There is a good buzz in the Indian Manufacturing Industry now about Digitalization and Industry 4.0. Every Managing Director would like to tell his/her colleagues at the Club about how they are implementing Digitalization in a big way and trying to implement Industry 4.0 and so on. 

I hear many Functional Managers also trying their hand at collecting more data from machines. They are not very clear what exactly they want to do with that data. But, they have started a Project anyway. 

This same companies are having modern Machine Tools that already collect a lot of data as a routine. Most of this data is not being used at all. 

The other day I heard about a Machine Shop Manager who is collecting data about vibration on the tool holder on the Machine tool and trying to decide when to change the Tool. This is a smart local application. This Will definitely help the Manager to avoid Quality losses due to blunt tools running for more than their life. 

But, these smart local applications are very few. 

Irrespective of what they already have, Managers and Managing Directors across the Industry are in mad rush to get a tag of ‘We are implementing Industry 4.0’. 

I see following problems in many of these companies rushing to ‘try Industry 4.0’.

01.  Many Indian Manufacturing Companies have not yet implemented the Basic Lean Practices in their Shop floors. 

02.  The Pull principle is not being used. There are many companies that are still having Batch Production on their shop floor. 

03.  The Layouts are still archaic that necessitate unnecessary movement of material.

04.  I have seen companies allowing excess Production as they do not want their workmen to be idle!! 

05.  There is no focus on the Skills of the Workmen. With the attrition problem on the Shop floor, this is a serious problem for the industry.

06.  I know many companies that have not solved some perennial Supply issues and resultantly produce according to what material is available and not what Customer wants! 

07.  Wherever the Companies have installed Automated Machines and invested in to Technology, I have seen that the Company is having more problems with the Higher Technology machines. The Quality losses are higher in these machines, they breakdown more and over a period of time many of the wonderful features of these machines are by passed and it is used worse than its’ less Automated cousin that is co-existing. 

This is not a complete list of problems. I am not saying there are no Companies that are not using Technology and Lean Principles. But, this is a very small percentage.

I see three issues from this situation:

a)     Understanding Lean approach: Majority of Indian Companies have still not understood and leveraged the Lean Principles. 

b)    People element:We have not understood how to address the ‘People’ element when we bring in higher Technology. We need to help the person involved to ‘Work differently’. 

c)     Short term approach: We are still looking at this year results and many of us are worried about this Quarter performance and this Month’s performance. We continue to remain ‘Short Termish’!

While this is the status, there are some companies that are waking up as the Market Competition is increasing and they can’t simply tolerate the HUGE inefficiencies on the shop floor. 

Every Company has to wake up!! If they are not woken up by the ‘Indian Competition’ then they will be woken up by the ‘International Competition’. 

The Other Side

While this is the status of majority of the Companies trying to implement Industry 4.0, the Companies offering ‘Industry 4.0 solutions’ are also in the same Boat! While there are some International Companies like Siemens and a few of Local Companies that have understood how to use Industry 4.0 elements to take their clients to the next level, majority of the Companies offering the ‘Expert services of Industry 4.0’ do not know what they are talking about! 

I have personal experience of talking to a few of these experts who have fancy websites calling out the World to implement Industry 4.0 with their help. Most of these Companies have not done anything in this area. Most of them do not know anything about Lean! 

So, we have a very dangerous combination of Companies who are not ready for Industry 4.0 but want to implement it anyway! On the other side we have a big contingent of Companies who do not know anything about Manufacturing offering Industry 4.0 solutions. A lot of money is getting wasted around!! 

How can we go forward?

It does not matter what the current status of the  Manufacturing Company is, if they have understood the need to improve their efficiencies and the power of Lean then we can progress. 

I would suggest that these companies take up a Re-Engineering of their Manufacturing that would involve the following:

-      Put Three Year Targets like:

o  Tripling People Productivity (Blue and White Collar Please)

o  Cutting Quality Losses by 75%.

o  Cutting Manufacturing Costs by 50%

o  Solving 100% of Customer related problems permanently

You can formulate a few more Goals that are relevant to your company.

-      Only a BIG target will wake up your Company and your team! You will achieve it! 

-      Formulate a Full Time Task force which can be filled with Young Engineers straight from College. Bring in technical experts as needed. But, having a positive mindset is more important than the Technology. 

-      There should be representation from every Function in this Task force. 

-      Educate their Employees on Lean Principles starting with the Top. 

-      Recast their Value Stream Map on the basis of Lean principles. 

-      Resolve the perennial problems like Material Shortages, Bad Sub-Contractors who do not deliver on time and so on, Perennial Quality Problems that have become as permanent in the company as the owner himself/herself! 

-      Formulate several Projects that should be championed by the Task force with help from the regular Teams. 

-      On the way at the right time, we should start educating the employees on Industry 4.0 and the Technology that is available.

-      Visiting International companies to understand the Lean principles in action or Industry 4.0 in action is a very good idea. 

-      Implement Industry 4.0 elements as needed to achieve the Three year Goals. Finance Head should ensure that there is no Project that is being done just for the fancy of it. Every Project should pay back handsomely. 

When you are achieving some BIG targets in 3 years, that will allow you to spend a good amount of money to achieve it. The problem of how to finance the Industry 4.0 Projects will be addressed. 

So, you can turn your weakness of ‘Low Efficiency’ and ‘Not having implemented Lean’ in to something more positive as it would help you to spend good amount of money as you will get the payback relatively easier. 

So, when will you start off? 

Improve your Profits significantly and become a genuine implementer of Lean and Industry 4.0!! 

In many companies, the cost of White-Collar Staff is very significant. By international standards, the number of staff that Indian Companies hire is significantly high. The Productivity of the Staff in a company seems to be very low. We seem to be throwing ‘Warm Bodies’ at work and problems! More Problems, more ‘Warm Bodies’..

The Indian Companies have been waking up to the higher costs of employees in the past Decade or so. The profits are under pressure. Top line is not growing as aggressively as one may want. 

In this situation too, many companies have been addressing the Blue-Collar cost. Companies have been trying to hire cheaper and cheaper labor. I know many companies who try to run the whole Manufacturing Plant with temporary and low-cost labor. Genuine attempts to improve Productivity have not been many. Indian Companies have a long way to go in improving the Blue Collar Productivity. 

By Comparison, the White Collar Productivity had been an unexplored area for most of the Companies. 

No Standards for work!!

Most of the Companies do not have a Standard for the work of the White Collar Employees. What is the work each Position should be doing and what is the Standard time and effort that each of the work is supposed to take?

Resultantly there is no measure for the work of the White-Collar Employees. When something is not getting done, more employees are recruited. Sometimes having more people will result in more confusion and more inefficiency. 

The other side of this continuum is that some companies simply refuse to recruit White Collar Employees or fire who is there. Even this act will not have any rationale. Usually it is the ‘feel’ of the Boss who may just ‘feel’ there are too many people and they are ‘wasting’ their time! 

Direct and Indirect Cost of White-Collar Employees and their work

The White-Collar employees are tasked in every company with very important tasks. They decide what Raw Materials have to be purchased, at what cost, how much inventory to keep, what price to sell a product, how to market the products and many other crucial decisions. 

So, the money that the Companies spend on the Salaries of the White-Collar employees is only a small proportion of the Total cost. The Cost that this group of Employees can inflict on a Company is huge. They and the work that they do can either make or break the Profits of a Company.

Hence, this category of employees deserve a much higher Quality attention! It is not enough to just focus on Blue collar and drive their productivity ! 

What needs to be addressed?

Companies need to consider addressing two elements of this category of employees. 

01.  The numbers in this category. How many people you have and how you can optimize this number? This ensures you spend as little as possible on this category of costly employees. This addresses the Direct cost of White-collar employees.

02.  The Quality of the work and decisions of this category of employees.  Companies need to pay attention to this as they can inflict a very high cost on the company due to the quality of the decisions that they may take. 

Let us address these issues in two or three articles.  

Addressing the Direct Cost of the White-Collar Employees

This again can be addressed at two levels. You can improve the Productivity of White-collar Employees in two phases. 

a)     Multiply the Productivity by applying the Lean Principles.

b)    Go to a new level of Productivity and way of working by adapting Technology tools that are available today.

Multiply the Productivity using Lean Principles

I would suggest a methodology to address this area. 

While many companies may have KPIs for their Employees and may be some of them are using them well, the Productivity at Task level may still be suffering. 

Have a Target: When you start improving the White-Collar Productivity, it is important to have a CLEAR target. I would suggest the target as ‘Avoid recruitment for next one/two years’.  Do not start with a target of ‘Cutting 25% of Staff’. This would be like cutting the foot to fit the shoe. While this is so basic and everyone should be knowing, I see many companies just firing Staff to reduce costs!! A Good team is what the Management should be looking to build. They would reduce costs and improve profits! 

Log your time: Encourage the employees to log their time and find out what are they actually spending their time on. You can give them Log sheets and ask them to capture what they are doing and to what KPI is it really related to. This effort may give you a long list of activities. Pick the Pareto items for improvement.  You need to do this for each Position in the company. 

Time Study: Study the specific Tasks on which you are spending significant part of your time. By capturing the micro details of the Task, you can examine the various losses that you have in doing that particular task. Usually you would have very BIG losses. 

Identify Kaizens: Identify the improvements that you can do to reduce the time that the task takes. The improvements may involve changing the Work flows, changing the authorizations, improving the ERP features and many other activities. 

Carry out the Kaizens: Here, the company has to move with some great purpose. One should not be stuck with some Kaizens that are difficult to implement. It may involve modifying your ERP and modifying your methods. Good amount of ‘Change Management’ is needed here. 

Multiply the Productivity  

One should aim at improving Productivity by 2-3 times with this methodology. A lesser target will not justify the effort and possibilities that are there in every organization. 

Wherever IMA handled this type of Project, the improvement in Productivity was at least twice. 

What is critical: Try out in one model area. Take the help of outsiders in this project. An outsider can bring a fresh perspective for this work. But, you should develop an internal team that would focus on Productivity of People forever. 

Next Article: We will examine how an Organization can transit in to a New Way of working at the next level of improvement.