SUNDARAM CLAYTON WINNING THE DEMING PRIZE

Presented by:
Saurabh Katar (1021230) Vaibhav Nagar (1021235) Atul Agarwal (1021209) Apoorv Jhudeley (1021207) Ann Stephen (1021238) Amit Prakash (1021204) Rahul Sinha (1021226) Sundesh Murthy (1021224)

Case Summary
y SCAs journey for Deming Award started with realization of its y

y y y

incompetency in delivering world class quality product. SCL managers were introduced to the concept of Total Quality Control (TQC). The managers were also trained in modern manufacturing techniques. By the mid-1980s, the TQC culture was well established at SCL. Famous Japanese quality control experts like Yoshio Kondo and Washio trained managers and employees extensively in TQC. Deming prize was the ultimate goal of Srinivasan.

Contd..
y The companys TQM model ensured

Policy Deployment, Employee Involvement, Kaizen, Standardization and Training apart from promoting employer-employee relations.
y This customer satisfaction will be obtained

by supplying products of the right quality, at the right time, and at the right place.
y The company emphasized on factors such

as reliability, serviceability and durability of products.

Contd..
y Team of workers was responsible for a complete product and

not just a specific component or process.

y The product development team of SCL comprised

members from different functional areas such as engineering, production, marketing, purchase and R&D.

How did they go for it.

Team collected information from customers regarding their requirements, product-related problems, suggestions etc.

Examined various factors such as the life-expectation of the product, target-cost, production volume, and growth and availability of in-house expertise to meet the requirements.

Team sanctioned a design and developed a prototype, which was tested rigorously before being finally approved for manufacture.

Critically discuss the initiatives taken by Srinivasan to improve the quality standards at SCL. How far, do you think, these initiatives contributed towards laying the foundation to win the Deming Prize?

y SCL used concurrent engineering technique, which considerably

reduced its cycle-time. y With the help of Demings Plan-Do-Check-Act (PDCA) cycle, Identification of projects (Plan), collection of information (Do), analysis (Check) and implementation of the solutions (Act), SCL identified certain key issues three months.

Managing Points and Checking points

y SCL used Managing Points and Checking Points as TQC tools to

control the course of operations. y For eg: Marketing heads sales target will be his managing point and when this target flows down to the next level, it will be spilt into checking points, the segment sales and territory sales. y SCL plotted these managing and checking points on a chart and vertically connected those points. The chart formed the pictorial representation of an organization involved in pursuing its stated policy objectives

Training
y On-the-job and off-the-job training to its employees for various

statistical tools related to quality control. y SCL spent 45 hours per year on classroom training, which was very high compared to the industry average of 4 hours. y Employees were also trained on various aspects such as housekeeping, 5 Ss Seiri (clearing up), Seiton (organizing), Seiso (Cleaning), Seiketsu (Standardizing) and Shitsuke (Training). y Training included training in TQC tools such as control charts, causeand-effect diagram, check-sheet, the Pareto chart, scatter diagram, histograms and other graphs and charts, which helped operators identify, analyze and solve day-to-day problems on their own

Problem Solving
y For problem solving and system failure analysis, SCL

employed Kaizen and Taguchi techniques. Every machine had a daily-work management system, following which the operator met the quality and hourly production targets. Any deviations from this daily schedule were analyzed and rectified immediately at the problem-stage itself. y It enabled the operator to trace the problem to its root and eliminate it.

Kanban
y SCL also used the two-bin Kanban system to reduce the in-

process inventory costs, under which every stage manufactures only that many number of units as required by the next stage of the manufacturing process. y In February 1998, the company submitted its application to the Deming Prize Committee. After eight-month evaluation process, which started in February 1998 and ended in October 1998, SCL was awarded the Deming Prize for implementing CWQC.

After effects of success

y The defect rate in the manufacturing process at SCL decreased

y y

y y

substantially and customer returns came down as a result of these quality control initiatives. New-product development time was reduced from 24-to-30 months to12-to-14 months. The turnover per employee increased by an estimated 18% annually while the gross value addition by every employee increased by 12% per annum. Sales grew at an annual rate of 35% while its net profits grew at an annual rate of 83% SCLs quality initiatives motivated many Indian companies to adopt quality control practices. Eg: Maruti Udyog

What are the parameters prescribed for the Deming Prize? Discuss the steps taken by SCL to meet the parameters laid down by the Deming Prize Committee to ensure that the TQM exercise was successfully implemented at all levels of the company.

Top Management Leadership, Organizational Vision, and Strategies: Sundaram Clayton will deliver a level of quality that totally meets customer expectations. This customer satisfaction will be obtained by supplying products of the right quality, at the right time, and at the right place. Total employee involvement and continuous improvement in every sphere of activity will be the twin supports on which Sundaram-Clayton quality will stand.

y Total Quality Management Frameworks :SCL managers were introduced to the

concept of Total Quality Control (TQC) and exposed to the quality control practices of worlds leading companies. The managers were also trained in modern manufacturing techniques. Famous Japanese quality control experts like Yoshio Kondo and Washio trained managers and employees extensively in TQC.
y Quality Assurance Systems: The company also introduced the concept of quality

circles. To remain focused on quality control and to keep the employees interested in quality control practices, external targets such as winning national quality awards were set, following which the company won the Quality Circle Award of the Confederation of Indian Industry (CII) in 1989 and the Quality Circle Federation of India awards successively for the next few years. 67 Quality Circles, which improved operations in the organization.

y Management Systems for Business Elements; The product development

team of SCL comprised members from different functional areas such as engineering, production, marketing, purchase and R&D. y Human Resource Management: training them in their functional areas, the company also trained employees on the utilization of various statistical tools related to quality control. It was reported that on an average every employee at SCL spent 45 hours per year on classroom training, which was very high compared to the industry average of 4 hours. Training on QC tools and 5S

y Effective Utilization of Information: Data related to every process -

production, quality variations, time-related issues, productivity, faults and breakdowns and wastage was collected and analyzed continuously to establish cause and effect relationships and hidden linkages between the processes. This data-dictated analysis (data based) also helped determine, in accurate terms, the extent of the problem and the impact of the solutions. To implement this, SCL used Statistical Quality Control (SQC) across all units and functions.

y Scientific Methods: For problem solving and system failure analysis, SCL

employed Kaizen and Taguchi techniques. Every machine had a daily-work management system, following which the operator met the quality and hourly production targets. Any deviations from this daily schedule were analyzed and rectified immediately at the problem-stage itself. This considerably reduced future deviations as it enabled the operator to trace the problem to its root and eliminate it. y Scientific Methods: For problem solving and system failure analysis, SCL

employed Kaizen and Taguchi techniques. Every machine had a daily-work management system, following which the operator met the quality and hourly production targets. Any deviations from this daily schedule were analyzed and rectified immediately at the problem-stage itself. This considerably reduced future deviations as it enabled the operator to trace the problem to its root and eliminate it.

Critically evaluate the benefits SCL derived from the implementation of company wide TQM:
y The defect rate in the manufacturing process at SCL decreased substantially

and customer returns came down as a result of these quality control initiatives. New-product development time was reduced from 24-to-30 months to12-to-14 months. The turnover per employee increased by an estimated 18% annually while the gross value addition by every employee increased by 12% per annum. y The quality practices in the company also reflected in its financial performance. Between 1992 and 1997, sales grew at an annual rate of 35% while its net profits grew at an annual rate of 83%. Even though sales declined by 25% in 1998 due to recession in the automobile industry, company sources and the analysts commented that the companys internal performance had improved consistently, which was substantiated by the increased revenues during 19982001.

Why TQM initiatives fail to give the expected benefits to the companies?
y TQM focuses people's attention on internal processes rather than on

external results.
y An asset of TQM is that it gets managers to attend to internal processes, But taken to an extreme

manager can get too preoccupied with internal issues such as the controversial issue of the performance evaluation and measurement, and thereby, ignoring the shifting perceptions and preferences of customers.

y TQM focuses on minimum standards.

y Zero defects and no rework efficiency distract people from adding value and excitement to customers'

lives.

y TQM develops its own cumbersome bureaucracy.

y Organizational charts and reporting systems with interlocking committees, councils, and

improvement teams imply a linear and predictable improvement process, rather than the chaotic and disruptive rebuilding that is often necessary.

y TQM delegates quality to quality czars and 'experts' rather than to

'real' people.
y Quality should not be delegated, but lived in the strategy of the company and roles of the managers.

y TQM does not demand radical organizational reforms. y Real quality improvement requires structural change and liberation of

people from stifling control systems and the tyranny of functionalism which precludes teamwork.
y TQM does not demand changes in management compensation.
y If rewarded on short-term financial gains, managers will not be likely to attend to quality

measures.

y TQM does not demand entirely new relationships with outside

partners.
y This deficiency results from above conditions. Managers will fail to enact nonlegelistic

relationships based on trust and mutual support.

y TQM appeals to faddish, egotism, and quick fixism.

y Although they will not admit it , many managers have applied for awards, like the Baldrige, for

reasons of personal aggrandizement and corporate public relations, or for quick and painless profitability. In reality, quality requires a never ending pursuit of improvement.

y TQM draws entrepreneur ship and innovation

from corporate culture.

y Too much emphasis on standardization and routine precludes

the constant changes and shifting needed to keep up with external changes.
y Some of the other reasons of TQM failure are: y Poor adoption of TQM elements. y Improperly diagnosed organization problems y Adoption of wrong solutions

If you were the CEO/Quality manager, what would you do to ensure a successful TQM initiative?
1) Create constancy of purpose for improvement of product and service. Management must change from a preoccupation with the short run to building for the long run. This requires dedication to innovation in all areas to best meet the needs of citizens or clients. 2) Adopt the new philosophy. Develop a new philosophy in which mistakes and negativism is unacceptable. 3) Cease dependence on mass inspection. Inspection is equivalent to planning for defects; it comes too late, and it is ineffective and costly. Instead, processes must be improved. 4) End the practice of awarding contracts on the basis of price tag. Purchasing departments customarily operate on orders to seek the lowest-priced vendor. Frequently, this leads to supplies or services of low quality. Instead, they should seek the best quality and work to achieve it with a single supplier for any one item in a long-term relationship. 5) Improve constantly and forever the system of operations and service. Improvement is not a one-time effort. Management and employees are obligated to continually look for ways to reduce waste and improve quality.

6) Institute modern methods of training on the job. Too often, employees learn their jobs from other employees who were never trained properly. They are forced to follow unintelligible instructions. They cannot do their jobs because no one tells them how. 7) Institute modern methods of leadership. Lower-level managers must be empowered to inform upper management about conditions that need correction; once informed, management must take action. 8) Drive out fear. Many employees are afraid to ask questions or to take a position, it is necessary for better quality and productivity that people feel secure. 9) Break down barriers between staff areas. Often staff areas, departments, units, and so on are competing with each other or have goals that conflict. Each discipline must stop optimizing its own work and instead work together as a team for the company as a whole. 10) Eliminate work standards and quotas. Quotas focus on quantity not quality. They are usually a guarantee of inefficiency and high cost. To hold a job, a person meets quotas at any cost, without regard to damage to the organization. 11) Institute a vigorous program of education and training. Because quality and productivity improvements change the number of people needed in some areas and the jobs required, people must be continually trained and retrained. All training must include basic statistical techniques.

Recently
y Sundaram-Clayton

Limited (SCl),announced the appointment of Dr. Lakshmi Venu, daughter of Venu Srinivasan, Managing Director of SCl and Chairman of TVS Motor Company Limited (TVSM), as an Additional Director, with immediate effect.