Page 66 - AIMA : Foundation Day Souvenir

for it? The milling head was a critical assembly and had intricate component machining, gear velocities, noise considerations, etc. Among the machinery installed, there was no machine available to finish machine high precision parts. The hardening facility for the spindle was not installed. A group company that had a gear shop could have been asked to supply gears, but they did not have proper equipment to produce gears of quality class IT-5 and 6. So, in our assessment, the factory was not ready to produce the ‘milling heads’ in-house yet. We had to either source the components or the assembly in the short to medium term.
The group foundry was ready to supply castings. They had received the patterns of parts other than the head from the collaborator and made some sample castings. Quality issues on casting prevailed but, these could be resolved and overcome. The foundry was selling the castings at $1.40 per kg and wanted to be the final authority on price and salvaging standards! These factors would render us uncompetitive and hence was not acceptable.
The advantage of building the milling head assembly in house was obvious, and we wanted to get to this stage and bring in all that value addition. However, in the beginning our priorities included customers, markets, channel partners, supply chain partners, working capital, etc. Thus, in the beginning, we were not equipped to produce everything in-house. Sourcing from points of cost advantage without sacrificing quality, although costbased strategy would have been the right approach, with the outsourcing thought the differentiation strategy may not hold out. We could source the parts or assemblies from India or Taiwan, but this singular approach would not help develop internal competence.
Concurrent strategy
The critical issue was that even after five years since inception the joint venture had failed to produce machines, bag orders, establish markets, and corner a share in the market place. Everybody was eager to begin production and deliver machines. The concurrent strategy was
to set up two supply chains; one that focused on developing internal competence (long-term), while the other sourced parts from Taiwan until such time we had developed competence to produce parts of the required quality in the required time. This would give us the following advantages and help overcome all the in- between problems:
• We would commence manufacture of all components except ‘milling head’, and work on the supply chain, procurement cost and quality, manufacturing processes, cycle times, lead times, throughput times, standardise work, develop the ability to solve problems, process documentation etc.
• Initially, we would not be constrained by the results of in-house processes for component manufacture, but could respond to the market demands and fulfill those using outsourced components.
• One of the challenges was building in competencies, lean systems, and processesrequired. This was our top priority. The outsourcing strategy was to gain time to build in the Jidoka and Kaizen capabilities,
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