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CaseDetail:
Pleasereadthecasestudygivenbelowandanswerquestionsgivenattheend.

CaseStudy

ManagingTechnologyandR&D

ESABIndianlimited,Bombayisaleadingmanufacturerofweldingconsumablesandequipment.ESABIndiaLimitedis
theIndianassociateofESABAB,theSwedishmultinationalandtheworldslargestcompanyinweldingandcutting,with
productioncenters,corerepresentationinmostofthecountries.

ESABIndia,aPublicLimitedCompanywithpaidupcapitalofRs.50million,employs206people,including35S&T
personnel,atitsKalwaunitwhichisthemajormanufacturingfacility.IthadaturnoverofaboveRs.30croresduring1991
92.Itislicensedtomake1250nos.ofweldingandcuttingequipmentand24020kmofweldingelectrodes.
TheinhouseR&Dunitofthecompanyemploysabout10personsincludingS&Tpersonnel(scientistsandengineers)and
isheadedbyawellqualifiedchiefatthelevelofGeneralManagerdirectlyreportingtotheManagingDirector.TheR&D
unitisaseparateentitysituatedwithinthecompanypremisesoccupyingafloorareaofabout300sq.m.butclosely
interactswithotherfunctionalgroups.Ithaswellequippedlaboratoriesandpilotplantfacilitiesfordevelopment
purposes.TheannualR&DexpenditurewasaboutRs.24lakhsduring199192,i.e.about0.8%oftheannualturnover.A
goodtechnicallibraryhavingbooks,journalsandperiodicalsinthefieldofmanufacturingismaintained.Thecompany
alsoencouragescloseinteractionwiththerelevantR&Dorganizationsandacademicinstitutions.R&Dpersonnel
participateintechnicalseminarsandmeetingsinIndiaandabroad.Acomputerizedinformationfacilityhasalsobeenbuilt
up.

TheR&DunitoftheESABIndiacloselyinteractsfromtimetotimewiththeprincipalsinSwedenandatotherplaceson
developmentalneedsandreceivesrelevanttechnicalinformationwhichisveryusefulforR&DinIndia.Infact,thereare
someproducts/areaswhichhavespecificallybeendevelopedtomeettheneedsofIndiaandcouldberelevanttoother
developingcountriesaswell,butarenotcoveredintheproductrangeoftheprincipalsabroad.Mostofthedevelopments
relatetohighlyspecificapplicationssuchasforoil,power,underwaterusesandareimportsubstitutes.Thereare
immenseexportpossibilitiesthroughconstantdevelopmenteffortstomeetthespecificrequirementsofothercountries.

IntheearlyeightiesESABrealizedthattosurviveinthecompetitiveworldofweldingithadtobecomethebiggest
companyandaleaderintechnology.Asaroutetoachievethisobjective,ESABacquiredanumberofcompaniesactivein
thefieldofweldingandcutting.ItacquiredtheEuropeanweldingactivitiesofPhilipselectricalandelectronicgroup,
basedintheNetherlandsin1985.Subsequently,theweldingbusinessunitofPhilipsIndiaLimitedalsobecameapartof
ESABGroupinJuly1988.Thisunitwasnotdoingwellcommercially.TheturnoverofESAB(India)almosttripledinthree
yearsduetoactivemarketingefforts.InMay,1991ESABIndiaLimitedacquiredtheweldingbusinessofIndianOxygen
Limited(IOL),Calcutta.TheturnoverthenapproachedRs.100crore.ThenewIndianorganizationnowhasfourmajor
manufacturingcentersandhassalesoutletsinallpartsofthesubcontinent.

TECHNOLOGYANDSTRATEGYPOLICY
ESABsobjectivewastobecomeaworldleaderinweldingtechnology.Thiswastobeachievedbycarryinginhouse
researchandbyabsorbingthetechnologyofnewlyacquiredcompanies.ESABnowhaswellestablishedR&Dfacilitiesin
anumberofcountries,includingIndia.TheR&DunitofESABisaDSIRrecognizedunitandworkspresentlymainlyfor
theIndianmarket.InsettingtheobjectiveofESABIndia,thetopmanagementoftheparentcompanytakesintoaccount
theinhousecapabilityandpotentialforfurtheradvancementthroughimportedtechnology.AllpossiblesupporttoR&D
isextendedbythemanagementtoretaintheleadershipinitsfield.

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Thecompanyscommitmenttoweldingtechnologyandproductdevelopmentisevidentfromthegoaloftheorganization
whichistoprovidetechnicalsolutionstothecustomers.Heretheorganizationinsistsontheimportantdistinctionthatis
toprovidesolutionsanddoesnotsellproducts.

Inaworldwheretechnologydominatestherearenewopportunitiesforcontinuousdevelopment.Thedevelopmentoflow
moistureabsorptionweldingelectrodesisagoodexample.TheoffshorestructuresoftheNorthSearequiredwelding
consumables(electrodes)whichwouldproduceweldedfabricationfreefromstructuralfailureinaveryharshworking
environment.Thecostofsuchfailurescouldbetremendouscomparedtothecostofweldingconsumables.Typically,
weldingconsumablesconstitutelessthan1.5%ofthetotalcostofthestructure.Thecostoffailureofthestructuresis
frequentlymanytimesthecostofthestructureitself.

Theearlyobjectivewastohaveextralowhydrogenintheweldmetal.Forthispurposespeciallowhydrogenelectrodes
weremadeandthenrepackedjustbeforeuse.Thiscostlyprocesscouldbeeliminatedbypackingtheelectrodesin
vacuumsealedpackages(VacPac)atarelativelyhighcost.Effortsatdevelopingthelowcostdevicesforpacking
continued.Thelowmoistureabsorptionelectrodeshavenowbeenproducedwhichreducethecostofthesolutionofthe
weldingproblem.Atthesametimetheproductwasfurtherdevelopedtogiveimprovedweldingcharacteristicsinorderto
improvemanufacturabilityandtoreducecost.

ExpensesincurredonproductandprocessdevelopmenthavetoberecoveredfromsalessothatR&Dprocessfor
continuousimprovementcangoon.ThekeywordswhichcharacterizeESABscommitmenttothecontinuous
developmentofprocessesandsystemare:
Theproductivityofthewelderandfabricator
Thequalityofwelddeposit
Theworkingenvironment

PRODUCTIVITY
Duringthelastdecadeandahalf,ashiftfromthemanualweldingprocesstosemiandfullyautomaticweldingprocesses
hastakenplaceinmostofthedevelopedcountries,mainlytoachievehigherproductivityandlowermanufacturingcost.
Todayinthesemarketsmorethanhalfofthetotalproductionofweldmetalisderivedfromcontinuoussolidandflux
coredwiresprocesses.It,therefore,becamenecessarytodevelopconsumablestomeetthischallenge.Manynew
automaticconsumableshavebeenadded.

Therewasaparalleldevelopmentofnewweldingmachinestomatchtheautomaticweldingprocesses(includingwelding
robots).Thepackingstandardswerealsochangedtosuitautomaticweldingconsumablesforuninterruptedsupplyof
highqualitywiretotheroboticprocesses(ESABsMarathonPac).

QUALITY
Productsareserviceswhichdonotmeetthequalityrequirementsofthecustomersanddonotstandthetestoftime.
Todayqualitydoesnotremainwithintheboundariesoftheproductalone.Totalqualityistheneedofthehour.
IntroductionofaTotalQualityProgramistheESABgroupisastepinthisdirection.Whilefinalizingtherequirementfora
newproductthequalityoftheweldisinbuiltinthespecification.Weldingisnotanendinitself.Itisaprocesstoproduce
astructure.Themostsuccessfulweldsproducethebasecomponentorfabricationatthelowestlevel.

ENVIRONMENT
Thecostandqualityoftheweldverymuchdependonthewelderwhointurnisprofoundlyinfluencedbytheworking
environment.Thewelderwillproducebetterweldsinafriendlyenvironmentorwithelectrodeswithbetterwelding
characteristics,asinglepointcontrol(synergiccontrol)oftheweldingmachinesandreducefume.Controllingthetoxicity
limitoftheweldingfumeshowsconcerntowardsthehealthofthewelderwhilstatthesametimeimprovingthe
effectiveness.ESABsR&Disintheforefrontofactiontomaketheenvironmentfriendliertothewelder.

Ascanbeseen,developmentsinweldingconcernwhileprocessandarerealizedbyimprovingexistingproductsand
introducingnewtechnologies.Attentionwill,infuture,focusincreasinglyonissuesrelatingtotheinternalandexternal
environmentandeconomy.CombiningESABsproduct,processresearchanddevelopmentwiththecustomers
productionexperienceoftenleadtocollaborativeventurestoimproveeconomy,quality,andproductivityandsafety
standardsinthelatterworks.

TheR&DdepartmentofESABIndiaisthefocalpointofalltechnicalactivitiesofESABinIndia.Italsoactsastheinterface
betweentheprincipalsinSwedenandtheIndianorganization.Itundertakesresearchanddevelopmentactivitiesrelated
tonewproductsandtechnologiesformeetingtheneedsofthegrowingIndianmarket.Emphasisisoncontinuouslocal
technologicaldevelopment,absorptionandupgradationofimportedtechnologiesforalltheweldingactivities.

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Thedepartmentismannedbyagroupofhighlyqualifiedpersonswhohavetheexperienceinotherlinefunctionssothat
theirperceptionoftheproblemisrealisticratherthantheoretical.Membershavehadpreviousexperienceinquality
control,productionormarketingbeforetheyjoinedtheR&Dgroup.Theyarecapableofunderstandingtherealproblems
ortherequirementofnewproductsasenvisagedbythecustomer.Allmembersofthedepartmenthelpeachothertokeep
expectationwithinfeasiblelimits.

TechnologyandproductismarketleadinIndia.Forinstance,inaspecificnuclearprojecttherequirementswerevery
stringentandcritical.Therequiredproductwasdevelopedintwophases.Inthebeginning,thetechnicalrequirements
werefirstmetandsubsequentlythecostwasreduced.Initially,marketdemandwasnotlargebutwithtimeitexpanded
andnowtheyhaveaproprietaryproductwithlargedemand.

ManysuchmarketleddevelopmentshavebeensuccessfullycarriedoutinIndia.ThishashelpedESABearnthenameofa
technologybasedcompany.TheR&Ddepartmentaccordinglyhasestablisheditsimportanceintheorganizationandhas
representationinalldecisionsofthegroupmanagementpertainingtotechnologyandproductmanagement.

METHODOLOGY
Iftheproductdevelopmentismarketled,themarketingdepartmenthastopresentitsrequirementsinregardtofuture
marketdemand,possiblenewbusinessesornewapplications.OncetheneedhasbeenagreedtheR&Ddepartment
attemptstoascertainwhethertheproductisavailablewithintheESABgroup.Ifitis,theprincipalsabroadarecontracted
fordetailsofformulationandproductiondata.Intheeventthatagroupproductcannotbeidentified,thentheR&D
departmentoftheprincipalscombineswiththeirIndiancounterpartsforaprogramfordevelopment.Afterestablishing
thebasicformulationandproductiondata,workonadaptationtoIndianconditionstarts.Thisadaptationisnecessary
becauseofvariationsintherawmaterialsandproductionplant.

Theformulationsarebrokenintotheirbasicchemicalconstituentsandonthemthechemicalcompositionofthe
indigenousrawmaterialsissuperimposed.Imbalancesaresuitablyadjustedtoprovidethecorrectweldmetalanalysis
andweldingcharacteristicsoftheelectrode.Theoreticalknowledgeandpracticalexperienceareessentialfordoingthis.A
tentativeformulaisobtainedwhichisrefinedthroughexperimenttogivethefinaldesiredproduct.Thenewformulationis
firsttriedonpilotplantandsubsequentlytransferredtoproduction.Forsuccessfuldevelopmentandcommercialization
ofaproduct,marketingandsales,materialsmanagementandproductiondepartmentsareallinvolved.TheR&D
personnelremaininvolvedtilltheproductisestablishedcommercially.R&Dmustalsobeinvolvedinmanufacturing
technologytomeetthecompanysowndemandforimprovedproductivity,qualityortoincreasemanufacturingflexibility.

DIFFICULTIESENCOUNTERED
Whathasbeendiscussedaboveworksifthesituationisideal?Realityisoftendifferent.Someofthemajordifficulties
encounteredinactualpracticerelateto:
Changesinspecificationsduringthedevelopmentperiod
FailuretoachievetherequiredresultbytheR&Ddepartment
Undulylongresponsetimeofdevelopment
Prohibitivecostofproduct

Inthecourseofdevelopment,thecustomersneedmaychange.Ifsuchachangeisnotverymajor,itmayonlycausea
smalldelaybutincaseofmajorchanges,itmaymeandevelopmentinanentirelynewdirection.Alternatively,the
specificationsmaysometimesbetoostringentthatitmaynotbepossibletomanufactureanewproductwithinthe
constraintsandprojectedcost.Itisalsopossiblethatthetargetslaiddownintheguidelinesreceivedfromtheprincipals
cannotbemetbecauseofnonavailabilityofspecificrawmaterialsatreasonableprices.Theseareallmajorhandicapsin
developingthedesiredproduct.

Unduedelayindevelopingaproductmayresultinlosingmarketopportunityforwhichitwasintended.Often
developmentmayusecostlymaterialsandthefinishedavailableproductmaybecomemoreexpensivethananalternative
productinthemarketresultinginfailuretodevelopacommerciallyviableproduct.Allproblemsanddifficultiesdescribed
abovecombineintoasingleproblemloadingtheinterestofthecustomer.Thesedifficultiescanariseinmarketled
development.However,ifdevelopmentisproductionled,manynewandgooddevelopmentsneverreachthemarket
becausetheydonotsatisfyarecognizedcustomerneed.Inrelationtodevelopmentactivity,thefollowingobservationsof
generalnaturecanbemade:
1.Thetopmanagementmustcommititself(throughthecompanyobjectives)torenderactivesupportofdevelopmentof
productandtechnology.Oftenintimes,expensesincurredtodevelopmentcomeunderthemicroscope.The
commitmentofthetopmanagementwillensurethatinthelongterm,investmentinR&Dactivitieswillpayoff
handsomely.
2.Developmentisnotasingledepartmentsjob.Activeinvolvementfrommarketingandsales,productionandmaterials
managementisessentialtomakethenewproductreachthecustomeratrighttimeandattherightcost.
3.Costoftheproductplaysanimportantroleinthedevelopmentefforts.Thispointmustbekeptinmindfromthevery
beginning.Adevelopermustbeconversantwiththecoststructureoftheproduct.
4.AllindustrialR&Dactivitiesmusthavecommercializationofthedevelopmentasitsgoal.Anydevelopmentwillbe
termedafailureifitdoesnotimprovethebottomlineoftheorganization.
5.ManydifficultiesmaybefacedduringtheR&Dprocess,soR&Disassuredofaquickandeasysuccess.

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6.Guidelinesanddirectionsfromtheprincipalsabroadareonlypartofthestory.LocalR&Disimportanttosatisfylocal
needsandconstraints.AppropriatetechnologyistheneedforallR&Deffortwhileadaptingproductsandtechnologies
fromabroad.
7.ESABIndiasroleinfuturewillbetodeveloptheexistingtechniquesandtoparticipateintheresearchand
developmentofnewtechniqueswithaviewtomaintainitsleadingpositioninthefieldofweldingandcuttinginthe
21stcentury.

OPPORTUNITIESOFESABINDIA
Intheinternationalscenariothetechnologicaldevelopmentsaretakingplaceataveryrapidpace.Indiawithitswealthof
technicalexpertiseshouldadoptoverseastechnologicaladvancesforspeedycommercialimplementationandbenefit
fromthem.Suchadaptationwillhastentheprocessofindustrialization.IndianR&Deffortsshouldbedirectedinitially
towardsmeetingthelocalneedsandovercominglocalconstraintsbysuitableadaptation.Butfinallywemustaimtobea
worldcompetitivesupplierofweldingandcuttingsolutions.
Pleasegiveyouranswerinatleast25wordsandpresssaveandcontinuebutton.
S.No. Questions

1.

Marks10

WhatstrategicrouteESABABfollowedtobecometechnologyleaderintheworld?Whatcouldbe
thereasonsbehindsucharoute?

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2.

WhateffortsweremadebyESABABandESABIndiainthefieldofproductdevelopment?

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3.

HowistheR&DfunctionatESABIndiaorganized?Criticallyexamine.

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2008AmityUniversity,allrightsreserved.

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