FASTEST GROWING FREE MARKET DEMOCRACY

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MANUFACTURING

Why Deming Prize Matters to Sona Koyo

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India Brand Equity Foundation

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MANUFACTURING

WHY DEMING PRIZE MATTERS TO SONA KOYO

Located in Gurgaon on the outskirts of Delhi is the factory of a manufacturer steering systems. In June 2004, the owner of this company stepped onto a glittering stage in Tokyo to receive an award from the chairman of Toyota Corporation. The company - Sona Koyo Systems. The award - The 2003 Deming Prize. The significance - The Deming Prize is regarded as the Nobel Prize in the world of manufacturing. The achievement of Sona Koyo is significant on three counts. First, it took five years of hard work and a single-minded focus to create quality systems for this award. Second, Sona Koyo is the first steering system manufacturer in the world to win this award. Most important, the prize, which is awarded by the Union of Japanese Scientists and Engineers, establishes the companys bona fide among international automotive majors. Now, not only does Sona have the confidence to step up exports, it also has the self-belief to go global. That is not so bad for a small vendor, which started with a portfolio of three products in 1988. Sona Koyo today has a portfolio of 57 products, as well as the skills to re-engineer existing products to save costs. For example, it recently re-designed the steering system for a small car produced by Suzukis Indian venture, the Maruti Alto. The rework combined three components into one and reduced the weight of the system by 15 per cent. Today, Sona Koyo has successfully rolled out Total Quality Management (TQM) and Total Productive Maintenance (TPM) practices on the shop floor and throughout the organization (see accompanying story). After getting the production process right in India, gaining acceptability in other parts of the globe should not be an issue. Piece by piece, the company is putting together a well-crafted strategy to meet this goal. Of course, it has certainly been helped and aided by the fact that there is a tie-up with the US $ 3 billion Koyo Seiki of Japan. This arrangement gives Sona access to the strong R&D base of its parent, which owns a 20 per cent stake in the Indian company. Sona Steering is now putting together a plan to become an integral part of Koyos global sourcing strategy. In 2003-04, Sona bid for a $45 million
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For a small vendor, which started with a portfolio of three products in 1988. Sona Koyo today has a portfolio of 57 products, as well as the skills to reengineer existing products

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WHY DEMING PRIZE MATTERS TO SONA KOYO

outsourcing contract for supplying 20,000 steering systems per month to GM in the US. Sona competed and won against Koyos own subsidiaries in China, Thailand and Brazil. The company expects to increase exports by an additional US $ 6.2 in 2004-05. There is already an order book of around US $ 7 million and around US $ 15 million for 2005-06. To cater to its increase in export demand, Sona Koyo has set up an export-oriented unit in Chennai for steering gears. Trial production has been completed and the unit is in the process of becoming commercially operative. The target is to achieve exports worth US $ 22.2 million by 2006-07. Meanwhile, plans are being firmed up to move up the value chain. The company proposes to design, develop and provide complete steering solutions to niche players in the four-wheel segment like off-highway vehicles. In this segment the company is working with customers in Korea, UK and USA. Besides, to create a platform to grow exports, Sona Koyo is continuously creating its infrastructure to support export activities. This includes appointing local representatives in different countries and building global relationships. That Sona is keen to steer a new course is no longer in doubt. In the initial years, nearly all of Sona Koyos production went to Maruti Suzuki, Indias largest automobile venture. Today, Marutis dominance has come down to 58 per cent and the companys steering systems also go into vehicles made by Toyota, Mitsubishi and Hyundai in India. Yet it is the engagement with Maruti that has provided the company with sustained benefits. For example, Sona Koyo is one of the nine suppliers who are members of Marutis TQM Circle and the companys staff has received regular training. This year, Sona will make electronic power steering systems for Maruti, which will enable it to meet the companys demand for three of its models in India: the Alto, the Wagon R and the Versa. Currently, the steering systems of all these models are imported. Sona Koya is part of a booming auto component industry, which generated exports worth more than US $ 1 billion last year. With many foreign auto ancillaries setting up shops in India (Korean ancillaries tagged along with Hyundai Motors, and Daewoo Motors and Visteon with Ford Motors) domestic units like Sona were forced to upgrade themselves to ward off competition within India.
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There is already an order book of around US $ 7 million and around US $ 15 million for 2005-06. The target is to achieve exports worth US $ 22.2 million by 2006-07.

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WHY DEMING PRIZE MATTERS TO SONA KOYO

In the process, theyve now become world class. In fact, not a day passes without an overseas automobile manufacturer announcing sourcing possibilities from India. Our cost of production is actually the same as Chinas, Kapur told The Economic Times recently, adding Where we scored was on our engineering and management capabilities. Confidence and belief, breed success. Sonas Tryst With Quality The countrys premier car manufacturer, Maruti Suzuki, through its cluster approach in the early nineties, was the first to set in motion the quality movement among domestic auto ancillary companies in India. Maruti got 11 of its vendors to adhere to quality systems and processes. Sona was one of them. The idea was to set an example, so that others could follow. Today the cluster approach is being practised across the board and many of the auto ancillaries that have won the Deming Award are members of the Maruti cluster. Other global car manufacturers have also played an important part in the maturing of Indias auto component industry. Today, for example, a company like Ford Motor Company has mandated that its vendors be Q1-certified. Companies like Sona Koya and a clutch of others have taken this as a challenge. The companys in-house rejection levels, supplier rejection levels and customer return levels have decreased considerably after the implementation of TQM and TPM initiatives. Sona Koyos TQM initiative began in 1998 as a part of a cluster of companies promoting group learning under the quality guru Professor Tsuda. In 2000, the group was dismantled. However, Professor Tsuda provided further mentoring to Sona and in the course of time, the Company has seamlessly integrated the various elements of quality management. This includes 5s, Exactness, Visualisation and Pokayoke on the shop floor;
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Sona Koyos TQM initiative began in 1998 as a part of a cluster of companies promoting group learning under the quality guru Professor Tsuda.

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WHY DEMING PRIZE MATTERS TO SONA KOYO

and widespread use of problem solving techniques among middle level managers including gap analysis, why-why analysis, deep analysis and 7 Quality Control problem solving techniques. Company-wide kaizen activities have also met with great success. Sona Koyo has implemented TPM techniques like Jishu Hozen, which has resulted in the control of rejection at the source of production. All these initiatives have been deployed in the organisation using Hoshin Kanri or Policy Deployment Tools, which have ensured that every line managers objectives are in line with the overall corporate objectives. TQM tools that have been deployed in Sona Koyo include reengineering the production processes to eliminate waste, reduce costs, improve output and speed of delivery and reduce inventories. Along with TQM, the TPM program is also helping the company to improve operational efficiencies with its emphasis on zero accidents, zero breakdowns and zero rejections. These initiatives have fashioned a new culture in the organisation. They have also played a major role in bringing the companys medium term management objectives and annual policies in line with its long-term customer oriented vision of becoming a Supplier of Choice to global customers by 2010. Resources: 1. For more about the companys strategic plans for the future, contact Dr Surinder Kapur, chairman, Sona Steering at 91-1242215101-07. Alternatively, e-mail kmdeshmukh@sonagroup.com 2. To learn more about the auto component industry in India, contact the industry association, Automotive Component Manufacturers Association at: 91-11- 5501669, 5593190, Fax: 91-11-5593189

Sona Koyo has implemented TPM techniques like Jishu Hozen, which has resulted in the control of rejection at the source of production.

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India Brand Equity Foundation

JULY

2004

The India Brand Equity Foundation is a public - private partnership between the Ministry of Commerce, Government of India and the Confederation of Indian Industry. The Foundation's primary objective is to build positive economic perceptions of India globally.

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