The Success Process

WHAT can be the result of a two-day meet in a park, where top executives play ball in shorts? The answer: BPR—business process reengineering. That's what happened to Ahmedabad-based Amt-rex Appliances. Says CEO Arvind Nair: "The air was charged, there was excitement, and we decided that not one, not two, but everything needed to be reengineered." It started with a book by James Champy and Michael Hammer, Reengineering the Corporation, which introduced the world—and Nair—to BPR. And when Amtrex—the country's third-largest air-conditioner manufacturer—started feeling the pinch of growth in 1994, Nair decided to go hell-for-leather. Recalls Anil Gupta, head, corporate planning: "A lot of time was being wasted in rectifying wrong decisions." Against a working capital turnover of 47 days for its competitor Carrier Aircon, that at Amtrex was 70 days. Carrier has a turnover per employee of Rs 40 lakh while for Amtrex, it was Rs 17 lakh.

Amtrex went for a benchmarking exercise with Modi Xerox, BPL, HCL-HP and Voltas. The key factors behind the success of any consumer durable company are its ability to respond faster to the requirements of the customers and consistently provide discernibly higher quality goods than its competitors. One way of beating the competition in terms of response time was to carry high levels of inventory of finished goods. The downside of this is that high inventory levels severely erode the bottomline.

The first process was to set up a vision and a goal. For Amtrex it was to become the largest air-conditioning and refrigeration company in India with a significant presence in international tropical markets. The next was a comprehensive structural change. Heads of marketing, manufacturing, finance, design and personnel reporting to the CEO were replaced by chains—customer services, supply, innovation and so on. Says Nair: "Earlier a sales manager would make a commitment for delivery without knowledge of the production plan and the materials manager would go to a cheaper vendor with a longer lead time. This resulted in unnecessary interdepartmental conflict."

With the new structure and designations, the manufacturing function became the supply chain with all activities related to the production of final goods parts of the chain. The materials function was attached to the chain and shifted to the factory. The materials accounting function was shifted from the corporate finance department to the supply chain. Stores and bill passing were made part of the procurement process. Simultaneously, Amtrex began a quality movement that empowered people. If, for instance, a factory worker saw that the product was not up to the mark, he could, by pressing a button, stop the production process.

Empowerment, however, had to become an attitude across the company. Thus, people from marketing, design and finance were brought together as a team. Every team now operates as a profit centre, complete in itself and answerable to the customer. If a salesperson conducts a sale, the production man in the same team coordinates the physical delivery, the technical people set it up and look after glitches and the finance people look after the money flows. The team leader is a sort of CEO within the broader context of Amtrex.

Initially, there was resistance. The major problem, says Nair, came from the finance people: "Their empire disintegrated". Many, who did not fit into the new scheme of things, left Amtrex. But the achievements far outweigh the glitches. Order processing time has dropped from three days to one. The service contribution has grown from being negative to 3 per cent of sales contribution. Manpower costs have moved from 5 to 3.5 per cent of sales. Communication cost is expected to come down to 0.3 per cent of turnover from 1 per cent last year. The rate of innovation has also accelerated. Amtrex developed and launched Space Maker—a new product to meet the specific requirements of the tele-com business—in record time.

Given that BPR guru Hammer himself concedes that about 70 per cent of BPR implementation efforts fail, it might take awhile for Amtrex to become the largest AC company in India. But even if it achieves its projected turnover of Rs 140 crore for 1996-97 from the Rs 83.62 crore it posted last year, it would be a remarkable achievement.