CASE II - GEARING FOR GROWTH Premier Differential Gears Pvt. (PDGL) was formed in the year 1991 near Noida in the state of Uttar Pradesh (India).
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CASE II - GEARING· FOR GROWTH


Premier Differential Gears Pvt. Ltd. (PDGL) was formed in the

year 1991 near Noida in the state of

Uttar Pradesh (India). The company was established to cater to the evergrowing needs of the differential

gear market for cars, jeeps, trucks, and tractors. It was established under the aegis of the parent company

called Premier Gears Pvt. Ltd. which in turn was established in the year 1962 at Noida. The parent company

was engaged in the manufacturing of automobile transmission gears. With a modest start in 1961, it had

never looked back and by 2006, it became the largest manufacturer of automobile transmission gears in the

country. The parent company had employee strength of 2,500 trained and dedicated employees and was

producing a range of over 1,000 gears. Premier Gears Pvt. Ltd. was making gears for virtually every major

brand of truck, car, jeep and tractor. In 2006, the group company comprised of three firms namely, Premier

Gears Pvt. Ltd. (manufacturing Transmission gears, Gearbox assemblies, Laser marking machines, and

Material handling equipments), Premier Differential Gears Pvt. Ltd. (manufacturing differential gears) and

Elve Corporation (a government recognized export house).

PDGL was manufacturing a wide range of Crown Wheel and Pinions, Bevel Gears, Bevel Pinions, and Spider

Kit Assemblies. The installed capacity was 20,000 sets per month. PDGLs focus on quality, fast product

development and customer service had enabled it to become an OEM supplier to many car and tractor

companies in India, the EU, and Asia. Almost 75% of the total production was exported to a number of

countries like Germany, Russia, USA, China, Japan, South Mrica, etc. The domestic OEM and replacement

market accounted for the remaining 25% of the company's sales and in a short span of time, the company

had become one of the major players in the Indian replacement market. The use of latest technology and

comprehensive quality control systems at PDGL go a long way to ensure that customers get exactly what

they want.

PDGL was using world class Gleason machines in its manufacturing programme. The raw material for

manufacturing gears was in the form of forgings, which were procured from various parts of the country for

manufacturing crown wheels and pinions. These forgings were subjected to turning followed by drilling. The

drilled crowns and pinions were taken for tapping, which were then rimmed. After this, the teeth cutting

procedure was applied which was called broaching. The broached units were then heat-treated. Heat

treatment was very critical in producing gears having short tolerance levels. To meet this end, the company

had two rotary furnaces and one state-of-the-art Continuous Gas Carburizing Furnace (CGCF) from Aichelin

ALD of Austria to heat-treat its products. After the heat treatment, a number of intermediate processes like

short blasting, phosphating, lapping were performed which resulted into the finished product, ready for

putting company marks to avoid imitation/forgery. The company had developed a state-of-the-art 70-watt

NDYAG laser-marking machine in collaboration with Quantum Laser (UK), which was used for marking on its

produces. Laser marking was environment-friendly and was applied without any force or contact and thus

the material was not subjected to any stress. The marked products were" manually pushed onto a conveyer

for packing and dispatching. All the above have enabled the company to meet international standards and to

produce worldclass gears with the highest performance standards.


The upstream portion of the supply chain at PDGL included a number of forgers located at "geographically

dispersed locations in various parts of the country. These forgers were supplying the forgings to PDGL, which

were then used in manufacturing the differential gears. All of the raw material was routed to the POGL works

through road transport and"" due to large distances, transportation costs were a major issue in increasing

the efficiency of this upstream portion of the supply chain. The forgings were supplied according to the

drawings and dimensions set by design engineers at the company. The company indeed tried some local

suppliers to cope up with the increasing transportation costs but the results on quality front wet satisfactory.

To serve this end, the company was planning to develop some local suppliers. It had planned to provide

them support in the areas of procuring good material for producing forgings, procuring good quality

machines and" training their workforce in the required technical know-how. This was considered as an

investment by the company to reduce its inbound transportation costs. To meet the small lot requirements

of the forgings, the company was also contemplating to share the truckloads with the parent company. This

was feasible because of the geographical proximity of the parent company, which was situated at a distance

of less than 15 kms, the similar nature of raw material and same suppliers supplying to both the units.

The internal supply chain at PDGL comprised of various processing stations/lines" through which the forgings

were transformed into finished differential gears. The movement of the work-in-progress between various

stations was semi-automatic in which the workers manually placed the goods on trolleys/carts. Even the

finished units were manually placed on a conveyer; which needed to be pushed to send the units to the

packing section. There was a risk of units being damaged in this process. To minimize this risk, the company

was planning to have automatic systems for moving the material from one place to another. It was decided

to have hydraulic lifts, cranes, electronic escalators and the likes for progression of material from forging to

packing. The packing material was stored on first floor as and when it arrived, with the help of casual

laborers, which was inefficient and also involved a: risk of some· casualty.

The downstream portion of the supply chain at PDGL included around 10 distributors located evenly in

various parts of the country. These distributors were supplying the products of PDGL to number of car, truck,

jeep and tractor manufacturers. This portion of the supply chain also included a large replacement market,

which accounted for almost half of the company's domestic sales. To meet its distribution needs the

company had a panel of transporters, who used to distribute the finished goods. At times, the consignments

scheduled for distributors were delayed because of lack of full truckload. One possible solution to this

problem was sharing of truckload with the parent company. This was feasible because both the companies

shared the same distribution network. The distribution of export consignments was through an intermediary

who helped the company in exporting its products to the US, UK, Germany, China, Italy, Turkey, Saudi

Arabia, Singapore, Malaysia, Thailand, Indonesia, and Nigeria, amongst other countries. The company's wide

export range included replacement gears for internationally renowned automotive manufacturers like

MercedesBenz, Mitsubishi, Toyota, Nissan, Clark, Eaton, Fuller, New Process, ZP, Hino, Fuso, Tong Feng,

Tata, Leyland, Massey Ferguson, Magirus - Deutz and various others.

There was a shortage of skilled employees. Therefore, the company has recently started training input for all

their 400 employees. These training programmes are being conducted in the organization to enhance the


skills of the employees and the duration of these programmes were 20 hours per month. On the financial

front, the company is continuously moving on the growth track showing better financial results year after

year. It has embarked on an ambitious plan to double its turnover by the end of this financial year and to

become the world's numero-uno in the automotive gear-manufacturing segment. The current capacity

utilization was at a meager 6000 sets against a total installed capacity of 20,000 sets per month.

1. Comment on the upstream and downstream supply chain portions operating in the

company.

2. How far are the plans to improve the supply chain efficiency in the company feasible?

3. "Internal supply chain at the company can be characterized by the lack of it". Comment.

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