Salient Features of New Scheme of Lean Manufacturing for MSME

Quality Council of India Relevance of Lean in MSME sector About QCI - Quality Council of India • Cabinet decision to establish Quality Council of India, in 1996 • formed in January 1997. • Non-profit autonomous society • Joint initiative of the Government of India, and the Indian Industry, namely ASSOCHAM, CII and FICCI. • PPP – 50% seed money by Govt; 50% by the industry bodies • Purpose: To establish & operate national accreditation structure and to promote Quality through nation wide quality campaign • Mission – Quality for the National Well Being Governance

Council – 38 members Governing Body – 11 members out of the council Chairman - appointed by the Prime Minister on recommendation of the Government and Industry.

Past Chairmen: Mr. Ratan N. Tata (1997-99) Mr. Venu Srinivasan (1999-01) Dr. R. A. Mashelkar (2001-07) Mr. Ajay Shankar (2007-10)s Mr. Arun Maira (2010 -13) Mr. Saurabh Chandra ( 2014) Current Chairman Mr. Amitabh Kant Secretary, DIPP, Ministry of Commerce and Industry * Currently an independent autonomous organization under 5 Department of Science & Technology Working With MSME

Training of ITI Teachers – 1800 Teachers trained on QMS/ QT Tools

Awareness Programs on QMS/ QT Tools -198 programs, 7000 individuals trained on QMS/ QT tools

Cluster project : Implementation of QMS/ QT Tools in 10 identified clusters

Training of Polytechnic Teachers on QMS/ QT tools

Evaluation Study report on Lean Manufacturing Competitiveness

National Workshop on Enabling MSME to be Competitive through Quality Tools ROLE of MSME

Worldwide, micro, small and medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development. MSMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports.

In India too, the MSMEs play a pivotal role in the overall industrial economy of the country. MSMEs in India account for more than 80% of the total number of industrial enterprises and produce over 8000 value-added products. It is estimated that in terms of value, the sector accounts for 45% of the manufacturing output and 40% of the total export of the country and employs over 6 crore people.

Further, in recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost (skill development). Status of MSME’s

The Micro, Small and Medium Enterprises (MSMEs) are a vital part of the Indian economy contributing to over 45% of industrial production and around 40% of the total exports. There are more than 13 million MSMEs in India employing about 31 million people, easily the single largest contributor in terms employment generation in the manufacturing sector

Manufacturing Sector has been recognized as the main The National Manufacturing Policy of Government of engine for growth of the India envisages share of manufacturing to reach target of economy 25% of the National GDP by 2022

The share of the manufacturing To achieve a sustained rate of growth, the sector in Indian National GDP manufacturing sector needs to build and maintain over the years has stagnated to competitiveness needed to face the challenges posed 14-15% only by globalization

Under the LM Scheme, MSMEs will be assisted in reducing their manufacturing costs, through proper personnel management, better space utilization, scientific inventory management, improved process flows, reduced engineering time and so on with application of LM techniques Problems being faced by MSME

Despite constituting more than 80 % of the total number of industrial enterprises and supporting industrial development, many MSMEs in India have problems such as •sub-optimal scale of operation •technological obsolescence •supply chain inefficiencies •increasing domestic and global competition •fund shortage •change in manufacturing strategies • turbulent and uncertain market scenario. Lean Manufacturing

Lean manufacturing is aimed at The goal of Lean Manufacturing is to incorporate the elimination of waste in - less human effort, every area of production - less inventory, including - less time to develop products, and - customer relations, - less space - product design,

- supplier networks and to become highly responsive to customer demand, while at the same time producing top - factory management quality products in the most efficient and economical manner. Lean Manufacturing goals 4 Goals of Lean

•In order to stay competitive in today’s marketplace, a company must understand its customers' wants and needs and design processes to meet their expectations Improve Quality and requirements.

• Waste is any activity that consumes time, resources, or space but does not add any value to the product Eliminate Waste or service.

• Reducing the time it takes to finish an activity from start to finish is one of the most effective ways to Reduce Time eliminate waste and lower costs..

• To minimize cost, a company must produce only to customer demand. Overproduction increases a Reduce Total Cost company’s inventory costs due to storage needs. Lean

The term “lean” is used because lean manufacturing uses “less”…

• Labor in factory 1

• Manufacturing space 2

• Capital Investment 3

•Material 4

• Time between the customer order and the product 5 shipment Definition of Lean

A systematic approach to identifying and eliminating waste (non-value-added activities)throughcontinuous improvement by flowing the product at the pull of the customer in pursuit of perfection.”

Non-value added is an Value-added is an activity that activity that takes time, transforms or shapes raw resources or space, but does not add to the value material or information to meet of the product or service customer requirements. itself.

Waste: Anything that adds Cost to the product without adding Value The Basics of Lean Manufacturing

- Eliminating work processes that add no value to the product It means : - Simplify those processes that add value

Typically >95% of Total Lead Time is Non-Value Added!!

OrderProcessing, Transport, Storage, Waiting, RUN Rework, Machine Setup, Inspection, Machine TIME Breakdowns, etc...

Total Lead Time 5 Principles of Lean

Define Value from the • Specify value from the standpoint of the end customer by product Customer Perspective family.

Identify the value • Identify all the steps in the value stream for each product family, eliminating whenever possible those steps that do not create stream value.

Make the process • Make the value-creating steps occur in tight sequence so the flow product will flow smoothly toward the customer

Pull from the • Make only what the customer has ordered customer

• As value is specified, value streams are identified, wasted steps Head toward are removed, and flow and pull are introduced, begin the process again and continue it until a state of perfection is reached in Perfection which perfect value is created with no waste. 8 Wastes of Lean

“OMIT What U DO”

• Overproduction • Waiting O What

• Motion M • Underutilized U People • Inventory I • Defects • Transportation Do • Over-processing T Lean Vs Traditional

Lean . Simple and visual Traditional signals . Complex . Demand driven . Forecast driven . Inventory as needed . Excessive inventory . Reduce non-value . Speed up value-added added work . Small lot size . Batch production . Minimal lead time . Long lead time . Quality built . Inspected-in . Value stream . Functional departments managers Benefits of Lean Manufacturing

Helps in – Real Results  Cost reduction 0 50 100  Cycle time reduction Lead Time Reduction

 “Waste” minimization Productivity Increase  Elimination of non- WIP value-added activities Reduction

Quality  Resulting in a more Improvement

“lean,” competitive, Space Utilization agile, and market- responsive company 5S

TPM ( Total Productive Maintenance) Lean Just in Time Tools (JIT) Kanban System

Poka Yoke or Cellular Mistake Proofing Layout Value Stream Mapping The 5 S systemsisaworkplaceorganization which helps in getting the "junk" out of the work area and set of procedures to keep it that way. 5S stands for Sort, Set in order, Shine, Standardize & Sustain.

Visual controls such as cartoons, charts, light signals, Lane marking on floor, Safety instructions, Warning signs, Poka-Yoke instructions etc. can be displayed all over the work place.

All verbal instructions should be converted to SOPs to remove dependency on skilled personnel in achieving required product quality level, consistency, effectiveness and efficiency. JIT is a Japanese manufacturing philosophy to make the right product in right quantity at the right time. This almost results in zero inventory and shortest possible cycle time.

In Kanban System, components are pulled by assembly or subsequent work centers and the containers are replenished with the right quantities by the previous work center, which reduces the inventory of unwanted components.

Cellular Layout is improved manufacturing system, family wise component completion is aimed at within the smaller self contained cell, which is a part of a big factory, as compared to operation wise completion in traditional functional layout Value Stream Mapping covers all activities, both value added and non-value added, and helps in arriving at best layout of all resources required for making the product.

Poka Yoke is again a Japanese technique used to prevent errors occurring at their source of origin, and it finally leads to a 'Zero Defect' situation.

Applying ingenious methods, set up time is minimized and brought to less than ten minutes; there by smaller batches as required by the customer can be taken up for manufacturing. TPM involves operators, maintenance staff and management working together to improve overall operation of any equipment. Operators, who first identify noisy or vibrating motors, oil or air leaks, can be trained to make simple repairs to prevent major and costly break downs.

Kaizen Blitz or Improvement Process is an intense management programme, which results in immediate change and bottom line improvement. Both management staff and workers are involved in this. Introduction

The Government has announced formulation of National Manufacturing Competitiveness Programme in 2005-06 with an objective to support the Small and Medium Enterprises (SMEs) in their endeavor to become competitive and adjust the competitive pressure caused by liberalization and moderation of tariff rates

Office of the Development Commissioner ( Micro, Small and Medium Enterprises), Ministry of MSME has launched the National Manufacturing Competitiveness Programme to improve the competitiveness of Micro, Small and Medium Enterprises (MSME ) Sector.

The initiative under NMCP aims at increasing productivity, upgrading technology and conserving energy in manufacturing processes as well as expanding domestic and global market share of Indian MSME products.

One of the components of NMCP is Lean Manufacturing Competitiveness Scheme and its upscale version ready to launch after successful completion of first phase. The scheme will be implemented in 500 mini clusters in 12th Five Year Plan. Need for Lean Manufacturing

Ever changing globalized environment has been posing challenges of competitiveness and survival to all the constituents of the economy. It has been more so for MSMEs in the manufacturing sector.

MSME units are so engaged in their day to day management issues that they don’t have time and resources to dedicate a strategic understanding of the need and acquiring means of various techniques which would help them in enhancing their productivity and hence being competitive in the world market

Lean Manufacturing is a set of techniques, which have evolved over a long period and are based on various minor to major breakthroughs that help in reducing cost and hence increase productivity and competitiveness,. Objective of Scheme

• Elimination of Waste is prime goal of lean • Over Production, Waiting Time, Transportation within the units, Reducing Waste Over Processing , Inventory ( Raw Material, Finished Goods, Finished Goods), Motions, Defects

•Increasing productivity is another goal of Lean •Cycle time of products, Cost of Product ( Labour Cost, Material Cost, Increasing Productivity Overhead Cost), Energy Conservation ( Electricity, Fuel ( Coal/ Oil), Productivity Space Utilization, Machine Utilization, No. of Accidents, Green Productivity ( Pollution Control, Pollution Prevention)

Introducing Innovative • New Process, New Technology, New product(s), New Management Practices for Improving overall practices etc.) Competitiveness

• Company level governance, business management, functional Inculcating Good Management management, quality management system, environment, occupational health & safety or any other parameter related to Systems good management system

• culture of continuous improvement is the aim of implementation Imbibing a Culture of of lean tool in the organization. Culture of continuous improvement helps the organization in long term for sustained Continuous Improvement growth and development of the organization. Implementation Arrangement A three tier arrangement has been proposed in the Scheme. A Mini Cluster (MC) would be formed at the lowest tier. The units of MC would work with assigned Lean Manufacturing Consultant to implement the specific Lean Manufacturing techniques. The next higher level tier, National Monitoring and Implementing Units (NMIUs) will be responsible for facilitating, implementation and monitoring of the scheme. At the highest level, Screening and Steering Committee will provide overall direction to the scheme and will be headed by the Development Commissioner (MSME)

Screening and Steering Committee (SSC)

National Monitoring and Technical Advisory MSME - DI Implementing Unit (NMIU) Committee (TAC)

Implementing Agency (IA)

Mini Cluster/ DPG/ Sub Group/ Special Purpose Vehicle (SPV) MSME -1 MSME -2 MSME -10

Minimum 6 Units per cluster

Lean Manufacturing Cluster (LMC)

Special Purpose Vehicle (SPV)

Association Or Existing SPV

Sub Group (SG) / Distinct Product Group (DPG)

Minimum 6 Units per cluster

MSME -1 MSME -2 MSME -10 A mini cluster will Mini Cluster is a group of preferably 10 MSME’s located within an identifiable and as far as practicable, consist of ideally contiguous area and manufacturing same/ similar 10 MSMEs products. (minimum 6 units) AminiclustermaybeformedbyanewSPVorasSub Group / Distinct Product Group of an Association or Existing SPV. In case SPV is not available in the cluster, the scheme may be availed through another legal entity i.e. concerned association by grouping the MSMEs in the form of Distinct Product or Sub Groups Mini Cluster DPG and SG will be small groups within Association or existing SPVs, formed with the approval of Management of SPV or Associations as the case may be. All the units of MC would work with Assigned Lean Manufacturing Consultant to implement specific Lean Techniques. In case the scheme is being availed by SPV ( existing or new), a separate joint Bank Account will be opened in a National Bank for receiving the funds from NMIU. In case DPG/ SG is formed for taking benefit of the scheme, the project specific account will be operated jointly by Head of SPV or Association and the Nodal officer of DPG/ SG. Lean Manufacturing Consultants (LMCs)

An Individual or a Consultancy Firm ( National or International) duly registered with or certified by a reputed certification agency in the field of manufacturing technology, quality control etc. , would be an eligible entity to participate in the scheme as a LMC. NMIU will obtain the approval of the SSC for empanelment of LM Consultants

Roles and Responsibility of LMC Consultants

 Assess the existing system at each member unit of the concerned MC  Diagnostic Study Report for each cluster shall be prepared by assigned LM Consultant. The report includes measurable targets with respect to baseline data. The baseline data and monitor able increment may be different for each unit  Stipulated detailed step by step procedures and schedules for implementation of the LM Techniques ( pre- defined milestones)  Identify the end targets in quantified parameterstobeachievedbyeachunitattheendofthe scheme  Work in close cooperation with each of the units to assess and then achieve the LM techniques implementation and  Respond to specific queries raised by SPV or NMIU on its performance  To attend orientation / meet / re- orientation programme organized by NMIU/ Office of DC (MSME) so as to clarify scheme implementation related doubts, if any and to share their experiences with peers and also to update LMCs with the developments in the field. LMC’s would be required to attend these workshops at their own cost. The cost of conducting workshops would be borne under the scheme.  “Trust” as per Indian Trust Act, 1882 or any similar Trust Act or  A Private Limited company incorporated as per Indian Companies Act , 1956 or  A “ society” under The Societies Registration Act, 1860 ( including any of state equivalent) or  Any similar entity as approved by SSC from time to time

Special Purpose The MSMEs would be required to sign a MoU among themselves. MoU should, inter alia, cover the following Vehicle points – 1. Collective and joint responsibility of units 2. Details of SPV or any other legal entity for receiving Government of India funds/ grants from the NMIU 3. Undertaking to adhere to Terms and Conditions of the Scheme 4. Undertaking to cooperate and work in collaboration with LMC 5. Undertaking to continue to implement LM techniques after the completion of project under the scheme. 6. Undertaking for periodic reporting on progress to NMIU and 7. Appointment of a nodal officer to be authorized signatory and single point of contact National Monitoring and Implementation Unit (NMIU)

National Monitoring and Implementing Unit (NMIU) will be a competent National Level organization, with experience and competence in Quality Management and / or Lean Manufacturing programmes and will function as MSMEs outsourced project “ Control Room”

National Monitoring and Implementing Unit (NMIU) will be responsible for facilitating, implementation and monitoring of the scheme

NMIU will monitor every Stage of the program on behalf of the Development Commissioner (MSME)

The field level office / project offices of the NMIU will function as Implementing Agency (IA) for implementation of the projects

These IAs will discharge day to day activities for smooth and effective implementation of the projects. IAs will coordinate with LMC, cluster units, concerned associations, NMIU, MSME – DI etc.

LMCs and IAs will submit progress report to NMIU which in turn will send consolidated report to the office of DC MSME. The end of the project reports may be prepared to show the tangible results obtained during the implementation of the LM Interventions National Monitoring and Implementation Unit (NMIU)

1. Act as Implementation Unit on behalf of DC – MSME 2. Receiving applications for the scheme, examine through TAC and put up for consideration of SSC. 3. Maintaining an panel of LM Consultants. Approval of List of LM Consultants with SSC. 4. Maintenance of separate account of funds of the scheme 5. Release of fund to the beneficiaries against the reports on the basesofprogressofimplementationandonsatisfactory performance of LMCs. 6. Undertake awareness generation programmes for the units and encourage them to participate in the scheme. 7. Organize orientation program for LM Consultants 8. Industry expert for Apprising Team 9. Creating Benchmark Action Plans 10. Monthly Review and Trouble Shooting 11. Development of National Reports, 12. Submission of DSR, completion report etc. required under the scheme 13. Publications, News letter etc. 14. Website Technical Advisory Committee

NMIU would be required to deal with a number of Mini Clusters and their technical issues, take decisions on the matters of productivity, preparation of reports, recommendations of clusters for approvals, progress etc. To this end a Technical Advisor Committee ( TAC) would be constituted, within NMIU, which would be empowered to take the decision on productivity related issues . Role and Responsibility of TAC –  Appraisal of the applications received from Mini Clusters and giving recommendations on the same to Screening and Steering Committee ( SSC)  Cross Checking of implementation of the Lean Manufacturing milestones at the unit level, against the LMC’s periodic report and accordingly approving acceptance of Claims of units  Conducting field visits along with representatives of SPV’s at units participating in the scheme  Conducting Orientation/ Meets for LMCs at periodic intervals  Maintaining a central data base and reference library for participating units and LMCs;  Conducting periodic workshops and meets for participating units  Appraising the decisions of TAC to office of DC MSME through NMIU Screening and Steering Committee (SSC)

At the highest level, SSC will guide, review, monitor and provide overall direction for It will be empowered to take all SSC would deliberate on the implementation of the scheme Key decisions related to the andwillbeheadedbyDC issues put up by NMIU. It would Scheme and approve minor laid down detailed (MSME). SSC will have Overall modifications / procedural responsibility for policy implementation Strategy for changes in the guidelines for NMIU. formulation, scheme operational expediency implementation and monitoring.

1 AS & DC, MSME Chairman 2. AS & FA / Alternate EA ( IFW) Member 3. Representative of NMCC Member 4. Representative of expert Agencies like NPC and QCI Member

5 In Charge, NMIU Member 6 Representative of Associations Member 7 Director of MSME – DI Concerned / invitee Member 8 Nodal officer handling LMCs in DC, MSME Member- Secretary

9 Special Invitee / experts/consultants/ IAs/ SPVs Implementation Period

The implementation Period will be maximum 18 months in each Mini Cluster to complete Diagnostic Study Report , implement the action plan, , verify the incremental stages, submission of final reports.

Performance of Implementation of LM Techniques will be divided in to 5 Milestones

 1st Miles Stone – Completion of Cluster Specific Diagnostic Study Report (DSR). DSR includes –

 Existing Status ( 5s, workspace management, Safety, health, energy conservation, Single Minutes of Exchange of Dies, TPM, Reduction in inventory, Organization Structure, Layout , process of Mnaufacture, visual base line survey, identifciation of 7 wastes, inventory practices, top chronic problems etc.)

 Time Bound targets for achieving Incremental Improvements. Paramters are rated on a scale of 1- 10

 Phase wise Action Plan

 Qualitative , Quantitative, monetary benefits likely to be achieved 2nd,3rd,4th and 5th Milestones – Incremental Improvements to next stage on the scale of 1 -10 To Participate in 1st,3rd and 5th audits of lean implementation jointly with NMIU To organize program in coordination with NMIU, LMC, Facilitate the Associations, other beneficiary MSMEs to stakeholders etc. submit application for availing the scheme

Participate in the MSME Screening and Steering Committee Meetings and -DI Meetings for Selection of Lean Consultants Fund Flow Chart

Office of Development Commissioner (MSME)

National Manufacturing and Implementation Unit (NMIU)

For Awareness Program/ Office of MSEM – DO (For Orientation Program / Awareness Program/ SPV/ Association Workshops/ Training Training Programs , Programs etc Workshops etc)

Lean Consultants Changes in Scheme

Particular Earlier Scheme New Scheme Requirement Requirement Implementation Period 12 months 18 months LM Consultant Fees Rs. 22 lakhs Rs. 36 Lakhs ( Max.) MSME –DI Not there Now will be involved in Audit, Awareness program, formation of Cluster etc. Payment Terms Fixed Pro Rata. Cluster size limited to 6 units Contribution from 25% from Micro Flat 20% Industries 50% from Small SPV formation SPV only Sub Groups/ Distinct product Groups can also form cluster Knowledge Management

Orientation Program for LMCs

Defined deliverables in measurable / parameters for evaluating/ reporting

Development of interactive dynamic website

Benchmark action plans

Publication of Newsletter, Book of Knowledge, Success stories, case studies Kindly contact us:

1. Mr. Anurag Rastogi, Deputy Director Email Address: [email protected]

2. Lianzalal Vaiphei, Assistant Director Email address: [email protected]

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