There are two odd things about Lakshmi Precision Screws (LPS). The first, it is based in Rohtak, a district of Haryana which has little to do with engineering or auto component manufacturing. In fact education and agriculture are the major drivers here. The second is that although LPS is rated as the number two in automotive high-tensile fasteners in the country, market perceptions place it as number one.
Chairman and managing director, Lalit Jain says that his father wanted to do something different from the family’s involvement in agriculture and textile business and so went on to make bicycle parts from a single spindle lathe machine that he imported from Germany. He became a supplier to the few well-known bicycle manufacturers in India then. His ambitions led to a diversification into the fasteners business when he obtained a license to manufacture these out of Rohtak in 1969 and began production in 1972.
The fledgling company’s first customer was Lakshmi Machine Works, a prominent Coimbatore-based manufacturer of machine tools, and then others like Escorts followed. “On the basis of installed capacity, we are number two in the country and in exports as well,” Jain says. However among the biggest challenges the company faces is in the area of logistics and scale which sometimes prevents it from grabbing new business opportunities.
Acting on this, Jain is establishing LPS’ third plant in Manesar at an investment of Rs 20 crore . This is expected to become operational by October this year. It will have an installed capacity of 2,500 tonnes. He admits that the plant where he sits and the one that this author visited has much to improve in its 5S and some other processes. This has led him to begin a TPM movement in the factory which he hopes will eventually see it contest the Deming Award.
The upcoming factory in Manesar, Jain believes, will be a model manufacturing unit whose learning will filter down to the other facilities of the company. It will be based on cellular manufacturing; the workers are expected to be more skilled and fewer and it will function principally on lean manufacturing which will be learnt from Japanese experts. Despite the improvements it needs to make, the company has many other positive ingredients that have enabled it to service some of the most demanding customers in the automotive industry.
CUSTOMER DELIGHT
For high tensile fasteners, its two-wheeler customers include TVS Motor, Hero Honda, Honda Motorcycle and Scooter India (HMSI), Suzuki and Yamaha. The rising rising demand for better engineered products has forced LPS to deliver quality that is comparable to Japanese or European companies. Encouraged by LPS’ rigourous commitment to quality as a vendor , two-wheelers giant TVS prodded it into making automotive cold forged precision components.
The company’s engineering team under Jain’s guidance successfully developed a cold forged part for TVS. The OEM was pleased because LPS was able to deliver a part in two operations which took TVS six to make. More significantly, it passed on the cost benefits to TVS, thus enhancing customer delight. The cold forged parts such as spline shafts for gearboxes and transmissions and tie-rods are made through a non-vertical process. This process, according to Jain, provides for better material grain flow than the vertical cold forge process.
The company’s cold forged parts are supplied to Hero Honda, HMSI, TVS and Yamaha. Four-wheeler parts and customers will emerge after the company inducts new vertical presses, he says. Around 150 different kinds of fasteners are being supplied to tractor maker John Deere, as single source, for applications in engine, transmission and vehicle assembly.
The company has also approved LPS for supplying to its engine facility in France – the largest it possesses in the world. Eicher, Escorts and Mahindra and Mahindra are its other customers in this segment. The largest volume-based segment for LPS remains the truck segment. In addition to Tata Motors, it supplies to Volvo’s buses and trucks operations both in India and globally.
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Domestic demand, says Jain, is looking up for the automotive fastener business. Over the past five years, it grew by about13 percent while he foresees growth of up to 15 percent in the next five years. In FY 2005-06, LPS’ overall sales turnover was Rs 167 crore while it achieved sales of Rs 195 crore in the last financial year of 2006-07 of which 25 percent was attributed to exports. Jain is aspiring to touch the Rs 500-crore mark by 2009-10.
QUALITY RAW MATERIALS
Getting adequate raw materials continues to be a challenge for LPS and other fastener manufacturers in the country. He says that the company buys 60 percent of its raw material of cold heading quality steel (CHQ) - a specially annealed steel which improves the ductability and formability of the raw material to withstand pressure from the cold forge technique - from companies like Mukund Steel and the rest is imported.
Another potential supplier of steel would interestingly be the TATA-acquired Corus steel company, according to Jain. However, it is understood that Mukund is investing a lot to modernise and enhance capacities. The lack of quality of raw materials used for producing fasteners has apparently made high-quality conscious companies like Honda SIEL and Toyota Kirloskar Motor source their requirements from abroad.
Thailand is known to be one source where companies feel that the steel mills have better checks on quality and hence the raw material produced is superior. The other challenge that Jain sees arises out of the various FTAs and RTAs that the Indian government has been signing where “Indian manufacturers will have to compete on their own strength and technology”, he says.
OVERSEAS STRATEGY
LPS’ overseas business takes place more in the developed markets where customers are either OEMs like Volvo Truck in Sweden with whom they have been doing business for more than two years or the Tier-1 company Meritor who has been a buyer for the past four years. Jain says that soon John Deere in the US would see supplies coming from LPS via a distributor.
Jain thinks that his company’s customer base will definitely open avenues with others as well but the company is specially targeting new customers in the truck segment as “LPS’ strength is in big size fasteners”. Such are the immense opportunities in the developed markets that he does not see the need to run to emerging markets elsewhere in the world including Asia. “I do not think we will look at setting up a manufacturing facility in other Asian countries unless any of our OEM customers set up something and want us to follow,” he says.
But there is an exception. Sometime ago, one of his international marketing directors visited Vietnam and came back with exciting reports and he opines that he could look at setting up shop in that country along with a Vietnamese partner which, in the prevailing communist regime, will also have to have links with the government.
Giving his perspective on Taiwan’s prowess in the mass production of standard fasteners, Jain says that LPS will be unable to compete but can definitely run ahead in high quality, low volume manufacture of fasteners. Taiwan, he observes, has over the years been enjoying the advantages of both material and mass production. It buys most of its steel from China Steel which Jain feels is “reasonably good”. To give a comparison, while Taiwanese requirements for fastener grade steel is 500,000 to 600,000 tonnes, India’s manufacturers all put together use not more than 50,000 tonnes per annum.
Are there going to be any developments in terms of newer product technology and level of quality in the manufacture of fasteners? Jain feels that there is not going to be a big leap into newer forms of technology. The cold forge method will continue to remain the best way to make the product. But sustainability of quality over large volumes is the key challenge, according to him, and that is where a lot of work will happen. He says that Japanese companies are focusing on reducing set-up time of machines and getting more involved in streamlining product processes, minimising wastage in the system and improving PPM levels.
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LPS started out with a technical collaboration with a German company but now they do not feel the need for any partner on that front. Jain says, “I am now going in for high quality research-oriented product fasteners and for that I am in touch with some Germans to give us, selectively, knowledge on high strength fastening technology and where customers need some high-end fatigue strength or some different fundamentals, which we do not have, that I am trying to obtain. To compete in the market I am trying to bring in the best of knowledge.”
To maintain LPS’ position as a market leader Jain says he is very focused on being consistent in quality combined with the best processes possible.
He says that in the developed world, assembly line robotics is used in the manufacture of fasteners. It is not the case in India where “we have cheap labour. Once robots are used, fastening technology will become more stringent because when the robot will pick up the fastener and if there is any mismatch of threads the robot cannot do anything as it will damage the body. So the requirement of quality will be much higher if robotics are used”
SYSTEMS AND PROCESSES
The PPM levels attained by LPS have been below 100 while most of its customers follow a limit of 200. One of the company's key strengths is its ability to produce, from development to manufacture, in the shortest lead time.
If the tooling is available and does not have to be procured from outside then they can produce a new product within 48 hours. To commend just that HMSI awarded the company with its “new model development award” for 2006-07 in connection with the launch of the Unicorn.
LPS is very proud of its best practice in lot traceability. Lots can be traced right from the raw materials end to the machine and to the process. Each carton containing the company’s product bears a distinctive GRA number and an inspection report (IR) number on the top which is linked to the customer proforma invoice and whose details are computerised using internationally acceptable software.
In case a customer detects a flaw, then on quoting the invoice number, LPS can co-relate, trace the lot and identify at which process the problem arose leading to a flaw in the product. The company has taken a policy decision to maintain IR number records for 10 years. Last year, the company opened its plant to audit as part of its plan to contest the Frost and Sullivan’s Indian Manufacturing Excellence Awards and. Of 22 processes, 17 were found to be up-to-date.
“Some processes definitely needed improvement and we will take their services this year”, Jain says candidly. Eventually the company did bag the silver award in the “Emerging Engineering” category. As the CEO where does Jain get ideas to take his enterprise ahead? From reading books, attending technical seminars, overseas travels and, most interestingly, by being a member of what is known as the Global Fastener Alliance.
This alliance comprises seven companies: two from the US, two from Europe, one from Japan, one from South Korea besides LPS. The alliance partners share experiences, market trends and knowledge, developments in the area of raw materials, technology trends, benchmarking exercises between companies and customer analysis.
In case a customer of an alliance partner wants to establish its presence in the country of origin of another partner, then the two alliance partners are open to forming a tie-up to synergise each other’s strengths. The overall sales of all partners put together are $1 billion. Jain has also been pursuing an exchange of engineers between his company and the other alliance partners where LPS engineers enlarge their expertise which is then applied at its facilities.
Though LPS is still a “build-to-print” company it is aspiring to become a fastening solution provider. Jain says that OEMs do not want to do fastener designing as they already have many other pressing needs. "When a vehicle is designed the fastener is always already standardised. Presently, the most important OEM requirement is to meet delivery schedules and offer high quality. Worldwide, research is being done on using lighter weight raw materials. I am trying to obtain knowledge in this area”. LPS’ vision is to become the “most sought-after brand” in its product segment by 2010. Any doubt?