Rolled out early this month at the company's Dadra-based manufacturingfacility, `Challenge 20' aims at achieving Rs 20 crore in savings over thenext one year.

``The exercise will concentrate on quality improvement using innovativemethods in all aspects of operations and focussed cost reduction measures,''says SN Tripathi, Voltas Limited vice president (unitary products).

Where the total costs saved in absolute terms might not be much, Challenge20 is expected to increase competetiveness by giving internal processes amuch needed facelift, say company sources. ``We are looking at a 40 per centvolume growth in the room air conditioning segment with the help of the costreduction and quality improvement activities,'' informs Tripathi.

To that end, the company has initiated action plans to reduce manufacturingand operational costs.

Manufacturing costs
Close to 50 per cent of the targeted savings are expected to come fromrationalisation of the vendor and sub-contractor base and value engineeringactivities. ``Only those vendors who comply with our quality, costs anddelivery standards will be retained,'' says RL Gajwani, general managersales, Voltas Limited. As part of this initiative, the company plans toprune close to 40 per cent of its 130-strong vendor base.

The company is also looking out for low cost suppliers of quality rawmaterial from around the globe. Quality will be further improved in allareas of operations including scrap and rework, bringing down defectivestock of new units and reduction in repeat failures of repaired units.

Finally, Voltas will invest in new product development and will improveexisting designs to reduce defect-related costs, brought about by buildingreliability into new products and reducing failures during guarantee.

Operational costs
The operational costs will be controlled through a series of activitiesincluding rationalisation of manpower. By the middle of this year, yetanother VRS ( Voluntary retirement scheme) will be introduced for allemployees in the cooling appliance business. Contractors will beincreasingly utilised for low skilled jobs and need based manpower will beretained. Efficiency in sales will be improved with the integration of IT.

The company is attempting to improve productivity through increasing salesper person to over 1000 units across all major centers at the sales andservice end- a 70 to 80 per cent improvement over the past. The productionper person at the factory end will be improved by 30 per cent.

The company also plans to double profit realisation per employee by reducinginventory-carrying costs by controlling finished goods and spare parts.Finally, costs will also be controlled by reducing outstandings. At themarketing end, brochures and POP material will be ordered and usedjudiciously, besides keeping a strict tab on advertising expenditure. ``Weare also rewriting logistics, customer satisfaction and inventory managementas part of a host of other initiatives besides Challenge 20. We areimplementing the Balanced Score Card in a bid to weave all initiatives onthe shop floor to the other disciplines within the company and instillrigour in their implementation.

An aggressive marketing and advertising package, expected to break nextmonth, will help us at the customer end,'' says Gajwani.

Thanks to a host of similar initiatives, the company achieved amanufacturing turnaround in August last year in its Hyderabad-basedrefrigeration and office furniture business.

``We intend to replicate our success at Hyderabad with our coolingappliances division this year,'' says Tripathi, who has been at the helm ofthe company's success at the Hyderabad plant. The plant has registered asubstantial increase in productivity despite a reduction in the labour forceto 1,790 from a 4,800 in 1995.