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    TQM Strategy Case - Indian Metal Corporation

    Uploaded by

    nandini patidar

    Copyright:

    © All Rights Reserved
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    of 8
    Case date 1996 Indian Metals Corporation Sara Mountney, Kenneth Work and Stuart Chambers Introduction ‘The problem isn’t the plant itself, it's the way it's being run. After four weeks in this remote part of north India, John Daley had seen at first hand the immense problems at the Lead and Zinc Processing Plant and was pleased. to be heading home. He stared at the views from the taxi for the final time. The only signs of industrialisation in this isolated, mainly agricultural area were the makeshift sheds at the side of the road which had been put up by local villagers to service the trucks going to and from the plant, John was part of a UN development team which had visited the site at the request of a team of European technical experts who were already on-site. The large processing plant and adjacent mine were owned by the Indian Metals Corporation (IMC). The complex had become operational in 1990, The Refinery ‘The plant used a method known as the Dual Refinery Process (DRP) to extract lead and zinc from the mined ore. This method had been a new venture for IMC and John’s UN agency had been involved in the development of the plan‘ ‘The mine was a great success. The refinery, however, was experiencing immense problems and it was hoped that the European team and the UN team could help to resolve them. Despite processing half the company’s zinc output, the plant had only ever operated at a maximum of half its capacity level. The layout of the plant is shown in Figure 10.1 A mixture of the ore (from the mine) and other inputs are brought into the plant and processed into pre-product. Pre-product is a blend of inputs of a certain size and. composition designed to enable the next stage, the furnace, to operate at maximum, performance. The pre-product is broken down inside the furnace and both molten ead and molten zinc are tapped off and sent to the separate refineries for further processing. Lead processing is run in batches, but only when enough stock has built ‘up to enable the refinery to run economically. Any contaminated or scrap lead can bbe recycled back into the furnace. The zinc refinery has to run continuously to pre- vent damage to the equipment. Large levels of buffer stock are needed to keep the refinery running because the furnace and pre-product units are unreliable and liable to shut down, Insian Metals Corporation 91 Figure 10.1. The plant layout aiver Water copper reserva refinery t Gold Traut Bincretiney | miu hoppers Furnace eerie” EE Pre-production Lead refinery Coal stock plant yard Sulphuric acid plant ‘Other than zinc and lead, useful by-products produced are sulphuric acid, gold, cadmium and arsenic, all of which are processed and sold. A non-toxic black sand is, also produced which is sold as landfill. John’s visit to the plant John’s taxi arrived back at The Colony, seven kilometres away, wh ers lived. A sketch of The Colony is shown in Figure 10.2. With the surrounding area being so isolated, the company had built it for staff at all, levels, The houses, for staff and their families, ranged from faizly luxurious for senior ‘management to communal barracks for contract workers, most of whom sent money home to their families. Basic living expenses and transport costs to and from work were paid for by the company. In all, the residents seemed satisfied with the ameni- ties. John, however, did not like the surrounding barbed wire fence nor the look of the local militia who patrolled it, Back in the hotel, he began to think about the main aspects of his visit to be included in a presentation to his superiors on his return, fe the plant work- Working conditions He remembered how shocked the team had been at conditions inside the plant on their first visit, This visit had been the cause of some controversy - the team of European experts had been unhappy at the decision to allow the UN team inside as, they thought it too dangerous. John and his team wore hard hats and masks, but, had never received any safety briefing, ‘The first area they visited was the zinc refinery. The most obvious sight was the piles of lead and zinc dust everywhere. Zinc buffer stocks were also stored near equipment, and often across walkways and emergency exits. The team watched as a 92 Part2+ Operations strategy Figure 10.2 The Colony Junior management “idle housing statt management housing owsing \, shop __! school Senior ‘management housing FF panagers 7 db Contractors" barracks (communal) Top ‘management housing <— Refinery 7km RoaD man stood on a SOmm girder over a conveyor belt from which hot zinc blocks (at around 250°C) were emerging. As each block appeared, he aligned it with the belt ‘This was repeated every 10 seconds. The man was not wearing any protective cloth- ing, Their guide told them that, as a contractor, he was not entitled to any. The team watched, impressed by the contractor's balance. If he had fallen down onto a block he would have burned to death before anyone could help him. The entire area was hazardous. As John had leaned back and put his hand out to support him- self on what he thought was a horizontal sheet of aluminium, the guide swiftly stopped him. The aluminium sheet was in fact molten zinc, The staff ‘The next area he visited was the pre-product plant, where the ore and inputs were crushed and processed for the furnace. Here, John talked to Mr Singh, the shift manager: ‘Ve worked here since the plant opened five years ago. As.a shift manager, | work seven days a week, from 5,30 a.m, to 8 p.m. and I'm on call all night, The hours are excessive compared to other places, | must say. The pay here is low, but we do have some perks if ‘we don’t make waves and are liked by our managers. Perks include your own tea boy. “Although I'm the shift manager, I'm not really too sure where my responsibilities lie, or sometimes even what | can and can’t do. If there's a problem, | pass it on to my man- ager. That's how it is supposed to go up the chain of command. Eventually, it comes down again. The management is very strict here and | prefer not to make a decision unless | really have to, because | could be punished. ‘Ihad a situation only a few weeks ago. | was called in at night because that waste recycling machine over there wasn’t working properly ~ it was making odd clanking noises. I didn’t really know what to do about it I wasn't going to close the plant down, Insian Metals Corporation (93 94 that would be unthinkable, so | phoned my manager at home in The Colony. That took a bit of time because there's only one phone line. Anyway, he really didn’t know what to do either so | left it with him. Nothing was done until about three hours later, when the General Manager phoned me. In the meantime, the clanking noises had got louder and more frequent, but there was nothing | could do, As I spoke to the General Manager, the machine literally fell to pieces in front of my eyes! Imagine having to tell that to hhimt In the end we managed to repair the machine by stripping out parts from an older fone. We managed to get it going again in three days. In order not to stop the plant ‘operating, the waste that would normally be crushed by the machine and fed back into the process was pumped into a wood at the back of the plant. “Live with my family on The Colony, where all the company workers live, about seven, kilometres away. They pay for our house, our bills and transport. Our house is quite small, abit crowded really, but we won't get a bigger one unless 'm promoted. I can only go up fone more step because | have a higher education certificate and not a degree.” ‘The General Manager, Mr Paul, was quite unequivocal about his staff ‘My staff, unfortunately, are lazy, half-witted and useless! They should be whipped into doing some work! Unfortunately, | am stuck with them, as they cannot be dismissed. | hhave to make all the decisions in this company because | cannot trust anybody! You ask any worker here to think of the answer to a problem, even a trivial, simple one, and they cannot do itt They are all idiots! The organisational structure was extremely hierarchical. The team identified up to 16 levels of management in some areas. A total of 2800 people worked in the plant. A comparable plant in Europe or the US would typically employ 800. Of the 2800, 800 were staff, identifiable by the company uniform, and the remainder were contractors, gangs of people who were hired casually. ‘The staff carried out the technical and administrative roles within the organisation, such as running and monitoring equipment, maintenance and repairs. Many mem- bers of staff were also employed as tea-makers, chair-setters and general helpers for management. These earned privileges could also be removed as punishment. Half of the staff had university degrees and the remainder had higher education certificates. Contractors ‘The contractors were paid for non-technical manual labour, such as digging trenches, loading and unloading raw materials and cleaning. This was gruelling and dangerous work ~ two contractors had been killed since the plant opened. Half the contractors were female because they cost less, even though employment of women in lead mines and processing plants is illegal. Hans Schmidt, a member of the European team, commented: “We'd heard that women were working in the plant but when we arrived we couldn't see any of them. It turned out that they'd been hidden from us as we toured the plant! ‘A manager showed me an official letter he'd received from the General Manager. It told hhim to say that no women were employed in the plant. The manager told us that the General Manager hadn't said anything about showing us the letter!" Part2 Operation suategy ‘The staff were reluctant to criticise the plant at first, but they became more honest as the teams stayed. The head of the pre-product plant, Mr Chandra, told the team how the contractors had died: ‘One woman was digging a trench and it collapsed in on her. The other, a man, was cleaning out a machine. It crushes the waste from the furnace into a fine powder, but debris does build up around the inside and this has to be knocked out with a stick. Normally this is done from outside the machine but the man’s stick wasn't long enough s0 he climbed inside, When he hit the roof with the stick, all the debris fell down and crushed him. Of course, the company paid a reasonable pension to both of their fam- ilies, but it wasn’t really that much money.” Chemical poisoning There was an exhibition on health and safety in one of the office blocks, with an example of a protective suit to be worn in dangerous and high temperature areas, Unfortunately, the staff did not know about the exhibition and the contractors were not allowed access to the building. The protective suit was also the only one in. the whole of the plant, The major health and safety issue within the plant was lead poisoning. Regulations ‘were in place to protect employees, such as wearing respirators, but they were largely ignored. Most of the staff did not wear their respirators and the contractors were not issued with them, There were no safety posters within the plant itself, although some were pinned up in the office blocks. The posters were very dirty and neglected. ‘The UN team were concerned about the exposure of the employees to lead and ‘were convinced that many were showing symptoms of lead poisoning, including dizziness and lethargy. Yet blood tests showed the levels to be acceptable. Paul Buchanan, a member of the UN team, decided to investigate "The average reading from the plant's laboratories always showed less than 30 parts per million (PPM), but many of the staff tested had symptoms that you would relate to more ‘chan 55 PPM, We queried the levels with the laboratory officials, but their explanation ‘was that lead was removed from the body far more quickly than in Europe because of ‘the high levels of pulses in the Indian diet! This explanation was highly suspicious so we decided to carry out our own tests in the UK to check the plant's results. We took two blood samples each from six staff members and analysed them at the plant and at our testing centre in London. The plant tests revealed 30-35 PPM, an acceptable level, but the London results showed 55-65 PPM - twice the Indian level. When we showed this to 1e IMC officials, we were bluntly told that there must be problems with the testing facilities at London.” Another major health and safety concern was the transportation of sulphuric acid to the customer. The customer's tankers used were old and rusty and liable to spill. In fact, many spillages had occurred inside and outside the plant. The driver of the tanker was often responsible for loading the acid and had not been issued with any protective clothing (except gloves) nor had he received training, The plant manage- ment were reluctant to do anything about this, seeing it as the customer's problem. Indian Metals Corporation (95 96 Despite these obvious health and safety breaches, the UN team discovered that the plant regularly passed all its inspections. These were carried out by a regional inspector. Planning Annual production targets for the plant were usually set in October for the follow- ing year and were reviewed every quarter. They were decided at a meeting at HQ which was attended by the general managers of the larger business units and the government, the plant’s main customer. Junior management were not consulted, and the targets were generally fictitious ~ there was usually no possibility of them. being achieved. Demand was theoretically steady, but in practice the plant pro- duced as much zinc as it could. As the financial year progressed and successive monthly targets were missed, the production office reworked the production esti- mates. Mr Chandra commented: “The production targets are seen as a joke which is not at all funny. We are all aware that they cannot be met but we have a conspiracy of silence. If you fail your target, which we always do, itis readjusted for the next month. There are no reprisals as long as, the plant keeps running ‘There was no long-term planning within the company. The staff did not carry out short-term planning because their roles mainly involved minute-to-minute troubleshooting, Maintenance ‘The policy at the plant was always to continue operations until a breakdown. At this point, a combined repair and preventative maintenance team would carry out emergency repairs and maintenance work, where time allowed, simultaneously. The consequences were that the maintenance was only partially effective, there were frequent machine breakdowns and plant utilisation was as low as 50 per cent. Equipment which was expected to last 10 years normally lasted just three. ‘A conventional approach for a plant of this type would be to have separate repair and maintenance teams. The repair team would carry out running repairs and fix plant breakdown, and the preventative maintenance team would work during scheduled plant downtimes, preparing equipment and spare parts while the plant was in operation. A plant using this strategy could expect to operate at 75 per cent, to 80 per cent utilisation, The mission of the preventative maintenance team would be to ensure that the repair team never had any work to do, ‘The plant was not shut down, even when serious problems developed, on the orders of the General Manager. The heads of the pre-product, furnace and refinery units saw a plant breakdown elsewhere as an opportunity to carry out repairs on their own equipment. When a breakdown did occur, a witchhunt was carried out to find out who was to blame. Mr Chandra explained the consequences to the team: “The General Manager will record who is to blame every time the plant stops. Then, if it's your fault, you will be verbally berated and some of your privileges will be removed, or you will be demoted, or your promotion will be blocked. | have to say that we are fright- ened to stop the plant, even in the most extreme circumstances. The Furnace Manager stopped his area once because somebody’ life was in danger. He was severely disciplined.” Part2 Operation suategy Another problem had occurred in the furnace. It was noticed that the roof above the furnace was unsound but the General Manager had refused to stop the plant, ‘Three weeks later, the roof collapsed into the furnace, releasing carbon monoxide gas. Fortunately the area was clear at the time and nobody was killed or injured, Modifications were carried out to the equipment and process in the pre-product ‘unit to increase output. This was only partially successful because the pre-product produced was of such poor quality that the furnace took longer to process it into lead and zine, leading to poor energy efficiency. The modifications to the pre- product plant also resulted in the release of sulphur dioxide into the atmosphere ‘This could be noticed by a foul sulphurous taste in the mouth up to half a mile away. With the wind in the right direction, the gas blew over local villages. Due to the inefficiency of the plant, traces of lead had been found in water samples from. an outlet pipe which was fed into a nearbly river. This river was the source of the local water supply. The plant drew its power supply from the public electricity supplier. Originally, the plant was supposed to have its own independent power station but this was never built. The electricity grid was unreliable and often the plant electricity supply failed or was reduced to a level where efficient operation was impossible. There were two back-up generators in the plant but neither of them worked. ‘The original machinery installed in the plant was of a high specification and om suppliers known to be world leaders. The equipment was controlled by basic electrical switching and was robust enough to deal with the fluctuating power supply. However, the quality of the equipment used in the plant had been affected by a process known as ‘Indianisation’. The Indian government levies a 105 per cent tax on all imported industrial equipment. In order to reduce spares bills and to obtain them quickly, some equipment and spares were replaced by cheaper Indian. goods. Unfortunately, these companies had not reached the same quality standards of the original suppliers and there were comfort stocks (long lead-time parts kept as, duplicates in case of breakdown) in the warehouse which may not have worked. when fitted to the equipment. Quality Product quality was fairly well monitored, The zinc and lead produced were regu- larly checked for conformance to specification, and feedback occurred to ensure that the equipment was adjusted if the products started to fail. However, if a product was produced out of specification it was still sent out and not reprocessed. There were no reprisals for producing poor quality product as long as the plant was not stopped. In the pre-product unit, John noticed several gangs of contractors clearing up a huge pile of ore and coal around a conveyor belt. A week carlier, a ten-tonne hopper containing this pile had fallen off the steel girder which supported it and crashed, down through a conveyor belt. Luckily, nobody was nearby at the time. It seemed ‘hat these ‘near misses’ happened regularly yet nothing was done to prevent them. The kidnap Outside the plant, a local village had decided that enough was enough. They told. John how they had kidnapped a manager and held him hostage overnight. A man rom the village commet Insian Metals Corporation (97 98 ‘Since that plant opened a few years ago it’s done nothing but spill out dangerous chemicals! We've had clouds of chemicals over the village. You couldn't see anything but you could taste it. I've also heard people say that there is lead in the water. | really worry about my health and my family’s. We're all being slowly poisoned. We complain but they never listen, so we decided to do something to make them notice, As it was, it was useless. The manager said he'd be punished if he said anything.” As he packed, John pondered over the problems at the plant, The staff them- selves were highly skilled and very good at their jobs individually. They certainly did not need the European team to tell them how to run the plant. Yet they all said that they were unable to do their jobs properly. The problems at the plant were far more complex than was first thought. There was much more to be done than just, replacing some machinery or installing a computer. John wondered, realistically, if the plant could ever be changed. Questions 1 Evaluate the ethical issues concerned with the operations management decisions of the IMC plant. 2. Comment on the maintenance strategy at the plant. Are there any alternative methods that would be suitable? 3 ‘John wondered, realistically if the plant could ever be changed.’ If you were to

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