TCPL and the new packaging mantra

15 November 2010

Packaging

Saket Kanoria reveals how the team at TCPL has brought rigour to the packaging process and even training. In conversation with Ramu Ramanathan, he reveals the journey

Ramu Ramanathan (RR): I visited your Silvassa unit and spent two days there. Most impressive.
Saket Kanoria (SK): Thank you. TCPL has a humble beginning which dates back to 1990. At that time the focus was on tobacco packaging with one gravure machine in Silvassa. Subsequently another was added in 1995. One of it was a Chambon press from Komori, an offset-gravure combination press. Then in 1999, we broke into the liquor business and having had the experience, we thought it would be good to get into general folding carton. So we ventured into offset at the same premise.

RR: You've grown three-fold. Now there are independent units for gravure, corrugation and offset ...
SK: This transformation was a planned move. We hadn't made any new investments in gravure for a long time. Our major investment was in 1995, which we updated and modernised between 2000-2002. Currently, cigarette business is growing but not comparable to the growth in FMCG. Hence, last year, after running at full capacity, we decided to install a new gravure line. There was no space in the present factory. We were fortunate to acquire a land across the street, to fulfill our space requirement. Once the gravure unit became self-contained, we separated the gravure and offset because of the different workflow. Now, the old plant has been modernised for offset. Gravure and corrugation have been shifted to the new space. Our aim is not to simply buy a machine. We want a productive machine. In the future we won't have much space to expand. So we plan to go for the next generation machines which are faster and more productive. At Haridwar, we are in the process of adding a third line by March 2011.

RR: What influenced your decision to set up a new offset plant in Haridwar in 2006?
SK: I had a conviction that offset will be a success but I couldn't believe there would be such a high growth. By then the GDP and the demand had been growing. We got an opportunity to double our offset capacity with our set-up in Haridwar.

RR: In terms of technology and empowerment, how do you identify the cost of cash to fund the project?
SK: We talk to our customers. We see where they are going. Whenever we plan, we take the worst-case scenario. Like how much money do we need to make an expansion and the break-even period for that expansion. If we are confident of achieving that amount quickly then I don't think we will hesitate because the growth will come, and the customers will come.

RR: What about tobacco?
SK: In tobacco, there are very limited customers. It hinders our volume increase in tobacco. Today, tobacco is growing only at 4-5%. Recently, we got approved by Philip Morris, an international cigarette manufacturer, which has launched Marlboro in India. We are in a financial discussion with them. Hopefully we will get a contract which will boost our gravure prospects.

RR: Your production team maintains high productivity levels and pays attention to job turnaround. How do the systems and processes get integrated?
SK: We are very strong with our numbers, internally. We keep a track of these numbers everyday. Our realistic targets are set by the people working for us. We tend to talk to machine suppliers and ask them about the optimal performance that can be achieved and then set targets accordingly. It is monitored against the person handling that machine. This sets a benchmark for him. Productivity is tightly controlled and measured. We have a good performance incentive scheme for almost every employee. Their performance is measured year on year. This motivates them. Plus, we have training programmes for our senior people. We run this on a professional basis, so everyone has to deliver and take pride in their performance. It's not just the machine performance but their individual performance. We are interested that they should evolve as better managers, be it production or marketing or techno-commercial.

RR: You have experts for every aspect. That's great. But there's also the danger that they remain standalone units ...
SK: We have an open culture in the organisation. No data is hidden from each other. Each of them is aware and integrated in the whole process. At our monthly review meetings, functional heads from all the units are present. We cannot manage if Silvassa develops something new and Haridwar doesn't benefit from that. People who were working at Silvassa are now working in Haridwar and vice versa. So they are all integrated and not stand alone. For example, we do many jobs which are printed both at Silvassa and Haridwar. These jobs have identical artwork. That's why we have centralised the artwork at our pre-press bureau, Accura Reprotech in Mumbai. That knowledge is shared. There is no favouritism or preference given to any one unit. In fact even when the Haridwar unit was not doing good; the increment policy, the salary remained the same. We consider the company as a whole.

RR: I was doing a wage comparison and I figured that TCPL has one of the highest pay-scale in the packaging segment.
SK: A key challenge is to get good people and retain them. Quality of men available in our industry is limited. This is because of lack of exposure. There are very few print companies which are run by professionals. Among the commercial printers, I don't think there will be any, and even in packaging, 80-90% of the units are managed by the owners, who do everything. When we recruit people we don't find an imbalance between our present levels and new recruits. Our retention levels have been good. And we want it to be better.

RR: Today shopfloor personnel are expected to be aware of both technological as well as commercial aspects...
SK: Yes, they should be aware but I find that in our industry, they aren't. They haven't been given that exposure. At TCPL, we set targets for our production people not just on quantity but on the basis of value emerging from them. For example, our print manager, is aware of the price per sheet and his contribution per hour, per sheet and so on.

RR: Pricing has been a big concern. Recently, there was the paperboard crisis and the reviewing of prices. Then there are stories that one gets to know of reverse auctioning.
SK: It is a matter of concern with those customers who have opted for e-auction. But some of them who have gone for e-auction have realised the futility of quoting a lower price.

RR: The price benchmark has become lower and it will take a long time for that correction to take place.
SK: True. But the heartening news is, the value chain is improving. Customers are upgrading the pack from a grey pack to a white back and from a white back to a folding box board or adding metallised film or demanding foil stamping or shifting from aqua varnish to UV varnish. When they go up in the value chain their margin becomes better. They have promo packs that is not subject to e-auction numbers. Customers with large volume will obviously command better price from their perspective. But after a point you have to stick to your price because you can't do business at a loss.

RR: So what you're saying is, one auction cycle, a firm will quote the lowest price, but the next time it will have to correct ...
SK: Yes, otherwise it will be out of business. Today, banks are very unforgiving and you have to modernise your factory. The biggest challenge in India is the growth which is happening and the resulting lack of manpower coupled with the inflation. So you have to increase your salary levels quite substantially. So costs are going up year on year. In such a scenario, if your margin goes down, there's no way you can survive. You've to increase your capacity and do an extra business by 15-20% on a yearly count. If not, you are asking for trouble.

RR: TCPL's transition has been to a corporate structure unlike other companies. How did you take the lead?
SK: As far as we are concerned, our family has been in business for a long time. My grandfather started the group in 1940 and our family had many businesses over the years. We were in textiles, jute, chemicals, tea and sugar. All these have to be professionally run. The involvement of the family member is to be the chairman or the managing director and then run individual businesses. So down the line in the hierarchy it's always been skilled professionals. In fact when TCPL had started we had a full time director, Debu Choudhary, who had complete powers. He was running the company.

RR: You have been referring to growth rates and precise percentages. How do you benchmark what the growth rate is?
SK: Paper manufacturing mills are quoting an overall production of two million tonnes of paper board annually. Sometimes I wonder who are converting those. I feel the number is too large. Let us say it is between one and a half million tonnes of paperboard. It is growing at 10-12% in tonnage. If you add a new machine, one machine will do five thousand tonnes easily. And so, we are talking of 100 thousand tonnes growth which means 20-25 new lines are coming in and getting absorbed. The growth is in double digit but you really have to make the machines sweat to achieve these numbers.

RR: I feel the brand owner has not been able to understand the effort that goes into it. They don't differentiate a TCPL creation from your competitors. How do you nurture a brand?
SK: For us brand positioning is very important. Be it e-auction or direct clients, at the end of the day, the brand owner will see performance, consistency in quality, ability to meet the demand in time. Some brand owners might not use these measurement yardsticks, some are subjective, some are objective but over time everyone does realise the value you bring along with the innovation. They want ideas for improvement all the time. So you should be able to cater to that. It should not be merely about supplying. Service levels have to be tracked to retain the brand.

RR: Have customers become more demanding?
SK: Their business environment is certainly becoming more challenging. There's no doubt about it. They have to bring new products, new launches, new ideas all the time. Plus they are fighting for shelf space as well. Therefore to that extent they want more from us.

RR: How does it benefit being multi-locational? Is it prudent to have one mother plant and support plants to complement it?
SK: By being multi-locational, you are spreading your risk. Rather than having one big plant, you have two to three at various locations. Worldwide, big printing companies have more than one plant, spread across different regions in one economic area. India is a big country with many different regions. There will be a limit to how much one plant can do because its efficiency of scale and economies of scale is limited.

RR: How did you benchmark all these plants?
SK: The culture of management in Western India is more professional and more productive. Whereas we had to face a lot of challenges to find the right people for the Haridwar unit because the town has no industrial background. Therefore it suffered for two years to attain the right productivity and it's only because we had the Silvassa unit to support that it was able to survive and take its time. A stand-alone company at Haridwar would have been a disaster.

RR: Have you benchmarked what is being created in Silvassa and Haridwar to the plants you have seen in Europe?
SK: No. We are nowhere near the European firms. But in terms of cost we are much better. Our employees' cost as a percentage of sale is less than half of what a typical European company would be. The advantage is that their cost per person is very high whereas ours is much lower.

RR: On the other hand we sweat our machines much more.
SK: Yes. We run around the clock and we run all the time. Our make-ready and turnarounds are quicker. I would say we would be equal in comparison to them for production per machine but our machines have got more people working on it. That is something we need to work upon. It should not be taken lightly because complete automation will be the need of the hour. Also in Europe, they use better materials and don't do guillotining before printing. They get pallets from the mill, which directly go onto the machine. Whereas we have to create the pile from bundles which are packed in jute and HDPE bags, which requires additional people. Plus stripping tools in India are not as good. There they don't run a single job with manual stripping. All jobs are done with blanking.

RR: But things like integrated ink-kitchens have become the norm. The ink kitchen at TCPL is doing good work.
SK: This is where the economies of scale come into picture. The same ink now runs for three lines. Earlier it would run for one machine. So it is three times the output and the same people – with one additional hand. The incremental staff that we have added for the ink kitchen and for platemaking is negligible.

RR: How different it is to set-up business operations in India today? Things like policy, paperwork, red tapism, etc...
SK: It is still the same. I don't think there's any change. I think the government is neglecting the liberalisation of day-to-day aspects of business like buying land, getting it transferred, electricity and so on. What should be a five minute exercise of buying land from the official liquidator and putting it up for transfer takes two months at the local government. Frankly speaking it is just apathy on the government's part.

RR: We continue to complicate matters ...
SK: Yes. If I am moving from Mumbai to Delhi why should I be asked for a C-form? You have to fill up a C-form, that too, for within India. You are not even moving outside India. And the number of people who are dedicated to filling a C-form is appalling.

RR: What about infrastructural bottlenecks?
SK: Electricity has been the major concern. In Haridwar, we had a period of six months where there was a power cut of eight hours a day. It affects the productivity and the final cost because you need time for changeover. Also the fluctuating power is not good for the health of the machines. It affects planning. How can you be sure of getting electricity for your next expansion. As far as the road network is concern, there's been an improvement. The national highways have got doubled to four lanes. Soon there will be six lanes. Still it takes more time to reach our customers than it should.

RR: You have worked out the permutation combination of equipment and people. Is there a correct size for a converter?
SK: It has to be the right balance of both. Companies shouldn't be shy about employing people. In India, the problem is that because of our restrictive labour laws companies don't want to employ people. This is a myopic approach. Intrinsically, people are not bad, whether its labour or management. If you treat people in a fair manner they understand your point. Personally, I believe in employing my own people.

DHARAMPUR TRAINING INSTITUTE
The ITI PPP (Public Private Partnership) scheme has been intiated by the government. This is where TCPL is playing a role. The company aims to improve skills and communication of the people in Dharampur, Gujarat. This is an adivasi district with low income. The ITI can ensure employment.

Kanoria believes: "One should try to help our society." But TCPL has realised it is a big challenge to run an institute. Requirement of quality teachers and their training is a lacuane. TCPL has sourced its own team. It has started a print and packaging course. When PrintWeek India visited the institute, the building was getting ready. The equipment was being moved. Time is invested in the basics. For example: how to fold paper and how to feed the paper on a press. This year 20 students will graduate. Next year, it will be scaled up to 40 students. Kanoria says: "We will absorb them in our units. Only if training flourishes, will our industry profit, since the gain will reach-out to all the people in our country.