This is a dated paper, written in 1996. I was working in a company making zip fasteners in India, and we had over 600 blue collar people working for us, and our production value was around Rs.14 crores (US$ 400,000 in those days).
The owner of the company wanted us to sell globally, and his idea was that in an industry requiring such a large workforce per rupee (or dollar) of production, we in India should be globally competitive. Indeed it made a lot of sense as a concept.
We could source raw materials duty free at international prices for export production. Our labour cost was just over $1 a day. Utilities were not a significant cost. And so, gung-ho, I was dispatched to conquer the world markets.
I came back with the discovery that our cost of production was far higher than our competitor’s selling prices. This led me to examine where we were going wrong.
We first started with checking specifications. Were our products heavier (and therefore using more raw materials)? No, we were at par. Was it the murderous 19.5% interest rates? We factored in interest at international rates and still found ourselves out-priced.
It was at this time that I came across a mentor who taught me about manufacturing management – as distinct from technology. He taught me two great techniques – SMED and IJIT.
SMED stands for “Single Minute Exchange of Die”, a technique developed for Toyota by Shigeo Shingo. Toyota used to take long shut downs (and idle their plant) whenever they changed the car model being produced. They had to change a whole series of dies and press tools, and this was being done by removing each part of the dies and tools, and replacing it with a fresh set. They could have a 30 to 45 days shutdown in the process.
Shingo had a Eureka. He proposed that the disassembly and assembly of dies and tools into its parts and components need not be done on the shop floor. Rather, Toyota could have a “nest” which could be slid out and then dis-assembled in the store. Similarly, the new nest could be assembled in the store, and slid onto the production machines. These processes cut down the stoppage time from 30 to 45 days to a few minutes, and raised production capacity by 10% to 25%.
We were doing change of tools in some of our machines every eight hours, by spending two hours on each change. And we were spending 19.5% interest on invested capital on this idle time. Replacing this idle time with productive time substantially changed the economics.
But the bigger effect came from IJIT or “Internal Just-in-Time”. Why only internal? Because India’s infrastructure did not allow for JIT.
How did IJIT help us? Manufacture of zip fasteners in an integrated factory requires a vast range of processes – knitting, weaving, cord-twisting, wire-drawing, annealing, die casting, press tooling, stitching, injection moulding, dyeing, painting, metal plating, ultrasonic sealing, assembly and more.
Each process was individually optimized for least cost production. For example, weaving would produce a 100,000 meters of a particular design of tape because that would maximize their output, even if the next stage required only 10,000 meters. The excess production would be carted to the store. If there were a quality problem, the foreman running the next process would be able to get 10,000 meters of required quality in any case, and he will quietly take this quantity. Over time, some of the stock lying in store would also deteriorate, and sold off as scrap at the year-end.
We found that in the process, almost 8% to 10% of our materials, at various stages of value addition, were going as scrap.
But when we implemented IJIT, we were producing only exactly as much as the next process required. We saved on working capital, on storage, on handling materials, and most of all, we would find quality problems the moment these appeared and slash scrap.
The result was that we became internationally competitive.
China is the world’s manufacturing powerhouse, and it is based on a low cost workforce. India is trying to edge itself in, but the basis is knowledge, superiority in design and technology. Yet, very few of our manufacturing companies have learnt from the Japanese, who were once the world’s manufacturing giant.
This kind of knowledge about manufacturing management has to percolate down to small and medium enterprises if we have to become competitive. Most of our manufacturers say that India specializes in producing small lots-large varieties. These and similar techniques could be invaluable in sharpening the competitive advantage.