How Operational Excellence saved LMW during recession while competitors burned?

How Operational Excellence saved LMW during recession while competitors burned?

This article is a reprint from Economic Times press release.

The slow down saw companies pressing panic button and rushing to cut costs across the board- advertisements, people, travel and client interactions. Instead, Coimabtore-based India’s number one textile machinery manufacturer, Lakshmi Machine works, decided to focus on operational excellence to get a strategic edge in the market.

“The capital goods industries were the first to feel the impact of slowdown and that we felt 18-months ago,” LMW CFO R Rajendran told ET. He said instead of going into a panic mode, the company decided to leverage the opportunity to build internal health. As part of this, it up its focus on operational excellence (OE) programme.

Focusing on ‘leaner, faster and efficient’ methodology to achieve business excellence, the company in tie-up with Kaizen Institute India as consulting partner, launched a global programme, Lakshmi Lean Excellence Acceleration Programme (LLEAP).

The Kaizen Institute helped the company to identify and eliminate all obstructions in implementation of an operation. It mainly worked on two products namely carding and ring frame. “They gave us guidance and developed internal expertise so that we could implement the same in other divisions ,” Mr Rajendran added.

Kaizen Institute’s director Jayanth Murthy said the measuring scale for success in any manufacturing company is the level of inventory, because inventory is the biggest manifestation of waste. “Our main objective was to move ‘roof high’ inventory to ‘head high’ and then to ‘below eye level,'” he added.

Following implementation of LLEAP, the company could see a visible change in layout of machinery and nearly 20% of factory space has been saved for future expansion. “The flow is being corrected and the inventory has also been reduced by around 25%,” Mr Rajendran added.

In value terms, he said, the inventory holding at any point of time dropped to around Rs 90 crore from the normal Rs 120 crore. “When inventory drops, working capital requirements drop and so bottom-line reduces,” Mr Murthy said.

Due to recession, the net sales of LMW dropped to Rs 1375 crore in 2008-09 from Rs 2205 crore in 2007-08. “When there was a long spell long recession in 1998-2003, we faced low demand but no cash crunch. The latest recession reduced the global buying power and it added to the problems of manufacturing companies,” Mr Rajendran said.

The capacity utilisation of the company touched as low as 40% but now with prospects of revival, the order book has improved resulting in capacity utilisation of around 60%. “We have 3450 permanent employees which includes staff and workmen. Everyone’s time, energies and focus during the slowdown was turned towards LLEAP. It helped us turn leaner and become quality and cost consciousness. We also used that time to develop new products in the existing line,” Mr Rajendran said.

The Kaizen Institute advocated the magic of one-thirds principle, where, top management, employees and tools were divided into three parts. “While most managements started with tools, since 82% of the company’s time revolves around using tools, the LMW top management was proactive enough to understand the demands of LLEAP,” said Mr Murthy.

He said, the top management resolved to adopt and drive OE by embracing the philosophy of everywhere, everyone, everyday KAIZEN™ for continued improvement. “They reviewed, monitored, supported and was the driving force behind the success of the programme,” he added.

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