M&M’S PROBLEM PLANTS
In the mid-1990s, India’s largest multi utility vehicle (MUV) and tractor manufacturer
M&M was facing serious problems at its Igatpuri and Kandivili plants in Maharashtra.
The plants were suffering from manufacturing inefficiencies, poor productivity, long
production cycle, and sub-optimal output. The reason: highly under-productive, militantly
unionized, and bloated workforces. The company had over the years been rather lenient
towards running the plants and had frequently crumbled under the pressure of union
The work culture was also reportedly very unhealthy and corruption was widespread in
various departments. Alarmed at the plant’s dismal condition, Chairman Keshub
Mahindra tried to address the problem by sacking people who allegedly indulged in
M&M also tried to implement various voluntary retirement schemes (VRS), but the
unions refused to cooperate and the company was unable to reduce the labor force. During this period, M&M was in the process of considering the implementation of a
Business Process Reengineering (BPR) program throughout the organization including
the manufacturing units. Because of the problems at the Igatpuri and Kandivili plants,
M&M decided to implement the program speedily at its manufacturing units. The
program, developed with the help of the UK-based Lucas Engineering Systems, was first
implemented on an experimental basis at the engine plant in Igatpuri. Simultaneously, an
exercise was initiated to assess the potential benefits of implementing BPR and its effect
on the unions.
M&M’s management was not surprised to learn that the unions expressed extreme
displeasure at the decision to implement BPR and soon went on a strike. However, this
time around, the management made it clear that it would not succumb to union demands.
Soon, the workers were surprised to see the company’s senior staff come down to the
plant and work in their place. With both the parties refusing to work out an agreement,
observers began casting doubts on the future of the company’s grand plans of reaping the
benefits of BPR.
Mahindra & Mahindra Ltd. (M&M) was the flagship company of the Mahindra group,
one of the top ten industrial houses in India. The company’s history dates back to 1945,
when two brothers, J.C.Mahindra and K.C.Mahindra, decided to start a business of
general-purpose utility vehicles. The brothers formed a company, Mahindra &
Mohammed Ltd., in association with their friend Ghulam Mohammed. In October 1947,
the first batch of 75 jeeps was released for the Indian market. In 1948, the company was
renamed Mahindra & Mahindra Ltd. Over the next few decades, the group promoted
many companies in areas as diverse as hotels, financial services, auto components,
information technology, infrastructure development and trading to name a few (Refer
Exhibit I for M&M’s history).
Though M&M had established itself in the markets and was among the leading players in many of the segments it operated in, it realized that some of its businesses were not
closely related to its core business. This realization marked the beginning of the biggest
change exercise since the company’s inception. In 1994, a major restructuring exercise
was initiated as part of a BPR program. M&M introduced a new organizational model, in
which various divisions and companies were regrouped into six distinct clusters of related
businesses, each headed by a president.
M&M’s core activities, automotive and tractors were made autonomous business units.
The other activities of the group were organized into infrastructure, trade and financial
services, telecommunication and automotive components. According to company
sources, the whole exercise was intended to develop a conceptual map to provide
direction for the future growth of various business lines. It was decided that, in future, the
group would confine its expansion to the identified thrust sectors.
The two main operating divisions of the company were the automotive division, which
manufactured UVs and LCVs, and the farm equipment division, which made tractors and
farm implements. The company employed over 17,000 people and had six state-of-the-art
manufacturing facilities spread over 500,000 square meters. The plants were situated at
Kandivili (MUVs and Tractors), Nasik (MUVs), Zaheerabad (LCVs, Voyager, threewheelers), Igatpuri (Engines) and Nagpur (Implements and tractors).
Real Business Examples:
Design by Computer:
One of the most time consuming and expensive business process is the design stage in product development, which had traditionally relied on paper and drafting tools. Dassault systems has met the challenge of reengineering this process and has created Catia, the top selling CAD/CAM allows engineers to design and develop products on a computer. This eliminates huge amounts of paper work and slashes the time required to design and develop a new product. Catia is used by nearly every air craft manufacturer and was used by Boeing to design the777. DaimlerChrysler used Catia to design the new jeep Grand Cherokee. By debugging the production line on screen, the company saved months and eliminated $800 million of costs.
Source: Howard Banks, “Virtually Perfect,” October 4, 1999
The Dark Side of Process Reengineering – Possible Disadvantage:
Process reengineering that is imposed from above and that results in disruptions and layoffs can lead to cynicism. Eileen Shapiro, a management consultant, says that ” reengineering as often implemented can erode the bonds of trust that employees have toward their employers. Nevertheless, many companies reengineer at the same time that they issue mission statements proclaiming, ‘Our employees are most important assets, ‘or launch new initiatives to increase ’employee involvement.’ As one superior executive, a veteran of reengineering, muttered recently while listening to his boss give a glowing speech about working conditions at their organization, ‘I sure wish I worked for the company he is describing.’ ”