Business Process Re-engineering (BPR) Kirloskar Oil Engine Ltd.

1. Business Process Re-engineering (BPR)Kirloskar Oil Engine Ltd.

2. KOEL – About the company • Year of incorporation : 1946 • Manufacturer of the wide range of Diesel Engines, Diesel Generating Sets and Engine Bearings and Engine Valves • Chairman & Managing Director - Mr. Atul C. Kirloskar • Industries it caters to - Agricultural Machinery, Construction & Material Handling Machinery, Marine applications and equipment used by Armed Forces (Military). • Sales Income, year ending March 31, 2007 - Rs. 1,883 Cr. • No. of employees : 2,858

3. Vision 2012 “We will become a major Global Player in off–highway engines and power generation businesses by offering winning combinations of Quality, Cost and Delivery through innovation and unmatched service. We will be amongst the Top Five engine companies of the world. While pursuing the above, we will continue to enhance the value of engine bearing and valves business.”

4. Case Findings • KOEL – always held customers in high esteem • However, in 1990s, due to heated competition entering in India, KOEL decided to pursue an aggressive BPR program with a focus on CRM • Multi-pronged process:- • Employee support • Vendor support • Customer support • IT support

5. Key Information Crankcase Industrial Buyers Crankshaft Camshaft Dealers (PG sets) Major Automobile (OEM) Gear casing Con-rod 5 major components for Diesel Engine Key customer segments

6. BPR Process • Step One – The Implementation Committee 2 Assistants for Co-ordination Vice-President 3 SBU Heads Change teams – 6 to 8 bright employees 4 hours a day for as long as needed • Step Two - IT program installation • Software module – Web Customer was established • E-order facility was set up with an automatic translator that interfaced with KOEL’s Oracle based ERP

7. PROCESSES CHANGED

8. Order Registration - Old Distributor physically sends orders Area sales officers – registers & forwards Order Acceptance travels back to all offices Regional sales officers – receives, registers & forwards HO – receives & registers Production Planning consulted Order acceptance number generated

9. Order Registration - Reengineered Distributor orders electronically HO receives orders through ORACLE interface Work order for delivery and/or production System checks – finished good, production plan Order for standard product? Order goes to Sales executive Benefits Average cycle time – 10 to Instant No. of people involved – 8 to 0/1 No. of documents involved – 6 to none Order acceptance generated, sent to distributor electronically

10. Market Segmentation Industrial segment One off or a few custom built models; Fast responsive supply chain Dealers of PG sets Larger variety of standard models; Frequent deliveries OEM Auto segment Standard diesel engine model; Large volume; Frequent supplies

11. Q1 - Auto OEM – JIT – KOEL’S strategy • This was achieved in the following steps • The OEM (Auto) first determined it’s own production schedule (no. of tractors to be produced per day) • Based on this, KOEL committed to delivering a fixed number of diesel engines • Electronically networked with Auto so changes were communicated instantaneously • Created a stand alone production cum assembly line to manufacture engines for Auto • 7 workstations being set up and a division of the target amongst them • Detailed breakdown of the production down to nuts & bolts was determined • Each workstation – One operator/ team

12. Advantages • First pass of product was increased from 90% to 99% • Reduction in wastages of about 2 lakhs per month • Created a sense of ownership and further motivated the employees • Customer Satisfaction

13. Q2 – Custom built engines for Industrial applicationDelivery time < 10 days? …If yes, how does KOEL achieve it? Source: ttp://www.indiamarkets.com/imo/industry/engineering/engine/engine.

14. Delivery time – Custom built engines for Industrial application • The demand pattern for such custom made engines is inconsistent • Leading players delivery time ranges from 8-12 days so KOEL • Standard Product Platforms, customization towards the end • Key Success Factors lie in Technology upgradation & efficient After sales services • A dedicated facility from a vendor like KOEL should serve the Industrial customers to maximum satisfaction • Delivery time lesser than this would increase costs for KOEL but would not offer equal or more value to the customer • Thus, no need to reduce delivery time to lesser than 10 days

15. Q3 - Backward Integration – Yes or No? • Oil Engines used as prime movers of industrial plants / machinery. • Production cannot be planned. • Instantaneous order registration & On-line communication of all orders • Customization of products only in the end. • This helps in faster deliveries , small batch production and help reduce defects . • Defects have come down from 1.5% to 0.2% • Small batch production helps identify defects quickly and helps take corrective steps. Hence, KOEL should not consider backward integration.

16. Q4 – 5 Major Components Crank Case - In an internal combustion, housing for the crankshaft. Is located below the cylinder block. 4 Stroke Engine 2 Stroke Engine

17. Crank Shaft • The shaft is subjected to various forces but generally needs to be analyzed in two positions. • Firstly, failure may occur at the position of maximum bending; this may be at the centre of the crank or at either end. In such a condition the failure is due to bending and the pressure in the cylinder is maximal. • Secondly, the crank may fail due to twisting, so the conrod needs to be checked for shear at the position of maximal twisting. The pressure at this position is the maximal pressure, but only a fraction of maximal pressure. Components of a typical, four stroke cycle, DOHC piston engine. (E)Exhaust camshaft, (I) Intake camshaft, (S) Spark plug, (V)Valves, (P) Piston, (R) Connecting rod, (C) Crankshaft, (W) Water jacket for coolant flow.

18. Camshaft A rod that transmits motion or power from one moving part to another, especially the rod connecting the crankshaft of a motor vehicle to a piston. Also called pitman.

19. All the above parts are critically important for the functioning of the engine. • They spend only 25-30 hours on the shop floor of KOEL. • KOEL is known for consistent quality of it machines • Superior technology is a key differentiator in this industry along with fuel efficiency • Hence, these 5 major components were manufactured in-house as they were a critical success factor to KOEL

20. Q5 - Reduction in suppliers from 500 to 100 • The need for JIT-this meant working with suppliers who could deliver JIT • Technological criteria required • Accurate forecasting: this meant that KOEL did not need a large base of suppliers in order to satisfy unstructured demand • The redesigning of the customization business lead to the need of less suppliers of customised parts • Cost reduction • Minimising error • Stronger relationships with lesser partners • Sense of ownership & increased motivation

21. In conclusion… • KOEL faced many challenges while implementing BPR • Attitudes & mindset of employees • Resistance to change from internal & external stakeholders • Educating, training • Convincing vendors to invest in technology & automation • 3 long years and still running…. THANK YOU