January 28, 2008
Order and efficiency are hallmarks of the TVS motorbike factory near Bangalore in southern India. To direct foot traffic, arrows are painted on the shiny shop floor of India’s third-largest motorcycle maker. Large banners with exhortations such as “Let Us Achieve Zero Defects” and “Quality is a Way of Life” hang across the bright facility where nearly 2,000 vehicles are built each day on neat assembly lines. Tea breaks are 9:15 to 9:22 and 14:15 to 14:22, according to a memo on the wall.
Japan’s veneration for order has been fully transplanted to this TVS factory in the city of Hosur. Venu Srinivasan, the mild-mannered 55-year-old managing director and chairman of TVS, has indoctrinated the company with the Japanese management strategy of total quality management (TQM). TVS’s turnaround has hinged on principles of attention to process, consistency, transparency and employee involvement. TQM was launched at TVS in 1989 and is credited with reviving the ailing company. Since then, TVS and sister companies in the $2.2bn TVS Group have won the prestigious Japan Quality Medal and the Deming Prize, a quality award from Japan.
TVS rolled out 923,000 motorbikes last fiscal year in India with sales growing 19 per cent to reach about $900m. It recently opened a factory in Indonesia and aims to globalise its business over the next few years. The scenario before and after TQM reflects how far TVS has come in nearly two decades. Productivity, quality and sales have improved dramatically. Previously, the rate of “re-work” – parts plagued by faults – was 15 per cent. That figure has fallen to 100 parts per million. The factory used to make four deliveries a month to customers compared with two daily now.
It was no easy task to overhaul the family-owned company that was founded in 1911 by Mr Srinivasan’s grandfather, TV Sundaram Iyengar. For three decades after 1960, India closed its markets to global competition. Imports were restricted and licences were required to start businesses, creating little incentive to improve or strive for quality.
After earning a degree in engineering from Madras University in today’s Chennai, Mr Srinivasan went to the US for graduate studies, like many scions of India’s business families. In 1979 he earned a master’s in science and management at Purdue University in Indiana – the degree became known as an MBA in 2001 – where he received a “strong dose” of industrial engineering. He visited factories of US automakers such as General Motors but was unimpressed. “US factories did not have that exactness,” he recalls.
A trip to Japan in 1981 and visits to the Suzuki and Honda factories proved pivotal. “Even the bullet train aligned exactly on the platform. People were highly motivated and committed.” He was inspired by “a country that could create this kind of excellence” and sought to restore the high quality for which TVS was known in the 1940s when it ran a highly-efficient bus network and General Motors dealership. Mr Srinivasan began reading books about TQM and “desperately tried to get hold of Japanese professors, but India was not on the radar” in the early 1980s.
The mission to restructure TVS grew more urgent in the 1980s when, profits slipped although sales grew. “That triggered the need for change. I knew that if we continued like that we wouldn’t be in business.” Mr Srinivasan introduced TQM to the company in 1989 and implemented and improved it over the next nine years. Experts from Japan still visit the company.
TVS’s adaptation of TQM rests on five pillars. They include policy deployment; involving every person at the company; kaizen, or continuous improvement; standardisation of processes; and new product development. Seated at a long boardroom table at the TVS office, Mr Srinivasan takes a pen and draws a series of boxes to illustrate the “silos” that hobbled the company before. There were six layers of management. With little co-operation or communication between divisions, “most meetings were full of fault-finding and finger pointing”.
Under the new regime, silos were broken down. For instance, different teams collaborated on design of new motorcycles so staff from R&D worked jointly with production and assembly. As a result, innovation has been boosted. TVS rolled out its first 20 models in 21 years but it has produced 10 new products in the past three years alone. This year TVS expects to roll out six new models. On the factory floor, inefficiencies were identified and weeded out. TVS used to keep 10 weeks of inventory at its factory compared with two weeks now. The assembly line suffered frequent delays. “We couldn’t predict what we could supply to customers,” says Mr Srinivasan. “It used to be a real mess.”
Mr Srinivasan recalls that previously the factory floor was haphazardly organised. “One man operated one machine with another man doing inspections. Relative to today it would be dirty.” Today employees are trained to operate different machines, allowing for a leaner workforce. In traditionally hierarchical India, Mr Srinivasan shocked employees by picking up cigarette butts from the factory floor in keeping with one of the pillars of involving every employee.
He started tracking all the company’s statistics and breaking them down, line by line. Figures were conveyed to employees through charts displayed in the factory. “Everybody could see the actual graph. Before, people would fudge,” says Mr Srinivasan. “But every hour productivity is displayed. We created a feedback loop.”
Changing an entrenched mindset was a difficult task. “It requires a high degree of understanding between employees and management,” says C. Narasimhan, formerly president of Sundaram-Clayton, the auto components firm and sister company of TVS. But employees were encouraged to offer suggestions for improvement. “Some employees give 200 suggestions a year,” says Mr Narasimhan. “Awards are given for the best suggestion.”Roles of each employee are now clarified and targets clearly assigned. Results are displayed for everyone to see in order ”to hold the gains”.
Changing his own role at TVS was also a challenge for Mr Srinivasan, whose position as family trustee shifted as the company’s president became more empowered. “For me to move back and change my role took a lot of change myself,” admits Mr Srinivasan. “You’ve got to look at yourself in the mirror honestly. But you have to make the change to get other people to make the changes you expect of them.”