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1 - 31 JANUARY 2012
CARVING COMPETENCE
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NIVERSA AN
Auto Monitor
Photograph: Dileep Prakash
Achieve price reduction by
Rattan Kapur
increasing efficiency
CMD, Rattan Kapur & Associates
G
rowth is absolutely crucial. If you don’t grow, then you are bound to stagnate. Challenge is to grow during tough times. You cannot grow by default; the customers are doubling their turnover in the next three years. There was a time when we were product-hungry, we were just looking for business and whatever came our way, we used to grab without worrying much about the bottom-line. Today, the time has come when the profit margin has to become very-very important. It’s not necessary, that we go after everything that comes our way; the company has to be selective in what it is going to produce. It doesn’t mean that you can refuse your existing customers. I am manufacturing catalytic converters and exhaust systems. For instance, if I get another business in the same segment but with reduced costs—I have to look inside my company and chalk out a strategy about how to produce at a more competitive price. In our case, raw material costs may vary from 70 to 80 percent. If I have to supply these parts and my volumes are increasing, then I will have to talk to our global raw material suppliers. Luckily for us in India, Europe is not expanding in manufacturing so the suppliers are looking at India,
China and other Asian markets for selling their products. In India, the quality of the product has reached the global standards if not better. Companies like Volkswagen, Mercedes have set up assembly plants here, not because there is a market but because there is a good possibility of localisation. Our quality is good, our volumes are going up. We understand systems and global qualities therefore the raw material suppliers are open to discussion—it all depends on how much you can push them. Now you have the luxury to have alternate suppliers, you have alternate sources; let them bid against each other. You must fi rst get some kind of price reduction.
Target 20-20-20 We are following 20-20-20 programme, under which we must increase our production by 20 percent without increasing labour—we must decrease rejections and wasteful expenses by 20 percent and fi nally we must increase the business by at least 20 percent. I am glad that in the last six months we have been able to achieve 15-15-15. However, due to our main customer, Maruti Suzuki India, experiencing the slowdown, we have not been able to meet our target of 20 percent. Also, as we have been able
We have decided to add a new range of products. We are going to start manufacturing shock absorbers. So far, we have been able to offer our products at a price that is about six to seven percent lower, to the customer Rattan Kapur & Associates Facility
to cut costs by 15 percent, we have offered a price reduction of somewhere in the range of six percent on our annual price terms. The customer does appreciate the company that passes on price reduction. We have now decided to add a new range of products. We are going to start manufacturing shock absorbers. We cannot sell this product at a price higher than what is already being offered, rather it has to be cheaper. We are looking at various aspects as to how to beat the current suppliers and for this, we require the technical support from our collaborator. Our collaborator is pro-active in supporting us and we have been able to offer it at a price that is about six to seven percent lower
(than the market price), to the customer. As far as our older products like door sash for Maruti Alto, which we have been making for the past 12 years, our volumes that had earlier gone up to 1,600 cars a day, have now come down to 1,000 cars a day. Even at this level for us, its 5,000 doors a day at least. With this product, we have got a great experience in terms of VAVE on reduction of scrap and reduction in re-work and saving in power and human resource. This was not attained single-handedly, but with the help of Maruti. Now we are training other factories based on this experience. We never forget our bottom line and have been maintain-
The Company Office And Facility
ing a healthy bottom line in last ten years and have not increased our equity. Our current EBITA (Earning Before Interest Tax Ammortisation) is at eight percent and we hope that we achieve 10 percent by March’12. We have been funding our projects with our own sources, which is a major cost saver. Imagine if today, we have to borrow then we have to pay a 15 percent interest. Factors like a healthy profit margin and right selection of products are very important. Lean is way forward. The labour problem is the biggest hitch at this point of time. The industry can expand much faster had there been clarity on the labour policy. The government has to look at the labour policy; doesn’t matter if we have to pay a bit higher but there has to be an agreement and in that agreement period we should quietly work to achieve our target. The workers should listen to us but they are insisting that we should listen to them instead. They will produce the numbers arbitrarily, as they have back-up and the government is ineffective in handling such a situation. Other factors like fi nance, marketability and acceptance are not a problem, while entrepreneurship is fantastic. The industry has almost done its job, but now it’s the government’s turn to bring in infrastructure and policy to support the growth trends. - as told to Nabeel A Khan