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Frugal engineering is not at all about cost-cutting: Pawan Goenka

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While the western world is learning frugality from us, we need to continue holding on to it to differentiate, Goenka tells Sayantani Kar.

What are the pillars propping up frugal engineering at Mahindra?

As we look at our product development plan, starting from how many engineers report on the project, how many vehicles we need to build for testing, where do we get certain components from to which equipment do we buy, we look for the bells and whistles that we can do without. These elements have to do the most important job at hand, albeit, without compromising on quality because the consumer should never feel any difference between frugal and regular engineering.

One of the ways to achieve frugal engineering is by considering 90 per cent functionality, instead of the 100 per cent. At times, it could spell a cost that is lower by 50 per cent. So we would be willing to let go of the last decimal point of functionality and save a lot of money in the process. For the user, it would mean a good spread of functionality but at a much lower cost. The XUV 500 and the Scorpio are examples. At every step of building a new product or a new plant, you do what you have to do but also ask if there are ways to not do it.

 

 

Is it about cost-cutting then?

Frugal engineering is not about becoming penny-wise and pound-foolish. It is not at all about cost-cutting. Look at our Chakan plant. We have spent Rs 4,000 crore. It is not a miserly amount but on the same thing other manufacturers will spend Rs 6,000 crore. It is a question of Rs 4,000 crore for what. It is not like we don’t want to spend money. In fact, we spend more money than anybody in the auto industry on our R&D. But all that money still goes in for a specific cause that will still save us money without compromising on quality. Frugal would mean that we sometimes question an unnecessary expense of Rs 10 but not question the spends of Rs 1,000 crore because the latter gives us value worth that of Rs 2,000 crore.

How do you walk the fine line between cost-cutting and the practice of doing away with needless costs?

In the Chakan plant, every square foot of the floor was questioned. Why do we need it, why can’t we move the material in some other way and do away with three stations on the line. I used to tell them that every additional square foot meant money that they not only spend then, but also money that would be spent later on maintenance. Once done, the cost gets built-in forever. Shopfloors need to be functional, clean and energising but certainly not spic and span like a hotel lobby. Companies spend extra amount of money to make the plants a visitors’ space but that should not be the focus.

What was the trigger for you to adopt frugal engineering?

One of the reasons was that it was the need of the hour at Mahindra. We could not afford to spend half-a-billion dollars to develop one platform. Otherwise, we probably would not have done the project. Small volumes meant that we were on a much tighter budget than our predecessors. We built a product, ground-up, which was the Scorpio, for Rs 550 crore, a first for any auto company then.

But even then, it had come to us naturally. The Indian mindset of not wasting and recycling everything, not indulging in excess, helped. It was evident in what one of the CEOs of an international auto company had told us on one of our plant visits. He had told us that there was nothing that could not be replicated in the plant but there was no way he could train his 5,000 engineers to think in the frugal way that our engineers could.

What would be the examples of frugal engineering at Mahindra? Would using the same platform for different vehicles be one of them?

Reusing platforms is not new and many companies reuse them extensively which mean refreshes at a low cost. I would mention our ‘start-stop’ system in the vehicles, or the micro-hybrid system that saves fuel, which cost us about one-fifth than that of European manufacturers who also offer it. That is because we gave up some of the functionality, such as switching to battery power without jeopardising the original concept — that is, shutting off the engine automatically when the vehicle comes to a stop.

Even though we spend a lot on R&D, it will be in keeping with our frugal ways. Say, we will design a test cell for engines 9-by-9 when the industry norm might be 10-by-10 because it serves our purpose ideally without superfluous costs.

Ten years after the Scorpio, the cost of developing a brand new product has not spiralled out of control. If we spent Rs 550 crore on the Scorpio, on the XUV 500, we spent Rs 750 crore when the latter was a much more complex product. The same would have cost Rs 300-400 hundred million normally.

Did you have cross-functional teams? How does one go about forming them?

Cross-functional teams are a must for frugal engineering. Engineers are not adept at reining in the costs in process planning for which we need the process team to set up the manufacturing.

Were there rules / processes / mindsets that you ran up against when implementing frugal engineering?

It started with the Scorpio and at that time there were no processes in place. We went along and set the process as this was the first major product development that we had done. In many ways, it was good for us because there was no legacy that we had to overcome.

The challenge was that there was a safe and standard way and then there was the frugal way of developing. So, to take those calls, especially for a team that was inexperienced in handling such a large project, was tough. For example, when we had to order a whole weld shop (bodyshop for welding), we could not go to the traditional vendors since we would have overshot the budget. We took the frugal route by identifying a company, which was good but had never done a complete bodyshop before, just like we had never launched a new product before. When we took that bet, we also had to reckon with the fact that if the bet failed then it could jeopardise the whole project. The company did deliver and went on to become our preferred vendor for all subsequent projects.

How did you work with suppliers to make sure they didn’t compromise on the quality of supplies?

Our project team members spoke to the suppliers and ensured that our targets were not met by squeezing their profit margins but by applying frugality to their processes too. Many were doing product development for the first time, so they were expecting us to handhold them, which we did.

Is there some sort of a handbook to show the way?

In fact, talking to you has given me the idea that we need to develop something like that. When we talk about our behaviour in the organisation, we mention four or five major traits, including frugality. But frugality has been a tacit knowledge of the people who have been around without a need for a manual so far.

So why do you need a manual now?

I sometimes worry that the frugal mindset that fit in with our engineering is changing. In the Scorpio days, something costing a crore would have been thought of as expensive, today people will say it is not much. Part of it is due to the value of the rupee but also due to the rise in disposable income. As we move to higher-end products, it becomes difficult to separate the frugal mindset at work from the lifestyles we lead at home. A frugal lifestyle should not mean austerity but one where you only spend money on what gives you value — not spend Rs 1 where the value will be less than Rs 1 and spend a crore if the value is more than a crore.

Earlier, with a smaller team, it was easier to remind people to stay on track with frugality but now, with 2,000 people in R&D working on six projects, it is time for a manual. Now, we constantly remind people that we are where we are because of such practices. While the western world is learning frugality from us, we need to hold on to it too to differentiate.

What are the hurdles that companies from the West are facing in their engineering practices?

When we worked on the Scorpio, we had made a presentation to Ford senior management as they were our partners. Happy with the concept, the chairman offered to send its engineers to assist our technical team. When someone offered to send a few programme managers as well, he immediately remarked it would kill what we were doing. The key is to bring in the technological advantage from the parent company without the process burden. Processes are necessary, but they should be built from scratch in India for a cleaner, less cumbersome programme. For that, the local team needs to be empowered to develop a frugal process and not follow the age-old one followed elsewhere.

Is the time for just-in-time (JIT) over, with most manufacturers letting stocks pile at the vendor’s end?

The ecosystem in India does not support JIT. We need to have some leeway, though we have minimised finished goods at the front-end. But that applies to the day-to-day operations. Frugal engineering, on the other hand, is applied during new product or plant development.