Automobile waste solutions key for automakers' sustainability

Automobile waste - problem automakers cannot ignore!
Key learning:
 Identifying the major components of automobile waste
 Delineating the problems waste substances cause
 Get insights into issues such as waste avoidance
 Reducing improper tyre disposal, getting better value from waste tyres
 Strategising to re-use and recycle options for handling automobile waste

Length of the article = 922 words
Estimated reading time = 7 minutes
Automobiles are one of the most significant inventions of the 19th century. By the 21st century,
automobile waste posed one of the biggest threats to environment. The industry continues to grow by
leaps and bounds but its effect on the environment due to energy and resource consumption, waste
generation both during manufacture and after, redundancy, discharge of hazardous substances and
disposal problems once processes are complete have begun to pose serious challenges. So much so
that environmentalists are wondering whether to adverse impact on the environment would soon
outweigh its usefulness.
The items causing waste are many and varied. However, tyres are the most common. In western
countries old tyres are generally abandoned at landfills, which cause major health and solid waste
disposal problems. Tyres are unwieldy and nearly three fourth’s of the space they occupy is empty.
Therefore, as the volume of old tyres increases the size of landfill also expands. Consequently, the
associated problems multiply.
Accumulated tyres become the breeding heaven for pests, flies and mosquitoes. Tyres do not
decompose for many years and, therefore, can contaminate surrounding grounds and surface waters.
They are also prone to dislocate the landfill cover by rising to the surface. Also, the danger of potential
fires is common. Tyres are tough to ignite, but once ignited they are hard to extinguish. Also, the ring-
shape of tyres with the hollow inside allows the breeze to stoke the fire. A big tyre pile can burn for
many weeks, sometimes even months. In 1983, a fire at the tyre stockpile in Virginia, US, continued
for nearly nine months.
Mercury switches are another cause of concern once the vehicle is ready to retire. Mercury is used to
turn on the hood, door and trunk lights and to operate certain kinds of anti-lock brake systems. Being
a bio-accumulative toxic, once released it cannot be removed from the environment. Studies show
that the quantity of mercury found in one hood/trunk/door light can destroy over 1000 freshwater fish.
Today, most manufacturers design cars without using mercury switches, but the problem with mercury
switches in existing vehicles remains.
Batteries, motor oil, oil filters, gasoline, antifreeze, windshield fluid, hydraulic fluid, brake and power
steering fluid, radiators, transmission fluid, air-conditioning gases are other major items of hazardous
waste to be handled when the vehicle retires. Automotive batteries contain sulphuric acid that burns
the skin. Should the batteries be trashed carelessly and should they leak, lead, the mercury and
cadmium present in them pose grave threat to all living beings, (human beings and animals) that
come into contact with them. Left over motor oil dumped into water straits can destroy the surrounding
flora and fauna. One quart of oil can contaminate over a million gallons of water! [1 US gallon = 3.78
litres = 4 quarts]. Un-drained oil filters pose the same danger as one oil filter contains nearly 12
ounces [1 US ounce= 29.57 millilitres] of motor oil.
All the other automobile fluids, if discharged into water or onto the earth, can contaminate the
surrounding surface and ground waters. Chlorinated fluorocarbons (CFC) and Hydro
chlorofluorocarbons (HCFC), if released into the environment, deplete the ozone layer. This apart,
inappropriate methods used while handling these waste substances can aggravate the associated
dangers.
Studies reveal that nearly 75 percent of the total weight of a vehicle can be recycled after the vehicle
becomes redundant. Today, recycling of automobile components has attained the status of a separate
industry. After a vehicle retires, it is stripped of all the reusable parts, which are passed on to the
recycling dealers.
Generally tyres, if still serviceable, are retreaded and used on a different vehicle. Otherwise whole
tyres can be baled and used in the construction of bridges, roadbeds or lightweight concrete blocks
for retaining walls. They can also be used as boat bumpers at docks. If a whole tyre cannot be used, it
can be recycled. This is done by cutting it into small pieces and grinding it to create new products like
rubber mats, rubberised asphalt and tyre chips, which are used in engineering projects and as landfill
covers.
Tyres can also be used as alternative fuel. Tyres go through a process called pyrolysis and are
decomposed into gas, carbon black and oil. The gas helps the pyrolysis process; some manufacturers
use carbon black in new tyres. (Carbon black is considered inferior and few manufacturers use it for
new tyres. So is oil as it is low-grade fuel). This helps reduce CO2 emission and consumption of fossil
oils.
All the other substances like engines, batteries, or motor fluids can be reused in other vehicles. The
hulk of the vehicle is shredded and passed through several processes to recover ferrous and non-
ferrous metals. Automakers used these same components from where they are obtained.
Components that cannot be used are sent to the landfill as automobile shredder residue (ASR). The
ASR is believed to be nearly 20-25 percent of the total weight of the vehicle. Studies are being
conducted to use the ASR as alternate fuel in blast furnaces.
Two major problems surface while in dealing with automobile waste. One is lack of a comprehensive
legislation and lack of awareness among the users about disposing off old vehicles. The other is that
manufacturers use lighter materials that cannot be easily recycled. Thus, increasing the ASR. They
are compelled to do so to comply with government regulation on fuel efficiency and emission
standards. Unless there is an integrated legislation and all the parties involved in the industry work
together these problems will persist.
Manish Jain
Operational Excellence – Part 1
Organisations desirous of achieving organisational success need to clearly distinguish between

operational effectiveness and strategy
Length of the article = 783 words.
Estimated reading time = 5 minutes.
Devising the right strategy will enhance a company’s competence in accomplishing its goals.
Strategy…
Irrespective of the business they do, companies world over are currently striving to keep ahead of
competition. In this attempt they choose different objectives or take different paths.
Some companies take an entirely different approach and deliberately choose a different path to
present the customer a unique product. This is a competitive strategy.
Operational effectiveness…
The term ‘strategy’ is often confused with operational effectiveness. Operational effectiveness is the
measure of how effectively an organisation meets its objectives. Operational effectiveness therefore
includes principles, plans, ability to survive competition, and the risks that it is prone to.
In short operational effectiveness refers to the effort companies put in to perform activities that are
akin to those their rivals use or those that are better than their competitors.
Operational effectiveness aims at continuously improving the performance of the operations without
compromising on any aspect.
An organisation lacking proper operational processes and yet not attempting to improve them is prone
to failure, despite devising the best strategy. Companies should therefore strive to be at least as good
as their competitors, if not better, to yield good results.
To adopt the industry best practices organisations can vary their operational activities. Conversely,
they can also adopt fixed strategies and activities and carve a niche for themselves through strategic
objectives set.
Though different, both operational effectiveness and strategies play an important role in organisational
success. Companies often ignore this fact and concentrate on either one of them leading to
unbalanced planning. Companies should realise that these two aspects, together steer the company
to success.
Operational effectiveness aims at establishing unique and sustainable business operations that
ensure the effectiveness of the services and products they offer. It also helps them balance their
economies of scale.
Organisations need to identify the business operations that are their core competencies and devise
strategies to perform them perfectly. However, the core competencies of a company restrict the
choice of strategy.
For instance, an organisation that is competent in the semiconductor business cannot suddenly alter
its strategy to compete in a food processing and preservative industry.
The strategy adopted might require a company to possess the capability to manufacture, but this in
turn restricts strategy. In the case of product development and new technology implementation,
strategies can also be modified accordingly. Therefore, strategies and operational effectiveness are
two contradictory factors, which have equal impact on organisational success.
Maximising the utility of raw materials procured, manufacturing products with minimum defects in less
time are some demands of operational effectiveness. This will in turn make the company proficient in
its operations.
Operational effectiveness aims at continuously improving process performance. This is done through
a systematic four phase cyclical process that involves people, processes, opportunities and
improvement.
People
The first step in this cycle emphasises on controlling and improving the performance of functional
operations on the plant floor through people. People are indisputably the assets of an organisation
and their performance drives organisational success.
Able leadership is a prerequisite to ensure efficiency in manufacturing operations like procuring,

processing, packing, supply chain and delivery. Ultimately, only a motivated employee can contribute
value-adding services to the company in terms of new product development, and organisational
success.
Processes…
Merely managing people and ensuring leadership is not sufficient. Competent processes operating
effectively must support them. By adapting industry standards, and continually measuring them and
improving, manufacturers can ensure organisation wide operational effectiveness.
Opportunities…
Employing right people and adopting the right processes is not sufficient to ensure operational
effectiveness in an organisation. To ensure organisational success manufacturers need to continually
look out for the emerging technological, infrastructure or process advances. Organisations must
capitalise at the right time on these opportunities and improve process performance. For instance,
monitoring the advances in the field of automation in plant floor operation will help them improve both
the quality and the productivity of the processes.
Improvement…
There is no defined standard for operational effectiveness. Operational effectiveness requires the
organisation to continuously improve its processes and employee capabilities by setting higher
standards and striving to meet them.
After defining a standard cycle of activities for operational effectiveness, organisations need to find
practical applications, which ensure organisational success. Typically, organisations can choose
between the two different paths mentioned below to implement the operational effectiveness cycle.
1. Assess each organisational process and find the appropriate locations where all the four parts
of the operational effectiveness cycle can be applied individually.
2. Identify a strategy, using which all the four parts of the operational effectiveness cycle can be
integrated into one single phase.
The next part of this article details how an organisation can adopt these methods.
Operational excellence – Part 2
Operational Effectiveness – Part I emphasised on the need for both operational effectiveness and
strategy and their role in organisational success. It also explained the four phases of the operational
effectiveness cycle and their importance.
The article also discussed two ways of ensuring operational effectiveness in an organisation.
1. Assess each organisational process and find the appropriate locations where all the four parts
of the operational effectiveness cycle can be applied individually.
2. Identify a strategy, using which all the four parts of the operational effectiveness cycle can be
integrated into one single phase.
As mentioned earlier the first step in the operational effectiveness cycle is improving the performance
of people. Organisations need to find people who guide and control the performance of the
employees. Ample information is available through various sources. What organisations require is just
the right kind of people to manage soft skills like strategic planning, decision-making, and ensuring
teamwork.
The quality of a process is continuously measured and improved. An effective way of improving
organisation wide process performance is by implementing standard industry practices like total
quality management (TQM), Six-Sigma, and continuous process improvement programmes. All these
programmes are based on standard analysing and testing methods, measuring quality and improving
it continuously.
The existing process and business methods can be evaluated and the areas identified improved using
software applications or automation.
Organisations ensure that all the above improvements are integrated and function efficiently. Areas
that need further improvement are identified and management reiterates the first three stages to
ensure operational effectiveness.
These were discussed in the previous part as four different steps to operational effectiveness. The
final stage is where most organisations often fail.
Root cause analysis
Organisations fail in their attempts towards continuous process improvement as they often adopt
project based improvement techniques. As a result, improvement is limited to specific process parts
while no innovative approach is adopted to improve the other parts of the process.
Conventional methods of process automation also do not help integrate the control and improvement
of the process. Organisations with an initial enthusiasm towards the emerging technology implement it
but do not improve the internal process capabilities accordingly to support it. Technology that is
initially viewed as a solution to all management and process problems proves incompetent. Therefore,
it is organisations need to support new technology by altering their internal competencies when
necessary.
Significance of knowledge management…
The performance of any organisational operation is driven by knowledge. Based on the amount of
evolution of the knowledge, it can be classified into five stages. At each stage the organisation
operates with the knowledge available to improve its operational effectiveness. Several stages of
knowledge in an organisation and their impact on operational effectiveness are discussed below.
Stage 1: Ignorance
Ignorance is an organisational state where the individual or the organisation is incompetent. Any task
carried out in such a state is neither reliable nor productive. Therefore, tasks performed in such a
state lead to several kinds of wastes in terms of time, money, and resources. So they have to be often
replaced, or reworked.
Stage 2: Available knowledge
This is the state where the requisite knowledge is available and used effectively to ensure reliability in
the process. This available knowledge can be transferred effectively.
Stage 3: Communicable knowledge
This is the stage of knowledge where it is either written down or transferred among individuals to
enhance the personal knowledge of each of them.
Stage 4: Corporate knowledge
This is the stage where knowledge about the process is available in a communicable form. Thus
organisations can enhance process performance in a systematic and coordinated manner. Such a
knowledge stage forms a base for organisations to communicate and design process improvement
programmes.
Stage 5: Embedded knowledge
This is a stage where knowledge is available through devices incorporated in the process like the
tools used, machines, software applications. This automates the systematic processes to enhance
their performance. It also helps organisations carry out the tasks that are manually not feasible.
To ensure efficiency of such knowledge organisations must be well informed about the devices and
their applications. This will help them operate, improve and sustain the process performance
continuously. Complex devices give more room for organisations to improve performance as they
make available the entire knowledge about them.
Therefore, a proportional relation exists between knowledge and operational effectiveness. Ignorance
or the lack of knowledge has an adverse impact on operational effectiveness. Higher levels of
organisational knowledge help improve process quality, and sustain it thereby increasing the
productivity of the organisation.
In short, operational effectiveness is a direct function of organisational knowledge. At each level, the
operations are made individually effective. This apart in the fifth stage, organisational knowledge
reaches an embedded stage where the operational effectiveness is integrated as a single stage
across the organisation.
Dramatic changes in the nature of manufacturing!

Key learning’s:
 Transformation of factory floor and focusing on demand-driven business, resulted in reduced

lead times and work-in-progress levels and customers increasingly got what they wanted at
the right time.
 Intelligent use of best-of-breed demand planning tools replaced inventory with information,
and replaced forecasts with facts.
Companies can earn full profit margin and sell to customers what they actually want, rather than luring
them through discounting to select from items that are in inventory.
The nature of manufacturing is undergoing a dramatic change with customers becoming increasingly
demanding and competition fierce. Manufacturers focusing on make-to-order business by applying
best-of-breed demand planning tools are earning huge profits.
Trent-based Tekdata Interconnect Systems is a manufacturer of wiring harnesses and systems for
avionics, marine, medical and instrumentation markets. It’s world class, blue chip customers include A
S Goodrich, Thales, Alenia Marconi, BAE Systems, General Electric and Fujitsu.
The nature of the company’s business has changed radically in the last two years. The products and
customers remained the same but a huge proportion of output is now demand-driven. According to
the manufacturing manager, “The make-to-order proportion of its business has risen to 65 per cent
and is growing at a faster pace”.
Transformation of factory floor
The factory floor has been transformed to cope with the increasing demand. Earlier, cables were
made on benches. An operator would undertake the harness build and pass the completed batch of
harnesses to inspection.
Inspection wing would inspect them and pass the batch to the encapsulation department. After
encapsulation, the batch would be re-inspected and then go to the moulding department. This
procedure is no longer followed.
The entire output of the factory now comes from 12 productions cells, which account for the total
manufacturing workforce collectively. There are 16 operators in the largest and most complex cell
while the smallest one has just three employees.
Tekdata has proved that it is possible to incorporate operations such as encapsulation and moulding
within the cell structure. This transformation had a very positive impact on the business. Lead times
have fallen, work-in-progress levels have reduced – and customers get what they want, when they
want it increasingly.
Lean practices, such as 5S, kaizen, and TPM (Total Productive Maintenance) have also had a
significant impact on the factory floor.
Tekdata Interconnect Systems has put in a lot of effort into lean manufacturing. However, there is a lot
left to do. It is now focusing on team communications, visual factory approaches and throughput as
well as manufacturing efficiencies.
Tekdata is an example for manufacturers looking to transform the factory floor due to pressure to
become more demand-driven.
It is vital to remember that before a customer’s order can even reach the factory floor, it must first
navigate tiers of administrative systems and processes. These systems and processes are designed
with mainly demand-driven manufacturing in mind.
The issues that impact a business’s ability to be demand-driven are not limited to its four walls. It is
more to do with the supplier base and the distribution system that brings raw materials and
components to the factory.
Uncertainties and inefficiencies within the supply chain have been buffered by stock conventionally
but that is no longer required.
“Intelligent use of technology can replace stock with information, and replace forecasts with fact,”
says, the director of manufacturing at Cisco Systems. It is now possible to know exactly what is
required, instead of predicting what will be required.
Moreover, instead of relying on discounts, companies can earn full profit margin and sell to customers
what they want actually. Geest, with headquarters in Peterborough, is a food retailer and service
provider with products like ready-mixed salads and chilled meals.
This firm recognised the importance of demand-driven business and implemented a whole new ERP
system from SSA Global. It aimed to improve supply chain visibility and standardise upon ‘best of
breed’ business process. It also focussed on improving customer satisfaction through improved lead
times as well as reduced stock.
Companies are becoming increasingly aware of the opportunity cost incurred for not meeting demand.
Capturing and filling demand that would have otherwise gone elsewhere is an easy way of developing
the business.
Companies need not spend heavily on advertising campaigns or marketing initiatives to earn revenue
from potential orders that went unfulfilled.
Efficient manufacturing and supply chain systems are required to make sure that such orders can in
fact be met. The best part is that it is not necessary to replace entire IT systems; augmenting what
already exists can help achieve this.
Even businesses that consider themselves as responsive can benefit from a renewed focus on
demand as a trigger. For instance, twenty years ago, computer giant IBM was one of the world’s first
electronics companies to adapt just-in-time principles from the automotive industry.
The following initiatives have yielded IBM impressive improvements on what was already a creditable
performance:
Reorganising its factories, procurement function, distribution operations and planning processes into a
single USD 45 billion integrated supply chain business unit – embracing 78,000 products, 33,000
suppliers of over two billion components a year and 16 manufacturing plants in 10 countries.
Applying best-of-breed demand planning tools from i2 Technologies and integrating supply chain
business unit allowed IBM to not only plan more effectively, but also process demand orders more
quickly.
IBM is a giant company that can invest a huge amount on expensive tools. However, it is possible for
smaller businesses – particularly SMEs-- to gain significant enhancements in demand responsiveness
without expensive software tools.
Companies need to focus on forecast error reduction, stock accuracy, and the impact of forecasting
on customer service levels.
Opportunities And Pitfalls Of Manufacturing In China And India
China or India?
Word count: 1066
Estimated Reading Time: 9 minutes
Key learnings:
 Carrying out operations in India or China, involves significant differences in culture and
business processes.
 A manufacturer is probably best advised to consider a wholly foreign-owned enterprise or

managed sourcing unless there are very good reasons for joint-ventures.
In a recent EEF survey conducted in the UK, almost fifty percent of the companies interviewed,
predicted that more of their production would take place outside the UK. In the next five years, 49 per
cent of the companies are looking at China and 22 per cent at India. However, carrying out operations
in India or China, involves significant differences in culture and business processes.
Shifting manufacturing units overseas is quite daunting for many companies, particularly SMEs with
no previous experience. More SMEs are seeking the advice of corporate lawyers. Generally, SMEs
have an inherent discipline that prevents them from getting into the problems experienced by big
multi-nationals. They are much more frugal in their thinking - keep travel and accommodation costs
low and continue to focus on the bottom line.
Required groundwork
In order to succeed, fledgling SMEs in the UK should be aware of the following issues:
If India is the key destination..
According to Sachin Kerur of law-firm Pinsent Masons, advisor to foreign businesses setting up in
India,"When it comes to work practices and culture, British businesses tend to get things about right
probably due to the long history of Indian nationals working in the UK. There are stringent labour laws
on `hiring and firing' in India and Government suppor is essential for redundancies. Therefore, UK
manufacturers need to understand clearly what their responsibilities are and the impact this will have
on flexibility."
Kerur believes strongly that UK manufacturers (familiarised to EU regulations) can also handle Indian
bureaucracy effectively. Local authorities generally favour larger businesses over SMEs, but smaller
businesses can explore the option of locating alongside larger businesses within one of the special
economic zones. While operating in India, businesses should set and monitor strict credit limits and
payment terms as there are instances of exploitation. He also hinted that fake qualification
documentation is common and therefore it is sensible to check carefully when recruiting.
UK businesses should utilise top level skills from India and availability of high quality senior staff is a
key advantage of operating in India. Many blue-chip British companies have extensive experience of
manufacturing in India.
Rolls-Royce
The year 2006 marks the 50th anniversary of the Rolls-Royce relationship with Hindustan
Aeronautics Limited (HAL) in Bangalore, India. Martin Brodie of Rolls-Royce said, "In India, Rolls
Royce, started with the licensed production of the Orpheus engine and then extended to a range of
engines, most recently, the Adour for India's Advanced Jet Trainer. The experience gained working
with Indian engineers at HAL was apparent in the decision to establish a wholly-owned subsidiary unit
in Bangalore. This unit looks forward to manage the growing volume of engineering work that it is sub-
contracting to many other companies in India."
In the aerospace industry, there is a common requirement throughout the world to meet the same,
strict airworthiness standards set by certification authorities. This requirement calls for knowledge and
skills to work with the same global standards.
Eli Lilly
Pharmaceutical company Eli Lilly also has a long relationship with India. However, Lilly finds
significant differences between manufacturing in India and China.
Eli Lilly is manufacturing in India since over two decades. According to its executive director of
regional manufacturing, India's manufacturing base is extensive: 26,000 companies, with expertise in
finished products as well as raw materials. The Chinese pharmaceutical industry is very different.
There are around 10,000 companies with experience primarily in raw materials and intermediates.
Specific challenges involved in establishing manufacture in China
Manufacturing standards in China are somewhat behind compared to other countries. Lilly had to look
at quality controls and methods of working in great detail and local personnel were given intensive
training. Though there were a few excellent Chinese personnel available, a whole team was required.
Lilly adopts GMP (Good Manufacturing Practice) in all its facilities to achieve integrity of product, and
it has been introduced in China.
It began the technology transfer in China by running demonstration batches of medicine to show the
local Chinese team the levels of variance that could be experienced and what was acceptable. Lilly
also invested heavily in process equipment for its Chinese manufacturing partner.
Though low-cost labour is a driving factor to opt for China, it did not help much in the manufacture of
medicines. This is because, high levels of automation can provide a more sterile environment than
one involving manual intervention.
If China is a key destination ...
According to Simon Rodwell of the China-Britain Business Councils "UK manufacturers need to
consider entry strategy very carefully. There are three options: joint venture, wholly foreign-owned
enterprise or managed sourcing. There are many joint-ventures progressing well, but an equal
number are failing.
At the very aspiration level, there exists a significant difference between an entrepreneurial Western
company targeting the East, and a Chinese company used to state-ownership. Therefore, a UK
manufacturer is probably best advised to consider a wholly foreign-owned enterprise or managed
sourcing unless there are very good reasons for joint-ventures."
Being politely hard-headed is the best guide
Establishing effective working arrangements with employees and local authorities is a major
challenge. To get things done, UK manufacturers need to understand China's relationship culture. If
naïve and easily manipulated, a manufacturer will be taken for a ride, whereas a bad-mannered one
with a big mouth will be disliked. Therefore, being nicely hard-headed is the best lead. A reliable UK
or Chinese mediator is important to establish good relationships.
Andrew Liu, based in China with law-firm Pinsent Masons, says "Businesses setting up in China are
subject to both national and local regulation. In each case a significant degree of documentation is
required to satisfy the regulatory bodies". A detailed feasibility study should be carried out and the
report should be submitted to the local authority.
Manufacturers need to chalk out special plans for social welfare, housing, healthcare and pensions of
workers. UK manufacturers should also avoid transferring Intellectual Property Rights (IPR) into any
joint-ventures. Working on a licensing basis while retaining IPR outside China, is the best option.
With high competitive pressures, smaller businesses should try and find a bigger playing field. After
choosing the field, how to play this game strategically is the biggest challenge for most companies.
The Complete Safety System…The Sequel

Emergency preparedness…the crux of the matter!

In the previous week, we discussed some entities of an Integrated Safety Management System
(ISMS). Any company, be it a hazardous chemical plant, or a manufacturing facility or a simple back-
end office, needs a stringent safety system in place. Companies undoubtedly equip themselves for
emergencies, but how effective are they in handling a crisis situation?
For a better understanding, let us visualise an emergency and the subsequent chaos. The Research
and Development (R&D) wing of a leading manufacturing company was situated on the first floor of its
building. One late evening (after office hours) a couple of employees were still working on the floor
when a short-circuit led to a fire. Since the fire had erupted from the entry area, the employees rushed
to the emergency exit. Ironically, it was blocked by storage racks with stacks of old files. Moreover,
the few fire extinguishers on the floor were out of reach. Eventually, when the employees found one
within reach, none of them knew how to operate it. So they had to brave themselves and run through
the main exit, which was engulfed with flames. In the process, they sustained serious burns but
fortunately no life was lost. The damage to property and other equipment was colossal. The company
had to face the aftermath several days after the incident with excessive heat, smoke and disturbed
operations.
Much of the damage and loss could have been averted had the company been better prepared for
emergencies. The emergency exit was a storehouse defeating its existence. While various other
aspects of safety were taken care of, this crucial element was ignored out of sheer callousness. How
then can organisations overcome neglect and ensure preparedness at all times? Experts say that
some crucial aspects as outlined below have to be taken care of:
Weighing risks: Companies need to spend time to analyse risks. Often changes in processes,
technology, products and the surrounding environment can alter risks, either raising or lowering them.
Simply following existing practices despite changes in processes and techniques can prove to be
disastrous.
Identifying needs correctly: After considering the plausible risks, specific emergency response
needs can be identified. For this, it is essential to consider areas prone to disasters. The type of
equipment to be readied is decided based on the hazardous materials used and processes involved.
The location of emergency equipment is based on the worst-case scenario. The type of activation
alarm required is also crucial.
Considering alternatives: The prices of emergency equipment are proportionate to their features,
content and quality. Often, companies end up buying equipment whose features are not actually
required or buy those whose features fall short of their requirements. Hence, adequate research has
to be done before investing in emergency equipment.
Ensure weekly checks: Ideally, emergency equipment has to be monitored/ checked on a weekly
basis. Though safety or maintenance personnel undertake this task, the team should include a few
random members from other functions of the company. This gives employees from other functional
areas a chance to familiarise themselves with the location and usage of the emergency equipment.
The above steps not only help eliminate panic, but also make emergency response second nature to
employees.
Many companies conduct regular safety training programmes and meetings through the conventional
system of lectures and presentations. Employees consider such initiatives futile unless they derive
sufficient value. What is more important is creating an awareness and encouragement of safe
behaviour.
Consider that in every employee’s mind, there lies a decision-making box, based on his past
experiences. It is true that every response or feedback from authorities or top management influences
his future actions. Experts liken the impact of feedback to colours that stimulate future
behaviour/actions.
Say, an employee assigns the colour green for positive feedback for any of his actions/ behaviour.
Likewise a reprimand of any nature is associated with the colour red. So the decision-making box is
assumed to contain balls of red and green colour, which impact an employee’s behaviour
psychologically.
So an employee associates the encouragement he receives, for his safe behaviour, to numerous
green balls. On the other hand, he gives one green ball for attending a safety meeting, which does not
add much value. Likewise, a reprimand for less than anticipated production performance from an
angry supervisor is associated with numerous red balls. Non-recognition of safe behaviour gets a red
ball. Hence, there is a mix of colours red and green in the employee’s decision-making box, which has
a psychological impact on his behaviour.
Now visualise how an employee’s behaviour depends on his understanding of the system. When he
has to take decisions, the colours in the box flash to his mind. Depending on the prominent colour in
his box, he takes decisions. The colours in his decision box direct him even for a task as simple as
moving a ladder to reach out for something. If he sees more of red, he wouldn’t wait to get down and
move the ladder closer to the object, despite being at risk of falling down, fearing reprimand for loss of
time.
Remember, every signal sent to the employee has a long-term and direct impact on his actions.
Hence, it is important to send the right signals. The first step is to recognise and encourage safe
behaviour, even if it cuts into production or time schedules. The outcome can be invaluable in the long
run. Now, isn’t it time to check your safety box and ensure that all the elements of an ISMS are
present?
Moving Upstream- Part I

Behind every successful organisation, there are successful strategies
With a strong commitment to enhance the performance of its products and services, organisations
worldwide initiate and follow a gamut of strategies. However, there are very few companies that
actually emerge as winners. British Petroleum (BP) adopted some exemplary strategies to emerge as
an outstanding leader in energy business.
Profile
BP, one of the popular providers of energy resources has its operations in many countries including
India, China, France, United States and Russia among others. In India, it operates as Castrol India
Limited, which is a trading unit for lubricants. Though lubricants is their foremost business in India,
they are also into solar power, chemicals, oil trading aviation, and development of gas, power and
marketing of fuels.
Crisis
Diversification, undertaken in the 70s resulted in cumbersome management. Apart from a huge head-
count there were 85 committees, which consumed managers’ time. Financial proposals had to be
passed on to number of officials for approval thereby delaying processes. These were affecting
company’s performance and subsequently the company was engulfed in vicious financial crises.
Embarking
To improve BP’s operational excellence and convert it into a profitable business, the management
decided to implement certain strategic and operational changes.
# Focus on core competency
Company divested some areas of its business. It then concentrated on core business areas
interrelated with one another yet operating independently. These included exploration and production
operations, refining and marketing operations and petrochemicals.
# Empower business streams
Robert Horton, the CEO of BP in 1989 embarked on a new project named ‘Project 1990’. This
initiative aimed at reducing the time taken for decision-making. To make this process effective, Horton
empowered various business streams to take decisions on their own. Thus, certain levels of
management were removed. Furthermore, Horton also decreased the staff at BP’s headquarters by
nearly 80%.
Horton encouraged teamwork and trust among his employees. He supported them in taking
responsibilities and implementing initiatives. However, as part of its cost cutting drive due to economic
slowdowns, Horton adopted retrenchment policy.
Enter David Simon
After three years, in the year 1992, David Simon was appointed as the new CEO of BP. He followed
the same strategies of his predecessor. By the end of 1995, the number of employees reduced
drastically and as a result of its cost cutting process the company finally arrested the vicious financial
circle, reducing its debts by USD 4 billion. BP gained a profit of USD 2.4 billion by the end of 1995.
# Identify and exploit profit generating areas

John Browne, who would succeed David Simon in the year 1995 as the next Group CEO focussed on
BP’s exploration business named BP Exploration (BPX), as it was the major profit-generating area.
He concentrated on exploring new areas of hydrocarbon deposits that would strengthen their
business. This was a critical move as a new exploration site would enable BP a better edge over other
companies and will also enable BP cheap production of crude oil.
# Discover entrepreneurs
Browne initiated a new model named ‘asset federation’ to redesign BPX and was later implemented
through out the company. This model was designed with an aim to discover and enhance
entrepreneurial qualities in employees. BPX comprised of several Regional Operating Companies
(ROCs), which had technical and business staff looking after various operations.
# Diminish bureaucracy
Browne formed a team of managers of ROC and other units, who aimed to improve the management
aspect of BP. He realised that field-level managers had restricted control over resources and
operations under their jurisdiction. This seemed to be the main reason for lower performance. In order
to improve performance, Browne implemented various changes.
Let us consider in detail, the various changes that were brought about by Browne as part of this
model. Exploration and production activities consisted of 40 units or assets. An asset manager
managed each unit, which consisted of technical and functional staff. In other words, the asset
manager managed a major single gas or oil field or a group of closely located fields.
Prior to implementing the new model, these asset managers had to report to ROCs. However, Browne
eliminated ROCs and this led to direct conversations between asset managers and the Executive
Committee (EXCO), which comprised of Browne and two more executives. Thus, each unit delivered
better performance, which resulted in more profits.
The next article will detail how each unit worked to improve its performance. It will also highlight some
stumbling blocks and benefits accrued by implementing the new model.
Part :- 2
BP’s organisational model changed the entire culture

The previous article dealt with British Petroleum’s (BP) initiatives to transform itself in to a profitable
organisation. The new model called ‘asset federation’ developed by the succeeding CEO augmented
the performance of each business unit. The present article discusses the consequences of
implementing the model and explains how the succeeding CEO improvised it.
Working strategy of business units
As mentioned in the previous article, asset managers of each business unit reported to the Executive
Committee (EXCO). These managers negotiated with the committee regarding performance targets
achievable by them. On behalf of business units, asset managers signed contracts with John Browne,
member of EXCO who became the next BP Group CEO.
The contract outlined terms, which included production capacities and costs incurred by each
business unit. Asset managers were empowered to devise their own strategies for accomplishing
targets. They could hire employees, outsource some processes, engage suppliers of their choice and
determine the core areas.
Performance gauge
EXCO monitored performance of all the units and gave necessary inputs to the managers. The
committee invested in information systems and other sources that improved the performance. A
quarterly performance review facilitated detailed conversation between the managers and the
committee and enabled Browne to assist managers in developing their skills.
Incentives and compensations of all the employees within each business unit directly depended on
individual and overall performance of the team. This resulted in variation of incentives among
employees. The new system was enthusiastically welcomed owing to huge incentives to employees
and empowerment to asset managers.
Arising problems
However, the complete supremacy of asset managers after elimination of Regional Operating
Companies (ROCs) posed another problem. The units did not have an intermediate advisory body
that could help the units during crisis. Managers had to tackle problematic issues faced by their units
all by themselves.
Solution
Management realised that all the business units might face more or less similar problems on their site.
Thus, it would be easy to find solutions by holding discussions with other units and come to a
conclusion. Thus, all the forty assets were divided into four batches and were termed as ‘peer groups’.
These peer groups along with numerous other groups met regularly to discuss issues precluding
interferences from EXCO. Apart from resolving problems these groups also shared knowledge and
means of optimising costs. Gradually the peer groups cooperated with each other to accomplish
targets. This kind of collective responsibility also included allocation of funds among various assets.
One step further
Cooperation among peer groups led to better performance of individuals and reduced costs. They
now focused on other ways of optimising costs, which included outsourcing some operations.
Suppliers were paid on performance basis. As a result of this approach, BP was able to develop a
new product in a short span of time at low costs compared to initial investments. This was possible
due to the fact that the company shared its cost-savings with contractors.
Wide horizons
John Browne was made the Group CEO in the year 1995 and he immediately extended his model
through out the company. Encouraged by the success of this model in BPX, Browne divided other
streams of business in a similar way, with each stream having peer groups working as per
performance contracts. The model was modified to meet the changing demands of time while
maintaining the core principles. The model proved to be very effective even when BP acquired major
oil companies- Amoco and Arco.
Benefits of organisational model
The new model resulted in increased outputs and optimised costs. Potential fields were earmarked
and developed at lower costs. This organisational model heralded cultural changes across the
company. Employees developed a positive approach towards work and inculcated mutual trust among
each other. They worked with more dedication and did not hesitate to seek assistance from other
members. This led to improved performance of employees at BP.
Principles
BP implemented and followed the organisational model based on the strategies at their company.
Some of the fundamental ideas upon which the model was based are:
 Reducing layers of management to facilitate direct communication with top management.
 Dividing the workforce into smaller units with each unit having a clear understanding of their
roles and targets.
 Linking all the units with one another for mutual cooperation.
 Rewarding individual units for better performance and creating this culture across the
company so that it leads to overall better performance.
Conclusion
BP has achieved astonishing results by implementing this model. This is clearly evident by the fact
that it moved from a loss of USD 811 billion to a profit of USD 2.4 billion within three years of
implementation. Organisational strategies of this kind can augment the overall performance of the
company and yield better results.
Establish a lean culture first!

Key learning:
 Understand the importance of lean culture and the success of Lean implementation
 Identify steps to build a Lean culture

Not every concept or manufacturing mantra is adopted in one go. Neither does adopting a particular
one ensure success. For instance, one will need a comprehensive Lean manufacturing dictionary to
understand all its associated jargon be it Takt time, muda, Kaizen, etc. However, mere understanding
or mastering of such jargon does not guarantee success.
That gives rise to yet another question. Do adopting lean tenets into every process ensure success?
Not necessarily. The truth is that every manufacturer or organisation works within its structures. Some
organisational structures are rigid while others may be flexible. There is widespread limitation to every
concept being adopted. These limitations arise from various organisational or strategic factors like the
strategic vision of the company. Therefore, manufacturers must choose the concept that suits their
organisations the best. So there could be mixed packaging or assembly lines. Some could be Kanban
driven lines while others more traditional ones. For example, a division of Electrolux that
manufactures lawn mowers, first embraced Kanban materials management only for its service parts
production.
Another manufacturer in India, Centricast uses constraints based scheduling along with lean. WIKA
Instruments Corporation, a global manufacturer of pressure and temperature gauges for industrial
markets successfully uses both Kaizen and Kanban techniques in its operations. Though its lean
efforts have been less than five years old, the results have been good. It uses a Microsoft business
solution - factory floor implementation with a drum buffer rope for precision items.
Centricast is able to have one common thread in lean implementation. While lean necessitates
specific procedures, success of lean efforts has more to do with the organisational culture. Merging
culture with lean is the most difficult part in the implementation of lean. Readiness to change to a lean
set up needs to be imbibed into the culture.
Missing links in establishing a lean culture:
1. Manufacturers have only limited interest in lean

2. Manufacturers are motivated but not sufficiently to spread it across the organisation
3. Manufacturers want to learn, but do not have time or are uncomfortable with the jargon. Often what
is learnt is forgotten in the daily scheme of things
4. Manufacturers practice lean in disjoint phases, not continuously. Lean requires constant devotion
and discipline
Pointers to establish a lean culture:

 Just do it! Rather than pondering, whether to implement lean or not, when to implement it, or
why to implement it just go ahead and implement lean. Middle managers as change agents
must drive the transformation.
 Discontinue old beliefs and practices: Doing things that do not promote lean culture would not
be wise. Procedures and metrics that nullify Lean principles and practices should be
discontinued. Management tools which aid in continuous improvement like Policy Deployment
Matrix (PDM) (used by Irish Aircraft Industries Ltd (IAI)) must be used. PDM is a performing
and planning tool of Continuous Improvement for all management levels.
 Kaizen: A good first step is to participate in Kaizen programmes. Kaizen implies continuous
improvement and serves as a good foundation to lean because it fosters new beliefs. IAI
conducted over 200 Kaizen events already in 2005. IAI’s Lean Culture contributed to its
selection as a supplier for the Boeing 787 programme.
 Promote the right people: In lean terminology, promoting people on seniority is a waste. The
top contenders for promotion should be those who best understand Lean tenets. Not
surprisingly, these employees would be participating in kaizen regularly. Promoting such
people helps motivate others as well.
 Reward lean behaviour: Toyota rewards employees who suggest process improvements. No
wonder it gets a million process improvements annually. Even Henry Ford's lean enterprise
system emphasises continuous improvement (kaizen), standardisation, and best practice
deployment as its foundations. Ford’s organisational culture empowered every worker to
identify and eliminate all forms of waste (muda).
 Own Lean cells: Very often organisations invite external support for implementing lean. This is
good for initial stages only. Active lean teams and workshops must be developed in-house.
 Systematise change: The effects of systematic change on employees, can endanger Lean
success unless properly handled at the onset. Lean essentially is a change in existing
practices, which will most certainly encounter resistance at some point. Therefore, a model or
approach that is particularly aimed at balancing change with organisational culture must be
adopted. Such a model will build relationships among teams and develop employee emotional
intelligence.
Once the culture is lean ready, restricting lean to the manufacturing floor is futile. Lean must be
extended to the suppliers and customers and from there to the supplier’s and the customer’s
customer. Such transformation to a lean enterprise will enable a pull supply chain environment
wherein lot sizes are not built in large lot sizes to meet the demand forecasts. The final goal would be
to allow daily customer demand drive production in the smallest lot size achievable.
Strong leadership focussed on internal improvement is the key strategy to

success!
Key learning’s
 Companies with strong leadership and special focus on internal improvement can achieve
major turnarounds
 Businesses driven by leadership styles that involve collaboration and delegation rather than
command and control are highly successful.
“Leading a business has got harder,” says Dominic Oughton of Cambridge University’s Institute for
Manufacturing. It may sound banal but the accelerating rate of change has made corporate leadership
more challenging.
Access to excess information confuses actually and diverts rather than assisting the process.
Besides, strategies are applicable for a short time, pushing senior personnel towards frequent reviews
and change of direction.
Senior managers are judged generally by their leadership capabilities. However, a leader’s ability to
inspire commitment from the workforce and develop effective strategies remains the key strength.
Having reviewed leadership and strategy approaches for around 20 years, the Institute for
Manufacturing listed potential problems for senior managers. The review says manufacturers in the
UK are efficient at looking outside their businesses, studying markets and developing customer-
strategies. However, they are not so good at looking inside their businesses to understand their
competencies fully.
This results in developing strengths that are important to the customer but generic in nature. The
business may end up being a good ‘me too’ but not extraordinary to produce real growth. For, it is not
focusing on its unique strengths.
Moreover, anoutward –focus poses a danger of ignoring important internal weaknesses and failing to
fill those gaps efficiently.
Strong leadership with a focus on internal improvement
Advansa, the largest polyester company in Europe, achieved a major turnaround only after its
management team focussed on internal performance. Advansa had focussed traditionally on reducing
fixed and variable costs to improve profitability.
The management reviewed this strategy, and realised cost reductions were achieved at the expense
of equipment uptime Overall Equipment Effectiveness (OEE). The net result of the previous strategy
in reality was reduced profitability.
Realising they were working hard towards the wrong goals they started studying data in fine detail on
equipment efficiency. This data covering many years was useful to understand the true impact of
alternative strategies on profitability.
The team identified that instead of focusing on unit cost of production, driving up OEE will give better
results. It will increase production capacity, lower variable and fixed costs, improve quality, reduce
stocks and working capital, cut waste, and achieve better morale and health and safety performance.
The detailed analysis helped Advansa team to gain support for capital investment from the senior
board to achieve company’s objectives.
Results to date include:
 32 per cent improvement in manufacturing output
 26 per cent reduction in fixed costs
 38 per cent reduction in unit costs and
 Significant improvement in health and safety performance
Strong leadership focussed on internal improvement has also been the key to success for
shipbuilders VT Group. The company was disturbed by underperformance with frequent disputes due
to poor industrial relations.
Relocation of the company at purpose-built premises in Portsmouth naval base, as part of a BP 70

million investment served as a catalyst for re-establishing the business.
The new management team focussed on investment in high technology panel production and the
implementation of manufacturing best practices. The new team “invested in culture change”.
The company had 30 different sections and 30 different cultures, before relocation. The team realised
investing in creating the right culture was as important as investment in production processes.
They initiated new ways for communicating with all employees and with the union. They started
weekly briefings on key business issues, quarterly presentations to shop floor staff and weekly
meetings with a senior shop warden.
They tightened up on the performance of management staff and introduced a bonus scheme and
team awards to recognise achievements. All these measures were supported by a significant
investment in training across the workforce.
The outcomes are impressive: absenteeism reduced from seven per cent to three per cent, health and
safety accidents reduced by 50 per cent and no strike in three years.
Other gains include 30 per cent improvement in steelwork productivity and overhead resources
reduced by 150 per cent. VT Group also strengthened its export position.
Power of a well-communicating a strategy
A strategy rated as average, communicated well to the workforce may achieve more than a brilliant
strategy remaining with its authors.
Highly-visible and involved CEO
A challenging leader is required to turn a successful company into a more successful company..
When Alan Barlow took over as the CEO of Hamworthy Combustion, his objective was to double the
size of the company within five years.
The company adopted a portfolio strategy to handle its multi-dimensional products and a diverse
customer base. Being a global business, it also had to monitor carefully its business at various
geographical locations.
Alan Barlow took some difficult decisions. “For example, he saw no financial sense in retaining their
Australian division and went there personally to explain the closure. He says “If there is bad news I
see it as my job to be there in person”.
He appointed a human resources director to the board soon after his joining to elevate the importance
of the role. He feels strongly that people are important and this needs to be acknowledged.
What really matters-Personality or Process?
Alan Barlow says “The processes have to be right and decision making person has to be rigorous.
Integrity and trust is more important than leadership or charisma this is what people really respond to
and makes an employee go the extra mile.”
When a business is changing rapidly there is a natural inclination to apply more pressure and exercise
more control. This does not allow the business to respond quickly and effectively.
According to Allan Barlow, successful businesses are characterised by leadership styles that involve
collaboration and delegation rather than command and control. He says “Don’t be afraid to make
mistakes. A CEO who has never made a mistake is a CEO who has never made a decision”
Lastly and more importantly, people will remember their interactions with the leader. A leader needs to
demonstrate that he is adding personal value to the company and that he is in for the long haul.
Managing Core Assets Effectively

For maximising ROI, technology and operations managers should strive to manage core assets
effectively.
Key learning’s :
 A key function of a CIO is the management of core assets with the help of a standardised
management process.
 Integration of IT assets enables the streamlining of organisational functions to derive optimal

results.
The primary function of CIOs in most organisations is to optimise assets and integrate operations.
Integration covers enterprise software, applications, networks, tools, databases, management
processes, standards, contracts, portals and IT facilities. These functions are primarily aimed at
enhancing productivity and minimising IT costs.
For optimal economic leverage of core IT assets, manufacturing organisations should manage IT to
be handled as an asset-based business.
However, most of the organisations consider IT-asset optimisation as a time-bound project thereby
diluting the gains. Instead, organisations should implement standardised, continuous core-asset
management processes like CMM, Control Objectives for Information and Related Technology, and
the IT Infrastructure Library.
Organisations should have well established management processes to generate an optimal life-cycle
performance from core resources.
Templeton’s IT asset management chart
Templeton Group, a Noida-based computer hardware manufacturer, has chosen the following criteria
for managing its core IT assets:
 It can be purchased, built, licensed or leased.
 It comprises a life cycle of at least three years from consideration to phase-out.
 It has multiple applications.
 It has a continuous operating, maintenance, support and enhancement cost.
 It can be substituted or abandoned at the end of its life cycle.
 Its utility determines its value.
In the aforesaid process, an asset manager functions as a coordinating master brain. Pieche Plc, a
UK-based telecom equipment manufacturer, recently concluded a two-year project to minimise its
stock of 1,270 core assets by a quarter.
The organisation’s enterprise architecture group collaborated with designated asset managers to
dispose of 365 core assets. A majority of the core assets that were disposed of included hard-
technology assets like servers, LANs, storage, licences and facilities.
Assets that were less visible and more difficult for disposal included duplicate standards, tools,
software, applications and data. Such assets require focussed attention over the next three to ten
years for proper control. In the process, the organisation’s stock increased to more than 1,500 core
assets.
The cost saving imperative
Organisations that have implemented mature asset-management processes have reduced IT unit
costs by 60% below the norm for their vertical industry. On the whole, organisations manage cost
savings of 25-40%.
For example, e-tailer Ltd., a leading online retailer of premium cosmetics, had more than 20 variations
of software for Web-service payment transactions.
Following an alteration in business processes, the company had to bear expenses of more than USD
50,000 per variation. The alterations almost tripled the company's time-requirement to market its
products.
Common characteristics of asset management prevalent in organisations include:
Discrete IT asset categories and formal stocks:
Organisations design formal charts of IT assets embedded in the Target Living Architecture. This is
known as the ‘Bill of IT’ by certain manufacturers. Each year, an operating stock is generated from the
most critical core assets.
IT asset ownership and accountability:
Each IT asset, category or subcategory should have at least a single owner or accountable person.
The areas of accountability may comprise health, performance, resource utilisation, financials and
preservation of the IT asset or category.
Well defined incentives:
The parameters and metrics of the IT asset are important to personal performance and incentive
plans of the IT asset owners.
Comprehensive financial and operating parameters:
Most of the asset-measuring metrics assume each core IT asset investment results in maintenance
(M), enhancement (E), support (S), and production (P) expenses in future. These expenses include
adjustment and refurbishment of infrastructure.
The functional and technical quality of each core asset is also taken into consideration. Functional
quality is established from a user's perspective.
Technical-quality attributes like maintainability, adaptability, redundancy, reuse, usability, utilisation,

underlying skills, risk assessment and performance assurance are determined from the perspective of
the IT staff.
Efficient management process:
The aforesaid asset management activities are rationalised into a formal management process
conducted round the year. Financial parameters are annual while other metrics are included as
benchmarks once in a few years.
A strategy for the optimal management of M+E+S is devised on the lines of renovation, replacement,
consolidation, or retirement.
Committed, trained, appropriate resources and tools:
IT asset management should get utmost importance since an asset office aids each owner/steward in
the process. The organisation should also instil healthy working relationships with a fully informed
stakeholder community.
The above factors underline clearly the importance of a formal asset-management process. This will
not only ensure optimal asset management but also minimise the operational process costs.
Going lean maintenance wise

Lean manufacturing is considered to be an enterprise wide approach to integrating efficiency.
Companies adopting the lean approach, essentially strive to eliminate waste in any form from all
processes, irrespective of department without necessarily adding any new equipment. However
manufacturers primarily aim to eliminate waste from manufacturing and core operating processes.
Maintenance departments in most companies present glaring examples of neglect in eliminating
waste. It has been found that:
Up to sixty percent of wasted maintenance labour results from activities that add no value to the
output factors or overall performance measurements of the plant.
Maintenance operations waste up to twenty five percent of available labour.
Maintenance is an important component in the initial stages of the Lean implementation process. How
then can Lean actually affect the maintenance department? Also how should a manager incorporate
Lean principles into the maintenance department operations?
Implementing a Lean Maintenance programme
The first step in implementing a lean maintenance programme is to gain a thorough and logical
understanding of all processes involved. Value stream or process mapping is a suitable tool to
analyse the processes. It helps easy identification of waste before attempting to eliminate it from the
process. This information can then be leveraged to design more efficient and effective processes.
Seven Wastes in Maintenance
Overproduction
Overproduction is a major waste in manufacturing plants. Any activity that is performed, which does
not add value or for which the customer does not consider worth paying for is a waste. In terms of
maintenance, performing preventive and predictive maintenance at other than optimal intervals (or
that is not necessary) is a waste.
Waiting
In the production department, the wait time for maintenance personnel to render their services is a
waste. Similarly delay in tools, parts documentation, transportation and lack of spares is also a waste.
Such non-value adding activity should be eliminated. Proper planning and scheduling of maintenance
jobs in accordance with production can achieve this. Additionally, locating the required tools, parts
and documents closer to the job is helpful.
Transportation/Movement
A common occurrence found in most companies is maintenance personnel moving around to get tools
that are stored far away from the job, searching for documentation, and non availability of work orders
for machines. Unnecessary movement is a colossal waste.
Process waste
Reactive or breakdown repairs are conducted to resume operations faster. In some cases
maintenance personnel might lose out on an opportunity to perform a longer term or higher quality
repair. Proper planning and scheduling of maintenance activities prevents this. Planning and
scheduling are akin to set-up for production.
Obsolete Inventory
A typical maintenance inventory holds 35% inventory that is either obsolete or hardly ever used. An
effective lean spares strategy can eliminate such wastes.
Unnecessary Motion
Carrying out preventive maintenance that adds no value to the final output is a waste. Monthly
preventive maintenance on a pump that has been working quite well for two years for instance is a
waste. The maintenance period can instead be increased to longer intervals, quarterly, half yearly or
annually depending upon the criticality of the equipment.
Improper maintenance
Maintenance job repetition due to improperly carried out repair work is a major source of waste.
Techniques like root cause analysis should be used to identify the source of defect and solve
problems permanently, instead of adopting a trial and error method. Appropriate training and detailed
procedures ensure elimination of defects.
Simple steps to Lean Maintenance
Integration of Lean can be expensive if time and budgetary resources are not adequately planned.
Visual cues such as painted outlines or cut outs aid in achieving lean maintenance. They:
Improve tool storage by showing where tools are or should be stored.
Indicate status, inspection due dates etc.
Create a simple and uniform work request system
Documentation storage should be well organised and accessible. Missing files should be easily
identifiable in the system. In addition, all machines should be labelled uniformly using the same
standards and methods. This will help maintenance employees identify and target reports of failure.
Cascade Engineering, Michigan USA, labelled all areas of interest on its machinery effectively thereby
easing maintenance and identification. For example, when a rear hydraulic assembly is leaking, the
operator can inform maintenance of the exact location of the leakage. This eliminates guesswork and
results in shorter downtimes. Additionally, regular checks are identified on the machine in red or
yellow lettering distinguishing the necessary order. For example, weekly check step one would be
written inside a box with red lettering.
A Computerised Maintenance Management System (CMMS) or a Kanban system (with visual

triggers) contributes to a waste free environment by maintaining records that can be used to start a
work order request.
Lean maintenance is a continuous process, which can yield huge gains in productivity and profitability
in the long run.
Does your company rest soundly and undisturbed on the pillars of excellence?
Key learnings:
 Recognise the five elements of organisational excellence
 Recognise the importance of resource management
 Review the need for process and project management
When asked to rate themselves, most companies would use the term good. Given the complex
business environment in which today's companies operate, good is no longer enough. Companies
need to excel.
To excel, companies need to have a clear view of their entire system, focus on all aspects and
optimise the use and effectiveness of the available resources.
Every company uses its own framework or mix of tools and methodologies to improve productivity,
performance and efficiency. Researchers who have studied these approaches over the years suggest
that there are five key elements that companies need to take care of to excel. In fact, these five
elements can be considered the inevitables for achieving overall excellence.
The focus needs to be on managing these five elements and leveraging their individual benefits and
interdependencies simultaneously. In fact, it is the top management that needs to keep all of them
moving forward at the same time. Prioritising one or two of the five pillars and relegating the others is
a sure-fire formula for failure.
None of these are new to us:
 Resource management
 Process management
 Project management
 Change management
 Knowledge management
1. Resource management
Resources are at the heart of everything that a company does. Too few resources and a company is
sure to fail, while too many are a waste. The problem is that in most cases, companies believe that
resource management is all about people and money. No doubt, these are very important, but they
form only a small part of the total resources a company needs.
When the focus is on resource management, it should include all the resources and assets available
to a company. This includes stockholders, management, employees, money, suppliers, inventory, the
board of directors, alliance partnerships, real estate, knowledge, customers, patents, investors, good
will even brick and mortar! In fact, when all these aspects are included, effective resource
management becomes one of the most challenging, critical and complex activities for a company.
For a company to excel, each of these resources needs to be well managed. Now, how to prioritise all
such diverse activities is the prime question. To answer this, a company must develop a very
thorough, total-involvement approach to strategic planning.
The strategic plan needs to involve everyone, from the chairman of the board to the doorkeeper, from
sales personnel, to shop floor personnel, from development engineering to maintenance. This is both
- a top down and bottom up approach to strategic planning. In short, it is a total-involvement
approach.
Resource management should not be considered an afterthought. In fact, all executive decisions must
be based upon it. This requires extensive planning, co-ordination, reporting and continuous refining.
Only then can a company hope to excel at resource management.
2. Process management
Process management has been the basis of most improvement methodologies in the recent past.
Much of the work under quality initiatives is largely related to continuous processes improvement.
These include designing experiments, process capability studies, root cause analyses, document
control, quality circles, Six Sigma, ISO 9001, JIT manufacturing and supplier qualification among
many others.
In fact, there are certain criteria to be defined and agreed upon in order to manage processes
efficiently. They include:
 An input statement citing requirements between process owners and suppliers
 An output statement between process owners and customers
 A standard process that is designed to transform suppliers' input into output so that it meets
the customers' performance and quality requirements
 A measurement system within the process

 Feedback measurement systems between process and customers, and between process and
suppliers
These key factors have to be addressed to ensure an efficient process. Most organisations have the
key processes in place, but support processes are a cause for concern. Support processes are never
designed in the first place. In fact, they are created in response to a need without really understanding
the process.
Processes in any company need to be well managed both at the micro (within a natural work team)
and macro (across departments and/or functions) levels.
To excel companies need to improve and refine the processes. This is an ongoing activity. If the
refinement process makes the right impact, the total process efficiency has to improve at a rate of
about 15 percent a year. Once the process improvement team accomplishes this for the larger
problems that reflect across departments, it can be disbanded. The process refinement activities
involved in the process can then be turned over to the natural work teams.
3. Project management
It is a fact that less than 30 percent of all projects are successful. While processes define how
companies function, projects are the means by which they improve those processes. Projects are
mission-critical activities. In fact, process redesign and process reengineering are two of the most
important projects that companies undertake. Ironically, the failure rate for such projects is estimated
to touch a figure as high as 60 percent. Here are some reasons why:
 Failure to adhere to a committed schedule due to unexpected variances, poor planning or

delays
 Poor resource utilisation owing to lack of proper skills, wastage of time and misalignment of
skills and assignments
 Poor management as a result of incorrect project selection, taking up high-risk projects, poor
control over interdependencies between projects
 Loss of intellectual capital as a result of poor means for knowledge transfer, people leaving in
between and unwillingness to use the output from the project (change management)
Experts compare project management to quality management. Most employees believe that they
understand what quality is and so can manage quality. This very thinking is applied to project
management too.
However, just as a quality manager is a special type of professional with very specific skills and
training, so is a project manager. Project managers require skill, training and effective leadership
particularly related to their fields.
Today, companies take up several projects simultaneously, of which many of them are
interdependent. Consequently, with any one of them changing due to varied reasons and schedules
there is a direct impact on the rest of the projects. Companies thus need to be very prudent while
managing a wide portfolio of projects, and make the right trade-offs, be it in terms of personnel or
priorities.
We pause here to comprehend the key pillars of resource, process and project management. Next
week, we will discuss the remaining two pillars that companies need to rest on to achieve excellence.
Walking On All Five! - Part I discussed how companies used different combinations of tools and
methodologies to enhance performance and efficiencies. It also introduced five key aspects, or pillars
vital to achieve excellence.
Three of these namely, resource, process and project management were also detailed. Here, we
delve into the remaining two aspects namely change and knowledge management.
4. Change management: Constant change to meet the ever-changing market and competition
conditions is one of the toughest challenges that companies face today. However, most companies
haven't yet realised the importance of chalking out and following a comprehensive change
management system.
An effective change management system requires a company to define what needs to be changed.
125This does not refer to issues like reducing stock levels, increasing customer satisfaction or training
people. The focus should be on the very fundamentals. In simple words, change management
involves defining which of the key business drivers need to be changed, charting out how they need to
be changed and actually implementing the change.
This brings us to a unique problem that arises when it comes to change management. Everyone in
the management team is ready for change. However, few initiate it, they want to see others change.
Most managers are reluctant to move away from past habits since they would have been successful.
Management experts say that if a company has to actually change for the better, it has to start from
the top management.
To do so, companies need to develop vision statements that define how the key business drivers can
change over time. This requires an in-depth understanding of what business drivers are and how they
operate. Next, a company must define exactly how it wants to change these drivers over a defined
period of time. Once a company has determined what it wants to change, it has to decide how to
change.
During this stage, it has to look at all available improvement tools and determine which of them will
bring about the required changes to the key business drivers already defined. It can then schedule the
implementation of these tools and methodologies. This schedule is critical to a company's strategic
business plan.
The last phase in any change management process is to make the change happen. For this
companies have to build resilience across all levels.
The last among the five pillars for achieving excellence is knowledge management.
5. Knowledge management: Undoubtedly, knowledge is the key to success for any business.
However, in most companies, knowledge is not well - documented.
Knowledge is broadly classified into-: explicit and tacit. Explicit knowledge is knowledge that is stored
as semi-structured content in the form of documents, e-mail, voicemail or video media, in short it is
tangible knowledge. It is conveyed from one person to another in a systematic way.
Tacit knowledge is knowledge that is formed around intangible factors embedded in an individual's
experience. It is personal, content-specific knowledge that resides in an individual. An individual gains
tacit knowledge from experience or skills that he develops. Also known as soft knowledge, it is
embedded in an individual's ideas, insights, values and judgment and guides an individual's actions. It
is only accessible through direct corroboration and communication with the individual who possesses
the knowledge.
It follows that key knowledge rests in the minds and experiences of the people doing a job. Such
knowledge is lost from a company's knowledge base whenever an individual leaves a company.
Today however, the Internet and other information technology systems have thrown open several
sources of inputs. Nevertheless, to ensure that companies do not miss key nuggets of information
they have to research these needs.
Given the almost endless amount of information that clogs up computers, desks and minds, a
Knowledge Management System (KMS) needs to be designed around a company's key capabilities
and competencies.
Knowledge Management (KM) is a proactive, systematic process by which value is generated from
intellectual or knowledge-based assets and disseminated to the stakeholders. An effective KMS
involves careful requirements definition, proper infrastructure evaluation, design and development,
pilot, deployment and continuous improvement.
Most companies find that one of the biggest challenges in implementing a KMS is transferring
knowledge (including processes and behavioural knowledge) individuals hold into a consistent format
that can be easily shared across the company. However, management experts say that the biggest
challenge is in changing the culture from a knowledge-hoarding one to a knowledge-sharing one.
The effectiveness of any KM system is a measure of the number of people who access and
implement ideas from the knowledge networks. Such knowledge networks bring new ideas and best
practices into the workplace. This apart, even the newest member of a company can access such
networks, understand the work environment and processes. He can also make recommendations
based upon his personal experience, insight and creativity.
Now, after understanding the importance of the various pillars of excellence, companies need to know
how to manage the common threads that run through the organisation. Key among them are
employee empowerment, teamwork, leadership, communication, respect for individual views, honesty
and fairness, zeal for quality and technological support.
To prioritise and manage different activities and improvement approaches, companies need to take up
a very thorough, total-involvement approach to strategic planning.
Today, customers are concerned not just about the products they purchase. In fact, they are equally
or more concerned about associating themselves with companies that care, are quick to respond, and
will listen and react to their unique needs. To match these expectations, companies need to excel in
all aspects of their business. Herein lies the significance of the five pillars.
For maximising ROI, technology and operations managers should strive to manage core
assets effectively.
Key learning’s :
 A key function of a CIO is the management of core assets with the help of a standardised
management process.
 Integration of IT assets enables the streamlining of organisational functions to derive optimal

results.
The primary function of CIOs in most organisations is to optimise assets and integrate operations.
Integration covers enterprise software, applications, networks, tools, databases, management
processes, standards, contracts, portals and IT facilities. These functions are primarily aimed at
enhancing productivity and minimising IT costs.
For optimal economic leverage of core IT assets, manufacturing organisations should manage IT to
be handled as an asset-based business.
However, most of the organisations consider IT-asset optimisation as a time-bound project thereby
diluting the gains. Instead, organisations should implement standardised, continuous core-asset
management processes like CMM, Control Objectives for Information and Related Technology, and
the IT Infrastructure Library.
Organisations should have well established management processes to generate an optimal life-cycle
performance from core resources.
Templeton’s IT asset management chart
Templeton Group, a Noida-based computer hardware manufacturer, has chosen the following criteria
for managing its core IT assets:
 It can be purchased, built, licensed or leased.
 It comprises a life cycle of at least three years from consideration to phase-out.

 It has multiple applications.
 It has a continuous operating, maintenance, support and enhancement cost.
 It can be substituted or abandoned at the end of its life cycle.
 Its utility determines its value.
In the aforesaid process, an asset manager functions as a coordinating master brain. Pieche Plc, a
UK-based telecom equipment manufacturer, recently concluded a two-year project to minimise its
stock of 1,270 core assets by a quarter.
The organisation’s enterprise architecture group collaborated with designated asset managers to
dispose of 365 core assets. A majority of the core assets that were disposed of included hard-
technology assets like servers, LANs, storage, licences and facilities.
Assets that were less visible and more difficult for disposal included duplicate standards, tools,
software, applications and data. Such assets require focussed attention over the next three to ten
years for proper control. In the process, the organisation’s stock increased to more than 1,500 core
assets.
The cost saving imperative
Organisations that have implemented mature asset-management processes have reduced IT unit
costs by 60% below the norm for their vertical industry. On the whole, organisations manage cost
savings of 25-40%.
For example, e-tailer Ltd., a leading online retailer of premium cosmetics, had more than 20 variations
of software for Web-service payment transactions.
Following an alteration in business processes, the company had to bear expenses of more than USD
50,000 per variation. The alterations almost tripled the company's time-requirement to market its
products.
Common characteristics of asset management prevalent in organisations include:
Discrete IT asset categories and formal stocks:
Organisations design formal charts of IT assets embedded in the Target Living Architecture. This is
known as the ‘Bill of IT’ by certain manufacturers. Each year, an operating stock is generated from the
most critical core assets.
IT asset ownership and accountability:
Each IT asset, category or subcategory should have at least a single owner or accountable person.
The areas of accountability may comprise health, performance, resource utilisation, financials and
preservation of the IT asset or category.
Well defined incentives:
The parameters and metrics of the IT asset are important to personal performance and incentive
plans of the IT asset owners.
Comprehensive financial and operating parameters:
Most of the asset-measuring metrics assume each core IT asset investment results in maintenance
(M), enhancement (E), support (S), and production (P) expenses in future. These expenses include
adjustment and refurbishment of infrastructure.
The functional and technical quality of each core asset is also taken into consideration. Functional
quality is established from a user's perspective.
Technical-quality attributes like maintainability, adaptability, redundancy, reuse, usability, utilisation,

underlying skills, risk assessment and performance assurance are determined from the perspective of
the IT staff.
Efficient management process:
The aforesaid asset management activities are rationalised into a formal management process
conducted round the year. Financial parameters are annual while other metrics are included as
benchmarks once in a few years.
A strategy for the optimal management of M+E+S is devised on the lines of renovation, replacement,
consolidation, or retirement.
Committed, trained, appropriate resources and tools:
IT asset management should get utmost importance since an asset office aids each owner/steward in
the process. The organisation should also instil healthy working relationships with a fully informed
stakeholder community.
The above factors underline clearly the importance of a formal asset-management process. This will
not only ensure optimal asset management but also minimise the operational process costs.
Strong leadership focussed on internal improvement is the key strategy to success!
Key learning’s
 Companies with strong leadership and special focus on internal improvement can achieve
major turnarounds
 Businesses driven by leadership styles that involve collaboration and delegation rather than
command and control are highly successful.
“Leading a business has got harder,” says Dominic Oughton of Cambridge University’s Institute for
Manufacturing. It may sound banal but the accelerating rate of change has made corporate leadership
more challenging.
Access to excess information confuses actually and diverts rather than assisting the process.
Besides, strategies are applicable for a short time, pushing senior personnel towards frequent reviews
and change of direction.
Senior managers are judged generally by their leadership capabilities. However, a leader’s ability to
inspire commitment from the workforce and develop effective strategies remains the key strength.
Having reviewed leadership and strategy approaches for around 20 years, the Institute for
Manufacturing listed potential problems for senior managers. The review says manufacturers in the
UK are efficient at looking outside their businesses, studying markets and developing customer-
strategies. However, they are not so good at looking inside their businesses to understand their
competencies fully.
This results in developing strengths that are important to the customer but generic in nature. The
business may end up being a good ‘me too’ but not extraordinary to produce real growth. For, it is not
focusing on its unique strengths.
Moreover, anoutward –focus poses a danger of ignoring important internal weaknesses and failing to
fill those gaps efficiently.
Strong leadership with a focus on internal improvement

Advansa, the largest polyester company in Europe, achieved a major turnaround only after its
management team focussed on internal performance. Advansa had focussed traditionally on reducing
fixed and variable costs to improve profitability.
The management reviewed this strategy, and realised cost reductions were achieved at the expense
of equipment uptime Overall Equipment Effectiveness (OEE). The net result of the previous strategy
in reality was reduced profitability.
Realising they were working hard towards the wrong goals they started studying data in fine detail on
equipment efficiency. This data covering many years was useful to understand the true impact of
alternative strategies on profitability.
The team identified that instead of focusing on unit cost of production, driving up OEE will give better
results. It will increase production capacity, lower variable and fixed costs, improve quality, reduce
stocks and working capital, cut waste, and achieve better morale and health and safety performance.
The detailed analysis helped Advansa team to gain support for capital investment from the senior
board to achieve company’s objectives.
Results to date include:
 32 per cent improvement in manufacturing output
 26 per cent reduction in fixed costs
 38 per cent reduction in unit costs and
 Significant improvement in health and safety performance
Strong leadership focussed on internal improvement has also been the key to success for
shipbuilders VT Group. The company was disturbed by underperformance with frequent disputes due
to poor industrial relations.
Relocation of the company at purpose-built premises in Portsmouth naval base, as part of a BP 70

million investment served as a catalyst for re-establishing the business.
The new management team focussed on investment in high technology panel production and the
implementation of manufacturing best practices. The new team “invested in culture change”.
The company had 30 different sections and 30 different cultures, before relocation. The team realised
investing in creating the right culture was as important as investment in production processes.
They initiated new ways for communicating with all employees and with the union. They started
weekly briefings on key business issues, quarterly presentations to shop floor staff and weekly
meetings with a senior shop warden.
They tightened up on the performance of management staff and introduced a bonus scheme and
team awards to recognise achievements. All these measures were supported by a significant
investment in training across the workforce.
The outcomes are impressive: absenteeism reduced from seven per cent to three per cent, health and
safety accidents reduced by 50 per cent and no strike in three years.
Other gains include 30 per cent improvement in steelwork productivity and overhead resources
reduced by 150 per cent. VT Group also strengthened its export position.
Power of a well-communicating a strategy
A strategy rated as average, communicated well to the workforce may achieve more than a brilliant
strategy remaining with its authors.
Highly-visible and involved CEO
A challenging leader is required to turn a successful company into a more successful company..
When Alan Barlow took over as the CEO of Hamworthy Combustion, his objective was to double the
size of the company within five years.
The company adopted a portfolio strategy to handle its multi-dimensional products and a diverse
customer base. Being a global business, it also had to monitor carefully its business at various
geographical locations.
Alan Barlow took some difficult decisions. “For example, he saw no financial sense in retaining their
Australian division and went there personally to explain the closure. He says “If there is bad news I
see it as my job to be there in person”.
He appointed a human resources director to the board soon after his joining to elevate the importance
of the role. He feels strongly that people are important and this needs to be acknowledged.
What really matters-Personality or Process?
Alan Barlow says “The processes have to be right and decision making person has to be rigorous.
Integrity and trust is more important than leadership or charisma this is what people really respond to
and makes an employee go the extra mile.”
When a business is changing rapidly there is a natural inclination to apply more pressure and exercise
more control. This does not allow the business to respond quickly and effectively.
According to Allan Barlow, successful businesses are characterised by leadership styles that involve
collaboration and delegation rather than command and control. He says “Don’t be afraid to make
mistakes. A CEO who has never made a mistake is a CEO who has never made a decision”
Lastly and more importantly, people will remember their interactions with the leader. A leader needs to
demonstrate that he is adding personal value to the company and that he is in for the long haul.
The high growth rate of the apparel industry has forced companies to focus more on the rate
of stock turnover.
Key learning's:
 Minimising stock costs is one of the biggest challenges in the apparel industry.
 Stock turnover and dilution rate hold the key to the company's stock management efficiency.
In the late 1990s, managers of clothing boutiques adopted the practice of replenishing stock in their
stores every few weeks. This was a relatively high turnover compared to the industry standard of
three to four times per annum. The faster turnover made apparel dealers stress more on metrics that
enable them to deliver the best business performance.
Textile showrooms having major deals with manufacturers could incorporate customer feedback and
deliver new products within a fortnight, thanks to advanced logistics.
Specialty stores, particularly the smaller ones, have become flexible and adaptive to changes in
customer tastes and preferences. However, department stores have often been flat-footed in adapting
to changing needs.
Major outlets had to ensure quick replenishment and changeover of the goods on their racks for the
sake of survival. In the process, the finance heads of the entire industry shifted their focus to stock
turnover.
The primary metric became the fraction of a year that an average item remains in stock. Equivalently,
it was the ratio of a company's annual sales to its stock.
In the second case, a turnover rate of zero indicates the company's inability to sell its entire stock in a
year. This, in turn, indicates an inefficient sales performance. If the turnover falls below a particular
point, it creates a negative impact on the company's working capital.
This forces the company to lend money to cover the excess stock. Superior Uniform Group, a
company supplying uniforms to hospitals, grocery stores and other businesses, realised this the hard
way.
Superior Uniform's stock turnover rate hit an all-time low in the beginning of this decade, due to a
spurt in competition. This led to excessive stock handling and maintenance costs. The result was
huge borrowings to maintain dead assets, bringing down the company's profits.
The metric takes into consideration the overall health of a company. Stock turnover is important for an
organisation as it translates to how much cash the company has in the account books.
On an average, the turnover ratio for Superior Uniform is approximately 180 days or two times a year.
In other words, the company requires six months to sell its entire stock.
The comparatively low turnover is mainly linked to employee turnover rate at client companies(which
determines the need for new uniforms). Another factor is that the company maintains excess stock.
This is necessary to meet customer demands while uniforms are being shipped to the company from
far-flung offshore sources. Almost three-quarters of the requirements for Superior Uniform are brought
from Central America and 15% from Asia.
Impact on financial resources
If the acquired stock remains in the warehouse for long, it creates a huge dent on the company's
financial resources. For, the resources could be utilised for better returns such as earning interest.
Moreover, a rise in warehouse space results in a significant escalation of operating expenses. On the
other hand, a high stock -turnover ratio indicates the desired goods may not be available on the shelf.
This drives away customers to other buying options.
The compulsion for quick turnover is much higher for apparel retailers. In fact, the pressure for quick
stock turnover has increased by three times over the last decade. However, the pressure creates a
major impact on the entire supply chain, including distributors, transporters, storage-facility operators,
suppliers and retailers.
Of late, the pace of moving goods through the entire apparel supply chain has reduced from 360 days
to 90 days or less. This has led to an intensive pressure build-up on new product design, development
and delivery.
Another key metric in the apparel industry is dilution to gross margin arising out of price reductions
and returns. The dilution metric provides an insight into how effectively an organisation sells items at
their full prices.
It also determines whether the company is producing the right goods for its consumers. Dilution,
which is calculated as a percentage of gross sales, varies from 5-20% in the apparel industry. Dilution
of 10% or less is considered to be ideal for the apparel industry.
Organisations rarely report dilution numbers in financial statements. Therefore the marketing manager
obtains them from apparel manufacturers on a monthly basis or on a quarterly basis from companies.
The primary objective of collecting such data is to manage dilution to a minimal level.
After all, the sales turnover of an organisation is inversely proportional to the level of dilution. Both
manufacturers and distribution channels in the apparel industry should focus on maximising stock
turnover and maintaining an optimal dilution rate. This is the way to enhance the company's stock
management efficiency.
Stories are a powerful medium of capturing and disseminating knowledge!

Key learning's:
 Recognise the importance and need to capture and disseminate 'tacit' knowledge.
 Recognise the power of story-telling at the place of work.
 Review key points to be noted when entering international markets.
No of words: 905
Estimated Reading Time: 9 minutes
As children, most of us have grown up listening to bedtime stories. Parents come up with interesting
stories every night. These stories came with great morals and learning. Most parents and children
await this bedtime ritual eagerly, which always brought a new story and a new surprise for both.
However, as children grow and reach the age of about 10 years, the ritual declines and stops
eventually. Children then prefer to read their own books. Does this sharp shift in their interest imply
that stories are just for children? No, definitely not.
Stories have immense power. They are meant not just for children but for managers too. For, they are
a great medium for generating and disseminating knowledge. Hard to believe? Here's a story to
support this fact.
From researcher to story-teller !
Dr. Alex Laufer began his career as en engineer and then pursued his master's degree in operations
research. After completing Ph.D., he went back to industry and developed comprehensive
computerised tools for controlling project time and cost. His focus was on first-hand data-- primarily
direct observations of behaviour, case studies and personal interviews.
As a researcher, he interacted with several practitioners of project management and realised that
competent practitioners knew more than they could tell.
He then wondered if there was some method to uncover, formulate, and articulate their "tacit"
knowledge. Dr. Alex thus proposed to do a theoretical interpretation of actual project practices.
In the early 1990s, Dr. Alex was ready to test his research work and wanted to find a real-life
'laboratory'. He believed consultation was a feasible way to test research results and to collect rich
and unfiltered first-hand feedback.
For this, he needed an appropriate progressive organisation that had to cope with high uncertainty
and accelerated speed in its project delivery. After consultation with co-researchers, he decided that
Procter & Gamble (P&G) could fit these requirements.
To gain firm ground!
Soon, Dr. Alex was working to use his research products in order to improve Project Management
(PM) at P&G. For this, he had to market himself throughout P&G, generate his own customers and
satisfy their immediate business needs.
He initiated a wide range of activities: training, review of procedures, development of tools, and many
'learning-from-experience' discussions with small groups. His main effort, however, was focussed on
working directly with project teams of ongoing projects.
Though the feedback was excellent, Dr. Alex was not satisfied. First, the pace of implementation did
not seem fast enough. Second, the PM approach he introduced necessitated adding some principles
and tools, and letting go some old ones.
Letting go!
Dr. Alex found that discarding old principles was not an easy task for the project teams. He tried hard
to convince people that they had to change their glasses to change the way they viewed the world.
He then decided his conventional mode of consulting was inadequate for the quick, wide, and lasting
assimilation essential for valid research implementation.
Realising people's minds are changed more through observation than argument, Dr. Alex hit upon the
idea of story-telling. He thought narration of real-life stories by credible and successful managers
would serve as an efficient substitute for observation by colleagues.
The idea that successful and busy project managers should spare time to tell or write stories about
their experiences was laughed at initially. Merely including the word 'story,' in the title of a booklet Dr.
Alex and his colleagues produced as a pilot, was considered improper. This was because most
people believed stories were meant for children and not for managers.
Next, Dr.Alex had to overcome disbelief among most managers in their own writing ability. He
convinced colleagues that the effort was worthwhile and project managers at P&G agreed to a test
project.
The turnaround!
Once the story-telling/writing initiative started, there was no looking back. Almost everyone who saw
the test booklet became enthusiastic and wanted to contribute his/her own success stories.
The results of Dr. Alex's two-year effort at P&G exceeded his wildest expectations. The final product
with 70 stories written by 28 project managers is considered a treasure trove of knowledge by P&G.
A workshop where project managers discussed their stories evoked high praise. The Chief of P&G
noted a profound change in language, focus of attention, and change in thinking had taken place in a
short time.
Remember, stories told in lunchrooms and coffee lounges in offices are often more effective at
shaping culture than official pronouncements of management. Sharing a story with a group of peers
will prompt others to respond with their own unique experiences.
This will generate a productive dialogue. There could be no better practical experience than hearing
problems and their solutions from your peers and mentors. That is the power of stories and stories are
definitely not just for children!
What looks like a perfect product portfolio today may be obsolete tomorrow! ( Part-1)
 Recognise the impact of excess diversification
 Review the problems of complexity
 Recognise that clutter comes disguised
The advent of Internet, technological advancements and opening up of global markets have
revolutionised the business environment. Fierce competition and hyper-accelerating innovation cycles
have resulted in customers having more power than ever before.
Today, customers can compare options, prices, product features and the like between several brands
before making any purchase decisions. All this happens at the mere click of a mouse!
Undoubtedly, customer is the 'king' and technology an added boon. Now, how bright are things at the
other end of the spectrum? How do companies match the pace and grow amidst such challenges?
Caught in a complex web!
Companies have worked hard to match 'customer power' by expanding dramatically their menus of
products and services. This is often done by means of expanding product portfolio and putting more
goods or services into the market.
Each innovation may represent a source of customer value and profits at the time of introduction.
However, competition catches up and the innovation turns into a commodity that is modified further.
Soon the elaborate menu of goods and services may go 'out of step' in the market. Customers often
do not find much benefit and are unwilling to pay for the excess.
The creeping malaise!
We have seen the 'bigger portfolio' problem happening with individuals, especially the highly
ambitious ones. Such individuals often add task upon task to their responsibilities. Eventually, they
find that they are left with too little time to do any of the tasks well.
Companies too are susceptible to the same creeping malaise called complexity. Management experts
define complexity as clutter, which by definition does not deliver value.
It can be in the form of too many price points, too many line extensions, or other goods and services
that do not add value to customers.
Complexity is a systemic effect that accumulates over time. So while a company may have a perfect
portfolio today, with customers' tastes changing constantly, products may become outdated tomorrow.
Diversifying problems!
Once into the rat race of diversifying products and services, many companies end up entangled in a
web of complexities. Eventually, they end up paying a price for diversifying their product or service
portfolios.
Does this mean that there should be no diversification? No, diversification is required, but to a certain
limit. Else, they will end up having an excess of products, services or offerings which customers do
not value much. Companies need to arrive at some mechanism for balancing the product/service
portfolio.
Otherwise complexity or clutter creeps into processes, taxes internal systems and drives up costs.
Even worse, it can strangle growth in the name of pursuing customer value.
Tackling complexity!
Complexity needs to be recognised and managed, which begins with quantifying its impact on the
business and cost. Complexity, or clutter, eats away at profits by diverting scarce resources and by
masking true profitability.
Thinks of toys in an attic. As children grow, more toys accumulate over time taking up precious space.
Old toys are not discarded due to sentimental reasons.
Similarly, complexity in a business increases with time. It interferes with operational and production
efficiencies, work schedules, time and with distribution. It can impede profitable growth.
Excess baggage!
Experts say that while most companies are enthusiastic about launching new products and
extensions, few champion eliminating old ones.
Say a company has a portfolio of 3,000 products. Which is better: distributing valuable resources
across all those products or concentrating on core brands?
The web of complexity is not always obvious and hence it becomes difficult for companies to identify
it. In a product-based company complexity can be seen like a big warehouse of parts or finished
goods. This is not so in a services environment.
While complexity costs may not show up in product/ service costs, it may appear in sales and
marketing. This is like carrying extra luggage while on vacation, or a heavy backpack on a hike.
Remember, clutter adds no value. Take the backpack analogy. Each item put into the backpack
makes sense by itself, but on the whole, the excess weight (clutter) slows the journey.
Focus on profitable growth!
A leading financial services company had more than 50 different configurations for one line of service.
Quality was going down gradually, but as complexity was not visible, the company just assigned more
people to the lines. The resulting additional cost was shifted to overheads, which again masked the
true cause of the problem.
The company was focusing on just growth, not profitable growth. This apart, there was inertia against
change. Management was hesitant to tinker with the company's legacy and hence did not want to
terminate old services. Experts say that a company has to do some serious thinking and ask some
tough questions when legacy does nothing much to add value.
A health care company found that one of its products had great proliferation in the market. So it made
an attempt to add further value for customers and offered to customise contracts for these customers.
At the end of a quarter, the company found that the customisations had begun to erode its profit
margins.
Analysis to determine if the proliferation delivered value showed red. The company was in a dilemma
about how to refuse any more customisations and about the value of saying 'no' to them.
Experts are of the opinion that complexity is bad not only for companies, but also for customers. This,
along with the strategic impact of complexity will be discussed in the forthcoming week.
Balancing product portfolio...an art and science! ( Part -2)
Key learning's:
 Recognise the strategic impact of complexity
 Recognise how complexity can be good and bad
 Recognise the need to rationalise product/service choices offered to customers
Steer Clear Of Clutter - Part I discussed complexity in business and how it arises. Complexity or
clutter diverts resources and impedes profitable growth. We know that clutter is often bad for
business. Here, we look at the other aspects and the strategic impact of complexity.
The strategic impact of clutter
Often, a small proportion of about 5% to 15% of a company's portfolio drives most value. However,
many companies fail to recognise this and get entangled in the complexity maze.
Failure to understand this driver highlights an inability to nurture and build upon that small percentage
of products driving value. That is a big strategic risk and can leave a company vulnerable to
disruption.
An industrial products company facing stiff competition from several SMEs took up several product
line extensions. Within a few years, it ended up having a very complex product portfolio, but no
profitable growth. The company conducted an analysis to grasp the true profitability of its products.
This revealed that complexity-related costs were consuming a significant seven percent of total
revenues. The company then realised its folly and began thinking of how to recapture the value.
Complexity has three distinct impacts that create competitive disadvantage for companies.
 Several costs are incurred, which are not rewarded in the marketplace.
 It distracts a company from zeroing in on key growth areas that generate maximum profits.
 It directly impacts processes, adding to costs and consuming resources that should be
directed towards growth opportunities.
The good and the bad
Now, a question that arises here: Is complexity always bad for companies? In other words, can
complexity be good? Experts say that complexity in business can be compared to cholesterol in
human beings. Cholesterol has both bad and good densities and both have to be maintained.
Next, are there metrics for good densities and bad densities of complexity? And how to differentiate
between the two?
First of all, complexity can be considered good only when it creates a profit for the company. While
bad complexity leads to more costs, good complexity promotes profit. The bottom line is that a
company has to understand if complexity is creating economic value or not.
How do companies identify which complexities add value and which do not? For this they should
engage in a process-based review of product/ service profitability with the help of tools like cost- profit
analysis and complexity value stream maps. The latter is nothing but a comprehensive map of
products and processes.
Instead of looking at a product or service in isolation, companies should consider it as part of the
complete production costs. This apart, it is essential to analyse the nature of the customers who use
the products/services and their behaviour over time.
Balancing complexity...an art and science!
Balancing complexity is not a one-time job. It is an ongoing battle. While some companies have the
culture required to conquer complexity and to achieve balance, most do not.
This again brings us to the cholesterol analogy. Once you begin to watch cholesterol levels, you can
never stop. You have to watch both the good and bad cholesterol densities. Even if both fall within an
acceptable range, you need to keep watch over time.
In the same way, businesses need to reassess their products and services on an ongoing basis while
responding to ever-changing markets. This is a crucial part of the balancing game.
Examining the culture, incentives and infrastructure of a company are components of a long-term
balancing process. Often, companies that are rewarded for proliferating products tend to churn out
complexity that does not drive value creation eventually.
The balancing effort is not just a one-time event, but involves an understanding of what keeps
creating complexity in organisations.
Balancing complexity involves a mix of science and art. The science involves learning to improve on
economics and profitability and the art lies in improving the culture so that everyone focuses on the
same metrics.
No room for confusions
In the book titled 'Conquering Complexity in Your Business', authors Michael George and Stephen A.
Wilson suggest that in many cases, both companies and customers could benefit from fewer choices.
Remember, clutter creates more barriers between a company and its customers. From the customer's
viewpoint, a cluttered product/ service portfolio implies that a company does not understand its
customers' needs clearly. Choosing from such a huge array of products often becomes frustrating for
a customer.
A telecom company had 50 different plans to ensure a wide customer base. The company did enjoy
some success in a period of profitable growth. With time, however, it was found that this proliferation
of choices increased confusion.
Many customers complained the new plan they chose was wrong, even though it was much better
than the ones they just left. The company soon realised it had to rationalise its portfolio for customer
satisfaction, for saving costs and for quality.
Automobile major Nissan once offered 87 varieties of steering wheel, but few customers wanted to
wade through all those choices. So it soon discontinued several variants.
Experts say that companies need to understand the issues of complexity and develop a process to
address it. Success in business is not merely about meeting all customer requirements and beating
competition. It is the art and science of balancing customer satisfaction subtly with the number of
products and services in the marketplace.
After all, to sustain in the long run, the focus has to be on not just growth, but profitable growth.
Clearing clutter is the first step in this direction.

Automobile waste solutions key for automakers' sustainability

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Automobile waste - problem automakers cannot ignore!

 Identifying the major components of automobile waste

 Delineating the problems waste substances cause

 Get insights into issues such as waste avoidance

 Strategising to re-use and recycle options for handling automobile waste

Operational Excellence – Part 1

Organisations desirous of achieving organisational success need to clearly distinguish between

Able leadership is a prerequisite to ensure efficiency in manufacturing operations like procuring,

Operational excellence – Part 2

Dramatic changes in the nature of manufacturing!

 Transformation of factory floor and focusing on demand-driven business, resulted in reduced

Transformation of factory floor

Opportunities And Pitfalls Of Manufacturing In China And India

 A manufacturer is probably best advised to consider a wholly foreign-owned enterprise or

Specific challenges involved in establishing manufacture in China

Being politely hard-headed is the best guide

The Complete Safety System…The Sequel

Length of the article = 916 words.

Moving Upstream- Part I

# Focus on core competency

# Empower business streams

Enter David Simon

# Identify and exploit profit generating areas

BP’s organisational model changed the entire culture

Working strategy of business units

One step further

Benefits of organisational model

 Reducing layers of management to facilitate direct communication with top management.

Establish a lean culture first!

 Identify steps to build a Lean culture

Length of the article = 836 words.

Missing links in establishing a lean culture:

1. Manufacturers have only limited interest in lean

Pointers to establish a lean culture:

Strong leadership focussed on internal improvement is the key strategy to

Strong leadership with a focus on internal improvement

 32 per cent improvement in manufacturing output

 26 per cent reduction in fixed costs

 38 per cent reduction in unit costs and

 Significant improvement in health and safety performance

Relocation of the company at purpose-built premises in Portsmouth naval base, as part of a BP 70

Power of a well-communicating a strategy

Highly-visible and involved CEO

What really matters-Personality or Process?

Managing Core Assets Effectively

 Integration of IT assets enables the streamlining of organisational functions to derive optimal

Templeton’s IT asset management chart

 It can be purchased, built, licensed or leased.

 It comprises a life cycle of at least three years from consideration to phase-out.

 It has multiple applications.

 It has a continuous operating, maintenance, support and enhancement cost.

 It can be substituted or abandoned at the end of its life cycle.

 Its utility determines its value.

The cost saving imperative

Common characteristics of asset management prevalent in organisations include:

Discrete IT asset categories and formal stocks:

IT asset ownership and accountability:

Well defined incentives:

Comprehensive financial and operating parameters:

Technical-quality attributes like maintainability, adaptability, redundancy, reuse, usability, utilisation,

Efficient management process:

Committed, trained, appropriate resources and tools:

Going lean maintenance wise