Diagnoses

presents analvses of the management case bv academics and practitioners. Problems are
examined, their causes are analvsed, and issues of relevance are discussed.
Lucas-TVS Limited: A 1ourney towards Manufacturing
Excellence
Kannan Sethuraman and Devanath Tirupati
The April-June 2000 (Vol 25, No 2) issue oI Jikalpa had published a Management Case titled "Lucas-TVS
Limited: A Journey towards ManuIacturing Excellence" by Kannan Sethuraman and Devanath Tirupati. In
this issue, we Ieature Iive responses Irom Roli Sinha, Shrilekha Phanse and Swati Mitra; Haribandhu Panda;
G H Rahalkar; N Ravichandran; and G Sunderraman.
Lucas-TVS Limited, a joint venture between Lucas Varity plc., UK and T V Sundaram Iyengar & Sons
(TVS), India, manuIactures automotive components and reaches out to all segments oI the automotive
industry such as passenger cars, commercial vehicles, tractors, jeeps, two-wheelers, and oII-highway vehicle.
In 1985, the top management at Lucas-TVS had initiated a. journey to make their Iirm a world-class
manuIacturing organization. The company's oldest plant at Padi, Chennai, acted as a test bed Ior several oI
their initiatives. The case describes the steps that Lucas-TVS management took Ior implementing this change
process in manuIacturing at their Padi plant during the period 1985-1998.
The background provided in the case clariIies that, in 1985, there was no compelling reason Ior the
company to adopt this initiative. However, the top management had the Ioresight to be open and adopted the
suggestions oI Dr Parnaby Ior making quantum improvements in its manuIacturing perIormance. At the
outset, the project was viewed as a one-time eIIort Ior changing the Iacility layout to streamline the product
Ilow. However, over the 15 year period, it evolved into a process oI continuous improvement with the
adoption oI several Ieatures oI Toyota Production System (TPS). The result is a slow and visible transition to
lean manuIacturing.
The case describes in detail the implementation strategy adopted by Lucas-TVS. This includes the initial
eIIorts in layout changes and subsequent initiatives in the introduction oI Nagare cells and quality systems.
In particular, the strategy adopted by the top management Ior securing worker buy-in and recognizing
continuous training as a precursor to system changes highlight the need Ior aligning the workIorce objectives
with that oI the Iirm. Likewise, the decision to delay hard investments and introduction oI new technology
reIlects the company's conservative Iinancial strategy. The case concludes at an interesting stage where the
company needs to make a decision about the Iuture direction to address a number oI critical issues identiIied
by Mr T K Balaji, the ChieI Executive and MD oI Lucas-TVS.
Jol. 25, No.4, October-December 2000
69
Jikalpa

Lucas-TVS Limited: Current Scenario, a

SWOT Analysis, and Recommendations
Roli Sinha, Shrilekha Phanse, and
Swati Mitra
Second Year, Post-Graduate Programme in
Management
Nirma Institute oI Management, Ahmedabad
Excellence is a moving target and we cannot
afford to remain satisfied with our current
achievements. We need to continuouslv seek
higher levels of excellence. '
T K Balaji, CEO, Lucas-TVS
This was the mission with which Lucas-TVS was
incorporated in 1961 as a joint venture oI Lucas
Industries, UK and TV Sundaram Iyengar and Sons
(TVS), India to manuIacture automotive electrical
systems.' Since then, the company has traced its path
through various ups and downs, and has always
emerged a winner primarily because oI its emphasis on
a continuous process oI change, customer orientation,
quality upgradation and last but not the least, an
insatiable urge to learn and improve.
Current Scenario
According to Mr N Ravichandran, the chieI methods
engineer at Lucas-TVS, there are some issues which
need to be addressed iI the company wants to retain its
position as one oI the largest auto component
manuIacturers in the country. Dealing with these issues
will again require the company to pass through a
similar transIormation phase as it did some 15 years
ago. As the company is on the verge oI another phase
oI transIormation, we propose to oIIer a Iew
suggestions regarding their strategies Ior overcoming
these challenges and spearheading into the 21st
century. For this purpose, we have probed Iurther into
the current position oI Lucas-TVS and have come
across the Iollowing Iacts:
Jol. 25, No.4, October-December 2000
. Indian Nippon Electricals Ltd. (INEL), a joint
venture oI Lucas Indian Service and Kokusan
Denski Co. Ltd. Japan, has entered the three-
wheeler segment with the commissioning oI its
Pondicherry unit in the year 1997-98. The unit
manuIactures Fly Wheel Magnetos with an installed
capacity oI, 1,50,000 units a year. A major Iactor is
the Iive-year sales tax deIerral which the company
has got Ior this unit. It has got a very strong backing
Irom its Japanese collaborator. Another Iactor,
which stands in Iavour oI INEL, is the level oI
indigenization achieved by it. It has achieved a cost
advantage over its competitors who have to depend
on imported raw materials.
. Lucas-TVS has developed a web-enabled soItware,
which works with parametric technology
corporation pro/engineering, allows the engineering
department to cut down the time taken Ior a new
auto part design to one day Irom 30 days (Kumar,
2000). This soItware incorporates the concept oI
generic design. For meeting any kind oI customer
speciIications, the design engineers start with the
generic design, which is in place, and make the
necessary changes to customize the item. This
reduces the design time to a great extent.
. The company specializes in Small Group Activities
(SGAs) (Majumdar and Majumdar, 1999) wherein
teams are Iormed. At present, there are 596 teams,
which have cracked 7180 problems in cost
reduction, quality, productivity, and housekeeping.
Lucas-TVS has been successIul in retaining
employees, especially engineers, even though the
lure oI the soItware industry is pulling them Irom
Lucas-TVS and other auto component
manuIacturers. This is all the more prevalent
among those engineers who have an experience oI
three to Iive years in this industry.
MUL has chosen Lucas TVS as one its suppliers
under the New Competitive Cluster
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(NCC) (Dubey, 1999), in addition to eight other

component manuIacturers.
SWOT Analysis
Strengths
Lucas- TVS reaches out to all segments oI the
automotive industry Irom two wheelers to
Heavy Commercial Vehicles (HCVs).
It has extensive distribution network compris-
ing over 2000 outlets spanning the entire
length and breadth oI the country.
It has established tie-ups with several reputed
companies like Kokusan Denski Co. Ltd.
Japan and Koito ManuIacturing Co. Ltd.
Japan Ior excellence in manuIacturing.
It has also been successIul in developing
contacts with a host oI service dealers over
the last six and a halI decades.
Its Iocus on quality products combined with
an urge to constantly learn and improve
imparts it a unique strength, which cannot be
easily imitated by its competitors.
The untiring eIIorts oI its workIorce are
diIIicult to be matched by its competitors.
The management style at Lucas-TVs allows
participation at the worker level. Small Group
Activity (SGA) is just an example oI this
management style.
Weaknesses
. Lucas-TVS has not been able to establish a
proper backward integration as has been evident
through the case. Out oI all their suppliers, only 10
per cent have been able to match their quality
requirements.
. To cater to the requirements oI the various OEMs
MUL, Hindustan Motors, TELCO, GM India,
Bajaj Tempo, M&M, Ashok Leyland to mention a
Iew - it has to manuIacture a variety oI parts and
products. It has not thoroughly understood the
costs involved in designing and manuIacturing
such a variety oI products. Thus, a proper cost
tracking system is lacking in the company.
Jol. 25, No.4, October-December 2000
. The company has not been able to bring down the
rejection levels to the international standards oI
150PPM in spite oI excessive measures taken to
improve quality.
Opportunities
. A big opportunity is awaiting Lucas-TVS in the
Iorm oI export markets. Further, with 3-D web-enabled
design soItware in place, they have a good opportunity
to tap the exports market.
. Rapid inIlow oI investments in the auto component
sector is resulting in new green-Iield sites near the
vehicle-manuIacturing units to ensure JIT delivery
to OEMs. This will Iurther open up new avenues Ior
the company.
. With liberalization and the slashing oI import duties
both on automobiles and auto components, world-
class automobile manuIacturers have shown a keen
interest in entering the Indian markets. Increased
production oI vehicles will stimulate the auto
components industry.

Threats
. Inability to match the technological capabilities oI
big Ioreign auto component manuIacturers like
Delphi.
. The company has established links with many
collaborators which is not the case with other
competitors like MICO. Thus, this might prove to
be a threat in the Iuture.
PEST Analysis
Political Legal Environment
1991 onwards-
. License Raj brought to an end.
. Customs duty on auto parts reduced to around 20
per cent while import duty on automobiles has been
brought down steadily to 25 per cent ad valorem. *
. High international standard set by exports
(US companies entering through joint venture.
.Source : Automobile Component ManuIacturers Association.
71
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Further, 257 collaborators Irom Japan, UK, and

Germany have also entered the Indian market). The
automobile industry has been exporting at the rate
oI 20-25 per cent Ior the last Iour) years.
. Import oI capital goods and automotive components
brought under Open General License (OGL), which
does not require government approval.
. Continuous rationalization oI excise duty in respect
oI automobiles.

Economic Environment
. BOP crisis in 1991, which was Iollowed by
liberalization oI the economy. Thus, the automotive
industry is now working on the dimensions oI open
market. Many joint ventures have been set up in
India with Ioreign collaboration.
. Increased derived demand.**

Social Environment
. Personal disposable income has gone up.
. Change in liIe style pattern Ior example, a new
recruit nowadays wants a car with a year oI job.
Technological Environment
. CNG-Compressed Natural Gas, which is now used
as a substitute Ior Iuel in automobiles. It is
environment-Iriendly as well as cost-eIIective.
. Most oI the automobile/automotive industry is
looking Ior environmental Iriendly alternatives to
comply with the EURO-II emission norms.
Michael Porter's Model of Industry
Analysis
Threat of New Entrants
. High investment sector oI the economy, hence,
threat oI new entrants is low.
**The automobile industry is growing at the rate oI 20 per cent per
annum while the automobile component sector is growing at the
rate oI 25 per cent on an average.
Jol. 25, -No.4, October-December 2000
State-oI-the art technology serving a large
number oI vehicle models because oI which
the new entrants might Iind it diIIicult to
match the technological capabilities.
High economies oI scale to the existing
players.
Threat of Competition
Threat oI competition is very high Irom the existing
players in the market as well as the Ioreign companies
like Delphi, which have recently entered the Indian
markets.
Due to high custom duties, other tariII and non-
tariII barriers coupled with Iast developing competitive
domestic manuIacturing Iacilities, more and more
Ioreign companies are entering the Indian market
through joint ventures. Several joint venture projects
involving world-class technologies are already
Iunctioning proIitably while many others have started
assembling their products in India. At present, a total oI
257 Ioreign collaborations are manuIacturing quality
auto components Ior local and export markets. Japan
dominates the list oI collaborations Iollowed by
Germany, UK, and USA. Many new auto components
ventures are now under consideration by various local
state governments.

Bargaining Power of Buyers
The major buyers in this industry are OEMs as well as
the replacement market. The nature oI customers in the
export market is undergoing a considerable change.
The contract Ior supply to the OEMs is won against
stiII international competition. This is a reIlection on
the quality oI products being produced by the
component manuIacturers in India. The export
destinations have also undergone a change. They are
also experiencing pressures Irom OEMs who demand
quick responses, JIT deliveries in small lots, and
reduction in prices.
Bargaining Power of Suppliers
The bargaining power oI suppliers is very high as they
have to depend on a number oI suppliers Ior inputs to
their components. Only a Iew
72 Jikalpa

up a supply chain Irom the component

manuIacturer to the sub-assembly
manuIacturer to the company, and then
Iinally to the customer. InIormation Ilows
down a supply chain Irom the customer to
the company, to the subassembly, and the
component manuIacturers. By tapping
inIormation Irom entities a step away in the
chain, the company will know what and how
to produce. An organized eIIort Ior man-
aging this inIormation via an exclusive KM
department/team devoted to this purpose can
soon become the company's competitive
advantage.
. Since the company is operating through SGAs,
eIIorts should be made to tap the knowledge Ilow
oI such a dispersed group. II the company succeeds
in such an attempt, it would aid in increasing the
satisIaction oI employees through appropriate
award systems besides providing the management
with essential inIormation. This would prove to be
an eIIective way oI building the "Iuture on the basis
oI the past."


Use of IT in Operations

The company wants to use IT Ior quality assurance,
new product development, and linkages with suppliers.
. One way in which IT can be used Ior quality check is
the use oI Multi-user SoItware
5
like Statistica. Another
soItware, which is very popular, is SEWSS. This
soItware oIIers knowledge sharing Ior users oI all
levels, a comprehensive set oI state-oI-the-art SPC
tools, and an easy-to-use interIace. SEWSS is a
completely customizable system with practically no
limit with regard to Ilexibility. Designed Ior company-
wide use, SEWSS accommodates the needs oI all types
oI users Irom managers and engineers to operators and
line personnel. In addition, SEWSS serves as an
extensive reporting tool that allows Ior pre-deIined
reports to be automatically printed or generated in
HTML or MSWord compatible Iormats.
. Another area where IT can be used very eIIectively
is in managing the supply chain.



Jikalpa
suppliers can match the quality standards set up by
the industry. Hence, the linkages with the suppliers
are not very strong and they have to depend only upon
a Iew suppliers, which raises their bargaining power
to a great extent.
Recommendations
Issues
1he Quality Issue - An Effort to Curtail the High
Rejection Rates
. A policy can be Iollowed to classiIy the deIects
into diIIerent categories. This analysis can be
Iollowed by a Pareto Analysis
1
(the 80-20 rule),
whereby the majority oI the deIects may be attributed
to a Iew causes, which can then be controlled.
. Another policy is the use oI statistical tools at
worker level
2
. Daily monitoring can be done to
track the production line quality Ior preventive
action at pre-determined time Irame. Workers can
then use the statistical tools like X-bar charts and
R-charts to plot the variations, iI any, on charts and
then take corrective actions quickly.
. A Knowledge Management
3
Department can be
created, which will speciIically look into the
avenues oI retaining the knowledge generated in
the organization over a time period. This becomes
especially important because oI two reasons:
. In a technology-driven business
4
, core
competency lies in devoted human resources
and hence retaining them is oI utmost
importance - more so, with the charm oI the
soItware industry pulling away the qualiIied
engineers Irom the manuIacturing sector. An
organized knowledge management team,
thereIore, can go a long way in preventing a
drain on the knowledge base oI the
organization with an obvious drain on the
human resource base.
. InIormation, very like products, Ilows
through a supply chain, and the smart
manager should know how to mine this
inIormation and use it. Products Ilow
Jol. 25, No.4, October-December 2000
73

The company can provide technological inputs Ior

trouble shooting on its supplier's shop-Iloors so that
they can cut their costs through a web-enabled
soItware (Kumar, 2000).
Linkages with the Suppliers
As mentioned in the case, only 10 per cent oI the
suppliers are living up to their expectations in terms oI
the parts supplied. This might have been aggravating
the problem Iaced by the company in lowering the
deIects to 150PPM thus Iailing to meet the standards oI
the best in the industry.
. One oI the strategies in managing the supply chain
is to Iollow clustering (Dubey, 1999), i.e., a group oI
companies sharing their knowledge with one another
to achieve higher operational and strategic standards
Ior each other. This strategy has been successIully
implemented by Maruti Udyog Limited
6
. The
objective behind creating the clusters is to leverage
shared learning Ior achieving world-class standards
7
.
Taking a cue Irom one oI its biggest customers,
MUL, Lucas-TVS can adopt the same policy to
Iorm clusters oI its suppliers, which would
invariably go a long way in improving the quality oI
the materials supplied by them to the company.
MUL, Ior example, has not only been demanding a
sustained drop in prices Irom its suppliers but also a
continuous reduction in the proportion oI deIective
parts, JIT supplies, and productivity enhancements
without monetary investments. Aiming Ior the same
goals enables members oI the clusters to share
practices and experiences and to bond closely
8
.
Since the ConIederation oI Indian Industry (CII) is
also making all eIIorts to create more clusters,
9
it is
but imperative that the company should approach
CII to Iorm a cluster.
. The clusters Iormed should be kept as small as
possible. This is because by narrowing down the
number oI vendors, the company can leverage a
long-term relationship
10
Ior the joint exploration oI
the options Ior reducing costs on a sustained basis.
Jol. 25, No.4, October-December 2000
. Moreover, the clusters can be Iormed geographic
area wise which will help the company to manage
its supply chain more eIIiciently because oI the
Iollowing Iactors:
Communication is easier.
Quality monitoring is easier.
Cheaper
11
and Iault Iree logistics.
Better knowledge Ilows.
Simultaneously, since suppliers will have
amassed in one place, their level oI
competitiveness will be high.
12

. Clusters, Iormed on the above parameters, thereIore,
can provide a conIrontation-Iree environment and
spawn the spirit oI cooperation and competition. By
squeezing out costs at every stage because oI
proximity and competitiveness, they could create
the most cost-eIIective value chains tomorrow Ior
the company.
. Another eIIective way oI raising its bargaining
power with the suppliers - with respect to quality
and standard oI production may be to register itselI
on a B2B site as a buyer or launching its own B2B
portal. This will open up new avenues Ior the
company in terms oI increase in the number oI
suppliers who can conIorm to the standard oI
production or quality that Lucas-TVS is actually
expecting. Having a membership in any auto-
component part portal will enable the company to
clearly speciIy all its requirements and also reach
out to a larger number oI suppliers who may be
interested in supplying required raw
materials/necessary inputs Ior its production.
. A step that can be taken conjointly with either oI the
policies, as etched out above, can be a well-planned
out education/training oI those suppliers who supply
Ior the maximum needs oI the company. For
example, TELCO has set up 'Supplier Quality
Improvement Teams' to improve the vendors'
systems to ensure that they produce deIect-Iree
parts. It applies a 13-step Quality Improvement
Programme, covering supplier selI-evaluation,
through design validation, to the audit oI supplier
quality.
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Jikalpa

Increasing Emphasis on Exports

The company exports its goods to the US, UK, and
Egypt. However, we Iind that the total volume oI its
exports is only 3.47 per cent oI the net sales Ior July
1999
13
. The company has been giving some thought to
establish export links with Europe. The company can
take major strides to increase its sales in the global
market in the near Iuture by keeping in mind the
Iollowing Iactors:
Auto components imported into India are
subjected to customs duties. Though customs
duties have been lowered in recent years, the
rates are still high by international standards.
The high customs duties, other tariIIs, and
non-tariII barriers coupled with Iast develop-
ing competitive manuIacturing Iacilities are
making more and more Ioreign companies to
enter the Indian market through joint
ventures. This is eIIectively increasing the
competition within the country.
The inIlux oI big multinational competitors
like Bosch, Nippon Denso, Delphi, MICO
and many others waiting in line have in-
creased the competitive rivalry in the domes-
tic industry. In Iact, there are a total oI 257
Ioreign companies with collaborations in
India, which are manuIacturing quality auto
components Ior local and exports markets.
Japan dominates the list oI collaborations
Iollowed by Germany, UK, and USA.
As mentioned in the case, though the pas-
senger car segment in India is predicted to
rise to 3.5 million by 2010 Irom 0.45
million cars in recent times, as per the
report published in Asian Automotive
Industrv, the greatest impediment to this
predicted growth may be the lack oI
inIrastructure
l4
. This Iactor should
consolidate the company's motive Ior
increasing emphasis on the international
market.
Notes
1. Pareto analysis seeks to discover Irom an analysis oI deIect
reports or customer complaints, which "vital Iew" causes are
responsible Ior most oI the reported problems. The old adage
states that 80 per cent oI reported problems can usually be
traced to 20 per cent oI the various underlying causes. By
concentrating our eIIorts on rectiIying the vital 20 per cent, we

The web-enabled 3-D design soItware, devel-
oped by Lucas- TVS can help in increasing the
company's eIIiciency in catering to the varied
needs oI the European auto industry. Europe,
Ior example, has at least 350 car models. For
each model, the customer usually requires
diIIerent designs oI the same item such as an
alternator, distributor, dynamos, etc. By
making use oI this soItware, the company will
Iind it easier to cater to the requirements oI the
customer.
Jol. 25, No. 4, October-December 2000
The two-wheeler market is shiIting towards
Iour-stroke models because oI the stringent
emission norms that have come into Iorce Irom
the year 2000. INEL, being the market leader
in the two-wheeler segment, can take
advantage oI this opportunity as it has already
developed Electronic Ignition System (EIS) Ior
the Iour-stroke model. In the European market,
this will ensure that they have a clear lead over
its competitors.
Conclusion
The case oI Lucas-TVS is a representative example oI
how a company with its visionary CEO, dedicated
workIorce, and incremental investments in technology
can scale new heights. The emphasis on quality,
reliability, and providing ultimate satisIaction to the
customer needs has made Lucas-TVS a case in point.
However, whether it can establish itselI as 'the leader
oI the pack' or not will depend on the way it deals with
the highlighted contemporary challenges.
We Ieel that its current outlook and competitive
strategies in congruence with the suggested measures,
as above, can make it reach an indomitable position in
the years to come.



can have the greatest immediate impact on product
quality.
2. For example, Vikram Cements uses the same procedure to
keep a check op the product quality and reduce deIects
(Majumdar and Majumdar, 1999).
3. Knowledge management is necessary Ior companies
because what worked yesterday may or may not work
75
Jikalpa

tomorrow. Considering a simplistic example, companies

that were manuIacturing the best quality oI products may
became obsolete regardless oI the eIIiciency oI their
processes since their product deIinition did not keep up
with the changing needs oI the market. The same holds
Ior assumptions about the optimal organization structure,
the control and coordination systems, the motivation and
incentive schemes, and so Iorth (Malhotra, 1998). The
Iactor, which is most important Ior creating and
transIerring knowledge, is intellectual curiosity.
However, it is diIIicult to train someone to be interested
in acquiring knowledge and hence the selection oI
employees should be done very careIully.
4. The principal Ieature oI the Indian auto component
industry is that it is a high investment sector oI the
economy with state-oI-the-art technology.
www.autoindia.com/industrv.htm
5. VISTEON, one oI the world's largest suppliers oI
automotive components and systems, gave rave reviews
to STATISTICA Enterprise-wide SPC System in a recent
issue oI the popular French magazine, QUALITE
REFERENCES. JISTEON representatives claimed
"SEWSS is actually only limited by our imagination." In
the process oI redesigning their SPC system and
preparing Ior QS 9000 certiIication, they chose the
STATISTICA/SEWSS system Ior a variety oI reasons
discussed in the article: "SEWSS is really Ilexible, and we
could perIectly match the soItware to our current system
in a very easy and quick way: each entry is
customizable(operator's name, lot number) which allows
Ior very detailed analyses oI the process variations. The
extensive tools that are oIIered in SEWSS (DOE,
multivariate analyses) were also an important aspect oI
our choice." VISTEON is clearly more than pleased with
their choice, saying "As oI today, our system grows very
quickly, and is not limited by our soItware."
6. In November 1997, MUL, with the assistance oI S
Nagpal, TQM Advisor, (IT), handpicked nine oI the
company's non-competing vendors, including Lucas-
TVS, to Iorm Cluster One. A year later, in October 1998,
there was such a leap in their perIormance levels that they
Iormed Cluster Two on the same lines.
7. However, Ior this purpose, it is very necessary to have
common objectives in a cluster. For, iI these diverge, then
sharing best practices becomes next to impossible.
8. Says S K Birla oI NEI (Cluster Two): "The transIer oI
ideas and experiences and the commonality oI purpose
lead to a speedy change process, which may not have
been possible alone. This generates improvement across
the cluster."
9. Says Nagpal oI CII: "We have had phenomenal response
to the success oI these clusters. The objective now is to
spread it across Iunctions and industries. "
10. Says T V Subramanian, a Chennai-based management
consultant: "The heart oI supply chain management is the
supplier-vendor relationship. The closer and more
dependent they are on each other, the better is the
outcome..."
11. Wipro Peripherals selects only vendors located within 50
kms oI its plant, cutting transport-costs.
12. For example, Hero Cycles (Dubey 1999a) reaps the
beneIits oI low-cost and JIT inputs Irom suppliers around
its manuIacturing Iacility at Ludhiana. Most oI them, in
Iact, belong to one local community, the Ramgarias,
renowned Ior their mechanical expertise and thriIt.
13. This is quite a low Iigure compared to the industry
average, which is around 20 per cent oI its production
over the last Iew years. www.autoindia.com. Also reIer to
Appendix 1.
14. As mentioned in the case, the parking Iacilities, roads,
etc. are hardly developed enough to handle this kind oI
mushrooming load in India. .
References
Dubey, Rajeev (1999a). "Beyond Bargaining: Smartsourc-
ing Your Costs," Business Todav, January 7-21.
Dubey, Rajeev (1999b). "Clustering Ior Competitiveness,"
Business Todav, 22 April.
Johnson,G and Scholes, K. (1997). Exploring Corporate
Strategv, Hemel Hempstead: Prentice Hall.
Kumar, Bharat (2000). "Beyond 3-D design," Business Line,
21 June.
Jol. 25, No.4, October-December 2000
Majumdar, Nanda and Majumdar, Rakhi (1999). "TCM
the TQM Way," Business Todav, January 7-21.
Malhotra, Yogesh (1998). "Knowledge Management, Knowledge
Organizations and Knowledge Workers: A View Irom the Front
Lines," Maeil Business Newspaper, Korea, 19 February.
Naidu, Rajeev (1999). "Recovery in Parts," Business Stand
ard, 14 June.
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Websites
http://strategies.ic.gc.ca/SSG/dd76216e.html
http://wheels.indiainIo.com/autoexpo/ story.html
www.Lucas-TVS.com
www.ariba.com
www.indiamart.com
Appendix 1
The current export profile of the company is diversiIied to Europe and America
as follows:
Exporr Customers
Helwan Diesel Engg Company
Lucas Electrical, UK
Deleo Remy Prestolite
Electric Ltd
AIter Market
Countrv
Egypt
UK
USA
USA
USA/UK
Over the past decade, both the nature oI customers Ior the
export market as well as the export destinations oI the auto
component industry have been undergoing considerable
change. From being exporters mainly to AIrica and South
East Asia, the major destinations Ior auto components have
The major countries for export are:
Export Continent
Europe
Countrv
Germany, France, Italy, Neth-
erlands, Spain, Sweden, UK USA,
Canada, Brazil, Mexico, Colombia
Singapore, Sri Lanka, Malaysia,
Indonesia, Bangladesh, Nepal,
Japan
Egypt, Kenya, Ghana, Nigeria.
South AIrica
Australia
America
Asia
AIrica
Others
Lucas-TVS Limited: Capabilities
Analysis
Haribandhu Panda
Associate ProIessor
Institute oI Rural Management, Anand
First Phase: Proactive-Incremental
Approach


The Iirst stage oI the journey (1985-91) oI Lucas TVS
towards manuIacturing excellence was a proactive-
incremental approach to strategy development.
During this stage, the company had simpliIied
material Ilow, introduced cellular manuIacturing,
created team structure, provided cross-training to
work Iorce, and introduced world-class product
introduction system through in-house design. The
strategy implementation started with a solid
Ioundation oI mutual trust and good management-
employee relation. Although there has been a time
delay oI two years, the implementation oI strategy in
the Iirst stage can be termed successIul considering
the processes Iollowed, change agents used, and the
Jol. 25, No.4, Dcrooer-0ecemoer 2000

outcome (Exhibit 7 oI the case) achieved. In this stage,
the company was Iollowing a low-price strategy that
required tight cost control, detailed reporting, highly
structured system, and quantitative targets. To achieve
the above strategy, the underlying competencies that
the company developed included process re-engi-
neering and low-cost distribution. The investment was
also marginal.
Second Phase: Proactive-Transformational
Approach
Considering the nature oI industry environment aIter
liberalization (competition Irom the new and existing
players, reduction in customers' vendor base, high
unused capacity with the component manuIacturers,
increasingly demanding customers, opportunity oI
global auto market), the second stage oI the journey that
starts Irom 1999 cannot be a continuation oI the same
change process. What is required at this stage is
proactive-transIormational change. The company needs
to Iollow a strategy oI Iocused diIIerentiation. It will
require looser control, simple reporting, strong
coordination, and productivity-based incentives.
77
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The company requires competencies in the area oI new-

product development, product design, marketing,
developing a spirit oI inquiry and research among
employees, and corporate image building. They should
move up Irom a strategy oI technology Iollower to
technology leader, i.e., moving away Irom playing the
role oI made-to-order to partner-in-production oI Iinal
product (automobile). As a key actor within the value
addition-constellation, their emphasis has to be on
IulIilling all the manuIacturing objectives (cost, quality,
timeliness, Ilexibility, and innovativeness)
simultaneously. There has to be a closer
link between manuIacturing strategy and man-
uIacturing objective through technological capability.
Table 1 provides a possible Iramework Ior identiIying
the technological capability (against each
manuIacturing strategy) that is necessary to achieve the
desired manuIacturing objective. The list oI
technological capabilities necessary Ior Lucas-TVS in
their second stage change management journey is
presented in Exhibit 1.
Technological gatekeepers must be developed
within the company. Besides primary technological
capabilities such as research, design and engineering,
production and servicing, supplementary
Table 1: Technology Capability - Manufacturing Strategy - Manufacturing Objective Matrix
Manufacturing Strategv Manufacturing Obfective
Deliverv Time Flexibilitv
Cost
Q,ualitv
lnnovativeness
1. Facility
2. Capacity
3. Vertical Integration
4. Process Technologies
5. Product Scope and
Introduction oI New Product
6. Human Resources Management
7. Quality Management
8. ManuIacturing Organization
and Managerial InIrastructure
9. Supplier Relations
Note: The manuIacturing strategy aIIecting the manuIacturing objective has been shaded. The appropriate technological
capabilities necessary to achieve the manuIacturing objective are indicated in the shaded cells.
DEC : Design and Engineering Capability
SMC : Strategic ManuIacturing Capability
RDC : R&D Capability
HRC : Human Resource Management Capability
PRC : Production Capability
SMC : Strategic ManuIacturing Capability
IMC : InIormation Management Capability
Vol. No.4, October-December 2000
Vikalpa

capabilities such as acquiring (technology, raw material,

Iinance, human resource) and inIormation system and
networking must be developed. At this stage, the
company has to invest in new manuIacturing
technologies that will be appropriate to the desired
quality, Ilexibility, and timeliness oI product delivery.
Inhouse skill should be developed to evaluate such
technological investments. Capability to manage
linkages in the value chain with OEMs, service
providers, R&D organizations, and academic
institutions has to be strengthened. Suppliers need to be
brought into the Iold oI JIT system.
Exhibit 1: List of Technological Capabilities Necessary for Lucas-TVS in their Second-stage
Change Management
R&D Capability (RDC)
RDCOl Capability to develop new products/processes.
RDC02 Capability to carry out improvements in existing products/processes.
RDC03 Capability to introduce products rapidly and Irequently.
RDC04 Capability to build and develop intra-organizational linkages (design, marketing, and manuIacturing) .
Design and Engineering Capability
Capability to identiIy, assess, and select process type and manuIacturing technology.
Capability to undertake process engineering including Iacility layout planning and degree and type oI Iocusing.
Capability to select appropriate size considering cyclical demand and in anticipation oI Iuture demand.
DECOl
DEC02
DEC03
DEC04
Capability to plan, monitor, and control design and engineering activities.
Production Capability (PRC)
PRCOl Capability to achieve design and conIormance quality, to allocate responsibility Ior quality management, and to use
suitable decision tools and measurement systems.
PRC02 Capability Ior carrying out preventive, corrective, improving, and predictive maintenance.
PRC03 Capability to decide on materials management, production planning, scheduling, and control.
Strategic Manufacturing Capability (SMC)
SMCOl Capability to use capacity decisions to aIIect the capacity decisions oI the competitors.
SMC02 Capability to design and control an internal mechanism that will be more eIIicient than the market it replaces.
Capability to assess the cost oI business to be acquired, degree oI supplier reliability, and the transaction cost oI
contracting through market compared to non-market mechanism.
SMC04 Capability to decide between competitive and cooperative approach as regards subcontracting.
Information Management Capability (IMC)
IMCOl Capability to provide inIormation support and building inter-organizational linkages.
Human Resource Management Capability (HRC)
HRCOl Capability to plan and implement human resources development.
HRC02 Capability to develop incentive system based on productivity and innovation.
SMC03
Jol. 25, No.4, October-December 2000
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Lucas-TVS Limited: A Comparison with

Nippon Denso
G H Rahalkar
Director, QC Services
Pune
The management oI Lucas-TVS deserves praise Ior
their painstaking eIIorts in changing an old Iactory
culture to the modern culture required Ior
transIormation in manuIacturing. The achievements in
productivity increase and quality improvement can be
considered as one oI the best in the country.
Lucas-TVS stands out as an exception since most
other organizations in the country have taken the route
oI increasing assets and man-power or large scale
subcontracting to meet the increased demand in the
market. Typically, during the period 1983 to 1995,
almost every organization signed a productivity-linked
wage agreement with the unions. However, when
measured with detailed analysis oI hours per unit, there
has been very little real improvement. When we look
at this situation in the light oI new investments in CN
C machines, automation, and conveyorization in many
industries, it is a moot point whether there was any real
improvement in the productivity oI comparable Indian
industries during 1983-95.
Against this background, the experience oI Lucas-
TVS is deIinitely heartening. It proves that whatever
Schonberger, David Hutchins, Shiego Shingo, and
Taiichi Ohno have written in' their classic books is
equally applicable in Indian organizations given the
top management commitment and perseverance. One
can saIely conclude that, without this change, the
sound oI death bells making rounds in several com-
parable Indian organizations would have been much
louder at Padi Iactory, which now Iaces the challenge
Irom global purchasing being pursued by Indian
automobile industries.
Since the case is extremely well-written and selI-
explanatory, only one topic is selected Ior comments
which is that the explanation on quality initiative is
rather inadequate. By now, most Indian organizations
have come out oI the
Jol. 25, No.4, October-December 2000
euphoria and hype generated by receiving ISO 9000 or
QS 9000 certiIications. Lucas-TVS obtained these
certiIicates in the early days oI these certiIications.
A much more detailed analysis oI the quality
systems and structures would have immensely
beneIited the readers. Details on the Iollowing points
would have helped understanding oI quality initiatives:
Role oI management in quality.
The concept oI quality as pursued in Lucas
TVS - is it still inspection based as in most
Indian organizations or have they changed to
process control as is routinely practised in
advanced countries?

How many operations have achieved
process capability index (Cp/Cpk ~
1.33)? How are these operations monitored
on a day-today basis? What is the role oI
operating executives and top management
in maintaining process capabilities? How
does top management receive Ieedback on
process control activity and how do they
intervene? How are the back-up systems oI
precautions (preventive maintenance) and
actions (standard operating procedure,
charts, and worker certiIication) handled at
the workplace?
What is the ratio oI inspectors to operators?
Is there any Iinal inspection Iunction Ior
lots? Are these lots passed by checking
process capability or by conIormance to
standards? How are lots received Irom
vendors checked? What is the vendor
quality improvement system?
The case gives data on rejection and scrap
which in 1998 was 2.5 per cent rejection
and 1.5 per cent scrap. This is about 30 per
cent oI 1985 Iigures. Although these
Iigures look good by Indian standards, the
industry worldwide has stopped measuring
quality in terms oI percentages oI rejection,
rework, and scrap. There is more emphasis
these days on PPM (parts per million)
values which are not actual numbers
rejected but indicate only the possibility oI
rejection, depending upon the control level
established on the processes.
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Today's acceptable. world-class is 3.4 PPM.

Data on customer complaints and warranty
claims on Lucas-TVS products and improve-
ment in this during the period oI review
(1985 to 1998). Elaboration oI how these
complaints are handled, how processes or
designs are modiIied, the response time Ior
modiIications, how actions actually take
place and how product testing is carried out
to establish improvement due to
modiIications in terms oI higher expected liIe
in use.
Use oI modern concepts and techniques such
as QFD (Quality Function Deployment),
routine customer surveys, customer satisIac-
tion index, and its monitoring by the top
management. How Lucas-TVS benchmarks
its products with world-class products in
terms oI product liIe, trouble Iree perIorm-
ance liIe, international cost and competitive-
ness, delivery perIormance, etc.
The above list is not complete. However, this is only
to show how deployment oI quality Iunction can be
carried out in organizations. An analysis oI these and
beneIits accrued due to such deployment would have
undoubtedly helped readers develop an insight into
how a leading organization handles its quality
Iunction.

~
A Comparable 1apanese Case
A comparable case oI Nippon Denso, a manuIacturer
oI almost similar items, was presented at the
International ConIerence on Productivity and Quality
Improvement, organized by the Japan Management
Association at Tokyo, Japan in 1982. The case
presented by Mr Katsuo Aoki can be reIerred to in the
proceedings oI the seminar in section A-4-3. This case
explains clearly how productivity UIT approach) and
quality (as pursued by the process capability
approach) gave tremendous beneIit to the company. It
explained in detail how JIT and quality control were
applied. The company has reported results Ior starter
assembly.
Jol. 25, No.4, October-December 2000
Period: 195 to 198
Productivity increase - 12 times (Lucas-TVS
improved three times during 1983-1998}.
Reduction in customer complaints - Index 100
to 8.
For all products oI Nippon Denso, customer
complaints rate index reduced Irom 100 in 1965 to 20
in 1980.
It is anybody's guess whether Nippon Denso's
condition in 1965 was comparable or better than
Lucas-TVS in 1983. Even iI we assume that it was
comparable, Nippon Denso in 1980 was several times
ahead oI Lucas-TVS in 1998, in terms oI productivity
and quality in manuIacturing.

Considering that Nippon Denso supplies to Toyota
Motor Company which in 1980 was the world leader in
manuIacturing excellence, this indicates the extent oI
improvements required to achieve world class. This also
gives us the gap in manuIacturing between Indian and world-
class organizations. Nippon Denso is not an isolated example.
Many other organizations such as Toyota
1
, Cannon
2
, Fuji
Xerox
3
etc. have achieved comparable or better results which
are well documented. During the last decade, American
industries such as Ford, Motorola, General Electric
4
etc. had
made great progress. These eIIorts are also well known.

Most Indian industries lack global Iocus. Our thinking
and culture is the product oI old protected environment. Now,
with the threat oI global competition, companies having a will
to survive will have to change things in a hurry.

The greatest hurdle Iaced by Indian organizations is oI
outdated and restrictive labour laws which have developed
inertia on a massive scale. The removal oI this hurdle
appears imminent since there is a realization at the highest
level oI government that the change in labour laws will
actually open the doors to increased investment and
employment. II Indian organizations are Ireed Irom this
restrictive hurdle, it will open up new vistas oI
manuIacturing creativity. The Lucas-TVS example should
serve as a guide post Ior this to happen.
81
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References
1.
Toyota Production System - Taiichi Ohno, Productivity
Press, 1988.
2.
Canon Production System, Japan Management
Association, Productivity Press, 1987. Canon
Lucas-TVS Limited: Past, Present, and
Future
N Ravichandran
Faculty
Indian Institute oI Management, Ahmedabad
Introduction
Lucas-TVS Limited is a description oI the productivity
improvement path adopted by an auto component
manuIacturing Iirm during 1984-1998 with an aim to
enhance its competitiveness. What is achieved in the
context oI Lucas-TVS is undoubtedly impressive;
however, this implementation raises several managerial
concerns and important issues which are not only relevant
to Lucas-TVS but in general to the Indian manuIacturing
organizations to enhance their competitiveness.
This diagnosis is organized in terms oI what has been
achieved in Lucas-TVS, what enabled these changes, and
the challenges ahead.
What Has Been Achieved?
. Lucas-TVS is the story oI transIormation (over a
span oI 15 years) oI a process-based plant to a
plant with higher productivity levels.
. This transIormation has been relatively smooth and
inexpensive but prolonged.
. This transIormation has been Iacilitated by a
committed leadership, involved senior management
team, cooperative employee union, and dedicated
workIorce.
. This initiative has resulted in a Iive times increase in
sales (in value terms), three times increase in
production volume, 15 per cent reduction in
employee strength, six times growth in sales per
employee supported by a Iour-Iold increase in
worker compensation.
Jol. 25, No.4, October-December 2000
improved productivity by six times in Iive years (1976-
1981 ).
3. Fuji Xerox improved productivity by ten times
in Iive 'years (1981-1985) Masaki Imai, Kaizen.
4. Jack Welch and the GE Way by Robert Slater,
McGraw Hill Publications, 1999.
. The prime Iocus oI the change process has been on
the relayout oI Iacilities and regrouping oI machines
to create a product-Iocused layout with a cellular
manuIacturing architecture. This revised
conIiguration resulted in substantial reduction in
WIP, manuIacturing cycle time, and improvements
in quality and productivity.
. The strategic advantages oI this transIormation Ior
Lucas-TVS have been improvement in product
quality, enhanced resource productivity (employee,
machine, and material), and, hence, superior cost
advantage position. By adopting "Nagare" cell as oI
1994, the plant was attempting to improve its
perIormance on Ilexibility (both in volume and
variety).
. While the reorganization in terms oI plant layout is
complete, employee education and training, small
group initiatives, suggestion schemes etc., which are
organizational enablers to sustain the manuIacturing
competitiveness oI Lucas-TVS, have just began.
They are experiencing either slow growth or
decline.
. The product quality perIormance oI the company
holds the maximum potential Ior improvement.
What is Needed
In order to strengthen its position in the emerging
competitive environment, Lucas-TVS need to work on
several dimensions. Some oI these dimensions and
associated managerial challenges are outlined below:
Quality: There is a need to reduce product quality gap
in terms oI consistency and conIormance. The goal is
to achieve 150 PPM Irom 240 PPM. This will require
superior process capability, moderate automation,
revised work methods, and possibly investments in
technology. Bold management objectives, dramatic
shiIt on the Iocus and content oI the change process,
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Jikalpa
I

strong executive leadership, and organizational

initiatives would be critical to achieve this.
Aew Product Development (APD). NPD would be
more important when the process oI economic
liberalization in the country is complete and
competition is intensive. This is an area which
would need urgent and immediate attention within
Lucas-TVS. The organizational process towards new
product development, manpower quality, control
systems, and empowerment mechanisms would need
a complete revamp.
Jendor Quality: The quality initiatives and
productivity improvement plan so Iar has been
conIined to the plant. The vendors have not been
involved. Upgrading them on quality (process,
product, technology, methods, equipment,
manpower, operating systems, and delivery
mechanism) would need both managerial and capital
investment, involvement Irom the top and senior
management team, and vendor cooperation. The
larger management concern is how to Iormulate,
inIluence, and execute productivity improvement
activities outside the boundaries oI Lucas-TVS.
Worker 1raining. So Iar, training in Lucas-TVS has
been need-based. The quantum oI training is kept to
the minimum. Training is positioned as a supporting
mechanism rather than as an enabling inIrastructure.
Accordingly, only moderate attempts are made to
develop the Iull potential oI employees and upgrade
their proIessional skills. The key management
challenge is how to evolve training in Lucas-TVS
Irom a supporting activity to an enabling role. The
implications oI such a change would include
investment in training inIrastructure, training
exposure to employees both in terms oI variety
content and in depth, and Iormal recognition to
training within the organization.
Information 1echnology 1rends. The changes and
advances in inIormation technology would provide
Jol. 25, No.4, October-December 2000
opportunities as well as challenges to the way in which
business is conducted. More speciIically in the context
oI companies like Lucas-TVS, content, style, and Iocus
oI supply chain would be completely redeIined. Taking
advantages oI such opportunities and challenges would
require a redeIinition oI business Iocus, appropriate
investments in inIormation technology, and ability to
managerially cooperate and coordinate within and
outside the organization. Given the past perIormance
and implementation experience at Lucas-TVS, it is
tempting to attempt such a transIormation. However,
the concern is, given the past legacy, would Lucas TVS
be able to manage this eIIectively?
Road Ahead
In a sense, Lucas-TVS is a story oI a successIul
implementation experience oI a productivity
improvement plan with moderate budget, supported by
a conservative implementation style and an
understanding and cooperative people environment. At
best, this implementation has enabled the company to
deIend its competitive position on cost and productivity
and resulted in modest improvement on quality and
Ilexibility dimensions. The changes needed to compete
in an emerging economic and competitive environment
are Iar more challenging and steep. The company
would need a bold vision. It should be willing to
commit signiIicant resources towards IulIilment oI such
a vision. Empowering employees and enabling them by
education and training would be a pre-condition to
build a sustainable competitive position. Finally, creat-
ing an organization culture conducive Ior continuous
learning and rapid perIormance improvement would be
vital. These issues are relevant and important not only
Ior Lucas-TVS but Ior several Indian manuIacturing
organizations who would like to retain their
competitive lead in the domestic market and aim to
make their presence Ielt in the global market.
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Lucas-TVS Limited: Analysis of the

1ourney
G Sunderraman
Vice- President
Supply Chain & Logistics,
Godrej-GE Appliances Mumbai
Case Background and Introduction
The combination oI manuIacturing excellence and TVS
group is an established industry benchmark. As
practising operations managers, we have heard and read
about the meticulous detailing and the visionary
leadership in operations excellence provided by the
senior management oI TVS group. The exemplary com-
mitment, personal involvement, and the Ioresight oI the
top leaders is legendary.
Yet, in the world oI management, there is nothing
everlasting and one has to look Ior scope to improve
perennially. This analysis is done Iocusing on the
primary need to distil the wisdom Irom the years oI
experience gathered in manuIacturing Irom the case. At
the same time, there is a need to view manuIacturing in
the larger strategic context oI the emerging global
competitive Iorces and the consequent supply and
demand side dynamics. This is particularly acute in the
automotive industry, where Lucas-TVS is operating in.
First, we recapture the key highlights and signiIicant
strengths oI the excellent journey oI Lucas-TVS.
The Foresight and Early Diagnosis
Back in 1985, the management oI Lucas-TVS identiIied
the need to change the paradigm oI manuIacturing.
With the entry oI Maruti, they viewed the emerging
auto component industry as a challenging opportunity.
They realized the need Ior reduced inventory, reduced
cycle time, smaller lot sizes, rapid changeover, high
quality and reconIiguring the manuIacturing operations
as the key to competitiveness. They had rightly
diagnosed the need Ior a cross-Iunctional team-based
approach Ior improvement. Finally, they also stressed
Jol. 25, No.4, October-December 2000
on the importance oI workmen involvement and
participation as the key ingredient Ior successIul
implementation oI such "turnaround in anticipation"
and paradigm shiIts. The management had, indeed,
anticipated the globalization process almost a decade
ahead oI the real market opening!
Phase I Strategy and Actions for Manufacturing
Improvement
The top management Iormed a cross-Iunctional apex
team consisting oI Murugan, Ravichandran, and Mohan
Raopeople with excellent track record and
credibility. The team studied the practices in UK and
also analysed the product market and operations context
oI Lucas TVS. The direction oI solution rightIully
hinged around the layout change Irom process and
activity-centered work Ilow to product-centered Ilows
in manuIacturing. This involved systematic shiIting and
relocation oI over 100 machines and work stations. The
work was done on weekends without disturbing the
regular production, spread over a Iive-year period. The
layout eliminated the criss-cross movements oI material
across the plant and reduced space requirement
dramatically. Simultaneously, it led to restructuring the
work allocation. The concept oI long assembly line was
replaced with product-Iocused component and Iinal
assemblies. Each workman combined many tasks and
undertook a larger chunk oI work content. This
leveraged productivity gains by multi-tasking with
shorter lead times and smaller batch sizes.
The "hardware" oI layout solution had to go hand
in hand with the "soItware" and "human ware." The
speciIic training inputs Ior task skills and supporting
control and statistical skills were systematically
provided to all the relevant workmen. In a larger
context, the cultural dimension was handled by "mind
set changing" direct communication addresses to all the
members oI the workIorce. These senior management
talks were critical in getting the required buy-in oI the
entire workIorce.
Supporting Initiatives
The hard core layout solutions would not work by
themselves. They were supported by a series
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Jikalpa

oI measures and initiatives to build skills and

attitudes oI the workIorce. The workers were
imparted training on Ilow charting, SPC, preventive
maintenance, Ilow production system, use oI
Kanbans, 5S, QFD, FMEA, Kaizen, DFM etc. An
exclusive training set up was established at Taramani
and Dr Parnaby personally Iacilitated the transIer oI
learning to successIully transIorm the culture. A team
oI ManuIacturing Systems Engineers (MSE) was
created in a new training centre at Padi Ior all levels
to support the initiatives Ior manuIacturing system
changes.
Small Group Activities (SGAs) were actively
promoted to create an environment oI continuous
learning and improvement among workmen. Their
weekly meetings created a platIorm Ior participation
and led to dramatic productivity and quality
improvements. The SGA was supported well by
constant communication, sharing, and a sense oI
contribution and recognition by publishing
newsletters in Tamil.

Phase II Strategy for Manufacturing Excellence
AIter a lull oI a year or two in 1991-92, the second
phase oI changes was rolled out. The lull could be
attributed to industry recession and also a certain
amount oI complacency and laxity in drive so Iar.
In the second phase, the task Iorce started, Irom
where it leIt in the Iirst phase, to drive complete
modularity hierarchically down to individual
tasks Irom the highest level oI company, site, unit,
module, and cell. They drove the Ilexibility,
productivity, and product Iocus to its logical
conclusion by Iorming cells "Nagare Cells" as the
Japanese would call them. The cells were designed
by the MSE teams aIter meticulous analysis oI
work content, assembly sequence, and material
Ilow. The transIer and process batch sizes were
systematically and progressively reduced by
building required capabilities in manuIacturing and
driving single piece Ilows in the Nagare Cells.
The "U" shaped layouts were designed such that,
by and large, one multi-skilled workman manned the
speciIic sequence within a module
Jol. 25, No.4, October-December 2000
with the least amount oI movement. In other words, the
machines were centered around the worker to minimize
worker movement and the material Ilows. Such layouts
are also called "rabbit chase" when more than one
operator operates the "U" layout. Simultaneously, the
low cost automation was also driven to improve
productivity, quality, and reduced cycle times.
Since 1992, the company also put in eIIorts to
streamline quality initiatives through the adoption oI
ISO 9001 certiIication activities. The thrust was on
building and sustaining systems Ior quality and a
certain disciplined process management regimen. In
course oI time, the company received the QS 9000
certiIication as mandated by major automobile
manuIacturers world-wide.
Since 1995, the company stressed on the JIT
deliveries to customers as Maruti and other OEMs
demanded dramatic reduction in inventories and
smaller lot sizes. The required warehousing and
regional distribution was also streamlined.
The work assignments were synchronized to
customer demands by aligning the "takt" time. The
staIIing was also driven by the "takt" time. Deployment
oI workers was done on weekly basis and production
rates were changed even daily to respond to customer
demands.
In all, these eIIorts contributed signiIicantly to the
productivity gains and customer satisIaction
simultaneously. Exhibit 7 oI the case details the
improvements over the entire period spanning both the
phases oI excellence drive.
The management oI Lucas-TVS got the required
buy-in Irom the union and also incentives were oIIered
Ior the transIormation by sharing the gains as cell
allowance. The individual workers were suitably
trained Ior skills, quality systems, and ISO 9000. The
management created a great sense oI ownership in all
the members oI the workIorce, and systematically
empowered them to drive improvement and take greater
control oI what they do. The visibility oI their result
and the sense oI pride in contributing a visibly larger
part to the Iinal product boosted their morale and
motivation.
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Some Lessons to Learn from Their 1ourney

In all, the journey had many success ingredients
required to make a comprehensive technical change
resonate with deeper culture change. Here are some oI
the signiIicant strengths and key lessons that one can
learn Irom the journey that Lucas-TVS went through.
. Focus on the Content as well as the Process of
Change. The management oI Lucas-TVS balanced both
admirably well. The soIter issues oI change
management, involvement, empowerment, and the hard
core process layouts went hand in hand. This is
essential Ior successIul turnaround in India where the
resistance Irom the workIorce is natural Ior such large
scale changes. The paradigm change is both a technical
and a cultural revolution.
. There is no large scale change without leadership
commitment and cross-functional team-based
"drivership". While the vision, culture, and the
resourcing dimension get addressed by the leadership,
the competency development and the action Iocus
come Irom the team-based drivership. Lucas-TVS
demonstrates the balanced change leadership in Balaji
and his core team.
. God lives in details. The concept oI cellular
manuIacturing and "U" layout or product-centered
Ilows is not rocket science. However, the meticulous
analysis required and patient and systematic
Iormation oI over 200 cells across the whole plant
are rarely Iound in Indian companies. Such detailing
and perseverance is indeed a useIul lesson to learn
Irom Lucas-TVS.
. Change needs to be supported with extensive
training. There is no transIormation at just the
conceptual level. TransIormations are driven
through actions. And actions need skills and
competencies. Change and improvements occur as
the workIorce gets more competent through training.
Lucas-TVS provided a comprehensive package oI
inputs to the entire spectrum oI employees to make
them multi-skilled.
Jol. 25, No.4, October-December 2000
. Greatest benefits occur bv attacking the roots
widelv. Lucas-TVS eradicated the concept oI line by
making deep and permanent changes in the very
layout oI the plants. The cell concept and "U"
clusters were widespread. There is no signiIicant
gain iI cell, lean, and JIT concepts are implemented
in isolated experimental islands. The company
spread the concept and execution across the entire
plant.
. Think revolution, implement in evolutionarv steps.
Lucas-TVS managed the entire changeover during
week-ends. It, no doubt, took longer, but it ensured
business continuity and allowed lot oI learning to be
leveraged with each packet oI implementation.
Besides, the physical changes remained in harmony
with typically slower cultural readjustment.
. Change before the crisis forces change. Lucas-TVS
anticipated the pressures due to competitive
dynamics a decade ahead and moved rapidly
towards world-class production principles, methods,
and layout. The change is lasting when there is
suIIicient energy in the system to drive
improvements pro actively. Under Iorced
emergency changes, the systemic psychological and
physical energy is drained in addressing crisis.
Lucas-TVS oIIers an important lesson to aspiring
change leaders.
Some Reflections on Emerging Global
Dynamics and Sustainability of Competitiveness
While the journey so Iar is exemplary and demonstrates
comprehensive evidence oI success, there are certain
Iacets that the case documentation does not touch upon.
These aspects become vital in the emerging rapid
globalization oI markets. These issues extend beyond
manuIacturing into the business and the strategy
domain. Even assuming Lucas-TVS does in Iact
address these issues and the case writers have
speciIically chosen to Iocus only on the hard core
manuIacturing issues, the author would still like to
highlight the same to the readers to make
manuIacturing "come alive" in the larger context oI
business and operations strategy.

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Emerging Strategic Context

The business boundaries are extending beyond the
country territories. With open economy and seamless
spread oI global businesses, there can be threats (and
hidden opportunities!!) Irom any corner oI the world
Ior auto ancillaries in India. These can be potential
suppliers oI raw material and components or even
Iully developed parts or markets Ior components and
parts anywhere in the world. Lucas-TVS Iinds itselI as
just a part in the global supply chain. Its upstream
partners can Iind more lucrative business in the world
market or its downstream customers can Iind world-
class, world-spread suppliers. Either way, the current
cost, volume, and proIitability equation can be Iragile
and may get drastically altered.
The second dimension is the E-Business and the
"webbed-economy." These demand a complete re-
look at inIormational Ilows and "inIormational value
add" in the supply chain as distinct Irom "material
value add." The third dimension is the consumer
expectation and competitive dynamics in auto
industry. These are changing continuously. These will
Iirst aIIect the end product makers and then spread up
stream to component ancillaries. In rapidly
'commoditizing markets Ior products like
automobiles, "novelty" and "customization" will be a
key diIIerentiator. Besides, the countries and
consumers alike will drive towards "eco-Iriendliness."
The imperative would be clearly in the direction oI
rapid and continuous changes in product and
component concepts, architecture, conIigurations,
technology, and material composition.
And, Iinally, with gross proliIeration oI
component variety and even shorter demand response
time, the total supply chain cycle times and
changeover times will be critical. The cycle time and
"timing" oI introduction oI changes is as critical as the
cycle time Ior order execution. The other Iactor will be
wider spread oI physical markets and supply sources
across the globe. The cost oI logistics will be a
signiIicant part oI the total cost structure. Distribution
and logistics will be a critical success Iactor and a
powerIul diIIerentiator.
Jol. 25, No.4, October-December 2000
In such a competitive scenario, manuIacturing
excellence is a small part and is largely transparent to
the buyers. What matters is the demand chain. The
cost, quality, and responsiveness oI the entire supply
chain drives competitiveness. The "material value add"
and diIIerentiation is only a part oI the total "supply
chain value add" and diIIerentiation. Lucas-TVS needs
to reIlect more deeply on these aspects as Balaji seems
to have already sensed in the concluding parts oI the
case. Some oI the issues and questions that conIront
Lucas-TVS are brieIly summarized below:
. Crowth and Competitiveness: How will the auto
ancillary market grow in a stagnant or Ilattening
Indian auto market growth? What will eventually
happen when the constraint is no more in the
manuIacturing domain? Any Iurther improvement
will at a best add marginally to the overall bottom
line. At worst, such improvements will turn out to
be counter productive. The productivities will have
to come in terms oI demand creation and demand
management.
. Clobal Markets and Benchmarks: There is a need
also to look beyond India to global markets. Will
Lucas-TVS be competitive in the world market? Are
the economies oI scale and scope compatible? Are
the product and process technologies competitive
and world class? How are the cost and price
structures oI the products? Is the total supply chain
benchmarked against the global sources Ior these
components? Are the quality and reliability
comparable to world standards?
. 1echnology and Manufacturing Engineering
Development: How contemporary is the tech-
nology? How do the development eIIorts and
resources stack up against the world players? How
much "electronization" has Lucas-TVS done? Have
they systematically developed and nurtured the
emerging technology competencies Ior components,
products and industry? How well has the company
understood the emerging "energy," "emission" and
"disposal" demands? How are the latest
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design competencies nurtured that would interIace

the internal demands oI the manuIacturing and
external demands oI the consumers and auto
makers? Has the layout been designed or modiIied
Ior rapid product introduction Ilexibility as against
just the Ilexibility Ior the Iluctuating volumes oI the
established conIigurations? In simple terms, is
Lucas-TVS driving innovations?
. E-Business: How much has Lucas-TVS automated
the transactional and inIormational Ilows? How well
are the bar-coding and scanning technologies used
to capture data at the source? Have the transactional
processes been re-engineered in the light oI the
available "web," both internally as well as Ior the
external partners? Are the partners in the entire
supply chain wired? How big are the "white collar"
batch sizes and lead times? How much has been the
productivity gains oI the "white, silver, and gold
collar" jobs? Are the scheduling and planning algo-
rithmsor more likely heuristicsbeing evolved
Ior rapid introductions and extinctions oI products
in the "webbed" supply chain? How much oI
collaborative commerce is envisaged to tie in the
total supply chain partners in the entire "liIe cycle"
oI the oIIerings?
. Strategic Outsourcing & Supplier Development:
Can Lucas-TVS continue with manuIacturing the
way it is doing currently? Would the
competitiveness sustain without outsourcing the
non-core competencies? How are the suppliers
developed as partners? Will players Irom China
with low labour cost and cost oI capital allow such
"in-sourced" plants to Iunction proIitably? What
about the outsourcing options Ior services? Are the
logistics and distribution or back-oIIice operations
viewed as potential candidates Ior outsourcing?
How much oI supplier competencies could be
leveraged in product and component development?
Can outsourcing help exploit advantage in a
Iragmented competitive auto component industry
where Lucas-TVS contributes management and
leadership and not "raw manuIacturing muscle
power"?
Jol. 25, No.4, October-December 2000
. People Development: Can Lucas-TVS sustain a
work Iorce oI 2000 in this industry? Is there
suIIicient long-term growth to support such a large
Iamily? How are the costs oI conversion
comparable with the world benchmarks in this
industry? Are the productivity benchmarks
comparable? Are the baskets oI skills oI the
workIorce Iuture-oriented? Do they improve the
"employability"? Is there a systematic approach to
outsource through employees - by creating loyal
entrepreneurs out oI them? On the Ilip side, there is
little recruitment in the past Iew years - will the
large proportion oI workIorce retire in the next Iew
years in a span oI three to Iive years? (A lot oI
companies which recruited "en masse" in early 70s
will Iace mass retirements by 2010!) In that case,
are the competencies preserved and nurtured? Is
that the time to view outsourcing?
. Leadership Development: Can Lucas-TVS
sustain with only top management driven
initiatives? Has there been a systematic second
level development? Are there leaders at each level
capable oI carrying Iorward Iocused smaller
Iactories within Iactories? Is there a succession
plan Ior leadership? Is there a succession plan Ior
the union leadership? What is the extent oI
proIessionalism oI the middle management?
. Learning and Sharing: How much oI what Lucas-
TVS learned in the Iield oI manuIacturing
excellence is shared in the group companies? How
are the lessons learnt captured? Can this learning
be replicated elsewhere without the same set oI
leaders and team members? Is the learning
individual-speciIic or is there an organizational
learning? Even within the company, how is the
learning shared to develop competencies?
Concluding Remarks
There are no text book answers to these questions. Nor
is there a prescriptive strategy. But, unquestionably,
the answers extend much beyond the typical
manuIacturing domain. The Iocus so Iar dominantly
conIined to the manuIacturing arena may become
counter productive iI the other dimensions are ignored.
88
Jikalpa

In other words, without the larger perspective, the

island oI manuIacturing excellence may just
evaporate!
The approach that Lucas-TVS can take would be
to make a complete strategic reassessment oI the
unIolding business context. The analysis could cover
the entire spectrum oI strategic choices and their
imperatives. Some oI the sample questions highlighted
above could be explored Ior generating alternatives. In
the absence oI data and perspectives on these issues
Irom the insiders, it is diIIicult to suggest speciIic
strategies, but options in these directions could still be
explored gainIully.
To sum up, the Lucas-TVS journey in
manuIacturing excellence oIIers very useIul lessons
Jol. 25, No.4, October-December 2000
and deeper insights into the Ioundation oI
competitiveness in a dominantly operations driven
"business model." A typical Indian enterprise does
need a Iull dose oI these initiatives to move towards
world class. However, Lucas TVS cannot rest on its
laurels at this point in time. The tasks are complex in
the emerging market dynamics and the unIolding
global "economics." The scope oI excellence must
expand to include many other critical business
processes and aspects. In Iact, in such a larger context,
the manuIacturing excellence will assume a
signiIicantly diIIerent role. And Iinally, as done earlier
in '85 and '92, Lucas-TVS has the option to drive even
the third envelope oI changes proactively, beIore it gets
Iorced by the markets and competitors.
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Jikalpa

Lucas-TVS Limited:
Excellence
towards A 1ourney Manufacturing
Kannan Sethuraman and Devanath Tirupati

The April:June 2000 issue oI had published
a Management Case titled "LucasTVS Limited: A
Journey towards ManuIacturing Excellence" and the
diagnoses was Ieatured in the October- December
2000 issue. In this issue, we are carrying two
additional responses on the case by Nitin Singh and
Vishal Shah and Surendra H Shah and Anil V
Mishra
Jol. 26, No.1, Januarv-March 2001
Build All-round Supply Chain
Effectiveness
Nitin Singh
Student, Fellow Programme in Management
Production and Operations Management
IIM, Bangalore
Vishal Shah
Student, Fellow Programme in Management,
Quantitative Methods and InIormation Systems,
IIM, Bangalore
Lucas-TVS has implemented a series oI manuIacturing-
related innovations since 1984. The shiIt Irom a
regulated environment to a liberated environment has
provided Iurther impetus Ior change and the company
has responded well. The plant has progressed Irom
small group activities in 1984 to single piece Ilow cells
in 1998.
Some salient accomplishments in this journey are:
A shiIt Irom Iunctional layout to product
layout. This has resulted in beneIits in certain
areas. The case cites that the networth and sales
per employee doubled in six years with
negligible workIorce change. Other beneIits
stated are a smoother product Ilow, improved
inventory turns, and reduction in Iloor space
requirements.
A change in the mindset oI the employees. The
company is well positioned to take advantage
oI new ideas since its workIorce has already
seen the beneIits oI adopting and
implementing benchmarking results and other
change initiatives. The employees realize the
beneIits oI continuous improvement and
aiming Ior higher standards oI excellence.
Creation oI a workIorce consisting oI workers
who recognize the beneIits oI multi-skilling.
727
Jikalpa

Increasing importance oI Ilexibility as well as
customization in the company's manuIacturing
strategy.
Salient Issues
Observation oI Exhibit 1 (in the case) indicates that the
company has been successIul in improving capital
turnover rate as reIlected by the ratio Net Sales/Capital
Employed Irom 1985 to 1996. Improved capital
turnover was being utilized Irom 1985-1996 to boost
return on investment. Capital turnover (Net
Sales/Capital Employed) reached a peak oI 2.36 in
1996 but has dropped to 1.54 in 1998. The values Ior
these ratios are given in Table 1. The same proIile is
Iollowed by Net Sales/Gross Fixed Assets ratio (Figure
1). This indicates that the asset productivity oI the
company has been decreasing steadily Irom 1996 to
1998 though the company has increased its investments
substantially. To investigate the phenomenon oI
decreasing asset productivity, we have looked into the
gap oI capital employed and Gross Fixed Assets. This
gap is constituted by a composite oI inventory, cash
and accounts receivable. We Iind that this gap has
increased steadily Irom -1.5 in 1985 to 325.1 in 1998.
Thus, the share oI inventory, cash and accounts
receivable in the capital employed has increased to
325.1 in 1998. This gap impacts capital turnover and
the potential Ior improvement through better logistics
management. More importantly, the proportional
increase in this gap has peaked in 1998 (indicated by
the asset utilization ineIIiciency ratio). Under such cir-
cumstances, the inventory policy, credit policy, arid
working capital management need to be addressed to
bring down this gap and ensure that asset productivity
increases.

Observation oI Exhibit 7 (in the case) indicates
that the perIormance oI the Padi plant has improved
considerably Irom 1985 to 1998 in terms oI
perIormance metrics like space utilization index, sales
per employee ratio, annual production, set-up time, lot
sizing and inventory turnover. The Padi plant has also
seen a reduction in the rejection rates, scrap, and
downtime. However, the sale/capital ratio has
Jol. 26, No.1,Januarv-March 2001
Performance Metric
Net Sales/Capital
Employed
Net Sales/Gross Fixed
Assets Capital
Employed-Gross Fixed
Assets (CE-NS)/CE
a

Table 1
1985 1991 1996 1997 1998
2.14 2.36 2.17 1.94 1.54
2.13 2.62 2.34 2.13 1.73
-1.5 65.8 153.4 238.9 325.1
-.5% 9% 7% 8% 10.9%
a
We call this asset utilization ineIIiciency ratio. The higher
this ratio, higher is the inherent ineIIiciency in utilization oI
assets.
Where: NS Net Sales.
CE Capital Employed.
GFA Gross Fixed Assets.
not shown such an appreciable increase (2.68 in 1985,
3.61 in 1997 and 2.78 in 1998). Considering the
outstanding perIormance improvement in all other
areas, it would have been expected that this
perIormance metric should have also seen a
proportionate increase. However, this has Iailed to
happen. It is also observable that capital turnover,
asset deployment, and utilization eIIiciency has
dropped in 1998. These issues make it important that
the company also looks into its other logistical
activities concerning purchasing, credit policies, and
cash management.
The case suggests that the Iirm targets to achieve
complete Ilexibility.
1
Further, Mr Balaji has rightly
observed that inIormation technology
Figure 1
3
2.5
, . - Net sales/cap
~
'tal
Employed
... Net Sales/Gross
Fixed Assets
S 2

.~ 1.5
"C
.5
0.5
0
1985 1991 1996 1997 1998
--J
Years
1
An instance oI this being the redesign oI line to Iorm cells within
each module to achieve productivity gains and operational
Ilexibility.

Jikalpa

would be a kev tool to enhance the eIIectiveness oI
overall operations and processes oI the company. In
this perspective, TVS needs to emphasize the use oI
inIormation technology especially collaboration
systems iI it is to remain competitive. The company has
a geographically dispersed set-up with production
centres and regional oIIices located across the country
(Exhibit 2 in the case presents the location oI its
divisions). Product variety oI the company is also high
with items ranging Irom automobile equipments to
electrical goods.
Under such a scenario, a comprehensive web-based
system would be an ideal environment to link such a
wide set-up. Lucas-TVS is one oI India's largest
suppliers oI automotive components. Customers like
Maruti are demanding high levels oI Ilexibility and Iast
response times. A web-based system would enable
Lucas-TVS to receive demand Iorecasts Irom its
customers on-line regularly. Based on the Iorecasts,
inventory can be planned. Further, the continuous
access to inIormation would reduce inventory levels.
The customers can also use this system to keep a track
oI the orders. Such a system can also enable Lucas-
TVS to backward integrate with suppliers. Suppliers
can use Lucas-TVS requirements to plan their own
production and enable Lucas-TVS to achieve its twin
objectives oI greater Ilexibility and reduced inventory.
The end result would be improving customer service
and throughput, reduce inventory costs and optimize
supply chain processes as a whole. The Ieatures
supported by this system would allow appropriate
coordination and integration abilities that the company
would like to build.
2

2
ReIerence to Mr Balaji's statement regarding alignment initiatives
within supply chain (page 54).
The company has a high product variety and parts
complexity (Exhibit 2 and Exhibit 3 in the case present
the product portIolio oI the company). The ChieI
Executive oI the company has also expressed concern
over this issue
3
and has cited a need to achieve cost
eIIiciency and rationalization. This would deIinitely
involve use oI modularization and eIIiciency in
purchasing Iunctions. Cost eIIiciency would also be
Iacilitated by optimization in logistics processes. Under
this scenario, on-line trade exchange markets provide a
platIorm to simpliIy and rationalize the procurement
and distribution processes so as to smoothen shortIalls
as well as product proliIeration problems. Trade ex-
changes have become signiIicant tools Ior improving
cost eIIiciency and responsiveness oI the Iirms by
linking suppliers, customers, service providers, and
other partners in the supply chain. An instance oI such a
mechanism can be i2's Trade Matrix market exchange.
Typically a solution like the i2 Trade Matrix platIorm
can be used by Lucas-TVS. It combines supply chain
technology with transaction management capability. It
employs Ieatures such as ED I, Iax, messaging, and
even XML and wireless to integrate systems within and
outside enterprise. It is built on the concept oI open
technologies. Companies in the automobile sector,
particularly, have been increasingly utilizing this
mechanism wherein partners in the supply chain can dig
into a common inIormation and storage pool and extract
relevant inIormation. Such a mechanism would enable
the company to go beyond its internal boundaries and
link seamlessly with its partners in order to reduce costs
and improve responsiveness at the same time.
3
Mr Balaji's statement on "tremendous product proliIera
tion oI parts and products ................ " (page 54).
Still a Long Way to Travel
Surendra H Shah
MBA Third Year Student (Evening Programme) B K School oI Management, Ahmedabad.
Anil V Mishra
MBA Second Year Student (Evening Programme) B K School oI Management, Ahmedabad.
A process capability study in 1985 revealed certain as compared to international standards. Dr
Iacts leading to deteriorating perIormance John Parnaby, the Group Director, ManuIactur-
Jol. 26, No.1, Januarv-March 2001
'129
Jikalpa

-ing Technology, Lucas Industries PIc. visited Lucas-
TVS in early 1985 and stressed the need Ior change at
Lucas-TVS. He advised the top management oI Lucas-
TVS to adopt the Toyota Production System (TPS) that
enables a manuIacturer to produce the right products in
the right quantity and deliver them to their customers
at the right time in the right place with the desired
quality and price.
Change Process (1986-91)
In 1985, Lucas-TVS management set up a task Iorce to
study the issue in greater detail and prepare a
Ieasibility report Ior adoption oI the change process at
the Padi plant. The task Iorce analysed the market,
product, quality, and Ilow within their plants. It
benchmarked TVS's perIormance with the best in the
industry locally as well as globally. It recommended to
the management to go ahead with the project and
identiIied several tangible and measurable
perIormance targets. It targeted at raising productivity
levels and reducing inventory, rejections, scrap levels,
and warranty losses by 50 per cent in a span oI three
years while simultaneously aiming at maximizing
customer satisIaction. It recommended that the Iirm
should Iocus initially on maximizing potential oI
current resources. The task Iorce accorded lower pri-
ority to investments in new technology and automation
and decided to make investments on the same at later
date.
The management adopted the strategy oI reor-
ganization oI the plant and changing the layout Iacility
to streamline the product Ilow. All employees were
provided special training. Workers were trained to
perIorm multiple tasks. The products were classiIied
into six product units. The engineers were advised to
relocate equipment and machinery to create Iocused
Iactories, each capable oI handling a single product
type. This product Iocus was conIined to assembly and
a Iew upstream operations. Further upstream processes
represented resources common to all products. This
modiIication oI layout Irom process to product-based
began in 1986. The task Iorce had decided to
Jol. 26, No.1, Januarv-March 2001
perIorm all layout changes during the weekends to
avoid the stoppage oI production. The relative
positions oI as many as 120 machines and work
stations were changed. The complete layout change
process required a period oI Iive years. The workers
were given specialized training in the area oI change
management, SPC, QFD, FMEA, etc. Suggestions
were obtained Irom the workIorce through initiation oI
small group activities (SGA).
The layout changes and worker training together
involved an investment oI Rs 1. 7 crore. The networth
and sales per employee oI the company doubled in six
years. The product layout eliminated criss-crossing oI
material across the Iactory and resulted in smoother
Ilow oI products through the Iactory. The changes led
to considerable reductions in Iloor space requirements
and resulted in improved inventory turns.
The year 1991-92 experienced a severe recession
in the Indian economy resulting in low sales growth.
Dr Parnaby introduced the ManuIacturing Systems
Engineering Methodology, which aimed at increasing
the eIIectiveness oI the core business processes at
Lucas-TVS, Le., the manuIacturing operations process,
the supply chain management process, and the product
introduction process. The MSE department adopted the
concept oI Ilexible or "Nagare" cells under the
direction oI Mr Miles.
In 1993, Lucas-TVS was awarded ISO 9001. This
process involved educating the workIorce in the areas
related to quality systems, quality control charts,
visual displays, work instructions, and procedures.
Lucas-TVS received the QS 9000 certiIication in
October 1997.
Problem Areas
130
Some problem areas that require immediate attention
are mentioned below:
. Continuous improvement in quality to match
world-class standards. A process capability study in
1985 had revealed that roughly 30 per cent oI the
processes were not capable oI meeting the product
speciIications. The rejection rate Ior Indian auto
components was 2900 ppm as against the world level
oI 240
Jikalpa

ppm. To be amongst the best in the world, the
company has to improve the processes to bring
down deIects to 150 ppm. DeIects should be
eliminated in the Iirst place and this requires
capable machinery and system.
. The company will have to make special eIIorts
towards modularization oI products. It has to
enhance new product development capabilities so
as to reduce costs. For this purpose, cost analyses
have to be done and product varieties have to be
developed. This would enable the company to
sustain the pressure Irom competitors.
. The company is required to match the
technological capabilities oI the competitors. The
management has to study the technologies used
by competitors and also advancements across the
globe. This may lead to modernization oI plants,
machinery, and processes. This may again lead to
cost reduction and quality assurance.
. More attention has to be drawn towards training
employees. The total training expenditure per
employee is one oI the lowest in the industry. The
company should spend some money in the
direction oI manpower development through
training and also retention oI trained employees.
The training should be a continuous process. The
technological advancement alone would not be so
much IruitIul without combining this with
provision oI adequate training to employees. The
management should provide an environment
which is highly conducive Ior continuous learning.
. Adoption oI IT: The developments in the area oI
IT are bound to inIluence the perIormance oI the
company. However, it should become a means
Ior achieving goals. The company should Iind out
the areas Ior IT applications which can enhance
the eIIectiveness oI operation, quality assurance,
new product development, adherence to time
schedule, etc.
The company should sort out the above problem
areas, work out priorities, allocate
Vol. 26, No.1, Januarv-March 2001
Iunds accordingly, and take up activities sys-
tematically. The change process so Iar has given some
results but the Iuture course oI action has to be decided
in light oI the above critical areas, which may be
another extension oI OD intervention already
implemented.
Options
~ Technological advancement and upgradation oI
machinery in order to achieve quality that matches
world-class standards. The rejection rate Ior Indian
auto components being quite high, it posed lower
standard in relation to quality consistency.
Technological advancement would lead to high quality
standards and upgradation oI machinery. These tech-
nological advancements will increase production. This
will help in maintaining the delivery schedules
resulting into more reliability and higher conIidence
Irom customers. We Ieel that the present machinery
may be considered obsolete in light oI poor quality
standards oI the product and Iailure in maintaining the
delivery schedules. The company should employ the
latest techniques related to CAD/CAM Ior the design
and manuIacture oI its products.
~ Modularization oI products, detailed cost analysis,
and development oI product varieties are needed iI
high quality products are to be delivered at low cost.
Moreover, new product varieties will be able to
attract the customers and satisIy their needs better.
~ Continuous training Ior upgradation oI skills.
Training is a continuous process and hence training
needs should' be assessed regularly and accordingly
knowledge and skill upgradation training
programmes should be organized. Some training
should be imparted in the areas oI behavioural
changes and attitude building. A training strategy
may be designed which will include a series oI
various training programmes Ior diIIerent
categories oI personnel at speciIied intervals oI
time. This strategy may be implemented at least Ior
a period oI Iive years.
~ Detailed study Ior applying IT tools and
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Jikalpa

. The balance sheet oI the company has not been
given but it seems that the company should have
accumulated proIits. Though the company has
employed a capital oI Rs 1144.4 million, there is
still scope and need Ior Iurther investments Ior
implementing the above-mentioned suggestions.
Since the company has a good name in the Indian
market, it may go in Ior public issue oI shares and
debentures Ior the purpose oI expansion and
development. The Iinancial resources raised can be
used Ior the implementation oI above suggestions.
Conclusion
In a nutshell, the company has to go in Ior
modernization. Looking at its position in the market
and growth potential oI the industry, such investments
will prove rewarding in the long run. As it has
exploited the potential oI existing resources (including
manpower), it has to go Ior upgrading technologies,
developing human resources, and adopting latest
trends.
techniques. The company should make use oI latest
oIIice automation techniques. It should have a
separate team that is involved in analysing the IT
needs and implementation oI the same. This team
should develop intranet inIrastructure, website
development and its upgradation, and IT training
programmes. Further, the team should be involved
in the setting up oI Management InIormation
System and Knowledge Management database Ior
the company.
~ The company has done commendable work in the
direction oI organizational development and
implementation oI the change process to bring in
desired changes and achieve the results. But, as
indicated in the results, the task Iorce had given lower
priority to investments in new technology and
automation. The changes implemented in both the
phases have brought results in terms oI improving
productivity and bringing down the cost with better
quality.

Future Strategy
Our suggestions Ior the Iuture are as Iollows:
. It seems that the existing resource potential has now
been Iully utilized in terms oI machinery, space,
manpower, and material. The company has to now
look Iorward to invest some money Ior upgradation oI
machinery and technology. A separate team oI
technical persons should be Iormed to study the cost-
beneIit oI these advancements and then go Ior the latest
machinery. The obsolete machinery should be
discarded.
. The company should also develop an R&D division
in the long run. As an immediate step, it may go in
Ior buying technology and design Irom an
MNC/Ioreign company. The Iunds invested in R&D
will pay rewards in terms oI developing a variety oI
products that are cost-eIIective and have high
perIormance level.
. The workers and employees at all levels have to be
provided continuous training. The company may
create a training cell under the HRD division. This
permanent cell will
Jol. 26, No.1, Januarv-March 2001
ensure that all the employees are provided exposure
to training. The training may be classroom teaching
by involving some outside training agency and on-
the-job training with the help oI trained employees
within the company itselI.
. Kaizen suggestions are still to be encouraged and
attractive incentive scheme has to be devised to
ensure good implementable suggestions.
. The company has not Iocused its attention towards
the introduction oI IT in its operations. It should
now think in terms oI developing computerized
MIS Ior eIIicient perIormance oI various
operations. A consultant may be appointed to study
the present system and then design a sound
computerized MIS. The latest devices in the Iield oI
IT may be employed to enhance communication
capabilities, Iast Ieedback and improved inventory
management. The IT culture will enable linkages
with suppliers as also end users.