Sushil Verma, CEO of Pune-based Aichelin Unitherm Heat Treatment Systems India Pvt Ltd, shares his experience of braving the challenges of lean time in this first person account.

Our company is into manufacturing of heat treatment furnaces, which are mostly custom built and fall into capital equipment line. So we face all difficulties, which are associated with any capital equipment industry, in our daily life.

We can categorise these issues into internal and external factors. The internal ones are those, which are related to company resources, efficiency, training and management working style. These are totally dependent on how the company works and management supports its staff from time to time. The management has full control on these factors.

Internal Factors

The internal factors can be classified into 3 major challenges listed below:

Technology - In case it is our own design then there is challenge of keeping it updated with new technology and spending considerable time and money in R&D to develop new technology. In case there is JV or technical tie-up then the issue is of how to transfer the technology from parent company. This is easier said than done. The challenges are many here - the right identified person in parent company who understands your customer's requirement well and can manage to transfer the required technology to you. Then you must have technically qualified person at your end to receive the technology and modify, change, improve, localise and indigenise it so that it meets the local criteria of quality, price, manufacturability and availability of materials.

Generally in capital equipment we get reference drawings from parent company, which are similar to the specifications in enquiry. Now our local design engineer has to study them and make detailed drawings as per the material available in India and what we can manufacture here. Also there are many stringent safety requirements in Europe like CE marking which are not there in India so those changes have also to be made. The revised design then has to be vetted by the parent company to see that there is no compromise done on basic design parameters and there are no mistakes.

While modifying the design to our needs, we have to anticipate the probable issues, which might come and need to be addressed adequately at design stage itself. Any issue detected at later stage of manufacturing will cost you much more then at design stage.

Manufacturing - Our product range is such that a job is rarely repeated. More than 30% of our equipment has changes from what was made in the past and 50% have new designs. So every drawing is virtually new and the manufacturing team has to study well to see what has changed from last job and also the new modifications, which have been incorporated in the new drawings. This is always a challenge including getting individual parts made in factory or at vendors' place.

Also the manpower keeps on changing from time to time so the efficiency created and knowledge earned by working on so many earlier similar jobs is lost when an employee leaves the company. We have to keep working on motivating employees, improving HR policies to retain talent and experienced employees.

Adherence to committed delivery by supplier is another challenge for most of the bought out items. The suppliers are limited and we have to engage with them including putting stringent clauses to bind them for timely delivery of the material to manufacturing.

Commissioning - It is long drawn process in the furnace industry to erect and commission a furnace at site and prove the same. Since 50% furnace lines that we manufacture are based on new technology, which is introduced for the first time, we have to spend considerable amount of time in training our site commissioning staff to do the job effectively. But in spite of all this, many issues crop up at site due to customer layout changes, matching supplies with previously supplied equipment, new modifications required by customer, customer not ready with site and utilities and some parts getting damaged during commissioning, transportation, etc.

These all factors put together lengthen the commissioning time at site. We have to make bar chart for each site activity and monitor it on daily basis whether the planned activity is completed or not, if not, why and how it can be completed now. More coordination is required between site engineers and design, manufacturing, sales and QC department to give fast solution to engineers at site.

External Factors

The external factors are those on which the management or company has no control and are totally market driven and dependent on government policies. As per my experience there is only one major external factor, which has great impact on company survival and is to be dealt with lot of planning and expertise. This is:

Demand - The product demand is totally dependent on the market situation and moves up and down year after year depending upon the economy. The last two years have seen depressed market and hence low demand for the products. Last year the 1st half had very less business from the usual product lines, which gradually increased in the 2nd half. We introduced many new lines last year like aluminium melting and solutionising furnaces and bogie hearth furnaces, which are not dependent on auto sector as our all existing furnace lines are mostly catering to the auto sector. Diversification of products helps you float even when a particular market segment is down.

This factor is also directly linked with government policy and any adverse policy has devastating effect on capital equipment sales. For example, government lethargy on infrastructure projects led to diminishing demand in all major sectors, which brought the economy down and hence sales of all products came down. A healthy order backlog helps in such difficult times as no new orders pour in. Remember the capital equipment market is first one to go into depression and last one to come out when market improves.

Another step the company must initiate is to make itself lean so as to bring down the break-even point at which the company makes profit. This is very important for survival and has to be reviewed periodically to check if further steps are required. Excess manpower, unnecessary expenses, stock reduction, more emphasis on collections, reducing wastage, increasing efficiency, renegotiating contracts with better terms with suppliers can be done to achieve this.

Since you have no control on this external factor and also you do not know for how long it will last, you have to do whatever is required to overcome this situation by employing all of the above factors. When the situation improves, you will benefit the most from the steps taken in the past. Time is very critical here to decide when to take which step to reduce expenses.

Also remember all these steps will give insecurity to your staff on what is happening to company but you need to take them into confidence to tell them that these steps are for the survival of the company which ultimately will benefit them all in the coming days. If the company survives then all of them will survive. The above steps reduce only wasteful expenses and nowhere have I said to reduce direct salary of the staff, which should be avoided and should be done as a last resort. Otherwise you are cultivating unsatisfied employees and with such a team you can never win. Motivated employees are the key to success and in such atmosphere I have noticed they also support management decision if they see a secure future.

With such steps I can say our company has successfully come out of depressing sales in last 2 years and not only made substantial profits but also found time to spend in correcting design issues, locating new suppliers, training the team, developing new products and above all, keeping the team motivated and preparing them for tomorrow's challenges.

About the author

Mr Sushil Verma, CEO, Aichelin Unitherm Heat Treatment Systems India Pvt Ltd, is a graduate in mechanical engineering and post graduate in business administration with 26 years of extensive experience in sales, business development, production and as profit centre head.