Ashok Leyland struggles to beat recession

There is fire fighting at Ashok Leyland as it struggles to cope with the recession in commercial vehicles. The management is trying to improve efficiency and production quality, reduce costs and increase customer satisfaction.
     Among the means the company is using to cut costs is just-in-time inventories. The idea is to reduce inventory-holding costs. The management has been talking to its suppliers to get them to supply parts on a daily basis so that Ashok Leyland doesn't have to stock up for longer periods.
     Improved communication systems, which include e-mail connections, are being created to facilitate the JIT implementation. Also, the company will work to a three-month rolling plan, which will be known to its suppliers, so that they too can plan their production cycles.
     It is reported that of the 40-odd vendors with whom discussions have been held, about a dozen have agreed to daily supplies. These include Automotive Axles, Mico, Sundaram Clayton, Sundaram Brake Linings, and Wheels India.
     Others will fall in line after a couple of months after reorienting their own systems. Suppliers with plants in western and northern India will build warehouses close to Ashok Leyland's plants to that they can meet the daily supply requirement. Until then, Ashok Leyland will have to make do with two days' to a week's inventory of these parts instead of one day's.
     The biggest problem before Ashok Leyland is lack of demand. The company has been able to utilise only half its manufacturing capacity. Workers have accepted a 50 per cent wage cut along with a three-day work week. Whether they will do so for more than a brief period is to be seen.
     The company is emphasising the importance of team work and constant improvement. Last year the company implemented what it called 'Improve 98', an exercise that saw the generation of many new ideas by employees that could save the company lakhs of rupees.
     The aim, according to the management, is to produce world-class vehicles. It had better do that because it will soon be threatened by vehicles from Volvo India, subsidiary of the Swedish truck manufacturer, which has built a plant near Bangalore. Ashok Leyland is also planning a strategic alliance with  New Holland India, a subsidiary of the Netherlands-based tractor manufacturer. New Holland India is interested in buying Ashok Leyland's Iveco engines for the 70 hp Ford tractors it will make at a new plant at Greater Noida, near New Delhi.
     The Ashok Leyland management also wants to increase its exports. The company exported 2,150 vehicles in 1997-98.
     Ashok Leyland's unaudited results for the third quarter ended December 1998 are encouraging. Turnover was Rs 430 crore, compared with Rs 413 crore in the corresponding quarter of the previous year. Operating margins improved from 4.91% to 5.72%. The company posted a gross profit of Rs.6.15 crore in this period.