NBC Bearings: Winning the most coveted quality prize in the world!
NBC Bearings is redefining what quality means with improved processes and systems that help it attract high end international consumers
The company NEI Ltd. that produces bearings under the brand name of NBC, has a revenue of $250M and is based in Jaipur, India. It is the largest bearing manufacturer in the country and the largest exporter of bearings from India. It produces 100 million bearings a year with over 1000 SKU’s. Up till 1991 it operated in a monopoly. With the liberalisation of the economy in 1991, when India opened up its doors to the outside world, everything changed. NEI was forced to rethink its strategy in order to be competitive in the new changing landscape. It became aggressive in procuring the latest technology and equipment from its collaborator NTN (Japan) and this opened it up to a broad and global consumer base that wanted high quality, high functionality bearings. But NEI soon discovered that in order to be relevant as a strong domestic player that could play in a global market, it would need to create its own technology capabilities. The last 13 years have seen the company turn itself around and go from being a second class supplier that was dependant on outside technology to having one of the strongest R&D facilities in the country that provides best in class quality.
I believe that the company is effective at driving alignment because it is able to define and implement its business strategy and align it with its operational goals despite being in a tough industry, with strong international (SKF, FAG ,Timken, NSK Koyo) and local (a large unregulated unorganised sector) competition and a market that is de-growing.
(See link to understand different types of bearings: http://www.nbcbearings.com/products/)
Business Model
NEI grew revenues by 10% for the past 2 years despite the shrinking market. They were able to achieve growth by focusing on exports rather than just domestic sales. Exports gave them better prices for the same goods and ensured that they maintained their reputation of being seen as a high quality, high technology suppliers despite being manufactured in India (of which global market perceptions of quality is low.) In terms of perception, part of their business model has been to move away from being seen as a good second supplier amongst international consumers, to becoming a high quality well established brand that has high in house R&D capabilities. The company maintained high margins despite the decline in the industry by refocusing its strategy to target industrial and export consumers, rather than just relying on the automotive sector. (Auto offers lower margins with their bulk order sizes, which generally affects the top line. It has also seen an industry wide downturn recently.) In addition to this NEI also increased its focus on higher margin products such as bigger size taper roller bearings, rather than the mainstream ball bearings. Ball bearings though a majority of the revenue for most ball bearing manufacturers are commoditised and offer little to no margins.
Operational Model
NEI won the Grand Deming Prize for 2015. This was the culmination of their work over the last few years in implementing TQM (Total quality management) in all their facilities. This is in line with their goals of charging higher margins to export customers who expect almost 0 ppm defect rates. The company also re focused its R&D spending from less than 0.5% of sales to over 2% last year. It is building a new facility that started production early this year and is adding capacity every month. This facility will focus on higher margin bearings, such as bigger taper rollers bearings and also cater to some higher margin auto customers. By investing in categories and segments that help it strengthen its already strong foothold amongst the export market, it is helping position itself as a strong player that is competition to the largest bearing manufacturers in the world.
(See link to understand the Deming Award: http://blog.deming.org/2015/10/2015-deming-prize-winners/)
References
http://www.autocarpro.in/interview/quality-simply-customer-quantity-9794
http://www.autocarpro.in/news-national/national-engineering-bags-2015-deming-grand-prize-9685
It’s fascinating that the company managed to grow revenues in a shrinking industry by focusing on exports. Is that simply because the export market carries higher margins compared to the domestic market? Are there other factors at play, e.g. better import duty terms in the export markets? Also quite impressive that they pull off the focus on zero defects rates, which marries nicely with the proposition to the export consumer. Very interesting, thanks for shedding light on this firm.