Performance Measurement System for Performance Measurement System for Wheel Shop Wheel Shop Rail Wheel Factory Rail Wheel Factory Bangalore INDIA Bangalore INDIA
Performance Measurement System for Performance Measurement System for Wheel ShopWheel Shop
Rail Wheel FactoryRail Wheel FactoryBangalore INDIABangalore INDIA
Presentation OutlinePresentation Outline
• Introduction to the Plant• SWOT Analysis for the RWF as it is on
date• Existing scheme of Performance cost
measurement• Research hypothesis & findings
BACKGROUNDBACKGROUNDof Setting Up of Setting Up
RWF/BANGLORE/INDIARWF/BANGLORE/INDIA§ Till the early 1980s, the Indian Railways
were heavily dependent on imports for meeting their requirement of wheels and axles
§ Indigenous capacity was only available in TISCO/JAMSHEDPUR and Durgapur Steel Plant (DSP)
LIMITATIONS OF LIMITATIONS OF INDIGENOUS SOURCESINDIGENOUS SOURCES
§ The TISCO Plant was outdated and technically not capable of meeting the changing requirements of solid wheels and heavy axles for the newer designs of rolling stock.
§ The performance of DSP was very indifferent, suffering from labor strife and quality problems. Due to these reasons, the supplies from DSP were erratic and unreliable.
SETTING UP OF WHEEL & AXLE SETTING UP OF WHEEL & AXLE PLANT(WAP) Now called asPLANT(WAP) Now called as
RAIL WHEEL FACTORY(RWF)RAIL WHEEL FACTORY(RWF)
• The Wheel & Axle Plant Project was thus conceived in 1972 for attaining self sufficiency inWTA and reduce imports besides using return scrap for wheels production
• The Project was sanctioned by the Planning Commission in 1978 at a cost of Rs.146 Crores with IDA funding
• Trial productions commenced in 1983• Wheel & Axle Plant was formally commissioned on
15th September, 1984
Organization Structure &EnvironmentOrganization Structure &Environment
• RWF is a Production Unit under Ministry of Railways,India• Headed by General Manager ,Special Secretary status
reporting to the Minister of Railways through Railway Board
• Functional autonomy limited in Budgeting,Pricing and Managerial Personnel recruitment-these activities coordinated by Board(mechanical directorate)
• Production schedule and distribution of manufactured products is predominantly determined by Railway Board
• Market structure is duopolistic-assured domestic takeoff• “Winds of change” are blowing now but very gently-latest is
Memorandum of Understanding between RWF & Board on Pricing policy on principles of marginal costing
Will the Wind become a Gale?
MR’s Rail Budget extract ; Reform Agenda“ Our Production Units have been catering mainly to
the needs of Indian Railways. Having acquired the State of the Art technology, Railway Production Units can now become competitive and can make their presence felt in the global market provided they are given the requisite autonomy. In order to facilitate this, it is proposed to restructure the production units as independent cost and profit centers”
TECHNOLOGIES ADOPTED AT RWFTECHNOLOGIES ADOPTED AT RWF
Study and evaluation of advanced technologies available at that time led to adoption of following technologies for manufacture of wheels and axles:
WHEELS:Controlled Pressure Pouring Cast Wheel Technology set up under technology transfer agreement with Griffin Wheel Company(GWC), AMSTED Inc.,USA.
AXLES: Axle technology then current in European countries using a special purpose Long Forging Machine procured from M/s GFM, Austria.
INITIAL PRODUCT RANGEINITIAL PRODUCT RANGE
Located in the garden city of Bangalore, RWF began production in 1984-85 with manufacture of:
• One type of wheel
• One type of wheel set
• Six types of axles
TOT AGREEMENT WITH M/s AMSTEDTOT AGREEMENT WITH M/s AMSTEDFOR WHEEL MANUFACTUREFOR WHEEL MANUFACTURE
As part of technology transfer agreement RWF received:
• Griffin(GWC)s’ Standard Practice manual containing technical information and documentation pertaining to the relevant processes related to wheel manufacturing
• Factory lay out , M & P details
• Material Specifications,Vendor Information
• Training of Personnel at GWC, USA
Limitations of the agreement with M/s AmstedLimitations of the agreement with M/s Amsted
• GWC support was only for freight wheels and RWF was given 5 designs of freight wheels as part of technological support
• Process parameters for manufacture of coaching and locomotive wheels was not disclosed
• The agreement lapsed in 1991 and thereafter RWF has been on its own
GROWTH OF WHEEL & AXLE PLANT GROWTH OF WHEEL & AXLE PLANT ––Now Now renamed as RAIL WHEEL FACTORYrenamed as RAIL WHEEL FACTORY
The initial capacity of the Plant was for manufacture of
WHEELS - 56,700
AXLES - 23,000
WHEEL SETS - 10,000
INCREASE IN PLANT CAPACITYINCREASE IN PLANT CAPACITY
The increase in Plant capacity has been achieved through:
Measure Taken Year Installed CapacityWheel Axles Wheel sets
Commissioning 1984 56,700 23,000 10,000Incentive scheme 1990 67,500 35,000 35,0003rd Shift introduced 1995 67,500 48,000 35,000Augmentation (Ph I) 1998 95,000 48,000 35,000Augmentation (Ph II) 2003 1,15,000 48,000 48,000
DIVERSIFICATION OF PRODUCT RANGEDIVERSIFICATION OF PRODUCT RANGE
After the termination of collaboration agreement with M/s Amsted, RWF has independently developed the following products:
May 93 915 mm dia. COACHING WHEEL
Aug 93 First ICF COACHING WHEELSET
Jan 95 840 mm dia CONTAINER WAGON WHEEL
Dec 95 915 mm diameter WAGON WHEELSET
DIVERSIFICATION OF PRODUCT RANGE DIVERSIFICATION OF PRODUCT RANGE (continued)(continued)
Dec 95 CH-36 WHEELS & F -CLASS AXLESexported to USA
Dec 97 1097 mm diameter LOCOMOTIVE WHEEL
Aug 98 First MoV LOCOMOTIVE WHEELS
Sep 99 First MG COACHING WHEEL
Nov 01 First MG LOCOMOTIVE WHEEL
QUALITYQUALITY
Customer satisfaction and delight have forever been the keywords in RWF’s philosophy.
Realizing the globally prevalent competitiveness in all industries, RWF became the first Production Unit of the Indian Railways to be certified to the ISO-9002: 1994 Standard in 1994.
RWF once again became the first Production Unit on Indian Railways to achieve accreditation to ISO-9001:2000 Standard in March 2001 – within three months of issue of the revision by ISO.
ENVIRONMENTAL MANAGEMENTENVIRONMENTAL MANAGEMENT
RWF continued its trend of firsts by becoming yet again the first Production Unit on Indian Railways to achieve accreditation in June 1999 by M/s BVQI to ISO-14001: 1996 the coveted Standard for Environmental Management System.
ACCREDITATION BY AARACCREDITATION BY AAR
RWF, in keeping with its World Class status has been accredited since November 1995 by the Association of American Railroads (AAR) for manufacture of wheels and axles for use in North American Railroads.
Wheels have been exported to North America worth USD 4,00,000/- .
AWARDS & ACCLAMATIONSAWARDS & ACCLAMATIONS
The prestigious Golden Peacock Award for Quality Systems in 1997 by the Institute of Directors, India.
The Arch of Europe award for excellence in Quality in 1999 by the Business Initiative Directions, Europe.
The Golden Peacock Award for Environment Management Systems in 2002 by the Institute of Directors, India.
The micro-alloy cast steel locomotive wheel developed by RWF was found to be far superior to forged and cast wheels made in USA in respect of its wear resistant properties.
RWF TODAYRWF TODAY
• RWF today is a World-Class manufacturer of wheels, axles and wheel sets for all types of rolling stock.
• The Plant has the distinction of not having even a single case of line failure of its products.
• With a staff strength of 2392,RWF has an annual turn over of over Rs 300 crores.
GROWTH IN RWF’S REGULAR PRODUCT GROWTH IN RWF’S REGULAR PRODUCT RANGERANGE
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5
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Wheels Axles Wheelsets
PRODUCT
TYP
ES
19842005
MARKETING ACTIVITIES IN MARKETING ACTIVITIES IN RWFRWF
§ Marketing activities started during 1995 when IR demand reduced
§ Sales to non-railway customers accounted for under 2% of the annual turn over till 2001-02
§ In the current year, orders worth of Rs. 40 Crores(13% of turnover) have been secured from non-railway customers
§ The Plant eventually aims to target 30% of its turn over for orders from non-railway customers
MARKETING PERFORMANCEMARKETING PERFORMANCE
Exports
Value of export - Rs.145.36 lakhs
Profit accrued - Rs. 18.42 lakhs
Countries - USA, Malaysia
Indigenous
Value of Indigenous orders - Rs. 54.70 Crores
Profit accrued - Rs. 4.3 Crores
SWOT Analysis• RWF today stands at the crossroads.It is
necessary to take stock of the situation. The SWOT analysis looks like this
THREATSOPPORTUNITIES
WEAKNESSESSTRENGTHS
STRENGTHSSTRENGTHS
• Modern manufacturing facility.
• Augmentation Works completed for increasing capacity of wheels, axles and wheel sets.
• A well-drawn out plan under implementation for phasing out of old machinery.
• Well-trained and committed workforce.
• Good in-house laboratories for testing of raw material and products.
STRENGTHSSTRENGTHS (contd.)(contd.)
• Good facilities for maintenance of assets.
• Quality systems are in place.
• A fairly captive market for its products which utilizes 80-85% of the installed capacity.
• Excellent track record in terms of delivery and reliability of products.
WEAKNESSESWEAKNESSES
• The financial health of the mother organization (IR) is not sound
• Requirement of Wheels,and other railroad consumables is sporadic and dependent on PLAN outlay for Rolling stock acquisition which is fluctuating demand
• The Plant design is very specialized and is equipped towards manufacture of only Wheels & Axles
WEAKNESSES (contd.)WEAKNESSES (contd.)
• R&D facilities are inadequate to meet with the changing designs at a faster pace. Consequently development of any product takes a long time in being established through field trials.
• Development of new processes/raw material specifications has been more or less stagnant.
• The rejection and rework levels are higher than comparative figures for the Griffins Plant.
WEAKNESSES (contd.)WEAKNESSES (contd.)
• Cost of production is higher due to high cost of scrap and electricity.
• Marketing infrastructure is extremely poor.
• Archaic costing and accounting principles applicable over IR are uniformly applied across the board in RWF. These procedures are not conducive to aggressive marketing.
• Delegation of powers for market penetration are limited.
• Staff morale likely to be affected due to uncertain future.
WEAKNESSES (contd.)WEAKNESSES (contd.)
• Higher management only pays lip-service to marketing efforts. Inadequate delegation of powers at the field level results in delayed response to market queries.
• IR is obligated to give place orders for a part of its requirement to DSP as the augmentation and modernization of DSP was done at IR’s behest.
• Exposure of officials to developments made by other Plants is limited.
• Exposure to overseas customers and markets is practically non-existent.
OPPORTUNITIESOPPORTUNITIES
• Autonomy in pricing will lead to better focus with Customer Segmentation
• Dual pricing policy (after satiating in house demand at installed capacity) can be considered
• ERP solutions for production,planning and control including costing systems can be planned
• Enter into MOU with the parent Ministry for autonomy in all areas of operations in exchange for adherence to predetermined performance benchmarks
THREATSTHREATS
• Poor financial health of IR is resulting in reduced orders for RWF. The wagon acquisition in the X Plan has been drastically down-sized.
• Liberalization policy has enhanced the threat of cut-throat competition from emerging giants like China.
• The capacity of RWF and DSP combined exceeds the WTA requirements of IR. RWF faces a threat from DSP in respect of sharing of IR’s orders.
• Global railroad market space is reducing.
Survival in Future
• IR’s reducing requirement for WTA items, would result in an increased cost of production unless the Plant capacity can be fully utilized.
• Such an eventuality would make it even more difficult for RWF to effectively compete either in the Indian or the global market.
• It is becoming increasingly clear that to avoid getting caught in this vicious cycle, RWF has to make concerted efforts to fully utilize its Plant capacity and to bring down the cost of production to enable it to establish a competitive edge in the Indian & overseas market.
THE MAGIC FORMULA• In fact the situation is such that both plant capacity utilization
and cost reduction have to go hand-in-hand as one is not possible without the other
• Low production higher overhead costs
• Higher production costs lower orders
• The captive IR market cannot account for booking of the entire capacity of RWF
• The Indian market for WTA is limited to sporadic requirements for CONCOR, Defense needs and some exports made by Wagon Builders. This market is not sustainable
•• The magic formula therefore appears to be The magic formula therefore appears to be to reduce costs and to reduce costs and penetrate the export marketpenetrate the export market
Existing Performance measurement Scheme Wheel Shop,Rail Wheel Factory
• Existing scheme is cost plus model• Costs of production allocated over
specified period of production of wheels• Overhead costs distributed to the finished
product-100% or ratio thereof• Batch costing of finished product is done
with no focus on intermediate product costs
Methodology for costing in Existing measurement scheme
Important materials for production purposes (about 50 items) constitute 90% of value of issues.
The actual consumption taken rather than booked expenditure under stores transactions.
High value shop arising and rejected materials from PWO - actual generation taken.
Expenditure on Labor and Electricity are charged based on actual payments made.
Expenditure booked against various Cost Centers gets charged off to PWO.
All indirect expenditures are treated as OH and charged off or apportioned to final products in a calendar month on a predetermined basis.
Research Hypothesis & Research Hypothesis & ValidationValidation
• Hypothesis is that Performance measurement scheme based on cost plus model of allocation of costs to the finished product is inadequate to evaluate the production process
• Regression analysis of Cost sheets of performance measurement for BOX N wagon unit cast wheel total Cost of wheel production(V5:dependent variable) linked to the manufacturing & non-manufacturing costs(independent variables V2:labor cost,V3:material costs,V4:total overheads costs)
Validation (continued)Validation (continued)
• Total cost of production for cast wheel V5= .02V2 + .778 V3 + .203 V4.
• This model indicates that total cost of wheel is primarily dependent on the costs of material (V3) and the total overheads (V4) with least impact of labor costs (V2) on the total cost of production.
• This does not indicate the inefficiencies in the processes or activities that contributes to high material and overhead costs towards the cost of wheel production.
• Good historical account of costs of production but is grossly inadequate for a process based manufacturing system that is in place at the wheel shop of the RWF.
Evolution of Performance Evolution of Performance measurement System for Wheel shopmeasurement System for Wheel shop
• Done with the articulation of the views of the stakeholders of the plant.
• Questionnaire with regard to the cost competitiveness of RWF products was administered to the stakeholders of the plant-selected at random.AnnexuresA1.doc
• Questionnaire on employee satisfaction was given to 110(one hundred and ten) respondents.AnnexuresA2.doc
• Total sample size surveyed in both the questionnaires was 150 out of 2355 employees of RWF (900 in wheel shop).
• 20(twenty) interviews were conducted on one to one basis with stakeholders.
• Stat Analysis of Basic Wheel Production data for 2005 captured. Research Hypothesis1.ppt.
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AVERAGE COST REPORT per Wheel
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AOHCOHFOHSOHDEPAMTPENSION
Cost Competitiveness Survey
• Analysis can be segmented in FIVE segments for responses as rated on RWF efforts in these following areas
• Existing organizational structure• Adequacy of cost management systems• Vendor management• Buoyancy of internal business process systems• Employee Productivity levels
Stakeholders Response in Cost Competitiveness Survey
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Scale of Response
Num
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OrganizationalStructure
Costmanagement
Vendormanagement
Businessprocesses
Employeeproductivity
Research Analysis for Research Analysis for Stakeholders Responses to Cost Stakeholders Responses to Cost
Competitiveness surveyCompetitiveness survey• Respondents surveyed perceive on an average (greater
than 45%) that the organizational structure and employee productivity levels are GOOD and satisfactory to the challenges of cost competitiveness strategies
• Weighted mean response to questions in the segments on rating of internal business processes and organizational structural adequacy is 3.295 and 3.223 on a scale of 1 to 5
• Composite index of respondents’ perception of cost competitiveness strategies of RWF is 3.090,which corresponds to a satisfaction level as GOOD at the present efforts of RWF in this regard
Stakeholders rating of Internal Business processes at RWF
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1 2 3 4 5Scale of Response
Num
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pond
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Concern for process timemeasurement
Impact of continuousimprovement of productionprocess
Effectiveness of preventivemaintenance schedules
Effectiveness of continuousfeedback mechanism
Quantum and Impact ofresearch in-house to improvethe product
Rating of buoyancy of Internal Business Rating of buoyancy of Internal Business Process systems in Wheel ShopProcess systems in Wheel Shop
• Majority stakeholders (57%) are sanguine with regard to the efficacy of the internal business processes in place at their plant
• Weighted mean response (3.295) on the scale of 1 to 5
• Interviews confirmed the stakeholders’ belief they were doing well but they could not authoritatively say what performance indices of similar plants mean to be the best in the world
Stakeholders Rating of Cost Management at RWF
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Scale of Response
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Elimination of non valueaddition activities
Effect of JIT in productioncosts reduction
Impact of productimprovement throughreduction in rework on costsUnderstanding of nonconformance costs ofproduction by all staff
Rating of Cost measurement Rating of Cost measurement and management as practiced and management as practiced
at RWFat RWF• Significant segment of respondents(18%)believed that
steps taken are poor and unsatisfactory• 28% rated the response as fair and somewhat
satisfactory• 21% each rated the present system as good and very
good • 12% the existing cost management system as excellent • Majority of the respondents interviewed(14 on
20)perceive that cost performance measurement can be improved with focus on process improvements to reduce manufacturing costs with elimination of non-value addition activities
Stakeholders rating of Vendor management at RWF
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Efforts at improvementsin vendor relationships
Encouragement to longterm vendor relationships
Effect of cumbersomeprocedures in buildingvendor relationships Vendor rating systemefficacy
Prequalified vendorssystem efficacy
Inventory management
Rating of Rating of Vendor ManagementVendor Management at at RWFRWF
• Stakeholders’ rating on steps taken by RWF to improve vendor management including inventory management evoked a mixed response-40% believed that existing system at vendor rating/inventory management is adequate
• 67% believed that it is the cumbersome procedures that dictate procurement in government that hinders better customer-supplier relationship rather than lack of managerial talent
• Majority stakeholders (55%) weighted mean response to current RWF attempts at vendor management is 2.80(only somewhat satisfactory) in the scale of 1 to 5
Employee Satisfaction survey at Wheel Shop,RWF
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Learning &Growthperspective
Motivationalissues
Learning and Growth perspectiveLearning and Growth perspectivefor Wheel shop employeesfor Wheel shop employees
• Employees Learning and Growth perspective at the Wheel shop of the plant was done for a total of 1100 responses
• Segmented in two categories-one is aspect of perceptions of Learning & Growth prospects and the second on Motivation available for the Wheel shop employees
• Weighted mean response; 2.9876 in a scale of 1-4, the majority of the employees are to a great extent satisfied with the opportunities provided for learning and growth in the Wheel shop of the plant as well as the schemes in place to foster Involvement and Motivation of the employees
• 56 out of 110 confirmed that they are in complete agreement to the view that they are actively encouraged to use innovative solutions to overcome problems in production line
Performance measurement system and Performance measurement system and
Activity cost drivers for Wheel shop, RWFActivity cost drivers for Wheel shop, RWF• Cost driver in the entire Wheel shop at present is the
HEAT. • In the Melt shop, the MELT tapped in the ladle in
Mt(metric tonnes) is the basic activity driver to be monitored and measured.
• The Mould room activity driver is Good wheels as cast .• The Cleaning room activity driver will be the number
of rough wheels processed into finished good wheels in a given time in first pass.
• Robust performance system will focus on activity drivers for each sub shop.
• Performance and cost measurement system will measure the input requirements of scrap which go into wheel production and calculating the output of good wheels .
Performance Measurement Performance Measurement Scheme For Wheel ShopScheme For Wheel Shop
• Set The Strategy:To produce low cost wheels• Melt shop: Melt quantity, &scrap melt loss measured• Mould room: Melt/heat in Mt qty returned, number of good wheels
cast, Pouring time/heat measured• Hot Wheel line: Sprue losses, hub cuts return measured• Cooling Yard: Wheels stacked >16 hours to be tracked• Cleaning room: Good wheels processed in 24 hours. Rejection of
wheels. Good wheels in first pass/Reworks• Establish review mechanism-persevere with measurements• CUSTOMER RESPONSE and Feedback to be established• Evaluation :What can be done to reduce Costs
Performance Measurement SchemePerformance Measurement SchemeWHEEL SHOPWHEEL SHOP
Melt shop: Melt quantity, &scrap melt loss measured.Mt/24 hour cycle, Energy per heat, materials/heat continue to measure
Mould room: Melt/heat in Mt qty returned, number of good wheels cast, Pouring time/heat measured.Consumables/heat, Pouring defect wheels, Risers, ladle temperatures to be measured as before.
Cooling Yard: Wheels stacked >16 hours to be tracked.
Cleaning room: Good wheels processed in 24 hours. Rejection of wheels. Good wheels in first pass/Reworks.
Final inspection
Good wheels
Scrap from Railways in Mt/heatReject wheels
Store depot
Input
stores
Returned stores
Transfer price mechanism for the Transfer price mechanism for the Wheel shop of RWFWheel shop of RWF
• Wheel shop in position of excess capacity with almost monopolistic market for the cast wheels
• Cost sensitivity in each of the sub shops through activity based incentive bonus mechanism
• Transfer price will be set at the Unit Cost basis of Melt as delivered by upstream shop-Melt and accepted by Mould
• Roughcast wheel is Cost in terms of the Melt quantity in Mt (metric tonnes)
Transfer price mechanism for the Transfer price mechanism for the Wheel shop of RWF(contd.)Wheel shop of RWF(contd.)
• Finished wheel is assigned the transfer price on the quantity of wheels processed in relation to the melt generated for that batch or HEAT
• Assignment of transfer price on the Melt and tracking the melt as it is transferred to the Mould /Cleaning room highlights inefficiencies in production of melt from scrap
• Transfer price of the melt in Cost/Mt and relating it to the finished product, the wheel, can be used to assign the incentive bonus to the Wheel shop-sub shop wise for activity based performance bonus scheme
• Incentive bonus amount proportionate to the savings made in transfer price savings for each set of sub shops settled in consultation with employees representatives on two part formula
Transfer price ModelTransfer price Model--Wheel shopWheel shop
Melt shop:Melt qty to be cost on Unit Mt of melt as transferred to Mould room
Mould room: Wheels cast measured per cost of Mt of melt. Value addition cost in this shop not attempted
Cleaning room: Transfer price per wheel measured as outcome of complete processing
Set Transfer price for MELT Compare MELT price to finish wheel cost.(Rs./Mt)
Inc.Bonus to MELT staff Inc.bonus to other than Melt staff on savings of Finish wheel price rather than
on savings at this Price fixed rate per finish good wheel as per current system
BSC for Wheel shop, RWFBSC for Wheel shop, RWF
• Perspectives of Internal business processes, Learning& Growth derived from the evaluation of responses to the Questionnaires, interviews with key plant personnel & Performance measurement system
• Internal Business Processes PERSPECTIVE Objectives :
1. Increase the output Melt /Heat, optimize production2. Lowest cost producer of steel3. Value creation with suppliers4. Encourage innovation5. Ensure safety 6. Environment sustainability
Balanced ScoreCardBalanced ScoreCard--Internal Business Internal Business ProcessesProcesses for Wheel Shopfor Wheel Shop
• Measures1. No. of good wheels/heat,
maximizeYield,least rejects2. Employee cost/tonne of
melt3. Supplier rating4. Cost reduction from
innovation5. Accident/man day6. Reclamation savings
• Units1. Numbers, %
2. Rs./Mt of melt3. Index %4. Rs. in Crores5. %6. Rs. in Crores
Learning & Growth Perspective for Wheel shop
Objectives1. Enthused and happy employees2. Manage knowledge, training& development of employees
Measures1. Satisfaction Index2. Training records/Aptitude bank
Units1. % recorded
2. database
Targets & Initiatives are Deliberately kept open for the Wheel shop to take appropriate steps to adopt the BSC
What should RWF do?What should RWF do?The Road AheadThe Road Ahead
I. Performance Cost Measurement§ Adoption of a performance measurement system
based on activity cost drivers specific to sub shops§ Focus of cost control shifts to activities in progress
and not a post mortem of allocation of costs to a manufactured product
§ Plant’s assessment of high input cost of production requires fixing of uniform administered price of scrap sourced at different rates from Zonal railways
§ Trimming of the high administrative overheads in procurement, personnel, finance inclusive of managerial cadre establishment costs
Recommendations(continued)Recommendations(continued)
II. Performance Bonus system§ Adoption of sub shop two part performance bonus
system for all Wheel shop staff on fixed rate / finished good wheel
§ Introduction of the Transfer price mechanism for wheel as it is handed over from the melt shop to the downstream shops
III. Vendor management§ Establish long term relationships with pre-
qualified, approved and reputed vendors of quality material
§ Just in Time Usage of pre-inspected quality material from credible and reputed vendors
§ Start as a pilot project for high value consumables
Recommendations(continued)Recommendations(continued)
IV. International collaboration and Performance benchmarks
§ Export subsidy to match reduction in manufacturing costs done by the plant
§ Reaffirm RWF performance indices are in line if not better than international cast railroad wheels manufacturers
§ Collaboration agreement with a reputed global partner, as a WIN-WIN strategy, to make a presence in the international railroad equipment and spares (wheels/axles) market
Reach the DestinationReach the DestinationV. Organization restructuring and autonomy§ Redesign motivational packages as a PSU under GOI§ RWF can implement Employee Stock Options (ESOPs) § Memorandum of understanding can detail greater
devolution of financial, marketing and managerial autonomy to the plant
§ Assured delivery of first sale of products to the parent Ministry and the balance production for sale to trade at pricing policies to be ratified by the Board of Directors of the corporation
§ Equity holding to be listed(GOI can be principal shareholder)
§ Market forces will determine the viability or otherwise of this railroad consumables manufacturing unit
FOOD FOR THOUGHTFOOD FOR THOUGHT
“Not everything that counts can be counted;not everything that can be counted counts.”
Albert Einstein
THANK YOU