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1. “WORLD CLASS MANUFACTURING AND ITS IMPLEMENTATION IN INDIA”
CONTENTS
Executive Summary 6
What is World Class Manufacturing? 7- 12
 Concept of World Class Manufacturing
 World Class Manufacturing- Understanding Implementation.
 Criteria for projecting World Class Manufacturing Company.
 Strategies adopted by World Class Manufacturers.
Indian Scenario 13- 21
 Factors Favouring Manufacturing in India.
 Facts and Figures.
 India v/s China.
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2. WCM Checklists 22- 29
Conclusion 30
Bibliography 31
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3. EXECUTIVE SUMMARY
For years, manufacturing was internally focused and operationally compartmentalized.
Workers often completed their jobs without understanding the impact of their work on the
whole operation, and whether or not their labour has an important impact on customers.
Critical functions such as quality control, engineering, purchasing, and other preoccupation
weren’t clearly separated and were often described as a “wall approach” to manufacturing.
These so-called “walls” inhibited direct and continuous interaction between functions and
isolated decision-makers from both the inside and outside worlds.
The results of this isolation were concretely felt on products that did not meet customer
expectations—not to mention internal operational snags such as losses in time, money,
opportunity, etc.
The goal of implementing a World-Class enterprise is to improve all aspects of business and
capitalize on the advances gained from applying technically-proven trade methods and
principles to be profitable and eventually be globally competitive.
World Class Manufacturers are those that demonstrate industry best practice. To achieve this,
companies should attempt to be best in the field at each of the competitive priorities -quality,
price, delivery speed, delivery reliability, flexibility and innovation. Organisations should
therefore aim to maximise performance in these areas in order to maximise competitiveness.
However, as resources are unlikely to allow improvement in all areas, organisations should
concentrate on maintaining performance in 'qualifying' factors and improving 'competitive
edge' factors. The priorities will change over time and must therefore be reviewed.
The motivating factor behind the World Class Manufacturing (WCM) initiative is two-
pronged: First, is to put into action operations management improvements across all
functional units, departments or sectors. And second, is to equip companies of tool that will
enable them to become competitive and responsive to the changing market landscape.
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4. As the manufacturing sector faces new challenges in the midst of competition, WCM
advocates strive continuously to improve on the areas of delivery, safety, quality, operating
cost and profit margins simultaneously, eliminating waste in the production system by
applying appropriate tools and techniques at all levels within the organization.
By examining their strengths and weaknesses, manufacturing organizations are taking
positive steps to respond to the challenges of becoming world-class competitors.
WCM is a process that integrates key cross-functional operations in ways that meet precisely
what the customers specifically need and want from a product.
WCM is not an end, so they say—but a definitive process. Since it is a process, companies
are likely to achieve favourable results associated with successful implementation of
industry-tested methods.
WhAT IS WORld ClASS?
A journey without a destination
Manufacturing is a competitive business, but it’s not a sport where the winner gets a trophy
or a gold medal.
So how do you measure world class?
Is it the company that sells the most, makes the best, or makes it quicker than anybody else?
Or is it a combination of these things?
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5. The recognition of an organisation as a benchmark- by its industry sector, and for some
aspects by other industry sectors.
World class manufacturing organisations consistently deliver exceptional performance,
frequently in excess of expectations of customers.
There can be no absolute World Class Manufacturing standard. World class manufacturing
opportunities vary enormously from one industry to the next. One should therefore judge
company's performance against the other companies.
World Class Manufacturing helps companies achieve the perception of being
Industry Best.
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6. WCM-UNdERSTANdING IMPlEMENTATION
World Class Manufacturing originated with Richard J. Schonberger. Schonberger a
Professor studied the then-peculiar approach of some Japanese manufacturers. His original
book, "Japanese Manufacturing Techniques" was published in 1982. It was based on his
studies of the Kawasaki motorcycle plant in Lincoln, Nebraska. This book was a major
contribution to the literature of the time.
In 1986, Schonberger wrote "World Class Manufacturing" to extend and universalize the
concepts. The basis of these ideas was still the Toyota Production System.
World Class Manufacturing is a different set of concepts, principles, policies and techniques
for managing and operating a manufacturing company. It is driven by the results achieved by
the Japanese manufacturing resurgence following World War II, and adapts many of the ideas
used by the Japanese in automotive, electronics and steel companies to gain a competitive
edge. It primarily focuses on continual improvement in quality, cost, lead time, flexibility and
customer service.
World Class Manufacturing is a process-driven approach where implementations usually
involve the following philosophies and techniques:
 Make-to-order
 Streamlined flow
 Small lot sizes
 Families of parts
 Doing it right the first time
 Cellular manufacturing
 Total preventive maintenance
 Quick changeover
 Zero Defects
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7.  Just-in-time
 Variability reduction
 High employee involvement
 Cross functional teams
 Multi-skilled employees
 Visual Signalling
 Statistical process control
Companies engaging in World Class Manufacturing strategies focus on improving
operations, strive to eliminate waste and create lean organizations. This often results in higher
productivity. But these companies also focus on speed of total throughput from order capture
through delivery setting new standards for delivery without the heavy dependence on
inventory. Sequential methods of performing work are being replaced with concurrent
methods to compress time, and functional and hierarchical divisions of duties are being
replaced by team-driven activities.
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8. CRITERIA FOR JUdGING WCM COMPANY
 How does the company compare with its best competitors?
 Has the company increased its score on the check list since last year?
STRATEGIES AdOPTEd bY WC
MANUFACTURERS
Areas relevant to achieve the competitive advantage in production and operations
management:
– Manufacturing/ Operations strategy
• Developing business and operations strategies for capturing
increasing market shares of global markets
– Forecasting in Operations Management
• Effective forecasting techniques, as
– Exceptional long-range business planning systems and
forecasting is integral to these plans
• Develop excellent short-range forecasts as well to facilitate timely
production of goods and services of highest quality, at the lowest cost,
with little inventory while remaining responsive to customers’ needs
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9. – Designing and Developing Products and Production Process
• High product quality, high production flexibility, low production cost
and high customer service considered as major strengths of world class
producers
– Continuous efforts to redesign processes important to achieve
above
• Production Technology- Selection and Management
– Producers consider advanced production technology as a
competitive weapon to capture world market share
– Use of CAD, CAM, FMS, Computer Integrated Manufacturing
(CIM), etc.
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10. – Long-Range Capacity Planning and Facility Location
• Carry out outstanding long-range business planning and also excel
in conducting long range capacity studies
• Provision for extra capacity in the form of capacity cushions to allow
for unexpected demand, seasonal demand peeks, avoidance of
diseconomies of scale etc
• Facility location decisions involve a world-wide search for plant
location sites
– Plant lay- out
• Exert great efforts to develop layouts designed for achieving
competitive priorities for products
• Strive for flexibility in the layout allowing them to change
production rates & product design quickly
• Layouts are relatively small, compact and tightly packed with major
part of floor space used for production and smaller portion for inventory
• Mostly use cellular layouts with automated handling equipment and
flexible manufacturing systems
– Aggregate Planning and Master Production Schedule
• Provides the workforce, inventory, utilities and material supply
contracts necessary to respond quickly
– To customer demand producing high quality and low cost
product and services over a planning horizon of 6-18 months
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11. • Exceptional short range planning necessary to achieve increased
market shares, high quality product, low production cost and high
customer satisfaction
– Independent Demand Inventory Systems
• Producers have established information systems that electronically
link them with their suppliers and customers
• Combination of real time information about customer demand and
inventory
– Lean production system enables them to reduce production and
inventory costs and improved product quality and customer
responsiveness.
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12. – Resource – Requirement Planning
• World class producers have adopted Material Requirement Planning
(MRP, Capacity Requirement Planning (CRP), Manufacturing
Resources Planning (MRP II) and Enterprise Resources Planning
(ERP) over a period of time
• These improvements enable them to achieve higher product quality,
lower production costs and greater responsiveness to customer needs
increasing their market share
– Shop floor Planning and Control in Manufacturing
• Lot sizes drastically reduced, in-process inventories slashed and
customer responsiveness greatly improved
• Increasing use of computer information systems including
scheduling information and scheduling decisions like SAP-R/3, Macola,
Order Links etc
– Planning and Scheduling Service Operations
• Successful producers have adopted advanced and well known
planning, analysing and controlling approaches that were first
developed in manufacturing, where appropriate, and
• Have recognised the unique properties of service operations and
developed novel management approaches for these operations
– Just-in-time Manufacturing
• Producers have switched their operations to JIT so that they can
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13. engage in time-based competition
• Had to invest heavily in engineering studies and equipment
modifications
– To drastically reduce set-up times,
– Training programmes to train workers for multiple skills, and
– New business strategies with narrower product lines that allow
stable and level production schedules
– Supply-chain Management
• Supply chain managers of world class producers plan and control all
activities related to movement of materials, from suppliers, through the
production process and to customers
• Form partnerships with suppliers to quickly produce products of
near perfect quality precisely when needed and with little inventory
• Close by located suppliers preferred
• Use computer models to develop and optimise shipping plans for
manufacturing and service operations
– Productivity, Teamwork and Empowerment
• Employees are of both strategic and tactical importance as
– They directly affect product costs, product quality, customer
satisfaction, and
– The successful implementation of such strategic initiatives as
installing high tech production systems, JIT and TQM
• Workers hired have problem solving abilities and trained in multiple
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14. skills
• Workers must have the state-of-the-art technology, machine and
tools and product must be designed for manufacturability
– Quality Management & Quality Control
• World class producers commit tremendous resources to put in place
Total Quality Management programmes aimed at continuous quality
improvement
• Apply for a Malcom Baldrige National Quality Award and the
Deming Prize and quality for the ISO 9000 standards in the coming
years
• Understand that quality cannot be inspected but has to be built into
the product
• Effective Quality control achieved through use of statistical
techniques, automating inspection and testing
– Maintenance Management and Reliability
• World class manufacturers give much of the responsibility for
repairs and preventive maintenance to workers
• Implement TPM programmes for maintenance management
• Extensively use computers in maintenance management for
scheduling maintenance projects, inventory systems for spare parts and
parts failure data
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15. INDIAN SCENARIO
Manufacturing in India
Why India?
India represents an economic opportunity on a massive scale: China and India are likely to
be the world’s two biggest economies by mid-century, and although India has
underperformed in the first lap of the growth race, there is a strong possibility that India may
well move ahead. Although India is still seen by industrial investors as an economy where
risk is higher and the business environment more problematic than in rival Asian investment
locations, India also offers some advantages in the region. The legal framework that protects
investment is one of the best in Asia. The economy offers an abundance of technical and
managerial talent, often with international experience. Geopolitical risk is diminishing
consistently, in contrast with some of India’s emerging economy rivals in Asia. And above
all, India has a demographic advantage that should see its working age population continue
to grow well into the century, increasing wealth and reducing cost.
The companies range from Bharat Forge, Bajaj, and Tata in the auto sector to Larsen &
Toubro and Godrej & Boyce in specialist engineering, Ballapur Industries in paper, and
others in pharmaceuticals and textiles, as well as Moser Baer. And they are showing that
India is beginning to shrug off its reputation for appalling quality and reliability, and that it
can compete internationally.
India is also emerging as an outsourcing design and production base for manufacturing, as it
has been for software, with most of the world's autos companies - and many others such as
Finland's Nokia and Taiwan's Foxconn in mobile phones - sourcing components and
assembling products.
Another example of the future is Tata Technologies, a Tata group design house based in Pune
that operates in 12 countries. It has been involved in the design of Tata Motors cars and vans
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16. but does 74% of its work for foreign clients, including Chrysler, General Motors, Boeing, and
Airbus.
The turnaround in Indian manufacturing began in the early 1980s when then-Prime Minister
Indira Gandhi told government-owned Maruti to make a "people's car." She didn't get what
she wanted because Maruti ended up producing a small car for the middle class, followed by
larger models. But she did get a successful 50-50 joint venture with Japan's Suzuki that
sparked the foundation of today's automotive industry, which has annual sales of $34 billion
and $5 billion in exports.
After the IT boom, a manufacturing revolution has been well underway in the Indian
economy, spurred on by the increasing presence of multinationals, scaling up of operations
by the domestic companies and expanding domestic market. The sector has been averaging 9
per cent in the last four years (2004-08), with a record 12.3 per cent in 2006-07.
India's manufacturing base, which is the fourth-largest among emerging economies, is among
the fastest growing and has seen more investments as a proportion of gross domestic product
than any country except China.
Consequently, manufacturers from across the world are transforming India--which has all the
required skills in process, product, and capital engineering, thanks to its long manufacturing
history and higher-education system--into a potential manufacturing powerhouse.
"Every major company has India on its radar screen," says Wharton Professor of
Management, Saikat Chaudhuri. And the number of companies, spanning diverse industries,
planning to make India their global hub for host of operations has only been increasing by the
day.
Cummins is making India its manufacturing hub for newly developed line of generator sets;
Samsung plans to make its manufacturing plant in Chennai its global hub; Ford is making
India its manufacturing hub for engine manufacturing; Suzuki and Hyundai are making India
the manufacturing and exports hub for small cars. In fact, all the top five telecom
manufacturers have set up manufacturing facility in India.
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17. FACTORS FAVOURING MANUFACTURING IN
INDIA
India Advantage
India's vast domestic market and availability of low-cost workers with advanced technical
skills has been instrumental in attracting the ever expanding number of multinationals who
are setting up their manufacturing base in the country.
The sheer size of the Indian market has obvious appeal. The rapid growth of the Indian
economy is likely to make India the fifth largest consumer market in the world by 2025 from
twelfth in 2005, says a study by McKinsey Global Institute. Aggregate Indian consumer
spending is likewise estimated to more than quadruple to US$ 1.77 trillion by 2025, on the
back of a tenfold increase in middle class population and three fold jump in household
income.
Along with this India offers abundant engineering and technical manpower; producing
annually about 4, 00,000 graduate engineers. Significantly, the technical workforce is set
cross the two million mark this year, with the march from one million to two million
happening in just about three years.
Top of the Value-Chain
With such a large technical workforce it is no accident that high skill-sectors account for
almost 40 per cent of the manufacturing output in India. Taking advantage of this fact,
several multinationals operating in skill-intensive industries requiring advanced technical
expertise have set up their shop in India.
For example, ABB, Honeywell, and Siemens in electrical and electronic products; Cummins,
DaimlerChrysler, and Toyota Motor in auto components and engineering; and Degussa as
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18. well as Rohm and Hass in specialty chemicals have all set up their manufacturing base in the
country.
And as the next wave of outsourcing in manufacturing expected to take place in just these
kinds of industries, India is likely to become primary sourcing and manufacturing base.
Already just over half of all offshore manufacturing by US companies involves skill-intensive
sectors, and that figure could rise to 70 percent by 2015 opening up huge opportunities.
Global Manufacturing exports hub
'Made in India could become the next big manufacturing exports story' says a report by
McKinsey. India, with its proven track record in the skill-intensive industries and the global
trend to manufacture and source products in low cost countries, is well placed to emerge as
one of the leading hub for manufactured exports.
Already a host of companies are making India their global manufacturing exports hub for
their global operations. The list includes companies like Nissan Motor Co, Suzuki Motor
Corp, Fiat, Anest Iwata, Hyundai and Nokia, among others.
Also, manufacturing contributes about two-thirds of the total exports of the country. It is
estimated that manufacturing exports could increase from US$ 40 billion in 2002 to US$ 300
billion in 2015, simultaneously increasing its share in world manufacturing trade from 0.8 per
cent to 3.5 per cent.
Going Global
Indian manufacturers, with the tremendous expertise gained in the domestic market, are
spreading their wings to reach out to global markets. Indian corporate has been busy taking
aggressive steps through both acquisitions and Greenfield investments abroad. All these
initiatives are likely to boost brand India in the global arena.
Bharat Forge after multiple acquisitions has emerged as the world's second-largest
manufacturer of axle beams, crankshafts, and other forged auto components. Similarly, Tata
Steel after the acquisition of Corus has become the fifth largest steel producer in the world.
Suzlon is the world's largest wind turbine generator (WTG) manufacturer. Ranbaxy
Laboratories, India's largest pharmaceutical company, manufactures generic drugs in 11
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19. countries, distributes and markets them directly in 49, and counts on foreign markets for 80
per cent of its revenue.
In addition, a clutch of Indian companies are also becoming a vital link in the global supply
chain. Sundram Fasteners makes generator caps for General Motors. Moser Baer has
established itself as a global manufacturer of data storage media such as DVDs and CDs.
Manufacturing Excellence
Indian companies are also becoming renowned for their adherence to global quality
standards. Already, India is amongst the countries with the highest tally for 2007 with total
TPM Excellence Awards -- conferred by the Japan Institute of Plant Maintenance --winners
standing at 111. It can also proudly claim to have 15 Deming award-winning companies
(amongst the highest tallies worldwide outside Japan), and one Japan Quality Medal winner.
The industry has also been on the path of continuously increasing its productivity levels. For
example, an Economic Times survey of 200 companies (arranged in terms of value of output)
finds that the incremental capital output ratio (ICOR), that measures the output generating
capacity of incremental capital, has improved from 0.62 in 2005-06 to 0.59 in 2006-07.
Government Initiatives
The Government has taken several initiatives to accelerate growth in this sector and improve
competitiveness of Indian industry in general and manufacturing in particular:
Implementation of technology upgradation schemes for various sectors such as small scale
industries, textiles, food processing among others.
Implementation of industrial infrastructure upgradation programmes on cluster basis, Easier
access to inputs at competitive prices and rationalisation and reduction in duty rates.
Encouragement to foreign technology, collaborations, and liberalisation of FDI in
manufacturing activities.
Launch of "Visionary Leadership in Manufacturing" programme to generate 300 visionary
leaders in manufacturing in the next three years.
Implementation of Special Economic Zones Act.
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20. Starting the construction of Delhi-Mumbai Industrial Corridor in cooperation with Japan
External Trade Organisation (JETRO).
To further encourage manufacturing growth, the Government plans to set up Manufacturing
Investment Regions (MIRs) on the lines of Petroleum and Petrochemicals Investment
Regions (PCPIR).
Looking Ahead
According to a response of more than 340 of the world's largest international manufacturing
companies-from Europe, Americas and Asia Pacific-in a study by global consultancy major
Capgemini, India is all set to threaten China as the world's backyard for manufacturing in the
next three to five years. It says companies are planning to offshore manufacturing activities
primarily to India, that will surpass its IT and BPO activities.
Reflecting this optimism in the country's potential, India has emerged as the top most
promising destination for long-term Japanese overseas business for the first time in a survey
by Japan Bank for International Co-operation.
With such a surging interest of global manufacturers in Indian market, as Lord Swraj Paul,
chairman of Caparo Group says, "India will become the hub for world manufacturing
industry".
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21. FACTS AND FIGURES
India is one of the top performers in the manufacturing sector in the world. India’s
manufacturing sector is large and diverse, composed of several independent sub-sectors. The
10 key sectors that comprise the bulk of Indian manufacturing are:
 Engineering
 Electronics
 Automotive
 Textiles
 Chemicals
 Leather
 Metals
 Machine tools
 Food processing
 Gems and Jewellery
India is the largest three wheeler market and second largest two wheeler market in the
world.
India is the second largest jewellery market and largest diamond cutting and polishing
centre in the world.
India stands nineteenth in production and sixteenth in consumption of machine tools in the
world.
India’s Textile Industry is the second largest in the world in cotton trade.
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22. The Indian Chemical industry ranks twelfth by volume in the world for production of
chemicals.
India is the third biggest leather producer in the world after China and Italy.
India is world’s largest producer of milk, tea and pulses with world’s largest livestock
population to support food processing sector.
India ranks fifth in the world bauxite reserves next to Australia, Guinea, Brazil and
Jamaica.
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23. INDIA v/S ChINA
Will it be India or China that wins the race to dominate the world economy in the second half
of this century? Many assume the answer has to be China, the economy that has been
growing and drawing in manufacturing investment at an astonishing pace for the last two
decades.
But this is a long race, and India has several long-term advantages. China has certainly made
most of the running in recent years. In 1950 China was the poorer country, with per capita
GDP in today’s dollars of U.S. $439, against U.S. $619 for India. By 2003 the Chinese figure
had leaped ahead to U.S. $1,100, while India had slipped to U.S. $530. The disparity is highly
marked in the relative record on foreign direct investment. According to Chinese figures, well
over U.S. $50 billion in FDI is now going into China each year: today it is hard to think of a
significant cross-border company that does not have manufacturing or services operations
based in China.
India is a long way from being able to claim the same, even though much has been achieved
since the government of Rajiv Ghandi began the long, slow, and painful process of opening
up the economy. Over the 1980s the growth rate rose from 3.5 percent to over 5 percent; a
financial crisis in 1991 prompted a bigger and faster deregulatory reform package with cuts in
trade taxes and sell-offs in the state-owned economy. Growth crept up further, to 6 percent,
but that level is still well below the growth of around 9 percent that China is currently
recording.
But that is not the end of the story. Firstly, there is reason to distrust the official investment
figures. Chinese official sources are sometimes inconsistent (in many areas the aggregate of
local figures does not match the national totals) and inflated by double counting. Neither do
raw investment figures record the quality of investment.
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24. According to the Confederation of Indian Industry, the average return on investment in India
is over 19 percent, compared just over 14 percent for China. That higher return is a reflection
of the higher value-added manufacturing investment that India attracts. “If you are looking at
high volume and relatively low technology manufacturing, China tends to be more
competitive,” says Kuldip Khushoo of Honeywell. “But in lower-volume manufacturing
where technology use is more intensive, then India is better,” he says. Another foreign
manufacturer with many decades’ experience in India agrees: this company says that “India is
very competitive at low volume, high specification engineering work, which is why we are
now talking about using India as a global source point for these products”.
India has a demographic advantage. India’s working-age population is likely to continue to
grow for the next two decades at least, while China’s is now beginning to decline. And in this
global economy demographics drive growth: over the last century there has been a consistent
positive correlation between long-term growth rates and the low-dependency ratios associated
with relatively youthful populations. According to a recent long-term growth forecast from
banking group Goldman Sachs, demographic patterns may put Indian growth well ahead of
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25. Chinese growth by mid-century. Just now confidence is booming in India, with record growth
and low inflation.
If recent history is any guide, the euphoria will not last – domestic confidence tends to be
highly cyclical in India. But the longer-term outlook is exceptionally positive: Indians may at
last have to get used to success
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26. WoRlD ClASS MANUFACTURING (WCM) ChECklIST
Checklist below is used to evaluate business and manufacturing / production processes
against the best. With this World Class Manufacturing checklist one can identify
improvement opportunities. The checklist is graded so that one can also use it to check
company’s progress.
WCM- The recognition of an organisation as a benchmark- by its industry sector, and for
some aspects by other industry sectors.
Organisations that consistently deliver exceptional performance, frequently in excess of
expectations of customers are World Class Manufacturers.
There can be no absolute World Class Manufacturing standard. World class manufacturing
opportunities vary enormously from one industry to the next. One should therefore judge
company's performance against the other companies.
The best way to score the checklist is for a group of senior managers from key departments
plus production operators to go through the checklist by themselves and then get together to
either agree the answer or take the most popular answer. The value of the checklist is as much
the value of the discussion as the answers. What is vital is that the same group gets together
at least annually to discuss progress since the last time.
Please now answer the questions below. The first question on customer service requires a
percentage the remainder have a graded answer:
"W" World class
"X"
Very good but not quite world class –
(country class)
"Y" Better than many – (city class)
"Z" Poor – (village class)
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27. It is recommended that as you work through the checklist you build up a list of short, medium
and long term improvement opportunities. You need to be clear from the start and consistent
about the division or section of your company that you are referring to when answering the
questions.
Q1) Do you have a 99% or better level of customer service (on time in full (OTIF) or
product availability)?
All objectives are subordinate to the requirement to ship what your customer expects, when
expected, with all relevant paperwork complete. For make to stock companies the principle
customer service measure is the percentage of orders received where stock is available at the
time of receipt of the order, an out of stock item is normally only counted once in the time
period under consideration. Out of stock items not ordered are not counted. Where you are
supplying to a customer kanban, you must achieve better than 99% in line with the kanban
agreement. For other companies the measure is the percentage on time in full (OTIF)
delivered complete to the customer on the agreed / promised delivery date; agreed re-
schedules are allowed. If there are multiple lines or items on an order, one hit means all
ordered item lines are delivered on time in full; if one line item is missed, this is a miss for
the whole order.
Customer service level (on time in full or % availability)
%
Q2) Does everyone in the company know who the key customers are and what
differentiates the company’s products and services from the competition?
Awareness of the strengths and weakness of the company’s product or service is a key factor
in achieving the involvement of everyone in the company and improving employee
satisfaction. It is not possible to achieve this objective without an employee induction
process, current customer service challenges discussed at meetings (not just late orders) and
information about customers readily available to all employees.
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28. Q3 Do all staff who are in contact with customers have the authority and empowerment
to resolve customer problems?
Managing the points of contact with your customers is the single most important company
success factor. A company can only consider itself to be a world class manufacturing
company if all its customers are confident that any problems they have will be speedily
resolved and they will be kept fully informed, preferably by the person they initially
contacted. It is very unlikely that any company that uses a remote call centre or layered
telephone answering system could ever be considered world class in any business or industry.
Q4 Do kanbans control your supply chain?
Kanban control means that the authority to make or move an item is based on that item's
usage unless there has been a properly approved and strictly limited deviation.
4a) A world class manufacturer must be able to help their customers reduce the stock of their
products by rapidly replenishing their customer's stock on a kanban basis with over 99%
reliability. The kanban messages can take the form of an e-mail, fax, card, empty container or
require you to visit their plant to replenish their stock of your products (usually referred to as
vendor managed inventory.
4b) It follows that the ability to reliably supply to customers under kanban control is crucially
dependent on the control of internal manufacturing by kanbans, otherwise the final kanban
control is at risk. Your speed of response will be much better when manufacture is controlled
by kanban as, in addition to reducing lead times, kanban control can eliminate the scheduling,
kitting and issuing processes. There may be some operations which need special controls but
there is no problem with operating with a mixture of kanban control and work-to lists. If all
parts produced by a work area can be kanban controlled, however, then there are fewer
clashes of priority.
4c) The final element of kanban control is the supply of material from your suppliers. Ideally
your suppliers should be given responsibility for maintaining a minimum stock level in your
designated storage locations, often referred to supplier or vendor managed inventory (VMI).
Alternatively your supplier will replenish stock as you have used it based on kanban signals
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29. such as an e-mail, fax, card or empty container. The kanban messages should be at least daily
although the replenishment could be less frequent. You may have to educate any suppliers
who are currently unable or unwilling to supply under kanban control.
Q5 Have you eliminated the central storage of direct material and is purchased material
supplied to the point of use without routine inspection?
Moving material from one place to another adds cost but not value, so material should be
delivered to the point of use wherever possible. The users of material should be responsible
for the storage of that material, including any goods-in checks that cannot be carried out by
the supplier. Users should also be able to check that replacement of stock is underway if
stocks get too low. Ideally, the vendor should be responsible for delivery to the point of use
(i.e. vendor managed inventory) and should be able to decide when to replenish material
when this is practical (direct material is any material consumed in the manufacture of the
product).
Only "approved" vendors can safely supply to the point of use (see Q11 below) There must
be audits of quality and quantity of all supplies.
Q6 Have you laid out the majority of your machines and equipment so as to minimise
the distance between sequential operations?
In the old days a company would lay out equipment according to its function. Thus four
milling machines would be put next to each other. Functional layouts must increase the
distance parts have to travel because work almost never passes between machines with the
same function. You should always arrange machines and equipment in the sequence in which
they will normally be used. Such a process based layout will sometimes decrease utilisation
of equipment but the work in progress saving alone will more than pay for this in most cases,
with additional savings in quality, costs and administration. The people who are responsible
for work place layout, ideally the people who work in the area, have to take the trouble to
think through the work flows before laying out the work place. The value of line-of-sight
communication between sequential operations cannot be over-stressed.
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30. Q7) Have you reduced or are you reducing the set-up time between products to the
point when it is economical to make your product in the quantities required for
customer shipments?
If at any stage of manufacture you produce in batch quantities that are larger than the
shipment quantities required by your customers due to set-up time, there should be an active
set-up time reduction group. Wherever possible, equipment should be dedicated to one
product to eliminate the time and cost of changing from one part to the next. Where this is not
possible or economic, set-up time must be kept as short as necessary to avoid the need to
increasing lot sizes to gain "economies of scale". The old "economic lot size" calculation
should be turned on its head to work out the "economic set-up time" for the lot sizes required
by your customers. You should never impose, or need to impose, minimum batch sizes for
your customers.
Wherever possible batch sizes should be the same throughout the process.
Q8) Have you an ongoing education and communication programme to inform existing
employees and educate every new employee, whatever function he or she performs, in
the world class manufacturing techniques you are using?
World class manufacturing is a programme of continuous change and change has to be
carefully managed. It is important to take everyone along with the changes and so avoid the
pockets of resistance that result from a lack of understanding of the changes and the reasons
for them. It is also easy to forget new recruits who may have come from a traditional
environment and so find some of the world class manufacturing ways of working difficult to
understand.
Knowledge of the benefits of world class manufacturing are important for sales staff. The
value of the ability to offer kanban delivery will be lost if your customers are not told about
it.
There is no better way for people to become more aware of quality issues than for everyone
to understand where their tasks fit into the business. Whilst it is desirable for the same person
to routinely carry out the whole process it is not always practical but it is the appreciation of
the whole process that is required. Cross-training (or multi-skilling) is also very important to
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31. meet the rapid changes that will often result from being more responsive to customers' needs.
Multi-skilling can be expensive unless spread over a period, so it is acceptable to concentrate
on your longer service personnel.
As many people as possible should have an awareness of the basic 7 tools of quality (process
charts, Pareto (80/20) analysis, Ishikawa (cause and effect) diagrams, histograms, run
diagrams, statistical process control and check sheets). When problems occur in a world class
manufacturing environment they tend to affect everyone quickly. If everyone can help not
just to solve the problems but find the root cause of the problem you turn this enforced
problem solving to your advantage. The training must be backed up with the necessary
support and authority, given appropriate safeguards, so that as soon as the solution to a
problem is found it can be implemented without delay.
Q9) Do the employees take the initiatives to move to the point of need?
Employees taking the initiative are recognition of the "thinking worker" and helps reduce the
level of direct supervision required by a team. Employees should never be "kept busy" doing
work that is not needed.
Q10) Is there is a programme in place to progressively reduce non value-adding costs?
A non value-adding cost is anything which adds cost but not value to the saleable product or
services provided by the company to customers. Non value-adding costs are characterised by
the 7 wastes of early or overproduction, waiting, transporting, inappropriate or unnecessary
processing, unnecessary inventory, unnecessary motions and defects. All the wastes should
be investigated from time to time and at least one under active investigation now by a team or
task force. Every new product and process should be evaluated against the need to reduce
waste. The decision to purchase or replace equipment must include all the factors that could
increase waste, set-up time and reliability in particular, if world class manufacturing standard
are to be achieved and maintained.
Q11) Is there a programme in place to reduce your supplier base to a small number of
qualified suppliers integrated into your business?
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32. The world class purchasing objective is a small supplier base of reliable companies working
in partnership from the design stage, delivering frequently, in the quantities you need, directly
to the point of use.
As it is not possible for one person to maintain a good relationship and understanding with
more than about 50 supply companies, single source supply is necessary. With single sources
you can get the genuine, invaluable involvement and commitment of your suppliers to your
business.
Long term commitment to suppliers and single sourcing makes you as important as possible
to your suppliers and allows suppliers to engage in a continuous reduction of costs using, for
instance, value analysis techniques. Delivery to the point of use is not possible without single
source supply.
There should be a systematic way to approve potential qualified suppliers based on their
quality, costs, management, product development resources and financial health.
Performance measures in purchasing should be based on total acquisition costs not simply
purchase price variance.
There should be significantly fewer direct material suppliers than last year and you should be
working more closely with them. You should also have a higher proportion of approved
suppliers.
Q12) Is there a culture of Total Quality?
There must be a culture of total quality throughout the business. Getting one person to do a
job and then someone else to check it is not only wasteful but also de-motivating. Every
person or team that has a job to do should be able to check that the job has been done
correctly and should be given the training, equipment and responsibility for doing so. The
role of quality control is to audit quality and feedback long term process control information.
Only if very expensive equipment, a special environment and/or very specialist training is
needed should a quality control department be involved with routine testing.
The principles of total quality should permeate all activities. Commercial departments are
concerned about the quality of their forecasting process and monitor the accuracy of their
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33. forecasts in order to improve them. Stores monitor the accuracy of stock records, engineers
the accuracy of the bills of material and so on.
There should not be an independent rework or rectification process which just legitimises
faulty work. It should not be regarded as a punishment for people to put right their own
defective work but part of the principle that people are expected to produce work that is
correct first time.
Identifying and eliminating the cause of the faulty work must also be seen as part of the
rectification process. The people in the best position to rectify the causes of faults are the
people doing the work. Every fault found must be seen as an opportunity to improve the
quality of the product, the basis of blame free quality control.
Q13) Do you audit the product and process quality inside the test limits?
You cannot get to parts per million quality levels if your quality checks only sort the good
from the bad, the passes from the failures. Everyone involved with a task that can vary must
check where the process is within the tolerance band and be able to take corrective action
before defects occur. By this means, operators have an early warning of possible failures so
enabling the processes to be fine tuned. The technique generally used is statistical process
control.
No reason or excuse is good enough for failing to allocate the resources necessary to achieve
customer returns measured in parts per million. The cost of your rejects to the customer is far
more than just the cost of replacing faulty parts. The damage to your reputation of poor
quality can never be repaired. This quality target applies also to mistakes in the shipping and
packing departments, invoicing and even such things as order confirmation.
Q14) Does everyone have authority to "stop the line"?
If quality is crucial to your success, there is no better way to drive up the quality than to give
all employees the authority to halt any job or process if they are unhappy about quality levels.
An employee must always choose to stop a process rather than possibly create or even pass
on a known or suspected defect. Anyone who finds a defect must always pass it back to the
person who made it if possible, without the need to refer to management.
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34. Q15) Have you 'foolproofed' critical jobs?
To reach parts per million quality standards, jobs have to be made foolproof. Foolproofing
(called poka-yoke by the Japanese) means that either mistakes cannot be made or, if this is
not possible, the equipment will automatically identify and/or stop when a reject part is
produced. Foolproofing requires imagination and commitment to quality. There is no easy
way to measure your degree of foolproofing except to ask yourself if the operations that
could cause faulty products rely on human judgment.
Q16) Are the majority of people responsible for the maintenance of the equipment they
use?
You cannot afford delivery schedules to be dependent on unreliable equipment. If it is not
possible or practical to have duplicate equipment then you have to do as much as you can to
avoid equipment failures. The users of equipment are the best people to carry out
preventative maintenance because they are the first to know when their equipment is not
performing properly and should also be the best people to know when it is fixed. It follows
that if they can be trained in preventative as well as corrective maintenance, this will be the
most cost effective way of reducing down time. Users of equipment should have a real sense
of ownership. Some people will not be willing or suitable for such training but there should
be a sufficient number of people in each group or team that are sufficiently experienced and
committed. In a world class manufacturing environment the role of equipment maintenance
should increasingly be to help and advice on equipment maintenance as well as auditing
equipment reliability.
Unreliable equipment is one of the most popular reasons for "safety stock" or "safety time"
which increases costs and lengthens lead times. You cannot solve maintenance problems and
keep them solved unless you know where the problem areas are and then monitor the effects
of any changes. There should be a routine report of downtime widely circulated as well as a
downtime reduction teams set up if required.
Q17) Do you have an active policy to help keep work areas clean, tidy and uncluttered?
It has been shown time and again that tidy work areas reduce the frequency of errors and
delays. World class companies have regular inspections of their work areas and continually
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35. look for ways to tidy up their processes. Housekeeping must be the responsibility of the
people who work in the area. A clean and tidy workplace will also give people working in it a
sense of pride. You could not imagine a world class company being a mess now could you?
The importance of a tidy workplace applies to administration as well as manufacturing areas.
Q18) Does the design of products include a consideration of the manufacturability of the
product?
The design of all products and processes should include manufacturing considerations such as
current equipment, suppliers, existing parts, subassemblies and ingredients. In many cases
manufacturing, marketing and purchasing functions should be involved at the design stage to
ensure, as far as possible, designs are manufacturable.
In most businesses it is impossible to optimise designs unless the suppliers of material or
components are involved at the design stage of your products. Improvements to materials and
components you are currently purchasing should be evaluated also to see if your end product
can be improved so that you keep your products competitive.
A key element in design for manufacture is an evaluation of existing designs. Unless
designers are aware of problems and changes required to current designs, future designs
cannot benefit from the lessons learnt in the past. Self-inspection and rectification of your
own mistakes is just as important in design areas as it is anywhere else.
Q19) Is there a culture of continuous improvement in customer service?
The one universal truth in all manufacturing companies is that customers are demanding
higher and higher levels of service which include higher quality, faster response for make to
stock companies and shorter lead times for configure to order, make to order or engineer to
order companies. It is also true that in most industries suppliers are responding.
No matter how good you think your customer service is, it is vital that you ensure you are
addressing the changing needs of your customers and the market place. You can be sure some
or all of your competitors will be striving to exceed your current level of customer service.
World class manufacturing companies are characterised by continuously improving their
customer service. There should be an active customer service improvement group looking at
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36. all the tools and techniques available to be more responsive to customers. Significant lead
time reductions, for instance, involves most functions in the company working together so
will seldom happen spontaneously.
Improving customer service must also include reducing the time it takes to move from the
start of a design to the first shipment of reliable product that meets the specification. This
lead time to market must be monitored.
Improvements are rarely achieved unless there are performance measures in place. These
customer service improvements must therefore be supported by relevant performance
measures which are owned by senior managers, reviewed at least monthly and have realistic
targets for improvement which are achieved.
Q20) Is there a mechanism to quickly and effectively receive and evaluate suggestions
from all employees?
Everyone must feel that any ideas they have for the improvement of any task they perform or
are familiar with will be welcome and resources made available to evaluate their ideas if
necessary. A formal suggestion scheme is neither necessary nor sufficient to score on this
point neither is a suggestions reward scheme. It is an attitude that encourages innovation and
involvement of everyone which is important. This attitude will result in a regular flow of
implemented ideas from the majority of employees.
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37. CONCLUSION
The competitiveness of the manufacturing sector in India comes from a number of
advantages that India offers to the companies investing in India. India has competitive
advantage in manufacturing sector. The competitive advantage of Indian manufacturing
sector is determined by five major factors. These factors are further supported by government
policies and regulations to provide favourable investment climate for investors in
manufacturing sector in India.
Factor conditions for production: These include availability of
 Skilled labour and Raw Materials.
 Large Domestic Market
 Engineering Capability
 Infrastructure / Location Advantage
 Government policies and regulations, which mainly focus on infrastructure support,
improving competitiveness of manufacturing firms and attracting foreign investments
in India.
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38. BIBLIOGRAPHY
REFERENCE BOOKS
 WORLD CLASS MANUFACTURING:
SAHAY / SAXENA / ASHISH KUMAR
 MODERN PRODUCTION / OPERATIONS MANAGEMENT:
BUFFA / SARIN
 WORLD CLASS MANUFACTURING:
RICHARD J. SCHONBERGER
 TOTAL QUALITY MANAGEMENT:
K. SHRIDHARA BHATT
PROFESSOR’S REFERENCE NOTES
 PROF. GOPAL KACKAR
Notes on WORLD CLASS MANUFACTURING
 PROF. NANDKISHOR AGARWAL
Notes on PRODUCTION PLANNING AND CONTROL
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39. WORLD WIDE WEB
 INDIA BRAND EQUITY FOUNDATION (IBEF)
 KPMG FOUNDATION
 ROCKFORD CONSULTING
 WORLD CLASS MANUFACTURING REPORT 2005
 RESOURCES FOR WORLDCLASS MANUFACTURING
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