Qimpro Convention 2008: Winner of the QualTech Prize

Larsen and Toubro, Hazira
Presenter: B Srinivasa Reddy, Manager, TQM Facilitation

Background
As a company, Larsen and Toubro (L&T) has a history of quality improvement initiatives. Founded in 1938 by two Danish engineers and originally a dairy equipment maker, the company has diversified into infrastructure, heavy engineering, electrical and electronics, industrial machinery and information technology. It is one of the largest conglomerate in India, with annual revenues grossing Rs20,000 crore.

At the Hazira Works, L&T designs and manufactures high-tech fabricated equipment for core sectors like oil and gas, refineries, petrochemicals, nuclear, defence, ship building, coal gasifier and thermal power plants, etc., for both domestic and international clients. The facility has won a number of awards for its quality initiatives, such as the CII award for "strong commitment to TQM" in 2003, the Frost and Sullivan manufacturing excellence award in 2004, and the British Safety Council Award in 2008.

Introduction
Since 2004, the Hazira facility has embarked on a six sigma quality management initiative to improve core processes that deliver value to customers. This case was undertaken as part of this six sigma quality initiative.

The team managing the project identified the problem as an average inspection cycle time of each inspection stage in the power plant equipment (PPE) as 8.05 hours, with a standard deviation of around 3.9 hours.

Inspection, as a part of the manufacturing process, takes around eight to 10 per cent of the total project cycle time for PPE. Therefore, the team found it important to reduce the number of inspection stages and cycle time to expedite project cycle times proactively.

Diagnosis and remedies
The team gathered data on the number of inspection stages from its Baan - ERP system, selecting projects carefully so that the data represented a true cross section of the equipment manufactured at the Hazira Works. It got a first hand view of the contribution of each inspection stages to the total inspection activities in a project.

To better understand the causes for the high number of stages, the team relied on an Ishikawa "cause and effect" diagram, better known as the "fish bone",  developed through extensive brainstorming. It collected feedback from the manufacturing shops to explore options for the reduction, transfer and/or elimination of a number of inspection stages.

With due acknowledgment to other factors such as organisational culture, feasibility, customer service, the team again brainstormed on the data collated to come up with a final list of stages that could be dropped, transferred, or merged to reduce the overall number of inspection stages. Inspectors, who carried out the inspection physically, were also involved in the brainstorming exercise, and the team came up with 69 causes.

These 69 causes were classified into three categories using an affinity diagram, viz.:
38 direct improvement causes
24 potential or controllable causes, and
7 non controllable causes.

The team prioritised the likely root causes using a prioritisation matrix, basic factors such as job quality, project schedule, cost of the project, frequency of occurence, etc.

As part of its remedial measures, the team developed and implemented solutions for all validated key process input variables. These solutions were discussed with all internal stakeholders to build a consensus, and countermeasures proposed were implemented.

Sustaining the gains, and the benefits
Control plans were put in place to ensure solutions were of a permanent nature, by engaging stakeholders in areas where the solutions were implemented.

Besides improved performance and service quality levels, there was a pronounced impact on project cycle times. The team says that the process owner was able to reduce three per cent of the stages, and the project resulted in a 17 per cent reduction in inspection stages, and a 25 per cent reduction in inspection cycle times.

Sigma level for the inspection cycle time improved by a factor of 2, translating into direct financial benefits for the company to the tune of Rs425 lakh, in addition to the reduction in the manufacturing cycle time. The ripple effect was the freeing of some manufacturing capacity at the manufacturing shops, resulting in significantly higher sales for L&T Hazira, and the capacity expansion by putting up additional shops. The better service levels brought down the waiting times in fabrication.

The biggest evidence of sustainability of the solution comes from the fact that the team has been able to maintain the inspection service levels despite a doubling of manufacturing capacity at the Hazira plant over the last three years.