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Executive SummaryBajaj – introductionProblems faced by BajajA Strategic plan for success - The Project 110%Overview of Lean ManufacturingBajaj - Moving towards Lean ManufacturingTools and techniques employedMetrics used to measure resultResults and BenefitsChallengesLimitationsSome other successful implementation of leanConclusionReferences

Executive Summary

Bajaj Auto Ltd. – About the company

Bajaj Auto is ranked as the world's fourth largest two- and three- wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia.  It is based in Pune, Maharashtra, with plants in Chakan(Pune), Waluj (near Aurangabad), Pantnagar in Uttaranchal and one in Indonesia. The combined manufacturing capacity is about 4 Million vehicles. The Product range covers motorcycles, un-geared scooters and 3-wheelers.

2 Wheeler Models

Commercial Vehicles

Problems faced by Bajaj

Because of the regulated market in the 80’s, the demand outstripped supply by a large margin. Thus the Manufacturing model in 80s & 90s was largely characterized by few innovation and high prices which is shown by the left part of the figure below -

The key objectives of the manufacturing model of 80’s & 90’s were - Economies of Scale and High utilization of Investment. Some of the characteristics of this model -

Batch Flows with high Set-Up time on high cost machines / equipment. Model specific dedicated assembly lines. Narrow, specialized labour skills. Quality through lot inspection, high rejection rates. High raw material inventory in stores and high WIP on shop-floors . Big stores and big material handling containers. Supplier base with low-end processes, most work done in-house.

This model leads to - High fixed cost, high cost of change and lower flexibility. Large inventory with hidden quality issues. In-efficiencies hidden under huge demand and less competition. IT systems limited to post mortem transaction and reporting.

But with changing economic scenario through 1991 liberalization led to - Strong competition. Higher customer aspirations – More models and upgrades.

This resulted into declining market share.

A Strategic plan for success - The Project 110%

In late 90s, Bajaj Auto did ‘The Project 110%’ that involved the re-organization and a fundamental re-design of the core business processes.

The re-design of the processes, manufacturing approach was changed towards Lean Manufacturing (in lines of Toyota Production System). TPM (Total Productivity Management), a Japanese methodology and SPC (Statistical process Control) in manufacturing operation.

Overview of Lean Manufacturing

Lean manufacturing is a variation on the theme of efficiency based on optimizing flow; it is a present-day instance of the recurring theme in human history toward increasing efficiency, decreasing waste, and using empirical methods to decide what matters, rather than uncritically accepting pre-existing ideas.

Lean manufacturing does not center on placing small stockpiles of inventory in strategic locations. Lean manufacturing strives to eliminate waste. The true foundation of lean is 5S, creating a clean stable work environment by engaging employees to make improvements in their work areas.

The elimination of waste is the goal of Lean, and three broad types of waste: muda, muri and mura. Firstly, muri focuses on the preparation and planning of the process, or what work can be avoided proactively by design. Next, mura then focuses on how the work design is implemented and the elimination of fluctuation at the scheduling or operations level, such as quality and volume. Muda is then discovered after the process is in place and is dealt with reactively. It is seen through variation in output. It is the role of management to examine the muda, in the processes and eliminate the deeper causes by considering the connections to the muri and mura of the system. The muda and mura inconsistencies must be fed back to the muri, or planning, stage for the next project.

The original seven muda are:

Transport (moving products that is not actually required to perform the processing)

Inventory (all components, work in process and finished product not being processed)

Motion (people or equipment moving or walking more than is required to perform the processing)

Waiting (waiting for the next production step) Overproduction (production ahead of demand) Over Processing (resulting from poor tool or product design creating activity) Defects (the effort involved in inspecting for and fixing defects)

Lean supply chains can be achieved in seven steps:

1. Redefine the architecture of supply. 2. Weld the links together contractually in a much more cohesive way to remove the

commercial obstacles. 3. Remove the obstacles to the free flow of information, both for development and

operational demand needs. 4. Remove the obstacles to the smooth supply of goods by developing better

logistics methods and systems. 5. Position stock strategically in the chain to accommodate known communications

and logistics constraints (whilst continuing to remove the constraints afterwards) and then remove nearly (but not) all of the other stock.

6. Reduce Commercial Administration 7. Behave like one entity, by coordinating change activity.

Bajaj - Moving towards Lean Manufacturing

With a muri or flow based approach (as used in the TPS with suppliers). Sort out as many of the visible quality problems as you can, as well as downtime

and other instability problems, and get the internal scrap acknowledged and its management started.

Make the flow of parts through the system or process as continuous as possible using work cells and market locations where necessary and avoiding variations in the operators work cycle

Introduce standard work and stabilize the work pace through the system Start pulling work through the system, look at the production scheduling and

move toward daily orders with Kanban cards Even out the production flow by reducing batch sizes, increase delivery frequency

internally and if possible externally, level internal demand Improve exposed quality issues using the tools Remove some people (or increase quotas) and go through this work again.

Resultant changes and focuses on –

Retaining specialized and critical processes in-house and outsourced rest. Multi-model assembly lines, with off-the-line setups. Flexible machining centres - quick change modules & tooling. Plant layout for single-piece & unidirectional flow. In-process quality assurance (inspection). Quality assurance through SPC & Poka-Yoke. Rationalized Supplier Base - consolidation at tier-1 suppliers. Direct-On-Line Supply based on Pull System (Kanban). No stores for in-coming material and WIP. Multi-Skilled labour; self-supervision & self-certification.

The strategy employed by Bajaj was to massively outsource the manufacture of parts to a core group of suppliers, short-listing and grooming them to be its single-source suppliers, thus cutting down heavily on variable costs. The move also improved manpower productivity by five times since 2002, and reduced Bajaj’s suppliers from 800 to 185. Today, just 15 vendors supply 75% of the components used at its Pantnagar facility in Uttarakhand. At Chakan, 50 suppliers cater to 100% of its requirements.

“Build technology inside and parts outside,” sums up the firm manufacturing philosophy.

Tools and techniques employed

Lean manufacturing tools Just In Time(JIT)

o JIT purchasingo JIT Productiono JIT distribution

Work cells Kanban tooling

o Withdrawal kanbano Production kanban

Various standardization techniques Correct tooling for the job Total Productive Maintenance (TPM)

o Preventive maintenanceo Corrective maintenanceo Maintenance prevention

Single Minute Die Exchange (SMDE)

Bajaj Auto adopted a wider and more encompassing concept of TPM. It is the acronym for ‘The Prime Mover’ towards excellence — to build and continuously improve its core

competencies. With this in mind, Bajaj Auto created a ‘Company-wide TPM Kick-off’. This initiative, the first of its kind in India, will align all key businesses and activities of the Company. Bajaj Auto’s core competencies rest on its values of innovation, perfection and speed. TPM is expected to build and continuously improve its core competencies, as also its entire supply chain including its suppliers and dealers.

Role of IT in enabling the Lean Manufacturing

The project 110% was supported by Project 110% IT. Bajaj Auto implemented SAP ERP.

The move towards Lean Manufacturing was first tried on the Chakan plant by means of the IT enablement.

Supply Chain Processes MRP Schedules for planning. Schedules visibility to suppliers though SAP portal. Intra-day supplies based on replenishment of line consumption.

Introducing E-kanbans”. Supplies synchronized to sequenced production schedule of paint shop,

assembly lines. JIT Supply (customized to our requirement) by Major Vendors –

Components and sub-assemblies as per JIT requirement Supply at 2 to 4 hours’ interval.

Moving towards Lean Manufacturing – E-KanbanMaterial supply & receipts

E-Kanbans created in system based on line consumption. The suppliers create invoices for open quantity in E-Kanban. The invoices uploaded to our SAP system after due validations

using Internet based EDI. A unique ASN (advance Shipping Notification) is generated for each

supply. With what we call as EDI Number,

Then the invoice is printed with bar-coded EDI number. Material is in-warded in plant by scanning this EDI number

GRs are created without manual data entry.

Deployed Portal for suppliers for –

Visibility on supply quality rating and PPM data. The Invoice wise rejections & payment impact. Supplier Quality Tracking & vendor accountability

A new plant was built in the Pantnagar (Uttarakhand) to avail new business opportunities (excise duty cut off for 10 years). This gives them an opportunity to overcome the limitations faced by Chakan plant.

IT Enablement

All cluster suppliers connected to plant in LAN mode over fiber.– High performance & availability.

JIT Supply from cluster suppliers & preparatory shop– System created hourly E-Kanbans based on replenishment of line

consumption.– E-Kanbans synchronized to production sequence of paint shop and

assembly lines.– Delivery / Invoice quantity strictly as per E-Kanbans.– E-Kanbans communication to suppliers over Portal.

Material receipt at unloading bays.– Use mobile barcode scanners to read EDI number on invoices.– Quantity confirmation based on standard pallets & trolleys.– GRs created using suppliers’ EDI based invoices, using only the above

inputs. Network based ANDON - applies break on cluster supply when even one

component supply goes out of synch.

Supply Chain improvements at Pant Nagar Bill passing & payments

o Suppliers’ invoicing system integrated BAL SAP system.o Invoicing rate, taxes & terms validated with Purchase orders on BAL’s

SAP system.o Suppliers get visibility of BAL Purchase orders & amendments over

Portalo Suppliers get visibility of BAL GRs and confirm GR quantiy.o As rates are already validated, suppliers’ 100% payments are ready on

same day.o It is nearly Production-based-payment except for statutory procedures.o Payment managed centrally at Pune. No accounts person in the plant.

Auto back-flushing of Components, Kits & Sub-assemblieso Direct use of manufacturing BoM.

Quality issues are detected, alerted and acted immediately through portal & ANDON (possible due to LAN connectivity to suppliers).

Measure

Overall equipment effectiveness (OEE) is a set of performance metrics that fit well in a Lean environment.

Achievements

Bajaj Auto started its Total Productive Maintenance initiative ten years ago with its manufacturing plants. In March 2007, it achieved a milestone of having all its manufacturing facilities awarded as ‘TPM Excellence Category –1’ winners byJIPM (Japan Institute of Plant Maintenance). Last year, TPM and quality initiatives at vendor plants gathered further momentum. Since inception of Bajaj Auto’s Vendor Quality and Vendor TPM awards, the tally of Quality and TPM award winners is as follows:

Quality award ‘Bronze’: 2009-10: 24 winners (cumulatively, 108) Quality award ‘Silver’: 2009-10: 30 winners (cumulatively, 89) Quality award ‘Gold’: 2009-10: 16 winners (cumulatively, 44) Quality award ‘Platinum’: 2009-10: 3 winners (cumulatively, 3) ‘BAL TPM’ award: 2009-10: 11 winners (cumulatively, 29)

In other words: Over 50% of BAL’s vendors have achieved a status of supplying zero defect

components to the Company’s plants for six straight months at least once during last four years (‘Bronze’).

Almost 40% achieved zero defect supplies for 12 straight months (‘Silver’). 25% have had zero defect supplies for 24 straight months (‘Gold’). Three vendors have supplied zero defect components for more than 36 straight

months (‘Platinum’).

Results and Benefits

The Fat results of this Lean supply process.

Productivity - vehicles per employee - increase10 X. The component inventory – reduced 1 week’s to half shift’s stock. The finished goods inventory - reduced 1 month to 3 days’ stock The quality improvements - improved 20000 PPM to <2000 PPM. Truck turn-around time - reduced 4 hours to ½ hour. Material un-loading rate / person – increased 150 to 350 loads per shift. Improved accuracy in invoice data - faster payment processing.

Lean manufacturing strategies can save millions of dollars and produce excellent results. Advantages include lower lead times, reduced set-up times, lower equipment expense, and of course, increased profits. It gives the manufacturer a competitive edge by reducing

costs and increasing quality, and by allowing the manufacturer to be more responsive to customer demands.

Challenges/Limitations

Some other successful implementation of lean

Lean was so successful at the Gillette plants in Mass., when P&G bought it, the only way to squeeze more profits was to move the entire operation to Mexico.

The best example is the case of EDO providing IED jammers in Iraq. Early on casualties were large and EDO contract performance was terrible. EDO then got acquired by ITT who implemented their Lean process to the EDO jammers. Results: No deaths to soldiers in vehicles protected by EDO/ITT jammers since.

Other companies besides Toyota and Honda (and now GM, Ford and Chrysler who can't afford NOT to do it, albeit much less effectively) who use Lean manufacutring are Boeing, Lockheed Martin, Honeywell, Emerson and many others.

Conclusion

References

Kaikaku-The Power & Magic of Lean by Norman Bodek

Lean Assembly by Michel Baudin

Improving the Extended Value Stream by Darren Dolcemascolo

http://www.beyondlean.com/5s.html

http://www.sae.org/manufacturing/lean/column/leandec01.htm

Appendix

Theory of Constraints and Lean