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.
 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