Salient Features of New

Scheme of Lean Manufacturing

for MSME

Quality Council of India

Relevance of Lean in MSME

sector

Quality Council of India

3

Cabinet decision to establish Quality Council of India, in 1996

Formed in January 1997.

Non-profit autonomous society

Joint initiative of the Government of India, and the Indian Industry, namely ASSOCHAM, CII and FICCI.

PPP – 50% seed money by Govt; 50% by the industry bodies

Purpose :

To establish & operate national accreditation

structure and to promote Quality through

nation wide quality campaign

Mission :Quality for the National Well Being

Current ChairmanMr. Adil Zainulbhai

4

GovernanceCouncil – 38 members

Governing Body – 11 members out of the Council

Chairman - appointed by the Prime Minister on recommendation of the Government and Industry.

Past Chairmen:Mr. Ratan N. Tata (1997-99)Mr. Venu Srinivasan (1999-01)Dr. R. A. Mashelkar (2001-07)Mr. Ajay Shankar (2007-10)Mr. Arun Maira (2010 -13)Mr. Saurabh Chandra (2014)Mr. Amitabh Kant (2014)

5* Currently an independent autonomous organization under Department of Science & Technology 5

Training of ITI Teachers – 1800 Teachers trained on QMS/ QT Tools

Awareness Programs on QMS/ QT Tools -198 programs, 7000 individuals trained on QMS/ QT

tools

Cluster project : Implementation of QMS/ QT Tools in 10 identified clusters

Training of Polytechnic Teachers on QMS/ QT tools

Evaluation Study report on Lean Manufacturing Competitiveness

National Workshop on Enabling MSME to be Competitive through Quality Tools

Working With MSME

Worldwide, micro, small and medium enterprises (MSMEs) have been acceptedas the engine of economic growth and for promoting equitable development.MSMEs constitute over 90% of total enterprises in most of the economies andare credited with generating the highest rates of employment growth and account fora major share of industrial production and exports.

In India too, the MSMEs play a pivotal role in the overall industrial economy of thecountry. MSMEs in India account for more than 80% of the total number ofindustrial enterprises and produce over 8000 value-added products. It isestimated that in terms of value, the sector accounts for 45% of the manufacturingoutput and 40% of the total export of the country and employs over 6 crore people.

Further, in recent years the MSME sector has consistently registered higher growthrate compared to the overall industrial sector. The major advantage of the sector isits employment potential at low capital cost (skill development).

ROLE of MSME

Status of MSME’sThe Micro, Small and Medium Enterprises (MSMEs) are a vital part of the Indian

economy contributing to over 45% of industrial production and around 40% of the total

exports. There are more than 13 million MSMEs in India employing about 31

million people, easily the single largest contributor in terms employment

generation in the manufacturing sector

Manufacturing Sector has

been recognized as the

main engine for growth of

the economy

The share of the

manufacturing sector in Indian

National GDP over the years

has stagnated to 14-15% only

The National Manufacturing Policy of Government

of India envisages share of manufacturing to reach

target of 25% of the National GDP by 2022

To achieve a sustained rate of growth, the

manufacturing sector needs to build and

maintain competitiveness needed to face the

challenges posed by globalization

Under the LM Scheme, MSMEs will be assisted in reducing their

manufacturing costs, through proper personnel management, better

space utilization, scientific inventory management, improved process

flows, reduced engineering time and so on with application of LM techniques

Problems being faced by MSME

Despite constituting more than 80 % of the total

number of industrial enterprises and supporting

industrial development, many MSMEs in India

have problems such as

•sub-optimal scale of operation

•technological obsolescence

•supply chain inefficiencies

•increasing domestic and global competition

•fund shortage

•change in manufacturing strategies

• turbulent and uncertain market scenario.

Lean Manufacturing

Lean manufacturing isaimed at the elimination ofwaste in every area ofproduction including

- customer relations,

- product design,

- supplier networks and

- factory management

The goal of Lean Manufacturing is toincorporate

- less human effort,

- less inventory,

- less time to develop products, and

- less space

to become highly responsive to customerdemand, while at the same time producingtop quality products in the most efficientand economical manner.

Lean Manufacturing goals

• In order to stay competitive in today’smarketplace, a company must understand itscustomers' wants and needs and designprocesses to meet their expectations andrequirements.

Improve Quality

• Waste is any activity that consumes time,resources, or space but does not add any valueto the product or service.

Eliminate Waste

• Reducing the time it takes to finish an activityfrom start to finish is one of the most effectiveways to eliminate waste and lower costs..Reduce Time

• To minimize cost, a company must produceonly to customer demand. Overproductionincreases a company’s inventory costs due tostorage needs.

Reduce Total Cost

4 Goals of Lean

Lean

The term “lean” is used because lean manufacturing

uses “less”…

1• Labor in factory

2• Manufacturing space

3• Capital Investment

4• Material

5

• Time between the customer order and the product shipment

Definition of Lean

A systematic approach to identifying and eliminatingwaste (non-value-added activities) through continuousimprovement by flowing the product at the pull of thecustomer in pursuit of perfection.”

Non-value added is an

activity that takes time,

resources or space, but

does not add to the

value of the product or

service itself.

Value-added is an activity

that transforms or shapes

raw material or information to

meet customer requirements.

Waste: Anything that adds Cost to the product without

adding

Value

OrderProcessing, Transport, Storage, Waiting,

Rework, Machine Setup, Inspection, Machine

Breakdowns, etc...

The Basics of Lean Manufacturing

It means :

- Eliminating work processes that add no value

to the product

- Simplify those processes that add value

RUN

TIME

Total Lead Time

Typically >95% of Total Lead Time is Non-Value Added!!

• Specify value from the standpoint of the end customer byproduct family.

Define Value from the Customer Perspective

• Identify all the steps in the value stream for each productfamily, eliminating whenever possible those steps that do notcreate value.

Identify the value stream

• Make the value-creating steps occur in tight sequence so theproduct will flow smoothly toward the customerMake the process flow

• Make only what the customer has orderedPull from the customer

• As value is specified, value streams are identified, wastedsteps are removed, and flow and pull are introduced, beginthe process again and continue it until a state of perfection isreached in which perfect value is created with no waste.

Head toward Perfection

5 Principles of Lean

8 Wastes of Lean

“OMIT What U DO”

O• Overproduction

M• Motion

I• Inventory

T• Transportation

• WaitingWhat

U• Underutilized

People

Do

• Defects

• Over-processing

Lean Vs Traditional

Lean Simple and visual

signals

Demand driven

Inventory as

needed

Reduce non-value

added

Small lot size

Minimal lead time

Quality built

Value stream

managers

Traditional Complex

Forecast driven

Excessive inventory

Speed up value-

added work

Batch production

Long lead time

Inspected-in

Functional

departments

Real Results

0 50 100

Lead Time

Reduction

Productivity

Increase

WIP

Reduction

Quality

Improvement

Space

Utilization

Benefits of Lean Manufacturing

Helps in –

Cost reduction

Cycle time reduction

“Waste” minimization

Elimination of non-

value-added activities

Resulting in a more

“lean,” competitive,

agile, and market-

responsive company

Lean

Tools

5S

Just in Time

(JIT)

Kanban

System

Cellular

LayoutValue Stream

Mapping

Poka Yoke or

Mistake Proofing

TPM ( Total Productive

Maintenance)

The 5 S systems is a workplace organizationwhich helps in getting the "junk" out of thework area and set of procedures to keep itthat way. 5S stands for Sort, Set in order,Shine, Standardize & Sustain.

Visual controls such as cartoons, charts,light signals, Lane marking on floor, Safetyinstructions, Warning signs, Poka-Yokeinstructions etc. can be displayed all over thework place.

All verbal instructions should be converted toSOPs to remove dependency on skilledpersonnel in achieving required productquality level, consistency, effectiveness andefficiency.

JIT is a Japanese manufacturing philosophy to make the right product in right quantity at the right time. This almost results in zero inventory and shortest possible cycle time.

In Kanban System, components are pulled byassembly or subsequent work centers and thecontainers are replenished with the right quantities bythe previous work center, which reduces theinventory of unwanted components.

Cellular Layout is improved manufacturing system,family wise component completion is aimed at withinthe smaller self contained cell, which is a part of a bigfactory, as compared to operation wise completion intraditional functional layout

Value Stream Mapping covers allactivities, both value added and non-value added, and helps in arriving at bestlayout of all resources required for makingthe product.

Poka Yoke is again a Japanesetechnique used to prevent errorsoccurring at their source of origin, and itfinally leads to a 'Zero Defect' situation.

Applying ingenious methods, set up timeis minimized and brought to less than tenminutes; there by smaller batches asrequired by the customer can be taken upfor manufacturing.

TPM involves operators, maintenancestaff and management working togetherto improve overall operation of anyequipment. Operators, who first identifynoisy or vibrating motors, oil or air leaks,can be trained to make simple repairs toprevent major and costly break downs.

Kaizen Blitz or Improvement Processis an intense management programme,which results in immediate change andbottom line improvement. Bothmanagement staff and workers areinvolved in this.

Introduction

The Government has announced formulation of National ManufacturingCompetitiveness Programme in 2005-06 with an objective to support theSmall and Medium Enterprises (SMEs) in their endeavor to becomecompetitive and adjust the competitive pressure caused by liberalizationand moderation of tariff rates

Office of the Development Commissioner ( Micro, Small and MediumEnterprises), Ministry of MSME has launched the National ManufacturingCompetitiveness Programme to improve the competitiveness of Micro,Small and Medium Enterprises (MSME ) Sector.

The initiative under NMCP aims at increasing productivity, upgradingtechnology and conserving energy in manufacturing processes as well asexpanding domestic and global market share of Indian MSME products.

One of the components of NMCP is Lean Manufacturing CompetitivenessScheme and its upscale version ready to launch after successfulcompletion of first phase. The scheme will be implemented in 500 miniclusters in 12th Five Year Plan.

Need for Lean Manufacturing

Ever changing globalized environment has been posing challenges ofcompetitiveness and survival to all the constituents of the economy. It has beenmore so for MSMEs in the manufacturing sector.

MSME units are so engaged in their day to day management issues that theydon’t have time and resources to dedicate a strategic understanding of the needand acquiring means of various techniques which would help them in enhancingtheir productivity and hence being competitive in the world market

Lean Manufacturing is a set of techniques, which have evolved over a longperiod and are based on various minor to major breakthroughs that help inreducing cost and hence increase productivity and competitiveness,.

Objective of Scheme• Elimination of Waste is prime goal of lean

• Over Production, Waiting Time, Transportation within theunits, Over Processing , Inventory ( Raw Material, FinishedGoods, Finished Goods), Motions, Defects

Reducing Waste

•Increasing productivity is another goal of Lean

•Cycle time of products, Cost of Product ( Labour Cost, Material Cost,Overhead Cost), Energy Conservation ( Electricity, Fuel ( Coal/ Oil),Productivity Space Utilization, Machine Utilization, No. of Accidents,Green Productivity ( Pollution Control, Pollution Prevention)

Increasing Productivity

• New Process, New Technology, New product(s), New Management practices etc.)

Introducing Innovative Practices for Improving overall Competitiveness

• Company level governance, business management,functional management, quality management system,environment, occupational health & safety or any otherparameter related to good management system

Inculcating Good Management Systems

• culture of continuous improvement is the aim of implementation of lean tool in the organization. Culture of continuous improvement helps the organization in long term for sustained growth and development of the organization.

Imbibing a Culture of Continuous Improvement

Implementation ArrangementA three tier arrangement has been proposed in the Scheme. A Mini Cluster

(MC) would be formed at the lowest tier. The units of MC would work with

assigned Lean Manufacturing Consultant to implement the specific Lean

Manufacturing techniques. The next higher level tier, National Monitoring and

Implementing Units (NMIUs) will be responsible for facilitating, implementation

and monitoring of the scheme. At the highest level, Screening and Steering

Committee will provide overall direction to the scheme and will be headed by

the Development Commissioner (MSME)

Mini Cluster/ DPG/ Sub Group/ Special

Purpose Vehicle (SPV)

Implementing Agency (IA)

National Monitoring and

Implementing Unit (NMIU)

Screening and Steering Committee

(SSC)

Technical

Advisory

Committee (TAC)MSME - DI

Lean Manufacturing Cluster (LMC)

Special Purpose Vehicle (SPV)

MSME -

1

MSME -

10

MSME -

2Minimum 6 Units

per cluster

Sub Group (SG) / Distinct Product Group (DPG)

Association Or Existing

SPV

MSME -

1MSME -

10

MSME -

2

Minimum 6 Units

per cluster

Mini Cluster is a group of preferably 10 MSME’s

located within an identifiable and as far as

practicable, contiguous area and manufacturing

same/ similar products.

Mini Cluster

A mini cluster may be formed by a new SPV or as

Sub Group / Distinct Product Group of an

Association or Existing SPV.

In case SPV is not available in the cluster, the

scheme may be availed through another legal

entity i.e. concerned association by grouping the

MSMEs in the form of Distinct Product or Sub

GroupsDPG and SG will be small groups within

Association or existing SPVs, formed with the

approval of Management of SPV or Associations

as the case may be.

A mini cluster

will consist of

ideally 10

MSMEs

(minimum 6

units)

All the units of MC would work with Assigned Lean

Manufacturing Consultant to implement specific

Lean Techniques.In case the scheme is being availed by SPV (

existing or new), a separate joint Bank Account

will be opened in a National Bank for receiving the

funds from NMIU.In case DPG/ SG is formed for taking benefit of

the scheme, the project specific account will be

operated jointly by Head of SPV or Association

and the Nodal officer of DPG/ SG.

Lean Manufacturing Consultants (LMCs)

An Individual or a Consultancy Firm ( National or International) duly registered with

or certified by a reputed certification agency in the field of manufacturing technology,

quality control etc. , would be an eligible entity to participate in the scheme as a

LMC. NMIU will obtain the approval of the SSC for empanelment of LM Consultants

Roles and Responsibility of LMC Consultants

Assess the existing system at each member unit of the concerned MC

Diagnostic Study Report for each cluster shall be prepared by assigned LM Consultant.

The report includes measurable targets with respect to baseline data. The baseline data

and monitor able increment may be different for each unit

Stipulated detailed step by step procedures and schedules for implementation of the LM

Techniques ( pre- defined milestones)

Identify the end targets in quantified parameters to be achieved by each unit at the end

of the scheme

Work in close cooperation with each of the units to assess and then achieve the LM

techniques implementation and

Respond to specific queries raised by SPV or NMIU on its performance

To attend orientation / meet / re- orientation programme organized by NMIU/ Office of

DC (MSME) so as to clarify scheme implementation related doubts, if any and to share

their experiences with peers and also to update LMCs with the developments in the

field. LMC’s would be required to attend these workshops at their own cost. The cost of

conducting workshops would be borne under the scheme.

Special Purpose

Vehicle

“Trust” as per Indian Trust Act, 1882 or any similar Trust Act

or

A Private Limited company incorporated as per Indian

Companies Act , 1956 or

A “ society” under The Societies Registration Act, 1860 (

including any of state equivalent) or

Any similar entity as approved by SSC from time to time

The MSMEs would be required to sign a MoU

among themselves. MoU should, inter alia, cover

the following points –

1. Collective and joint responsibility of units

2. Details of SPV or any other legal entity for

receiving Government of India funds/ grants

from the NMIU

3. Undertaking to adhere to Terms and Conditions

of the Scheme

4. Undertaking to cooperate and work in

collaboration with LMC

5. Undertaking to continue to implement LM

techniques after the completion of project under

the scheme.

6. Undertaking for periodic reporting on progress

to NMIU and

7. Appointment of a nodal officer to be authorized

signatory and single point of contact

LMCs and IAs will submit progress report to NMIU which in turn will send consolidated reportto the office of DC MSME. The end of the project reports may be prepared to show thetangible results obtained during the implementation of the LM Interventions

These IAs will discharge day to day activities for smooth and effective implementation of theprojects. IAs will coordinate with LMC, cluster units, concerned associations, NMIU, MSME –DI etc.

The field level office / project offices of the NMIU will function as Implementing Agency(IA) for implementation of the projects

NMIU will monitor every Stage of the program on behalf of the Development Commissioner(MSME)

National Monitoring and Implementing Unit (NMIU) will be responsible for facilitating,implementation and monitoring of the scheme

National Monitoring and Implementing Unit (NMIU) will be a competent National Levelorganization, with experience and competence in Quality Management and / or LeanManufacturing programmes and will function as MSMEs outsourced project “ Control Room”

National Monitoring and Implementation Unit

(NMIU)

National Monitoring and Implementation Unit

(NMIU)

1. Act as Implementation Unit on behalf of DC – MSME

2. Receiving applications for the scheme, examine through

TAC and put up for consideration of SSC.

3. Maintaining an panel of LM Consultants. Approval of List of

LM Consultants with SSC.

4. Maintenance of separate account of funds of the scheme

5. Release of fund to the beneficiaries against the reports on

the bases of progress of implementation and on

satisfactory performance of LMCs.

6. Undertake awareness generation programmes for the units

and encourage them to participate in the scheme.

7. Organize orientation program for LM Consultants

8. Industry expert for Apprising Team

9. Creating Benchmark Action Plans

10.Monthly Review and Trouble Shooting

11.Development of National Reports,

12.Submission of DSR, completion report etc. required under

the scheme

13.Publications, News letter etc.

14.Website

Technical Advisory Committee NMIU would be required to deal with a number of Mini Clusters and

their technical issues, take decisions on the matters of productivity,

preparation of reports, recommendations of clusters for approvals,

progress etc. To this end a Technical Advisor Committee ( TAC)

would be constituted, within NMIU, which would be empowered to

take the decision on productivity related issues .Role and Responsibility of TAC –

Appraisal of the applications received from Mini Clusters and giving

recommendations on the same to Screening and Steering

Committee ( SSC)

Cross Checking of implementation of the Lean Manufacturing

milestones at the unit level, against the LMC’s periodic report and

accordingly approving acceptance of Claims of units

Conducting field visits along with representatives of SPV’s at units

participating in the scheme

Conducting Orientation/ Meets for LMCs at periodic intervals

Maintaining a central data base and reference library for

participating units and LMCs;

Conducting periodic workshops and meets for participating units

Appraising the decisions of TAC to office of DC MSME through

NMIU

At the highest level, SSCwill guide, review, monitorand provide overall directionfor implementation of thescheme and will be headedby DC (MSME). SSC willhave Overall responsibilityfor policy formulation,scheme implementation andmonitoring.

It will be empowered to take all Key decisions related to the Scheme and approve

minor modifications / procedural changes in the guidelines for operational

expediency

SSC would deliberate on the issues put up by NMIU. It would laid down detailed

implementation Strategy for NMIU.

Screening and Steering Committee (SSC)

1 AS & DC, MSME Chairman

2. AS & FA / Alternate EA ( IFW) Member

3. Representative of NMCC Member

4. Representative of expert Agencies like NPC and QCI Member

5 In Charge, NMIU Member

6 Representative of Associations Member

7 Director of MSME – DI Concerned / invitee Member

8 Nodal officer handling LMCs in DC, MSME Member- Secretary

9 Special Invitee / experts/consultants/ IAs/ SPVs

Implementation Period

The implementation Period will be maximum 18 months in each Mini Cluster to

complete Diagnostic Study Report , implement the action plan, , verify the

incremental stages, submission of final reports.

Performance of Implementation of LM Techniques will be divided in to 5 Milestones

1st Miles Stone – Completion of Cluster Specific Diagnostic Study Report (DSR).

DSR includes –

Existing Status ( 5s, workspace management, Safety, health, energy

conservation, Single Minutes of Exchange of Dies, TPM, Reduction in inventory,

Organization Structure, Layout , process of Mnaufacture, visual base line survey,

identifciation of 7 wastes, inventory practices, top chronic problems etc.)

Time Bound targets for achieving Incremental Improvements. Paramters are

rated on a scale of 1- 10

Phase wise Action Plan

Qualitative , Quantitative, monetary benefits likely to be achieved

2nd, 3rd, 4th and 5th Milestones – Incremental Improvements to next stage

on the scale of 1 -10

MSME -DI

To organizeprogram incoordination withNMIU, LMC,Associations, otherstakeholders etc.

To Participate in 1st, 3rd

and 5th audits of leanimplementation jointlywith NMIU

Facilitate thebeneficiary MSMEsto submit applicationfor availing thescheme

Participate in theScreening andSteering CommitteeMeetings andMeetings forSelection of LeanConsultants

Fund Flow Chart

Office of Development Commissioner (MSME)

National Manufacturing and Implementation Unit

(NMIU)

SPV/

Association

For Awareness

Program/ Orientation

Program / Workshops/

Training Programs etc

Office of MSEM – DO

(For Awareness

Program/ Training

Programs , Workshops

etc)

Lean

Consultants

Documents Required

Memorandum of Understanding

Power of Attorney

Special Purpose Vehicle

Changes in Scheme

Particular Earlier Scheme

Requirement

New Scheme

Requirement

Implementation Period 12 months 18 months

LM Consultant Fees Rs. 23.8 lakhs Rs. 36 Lakhs ( Max.)

MSME –DI Not there Now will be involved in

Audit, Awareness

program, formation of

Cluster etc.

Payment Terms Fixed Pro Rata. Cluster size

limited to 6 units

Contribution from

Industries

25% from Micro

50% from Small

Flat 20%

SPV formation SPV only Sub Groups/ Distinct

product Groups can

also form cluster

Knowledge Management

Orientation Program for LMCs

Defined deliverables in measurable / parameters for evaluating/ reporting

Development of interactive dynamic website

Benchmark action plans

Publication of Newsletter, Book of Knowledge, Success stories, case studies

Kindly contact us:

1. Mr. Anurag Rastogi, Deputy Director

Email Address: anurag@qcin.org

National Accreditation Board for Education and Training (NABET)

Quality Council of India, ITPI Building, 6th Floor, 4-A

Ring Road , I P Estate, New Delhi - 110 002

Ph. +91 11 23323416 / 417 / 418 / 419 /420

Fax. +91 11 23323415

Thank you

NABET

Quality Council of India