A PROJECT REPORT ON Master Data Analysis to correct Overhead
Absorption on Product Cost At Tata Motors Submitted in partial
fulfillment of the curriculum requirement of Post Graduate Diploma
in Management at ISB&M, Bangalore
Submitted By AVIK ROYUNDER THE GUIDANCE OF MR. HIMANSHU DHAR
& MR. VIVEK SANTHALYA
Finance & Accounts Division1|Page
TATA MOTORS
DECLARATION I hereby declare that this project report titled
Master Data Analysis to correct Overhead Absorption on Product Cost
AT TATA MOTORS is my original work carried out under the guidance
of Mr.Vivek Santhaliya (FINANCE),Tata Motors Limited, Jamshedpur.
This is the property of the institution and use of this report
without prior permission of the institution will be considered
illegal & actionable.
AVIK ROY PGDM 2011-2013 ISB&M, (Bangalore) DATE: 17th
August, 2012 PLACE: TATA MOTORS, JAMSHEDPUR
2|Page
ACKNOWLEDGEMENTNo task is singles mans effort, various factors,
situations, person integrated to provide the background for
accomplishment of a task. So, thanking just a few people for this
project would be justified the kind of help, assistance and
valuable advice I got from person whom I approached, I will remain
indebted to them . It was a great learning experience for me to
work on my project from 4th June to 31st July, 2012 in such a
congenial environment in the Finance division of TATA Motors Ltd.
at Jamshedpur. I have gathered lots of experience in this limited
span of work. I take this opportunity to express my profound
gratitude and deep regards to my Guide Mr. Vivek Sonthalya &
Mr. Himanshu Dhar for their exemplary guidance, monitoring and
constant encouragement throughout the course of this Thesis work.
The blessing help and guidance given by them time to time shall
carry me a long way in my journey of life on which I am about to
embark.
Last but not the least I would express my heartfelt gratitude
to, Mr. Uttam Biswas for allowing me to do this project at TATA
Motors Ltd.
My several well-wishers helped me directly or indirectly; I
virtually fall short of words to express my gratefulness to
them.
Therefore, I am leaving this acknowledgement incomplete in their
reminiscence.
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ContentsACKNOWLEDGEMENT
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3 CHAPTER-1
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5 INDUSTRY OVERVIEW
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5 CHAPTER 2
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34 SWOT ANALYSIS:
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34 CHAPTER 3
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37 VEHICLE FACTORY:
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37 THE WORKING
MECHANISM.....................................................................................................................
37 CHAPTER 4:
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43 SCOPE & OBJECTIVE
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43 CHAPTER 5
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46 RESEARCH METHODOLOGY
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46 CHAPTER 6
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47 CLASSIFICATION OF COSTS(Manufacturing)
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47 CHAPTER 7
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52 PROCESS OF COSTING AT TATA MOTORS Ltd.
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52 CHAPTER-8
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57 DATA ANALYSIS & INTERPRETATION
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57 CHAPTER- 9
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62 FINDINGS
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62 CHAPTER 10
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64 SUGGESTIONS:
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64
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CHAPTER-1 INDUSTRY OVERVIEWThe automotive industry in India is
one of the largest in the world and one of the fastest growing
globally. India's passenger car and commercial vehicle
manufacturing industry is the sixth largest in the world, with an
annual production of more than 3.7 million units in 2010. According
to recent reports, India is set to overtake Brazil to become the
sixth largest passenger vehicle producer in the world, growing
16-18 per cent to sell around three million units in the course of
2011-12. In 2009, India emerged as Asia's fourth largest exporter
of passenger cars, behind Japan, South Korea, and Thailand. In
2010, India reached as Asia's third largest exporter of passenger
cars, behind Japan and South Korea beating Thailand. As of 2010,
India is home to 40 million passenger vehicles. More than 3.7
million automotive vehicles were produced in India in 2010 (an
increase of 33.9%), making the country the second fastest growing
automobile market in the world. According to the Society of Indian
Automobile Manufacturers, annual vehicle sales are projected to
increase to 5 million by 2015 and more than 9 million by 2020. By
2050, the country is expected to top the world in car volumes with
approximately 611 million vehicles on the nation's roads. The
Indian automobile industry took a u-turn when Indian market opened
up with 100% FDI in the industry. Since then Indian automobile
industry is growing rapidly. . Global player have set up their
factories in India taking the level of production from 2 million
vehicles produced in 1991, it has increased to 10 million vehicles
in recent years.
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Potential of Indian Automobile Industry
There is a very stiff competition in the automobile industry
segment in India. This has helped many to realize their dreams of
driving the most luxurious cars. During the recent past, a number
of overseas companies have started grabbing a big chunk of the
market share in both domestic and export sales. Every new day dawns
in India with some new launches by active players in the Indian
automobile arena. By introducing some low cost cars, the industry
had made it possible for common men to buy cars for their personal
use. With some innovative strategies and by adopting some
alternative remedial measures, the Indian automobile industry has
successfully come unaffected out of the global financial crisis.
While the automobile industry in India is the ninth largest in the
world, the country emerged as the fourth largest automobiles
exporter on the globe following Japan, South Korea and Thailand, in
the year 2009. Over and above, a number of automobile manufacturers
based in India have expanded their operations around the globe also
giving way for a number of reputed MNCs to enthusiastically invest
in the Indian automobile sector. Nissan Motors has revealed its
prospective plans to export 250,000 vehicles produced in its India
plant by the year 2011. General Motors has also come up with
similar plans. During the current fiscal year, the Indian
automobile industry rode high on the resurgence of consumer demand
in the country as a result of the Governments fiscal stimulus and
attractively low interest rates. As a result the total turnover of
the domestic automobile industry increased by about 27 per cent. A
reply produced in the LokSabha recently has quoted data from the
Society of Indian Automobile Manufacturers and has revealed that
the total turnover of the Indian automobile Industry in
April-February 2009-10 was 1,62,708.77 crore. This is a remarkable
achievement compared with the total revenue of Rs 1,28,384.53crore
reported during the same period of last fiscal year. Specifically,
the segment of commercial vehicles witnessed the biggest jump in
revenues by 31 per cent by reporting Rs 38,845.09 crore. During the
same period, the passenger vehicle segment in the country witnessed
a growth of 27 per cent over the last fiscal year by reporting
total revenue of Rs 76,545.96 crores. These figures imply a highly
prospective road lying immediately ahead of the Indian automobile
industry. Predictions made by Ernst and Young have estimated that
the Indian passenger car market will have a growth rate of about 12
percent per annum over the next five years to reach the6|Page
production of 3.75 million units by the year 2014. The analysts
have further stated that the industrys turnover will touch $155
billion by 2016. This achievement will succeed in consolidating
Indias position as the seventh largest automobiles manufacturer on
the globe, eventually surging forth to become the third largest by
the year 2030 behind China and the US. The Automotive Mission Plan
launched by the Indian government has envisaged that the country
will emerge as the seventh largest car maker on the globe thereby
contributing more than 10 percent to the nations $1.2-trillion
economy. Further, industry experts believe that the nation will
soon establish its stand as an automobile hub exporting about 2.75
million units and selling about a million units to be operated on
the domestic roads.Types of Commercial vehicles in India
Commercial vehicles are of two types Goods vehicles and
Passenger vehicles. Good vehicles used for transport are the
trucks, tempos, containers, trailers and tankers. In this segment,
the medium and heavy commercial vehicles goods occupy a maximum
market share of 48%. The light commercial vehicles enjoy a market
share of 38%. The industrial revolution that started
post-Independence and contributed to urban migration led to a huge
demand for these goods vehicles. In the recent years, with the
retail boom all over the country, it has been noticed that the
market share of Light Commercial Vehicles (LCVs) is increasing.
This is indicative of the hub and spoke model that most retailers
and producers are following. The boom in the economy has also
contributed to increase in passenger, business and leisure travel.
These segments have also contributed to the passenger vehicles
sales increase. With the expansion of the cities, the travel of the
urban dwellers has also increased manifold. This is also one of the
prime factors in increasing the passenger travel.
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Commercial vehicle manufacturers in India
There are about nine manufacturers of commercial vehicles in
India. Some of them are Eicher Motors Ltd, Tata Motor Limited,
Ashok Leyland, Mahindra and Mahindra Limited and Volvo Motors. The
commercial vehicles segment is dominated by leading domestic
players like Tata Motors with a total market share of 62%, Ashok
Leyland Ltd. with a total market share of 15%, M & M Ltd. with
a total market share of 11%, Eicher Motors Ltd. with a total share
of 6%, and others.
TATA MOTORS ASHOK LEYLAND M&M EICHER MOTORS OTHERS
Tata Motors Limited is India's largest automobile company, with
consolidated revenues of INR 1, 23,133crores (USD 27 billion) in
2010-11. It is the leader in commercial vehicles in each segment,
and among the top three in passenger vehicles with winning products
in the compact, midsize car and utility vehicle segments. It is the
world's fourth largest truck and bus manufacturer.
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COMPANY OVERVIEW
Tata Motors Limited is India's largest automobile company, with
consolidated revenues of INR 1, 23,133crores (USD 27 billion) in
2010-11. It is the leader in commercial vehicles in each segment,
and among the top three in passenger vehicles with winning products
in the compact, midsize car and utility vehicle segments. It is the
world's fourth largest truck and bus manufacturer. The company's
over 25,000 employees are guided by the vision to be ''best in the
manner in which we operate, best in the products we deliver, and
best in our value system and ethics.'' Established in 1945, Tata
Motors' has its presence in the length and breadth of the country.
Over 6.5 million Tata vehicle runs on Indian roads, since first it
was rolled out in 1954. The company has set up its factories spread
across the country- Jamshedpur (Jharkhand), Pune (Maharashtra),
Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Sanand (Gujarat)
and Dharwad (Karnataka). Following a strategic alliance with Fiat
in 2005, it has set up an industrial joint venture with Fiat Group
Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and
Tata cars and Fiat powertrains. The company's dealership, sales,
services and spare parts network comprises over 3,500 touch points;
Tata Motors also distributes and markets Fiat branded cars in
India.
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Going International: Tata Motors, the first company from India's
engineering sector to be listed in the New York Stock Exchange
(September 2004), has also emerged as an international automobile
company. Through subsidiaries and associate companies, Tata Motors
has operations in the UK, South Korea, Thailand, Spain and South
Africa. Among them is Jaguar Land Rover, a business comprising the
two iconic British brands that was acquired in 2008. JLR supports
two state of the art engineering and design facilities and three
manufacturing plants (Solihull, Castle Bromwich &Halewood) in
the UK. In 2004, Tata Motors acquired the Daewoo Commercial
Vehicles Company, South Korea's second largest truck maker. The
rechristened Tata Daewoo Commercial Vehicles Company has launched
several new products in the Korean market, while also exporting
these products to several international markets. Today two-thirds
of heavy commercial vehicle exports out of South Korea are from
Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano
Carrocera, a reputed Spanish bus and coach manufacturer, and
subsequently the remaining stake in 2009. Hispano's presence is
being expanded in other markets. In 2006, Tata Motors formed a
joint venture with the Brazil-based Marcopolo, a global leader in
body-building for buses and coaches to manufacture fully-built
buses and coaches for India and select international markets. In
2006, Tata Motors entered into joint venture with Thonburi
Automotive Assembly Plant Company of Thailand to manufacture and
market the company's pickup vehicles in Thailand. The new plant of
Tata Motors (Thailand) has begun production of the Xenon pickup
truck, with the Xenon having been launched in Thailand in 2008.
Tata Motors (SA) (Proprietary) Ltd., Tata Motors' joint venture
with Tata Africa Holding (Pty) Ltd., has its assembly plant in
South Africa at Rosslyn, north of Pretoria, in the Gauteng province
of South Africa. The plant can assemble, from semi knocked down
(SKD) kits, light, medium and heavy commercial vehicles ranging
from 4 - 50 tonnes. Tata Motors is also expanding its international
footprint, established through exports since 1961. The company's
commercial and passenger vehicles are already being marketed in
several countries in Europe, Africa, the Middle East, South East
Asia, South Asia, CIS, Russia and South America. It has
franchisee/joint venture assembly operations in Bangladesh,
Ukraine, and Senegal. The foundation of the company's growth over
the last 65 years is a deep understanding of economic stimuli and
customer needs, and the ability to translate them into
customer-desired offerings through leading edge R&D. With over
4,500 engineers and scientists, the company's Engineering Research
Centre, established in 1966, has enabled pioneering technologies
and products. The company today has R&D centers in Pune,
Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain,
and the UK. It was Tata Motors, which developed the first
indigenously developed Light Commercial Vehicle, India's first
Sports Utility Vehicle and, in 1998, the Tata Indica, India's first
fully indigenous passenger car. Within two years of launch, Tata
Indica became India's largest selling car in its segment. In 2005,
Tata Motors created a new segment by launching the Tata Ace,
India's first indigenously developed mini-truck. In January 2008,
Tata Motors unveiled its People's Car, the Tata Nano, which India
and the world have been looking forward to. The Tata Nano has been
subsequently launched, as planned, in India in March 2009. A
development, which signifies a first for the global automobile
industry, the Nano brings the comfort and safety of a car within
the reach of thousands of families. Designed with a family in mind,
it has a roomy passenger compartment with generous leg space and
head room. It can comfortably seat four persons. Its mono-volume
design will set a new10 | P a g e
benchmark among small cars. Its safety performance exceeds
regulatory requirements in India. Its tailpipe emission performance
too exceeds regulatory requirements. In terms of overall
pollutants, it has a lower pollution level than two-wheelers being
manufactured in India today. The lean design strategy has helped
minimize weight, which helps maximize performance per unit of
energy consumed and delivers high fuel efficiency. The high fuel
efficiency also ensures that the car has low carbon dioxide
emissions, thereby providing the twin benefits of an affordable
transportation solution with a low carbon footprint. In May 2009,
Tata Motors ushered in a new era in the Indian automobile industry,
in keeping with its pioneering tradition, by unveiling its new
range of world standard trucks called Prima. In their power, speed,
carrying capacity, operating economy and trims, they will introduce
new benchmarks in India and match the best in the world in
performance at a lower life-cycle cost. In October 2010, Tata
Motors launched the Tata Aria, the first Indian four-wheel drive
crossover. The Tata Aria redefines several benchmarks with its
design and technologies, offering class leading features that take
comfort and safety to a new height. Tata Motors is equally focused
on environment-friendly technologies in emissions and alternative
fuels. It has developed electric and hybrid vehicles both for
personal and public transportation. It has also been implementing
several environment-friendly technologies in manufacturing
processes, significantly enhancing resource conservation. Through
its subsidiaries, the company is engaged in engineering and
automotive solutions, construction equipment manufacturing,
automotive vehicle components manufacturing and supply chain
activities, machine tools and factory automation solutions,
high-precision tooling and plastic and electronic components for
automotive and computer applications, and automotive retailing and
service operations. Tata Motors is committed to improving the
quality of life of communities by working on four thrust areas
employability, education, health and environment. The activities
touch the lives of more than a million citizens. The company's
support on education and employability is focused on youth and
women. They range from schools to technical education institutes to
actual facilitation of income generation. In health, our
intervention is in both preventive and curative health care. The
goal of environment protection is achieved through tree plantation,
conserving water and creating new water bodies and, last but not
the least, by introducing appropriate technologies in our vehicles
and operations for constantly enhancing environment care. With the
foundation of its rich heritage, Tata Motors today is etching a
refulgent future
VISION AND MISSION PASSENGER CAR BUSINESS UNIT (PCBU):-
VISION To develop TATA into a world class Indian car brand for
innovative and superior value vehicles. MISSION To,11 | P a g e
Be the most admired multi-national Indian car company producing
vehicles that people love to buy. Create an organization that
people enjoy working for, doing business with and investing in.
COMMERCIAL VEHICLES BUSINESS UNIT (CVBU):VISION To be a world
class corporate constantly furthering the interest of all its
stakeholders.
MISSION
SHAREHOLDERS To consistently create shareholder value by
generating returns in excess of Weighted Average Cost of Capital
(WACC) during the upturn and at least equal to Weighted Average
Cost of Capital (WACC) during the downturn of the business cycle.
CUSTOMERSTo strengthen the Tata brand and create lasting
relationships with the customers by working closely with business
partners to provide superior value for money over the life cycle.
EMPLOYEES To create a seamless organization that incubates and
promotes innovation, excellence and the Tata Core Values. VENDORS
AND CHANNEL PARTERNS To foster a long term relationship so as to
introduce a brand range of innovative products and services that
would benefit our customer and other stakeholders. COMMUNITY
Toproactively participate in reshaping the countrys economic
growth. Take a holistic approach toward environmental
protection.
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CORE VALUES INTEGRITY
CUSTOMER FOCUS
CORPORATE CITIZENSHIP
PASSION FOR ENGINEERING
PURPOSE To create economic assets for road transportation for
bulk moment of goods and people and participate in managing these
over the life of assets in order to create economic value.
PRODUCTS
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Commercial Vehicles India:
Industry-wide sales of commercial vehicles in India during the
year were 7,42,091 a growth of 27.3% over the previous year. During
the year, Tata Motors commercial vehicles sales achieved an
all-time high of 4,58,828 registering a growth of 22.7% over the
previous year and a market share of 61%. Intermediate and heavy
truck sales increased by 30% and several new models were introduced
during the year. Sales of the Ace, the sub-one ton pick-up, grew
25% over the previous year and achieved the highest ever annual
sales. The Companys other commercial vehicles also achieved record
sales during the year. Passenger bus sales during the year also
grew substantially, both diesel and CNG powered,and the Companys
new low-floor city buses have been exceedingly popular in the
cities where they have been marketed.
Passenger Cars India
14 | P a g e
In the passenger car segment, the industry registered sales of
24,66,814 passenger vehicles a growth of 29.8% over the previous
year. Sales levels at Tata Motors grew at only 23% resulting in a
market share decline of 0.7%.Initiatives are underway to revitalize
the dealer network and improve market share. The totalCompany
sales, since it entered the passenger car segment in 1999, crossed
2 million cars.The highest ever annual sales were achieved during
the year. Nano sales crossed 1,00,000 and the all-new crossover,
Aria was launched in the second quarter.Total export sales of Tata
Motors amounted to about 58,000 vehicles an increase of 70% over
the previous year
Jaguar Land RoverSales of Jaguar cars and Land Rover/Range Rover
vehicles have been extremely encouraging. During the year, Jaguar
introduced the new XJ sedan and a new R-series high performance
shashi versions of the XK sports and the XF sedan. Sales of Jaguar
and Land Rover vehicles span 140 countries, and their market appeal
has been growing. Total wholesale sales of Jaguar cars during the
year were about 53,000, registering a growth of 11.8% over the
previous year. Land Rover/Range Rover achieved wholesale sales of
1, 90,628, registering a growth of 30.1% over the previous year.
The new Evoque is proposed to be launched in the current year and
has attracted a very positive reaction from the market. Assembly
operations in India have commenced for the Land Rover Freelander.
Assembly of other Land Rover products are also under consideration.
To optimize the synergetic strengths between JLR and Tata Motors in
India, an examination is also underway on a joint engine
development program which would have manufacturing facilities both
in the U.K.
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and India. The Company is also considering various options for
assembly and localization of selected products in China, which has
become an important market for the Company.
Both Tata Motors in India and Jaguar Land Rover in the U.K. have
extensive product development plans for cars, off-road vehicles and
commercial vehicles, powered by regular and alternative fuels, as
also electric and hybrid vehicles, to meet future fuel efficiency
and low emission requirements.
FINANCEThe borrowings of the Company as on March 31, 2011 stood
at `15,899 crores (previous year `16,595 crores). Cash and Bank
balances and Current investments in Liquid / Liquid Plus schemes of
Mutual funds stood at `2,514 crores (previous year `2,273
crores).Tata Motors Groups borrowings as on March 31, 2011 stood at
`32,791 crores (previous year`35,108 crores). Cash and Bank
balances and current investments in Liquid / Liquid Plus schemes of
Mutual funds stood at `12,071 crores (previous year `9,808 crores).
The keyhighlights were:- The Company issued rated, listed,
secured/unsecured non-convertible debentures of `900 crores with
maturities of 10 15 years as a step to raise long term resources
and optimize the loan maturity profile.16 | P a g e
In October 2010, the Company raised funds aggregating `3,351
crores (US$ 750 million) by an issue of 3,21,65,000 A Ordinary
Shares at a price of `764/- per share and 83,20,300 Ordinary Shares
at a price of `1,074/- per share to Qualified Institutional Buyers
('QIBs'), under a qualified institutional placement. The said issue
was well received by the investors and the Company availed of the
opportunity to price it at the mid-upper band. This milestone in
the financing strategy enabled it to come closer to its objective
off balance sheet de-leveraging. Consequent upon the holders of
Foreign Currency Convertible Notes (FCCNs) of US$327.07 million and
JP 30 million exercising their option to convert their FCCNs to
Ordinary Shares, the Company allotted 2,35,70,426 Ordinary
Shares.
AWARDS / RECOGNITIONS RECEIVED DURING THE YEAR ARE AS FOLLOWS:
The Companys CVBU Pune won the GOLD rating of Green Factory
Building Award from Indian Green Building Council (IGBC), which is
first of its kind in India and for the Tata Group. All the existing
buildings are rated as GOLD rating factory buildings in Pimpri. The
Company is the first to receive this award for the existing factory
buildings. CVBU Pune was declared winner of 'Vasundhara Awards
2010' organised by the Maharashtra Pollution Control Board (MPCB),
winner of first prize in Technical Paper Contest at INSSAN Regional
Convention 2010 of INSSAN (Indian National Suggestion
Schemes'Association) - Eastern India Chapter. It also received the
Excellent Energy Efficient Unit award in the CII 11th National
Awards for Excellence in Energy Management - 2010. The Company won
the Srishti G-Cube Awards for Good Green Governance in
Manufacturing - Engineering category, CVBU Pune was the winner,
Jamshedpur Plant was declared ''runner up'', and Pantnagar Plant
received a ''certificate of commendation''. CVBU Lucknow was
adjudged the Excellent Energy Efficient Unit for the second time in
a row at the 11th National Awards for Excellence in Energy
Management 2010, conducted by CII - Godrej Green Business Centre at
Chennai. It also received the Silver Award in the automobile sector
at the 11th Global Green Tech Excellence Awards 2010 and awarded
the first prize in the National Energy Conservation Award (NECA)
2010, in the Automobile Sector, at New Delhi. Pantnagar Plant
received the first prize in the Uttarakhand State Energy
Conservation Award 2010, under the Large and Medium scale industry
category. It was also awarded the second prize at the National
Energy Conservation Awards (NECA) 2010, under the
17 | P a g e
Automobile Manufacturing Sector. This is the consecutive second
year that the Plant has received this National Award.
Subsidiaries, JVs and Associates
Tata Daewoo Commercial Vehicle Company Ltd (TDCV) Tata Marcopolo
Motors Ltd (TMML) Tata Hispano Motors Carrocera S. A. Tata Motors
(Thailand) Limited (TMTL) Tata Motors(SA) Proprietary Ltd (TMSA)
TML Drivelines Limited Telco Construction Equipment Co. Ltd.
(Telcon) TAL Manufacturing Solutions Ltd. (TAL) Tata Motors
European Technical Centre plc. (TMETC) Tata Technologies Ltd. (TTL)
and its subsidiaries TML Distribution Company Limited (TDCL)
Concorde Motors (India) Ltd. (Concorde) Tata Motors Finance Limited
Tata Motors Insurance Broking & Advisory Services Ltd (TMIBASL)
TML Holdings Pte. Ltd. (TML) Sheba Properties Ltd. (Sheba)
Business Overview18 | P a g e
Tata Motors Business: The Indian economy recorded a robust
growth rate estimated at 8.6% over 2009-10, driven by growth in the
agricultural sector (5.4%), industrial sector (8.1%) and services
sector (9.6%). The growth in the first half of the fiscal year was
higher, Which moderated in the second half. The year also witnessed
inflationary trends beyond RBI targets and followed successive
increases in CRR and other monetary policy changes by RBI to curb
inflation, which progressively affected the business sentiment
through the year. As a result, the second half of the fiscal year
saw a drop in the Index for Industrial Production (IIP) as
industrial activity was affected. On the back of overall economic
growth, the automotive industry recorded an increase of 26% in
current fiscal. Facilitated by economic growth, increase in
personal disposable incomes, availability of finance and
development of infrastructure, the commercial vehicle industry
growth moderated to 27% as compared to 40% in 2009-10 and the
passenger vehicle industry grew by 30% as compared to 25% in
2009-10, driven by increased level of disposable income. From
October 1, 2010, emission norms in India migrated to the Bharat
Stage III for the nonmetro cities / towns, considering an imminent
increase in prices, there was a spurt in buying of vehicles (mainly
commercial vehicles) in the first half of the year. The fuel
prices, especially the petrol prices increased throughout the year,
thereby affecting the consumer sentiment to an extent. The year
also witnessed a significant pressure on commodity prices, leading
to increase in costs and pressure on margins. The Companys total
domestic sales increased by 22.8% to 7,78,540 vehicles in
2010-11.The commercial vehicle sales at 4,58,828 vehicles grew by
22.7% and the Company maintained its leadership position in the
domestic market despite new players entering the field. The
passenger vehicles volumes at 3,19,712 vehicles grew by 23.0% in
the domestic market on the back of increased volumes of the Nano,
launch of Aria and the launches of new variants of Indigo, Manza
and Safari. The Companys exports increased by 70.3% to 58,089
vehicles during the year with significant economic improvement in
its major international markets such as the Indian
sub-continent,South Africa and the Middle East.
The industry performance in the the domestic market during
2010-11 and the Companys share is given below
19 | P a g e
Source: Society of Indian Automobile Manufacturers report and
Company Analysis* including Magic and Winger sales; #including Fiat
& Jaguar Land Rover branded car
20 | P a g e
TATA MOTORS JAMSHEDPUR MANUFACTURING
The largest passenger automobile and commercial vehicle
manufacturing company of India Tata Motors Limited, was formerly
called TELCO (TATA Engineering and Locomotive Company), has its
headquarters in Bombay, now Mumbai, India. Established in 1945,
listed on the New York Stock Exchange in 2004 has created Rs. 320
billion wealth and was one of the21 | P a g e
top 10 wealth creators in India. It has its manufacturing plants
in towns of Jamshedpur, Lucknow, and Pune. This company was founded
by Jamshetji Tata and is run by Ratan Tata under the flagship
company known as Tata and sons group. He commands 22000 employees
working in three plants as well as other regional and zonal offices
across the length and breadth of India. Tata motors passenger cars
still need to reach acceptable international requirements. The
company commands an imposing 65% share of the domestic commercial
vehicle market and is trying to modernize this segment. The
financial business of Tata motors was separated into a subsidiary
company in Sep. 2006, where it recorded a strong financial
performance during the last 5 year period. From year 2003-2007, the
profits of the company went up at a CAGR of 36.4%, to attain Rs.
331, 525 million in 2007 from Rs. 95, 731 Million in 2003. By
floating two rights issues at the end of Sep 2008 Tata Motors Ltd
expected to raise Rs 4, 150 crores. They are offering one ordinary
share valued at Rs. 340 every six shares expecting to net Rs. 2.90
Crores, the so called A share would have different voting and
dividend rights, for every such 6 shares held at a face value of
305 would raise Rs. 1.960 Crores, these proceed would be utilized
for an early repayment of the short term funding of 2.3 Billion $
(Rs. 10,189 Crores) Borrowed for Acquisition of jaguar and Land
Rover from their principle The Ford Motor Companys. It is also in
talks with private equity funds to offload 25% of stake in each of
the following 6 unlisted group units, they are Tata Daewoo
commercial vehicle company, HV transmissions, Tata motors finance,
Tata technologies and TELCO construction equipment, the sales of
the stakes would possible conclude by June 2009, helping it to
raise further funds for this acquisition, earlier in July it sold
24% stake in an Auto component unit to a group firm and booked a
profit of Rs. 110 crores, it also sold 10 million shares or 1.36%
of Tata steel for RS. 486 crores to Tata Sons, the holding company
of whole Tata group firms. Tata Motors owes its leading position in
the Indian automobile industry to its strong focus on
indigenization. This focus has driven the Company to set up
world-class manufacturing units with state-of-the-art technology.
Every stage of product evolution-design, development,
manufacturing, assembly and quality control, is carried out
meticulously. Our manufacturing plants are situated at Jamshedpur
in the East, Pune and Sanand in the West and Lucknow and Pantnagar
in the North.
22 | P a g e
Engine Factory
Cowl
TATA MOTORS
Truck Factory,
Cab
The
Truck Divisionboasts of two assembly lines. The main assembly
line, measuring
180 m in length has 20 work stations with a vehicle rolling out
every 8 minutes. The other line23 | P a g e
is dedicated to special purpose vehicles and for meeting the
requirements of the Indian Army. The uniqueness of the Factory lies
in its possession of:
Advanced facilities for manufacturing long members comprising of
a set-up of 5000 Tones Hydraulic press line, cut-to-length line for
strip preparation purchased from M/s Kohler of Germany and a Camber
Correction line.
Facility for hot forming of axle halves with a 3000 tone press
and heating furnace. Flexibility in manufacturing frames with an
off line Proto-typing facility.
The
Cab & CowlFactory is
equipped with state-of-art facilities like Centralized Paint
Shop and Automated painting set up, Robot painting, BIW
Fabrication of day & sleeper cabs for trucks, Articulates
(Tractor/ Trailer), BIW Fabrication of Cowls for buses, and other
miscellaneous applications.
The fully equipped
Foundary, that the unit is supported by, supplies high-grade SG
Iron
castings for automobile components and excavators, and is rated
as one of the cleaner, better and highly automated foundries in the
world. It has an annual capacity of 42,000 MT of Good castings and
makes, both, Gey and SG cast Iron casting. It manufactures all
critical automobile castings e.g. Cylinder Block, Cylinder Head
etc. It has a sophisticated Kunkel Wagner High Pressure Moulding
line of a rated production capacity of 90 moulds/ hour. This is
supported by a sand cooler and sand mixer from Kunkel Wagner. Its
melting shop has Medium Frequency Induction Furnaces for melting
and Channel Furnaces for holding. The pouring is done by a Channel
Press Pour coupled with a Steam Inoculation Dispenser. The core
shop has a state-ofthe-art Cold Box Machine, making four cores per
minute. It has elaborate sand and metallurgical laboratories. In
1993 the foundry was ISO 9002 certified by the Bureau Veritas
Quality International, which was later followed by the more
stringent QS 9000 certification from the BVQI in the year 2000.
Currently it is certified as TS: 16949 by BVC.
24 | P a g e
The
Engine Factoryis
responsible for the in-house manufacture of Tata 697/497
Naturally Aspirated and Turbo Charged engines, and the 6B series
engines manufactured at Tata Cummins. As one of the most modern
forging set-ups in the Country, the Forge Division is equipped with
a semi-automated forging line with 40,000 mkgBeche Hammer and
state-of-the-art presses from Kurimoto of Japan. It produces
critical forgings like crankshafts, front axle beams and steering
parts for the automobile plant. The new forging line, installed in
April 1984, has the capacity to forge front axle beams at 90 sec
per piece and crankshafts at 120 sec per piece. Mechanical presses
help produce a variety of heavy forgings. The sophisticated FIDIA
digit 165 CC Graphite Milling Machine links shop floor machines to
the design workstation. The Forge has been certified as ISO 9002
and QS 9000 by the BVQI.
COMPETITIORS OF TATA MOTORS:Automobile industry is booming in
this century. India is one of the key players in the international
automobile market. One of the fastest growing sectors in India is
the automobile industry. High demand for cars,two wheelers and
other vehicles has driven the growth of the automobile sector
.Introduction of easy repayment and finance schemes has given a
boost to the automobile companies in India. The list below gives
the name of the best automobile companies in India.
Bajaj Auto Ltd :It is market leader among the automobile
companies in India. The Bajaj Group's flagship company is Bajaj
Auto. It is the fourth largest two-wheeler and four-wheeler
manufacturer in the world. The Bajaj Brand is renowned in countries
like US,Europe,Latin America etc .It is25 | P a g e
also among the top ten Indian companies in market capitalizaion.
The company has products in the segments like scooters, mopeds,
motorcycles, three wheelers.
Ford Motor Company:This company entered the Indian automobile
industry by a tie up with Mahindra Motors to manufacture the
awesome Ford Escort. The company's models made for India are
manufactured keeping in mind the Indian conditions. The company has
sold about more than 260,000,000 vehicles across the globe. The
eminent brands of the company are Jaguar, Mercury, Ford, Lincoln.
The company also ranks among the best five industrial corporations
in the globe and is found in about 200 countries.
Mahindra & Mahindra Limited:This Indian automobile company
is a subsidiary of Mahindra Group. The company specializes in
vehicles for the general purpose utility. It ranks tenth among the
largest private sector companies in India. The company has four
divisions-tractors, automotive,inter trade and MSL. It has about 33
sales offices and the network support is about 500 dealers across
India.
Maruti Suzuki India Ltd:It is the company which has ushered
revolution in the industry of Indian cars. The Company is the
result of the alliance of Japan's Suzuki and Maruti. Maruti Suzuki
car is for the average Indian. It is the first Indian company which
manufactured about one million vehicles. The motto of the largest
Automobile Company of India was to offer low cost and fuel
efficient vehicles. The company produces Zen ,Maruti 800, Maruti
Esteem,Maruti Omni etc.
Hyundai Motor India Ltd :The company is a sub division of the
Hyundai Motors Company ,a South Korean multinational. The South
Korean top manufacturer of automobile has captured the Indian
market
26 | P a g e
through this sub division. The company has more than 70 dealer
workshops. Hyundai Santro is giving competition to others. This car
is designed in India near Chennai.
Hindustan Motors:The leading manufacturer of Electric Motors in
India is Hindustan Motors. The first Car Company of India to start
the manufacturing process of cars in India in the year 1942 is
Hindustan Motors. The company has a strong network of 115 dealers
and 60 Parts Dealers and 4 regional offices. The new model
,Ambassador Nova was launched by this company.
Ashok Leyland:It is the second largest key player among the
commercial vehicles in India. The company manufactures Vestibule
buses, Haulage vehicles,18-82 seater single and double decker buses
etc. The six manufacturing units of the company can produce 77,000
vehicles at a time. It is an interesting thing to note that there
is a 50:50 partnership between General Motors and SAIC. According
to sources, General Motors India Private Limited is the fifth
largest automobile company in India after Maruti Suzuki, Hyundai,
Tata Motors and Mahindra. This company has launched vehicle
manufacturing plants in Halol, Gujarat and TalegaonDabhade,
Maharashtra. The company has its headquarter in Gurgaon and
Halol.
Toyota Kirloskar Motor Private Limited:The main aim of the
company is INNOVATION. The continuous effort of the company has
made it very popular in the automobile sector. The company is
working with the aim of becoming 'the most admired company in the
country.
MCKENCYS 7S MODEL:
27 | P a g e
Structure
Strategy
System
Shared Value
Skill
Style
Staff
Explanation of each element:-
Strategy:- strategy is crated to maintain and make competitive
benefit over the competition.
28 | P a g e
Structure:- structure is the way the organization is constructed
and who report to whom.
System:- in system the daily activities and events that staff
members join in to get the job done.
Shared value:- shared values are also called super ordinate
goals. These values are the center values of the company that are
evidence in the corporate culture and the general work.
Style:- you have to adopt the style of leadership.
Staff:- in staff employees and their general capabilities are
included.
Skills:- skills are the actual skills of the employee who are
working for the company.
MCKENCYS 7S MODEL RELATING TO TATA MOTORS
STRUCTURE:-
Structure refers to the organization hierarchy, which provides
information about who reports to whom and how takes are divided and
integrated.29 | P a g e
A Tata motor has an organization structure that implies
centralization of authority at the top departmentalization of jobs.
Hierarchy of command, narrow span and intense division of labour,
this type of structure provides a clear and well defined work
setting to its employees.
RESPONSIBILTY OF TOP MANAGEMENT IN TATA MOTORS Empowerment of
people Building excellence throughout the organization Open and
transport communication Setting up of performance management system
Motivate the manager.
FOLLOWING ARE THE DEPARTMENTS IN TATA MOTORS Technical
department Production department Human resource department Material
department Finance department
SKILLS
One of the important attributes or capability possesses by the
organization are skills. The term skill include those
characteristics or strength which most of the people use to
describe the company.
Tata motor believe that human resource is the single largest
factor responsible for more effective utilization of all the other
resource.30 | P a g e
The following are skills possessed by Tata motors.
1. Communication skill and technical skills 2. Initiative 3.
Interpersonal skills 4. Analytical skills 5. People sensitivity
STYLE:It refer to the way of working and the reporting
relationship. Style means how manager collectively spend their time
and attention and how they used symbolic behavior. How the
management act its more important then what management say.
Management is a employee oriented. The working of management is
democratic in style.
Tata motors the representative of workers takes active
participation in all the managerial activities where the interest
of employee are involved. Functional heads takes the day today
decisions.
Whenever the dispute arises it will be settled at the initial
stage through mutual discussion between the management and
employees.
Strategy:-
It is a coherent set of actions aimed at gaining a suitable
advantage over competition, improving positions and allocating
resources.
31 | P a g e
The main strategy is to ensure maximum utilization of available
resources. For this purpose the company believes in promoting from
within the organization and thereby encourage its people to strive
for higher management stability. The set up also allows them to
take the advantage of common pool of technical and marketing talent
of the highest quality.
Tata adopts the following other strategy.
1. Adopts dynamic business strategy 2. Maintaining and improving
quality 3. Business intelligence 4. Create innovative solution for
the future 5. Long standing client relationship
System:System refer to the organization methods that are used
for the flow of information from
one department to other department. Tata has an adequate system
of internal control designed to provide reasonable assurance on the
achievement of the objective relating to efficiency and
effectiveness of operation, reliability of financial reporting.
There is a system compliance to follow rules and regulations and
for safeguard of assets.
32 | P a g e
Staff:The company is accommodating various employees, they
comprise of staff, workers and
trainees. The people in organization are very dedicated and work
towards the improvements of the organization.
Shared values:-
Intensity to win Make customer successful Team, innovate,
excel
Act with sensitivity Respect for the individual Thoughtful and
responsible
Unyielding integrity Delivering on commitments Honesty and
fairness in action
33 | P a g e
CHAPTER 2 SWOT ANALYSIS:Strengths Strong Domestic player (Indian
market) Tata has a strong presence in india and is a key
manufacturer of commercial vehicles. Tata motors is india slargest
automobile co with revenues of 123133.30 cr in 2010-11.It is a
demand driven, and customer-oriented, taking care of customers
preferences and taste. 3. Long list of portfolios: Its products
include passenger cars, trucks, vans and coaches. It is worlds 4th
biggest truck producer, it is also worlds second biggest bus
producer. Global Presence Tata Motors has been in the process of
acquiring foreign brands to increase its global presence. Through
acquisition, Tata has operations in the UK, South Korea, Thailand
and Spain. Among these acquisitions is Jaguar Land Rover, a
business comprising two struggling iconic British brands that was
acquired from the Ford Motor Company in 2008. In 2004, Tata
acquired the Daewoo Commercial Vehicles Company, South Koreas
second largest truck maker. Today two-thirds of heavy commercial
vehicle exports out of South Korea are from Tata Daewoo. Tata
Motors has expanded its production and assembly operations to
several other countries including South Korea, Thailand, South
Africa and Argentina and is planning to set up plants in Turkey,
Indonesia and Eastern Europe. Tata also has franchisee/joint
venture assembly operations in Kenya, Bangladesh, Ukraine, Russia
and Senegal. Tata has dealerships in 26 countries across 4
continents. Dealership, Sales and Service Access: The Companys
dealership, sales, services and spare parts network comprises over
3500 touch points. Research and Development Activities: Tata motors
is known as an innovative global leader. The company has a very
strong R&D having over 3000 engineers and scientists. The
Engineering Research Centre (ERC) in Pune was setup in 1966 and is
among the finest in the country. It has been honoured with two
prestigious awards - 'The DSIR National Award for R&D Effort in
Industry - 1999' and 'National Award for Successful
Commercialisation of Indigenous Technology by an Industrial The
internationalisation strategy so far has been to keep local
managers in new acquisitions, and to only transplant a couple of
senior managers from India into the new market. The benefit is that
Tata has been able to exchange expertise. For example after the
Daewoo acquisition the Indian company leaned work discipline and
how to get the final product 'right first time.' The company has a
strategy in place for the next stage of its expansion. Not only is
it focusing upon new products and acquisitions, but it also has a
programme of intensive management development in place in order to
establish its leaders for tomorrow. The company has had a
successful alliance with Italian mass producer Fiat since 2006.
This has enhanced the product portfolio for Tata and Fiat in terms
of production and knowledge 34 | P a g e
exchange. For example, the Fiat Palio Style was launched by Tata
in 2007, and the companies have an agreement to build a pick-up
targeted at Central and South America.
Weaknesses Return on Investment on TATA motors shares in low.
Tata motors products are not considered as luxurious. The products
are generally targeted for economy class rather than for luxury.
Hence, the company lacks a strong footprint in the sector of luxury
products. Safety standards are not maintained/ often ignored. This
has led to diminish of public image of the TATA automobiles (eg
Tata Nano). Limited consumer base Though Tata is present in many
countries it has only managed to create a large consumer base in
the Indian Subcontinent, namely India, Bangladesh, Bhutan, Sri
Lanka and Nepal. Tata has a growing consumer base in Italy, Spain
and South Africa. Relatively smaller proportion of market share in
Passenger vehicles in India.
The company's passenger car products are based upon 3rd and 4th
generation platforms, which put Tata Motors Limited at a
disadvantage with competing car manufacturers. Despite buying the
Jaguar and Land Rover brands (see opportunities below); Tata has
not got a foothold in the luxury car segment in its domestic,
Indian market. Is the brand associated with commercial vehicles and
low-cost passenger cars to the extent that it has isolated itself
from lucrative segments in a more aspiring India? One weakness
which is often not recognised is that in English the word 'tat'
means rubbish. Would the brand sensitive British consumer ever buy
into such a brand? Maybe not, but they would buy into Fiat, Jaguar
and Land Rover (see opportunities and strengths). Opportunities In
the summer of 2008 Tata Motor's announced that it had successfully
purchased the Land Rover and Jaguar brands from Ford Motors for UK
2.3 million. Two of the World's luxury car brand have been added to
its portfolio of brands, and will undoubtedly off the company the
chance to market vehicles in the luxury segments. Tata Motors
Limited acquired Daewoo Motor's Commercial vehicle business in 2004
for around USD $16 million. Nano is the cheapest car in the World -
retailing at little more than a motorbike. Whilst the World is
getting ready for greener alternatives to gas-guzzlers, is the Nano
the answer in terms of concept or brand? Incidentally, the new Land
Rover and Jaguar models will cost up to 85 times more than a
standard Nano!
35 | P a g e
The new global track platform is about to be launched from its
Korean (previously Daewoo) plant. Again, at a time when the World
is looking for environmentally friendly transport alternatives, is
now the right time to move into this segment? The answer to this
question (and the one above) is that new and emerging industrial
nations such as India, South Korea and China will have a thirst for
low-cost passenger and commercial vehicles. These are the
opportunities. However the company has put in place a very
proactive Corporate Social Responsibility (CSR) committee to
address potential strategies that will make is operations more
sustainable. The range of Super Milo fuel efficient buses are
powered by super-efficient, ecofriendly engines. The bus has
optional organic clutch with booster assist and better air intakes
that will reduce fuel consumption by up to 10%. Threats Other
competing car manufacturers have been in the passenger car business
for 40, 50 or more years. Therefore Tata Motors Limited has to
catch up in terms of quality and lean production.
Sustainability and environmentalism could mean extra costs for
this low-cost producer. This could impact its underpinning
competitive advantage. Obviously, as Tata globalises and buys into
other brands this problem could be alleviated. Since the company
has focused upon the commercial and small vehicle segments, it has
left itself open to competition from overseas companies for the
emerging Indian luxury segments. For example ICICI bank and
DaimlerChrysler have invested in a new Punebased plant which will
build 5000 new Mercedes-Benz per annum. Other players developing
luxury cars targeted at the Indian market include Ford, Honda and
Toyota. In fact the entire Indian market has become a target for
other global competitors including Maruti Udyog, General Motors,
Ford and others. Rising prices in the global economy could pose a
threat to Tata Motors Limited on a couple of fronts. The price of
steel and aluminium is increasing putting pressure on the costs of
production. Many of Tata's products run on Diesel fuel which is
becoming expensive globally and within its traditional home
market.
36 | P a g e
CHAPTER 3 VEHICLE FACTORY: THE WORKING MECHANISMThe Vehicle
Factory boasts of two assembly lines. The main assembly line,
measuring 180 m in length has 20 work stations with a vehicle
rolling out every 8 minutes. The other line is dedicated to special
purpose vehicles and for meeting the requirements of the Indian
Army. The uniqueness of the Factory lies in its possession of
Advanced facilities for manufacturing long members comprising of
a set-up of 5000 Tones Hydraulic press line, cut-to-length line for
strip preparation purchased from M/s Kohler of Germany and a Camber
Correction line. Facility for hot forming of axle halves with a
3000 tone press and heating furnace. Flexibility in manufacturing
frames with an off line Proto-typing facility.
The Main Activities in Vehicle Factory:
Engine Drop Engine is brought with hoist & dropped on
chassis. Holes are aligned of mounting bracket with bolts of
mounting pads. Prefit washer & nut on the bolts. Holes are
aligned with front mounting pad holes, insert bolt & prefit.
After all nut bolts are fitted tackle is removed
37 | P a g e
Radiator Drop Drop the radiator with hoist on chassis. Align the
bottom holes & prefit bolts with washer. Align the dumbbell
assembly holes with radiator mtg bkt holes & prefit bolts.
Tighten all nuts. Apply paint after tightening.
38 | P a g e
Cowl Drop Bring the cowl with monorail hoist. Align it with the
chassis & drop slowly Align holes on cowl mtg bracket rear
LH/RH & insert bolts to prefit. Align holes on cowl mtg bracket
front LH/RH & insert bolts. After inserting the bolts remove
tackle.
Battery Drop39 | P a g e
Lift battery along with battery cover, Bring to mtg tray &
drop Apply petrol jelly to battery poles Prefit nuts & tighten
with nut runner to fit battery on tray
Fuel Tank Mounting Paste the rubber strap on the mtg bracket
with Lift the fuel tank & place on the mtg brackets Wrap the
strap & prefit into the bracket at bottom with double nuts
Tighten the straps by tightening the nuts
Tyre Fitment Collect front tyre, lift slightly with the help of
wooden bat Align the bolts on axle with holes on tyre rim, Insert
tyre on axle & prefit nuts. Assemble front LH & RH tyre
Similarly assemble rear inner & outer tyres on axle &
prefit nuts Repeat the same for dummy axle tyre fitment
40 | P a g e
Coolant Filling: Remove the cap of auxiliary water tank &
insert gun. Start the flow of collant into tank Fill the collant
till MAX mark on tank. Stop the flow of coolant
41 | P a g e
Diesel Filling Open the cover of fuel tank, Insert gun into it.
Dispense 25 lit of diesel in to tank. Fit the tank cover.
Clutch Bleeding Remove the top cover of clutch oil filling
bottle. Remove the clutch pipe from booster. Connect flexible pipe
& start filling oil with gun. Bleed the clutch oil from other
end till all the air in the circuit is removed. Stop filling &
plug the other end. Check clutch working
Smoke Meter: Insert the probe of smoke meter into silencer pipe.
Start the vehicle in neutral gear & race for few min. Take
readings at different intervals. Stop the vehicle & remove the
probe. Take the printout of the report from m/c & paste on
inspection card
Chassis Booking: After checking all the remarks in the
inspection card & correction of
42 | P a g e
defects listed in it, Ok sticker is pasted on the cowl &
chassis is booked. Ok chassis in now ready for road testing
CHAPTER 4: SCOPE & OBJECTIVE
OBJECTIVESAbsorption costing methods is followed in Tata Motors
Jamshedpur plant, for allocation of overheads to the product cost.
Overheads are classified into four major heads as given below:
Salary expenses. Indirect expenses. Consumption of Stores and
spares. Depreciation charge. Each expenses heads are allocated on
different basis to the product costs. My objective for the project
was to correct the allocation of depreciation cost to be absorbed
on the product costs, by:
Physically identifying the assets (fixed) and then allocating
them to their respective cost centers for correct depreciation
booking.
Correcting the asset master data in the system like gross block,
net block, depreciation etc, and these parameters are used as a
base for costing of products.
43 | P a g e
The another significant aspect of the project was that, those
assets which were not in use or which were lying as a scrap-
whether to make in use of those assets by modifications or to
dispose them off.
OUTCOME OF OBJECTIVES:
Correction of overhead absorption rate results in correct
costing of products.
Correct costing will lead to correct pricing of the product in
the market. Correct costing will lead to correct profit margin on
the product.
SCOPEScope of the Project was to correct Overhead absorption on
the Frame cost. Total Overheads are divided into four heads and are
calculated under given percentage basis: Salary expenses (67% of
Total Overheads) Indirect expenses (8% of Total Overheads)
Consumption of Stores and spares (15% of Total Overheads)
Depreciation charge (10% of Total Overheads) In this project our
scope was to correct only Depreciation Overheads by correction of
Asset master data for correct calculation and absorption of
Depreciation overheads on the product cost of the frame, which
constitutes 10% of the total overheads.
44 | P a g e
Scope of project was limited to the Vehicle Factory of Tata
motors Jamshedpur.
Time duration for the project was 2 months.
Only fixed assets of the Vehicle Factory was to be audited for
the study, not the current assets.
To physically identify the assets in their respective cost
center and to match them with the asset master for correct
depreciation booking.
To suggest the action point to the Tata motors based on my
findings for correct allocation of depreciation and overhead
absorption rate for correct costing of product.
45 | P a g e
CHAPTER 5 RESEARCH METHODOLOGY
Research Design The project study is based on descriptive and
applied research. This project based on physically finding the
assets in vehicle factory and matching them with the asset master.
Later on it focuses on the product costing method followed by Tata
motors.
Determining Sample Design
Research Process included some specific items related to the
research viz. Asset Number, Cost centre, Asset Category, Gross
block etc. and excluded those items which were not required in the
research process. Also assets included in the project were taken
from cost centre 1216210, and excluded other cost centres in the
asset master. Collecting the dataData Collection was both primary
and secondary. The first half of the project which includes the
company profile, industry profile, swot analysis etc. falls under
secondary data. The second half which includes the working
mechanism of vehicle factory, the 46 | P a g e
product cost followed by TML etc comes under the primary
data.
CHAPTER 6 CLASSIFICATION OF COSTS (Manufacturing)We first
classify costs according to the three elements of cost: a)
Materials b) Labour c) Expenses
Product and Period Costs: We also classify costs as either 1 2
Product costs: the costs of manufacturing our products; or Period
costs: these are the costs other than product costs that are
charged to, debited to, or written off to the income statement each
period.
The classification of Product Costs:
Direct costs: Direct costs are generally seen to be variable
costs and they are called direct costs because they are directly
associated with manufacturing. In turn, the direct costs can
include:
Direct materials: plywood, wooden battens, fabric for the seat
and the back, nails, screws, glue. Direct labour: sawyers,
drillers, assemblers, painters, polishers, upholsterers
47 | P a g e
Direct expense: this is a strange cost that many texts don't
include; but (International Accounting Standard) IAS 2, for
example, includes it. Direct expenses can include the costs of
special designs for one batch, or run, of a particular set of
tables and/or chairs, the cost of buying or hiring special
machinery to make a limited edition of a set of chairs.
Total direct costs are collectively known as Prime Costs and we
can see that Product Costs are the sum of Prime costs and
Overheads.
Indirect Costs: Indirect costs are those costs that are incurred
in the factory but that cannot be directly associate with
manufacture. Again these costs are classified according to the
three elements of cost, materials labour and overheads.
Indirect materials: Some costs that we have included as direct
materials would be included here. Indirect labour: Labour costs of
people who are only indirectly associated with manufacture:
management of a department or area, supervisors, cleaners,
maintenance and repair technicians Indirect expenses: The list in
this section could be infinitely long if we were to try to include
every possible indirect cost. Essentially, if a cost is a factory
cost and it has not been included in any of the other sections, it
has to be an indirect expense. Here are some examples include:
Depreciation of equipment, machinery, vehicles, buildings
Electricity, water, telephone, rent, Council Tax, insurance Total
indirect costs are collectively known as Overheads.
Finally, within Product Costs, we have Conversion Costs: these
are the costs incurred in the factory that are incurred in the
conversion of materials into finished goods.
The classification of Period Costs: The scheme shows five sub
classifications for Period Costs. When we look at different
organisations, we find that they have period costs that might have
sub classifications with entirely different names. Unfortunately,
this is the nature of the classification of period costs; it can
vary so much according to the organisation, the industry and so
on.48 | P a g e
Nevertheless, such a scheme is useful in that it gives us the
basic ideas to work on.
Administration Costs: Literally the costs of running the
administrative aspects of an organisation. Administration costs
will include salaries, rent, Council Tax, electricity, water,
telephone, depreciation, a potentially infinitely long list. Notice
that there are costs here such as rent, Council Tax, that appear in
several sub classifications; in such cases, it should be clear that
we are paying rent on buildings, for example, that we use for
manufacturing and storage and administration and each area of the
business must pay for its share of the total cost under review.
Without wishing to overly extend this listing now, we can conclude
this discussion by saying that the costs of Selling, the costs of
Distribution and the costs of Research are all accumulated in a
similar way to the way in which Administration Costs are
accumulated. Consequently, our task is to look at the selling
process and classify the costs of running that process accordingly:
advertising, market research, salaries, bonuses, electricity, and
so on. The same applies to all other classifications of period
costs that we might use.
Finance Costs: Finance costs are those costs associated with
providing the permanent, long term and short term finance. That is,
within the section headed finance costs we will find dividends,
interest on long term loans and interest on short term loans.
Finally, we should say that we can add any number of
subclassifications to our scheme if we need to do that to clarify
the ways in which our organisation operates. We will also add
further subclassifications if we need to refine and further refine
out cost analysis.
COST SHEET FORMAT
49 | P a g e
Particulars Opening Stock of Raw Material Add: Purchase of Raw
materials Add: Purchase Expenses Less: Closing stock of Raw
Materials Raw Materials Consumed Direct Wages (Labour) Direct
Charges Prime cost (1) Add :- Factory Over Heads: Factory Rent
Factory Power Indirect Material Indirect Wages Supervisor Salary
Drawing Office Salary Factory Insurance Factory Asset Depreciation
Works cost Incurred Add: Opening Stock of WIP Less: Closing Stock
of WIP Works cost (2) Add:- Administration Over Heads:Office Rent
Asset Depreciation50 | P a g e
Amount Amount *** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** *** *** *** *** ***
*** ***
General Charges Audit Fees Bank Charges Counting house Salary
Other Office Expenses Cost of Production (3) Add: Opening stock of
Finished Goods Less: Closing stock of Finished Goods Cost of Goods
Sold Add:- Selling and Distribution OH:Sales man Commission Sales
man salary Traveling Expenses Advertisement Delivery man expenses
Sales Tax Bad Debts Cost of Sales (5) Profit (balancing figure)
Sales
*** *** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** *** *** ***
Notes:1) Factory Over Heads are recovered as a percentage of
direct wages 2) Administration Over Heads, Selling and Distribution
Overheads are recovered as a percentage of works cost.
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CHAPTER 7 PROCESS OF COSTING AT TATA MOTORS Ltd.
TATA MOTORS- JAMSHEDPUR DIVISION CHART
AUTO
FORGEE
FOUNDRY
C.E.M
R&D DH.R
C. S
Assembly Line
Vehicle Factory Engine Division 52 | P a g e
Finance Security
Personnel Cab & Cowl Shop Administration Auto Planning
Example showing the procedure for product costing in Tata Motors
(JSR), through division chart.
*C. E. M- Capital Equipment Manufacturing. *C. S- Common
Service. *R & D- Research and Development.
PROCESS OF COSTING IN TATA MOTORS (JSR)
As shown in the chart in the previous page, there are many
divisions in the Tata motors Jamshedpur plant like Auto, forge,
foundry, C.E.M, C.S, R & D divisions. As also discussed
previously that there are two types of costs direct cost and
indirect costs. The indirect costs such as services which the other
supporting divisions provide to manufacturing divisions, example
common service division which consists of finance, H.R, personnel,
security and administration departments gives there supporting
services to like Auto division, forging, foundry, C.E.M, research
& development divisions. The indirect cost incurred by these
divisions for their common services are also considered in the
total cost of product. Another example for indirect cost from the
chart: In Auto divisions there are many manufacturing divisions
such as Assembly line, Frame shop, Engine division, Cab & cowl
shop, these divisions are also supported by Auto planning division,
the indirect cost incurred by53 | P a g e
this division in supporting other manufacturing divisions also
contributes in the total product cost. The costing procedure can be
made clearer by following parameters: A) If considering only Auto
division then costing procedure are1) Common service expenses are
allocated to Auto based on various parameters. 2) Auto expenses =
Expenses booked in cost center* of (Assembly line + frame shop +
Cab & cowl + Auto planning) + Common service. (*Cost center
means the area in which manufacturing activity is done). B) If
considering only frame shop in the Auto division then costing
procedure is1) Expenses of frame shop = Expenses in (productive
cost center + Non- productive cost center) + common service + share
of Auto planning division.
2) Cost per unit of frame (calculated quarterly) = Total
expenses of frame shop / Total production.
STANDARD STEPS FOR COSTING IN TATA MOTORS (JSR)1. BC rate or
Cost center working rate is done on Quarterly basis 2. Cost center
wise expense is downloaded from SAP. 3. Cost center wise summary of
expense is made in to the following category a. Sal b. Inert c. STS
Salary expenses Indirect expenses Consumption of Stores and spares
Depreciation charge
d. Depreciation -
4. Reconciliation between trial balance and cost center wise
dump is made. List of account that is not considered for overhead
absorption are identified and form part of the record. 5. Following
Non-Financial parameters are also included at the cost center wise
summary. a. NOM54 | P a g e
-
No of permanent employees
b. AGB c. Cu Dep
-
Average Gross Block Accumulated depreciation
Summary is prepared in the following format: Cost Center NOM
Salary Inert STSP Dep. Total Exp AGB Cu Dep
6. Cost centers are then grouped in to the following based on
the nature of cost centers: a. Tool Room b. Productive cost centers
c. Non Productive cost centers d. Maintenance cost centers e.
Stores f. Spares Domestic g. Spares Export h. Sales & Service
7. Power expense is booked in the divisional cost centers of the
respective factory. Power expense booked in the auto division
profit center is taken from SAP and re-distributed to the cost
centers based on SMH (standard man hour) of the productive cost
centers.
8. Total Common service charge allocated to Auto division is
grouped based on their nature of allocation in the common service
working file. These groups are further regrouped into the basis on
which they will be redistributed to group of cost centers of auto
division. A summary of the said grouping and redistribution is
given below:
Nature of Common service expense allocated to Auto Average Gross
Block 55 | P a g e
Basis of allocation of Common service share of Auto to Cost
centers group within Auto Average Gross Block
Allocated to Cost center Group ALL
Power Material Overhead Spares No. of Men Telephone Guest House
Low Cost Automation Compressor House Oxygen Plant NPI Floor area
Turnover Water Import ICR NPI
Average Gross Block Material Overhead STORES Material Overhead
No. of Men No. of Men ALL No. of Men No. of Men Standard Man Hour
Standard Man Hour Standard Man Hour Standard Man Hour ALL Standard
Man Hour Standard Man Hour Standard Man Hour Standard Man Hour ERC
ERC
9. Following common service expenses allocated to Auto are not
considered for BC rate working:Cost center 1219987 1219919 1219911
1219811 1219989 1219979 1219912
KOREA International Projects Internal Audit Divisional Office
(Marco Polo) Divisional Office (Prog. Mgt) Projects WT Projects
10. Common service expense of auto is allocated to group of cost
centers within auto based on the above basis.
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11. All the overheads of cost center group, except Productive
cost center group, and Common service expense allocated above is
absorbed to the individual productive cost centers, a matrix is
prepared for the same. The overheads are absorbed to the productive
cost centers based on the nature of expenses and allocation basis
sated above. Total expenses of productive cost center will be the
summation of the followings expenses: a. Direct expenses booked in
Productive cost centers b. Allocated expense, both direct expenses
and allocated common service expense, of other cost center on
productive cost centers c. Common service allocation of productive
cost centers
12. Total expense of a productive cost center arrived above is
divided by the total SMH booked in the respective cost center to
arrive at the overhead rate per SMH also known as the BC rate or
overhead absorption rate.
13. BC rate arrived above is updated in the System using Tcode
KP26
CHAPTER-8 DATA ANALYSIS & INTERPRETATION
Analysis 1 Asset category: Electrical InstallationsCost Centre
Number of assets as per asset master Assets Physically found in
cost centre 1216210 Assets Physically not found in cost centre
1216210 Disposed off Assets found in a different cost centre
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1216210
10
9
1
0
1
Interpretation In asset category electrical installations nine
assets present in the asset master were physically found in line 1
of the vehicle factory. There was one asset which was physically
found but in a different cost centre. It was found in Assembly Line
2 of the cost centre 1216211.
Analysis 2 Asset Category: Factory BuildingsCost Centre Number
of Assets Physically assets as per found in cost asset master
centre 1216210 Assets Physically not found in cost centre 1216210
Disposed Off Assets found in a different cost centre 1216210 20 16
4 1 3
Interpretation In asset category factory and buildings, there
are 20assets in the asset master of which 19 assets were found and
1 asset was disposed off. But there were three assets which were
found in a different cost centre i.e. in cost centre 1216211.
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Analysis 3 Asset Category: Factory Equipment & FixtureCost
Centre Number of assets as per asset master Assets Physically
found(a) in cost centre 1216210 1216210 88* 76 Assets Physically
not found in cost centre 1216210 12 4 8 Disposed Off Assets Lying
in a different cost centre
Interpretation Out of the eighty eight assets present in the
asset master, seventy six assets were found in line 1 of the cost
centre 1216210. Out of the 12 assets which were not found, four
assets were disposed off. Four assets lie in the cost centre
1216233 of the frame shop. The other four assets being used in
chassis line2 of the cost centre 1216211.
Analysis 4 Asset Category: FurnitureCost Centre Number of assets
as per asset master Assets Physically found(a) in cost centre
1216210 1216210 59 | P a g e 5 5 0 0 0 Assets Physically not found
in cost centre 1216210 Disposed Off Assets Lying in a different
cost centre
Interpretation Out of 5 assets in furniture category in asset
master, all the 5 assets were physically found in line 1 of the
cost centre 1216210.
Analysis 5 Asset Category: Other IT related equipmentsCost
Centre Number of assets as per asset master Assets Physically
found(a) in cost centre 1216210 1216210 3 3 0 0 0 Assets Physically
not found in cost centre 1216210 Disposed Off Assets Lying in a
different cost centre
Interpretation All the three assets included in the asset master
generated by the system were physically present in cost centre
1216210. There were no assets found in a different cost centre or
disposed off.
Analysis 6 Asset Category: Plant &machineryCost Centre
Number of assets as per asset master Assets Physically found(a) in
cost centre 1216210 1216210 29 28 1 0 1 Assets Physically not found
in cost centre 1216210 Disposed Off Assets Lying in a different
cost centre
Interpretation: According to the asset master in plant and
machinery category of the cost centre 1216210 there are 29 assets
altogether and out of them 28 assets could be physically
identified. There was a single asset that was present in cost
centre 1216211.60 | P a g e
Analysis 7 Asset Category: Roads and other BuildingsCost Centre
Number of assets as per asset master Assets Physically found(a) in
cost centre 1216210 1216210 5 5 Assets Physically not found in cost
centre 1216210 0 0 0 Disposed Off Assets Lying in a different cost
centre
Interpretation According to the asset master, the category roads
and other building have 5 assets. Four assets were physically found
in the chassis line1 and one asset was found in Tyre assembly line
1.
Analysis 8 Asset Category: Furniture minor, Minor Equipments,
Motor Cars, and Jeep.Cost Centre Number of assets as per asset
master Assets Physically found(a) in cost centre 1216210 1216210 2
1 Assets Physically not found in cost centre 1216210 1 1 0 Disposed
Off Assets Lying in a different cost centre
Interpretation:
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*Note: Since trolleys were old, and relatively lower in costs,
they were not considered. (26 Trolleys were not considered, out
which 25 of them fell under Factory Equipment & fixture and 1
under minor equipment.
CHAPTER- 9 FINDINGS
Cost centre 1216210 in vehicle factory covers 188 assets in
cross conveyor and assembly line 1.
62 | P a g e
Each and every asset has a particular and a unique asset number
booked in the asset master
Each and every asset is considered under various categories viz.
factory and buildings, electrical installations, plant and
machinery, furniture, minor equipments etc. The numbers of assets
which are physically found in the cost centre 1216210 of vehicle
factory are, out of 188 assets are 143. There were forty five
assets which were physically not found in the cost centre 1216210.
There are twenty six trolleys in the asset master. Trolleys are old
and the price is low, so their significance was minimal. So they
were considered either disposed off or not in use anymore. There
are nine assets which is present in the cost centre 1216210 of the
asset master. But they were found to be used in a different cost
centre i.e. 1216211. There are four assets which is present in the
cost centre1216210 of the asset master. But they were physically
found in the cost centre 1216233 of the frame shop.
According to the asset master digital tyre inflators are six in
number in the cost centre 1216210 of the vehicle factory. But there
were fourteen of them identified in the cost centre 1216210.
Finally there are nine assets that are disposed off.
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CHAPTER 10 SUGGESTIONS:
Nine assets which lie in the cost centre 1216211, but their
depreciation cost is shown in the cost centre 1216210 of the asset
master should be removed from the cost centre 1216210 of the asset
master to the cost centre 1216211 of the asset master. Benefits:
The overhead cost would reduce in the cost centre 1216210. Rivet
guns and hydraulic pack for rivet guns is booked in the cost centre
1216210 of the asset master but physically found in the cost centre
1216233 of the frame shop. Booking of these assets in the cost
centre 1216211 of the asset master should be done. Benefits: They
should be removed from the cost centre 1216210 of the asset master
and booked in the cost centre 1216233 as that would lead to correct
costing of the product. BLIND RIVET GUN lies in the cost centre
1216210 of the asset master and also physically found in the same
lying unused. It should be moved to the cost centre 1216233 (of the
frame shop) for its proper use. Benefits: It is increasing the
overhead cost of the cost centre 1216210. So moving it would lead
to reduction in the cost and also it being used for the
production.
According to the asset master digital tyre inflators are six in
number in the cost centre 1216210 of the vehicle factory. But there
were fourteen of them identified in the cost centre 1216210. So the
correct number of tyre inflators should be booked in the asset
master. Benefits: Correct booking will lead to correct finding of
the overhead cost and hence lead to correct pricing of the
product.
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BIBLIOGRAPHY
BOOK REFERENCES: Tata Motors Internal Document Tata Motors
Memorandum Of settlement 2011 Tata Motors Policies
WEBSITES REFERENCES: www.tata.com www.tatamotors.com
www.wikipedia.org
www.tatacarsworldwide.com
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