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Case study-Crompton Greaves

Overview
Crompton Greaves Ltd. (CGL), was one of India's leading
private sector electrical engineering companies. During
the 1980s, CGL was in dire straits with profitability at all
time lows. The then CEO, Kewal K.Nohria said, "In 1982
and 1983, industry in general and the electrical industry in
particular was gripped by recession, and the scenario
changed from a seller's market to a buyer's market.
Falling demand combined with higher production
capacity and employment levels resulted in declining
productivity during 1982-84 at Crompton Greaves,
Nohria decided to focus on total quality management to
improve CGL's performance.
The Nashik Unit Overhaul
Nohria began by talking about improving quality and
response to customer demands and improving delivery.
Shopfloor workers were sent to visit customers and get
first-hand responses on products. Cross-functional task
forces were created to look into rejections and deliveries
began to be monitored closely.
The most evident of the company's efforts were at the
switchgear unit in Nashik, Maharashtra. This 1400 worker
unit was one of CGL's heaviest investments, with the

maximum CNC machines, high voltage testing


laboratories and state-of-the-art manufacturing facilities.
The biggest change was regarding the reorientation of the
production process itself. The unit began using the
concept of single piece flow (SPF), which had been
successfully used by different industries abroad. One
group of machines was arranged so that work proceeded
in an anti-clockwise, 'U' shape. Rather than one product
being made at different points on an assembly line, one
entire product was made from start to finish by one cell.
The above setup offered many other advantages. While
production volumes were more or less the same, they now
required only one-fourth the floor space. This released
space for new products. Turnover or rotation of space
therefore increased by three times. Also, smaller batches
offered more flexibility and therefore higher
customization. SPF also increased the pressure on
processes by identifying problems and bottlenecks very
quickly. For instance, one shop had a board with differentcolored bulbs that indicated the reasons for various
bottlenecks. For instance, if there was no material or no
order, a red bulb lit up; if the basket was full, a yellow
bulb lit up, and so on. This resulted in efficiency
improving by 10%.
CGL found out that the steel brought into the factory was

worked on for 1-48 hours, but was kept in the factory for
as many as 147 days. Factory sources revealed that
though the investments in new machinery brought down
the working time by 50% from 48 to 24 hours, the
efficiency could further improve if the above problem was
tackled.CGL worked on the housekeeping front as well to
make the unit more efficient. Material was organized so
that no searching was required. All the items were
allocated a place, close to where it was used, with the date
and inspection status marked on it. The layout was
correspondingly changed so that minimum transport was
required. None of the machines were grounded, which
meant that layouts could be changed easily. Several
meters of pipe in different colors were put up so that
problem lines could be easily identified. Fixtures were
also colored according to the product they were used to
make. Detailed instructions in both English and the local
language Marathi were put up at various spots. Charts
displaying the cost of energy per machine per hour were
put up to reduce energy wastage.
Reaping Benefits
CGL's efforts seemed to have paid off initially as between
1990-95, CGL doubled its turnover crossing the Rs 1000
crore mark. Productivity went up from Rs 6 lakh per man
per year to Rs 12 lakh. Profits also increased by six times.
There was a 30% reduction in the total number of workers

needed because of the increased efficiency. However,


CGL did not retrench any workers and instead redeployed
them where necessary. The time spent by employees on
training also went up from 1% to 3%.
Since CGL assured job security to the workers, the union
agreed to productivity increases of 38% in 1991, and a
further 20% in 1994. There were significant positive
changes in the attitudes of the workers as well as the
management. While skilled workers began contributing in
routine tasks (such as unloading of material) if required,
they were also given sufficient authority (such as to refuse
to use inferior materials.) The management also began
measuring managerial efficiency based on certain
internally decided parameters. The efficiency was found
to have gone up from 23% to 51% during the same
period. The unit also began using information technology
to further improve its efficiency

Questions for Discussion


1. Analyze the steps taken by Crompton Greaves at its
Nashik unit to improve operational efficiency. Comment
on the advantages of the single piece flow (SPF) system
adopted by the company?

2. Study the steps taken at the Nashik unit on the people


and housekeeping fronts to supplement the overall 'value
added management' initiative. In what way did they help
the unit in improving efficiency?

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