ROHAN PALLEWATTE
LANKA HARNESS
EMPLOYEES: 330
FOUNDING: 2002
REVENUE: $40 MILLION
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WE REACHED A SATURATION POINT IN INNOVATION: ROHAN PALLEWATTE
Due to its narrow focus, Lanka Harness, a maker of sensors that deploy airbags and reduce seatbelt slack during a collision is in an innovation-constrained line of business. However, productivity improvements by the $40 million revenue business, a global leader in assembling wire harnesses, over the last few years may yet propel the business to double its topline and secure its position as a top tier supplier to the largest auto makers in the world.
World-over, impact sensors for airbags and seatbelts are hand assembled and manually tested in order to ensure that they are fail-safe. The defects cannot be higher than a rate of one-per-million, the global standard. “Sensors are critical for deploying airbags. That’s why robots don’t make them,” says Rohan Pallewatte, founder of Lanka Harness.
Workers assemble the wire harnesses referring to diagrams in order to meet the exact requirements of carmakers.
A completed harness is manually tested for defects. Defective products are reworked. Lanka Harness will lose orders if defects are discovered by carmakers. To boost productivity in a labour-intensive manufacturing chain, Pallewatte focused on reducing the rework rate
of assembled harnesses by introducing a manufacturing aid, a jig with sensors that sets off a buzzer if a component is placed incorrectly before a worker solders it into place. “We reduced the defective rate to zero following this,” Pallewatte says. Production costs have also fallen 5-10%.
“When you talk of innovative companies, no one talks about us,” says Pallewatte, “It would seem we’ve reached a saturation point in innovation.” But, he refuses to accept that Lanka Harness has reached the limit. He says the jig was developed in collaboration with a local university. “Nothing like this exists anywhere in the world,” he claims.
The company is experimenting with components that are able to conduct electric signals faster, an area well outside its core competency, but it’s adding value and solidifying relationships with its clients, some of whom are receptive to his ideas.
Lanka Harness assembles and exports sensors to 12 countries including China, Germany, India, Indonesia, Hungary, Poland, Russia and Romania. Over the last two years, orders have been increasing from the US, Brazil, and Mexico. Lanka Harness is also moving up the supply chain, supplying directly to carmakers. The car industry comprises a multi-tiered global supply chain. Companies that directly source parts, and component suppliers to carmakers are called tier-one suppliers. In turn, their suppliers are called tier-two suppliers. In the global automotive supply chain, Lanka Harness’ position has risen to a tier-one supplier, meaning its orders are received directly from major carmakers. Its Biyagama factory employs over 300 people making 2.2 million sensors for airbags and seat belts for Japanese, European and US car brands ranging from Aston Martin, Toyota, Nissan, BMW, Fiat-Chrysler, Ford, Volkswagen and Volvo.
The company is the exclusive supplier of sensors for Toyota’s Lexus range. Its industry reputation is well established. When 11 carmakers recalled over 30 million vehicles in 2015 for defective airbags made by Takata Corp, another tier-one supplier, Lanka Harness won the contract to replace these airbag sensors over a two-year period. This doubled the company’s output to 2.2 million units a month. Cars contain multiple harnesses and impact sensors.
A year later, Lanka Harness invested $5 million to set up operations in Mexico with 30 people to reduce lead times and costs, supplying to carmakers based in the US. Fifteen years ago, the company made low margins assembling wire harnesses for Japanese carmakers. Margins have improved since it graduated to a tier-one supplier, having earlier sold its products through its parent company Ito Springs. Its margins have improved to 55% by supplying to carmakers directly and is as high as 80% for certain European models.
“The value addition is high because the processes we have developed to achieve speed, cost savings and compliance to stringent standards are complicated, and not easily replicated by competitors,” Pallewatte says.