Indian Foundries Limited

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Asian Journal of Management Cases
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DOI: 10.1177/097282010400100206
2004 1: 177 Asian Journal of Management Cases
Rahul Pandey, Rajiv K. Srivastava and Samir Srivastava
Indian Foundries Limited
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ASIAN JOURNAL OF MANAGEMENT CASES, 1(2), 2004
SAGE PUBLICATIONS NEW DELHI/THOUSAND OAKS/LONDON
INDIAN FOUNDRIES LIMITED
Rahul Pandey
Rajiv K. Srivastava
Samir Srivastava
This case details the working of Indian Foundries Limited, a company which has
been in business for 32 years. It has been producing a large volume and variety of
high quality foundry products, mainly for export markets. Of late, however, the com-
pany has been facing problems of high lead times, excess inventory stocks and in-
process quality defects. These problems have come at a particularly bad time when
Indian Foundries is facing stiff competition from Chinese exporters. For Indian
Foundries the need is for a quick fix of their problems: otherwise they are likely to
lose their core customer base to the Chinese.
Keywords: Small and medium enterprises, operations management, technology
innovations, systems for improvement
In February 2003, Samir Gupta, Director (Operations) of Indian Foundries Limited (IFL),
was sitting in his office in Kanpur, India, going over a company progress report. This
report detailed several instances of product defects and delays in export deliveries made
by Indian Foundries. In the light of the growing competition from Chinese exporters,
Gupta feared an erosion of his companys established customer base if he did not reverse
the current trends.
BACKGROUND
Since 1990, when Gupta joined his fathers company, he had successfully steered its
technical growth. Technological systems for both designing and information processing
had been regularly upgraded. This had enabled him to offer high and consistent reliability
of products because of which his firm had built up a good reputation in certain export
markets. However, its internal costs were on a steady rise. Instances of quality defects
and need for rework or finishing had increased. Average lead time to produce a finished
at INDIAN INSTITUTE OF MGMT on July 28, 2014 ajc.sagepub.com Downloaded from
178 RAHUL PANDEY, RAJIV K. SRIVASTAVA AND SAMIR SRIVASTAVA
casting had increased over the past decade. Worse, it was now more difficult for Gupta to
accurately predict the production lead time in advance. The rear space of his factory
premises was usually littered with semi-finished and finished castings. He wondered if
some of his systems were still inefficient.
EVOLUTION OF THE FIRM
IFLa firm engaged in the foundry processwas founded in 1968 in Kanpur, a North
Indian industrial city, by L.K. Gupta, an engineer who had experience of working in pro-
cess industries. Gupta selected Kanpur because he belonged to the city. Although Kanpur
was a big industrial centre at the time of British rule, post-independence state governments
of Uttar Pradesh (UP) state to which it belonged did little to facilitate industrial develop-
ment of the city or the state. Kanpur, along with other industrial cities of UP, gradually
came to be known for old fashioned industries catering largely to low end and less demand-
ing mass markets.
Being optimistic about modern technology, Gupta started by investing part of his savings
and loans from friends in plasma casting technology, used for casting products of special
alloys in small sizes with intricate designs. These products did not have an adequate
market in India and IFL did not have links with export markets at the time. Having in-
vested a major portion of its initial capital in plasma technology and not succeeding in
achieving desired sales, the company suffered losses for the first four years and was on
the verge of closure in 1971. The owner then took the financial risk of investing in the in-
vestment casting processused for making small sized products found in various Indian
industrieswhich helped the firm to revive financially.
By 2002, IFL had come a long way. It steadily invested in various casting processes
such as No-Bake, Shell and Replicast to cover a wide range of products in terms of size,
shape, metallurgical composition and application.
A major milestone for the firm was entering the export market in the early eighties
which came about as a result of conscious efforts made by the owner during his visits to
the US.Under pressure from export customers to consistently deliver good quality pro-
ducts, IFL invested in modern/semi-automated process technologies. Another major
milestone for the firm came when the owners son, Samir, an engineering dropout with
a Masters in Business Administration (MBA)with specialization in Finance and Oper-
ations Research from the USformally joined IFL as Director (Operations) in the early
nineties.His enthusiasm triggered another round of major investments. These invest-
ments were on three technological fronts: investments in further modern process tech-
nologies (like automatic mould-making and core-making in 1993, and milling m/c for
pattern making in 2003); software-enabled designing of patterns and moulds ( like
INDIAN FOUNDRIES LIMITED 179
computer-aided design [CAD] and casting simulation software, both in 1997); and ana-
lytical software tools for scheduling (Operations Research-based heuristic in 2001) and
information transactions (enterprise resource planning [ERP] in 2000). Thus over the
past two decades, IFL had witnessed rapid growth in volume and variety of orders (mainly
for exports) on the one hand, and improvement due to modernization/automation of
processes and systems on the other.
In 2002, IFL was a well established medium sized foundry with an annual turnover of
Rs 300 million, employing four directors, fifty engineers and supervisors and 480 workers,
with a good presence in both Indian and export markets. It had foundry facilities in
three locations in IndiaKanpur, Bhiwadi and Surat. Bhiwadi was an industrial suburb
in the state of Rajasthan, located about 70 km from the countrys capital, New Delhi.
Surat was a large industrial city in the countrys industrially advanced western state of
Gujarat. Being in proximity to a major seaport, it provided logistical convenience for
exporters.
The Surat facility was the newest, built for economizing on distribution logistics for
export customers. Bhiwadi produced medium to large sized castings mainly for domestic
customers. Kanpur and Surat produced special alloy products and new products
respectively, mainly for export markets. IFL also had a machining facility in Kanpur to
meet part of the in-house requirement. Exhibit 1 gives the average expense break-up of
IFLs foundries.
PRODUCT AND MARKET CONTEXT IN 2002
IFL, with molten liquid preparation capacity of about 4,800 tonnes annually, produced
over 700 types of products, demanded in varying volumes and frequencies over a year.
The products were either stainless steel or alloy steel castings, ranging from a few grams
to 1,000 kg per piece. Since its inception, IFL had produced over 4,000 different products,
many of which were discontinued over time as customers changed designs or, in case of
some products, they stopped ordering from IFL.
About 90 per cent of IFLs sales were for export to a variety of customers in the US and
Europe. Its main products were parts for valve and pump manufacturers, like pump
casings, gate valves, ball valve bodies, butterfly valve bodies and impellers. Other cat-
egories of products included castings for mining and earthmoving (adaptors, tooth points,
corner tooth and chain links), crushing and pulverizing (fly wheels and hammers), heavy
castings used in industries like power, cement, transport ( banjo castings, crawler shoes,
steering case castings, spindles and yokes, hub castings and idler castings), small sized
investment castings (flanges, pipe fittings, seal rings and butterfly valves) and fabricated
parts (hub assemblies, dog handles and parts of hatch and ratchet straps). Quality, timely
delivery and cost played an important role in the export markets. Different types of pro-
ducts and customers emphasized various measures of quality like surface finish, hardness
and brittleness with different priorities. Although IFL did not have a significant competitor
in India for its export markets, its owner feared increasing competition from foundries
in China which were capable of producing good quality castings at low cost.
In 2002, India was the fifth largest producer in terms of total casting production in the
world, after the US, China, Russia and Germany. In terms of number of production
units, it was second only to China. However, most of the foundries in India did not have
the technological capability to ensure sustained levels of quality and on-time delivery
demanded by export customers. Over 90 per cent of about 5,000 metal casting production
units in India were in the small-scale and unorganized sectors, which were ridden by
poor access to capital, modern technologies and support infrastructure.
China had both foundries with low technological capability catering to low end mass
markets, and those with good capability competing in international markets. Its metal
casting industry had witnessed phenomenal growth in export markets over the past two
decades. Chinas growth in export markets had outpaced Indias in terms of both total
volume (tonnage) and variety of application. Unlike Chinese exporters who had a good
presence in a wide range of medium end to high end products, Indian export growth had
occurred primarily in high end cast products, higher technology and complicated shape
castings, serving industries like auto components, valve and pump industry, mining,
minerals and earthmoving machinery.
OPERATIONS MANAGEMENT PRACTICES
Manufacturing Process Technology
A typical casting process for a new product involved the stages shown in Exhibit 2. Exist-
ing products did not require fresh pattern making. Molten liquid preparation was similar
for different types of processes. It involved mixing of steel scrap with appropriate quan-
tities of different metals and heating the mixture in a crucible up to a specified temperature
for a specified time. The heating temperature and time depended on the type of product.
Heating time was normally one to two hours. Pattern designing, mould making and core
making were important steps from the quality point of view. Design of the final mould
influenced smoothness of liquid flow and gradients of temperature and stress during
the process of pouring and cooling of casting inside the mould. These, in turn, influenced
quality aspects like incidence of air trappings/bubbles, cracks, hardness and brittleness.
A casting process was classified mainly on the basis of the mould making step. The no
bake process involved sand moulding without baking. The shell process involved baking
of mould and core. Investment casting used moulds made by the lost wax process.
These different processes were used to make products with different sizes and quality
requirements. The mould and core making step took less than fifteen minutes for most
castings. The cooling of molten liquid inside the mould took between a couple of hours
for small and simple castings to over ten hours for large ones. Fettling involved cutting
and finishing the edges and surface of the casting and identifying and correcting defects
like surface cracks. The cutting and finishing step employed different cutting techniques
depending on the castings hardness and shot blasting (for no-bake and shell castings) or
sand blasting (for investment castings). The acid test and die-penetration test were used
to identify surface and sub-surface cracks. Although the fettling stage was technologically
simple, it took about ten days at IFL because of poor surface finish and high occurrence
of defects arising from previous stages, in spite of the fact that IFL had modern testing
instruments like a vacuum spectrometer, metallurgical radiography, ultrasonic testing
and chemical testing facility, besides regular instruments for hardness testing and impact
testing.
Designing of patterns and moulds was done using CAD and a casting simulation software
that IFL had purchased from a US-based supplier. Placement of risers and gates was crit-
ical in affecting quality of casting and utilization of molten liquid. Utilization of crucibles,
quality of castings, as well as lead time for designing and making of moulds had improved
significantly after IFL started using the software. Samir Gupta, along with a trained de-
sign engineer, was himself involved in designing the moulds using the software. While
patterns were designed in-house, most were sent for machining to a local vendor. In
order to control the quality of machining of patterns, IFL was planning to install an in-
house milling facility. Mould making and core making steps were automated. Fettling
required substantial manual intervention of skilled labour in both cutting/finishing and
testing.
IFL had consciously invested in modern technologies for the designing and casting
processes, as well as testing. Its owner and directors kept themselves abreast of the
latest developments in foundry technology from the internet and regular visits to national
and international conferences. Investing in modern technologies helped IFL to offer
high quality products to export customers and to impress new customers with its modern
facilities.
CAPACITY AND LAYOUT PLANNING
Physical addition of equipment and holding finished goods inventory on its premises
were the major modes of capacity planning by IFL. Equipment was added incrementally
in response to either growth in demand or competitive pressure to modernize. Every
time a piece of equipment was added, it was installed close to other equipment of the
same kind. The idea was to improve utilization of equipment. Thus, the entire fettling
facility was centralized. Crucible heating too was centralized. Pouring and cooling for
no-bake and shell moulds was done at the same place. Operations specific to a particular
process technology, like shell moulding, sand moulding, investment moulding and sand
blasting, were located separately from the others. Thus the layout of the main shop con-
tinued to be functional, but the relative locations of different operations with respect to
each other did not follow a logical sequence for certain product flows.
Well equipped laboratories for CAD, assessment of designs using simulation software
and chemical testing existed in the directors building which was close to the main pro-
duction shop. Acid testing and die-penetration testing equipment were housed in the
main shop itself as these tests were required to be done on every lot. (The layout of IFLs
main foundry facility at Kanpur is shown in Exhibit 3.) The owner felt that the layout
had grown too messy and resulted in confusion and inventory pile ups.
MATERIALS MANAGEMENT
A semi-formal system for purchasing and inventory management was used at IFL. Since
most suppliers were local and smaller in size than IFL, purchasing small quantities at
short notice was easy. There was a store for stocking certain raw materials. However, no
formal place was assigned for stocking semi-finished and finished goods. The main
moulding and casting facility and the alley in between the casting and fettling facilities
were often littered with stocks of semi-finished and finished goods lying in the open.
Stocks of steel scrap (a raw material) also did not have a proper storage place. They were
often dumped outside the main door of the production shop located near the crucibles.
Work-in-process inventory was high, mainly due to long lead time of fettling.
Distribution logistics (mainly for export) was a key concern area for the management
since it affected both cost and delivery time. As a strategy to tackle this concern, a new
foundry facility was started in Surat. For the products made at Kanpur, large stocks of
finished goods were held in order to ensure quick dispatch to customers. In order to
improve IFLs on-time delivery performance, the management was planning to open
warehousing facilities in foreign countries closer to its customers.
QUALITY AND MAINTENANCE MANAGEMENT
Product quality was ensured mainly through good CAD and casting simulation software.
The simulation software allowed evaluation of multiple mould design options of various
critical quality aspects like temperature/stress gradient, likelihood of air-bubble entrap-
ment at different locations, and utilization of heats. A small team of full-time engineers,
trained in using the software, regularly analysed new designs and improvements in
existing designs under close supervision by Samir Gupta. The usage of this software had
helped in cutting down the design lead time, the frequency of the design changes and
the incidence of defects during production.
IFL had modern testing equipment to check various quality aspects of castings. Every
casting was inspected for cracks at the fettling stage. A sample from every heat of molten
liquid was subjected to chemical tests. Each casting was identified by its heat number.
Samples of castings from different heats were tested for hardness, brittleness, etc. Com-
plaints from customers could be traced to heat numbers. Results of basic quality tests
were reported to customers along with every casting. IFL had not applied for the Inter-
national Organization for Standardization quality certification, but had obtained certi-
ficates from certain international agencies that were required by its key export customers.
IFL did not have a system for monitoring and controlling process quality. Preventive
maintenance was limited to periodic cleaning of key equipment like furnaces. No formal
records of equipment performance were maintained. Although quality defects caught
in-house were always corrected, records of their occurrence, diagnosis or rectification
were not maintained. In fact there was no department or personnel dedicated to monitor,
rectify or assure quality. Equipment maintenance too was not the responsibility of any
employee. Major equipment and instruments were overhauled by their suppliers ac-
cording to purchase and maintenance contracts.
The owner felt that several defects identified at the fettling stage could be avoided if
they were corrected at earlier stages like mould making, pouring and cooling. He was
concerned about the high load at fettling which he felt was mainly due to the high inci-
dence of defects. Besides the high cost incurred at the fettling stage, this led to a longer
lead time.
PRODUCTION PLANNING AND SCHEDULING
Delivery time requirements of export customers significantly influenced the production
planning and scheduling of orders at IFL. Firm orders from customers were external
drivers to the production planning exercise.
The production planning period at IFL was one month. A weeks schedule was frozen
for a planning period. Sequencing of different metallurgical heats in the two crucibles
was the most important part of scheduling because it determined the sequence of pouring
and finished castings. Mould and core making consumed much less time and a mould
was normally ready by the time its molten liquid was prepared in the crucible. Of all the
equipment, crucibles had the maximum utilization of over 90 per cent on the average.
This was achieved in 2001 after Samir Gupta formulated an Operations Research-based
heuristic to increase capacity utilization of crucibles from an average of 83 to over 90 per
cent. The heuristic considered various factors like forecast of orders for castings with
different metallurgical compositions, the need to run as many number of heats of the
same metallurgy consecutively in order to minimize damage of crucible linings and con-
straints of capacities at various steps in the entire casting process. Samir Gupta felt that
there was further scope for improvement of utilization by using a more comprehensive
optimization technique.
Though utilization of crucibles was good, delivery time performance was a major
concern. Samir Gupta was of the view that production planning and scheduling helped
him improve the former but not the latter objective. Average delivery time seemed to in-
crease despite his policy of stocking large quantities of finished products. He also found
it increasingly difficult to predict delivery time with reasonable confidence. This was
corroborated by instances of complaints by customers, which were not alarming but
growing steadily. Sustained ability to keep delivery time short and predict accurately
was important to attract new customers and retain existing ones in competitive export
markets. Samir Gupta hoped to partially address this problem by expanding the production
facility at Surat and opening warehouses in the vicinity of export markets.
USAGE OF INFORMATION TECHNOLOGY (IT)
The most important milestone of IT usage at IFL was the installation of ERP software in
1999 that was designed and marketed by its sister firm, E-Soft. IFL was using ERP for
accounting, reporting and web-enabled customer transactions. A customer could place
new orders, access quality inspection reports and status of dispatch of old orders through
IFLs website. The MRP feature of ERP was not being used since IFL did not have a
formal materials and production planning system in place.
In 2001, IFL started an internal discussion group on the intranet for facilitating exchange
of technical ideas among its directors, engineers and supervisors.
IMPROVEMENT INITIATIVES
Most improvement initiatives at IFL were led by modern technologies. Major investments
in the eighties and nineties in semi-automated and automated equipment for moulding,
testing, finishing and the latest software for designing reflected this strategy of the firm.
Export market pressures and technical orientation of the owner and his son were primary
determinants of this strategy. This had resulted in improvements in quality, productiv-
ity and lead time. For example, adoption of casting simulation software reduced many
problems arising due to bad designing of risers and gates in moulds. As a conscious
effort, designs of 5 per cent of castings comprising over 30 per cent of value were analysed
periodically for possible improvements. In 2000, an analysis comprising simulation runs
of fifteen possible designs of mould and core for a single piece three-tonne valve helped
the management change the number and placement of risers and gate, which led to an
improvement in the yield from 34 to 62 per cent. Samir Gupta, with wider exposure, was
the driving force behind investment in ERP and efforts in using Operation Research-
based techniques for scheduling. These initiatives had paid off as many export customers
continued sourcing from IFL for over a decade.
However, certain softer initiatives towards improvement had not been sustained. The
management had initiated Kaizen practices in 1999, but they died down within a few
months. Workers involvement in incremental and daily improvement activities could
not be sustained. In 2002, the firm had in place a suggestion scheme in which the worker
whose suggestion reaped maximum financial benefit to the firm received an award. The
owner admitted that there was a large scope for further improvement in productivity,
quality at stages before fettling, lead time at fettling and cost and time of distribution.
He acknowledged from his experience that performance of all process equipment that
he had invested in had gradually deteriorated over time.
Samir Gupta realized that Indian Foundries problems with delays and inefficiencies
needed to be resolved quickly, otherwise its old customer base would be taken over by
the Chinese exporters.
Please address all correspondence to Professor Rahul Pandey, Professor Rajiv K. Srivastava and
Samir Srivastava (doctoral student), Indian Institute of Management, Off Sitapur Road, Lucknow
226 013, India. E-mail address: rks@iiml.ac.in, fp1006@iiml.ac.in
Exhibit 1
Average Expense Break-up of IFL in 2002 (%)
Scrap (main raw material) 40
Other raw material 20
Indirect material 10
Overheads and wages 12
Electricity and other fuel 8
Transport 5
Miscellaneous 5
Exhibit 2
Typical Process Flow at IFL
Exhibit 3
Layout of IFLs Foundry Facility at Kanpur

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