GLOBAL ACQUISITIONS and a strong r&d HAVE made us a LEADER in components, SAYS NK MINDA, CMD, UNO MINDA group
By Jayashree kini-mendes
Every time a 4-wheeler manufacturer in India announces its decision to launch a new vehicle model, the entire components and ancillary industries know what is in store for them. The supplier will be required to work tirelessly on developing innovative and novel components within a span of a year or two, sometimes less. That’s not all. After emerging triumphant with an innovation, they will be required to go back to the drawing board to trim flab, seek out ways to reduce cost, get the final nod from the OEM (original equipment manufacturer), and finally see it through to mass production stage. Even after all this, the ambitious vehicle maker will lay down challenges of cost, quality, timely delivery and the required numbers.
Ask the Gurgaon-based vendor NK Minda, chairman and managing director, UNO MINDA, a seasoned auto components player in the country, about the challenges and he says, “When you are in the business of automotive components for 58 years, and supply 16 product lines for two-wheelers and 27 for four-wheelers (broadly classified), it becomes a way of life for us. We are here to cater to our OEMs and it is always a question of distinguishing between the possible and the impossible, and of knowing how far we can go.”
As a rule, it is second nature to the UNO MINDA Group to work closely with their OEMs with whom relationships have been nurtured carefully over the years. The first goal is to ensure that they contribute quality and reliability to an industry that is fast becoming a game-changer. The company understands that they can only withstand the challenges of market if they are voluntarily able to supply new products and innovations regularly to their customers.
Leading from the front
UNO MINDA Group has been in the business of making two-wheeler switches since the 70s, four-wheeler switches since the 90s, and lighting and horns since the 80s. And with each passing year, it needs to offer an assurance of new products and technologies and one that will excite its customers. Although the company has a strong R&D wing, it needs to make breakthroughs and become a formidable player so as to give its competitors a run for their money. A prolonged R&D process can get tedious and the compulsion to introduce new products must not only delight OEMS, but also offer an assurance of quality. It was for this reason that the company began looking overseas. Hence began the spree of carefully selected global acquisitions and tie-ups — a move that catapulted UNO MINDA into the big league (See box: Race to the top).
Apparently, Minda made the right moves. At a time when most component suppliers are struggling for a stronger foothold in the global market, UNO MINDA announced a 64% jump in profit after tax for fiscal year 2016. The home-grown component maker posted a net profit of Rs 111 crore as compared to Rs 68 crore in FY2015.
Attributing the profit jump to the consolidation undertaken by the company, JK Menon, CEO, electrical & electronics domain, UNO MINDA, says, “For various historical reasons, we had several entities holding shares in our subsidiary companies. These have now been consolidated under Minda Industries Ltd, the parent company. Then we have several companies that came under our ambit through acquisitions all now consolidated under MIL. The strong performance of the standalone entity was backed by improved performance of the subsidiaries, including strong turnarounds of few new loss-making subsidiaries whose businesses were just maturing.”
Companies don’t just throw up profits by themselves. Manufacturers have to work at it. When you are running 40 plants across 17 locations in India alone, besides the six plants overseas, it calls for a certain professional accountability and acumen. Minda says, “If you look at our chart, we have several plants in the north that cater mainly to Maruti Suzuki and Honda Car, while some of the plants cater specially to the two-wheelers such as Yamaha, Suzuki, HMSI, and Hero Motocorp. The plants in the south, Bengaluru and Chennai, have been set up for Toyota, Nissan, Daimler and HMSI, while our plants in Pune cater to the Western region and also supply components to Tata Motors in Sanand.” With more companies ramping up presence in Sanand, Gujarat, (Ford and Maruti Suzuki will soon be a familiar sight), UNO MINDA is well poised to supply to vehicle manufacturers that decide to set up operations in this region.
The company has accomplished this by setting up systems that are robust, agile and flexible allowing quick prediction and manoeuvrability. Minda says, “We are well integrated on both ends of the supply chain. We understand our OEMs requirements and our suppliers’ capabilities.”
With the OEMs constantly deciding to expand, UNO MINDA needs stay abreast of expectations. “It is a general trend among component makers to set up a plant close to the OEM’s plant. We are in no hurry. Instead, we look at the numbers and if it is not a profitable venture, then we initially supply through a warehouse till the time is ripe to make an investment. We keep our OEMs looped into our investment plan so that when volumes increase and business economics change, we will go ahead with manufacturing plants in a synchronous manner,” says Minda.
managing the supply chain
The automotive supply chain is one of the most stringent across any vertical and highly competitive. Most of the OEMs have a strong and robust system of sending out daily requirements to their suppliers. The logistics team of UNO MINDA shows a proficiency in ensuring that they maintain stocks for two to three days within their system. Using the Kanban system of pull production, the team prioritises components that need to be dispatched and refills the empty bins accordingly. In turn, UNO MINDA maintains a similar system with its own suppliers. As and when goods are pulled out of the suppliers finished goods (FGs), the Tier 2 supplier replenishes the bins. When teams work iteratively, waste is reduced. Because customers (or stakeholders) are involved in providing critical feedback, it helps the team make course corrections along the way; the pull system helps to reprioritise work. This way, teams can laser focus their efforts on the work that really matters.
What Minda really appreciates is the helping hand that its OEMs like Maruti Suzuki or Bajaj Auto lend in terms of working closely and upgrading the Tier-2 suppliers consistently. Considering that the auto industry is constantly faced with demand and supply fluctuations, it needs a capable and flexible system to handle variations and corrections.
More than market fluctuations, a major worry to auto-parts suppliers is the latent fear of massive recalls that have become a regular in the industry. Recalling an automotive product not only costs the OEMs more but also has a potentially debilitating financial loss for the parts manufacturer. UNO MINDA is constantly working on ways to eliminate the problem to the best of its ability. “We do a lot of backward integration. Besides making switches for two-wheelers at my plant, we also fabricate, make plastic moulding, sheet metal, die casting and surface treatment. We make the critical and highly complex parts in-house, while we parallelly work on upgrading our supplier base too,” says Menon.
parts on the roll
Manufacturing at UNO MINDA cannot start without a near realistic demand forecasting. The company prefers to start the process in Q4 of the previous year to accurately gauge demand for the next financial year. The marketing team, along with the group functional head (GFH), thrash out the plan based on information that has come from OEMs. The company also considers the forecasts shared by associations and makes a draft based on their understanding of the report and market. It is then dissected into a monthly production plan and sent to the production team.
Innovations in manufacturing is another point that the company constantly evaluates. Minda says the company regularly evaluates its manufacturing processes as OEMs look for productivity improvement reductions every year. “The idea is to look for latest technologies and low cost automation that we can offer to our customers. We consider the yield on the final inspection step of a process to measure the effectiveness of the overall process and design of the entire manufacturing line through a continuous PDCA (plan-do-check-act) cycle. Quality deployment with the help of Statistical Quality Control/Statistical Process Control (SPC/SQC) and assurance through use of Process Failure Mode Effects Analysis (PFMEA) techniques are supported by the use of strong visual controls,” he adds. As a part of daily work management, the plant head and manufacturing head hold daily meetings and conduct a Gemba (shop-floor) visit to ensure compliance of Minda systems and also conduct a daily health check of critical processes.
Systems & processes
Systems reflect the best practices that a company adopts. The strong systems that UNO MINDA has put in place are half the battle won for the company. Twice a year, the company updates its two apex manuals, Minda Systems Manual (MSM) and Minda Culture Manual (MCM). MSM deals with every point beginning with pre-RFQ (request for qualification) to RFQ to letter of intent. It also instructs employees on converting orders to manufacturing, the actual manufacturing, quality systems, logistics, engineering, etc.
Minda’s penchant for processes and technology led him to Japan in the mid-1990s where he spent time studying their manufacturing systems deeply and proceeded to usher in some of their best practices at their plants in India. Along the way, the company adopted TQM (Total Quality Management) and Kaizen/QCC for associate skill upgradation and motivation, and created cross-functional teams and improvement projects to improve white collar productivity. Today the company is a strong proponent of the Japanese way of manufacturing. No doubt this created strong bonds with their Japanese partners.
One of the strong back-end technology that helps UNO MINDA across its 40 plants is SAP. Technology plays a major role and helps the company scan every process and pre-empt glitches that could occur. The company has also deployed electric moulding machines by discarding the hydraulic ones. It has fitted high-speed machines for sheet metal and its assembly lines are equipped with real time control manufacturing through use of IT. The inclination to build some of the savvy assembly machines locally in India impressed some of its Japanese partners so much that they were considering purchasing some for their plants there. Menon says that it is such innovations that pushed them to break the glass ceiling and continue on its path of frugal engineering.
In order to minimise errors in assembly, it has disposed of the array of work instructions across stations and replaced them with computer screens that display the work sequence, quality checks & control the Poka Yoke while simplifying product changeovers. Minda insists that senior company officials visit the offshore JV plants to understand the systems and implement the same in India thus bringing in uniformity in manufacturing. To speed up deployment in India many Japanese experts are also stationed at Minda for skill upgradation in key manufacturing areas.
Design and R&D
A pertinent tactic that the auto industry adopts is R&D and design. When the company decentralised operations a few years ago, it applied the same to its R&D. Most plants in India and abroad are equipped with an R&D centre within. The company also added R&D centres to its kitty in Spain and Taiwan that came packaged with its acquisitions. The research that emerges from global counterparts is used in the Indian plants for some time before localisation takes over.
Similarly, the four design centres, different from the development departments, look after creating new product designs. “These designs could be disruptive, but they are a far cry above what we have. The centres could also look at making the parts more reliable, aesthetically more appealing, enhance quality and functionality, and reduce size,” says Minda.
The company’s focus on R&D has gained it 122 patents, which speaks highly of its technical capabilities. Of this 90 patents are in 2Wheeler switches alone, seven patents in lighting, and one of its JV companies Mindarika has filed for 13 patents alone.
Going forward, UNO MINDA wants to look at continuous improvement in manufacturing and retain its focus on reducing cost of production. “Low cost automation is going to be a big thrust. We will continue to improve with our methods of high speed production through purchase of better equipment. With the deadline set to deploy BS-VI by 2021, we want to relook at our engineering for all the changes that are going to happen,” says Minda signing off.