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Why Chinese goods are so cheap
Rajivnayan R Bajaj | October 20, 2005
While organisations such as Raymond, Milton Plastics and Welingkars Institute of Management use Kaizen, Bajaj Auto prefers TPM (Total Productive Maintenance) as its chosen process improvement tool.
Bajaj Auto embarked on TPM at its Akurdi (Pune) plant in October 1998 under the guidance of Professor Sueo Yamaguchi of the Japan Institute of Plant Maintenance. The Indian two-wheeler maker expanded this effort to its Waluj (Aurangabad) plant as also to two vendor clusters of five vendors each, one each at Akurdi and at Waluj.
The Smart Manager asked Rajiv Bajaj, Joint Managing Director, why TPM rates higher than Kaizen.
At Bajaj Auto, our manufacturing operations are characterised by a mix of high volume products from relatively simpler but older facilities and smaller volume products from complex new facilities, thus demanding very high workforce versatility. It is like living in two worlds.
Furthermore, ever-increasing quality and cost pressures challenge individual skills and collective effort continuously. In this context we found TPM's cross-functional, bottom up, empowering, detail oriented, fact based, analytical, and investment light approach to be extremely simple and sharply result oriented.
TPM provokes awkward introspection. For example, previously certain processes continuously yielded 2% defective components.
Professor Yamaguchi embarrassed us by observing that extraordinary skills were required to ensure such a precise failure rate. It should be much simpler to achieve 100% OK.
Needless to say, this was quickly achieved through data stratification, phenomenon identification, root cause analysis and implementation of not only appropriate counter-measures for immediate correction, but also preventive action for long term sustenance.
TPM focuses effort on improvement in PQCDSM (Production, Quality, Cost, Delivery, Safety and Morale) through the elimination of sixteen losses.
Far from being superficial, it is a scientific, step-by-step methodology. Though it is no substitute for business strategy or product innovation, it is a foundation for their viable sustainability. We use Kaizen also. Kaizen is the meticulous expression of the individual implementor.
Cells that implement TPM typically realise 50% increase in capacity and in OEE (Overall Equipment Effectiveness), zero defect quality, 20% conversion cost reduction, unfailing delivery and zero accidents -- all through numerous Kaizens (improvements) aimed at the elimination, reduction and prevention of waste.
India, China, Japan
Comparison between the Indian, Chinese and Japanese two-wheeler industry is inevitable. When discussing China, a few points have to be kept in mind.
China can afford to price so competitively because it does not take on certain costs, such as the cost of customer insight and product innovation, and of making mistakes until you get it right.
The absence of IPR (Intellectual Property Rights) means that products are quickly and easily copied. When Honda launches a product any where in the world, China copies it without delay.
Chinese motorcycle manufacturers don't make huge investments in marketing. In China, customers' expectations of products are not high. If a product breaks down, parts are replaced. There is no concept of service in the automobile segment. They don't spend on under-standing the customer.
Copying collapses time and eliminates the learning curve right through the supply chain.
Saving on tax is another area. A company declared production of 300,000 units but made 500,000. Labour costs are lower, and more importantly, labour is largely subservient.
Despite these factors, Japanese companies are making a comeback and are recovering lost ground, particularly, in markets such as the Middle East, Europe and South East Asia.
If one looks at the balance sheets of Chinese companies, not too many are making money. One Chinese company was recently taken over by an Indonesian group. Also one must compare like to like, component to component.
Rajivnayan R Bajaj is the Joint Managing Director of Bajaj Auto Ltd.
Published with the kind permission of The Smart Manager, India's first world class management magazine, available bi-monthly.