We will add new customers going forward –Daimler Benz, BMW and Nissan Micra are already our customers globally.
Can we have a detailed analysis of the TQM impact across NEI?
TQM has two impacts – implicit and non-implicit, the direct impact is our quality systems are much more robust today and our day-to-day tension related to quality has reduced. Also we are much more consistent. Non-implicit is that it has created a very positive environment in the company, now we are getting many more new ideas on how to develop new types of bearings. This creates a very good working culture in the organisation.
Can you detail the key innovations that have been taken up at NEI?
Innovations are happening not only in products but in new applications for bearings – we were not present in the third-generation bearings that go into the wheels of cars but have developed those bearings and will manufacture them next year. We have also developed a low friction bearing that will save fuel in the motorcycle, and innovated a low noise bearing for a motor application over the last few years. The low friction bearing is already being supplied to a big motorcycle maker in India, and the low noise bearing is also being provided to most of the motor manufacturers.
What were the challenges you faced in implementing TQM across the company?
The biggest challenge was to firstly change the mindset of the people from working in the old way to a new modern style of functioning and this is the part where our biggest effort went. Second was the magnitude involving 2,500 people, four locations and covering a large number of customers and systems.
How do you visualise the growth in demand in the next fiscal and plans for further investments?
The original target was to grow 20 percent YoY but in the current market situation it seems very difficult especially as the Indian, European and American markets are still showing a little bit of stress. But we still think we will be the fastest growing in the bearing industry in India. This fiscal, we will grow a little over 15 percent notching a topline of around Rs 1,700 crore from Rs 1,500 crore last fiscal. By 2020, we should achieve a turnover of Rs 3,000 crore by normal growth from India including exports. Additional revenue will accrue from proposed overseas acquisitions.
We envisage an investment of around Rs 1,000 crore over the next 4 years. At our fourth plant in Savli, we have already invested Rs 250 crore and will invest another Rs 250 crore in phase II. Then we will look at a fifth plant in Rajasthan where we have land. Investments will be funded by both internal accruals and loans. We are hoping to start construction of the fifth plant in 2017.
Could you elaborate on the kind of acquisitions that you are targeting overseas?
We are looking at three geographies – central and northern Europe, North America and Japan where we can access newer markets or newer technologies. We are targeting bearing companies in the range of Rs 300-Rs 700 crore. In the last three years, we were close to acquiring 2 companies but the deal fell apart at the last moment. We have hired investment bankers in all these locations and they are looking at the companies there but I cannot forecast a date for the acquisition. In terms of expansion, we have already set up a new plant at Savli Gujarat and phase I will be over by the end of this year. In phase II, the building will be completed by next May. Phase I has a production capacity of 25 million bearings per annum and phase II will have a similar figure. Currently we have a total capacity of 100 million bearings annually.
How deeply has NEI been impacted by the slowdown in the industry?
We have been impacted severely and are trying to open up some new markets to find a soft landing. The market does not look to be very good as of now.