1. A Discussion with Bradley R. Staats, Assistant Professor of Operations, Technology, and
Innovation Management Kenan-Flagler Business School, University of North Carolina
Lean principles, exemplified by the Toyota Production System (TPS), have become a vaunted
methodology in the operations community. Many credit Toyota’s sustained success to its
persistent application of these ideas to manufacturing and management systems.
Here’s the $64,000 question: can you translate TPS principles geared to the shop floor to IT
outsourcing? Wipro and an academic team headed by Bradley Staats at the University of North
Carolina decided to find out.
Six years ago Wipro wanted to enhance its service offerings, according to Staats, who is an
Assistant Professor of Operations, Technology, and Innovation Management at the Kenan-Flager
Business School. The service provider wanted to take on more complex assignments that solved
its customers’ business challenges, thereby adding value. To do this, the Indian supplier turned to
TPS. Back in 2004 no one had tried to apply manufacturing principles to software services and IT
work at the scale that Wipro was operating, the professor recalls. Wipro approached him, since
his specialty is the intersection of technology and operations. While the company’s Lean initiative
unfolded, Staats studied the process and then the results.
The study took three years and the partners are still working together periodically to further refine
the process. So, does it work? Staats measured results with the Lean teams against Wipro teams
using the old methodology. “It really did improve performance appreciably,” he reports.
Four steps to Lean tasks
The professor says one of most important tenants of the TPS is to start a project by working
backwards. First, the Wipro teams had to discover the challenges the outsourcing buyers needed
to solve. Then, it had to focus on solutions to that challenge. Finally, they had to establish a
deliverable plan that can do that. “This is how to deliver outsourcing value,” Staats explains.
Staats says Wipro established a four-step process to tailor TPS to its needs:
Specify the task. Do this in great detail. People need to know exactly how to accomplish the work
they are doing.
Streamline communication. Establish direct communication pathways between people. Staats
said in many companies an employee will finish a task and send his work to four or five people,
having to wait to hear from all of them before going on to task B. Instead, he should be able to
send the report to just one person who then responds promptly.
Simplify the process architecture. Map out every step so that everyone understands the
interconnections between steps and can eliminate waste.
Adopt hypothesis-driven problem solving. Discuss how the team thinks it can improve the work.
Create hypotheses and then test them by comparing them with real-world results.
In addition, there were three challenges specific to software services:
Task uncertainty. Staats says in his experience some outsourcing buyers change the
requirements continually. “The challenge is: how does a supplier standardize processes when the
processes change rapidly?” the professor asks rhetorically. The goal, he says, is to create
efficiency by removing variance.
Process invisibility. Often, employees do much of the work using “the knowledge in their heads,”
says Staats. Lean, on the other hand, “tries to bring everything out in the open.” The Wipro team
had to figure out “how to do this with knowledge work.”
Architectural ambiguity. When creating software, the engineers often won’t know if it works until
they do it.
Adapting the Lean process to software services: lessons for everyone

2. While many of the procedures just didn’t apply, TPS’s cardinal rule of lowering inventory wasn’t a
direct issue for a software services company; many of the ideas were valuable. For example, if
there’s a problem on the production floor, Toyota workers pull on an andon cord. This signals a
manager to come running to help the worker solve the problem. Wipro didn’t install these cords
into the offices. But it did put a structure in place to provide immediate assistance to a worker who
faces a work challenge. “This is powerful,” points out the professor.
Staats says, in any operation, managers have to find tools that can identify problems “as early as
possible. Then have the person who made the mistake fix it immediately, right where it went
wrong.” Having that particular employee make the correction is important for two reasons: he or
she has the relevant knowledge to actually fix it and it teaches the employee what to do so he or
she won’t do it again.
Another challenge is for the offshore Wipro team to understand in detail what is happening at the
customer location. Obviously, teams in India can’t just walk out to their offshore customers’
location whenever they face a challenge. Staats says one Wipro team came up with a clever
adaptation.
The buyer was testing new software at its headquarters. The software engineer told the offshore
team about it, but they couldn’t replicate the problem. So the Wipro team used WebEx and
watched the individual go through all the steps to make the problem happen. Then, the buyer’s
engineer went home and the Wipro team solved the problem. “Now they could identify the
problem because they knew exactly what steps to take,” the professor points out.
Another adaptation was modifying the Toyota’s visual control board, which the manufacturer uses
to track progress on the shop floor. “It’s graphically tracks the progress and productivity of the
organization,” explains Staats.
The Wipro project manager puts every team member’s name on a blackboard on the vertical axis.
The days of the week make up the horizontal access. The manager fills in the squares with the
work that each team member is supposed to accomplish each day. The employees fill in what
they actually accomplished each day before going home.
Staats says the control board helps managers see if a team member is not performing as
expected. This doesn’t mean the team member is incompetent. What it usually means is the
person hit a problem and needs other members’ help in solving it. The project manager can
assign others to help so the team gets the job done.
Another benefit is everybody gets to see what everyone else is doing. “Employees often feel they
are doing more work than everyone else. Sometimes they are! But more often they realize
everyone is busy and working hard. This information is good for team motivation,” he says.
Why Lean is good for outsourcing
The Lean solution provides benefits to outsourcing buyers, according to the professor. They
include:
Providing great value because the outsourced supplier can complete the work more efficiently
and with higher quality
Giving the supplier more flexibility to craft a better solution. The professor says some suppliers
use formal outsourcing models, which limits their flexibility. “The early results show this method
produces more flexibility,” he reports.
Focusing the supplier’s attention on the value the customer is looking for. “By working backwards
from the end state of the customer’s value, the supplier is able to design the process and then
drive to that value. This methodology forces the supplier to focus on the end game,” Staats says.
Removing the focus on technology. “Buyers tell me, ‘Sure, the technology is great. But where’s

3. the business value?’”
He says Wipro has received a number of requests from buyers interested in this type of
engagement. “There’s value in talking to them about this,” he concludes.
Lessons from the Outsourcing Journal:
A Lean solution provides benefits to outsourcing buyers including:
Providing great value because they can get the work completed more efficiently and with higher
quality
Giving the supplier more flexibility to craft a better solution
Focusing the supplier’s attention on the value the customer seeks because the supplier works
backwards from the end state
Removing the focus on just technology
Managers who use Toyota Production System (TPS), based on Lean methodology, find tools that
can identify problems as early as possible. Then they can have the person who made the mistake
fix it immediately, right where it went wrong. This procedure works because they have the
relevant knowledge to actually fix it and it teaches them what to do so they won’t do it again.
Using a visual control board tracks progress, creates the opportunity for positive interventions,
maps the productivity of the team, and builds team spirit.
Wipro set up the Council for Industry Research, comprised of domain and technology experts
from the organization, to address the needs of customers. It specifically looks at innovative
strategies that will help them gain competitive advantage in the market. The Council in
collaboration with leading academic institutions and industry bodies studies market trends to
equip organizations with insights that facilitate their IT and business strategies. For more
information on the Research Council visit www.wipro.com/industryresearch or email
industry.research@wipro.com.
Wipro's gains from applying Toyota’s methods a lesson for software export biz
Pankaj Mishra, ET Bureau Apr 15, 2011, 12.12am IST
Tags:
Wipro Ltd.|Wipro|Toyota
BANGALORE: When Sambuddha Deb, 53, now the chief global delivery officer at India's third
biggest software exporter Wipro, was looking for answers to deal with rising wage inflation and
growing complexity in large outsourcing contracts some years ago, Toyota's legendary production
system was nowhere on his mind. After all, there could be no parallel between manufacturing
cars and writing hundreds of lines of codes for customers you do not even get to see till the
project gets over, at least this is what Deb reasoned until late 2004.
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"Around the time when Vivek Paul was our CEO, McKinsey came and asked why don't you look
at Lean, but then it did not look very attractive," recalls Deb. Around that time, Wipro, along with
many other Indian peers had all the process and quality certifications the world offered- from ISO
9001 to SEI CMM. But like most new initiatives and certificates, even they had become mere tags
that offered no differentiation.
Unlike traditional methods of improving performance and quality of software projects, Lean
promised to bring about an internal focus for continuously seeking ways to cut waste and
increase value of investments. In a software development context, waste could include

4. duplication of efforts, more people doing the same job, and time spent on readying for a new
project.
Later, after looking at options that included the Malcolm Baldridge National Quality Award criteria,
TRIZ (short for Theory of Inventive Problem Solving in Russian), and Toyota's Lean, Wipro finally
decided to pick a leaf from the automaker's production system.
Early gains, learnings from Toyota and challenges
What started in 2005 as a 10-projects pilot to apply the automaker's legendary system invented
for eliminating all wasted material and labour is now helping India's third biggest software
exporter make savings of up to 60% in outsourcing projects, and even win new consulting
contracts from customers such as Nationwide Insurance. Of nearly 4000-5000 projects being
delivered by Wipro, over 1600 projects are now Lean, bringing a minimum of 20% savings on an
average.
Bradley R. Staats, who teaches innovation management, technology and operations at the
University of North Carolina, spent over three years working with Wipro on this project. Staats
believes Wipro's Lean experiences can be applied by other software service providers too.
"Things are getting commoditised in the industry and there's pressure to do more with less. This
is where Lean can help," he says. Barring Lockheed Martin, which actually did a much smaller
pilot, no other company in the world has attempted to apply Lean for software services work at
this scale.
According to Staats, for every $1, Wipro makes savings of 20 cents on an average. "For one of
the customers, the gains stretched to over 70% after we used Lean for minimising efforts (read
engineers) while delivering the project," recalls Staats.
Nationwide Insurance, America's fourth largest auto insurer is among customers now applying
Lean with Wipro's help. The insurance firm, which started with around 17 Lean projects two years
ago, has seen $2 million payback from the initiative.
Hunt For Experts
Then started the big hunt for an expert who could help Wipro start its Lean journey. "There were
many experts who had done Lean for manufacturing, some even for hotels, but none had any
experience in applying Lean for a software firm like us," says Deb.
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Another challenge was to find ways of applying Lean principles to the business of software
exports. Deb, along with several Wipro officials visited factories in Japan to understand how
heavy equipment and car manufacturers eliminated waste from their processes. "There's no
recipe or cookbook for applying Lean. The goal is more about building a platform for ongoing
improvement," says Staats.
Initially, Wipro could not get to visit a Toyota factory, Deb managed to visit one of the world's
biggest engine makers for tractors based in Japan. "They were making 200 variants of engines
on a single assembly line-that's unbelievable," says Deb. In another such visit to a Japanese
factory some five years ago, Deb studied how a company was producing 3-4 variants of one

5. excavator machine every eleven minutes.
Later, Toyota invited Wipro's billionaire founder Azim Premji to visit the company's manufacturing
plant in India. "What we saw was Corolla and Innova were mixed and were being produced on
the same line, but the catch was that nearly 70% of both the variants are same so you can use
the same line," he says.
Everything, except main engine and chassis, including seat management system, electrical
system and braking system are same for both the variants. "One of the most brilliant things
Toyota has done is that almost 70% of all their cars are built using standard platforms-they are
designed for Lean," Deb says.
DABUR- “THE OLDEST SUPPLY CHAIN IN INDIA”
11:38 OPEP IIMRAIPUR NO COMMENTS
Dabur the leading personal and healthcare company among the four FMCG giants in India is
managing the Oldest Supply Chain in India. Dabur is over 125 years old and deals with the
diversified product range in ‘Natural and Herbal’ which leads to the EBITDA –quarter growth of
27.8% and consolidated Q1 net Profit up 19.6% at `127.74 Cr with Revenue surges 31.6% to
`1216.24 Cr, for the Q1 2011-12. Building on a legacy of Quality and Experience, Dabur is at
present India’s trusted name and world’s largest Ayurvedic and Natural Helath Care Company
having distinct brand identities such as Dabur master brand for the natural health care product,
Vatika for premium personal care, Hajmola for digestives, Real for fruit juices and beverages &
Fem for fairness bleaches and skin care products.
Dabur procures raw materials worth around `500 Cr from a wide base of vendors. The Company
has wide and integrated distribution network for its around 600 SKU delivering to around 2100
stockiest, further connecting to the thousands of retail outlets covering every small and remote
part to organized stores of India. Dabur has improved distribution system through its unique
Retails Excellence program, “DARE” (Driving Achievement of Retail Excellence). the Program
covers a major objective as a channel focus, activating key customer, improving rural focus,
rewarding distribution efficiency, maximizing brand impact and building information capabilities.
Dabur has used Direct Shipment Strategy which was implemented in order to bypass
warehouses and distribution centers. Thus Dabur delivers products directly to the
retailers/consumer through the Institutions & Modern Trade System. Advantages of implementing
strategy are –
· The retailer avoids the expense of operating a distribution center
· Reducing lead time
Thus, Dabur has achieved cost reduction in the transportation process which overall adds to the
reduction in price of the product. By this strategy Dabur has reduced the lead time, bringing
Dabur and other elements in the Supply Chain closer which improves overall efficiency of the
supply chain as shown in following figure. Reduction in lead time has added in reduction in
Bullwhip Effect of the Supply Chain. Dabur has managed to minimize the Inventory-
Transportation cost Trade-off. By elimination of the warehouse in supply chain, the company has
reduced the inventory carrying cost and Implementing ‘Milk run’ system by the small truck loads
Dabur has managed the increased transportation cost in the chain.
Overall efficient tactics in the supply chain has made Dabur to succeed and sustain in the supply
chain network and has increased the entry barriers in the FMCG industry. Thus, Dabur having
strong distribution network will have to cope up when organized distribution network plays a major

6. role.
Figure : Supply Chain of Dabur
The writer of this article, Amol Deogade is a PGP student of Indian Institute of Management,
Raipur and has done his B.E. from Government College of Engineering, Amravati. Prior to joining
IIM Raipur, Amol was working at Cognizant Technology Solutions. Amol can be reached at
titanamol@gmail.com