Cluster Programme

For holistic improvement of Small and medium companies.

Suhas Gokhale,Nasik (India) www.SuhasGokhale.com

• OEM’s buy parts, assmeblies ,aggregates and systems (like brake system,clutch system,suspension parts,seats, body parts, rubber and plastic parts etc) from suppliers (who are typically called as, Tier I companies.).

• Further, these Tier I companies offload child parts manufacturing to smaller companies (who are typically known as Tier II companies). Usually, these Tier II companies (spread Pan India and even abroad) are manufacturer of thousands of small parts, child parts and sub assemblies..which goes to Tier I to get assembled on bigger assembly.

• Which then flows to OEM wherein they get assembled on vehicle. Usually 70 % parts of vehicle are bought out parts. Typically a vehicle will have more than 60,000 such small parts. There fore for perpetuity and consistency in material flow and qulity it is crucial and essential to strengthen all elements across value chain (i.e. OE, Tier I and Tier II)

Value flow in supply chain

A vehicle quality is sum total of the quality level of all these child parts + quality of building vehicle. This means that , to ensure a Quality end product, it is essential to inculcate “Quality” at child part level which is actually produced at Tier II level (which are many a times..bottom of pyramid companies). • Hence it is extremely important to build a quality at these Tier II to

ensure robust end product. It is therefore very important to work with suppliers to ensure required product quality level and throughput.

Build ‘Quality’ at root

Challenges in Current Context for OE and Suppliers ( P, Q, C, D, S, M, E )PRODUCTIVITY :- Rising numbers, models ,variants .

QUALITY :- Changing Customer Expectations (both External and Internal)

COST / PRICE :- Price – Old formula …… Cost +_Profit = Price. New Formula….. Price – Cost = Profilt.Price is now market driven.. Decided by competition.

Cost – The one which is in our hand to monitor and control.

DELIVERY :- JIT (Just in time) days are gone it is now one step beyond as JIS (Just in sequence).

SAFETY :- Must since lives of human beings involved.

MORALE :- Days will be coming wherein the people will be considered as most precious resource. To become competent and beat competition, motivated people will be key.

ENVIRONMENT :- Govt. norms, OE’s have to declare ‘Sustainability’ score. Motivators like ‘Carbon Credit’ Pressures from Global market.Social awareness.

How do we align P,Q,C,D,S,M,E challenges of OE and Suppliers together and have WIN MORE –WIN MORE….

OEM

Tier I Supplier

Tier II SupplierGovt. of

India

Society

External experts

Key Stake holders

Benefits of common engagement platform :• Learn directly from the behavior of its

customer• Generate new ideas rapidly • Experiment with new offerings quickly• Get input from customers on their

running preferences• Build deeper relationships and trust with

the community and generate “stickier” brand collateral

Lean techniques to address Manufacturing challenges deployed on common engagement platform SUPPLIER CLUSTER

Objective: Supplier Improvement

8

Waste Elimination

• Productivity Improvement• Capability & Competency enhancement

• OEE• SMED• VSM

Q

• Kaizen• Cellular Mfg• VSM

• Poka yoke• QC Story• Kaizen

P C D S M

• JIT• Kanban

• 5S• Kaizen

• Training• Competition• Involvement

•Reduction in PPMeq & Internal Rejection

Business Performance Indicators

9

Product Quality : PPMeq, Internal Rejection

Labour productivity

Inventory Turn Ratio

Delivery Schedule Achievement

Overall Equipment Effectiveness (OEE)

Floor Space Utilization

Value Added per Personnel Cost (VAPCO)

Delivery Mechanism for quality improvement & capability enhancement of Tier I and II suppliers.

M&M

Tier I

Tier II

10

Consultant

Identify Tier I

Identify Critical Tier II

Cluster Formation

Execution

Monitoring

Total Employee

Involvement

11

Supplier Improvement Methodology

IIIDeployment thoughHandholding

IV

Sharing & Review(MRM)

IIGEMBA (Value Stream Mapping)

I

Education & Training

VHorizontal Deployment

Cluster Deployment

Key Elements (which gets deployed in every month cycle)

• Common Trainings.

• Hand Holding Visits.

• Monthly Review Meetings (MRM).

SR DESCRIPTION OF NVA LEAN TOOL DEPLOYED BEFORE AFTER BENEFITS (per month)1 . Excess material handling for Cab Protector Line. Cellular Layout 117 mtr 81 mtr Rs.1.6 L

2 Cup welding from inside was cumbersome and manual KaizenManual welding JIDOKA Rs. 1.06 L

3 Excess handling –holding of fuel tank while welding + Kaizen 2 operator 1 operator 1 operator reduced

4 Set up time reduction on bolt heading hammer Set up time reduction 31.6 min 26.7 min. Productivity increase 2.5 %

5 Labours for excess material handling Cellular Layout - - Rs.1.54 L

6 Manual checking of battery rod length Kaizen - - Zero Defect7 Change over of Dies on all Press Machines SMED 56 min 26 min 30 mins

          4,00,000 strokes p.m., Rs.4.8 L

8 Waiting Time, Searching Time and Maintenance Time OEE 67% 78% 12%

9 Low output of Inj. Moulding on HVAC Assly for XUV 500 SPF, Cellular Layout 121 mtr 3 mtr Output increased by 240%

          Rs.1.6 L

10 Waiting Time, Searching Time and Maintenance Time OEE 66% 85% 13%

11 Higher In Process Rejection Kaizen30500 ppm 5500 ppm In Process Rej reduced by 82%

12 Higher In Process Rejection Kaizen21000 ppm 2500 ppm In Process Rej reduced by 88%

13 Unutilized Space on the Shop Floor 5 S - - 189 Sq.M. space saved

14 Higher In Process Rejection Kaizen 2100 ppm 132 ppm In Process Rej reduced by 94%

15 Unutilized Space on the Shop Floor 5 S, Cellular Layout - - 156 Sq.M. space saved

16 Excess material on shearing m/cs Kanban 6 labours 2 labours Rs.3.2 L

17 Excess material handling of CRCA sheets 3 M 4 labours 2 labours Rs.1.6 L

18 Excess Inventory of RM, WIP, SFG & FG VSM ITR : 8 ITR : 42 Rs.3.5 L

NVA’s (some examples)

Expected benifits of Supplier Clusters.OEM:-

Positive impact on Quality and enhanced ability of supply chain.

Tier I :-

Positive impact on Quality, delivery.

Tier II :-

Enhance capability and perpetuity in delivering customer requirements.Cultural change resulting long term positive impact.

Consultant :-

Active participation in ‘Driving positive change’ thereby perpetuity of profession.

RANKING CRITERIA OF Supplier Cluster companies Top level lowest level

Sr.No Area of influence Measurement Criteria Unit of measure Level IV Level III Level II Level I

No of days

1 Quality (Q) Number of Consecutive days without defect at Customer end

> 270 180 to 270 90 to180 < 90

2

Quality (Q)

First time right (i.e. PPMeq at PDI)

PPM eq

(The target is commoditywise) Machining,mechanisms <25 26 to 250 250 to 500 >500 Sheetmetal & BIW 0 <100 100 to 200 200 to 2500 Casting & forging <500 500 to 1500 1500 to 5000 >5000 Rubbe,plastic and all other not considered above <25 26 to 250 250 to 500 >500 3 Quality (Q)

Cost of Poor Quality (Rupees as % of sales value in Rs) % of sales < 0.05 0.05 to 0.1 0.1 to 1 > 1

kg/person-hour

4 Productivity (P) Production volume per employee -improvement over

base line in % basis>30%

15% to 30% 0 to 15%No

improvement or Nos/person-hour or

Sales in Rs/No of employees

Absolute value as per

formula

5 Cost (C ) I Inventory Turn Ratio (ITR) -Improvement over base

value>30 % 15% to 30% 0 to 15 % No

improvement

Delivery schedule adherence (as per daily trigger) as % > 99 95% to 99% 90% to 95% < 90%6 Delivery (D)7 Safety ( S ) Accident frequency rate (as per formula) Absolute value 0 0 to 0.05 0.05 to 1 > 1 Accident severity rate (as per formula) Absolute value 0 0 to 0.05 0.05 to 1 > 1 8 Morale ( M ) Number of Kaizens in per person per month Nos > 4 2 to 4 1 to 2 < 1

No change or negative9 Energy ( E ) Energy cost (as % of sales) - reduction over base value % reduction

> 10 % 2% to 10% 0% to 2%

10 Overall rating Rating as per Mahindra Supplier Sustenace audit % > 80% 60% to 80% 30% to60 % upto 30%

Finally…We

Win More – Win More

Through

Co-CreationThank You