Anant Goenka, MD, Ceat Tyres, cannot stress enough on the efficacious systems and processes he has put in place that has made the company a strong contender in the market.
by Jayashree Kini Mendes
Pedigree matters. When you come from a lineage that has set up an empire with roots going back to the early 1800s, you know that succession can’t be wrong. Meritocracy tends to be spoken of approvingly these days. Gone are the times when scions inherited their seats in boardrooms of great companies. These days, they are required to succeed through brains and hard work. And so it is with Anant Goenka, MD, Ceat Tyres, whose company is the winner of the prestigious Deming Award for Total Quality Management (TQM).
The soft spoken Anant is the son of Harsh Goenka, chairman, RPG Group. But there are few airs about him. He doesn’t allow his legacy to get in the way of what he knows best — drawing up strategy for the tyre business that he runs with an understated determination. Even though he officially took over as MD in 2012, Goenka says the business held no surprises for him. “Prior to that, I spent two years as deputy MD and enough time with my predecessor understanding the core of the business. Those were not easy days. I would like to think that the early 2000s was a period where the business struggled due to tough market conditions,” he adds.
Young, gifted, and not held back
Learning the ropes of the business was par for the course for Goenka. Quickly mobilising his resources and key people from the organisation, he knew that if Ceat needed to progress in the long run, the company needed to be distinct. Moreover, whatever needed to be implemented must be acted on fast. Goenka says, “The automobile boom of the mid-2000s compelled us to build up capacity. This called for investment and we set up the new radial tyres facility. The global slowdown of 2009-10 caught the entire industry unawares. Material prices shot up sharply and prices of rubber, which is our main component, went up alarmingly from Rs 100-110 per kg to Rs 260/kg, along with other elements. It was most unexpected.”
It was time for introspection. Goenka got back to the drawing board and made a decision that product strategy, quality, performance, and communication will be the pillars on which Ceat will focus on. That decision met with remarkable results. Over the last five years, Ceat’s market capitalisation has risen almost 20-fold, while unfolding massive potential for the company and tremendous belief by employees and investors alike. “People need to see results to believe. We worked that out. We regularly shared our story with investors through road shows (India and abroad) while strengthening our position in the market,” says Goenka with a smile.
For any manufacturing company, standing out amongst competitors in terms of products makes all the difference. Goenka understands that well. “We moved to focus on select categories of tyres. We chose the two-wheeler and SUV segment, which we believed would grow faster than other categories. Though SUVs were barely 12% of the passenger car segment, as compared to the US where SUVs hold 40%, it was an area where we expected faster growth. Our philosophy leans towards where you play instead of how you play. The two-wheeler segment also offered huge potential and the fact that there were only three players in the market only upped the ante,” says Goenka.
Today, the passenger vehicles segment, which includes two- and four-wheelers, account for over 35% of Ceat’s sales, while commercial vehicles, including trucks and buses, also account for a little over 35%. In the four-wheeler segment, Ceat is a leading supplier to all the top passenger vehicles and CV brands such as Maruti Suzuki, Tata Motors, Daimler, Ashok Leyland, Mahindra & Mahindra, Renault, Hyundai, Datsun, among others. In two-wheelers, the company supplies to Honda, Hero MotoCorp, Bajaj Auto, Royal Enfield, India Yamaha Motor, and Suzuki.
All the products to OEMs and the replacement market are offered through its four manufacturing plants located in Bhandup (Mumbai), Halol (Gujarat), Nashik and Nagpur. Together, all the four plants make about 26 million tyres per annum, with the replacement market giving it a lion’s share of its revenue, followed by OEMs and exports.
The business of breakthroughs
Creating a business model is a lot like writing a new story. What Ceat did was a culture change—and from that innovation evolved a robust business model with all the elements of a good story: precisely delineated characters, plausible motivations, and a plot that turns on an insight about value. At some level, all new stories are variations on old ones, reworkings of the universal themes underlying all human experience. Similarly, all new business models are variations on the generic value chain underlying all businesses.
Broadly speaking, this chain has two parts. Part one includes all the activities associated with making something: designing it, purchasing raw materials, manufacturing, and so on. Part two includes all the activities associated with selling something: finding and reaching customers, transacting a sale, distributing the product or delivering the service. A new business model’s plot may turn on designing a new product for an unmet need. Or it may turn on a process innovation, a better way of making or selling or distributing an already proven product or service. Goenka says, “Internally it was more about a culture change in thinking, and coming up with breakthrough products. One way to break through in the market was coming out with products that no one has created or creating a niche product and making it a mass market one. Here’s where constant interaction with customers helped. Most dreamed of a puncture-safe tyre that was one of the key requirements. Their biggest worry was being stranded on a highway with a punctured tyre.”
The compulsion to create this innovation was derived mainly since more women started taking to roads on two-wheelers. “Our research was based on the opportunities we could tap and the materials that could be used to come up with puncture-safe tyres. There were plenty of learnings along the way as happens with any revolutionary product, but now there is a sense of self-assurance,” adds Goenka.
Ceat is still testing the waters in a few states, but it expects a national launch soon once it has worked out the manufacturing math. But Goenka has moved on to newer pastures. With digitalisation becoming more relevant, the company knows that data, telematics, connectivity of vehicles, will soon be commonplace. The team is preparing itself to the changing environment and adapting itself to new emerging demands.
Over the last couple of years, Ceat has made a quantum leap in product development in terms of Gripp (designed for heavy loading), Fuel Smarrt (its low rolling resistance allows one to cover greater distances with lower consumption of fuel), among others.
Goenka has also made R&D a strong point within the organisation. The team listens carefully to customer and OEM demands before venturing on their research expedition. The company believes in creating a system of innovation where a customer’s ideas can be converted into a substantial product. “This is extremely challenging and there is much scientific research study that needs to be done. Questions that we need to constantly ask are the ways we are going to achieve that. For that reason, we work closely with academicians, institutes, and global institutes to develop a process. This knowledge is then shared with the entire cross-functional team of marketing and R&D,” adds Goenka.
Perhaps, this is the only company that develops a new product virtually, tests it virtually and only after it is satisfied, goes in for a prototype. Simulation to indoor evaluation is the new method of development cycle.
The 2017 winner of the illustrious Deming Award is a feather in the cap for Ceat. But Goenka is not resting on his laurels. Considered that quality and only quality a.k.a TQM is what the coveted award stands for, Goenka, in his own spirited way, signed up for visits to Tokyo and especially week long visits to the manufacturing plants of companies that follow TQM to the core. He adds, “We found lapses in performance back in 2009-2010. Though much work was being done, some improvement activities were not evolving as we planned. Some of us in the top management visited Tokyo to meet up with the Union of Japanese Scientists and Engineers (JUSE) and visited the factories of Toyota, Denso and Hino Motors who are pioneers of TQM.”
The visits left a lasting impression on Goenka and the team’s mind. Goenka says that they would have been content if they could achieve even half of what those three companies were doing. For example Toyota, with an employee base of nearly 50,000, has implemented Kaizen (continuous improvement) and every employee comes up with at least one or two Kaizen a week. Imagine the scale of improvements when you consider the vast number of employees!
At the Halol plant, there’s a visible zeal for Kaizen, continuous small improvements that add up to significant gains. Clockwork precision is maintained throughout each process right from material sourcing to manufacturing to storage. With 150 SKUs and three shifts, the plant operates at full capacity. The Halol plant was presented the ‘Sword of Honour’ Award by the British Safety Council, while it also received 5-Star rating from the British Safety Council for upgraded safety measures implemented.
Besides safety, the implementation of Kaizen is very prominent through the unique system of Self-Managed Teams (SMT). Waste is abhorred and workers are encouraged to find suitable methods to re-use the rubber discarded after cutting and slicing. An interesting observation here was the high levels of automation and the deployment of one to three persons to manage each process and machinery.
The Deming Award was not awarded for nothing. Right from material sourcing to each process of blending, milling, beading, plying, treading, curing, there is a continuous check on quality. The SCADA system keeps a sharp eye for minute defaults and rejects or shuts down the system briefly in case of any faults. Right from the raw materials that arrive at the plant to the final product, lab checks are conducted and until the report arrives with an OK, the materials are not used, and the final product is not shipped to the warehouse. An MIS and QR Code scan each product and retain records for 10 years on every tyre that leaves the shop floor (more than the lifecycle of the tyre). Ceat has preferred to work out a daily work management (DWM) in each process of the plant. This team records every minute of any untoward incident at the plant. The idea is to raise stability at the plant and maintain quality and safety.
This is a Japanese phrase meaning “go and see for yourself”, which is the central pillar of TQM. In at least one important respect genchi genbutsu represents a fundamental difference between western and Japanese management styles—whereas in the West knowledge is gleaned in the boardroom, in Japan it is gleaned on the factory floor. When asked to resolve a problem, Japanese managers go to see the place where it has arisen. American managers generally make their diagnosis from a distance.
Goenka too believes in the Japanese philosophy and has incorporated this as part of the culture. Every employee is aware that delighting the customer, ensuring that its processes only go on to fulfil the customer’s wish, must be adhered to. Every employee from HR to finance to manufacturing to sales are constantly engaged in continuous improvement activities with customer’s and suppliers. “Ultimately, it is about meeting business goals. We endorse growth initiatives for our people and work towards problem solving. Even employees at the plant are responsible for improvement. They are in charge of their area and oversee each machine in terms of cleaning and maintenance,” he adds.
Similarly, Ceat’s product innovations have only arisen from customer feedback. From the Ceat Gripp Tyre to the Ceat Czar for SUVs, the range of products have only proliferated and strengthened the company’s portfolio taking it from strength to strength. “The right distribution across markets also helped. We created an entirely new distribution network for two-wheeler tyres and that increased our presence two and a half fold. We are now present in 600-plus districts. We are looking at penetrating smaller towns. Then there was the relationship with OEMs, which we reinforced and today have a presence with all major ones,” adds Goenka. Just like Ceat evaluates its suppliers, its OEMs evaluate the company’s processes, quality, plants, etc. Getting an approval from an OEM can take as long as two years.
With such deep-seated thoughts and actions, Ceat has only tightened its grip on the market and is already giving competitors a run for their money.