“We are focusing on innovation centred on energy efficiency, oil free and quality to be the best in the world”
The virus pandemic has certainly shifted gears for the global industrial scenario. ELGi Equipments continues to remain buoyant in its bid to be No. 2 in the air compressor industry. Meanwhile, winning the coveted Deming prize has been an important milestone in the company’s TQM journey. In this exclusive interview, Dr. Jairam Varadaraj, Managing Director, ELGi Equipments Limited, elaborates about the company’s future strategies and the new products and technologies that will give it an extra edge.
ELGi Equipments recently received the Deming prize for excellence in TQM. Can you look back on the company’s quality journey?
ELGi Equipments has an ambitious aspiration; and to achieve this, we recognised that the company needed to adopt a management philosophy that builds vertical excellence in each operating function and customer-centric horizontal excellence across the business, operations and support functions. We strongly believe in endeavouring to accomplish ordinary tasks in an extraordinary manner, and turning extraordinary ambitions into ordinary tasks. TQM has significantly enabled this vision. Our TQM journey began in 2008 and gained momentum in 2014 with the implementation of ELGi’s TQM system.
The EBS (ELGi Business System) is a means to achieve ELGi’s goal of becoming the world’s second-largest air compressor manufacturer by 2027. It also helped establish a strong emphasis on customer-centricity and human resource development initiatives. Today, we are proud to be the first global, industrial air compressor manufacturer to win the prestigious Deming award in over 60 years. And while the Deming prize is a milestone in our journey, I commend our employees for their continual support and focus on building excellence in TQM, across the organisation.
How important is this Deming prize and what difference has it made to the company and the employees?
Winning the coveted Deming prize is an important milestone in our TQM journey. While the prize is testament to our focus on quality and building excellence in TQM, it has reinforced our commitment to customer-centricity. Every ELGi product bears testament to our hallmarks of reliability and performance, while meeting or exceeding industry-specific demands such as energy efficiency, cost-efficiency, ruggedness, zero oil tolerance or air delivery precision. And yes, it’s certainly been an exciting journey for all our employees and a challenging one as well. Taking a step back, the key foundations of the ELGi Business System are business processes, measurement-based management and alignment of individual goals with company goals.
The objective of our business processes is to bring reliable, repeatable, effective and efficient outcomes, while measurement-based management ensures that the performance of each individual in the organisation is defined in the form of objectives and control points, which are then measured and reviewed. The third dimension of EBS is to help the alignment of individual goals with the company’s goals and aspirations. This helps every individual employee to understand the importance of their roles and responsibilities in addressing the customers’ requirements and other stakeholders’ expectations.
Can you highlight some important milestones in ELGi’s quality journey?
ELGi’s TQM system, the EBS (ELGi Business System), has been implemented as a means to achieve ELGi’s goal of becoming the world’s second-largest air compressor manufacturer by 2027 and it comprises diverse improvement activities and human resource development initiatives. The objective of EBS is to satisfy the customers’ implicit and explicit requirements through continuous improvements in the performance of the company across all functions, on QCDSM and growth parameters, by adopting systematic work practices. The illustration below details the EBS journey at ELGi Equipments.
Some of the indigenous improvements include the development of Gemba prowess and staff improvement activities that suitably use problem-solving activities by cross-functional teams (CFTs). In addition, ELGi has structured a robust employee training system investing 400 hours of training per person for every shop floor employee, employing both in-house and external classroom quality education and the establishment of an in-house vocational training school.
ELGi’s TQM focus also extended to the standardisation of all sales activities (the GTM go-to-market process) for sales expansion as well as the creation and promotion of various mechanisms using ICT. ELGi values continuous improvement as a never-ending journey towards achieving excellence and an important pillar of our quality system. Continuous improvement strategies of ‘plan-do-check-act’ are embedded in all our business processes, being monitored by our senior management.
Could you comment on the impact of the pandemic-driven lockdown on your business globally and in India? Are you facing supply chain issues from global suppliers? How is ELGi combating this crisis?
ELGi’s supply chain is fairly complex in that we rely on more than 350 suppliers across 15 countries for more than 13,000 components. The complexity extends beyond our immediate suppliers, who in turn engage sub-contractors. As with most companies, our operations team’s goal is to strike a balance between maintaining sufficient inventory of finished products in key markets to serve customers, while minimising the level of raw material and work-in-process inventory to maintain healthy working capital models. However, none of our planning would account for the disruption brought on by the crisis.
ELGi relies on suppliers in China for critical components such as coolers and motors for its air compressors. Luckily, ELGi avoided the initial pandemic-driven disruption in late December and early January, as in anticipation of the supply slowdown from Chinese New Year in late January ELGi had padded its inventory of products from China. This strategic purchase gave us security until mid-April, at which point Chinese suppliers were back online and ramping up supplies.
However, relative to the industry, ELGi has vertically integrated production processes for quality control. In light of the pandemic, we are expanding our list of critical components and revisiting make versus buy decisions with more emphasis on accounting for unforeseen supply chain disruptions. For buy category parts, we plan to pursue multiple sources across regions to mitigate regional risks. For our workforce, we will invest in multi-skilling to ensure production during reduced manpower situations. Finally, we are revising our freight contracts to ensure we are price and service protected under all conditions along with having multiple ports of access.
We have just completed the financial year 2019-20 which has been a difficult year for many. How has it been for ELGi?
Over the last financial year we have laid a strong foundation to build our presence in the US and European markets. These will remain as key contributors in our Conquer K2 (CK2) journey. Our acquisition of Michigan Air Solutions in December 2019, a company that serves customers in the Lower Peninsula with air compressors, dryers, filtration, piping, vacuum pumps and blowers, among others, is a continuation to our strategy to invest in select, inorganic opportunities to gain presence in the North American market. With our robust product portfolio and Michigan Air Solution’s customer-centricity, we have built a strong foundation for market growth in the mid west.
We have also taken over the master distribution of Rotair range of portable air compressors in North America through our subsidiary ELGi North America, Charlotte, NC. Since 2012, ELGi North America has established reliable distribution and brand recognition with its industrial range of air compressors and accessories. This entry into the portable compressor market space will further strengthen our presence in the compressed air industry. To strengthen our ‘go to’ market strategy in Europe, we have established our European headquarters in Belgium. This will enable us to intensify our talent acquisition and build our sales and service network in the region.
(Note: ELGi acquired the Rotair brand of portable air compressors in 2012. Based in Caraglio, Italy, Rotair SPA manufactures portable air compressors ranging from 75 cfm through 900 cfm, available in trailer and skid mount versions.)
In recent years ELGi has made some important global acquisitions. Can you elaborate on the company’s expansion strategy globally and how is it contributing to your business? Currently what is the company’s global footprint in terms of manufacturing, sales and service network?
Conquer K-2 (CK2) – our aspiration to be the No. 2 in the global air compressor market by 2027 – draws inspiration from Mount K2, the second-highest peak in the world and arguably, the toughest peak to ascend among those peaks in the range of 8,000 metres. Currently, ELGi is at the No. 7 position and to accomplish our aspirational targets, our market-facing dimension of strategy (where to play?) includes, in addition to organic growth, business acquisitions across the world with specific focus on India, Europe, USA, Australia, Indonesia and Thailand.
On the value proposition dimension of strategy (how to win?), we are focusing on innovation centred on energy efficiency, oil-free and quality to be the best in the world. We believe that delivering strongly and reliably on these value propositions will set us apart from competitors and build our business globally. Today, we do business in more than 120 countries with direct presence in 28 countries. We have our own manufacturing facilities in India, Italy and the US with subsidiaries in Australia, Brazil, the UAE and Indonesia. At this moment, more than 2 million ELGi air compressors are driving critical applications across various industries verticals, supported by a strongly knit sales and service network of 2,000+ people and 200+ distributors, worldwide.
Currently, out of your total turnover, what percentage contribution is from Indian domestic market and what would be the contribution from exports or overseas?
We are looking at a 53% percentage contribution from the Indian domestic market and 47% from exports or overseas.
Talking about new products and technologies, can you list down some of the important launches and innovation by ELGi in recent times?
At ELGi, our definition of ‘always better’ is closely coupled with us always being the customer’s choice. And across the world, customers incur significant ownership costs, considerable maintenance requirements and relatively poor reliability. At ELGi we have questioned this, connected the dots and developed technology specifically applied to solving an existing need in a new way.
And our 400+ product range bears testament to this; for example, the lubricated screw – ELGi Global (EG) series and Encapsulated (EN) Series – and oil-free screw air compressors are highly reliable, energy-efficient and operate at low energy costs. Our oil-free (OF) series and ‘always better’ (AB) series of oil-free screw compressors are class zero certified by TUV in accordance with the ISO 8573 standards and the (HRS) heat recovery systems help companies recover approximately 96% of the waste heat generated during the compression process which can then be re-utilised for heating of air and water.
We have also innovated to address the compressed air needs of companies who have historically suffered the constraints of high cost, poor reliability and low efficiency in order to have oil-free air. The ELGi AB series, a disruption in oil-free compressed air technology, offers every customer across the globe a no-compromise, oil-free solution at lower ownership costs when compared with prevailing oil-free technology. Finally, our compressed air experts across the world offer specialised services to help customers identify potential areas of energy savings and provide them with solutions guaranteeing the optimum use of compressed air.
Specifically for the textile industry, has ELGi launched any new product or technology in recent times which can result in improving quality and productivity of yarn and fabric?
Compressed air is one of the key utilities in the textile industry with air pressure requirement ranging from 5 to 8 bar to power varieties of applications. Be it weaving or yarning or knitting, compressed air plays a vital role by coming into direct contact with the fabric during processing. Hence, it is highly critical to have an uninterrupted supply of oil-free air at the desired pressure. Contact with oil from the air compressors can leave grease stains on the fabric, causing it to darken.
Using oil-free compressors not only reduces the chances of rejection but also optimises production with less idle time and extended intervals between servicing the compressor and its downstream accessories. Over the years, ELGi has sharpened its focus on providing sustainable and energy-efficient solutions to the textile industry. It has partnered with textile customers to improve and enhance their compressed air applications. With its complimentary air audit program, ELGi has helped to identify energy saving opportunities for its textile customers that has resulted in the savings of over USD 9 million.
A couple of years back you had announced ambitious plans of becoming the No. 2 compressor manufacturer globally. How is this shaping up and what are the important initiatives taken by the company in the last few years and plans for the foreseeable future which will help achieve this ambition?
As I mentioned earlier, we are at the No. 7 position as per current market estimates and our aspiration is to be the No. 2 in the global air compressor business. To accomplish our aspirational targets, we have been focusing on business acquisitions across the world with specific focus on India, Europe, USA, Australia, Indonesia and Thailand, which we consider as key markets that are going to contribute significantly in our CK2 journey. In addition to our earlier acquisitions of Rotair in Italy, Pattons Inc. in USA, Pulford and Advanced Air in Australia, our recent acquisition of Michigan Air Solutions in USA has helped us to build a strong foundation for market growth in the the Midwest.
Our master distribution of Rotair range of portable air compressors in North America will further strengthen our presence in USA. Our newly opened European headquarters in Belgium will enable us to build our talent pool and strengthen our sales and service network in the region. All these strategic initiatives will help ELGi to march forward towards its mission.
Finally, with the global economy heading for a recession, what are your thoughts at this moment? Do you see more challenges or opportunities? How are you preparing your organisation to combat this crisis?
We are anticipating challenges in demand, supply, employee safety and general business continuity. Our teams are engaged with predicting and planning for the consequences of the pandemic. As we gain more comfort around this new normal, we will refocus our attention on our strategic markets and initiatives towards CK2, our ambition to be the second-largest compressed air manufacturer in the world.