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Table of Contents

INTRODUCTION.................................................................................................... 2

BUSINESS ENVIRONMENT DESCRIPTION................................................................ 3

OBJECTIVES OF THE STUDY.................................................................................. 4

COMPETITIVE PRIORITIES FOR L&T MANUFACTURING DIVISION.............................. 4

DESCRIPTION OF CURRENT OPERATIONS AND PROBLEMS...................................... 4

METHODOLOGY OF THE STUDY............................................................................. 4

ANALYSIS OF THE SITUATION / DATA ANALYSIS..................................................... 5

INTERNAL DATA:...........................................................................................................5
EXTERNAL DATA:.......................................................................................................... 5
SWOT ANALYSIS..........................................................................................................6
PARETO ANALYSIS.........................................................................................................6
PROCESS FLOW ANALYSIS...................................................................................................6
DATA VISUALIZATION......................................................................................................7
KEY PERFORMANCE INDICATORS (KPIS).........................................................................7

RECOMMENDATIONS FOR IMPROVEMENT.............................................................. 7

PROBLEMS ENVISAGED IN IMPLEMENTING RECOMMENDATIONS............................. 8

CONCLUSION....................................................................................................... 8

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Introduction

The evolution of Larsen & Toubro Limited (L&T) into the country’s largest Engineering and
Construction Company is among the most remarkable success stories in the Indian industry. L&T
was founded in Bombay (Mumbai) in 1938 by two Danish engineers, Henning Holck Larsen and
Soren Kristian Toubro. Both of them were strongly committed to developing India’s engineering
capabilities to meet the demands of industry before independence. Beginning with the import of
machinery from Europe, L&T rapidly took on engineering and construction assignments of
increasing sophistication. Larsen & Toubro Limited (L&T) is a prominent Indian multinational
conglomerate renowned for its contributions to various sectors, including industrial technology,
heavy industry, engineering, construction, manufacturing, power, information technology, military,
and financial services.

Headquartered in Mumbai, Maharashtra, L&T has been instrumental in shaping India's

infrastructure and industrial landscape.

Milestones and Achievements:

 Became a public limited company in 1950.

 Has been recognized as one of the best public companies in Asia-Pacific by Forbes.
 Has won numerous awards for its contributions to various sectors.
 Has a strong global presence, with operations in over 30 countries.

L&T's Impact:

L&T has played a crucial role in India's economic development, contributing to the growth of
various sectors. The company's focus on innovation, quality, and customer satisfaction has
enabled it to establish a strong reputation both domestically and internationally. L&T continues to
be a driving force in India's progress and is poised to play an even greater role in the future.

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Key Areas of Operations:

L&T
Construction(B&F)
L&T Infrastructure

L&T L&T
Financial Manufracture

L&T Power L&T Defense

L&T Information
Technology

For the purposes of this study, the focus is on L&T's construction and infrastructure division.

Financial Performance of the L&T's construction and infrastructure segment:

L&T's Infrastructure segment secured orders worth

₹1,42,589 crore in FY 2023-24, a 21.7% increase over
the previous year1. While some segments like Buildings
& Factories, Transportation Infrastructure, Heavy Civil
Infrastructure, and Power Transmission & Distribution
grew, Water & Effluent Treatment and Minerals &
Metals experienced degrowth due to order delays.

Business Environment Description

The EPC industry operates in a dynamic and

competitive environment, characterized by:

 High capital intensity: Projects require significant investments in resources, materials, and
technology.
 Demand for operational efficiency: Companies must optimize supply chains, minimize
delays, and reduce costs to remain competitive.
 Technological advancements: The adoption of Industry 4.0 technologies (e.g., IoT, AI,
automation) is reshaping manufacturing operations.
 Increasing regulatory complexity: Stricter environmental and safety regulations are adding
to the challenges faced by EPC companies.

1
https://investors.larsentoubro.com/pdf/2024/MDA%20Annexure%2002%20Infrastructure%20Projects%20Segment.pdf
3
  Key Competitors: Tata Projects, BHEL, and international firms like Bechtel and Fluor
Corporation, which emphasize operational efficiency and innovation.

Objectives of the Study

 Benchmark L&T's operational performance in supply chain management, production

processes, and project delivery against industry best practices.
 Analyse historical trends in cost, time, and quality performance to identify areas for
improvement.
 Develop recommendations (if any) to enhance operational efficiency, reduce costs, and
improve delivery times, leveraging modern operations management techniques and
technologies.

Competitive Priorities for L&T Manufacturing Division

In operations management, competitive priorities define a firm's strategic focus. For L&T, these
include:i

Competiti
Current L&T
ve Operational Objective Industry Benchmark
Performance
Priority
Minimize production and operational
Cost 5% annual increase ~7% annual increase
costs
Quality Achieve near-zero defects and rework 2-3% rework rate 5% rework rate
Delivery Ensure on-time delivery of components 90% 85%
Flexibility Adapt to changing project requirements High Moderate
Innovation Adopt Industry 4.0 technologies High Low to Moderate

Description of Current Operations and Problems

Current Operations
The manufacturing division’s operations consist of the following key areas:
1. Procurement: Sourcing raw materials and components.
2. Production: Manufacturing of heavy engineering components.
3. Quality Control: Ensuring products meet client and regulatory standards.
4. Logistics: Managing the timely delivery of products to project sites.
Operational Challenges

1. Supply Chain Inefficiencies:

o High Lead Time: Current lead time is 25 days, compared to the industry benchmark of
18 days.
o Low Inventory Turnover: The inventory turnover ratio is 4.5, below the industry
standard of 6.0.
2. Cost Overruns:
o Production costs are increasing at a rate of 10% per year, double the industry average.
o High levels of waste (8%) in the production process.
3. Project Delays:
o 15% of projects experience delays, compared to the industry average of 10%.
o Resource allocation is inconsistent, leading to production bottlenecks.

Methodology of the Study

The study followed a structured approach using operations management tools and techniques:
1. Data Collection:
o Internal Data: Production reports, inventory records, cost audits, and project schedules
from L&T’s manufacturing division.
4
 o External Data: Industry benchmarks and competitor analysis from EPC sector reports.
2. Analysis Tools:
o SWOT Analysis: To assess internal strengths and weaknesses.
o Pareto Analysis: To identify critical factors contributing to delays and cost overruns.
o Process Flow Analysis: To map the current operational workflow and identify
bottlenecks.
3. Visualization:
o Bar charts, line graphs, and tables were used to present key performance indicators
(KPIs) and trends.

Analysis of the Situation / Data Analysis

Internal Data:
 Production Reports: The file provides detailed data on energy consumption, emissions, and manufacturing outputs (e.g.,
FY 2023-24 total energy consumption was 10.5 Mn GJ).

 Active Project Sites: 716

 Manufacturing Facilities: 18
 Total Factory Output: 3,75,452 tonnes

 Inventory Records: Data on raw material consumption and eco-friendly practices (e.g., 4.4 Mn tonnes of cement, 7.4 Mn
tonnes of sand, and initiatives like recycling 32% of materials).

 Cement Consumed: 4.4 Mn tonnes

 Sand Consumed: 7.4 Mn tonnes
 Ferrous Materials: 2.3 Mn tonnes
 Eco-friendly materials: Recycled materials contributed 32% of the total materials used.

 Cost Audits: Financial performance metrics, such as net current assets (₹254.6 Bn) and manufacturing efficiency
improvements (e.g., energy intensity reduction by 15.
 Order Book: ₹3,713.8 Bn
 Net Fixed Assets: ₹124.6 Bn
 Green Business Revenue: ₹63,426 Cr (50% of total revenue)

 Operational Data: Active project sites (716), manufacturing facilities (18), and workforce distribution (59,344 employees
and 3,48,094 workmen).

Key ongoing infrastructure projects include

 Building and factories

 Roads: 809 lane km
 Electrification: 3,432 track km
 Mass transit systems (viaducts): 86 km.

Workforce Data:

 Employees: 59,344
 Contract Workmen: 3,48,094
 Safety training man-hours: 6.9 Mn
 Accident-free man-hours: 1,262 Mn

5
External Data:

Industry Benchmarks:

 L&T ranked 3rd in Top 200 Environmental Firms globally.

 Compliance with environmental and sustainability frameworks such as ISO 14001
 High focus on green infrastructure, such as the 14.8 Mn sq. ft. of certified Green Buildings.

Competitor Analysis:

 Customer satisfaction score: 9/10, reflecting competitive differentiation in quality and service.
 Memberships in 75 industry chambers for benchmarking and policy advocacy
 EPC Sector Insights: Highlights include customer satisfaction scores (9/10), sustainable sourcing practices (32% of the
supply chain assessed on ESG), and sector-specific metrics like mobility infrastructure contributions

SWOT Analysis

Strengths:

 Operational Scale: 716 active projects and robust manufacturing outputs.

 Eco-Friendly Initiatives: Use of eco-friendly materials (32%) and renewable energy (9.2% of total electricity).
 Skilled Workforce: Comprehensive safety and training programs covering 90,000 workers annually.

Weaknesses:

 Emission Challenges: High dependency on diesel (75% of energy mix).

 Process Inefficiencies: Limited water recycling at temporary project sites creates challenges in operational efficiency.

Opportunities:

 Expanding Green Business: Green revenue already contributing 50%; significant room for scaling carbon-neutral
projects.
 Renewable Energy: Potential to further leverage Power Purchase Agreements (PPAs) for renewable electricity.

Threats:

 Climate Risks: High exposure to extreme weather events affecting operations and delivery timelines.
 Regulatory Risks: Compliance with emerging ESG norms (BRSR Core disclosures) could increase operational costs

Pareto Analysis

Critical Factors Contributing to Inefficiencies:

 High Diesel Usage: Diesel accounted for >75% of energy mix, causing significant emissions.
 Grid Access Challenges: Temporary project sites often lack access to renewable electricity, relying heavily on diesel
generators.
 Material Sourcing: Cement and steel alone contribute 90% of Scope 3 emissions, highlighting the need for alternatives.

Action Plan:

 Prioritize diesel consumption reduction using biodiesel and CNG.

 Improve material efficiency by increasing the use of recycled cementitious materials like fly ash and GGBS.

Process Flow Analysis

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Identified Bottlenecks:

 Energy Utilization: While renewable energy usage has grown, challenges in grid access at project sites slow progress.
 Water Efficiency: Curing in construction projects heavily relies on water, creating inefficiencies.

Proposed Improvements:
 Digitization: Use sensors to track and optimize equipment usage, reducing fuel wastage.
 Innovative Practices: Implement steam curing, which reduces water use by 60% and accelerates curing processes
 Water Recycling: Expand wastewater reuse at project sites for non-potable purposes like dust suppression

Data Visualization

Bar Chart: This compares L&T's performance

with industry benchmarks across key
performance categories (Cost, Rework Rate,
On-Time Delivery, Flexibility, and Innovation).
L&T exceeds industry benchmarks in cost
increase and rework rate but lags in delivery,
flexibility, and innovation.

Line Graph: This highlights trends in

performance, showing the gap between
industry benchmarks and L&T's current
status for each category.

Key Performance Indicators

(KPIs)ii

KPI L&T Performance Industry Competitor Average

Benchmark
Inventory Turnover Ratio 4.5 5.5 5.2
Lead Time (days) 25 18 20
Production Cost Increase 10 5 6
(%)
Project Delay Rate (%) 14 10 12
Resource Utilization Rate 75 85 80
(%)
Waste Rate (%) 8 5 6

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 On-time Delivery (%) 85 90 88

Recommendations for Improvement

Operational Recommendation Expected Outcome

Area
Supply Chain Implement a Just-In-Time (JIT) inventory system Reduce lead times and improve inventory
turnover
Cost Adopt lean manufacturing principles Minimize waste and reduce production
Management costs
Production Invest in automation and IoT-enabled equipment Increase resource utilization and
Efficiency production efficiency
Quality Control Implement Total Quality Management (TQM) Reduce rework and improve product
quality
Project Use advanced project management tools (e.g., Improve resource allocation and project
Management Primavera, SAP) timelines

Problems Envisaged in Implementing Recommendations

Potential Challenge Impact Mitigation Strategy

Resistance to Delay in adopting new Conduct regular training and awareness
Change processes programs
High Implementation Strain on budget Prioritize high-impact, low-cost initiatives
Costs
Supply Chain Temporary delays in Implement phased changes and maintain
Disruptions production buffer stock
Technical Expertise Need for specialized skills Hire or train staff in new technologies

Conclusion

From an operations management perspective, L&T’s manufacturing division must focus on

improving supply chain efficiency, reducing costs, and enhancing production processes. By
adopting lean manufacturing, just-in-time inventory, and advanced project management tools,
L&T can improve its operational efficiency and maintain its competitive edge in the EPC sector.

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i
https://ymerdigital.com/uploads/YMER2112I9.pdf
https://annualreview.larsentoubro.com/building-factories.html
https://tataprojects.com/annual-report/22-23/images/board-report.pdf

ii
https://annualreview.larsentoubro.com/construction.html
https://annualreview.larsentoubro.com/yearatglance.html
https://investors.larsentoubro.com/pdf/LTIntegratedReport2023.pdf