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COST REDUCTION TECHNIQUES INAUTOMOBILE SECTOR & ITS IMPACT ON
INDIAN AUTOMOBILE MARKET
Report Submitted For The Fulfillment Of The Requirement Of Degree Of Master
Of Business Of Administration
Submitted To Submitted by:
1
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STUD!T"S D#$ARAT%O!
I hereby declare that this project report on the Topic COST REDUCTION
TECHNIQUES IN UTO!O"I#E SECTOR $ ITS I!%CT ON UTO!O"I#E
!R&ET'( Is an ori)inal *or+ done by ,e -nder the )-idance o. '
This is s-b,itted in .-l.ill,ent o. "achelor o. "-siness d,inistration'
/
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Table of #ontents
&age !o
#hapter '( %ntrodu)tion
#hapter *( Resear)h Methodology
*(' &rimary Ob+e)ti,e
*(* -ypothesis
*(. Resear)h Design
*(/ S)ope of Study On #ost Redu)tion0Automobile
1*(2 $imitations
#hapter . #riti)al re,ie3 of literature
.(' Automobile Mar4et O,er,ie3
.(* Automobile Domesti) &erforman)e
.(. 5ports of Automobile from %ndia
.(/ Re,ie3 of $iterature on #ost Redu)tion
#hapter / %ndustry &rofile0Automobile
/(' The &re '667 Automobile Mar4et
/(* The &rote)ted %ndian Domesti) Automobile Se)tor
/(. The Ad,ent of the Auto Ma+ors0%ndia
/(/ The After Sales Ser,i)e S)enario
/(2 Mar4et &otential of %ndian Automobile Segment
/(2(' 8ehi)le &ri)es
/(2(* #onsumer Finan)e
/(2(. %nfrastru)ture
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/(2(/ &rodu)t A,ailability
/(9 The Future0%ndian Automobile
#hapter 2 #ompany &rofile0Tata Motors
2(' -istory ,olution
2(* Area Of Business
2(. Tata Motors ;Su))essful #ar %ndi)a
#hapter 9 #ost Redu)tion te)hniques in
Tata Motors"s %ndi)a
9(' Outsour)ing Strategy
9(* 8endor De,elopment
9(. Supply #hain
9(/ $e,eraging The Supply #hain
9(2 #ost #utting
9(9
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in Automobile
#hapter Re)ommendation
(' Main %ndi)ators
(* Fo)us on Mo,es to Strengthen Ties 3ith
Automobile Manufa)turers
(. %n,estment Margin is Cey to Sur,i,al
(/ Fo)us on Adequa)y of quity #apital
#hapter 6 Bibliography
#hapter '@ Referen)es
#hapter '' Anne5ures
2
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Chapter 1' %ntrodu)tion
This research *or+ related to c-sto,er research st-dy3 titled E..ecti4eness O. Cost Red-ction
Techni5-es In The -to,obile Sector(3 thro*s a b-c+et o. ice *ater in the .ace o. so,e core b-siness
,ana)e,ent tenets 6 pl-s a n-,ber o. +eystone principles o. the ,ar+etin)3 distrib-tion channel3
ad4ertisin) and c-sto,er relationship ,ana)e,ent 7CR!8 ind-stries'
9reed .ro, the editin) and selecti4e hearin) b-sinesses o.ten in4o+es to a4oid hearin) -npleasant
tr-ths3 c-sto,ers dish o-t an ear.-l to co,panies abo-t *hat they *ant3 *hat they don:t *ant and *hat
they i)nore 6 and ho* they really ,a+e p-rchase decisions'
"-sinesses need to rethin+ their lo)ic and de4elop ne* operatin) ,odels based on c-sto,er centric
beha4iors and 4al-ations'
India has beca,e ,an-.act-rin) H-b .or a-to,obile and te;tile ind-stries'
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/??3??? per year@ !any co,e .ro, pri4ate en)ineerin) colle)es o. poor 5-ality' "-t e4en i. hal. the
)rad-ates are s-bAstandard3 that still lea4es 1??3??? co,petent3 inno4ati4e technicians' !-ltinational
car co,panies ori)inally ca,e to India .or the potentially h-)e do,estic ,ar+et' To c-t costs3 they
had to -se local co,ponents3 *hich initially *ere o. lo* 5-ality' "-t soon3 the interaction bet*een
co,ponent ,an-.act-rers and !NCs led to not j-st 5-ality i,pro4e,ent b-t inno4ations that nobody
had drea,ed o. earlier' Today3 Indian a-to co,ponent co,panies are doin) co,p-terAaided desi)n
and co,p-terAaided ,an-.act-rin)3 constantly co,in) -p *ith ne* desi)ns that red-ce cost and
increase e..iciency' This desi)nAsa44iness has ,ade India a )lobal player3 e;Aportin) o4er B1 billion
*orth o. co,ponents last year' nd car e;ports ha4e shot -p to o4er 1??3??? in /??0A?' In the bad
old days o. the licenceAper,it raj3 co,panies had no incenti4e to do R$D' ettin) a .orei)n
collaboration appro4al ens-red ,onopoly pro.its .or years' "-t the ne* co,petition bro-)ht in by
econo,ic liberalisation in the 1?s ,ade R$D is an essential tool to co,pete and s-r4i4e' Tatas
Indica car is a pri,e e;a,ple' "ajaj -to once depended on technical +no*Aho* .ro, &a*asa+i3 and
TFS on S-=-+i' Today3 both t*oA*heeler co,panies rely o4er*helA,in)ly on inAho-se R$DG this
aloAne *ill enable the, to *ithstand the ne* challen)e .ro, Honda' Other ,iracle sian econo,ies
li+e &orea and Tai*an -sed labo-rAintensi4e ,an-.act-rin) as their la-nchin) pad3 ta+in) ad4anta)e
o. their lo* *a)es' #ater3 they ,o4ed -p the 4al-e chain' India ,issed the b-s o. labo-rAintensi4e
e;ports3 b-t has no* ca-)ht the jet plane o. brainApo*er e;ports' This be)an in co,p-ter so.t*are' It
then spread to desi)nAintensi4e ,an-.act-rin)' nd it is no* spar+in) an R$D re4ol-tion'
.ter boo,in) years o. /??/ and /??0 the sales )ro*th is slo*in) do*n and the prices are
.allin)' Co,petition is beco,in) .iercer' %ress-re on pro.it ,ar)ins and .allin) ,ar+et shares .orce
,any local prod-cers to ,o4e to*ards e;ports to .orei)n ,ar+ets'
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Up to /?1? India is )oin) to beco,e the second bi))est a-to,oti4e ,ar+et in the *orld' 9orecasters
predict the co-ntry *ill be the .o-rthAlar)est prod-cer o. 4ehicles in the *orld by /??3 and ,ay be the
thirdAlar)est prod-cer by /?1?' Indian cons-,ers are de,andin) hi)h 5-ality cars so prices ,-st be
c-t and costs ,ini,i=ed' 7so-rce G Ernst $ Jo-n)8
In /??23 India prod-ced nearly .i4e ti,es as ,any ,otor 4ehicles as in the early 1?s'
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#hapter *( RSAR#- MT-ODO$OEG
#-A&TR *(' &rimary Ob+e)ti,eG
The .o-nder o. the KapanAbased :&ai=en Instit-te3: !asaa+i I,ai3 de.ined &ai=en in his boo+3 :&ai=en A
The &ey to Kapan:s Co,petiti4e S-ccess: as3 M&ai=en ,eans contin-o-s i,pro4e,ent in the personal
li.e3 ho,e li.e3 social li.e and *or+in) li.e'M -to,obile co,panies applied &ai=en .or contin-o-s
i,pro4e,ent in their operations'
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To St-dy Operations o. -to,obile Co,pany'7Tata !otors8
' 7a8 St-dy o. E..ecti4e Cost Red-ction techni5-es in S-pply Channel o. distrib-tion
Net*or+'
7b8' St-dy o. E..ecti4e Cost Red-ction techni5-es in %roc-re,ent o. Ra* !aterials'
7c8' St-dy o. E..ecti4e Cost Red-ction techni5-es in Operational !ana)e,ent'
ccordin) to the Co-ncil o. #o)istics !ana)e,ent S-pply Chain !ana)e,ent3 the process o.
plannin)3 i,ple,entin) and controllin) e..icient and cost e..ecti4e .lo* o. ,aterials3 inAprocess
in4entory3 .inished )oods and related in.or,ation .ro, pointAo.Aorder to pointAo.Acons-,ption3 .or the
p-rpose o. con.or,in) to c-sto,er re5-ire,ents as e..iciently as possible(' The a-to,obile ind-stry
has -nder)one si)ni.icant str-ct-ral and other chan)es in the last decade or so' In 4ie* o. the present
)lobalisation3 i,ple,entation o. lean prod-ction and the de4elop,ent o. ,od-larisation ha4e chan)ed
the relationships bet*een a-to,obile asse,blers 7OE!s8 and their s-ppliers3 especially those in the
.irst tier'Sti.. co,petition a,on) ,an-.act-rers *ill res-lt in ,ore ,er)ers or ac5-isitions' The
challen)es a-to,obile ,an-.act-rers and s-ppliers .ace incl-de i,pro4in) 5-ality3 ,eetin) cost
red-ction tar)ets and de4elopin) ti,e to ,ar+et'
#-A&TR *(* -ypothesis:
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Is -to,obile co,panies are .ollo*in) certain )-idelines .or Operations or notG
-ypo 'A !et3or4 &lanning This is one o. the ,ost i,portant iss-es .or SC!'
Deter,ination o. prod-ction re5-ire,ents and in4entory le4els at the 4endors .acility .or eachprod-ct and de4elop,ent o. transportation .lo*s bet*een these .acilities to the *areho-ses in a best
possible *ay to red-ce total prod-ction3 in4entory and ransportation costs *ith .-l.il,ent o. ser4ice
le4el re5-ire,ents'
-ypo *A %T and De)ision Support System;
This is another i,portant challen)e .or SC!' Today3 SC! is dri4en by the scope and opport-nities
appearin) d-e to ab-ndance o. data and the sa4in)s *hich can be achie4ed thro-)h e..icient analysis
o. these data'
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AIt tests the Hypothesis3 e;a,ines the relationship and co,es to a concl-sion' It test Hypothesis
*hether A
Is -to,obile Co,panies -sin) !et3or4 &lanningP
Is -to,obile Co,panies -sin) %T and De)ision Support systemP
Is -to,obile Co,panies Usin) Supply #hain %ntegration And Strategi) &artneringP
9indin)s and analysis are -sed .or Decision ,a+in) on acco-nt o. S-r4eyed Data'
In This type o. E;ploratory Research desi)n3 in4ol4es Collection o. In.or,ation .ro, Secondary Data'
In this -to,obile S-r4ey3 The *hole st-dy is Secondary data based oriented'
a' Secondary Data .ro, Internet on !an-.act-rin) Ind-stries
b' Ko-rnals on Cost red-ction Techni5-es on ,an-.act-rin) Ind-stries
c'Scholarly articles for brief about indian manufacturing industries
d' "oo+s on Operational ,ana)e,ent'
e' Re4ie* rticles on S-pply ChainAUpstrea, and Do*n strea,
.' St-dy .or Opeartion Research Techni5-esA Transportation Techni5-es'
#-A&TR *(/ S)ope of the Study
,on) the st-dy:s +ey .indin)s areG
10
http://www.google.co.in/url?q=http://scholar.google.com/scholar%3Fq%3Dbrief+about+indian+manufacturing+industries%26hl%3Den%26lr%3D%26oi%3Dscholart&sa=X&oi=scholar&ct=title&usg=__bLbW32D8MmljtVS1VhLAP2_4wRk=http://www.google.co.in/url?q=http://scholar.google.com/scholar%3Fq%3Dbrief+about+indian+manufacturing+industries%26hl%3Den%26lr%3D%26oi%3Dscholart&sa=X&oi=scholar&ct=title&usg=__bLbW32D8MmljtVS1VhLAP2_4wRk=http://www.google.co.in/url?q=http://scholar.google.com/scholar%3Fq%3Dbrief+about+indian+manufacturing+industries%26hl%3Den%26lr%3D%26oi%3Dscholart&sa=X&oi=scholar&ct=title&usg=__bLbW32D8MmljtVS1VhLAP2_4wRk=8/12/2019 Vinit Singh
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Indian a-to,obile and a-to co,ponents ind-stry is on a roll and there is an i,,ense scope .or
,ana)e,ent
.or enhancin) the s-pply chain o. the sector' India has beco,e a .a4o-rable destination .or .orei)n
co,panies
to establish their .acilities and .or, alliances *ith do,estic co,panies' #o* cost o. ,an-.act-rin)
and cond-ci4e )o4ern,ent s-pport ha4e been the ,ajor dri4ers .or .orei)n co,panies in4estin) in
India'
Indias lar)e yo-n) pop-lation3 hi)her D% )ro*th3 and ,ost i,portantly per capita passen)er car
penetration
is lo* at '2 car per tho-sand pop-lation3 *hich creates )reat opport-nity .or ind-stry players to o..er
an a..ordable .o-rA*heeler alternati4e to the t*oA*heeler c-sto,ers' ccordin) to %lannin)
Co,,ission o. India3 Indian a-to,obile ind-stry is e;pected to )ro* at CR o. 12 o4er the ne;t
.i4e years' The Indian econo,y is no* )ainin) ,o,ent-, in the *orld o. .ree trade and liberal
,o4e,ents o. )oods and ser4ices bet*een co-ntries' There.ore3 e..iciency in s-pply *ill be critical
.or Indias a-to,obile s-ccess'
!D FOR MATR%A$S0SESTMS A&&ROA#-
I,pro4ed ,aterials and ,aterials processin) can and ,-st play a lar)e role in )eneratin) prod-cti4e
and e..ecti4e responses to the .orces that *ill dri4e the a-to,oti4e ind-stry in the .-t-re' Ho*e4er3
these .orces o.ten p-ll in di4erse directions *hen speci.ic technolo)ical actions are considered' 9or
e;a,ple3 al-,in-, alloys can be -sed to red-ce 4ehicle *ei)ht3 thereby red-cin) e,issions and
i,pro4in) .-el econo,y3 b-t the added ,aterials costs c-rrently o..set these ad4anta)es .or ,any
1
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applications' s a res-lt3 steel is still the ,ajor ,aterial o. choice .or a-to,obile constr-ction today
and *ill be di..ic-lt to s-pplant .or the .oreseeable .-t-re
Indias processAen)ineerin) potential can be -tilised .or redesi)nin) o. ,an-.act-rin)
processes to ,a+e the, ,ore labo-r intensi4e and less capital intensi4e3 *hich *ill enable the !NCs
to red-ce their o4erall costs s-bstantially' 9or instance3 MdeAa-to,atin)M o. the prod-ction processes3
*hich are applied in
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#-A&TR *(2 $imitations:
9or -to,obile St-dy3 %ri,ary Data 4aries *'r't Secondary Data on acco-nt o. theoretical practices in
.ield then practical theories'
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#hapter .( #R%T%#A$ R8% OF
$%TRATUR
1
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CH%TER 0' #R%T%#A$ R8% OF $%TRATUR:
j-st released c-sto,er research st-dy3 titled C-sto,ers Say
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0 Ratan Tata= the #hairman= Tata roup
#hapter .(' Automobile Mar4et O,er,ie3
The do,estic a-to,obile ,ar+et has been )ro*in) at 1'/ per cent CR o4er the past years
7/???A?1 to
/??A?283 *hile the a-to co,ponents ,ar+et has been )ro*in) at 1'/ per cent CR 7/???A?1 to
/??0A?8' The ind-stry 7OE!s and s-ppliers to)ether8 contrib-ted nearly per cent to the co-ntrys
D% in /??0A?' The a-to,oti4e sector also o..ers si)ni.icant e,ploy,ent opport-nities' It e,ploys
?'2 ,illion people directly and aro-nd 1? ,illion people indirectly'
The ind-strys capabilities in desi)n3 en)ineerin) and ,an-.act-rin) ha4e been reco)nised the *orld
o4er3 and ,ost a-to,oti4e ,ajors are loo+in) to increasin)ly so-rce a-to co,ponents .ro, India'
India is e,er)in) as one o. the ,ost attracti4e a-to,oti4e ,ar+ets in the *orld3 and is poised to
beco,e a +ey so-rcin) base .or a-to co,ponents' The table belo* capt-res the hi)hli)hts o. the sector
in India that ill-strates its )ro*in) si)ni.icance'See Anne5ure A( B
Indian -to,obile Ind-stry
#ar)est three *heeler ,ar+et in the *orld
/nd lar)est t*o *heeler ,ar+et in the *orld
th lar)est passen)er 4ehicle ,ar+et in sia
th lar)est tractor ,ar+et in the *orld
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2th lar)est co,,ercial 4ehicle ,ar+et in the *orld
/?
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#hapter .(* Automobiles 0 Domesti) &erforman)e
The prod-ction and do,estic sales o. the a-to,obiles in India ha4e been )ro*in) stron)ly'
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/> per cent in /??A?2' E-rope is the bi))est i,porter o. cars .ro, the co-ntry *hile predo,inantly
.rican nations i,port b-ses and tr-c+s' The ssociation o. So-th East sian Nations 7SEN8
re)ion is
the pri,e destination .or Indian t*o *heelers'
//
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#hapter .(/ R8% OF T-S%S DO!:
This is easy to -nderstand beca-se the per capita disposable inco,e o. the people has )one -p
re,ar+ably' O4er the last .i4e years3 per capita personal disposable inco,e has )one -p by aro-nd 3
*hich has increased p-rchasin) capacity o. the people in the co-ntry' Other .actors ha4e also
contrib-ted to this hi)h )ro*th in Indian a-to,obile sector' These incl-de lo*erin) a)e o. .irst car
-sers3 shorter replace,ent cycles3 risin) d-el inco,e .a,ilies3 n* technolo)y3 *hich is lo*erin) cost
o. o*nership3 lo* car penetration in the co-ntry and ,ost i,portantly )ro*in) steel prod-ction in the
co-ntry' In addition3 *ide 4ariety and easily a4ailable .inancin) options are also so,e o. the ,ajor
reasons .or s-r)e in de,and .or a-to,obiles in India'
lobal a-to,obile ,an-.act-rers are consistently strea,linin) their b-siness process by o-tso-rcin)
their nonAcore acti4ities to lo*Acost co-ntries li+e India'lobal a-to,obile ,an-.act-rers are -nder
tre,endo-s press-res to inno4ate their ,an-.act-rin) process and at the sa,e ti,e3 to red-ce costs' In
4ie* o. the present )lobal
co,petiti4eness3 they ,-st not only de4elop ne* .eat-res to stren)then their c-sto,er re5-ire,ents
b-t also .ollo* the en4iron,ental and sa.ety standards' In addition3 the base price o. a car is e;pected
to re,ain sa,e o4er the ne;t decade' s a res-lt3 co,panies are .orced to so-rce ,ore co,ponents
.ro, lo*Acost co-ntries li+e India
ccordin) to !c+insey3 )lobal o-tso-rcin) o. a-to,obile and a-to co,ponents *o-ld reach USB02
billion by /?12 .ro, USB>2 billion in /??/' India has plenty o. scope to )arner this potential'
ccordin) to the ,ana)e,ent cons-ltin) .ir,3 India has the potential to notch this opport-nity and
/0
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reach -p to USB/2 billion to e,er)e as ,ajor so-rcin) destinations alon) *ith China3 !e;ico and
Thailand' "esides lo* cost3 India:s a-to co,ponents ind-stry has the ,ajor ad4anta)e o. enor,o-s
s+ills in process3 prod-ct3 and capital en)ineerin)6its e;cellent ,an-.act-rin) history and )ood
ed-cation syste,'
%uman beings think our way is the best, but at Toyota, we are told we have to always change. !e
believe there is no perfect way, so we continue to search. The goal is to break the current condition
through &ai'en."
0 Shoi)hiro Toyoda= #hairman= Toyota Motor #orporation= in De)ember *@@@
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Chapter ' Ind-stry %ro.ile
/2
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/>
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#-A&TR /( %ndustry &rofile
The TransAnationals *ere also serio-s abo-t de4elopin) 4endors in India' India is
bo-nd to beco,e an i,portant destination .or the )lobal a-to ind-stry' It too+ the .inancial t-r,oil in
So-th East sia and the slo*do*n in the Chinese a-to ,ar+et to rein.orce the tar)etin) to Indian
!ar+et' The ne* interest in the s,all car se),ent also re.lects certain a,o-nt o. b-llishness on the
part o. a-to ,an-.act-rers abo-t India @
Despite projected o4er capacitiesAAand c-rrent losses3 car,a+ers contin-ed to 5-e-e
-p their in4est,ents .or s,all car se),ent' To day there are 1? )lobal a-to ,ajors6incl-din) the B10A
billion S-=-+i !otor 7Kapan83 the B>2Abillion Dae*oo 7So-th &orea83 the B1Abillion 9ord 7US83 the
BAbillion 9iat 7Italy83 and the B1>Abillion eneral !otors 7US8 operatin) in Indian !ar+et'
#hapter /(' The &re '667 Automobile Mar4et
s late as 13 the a-to ,ar+et in India *as clearly se),ented' t the entry le4el
*ere !U#:s ??Acc carAApriced bet*een Rs /'1?Ala+h and Rs /'2 la+hAAand the O,ni3 at Rs 1'2
la+h' t the ne;t le4el *ere the 0Acc enAApriced at Rs 0'? la+hAAand the Acc 9iat Uno 7Rs 0'>/
la+h8' Then ca,e the 130??Acc Estee, ,odelsAApriced bet*een Rs '> la+h and Rs 2'2 la+hAAthe
13Acc Cielo 7Rs >'/? la+h83 and the 132Acc Opel stra 7Rs '2/ la+h83 .ollo*ed by pre,i-, cars
li+e !ercedesA"en=:s EA//? 7Rs // la+h8'
#hanging $anes
T*o e4ents ha4e -pset the e5-ations in the priceAse),ented car ,ar+et' Dae*oo has
Chan)ed the lanes *ith the Cielo3 *hich is no* priced at Rs '? la+h3 and co,petes *ith the en:s
topAend ,odel 7Rs '? la+h8 and the Estee,:s lo*erAend 4ersion 7Rs '> la+h8' Ceilo has created a
/
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ne* 4al-e se),ent3 *here the price is not proportionate to the si=e' Dae*oo:s strate)ic response has
4ery clearly rede.ined di..erentiation3 .ro, price or si=e to 4al-e'
Hy-ndai !otors India3 a s-bsidiary o. the B/Abillion Hy-ndai o. So-th &orea la-nched
its Acc Santro at the -to E;po 1 in Delhi' The ,odel co,es in .i4e 4ariants3 *ith the nonAairA
conditioned3 ,an-al trans,ission ,odel priced at Rs /'? la+h3 and the se,ia-to,atic3 airA
conditioned #S ,odel priced bet*een Rs 0'12 la+h and Rs la+h' Clearly3Hy-ndai:s strate)y is
ai,ed at ta+in) on the ,ar+et leader3 !ar-ti Udyo) #i,ited "-t by pricin) the del-;e ,odel at Rs
la+h3 it is also brid)in) the )ap bet*een the s,all and the ,iddle car se),ents' t present Maruti"s
steem $I is priced Rs ?3??? ,ore than the Santro $S3 *hile the #ielo is priced Rs ?3??? ,ore'
The .-rther entry o. ne* players *ill only bl-r the se),ents' Ne* entrants *ill be
in4ol4ed in price *ar to .ind a .oothold in the Indian ,ar+et' 9e* o. the e;a,ples incl-deG
TE#CO:s positionin) o. its 13??Acc Indica carAAla-nched in No4e,ber3 1 and priced close to
!ar-tis ??Acc ,odel as a s,all carLand -onda snea+in) its 130??Acc #ity into the se),ent 4acated
by the Cielo altho-)h it is an accepted .act that pricin) or positionin) cannot be done in isolation' In a
cro*ded ,ar+et3 that ,-st depend on the a4ailable strate)ic opport-nities'M
"y creatin) ne* se),ents3 co,panies can broaden their ,ar+et base3 increase
capacity -tili=ation le4els3 preAe,pt co,petitors ,ar+et entry ,o4es and i,portantly lo*er costs'
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the ,ar+et *ith .i4e 4ariants in near .-t-re' t hi)h 4ol-,es3 costs can be lo*ered by ,ore than /?
per cent across 4ariants d-e to e;perience c-r4e e..ect'
Con.i)-rin) the stic+er price .or a car in the ,ar+et today is no ,ore a .-nctional
decision' It has beco,e a strate)ic decision as it identi.ies the +ey se),ents response
elasticity to the ,ar+et o..er' The t*o +ey inhibitin) .actors .or the poor response to the a-to *ar .are
in Indian Car !ar+et are basically the lo* per capita inco,e at B02? 7Rs 13??? at c-rrent prices8 and
the hi)h ,an-.act-rin) costs' lar)e part o. the pop-lation e;pected to )rad-ate .ro, t*o *heelers to
.o-r *heelers has not responded as they *ere s-pposed to d-rin) this period o. ti,e' The do,estic
a-to )iant !ar-ti Udyo) li,ited3 still .orces the ne* players to bench,ar+ the,sel4es a)ainst its
prod-cts *hich roll o-t .ro, a depreciated3 yet hi)hA4ol-,e plant' It enjoys the .ast ,o4er as *ell as
the cost ad4anta)e *ith the hi)her capacity -tilisation that helps hi, to c-t costs across as ,ore cars
yo- ,a+e3 the cheaper they )et'
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liberali=ation steps3 s-ch as3 rela;ation o. the .orei)n e;chan)e and e5-ity re)-lations3 red-ction o.
tari..s on i,ports3 and re.inin) the ban+in) policies3 initiated by the o4ern,ent o. India3 ha4e played
an e5-ally i,portant role in brin)in) the Indian -to,oti4e ind-stry to )reat hei)hts'
It is esti,ated that the sale o. passen)er cars ha4e tripled co,pared to their sale in the last .i4e years'
Th-s3 the sale o. cars has reached a .i)-re o. 1 ,illion -sers and is e;pected to increase .-rther' It:s
also to be noted that the de,and .or l-;-rio-s ,odels3 SUFs3 and ,iniAcars .or .a,ily o*ners3 ha4e
shot -p3 lar)ely d-e to increase in the cons-,er:s b-yin) capacity'
The %ndian automoti,e mar4et
%ndia )ountry fa)t file *@@2
%op-lation 13 ??3 />30
%er Capita D% 7%%%8 B03??
D% ro*th Rate '1
Total a-to,oti4e sales /??2 13 03>? 730008Total a-to,oti4e prod-ction /??2 13 >03>? 713 ???32>8
!ar+et )ro*th /??2 4s /?? '? 7>'8
"est sold ,odel %C se),ent /?? !ar-ti lto 71>'8
"est sold ,odel #CF se),ent /?? !ar-ti O,ni 7/1'08
7passen)er cars8 L 7,ar+et share in se),ent8
So-rceG httpG***'se),enty'co,India'ht,
#hapter /(* The &rote)ted %ndian Domesti) Automobile Se)tor
0?
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!U#3 *hich set -p shop in 13 had 1? lon) years o. relati4e protection to e,er)e as a .or,idable
co,petitor *ith hi)h 4ol-,e and a stron) brand i,a)e in the ,ind o. Indian c-sto,ers'
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the lon) r-n3 lo* prod-ction costs and co,ponentA,an-.act-rin) s+ills *ill ,a+e IndiaA ,ade cars
co,petiti4e at )lobal ,ar+et place' Hence they are loo+in) India as a prod-ction base to cater to the
)ro*in) sian ,ar+et by *ay o. o-tso-rcin) .ro, Indian ,an-.act-rin) base' Ho*e4er ,any a
h-rdles they ha4e to cross on the jo-rney to pro.itability'
The in4est,ents necessary .or a lar)e plant are si,ply h-)e' Dae*oo has3 so .ar3 s-n+ Rs /3?? crore
in a
1'/?Ala+hA-nitAaAyear plant' Unli+e China3 *hich has restricted the n-,ber o. co,panies India has
.ollo*ed an open door policy .or car ,an-.act-rers3 *hich has res-lted in e,er)ence o. .ra),ented
,ar+ets *ith distrib-ted capacity'
n Ori)inal E5-ip,ent !an-.act-rer 7OE!8 needs a ,ini,-, econo,ic si=e o. 1'2? la+h cars a year
to attract 4endor interest' Dae*oo *as able to slash the Cielo:s price as it is cheaper to i,port
co,ponents beca-se o. the de4al-ation o. the So-th sian c-rrencies' The a-to ,ajors are lobbyin)
*ith the )o4ern,ent to ease the strict indi)enisation nor,s in the ne* a-to,obile policy3 so that they
can i,port the co,ponents .ro, other co-ntries' This *ill help the, to c-t the prices and to )o head
on the ,ar+et leader partic-larly in a price responsi4e ,ar+et li+e that o. s,all car se),ent'
The other ar)-,ent is that *ith the )i4en i,port d-ty o. 1?0 per cent on Co,pletely &noc+edADo*n
&its 7C&Ds8 3 *hich is the sa,e as that on Co,pletely "-iltA-p Units 7C"Us8 and > per cent on
co,ponents the i,ports *ill beco,e costlier and co,pel co,panies to locali=e their ,an-.act-re' The
e;pos-re to c-rrency .l-ct-ations3 *hich crippled the .o-r Kapanese li)ht co,,ercial 4ehicle projects
in the late 1?s3 is also ,ini,al *hen a co,pany locali=es co,ponent ,an-.act-re'
0/
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"esides lean ,an-.act-rin) techni5-es li+e K-stAInATi,e 7KIT8 are possible only *hen the s-pplier is
located close to the ,an-.act-rin) -nit' I. !ar-ti is a s-ccess story3 it is only beca-se it indi)enised 2
per cent o. its co,ponents *ithin .i4e years o. )oin) onAstrea,'
Then3 there:s the 5-estion o. ser4icin) the replace,ent ,ar+et .or spares' C-sto,ers3 typically3 e;pect
co,ponents to be a4ailable locally3 and at co,petiti4e prices' I,ports cannot )-arantee that b-t it: is a
tre,endo-s job to locali=e co,ponents at the ri)ht 5-ality and price )i4en the s-pplier proble,s in
pre4alent in India'
n Ori)inal E5-ip,ent !an-.act-rers co,petiti4e ad4anta)e lies in its ,ar+etin) s+ills' Ha4in)
achie4ed price and technolo)y parity3 it can easily *oo the cons-,er *ith attracti4e .inancin) sche,es
and s-perior a.terAsales ser4ice' N-d)ed by the co,petition3 ,ost a-to players ha4e a cl-tch o.
sche,es to o..erG Dae*oo !otors India pro4ides interest.ree car .inance3 9ord !otor and eneral
!otors ha4e slashed interest rates' !U#:s joint
4ent-re .inance co,pany3 !ar-ti Co-ntry*ide3 is o..erin) loans at 10'2? per cent *hen the pre4ailin)
lendin) rate is 1 per cent and abo4e'
#hapter /(/ The After Sales Ser,i)e S)enario
.ter sales ser4ice .or cars is as critical as sho*roo, deals' !ar-ti ser4ices its / ,illion c-sto,ers
thro-)h an ar,y o. 1 dealers spread across the co-ntry' It *ill be i,possible .or a co,pany to
d-plicate s-ch in.rastr-ct-re3 partic-larly *ith in4est,ents in a ,etroAbased sho*roo, )oin) -p to Rs
crore' !ar)ins in retailin) are ,o4in) .ro, act-al sales to a.ter sales ser4ice'M
00
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The proble, o. price *ar is e4ident *ith -to ,ajors as ,-ch as *ith dealers' In a bid to *oo the
c-sto,ers3 dealers3 partic-larly in nonApri,e locations3 are c-ttin) their ,ar)ins' It *ill not be
s-rprisin) i. sin)leAbrand dealers e4ent-ally t-rn into ,-ltiAbrand sellers in .-t-re'
Doin) so *ill bene.it all the three constit-ents in the ,ar+etin) chainG the OE!3 the dealer3 and the
b-yer' The car,a+er can e;pand his reach *itho-t e;pensi4e in4est,entL the dealer can increase his
re4en-eL and the c-sto,er )ets a 4ariety o. ,odels and brands -nder one roo. in .-t-re'
The local partner *ill be the loser in this .ierce battle'
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O4er >? per cent o. c-sto,ers opt .or cons-,er .inance' That .i)-re co-ld )o -p i. interest
rates contin-e to .all'
#hapter /(2(. %nfrastru)ture
Tra..ic con)estion and bad roads co-ld deter potential b-yers .ro, )oin) .or s,all cars
partic-larly in s,all cities o. India' The .-t-re is not 4ery heartenin) in this aspect'
#hapter /(2(/ &rodu)t A,ailability
s ,an-.act-rers shi.t their attention to the s,all car3 ,ore and ,ore people *ill be able to
a..ord it and de,and *ill only rise in the .-t-re period o. ti,e'
#hapter /(9 The Future0%ndian Automobile
There is a sharp contrast in the b-yin) beha4ior o. Indian Cons-,er co,pared to their *estern co-nter
parts3 yet there is no do-bt that Indian car ,ar+et is )oin) to increasin)ly rese,ble the latter' In the
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or the 4an sho-ld be b-ilt on the sa,e plat.or,' 9or the priceAsensiti4e c-sto,ers3 there can be a noA
.rills 4ersionL a loaded 4ersion .or the ,iddle c-sto,er and l-;-ry car ,an-.act-rers can tar)et the
hi)hAend c-sto,ers'
The .ort-nes o. the a-toobile ind-stry *ill contin-e to hin)e on the lar)e3 price sensiti4e c-sto,ers3
*ho *ill )rad-ate to the hi)her end o. the ,ar+et o4er a period o. ti,e'
Until then3 the s,all car *ill contin-e to dri4e de,and and ,ost o. the carA,an-.act-rers are
)earin) -p .or this e4ent-ality'
0
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#hapter 2 #ompany &rofile
JTata MotorsK
0
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#-A&TR 2 #ompany &rofile:Tata Motors
Tata !otors3 pre4io-sly +no*n as Tata En)ineerin) and #oco,oti4e Co #td 7TE#CO83 is one o. the
lar)est co,panies in the Tata ro-p3 and one o. India:s lar)est b-siness ho-ses' Tata !otors is India:s
leadin) co,,ercial 4ehicle ,an-.act-rer and the third lar)est passen)er car ,an-.act-rer' The
co,pany is the si;th lar)est tr-c+ ,an-.act-rer in the *orld' Tata !otors recently recei4ed the
"alanced Scorecard Collaborati4e Hall o. 9a,e *ard .or ha4in) achie4ed a si)ni.icant t-rnaro-nd o.
its o4erall per.or,ance' co,prehensi4e 5-ality i,pro4e,ent and cost c-ttin) initiati4e in Septe,ber
/???3 has played an i,portant role in the co,pany:s t-rnaro-nd3 .ro, a loss o. Rs 2?? crores in the
year ended !arch /??1 to a pro.it o. Rs / crores in the .irst 5-arter o. /??/A/??0'Tata En)ineerin) and #oco,oti4e Co,pany 7TE#CO8
#hapter 2(' -istory ,olution
Tata En)ineerin) and #oco,oti4e Co,pany #td3 pop-larly +no*n as Telco *as incorporated in 12
to ,an-.act-re stea, loco,oti4es' In 123 the co,pany di4ersi.ied into a-to,obile ,an-.act-rin)3
thro-)h a collaboration *ith Dai,lerA"en= .or the ,an-.act-re o. co,,ercial 4ehicles' "y the ti,e
the collaboration ended in 1>3 Telco had not only beco,e an independent prod-cer o. ,edi-,
co,,ercial 4ehicles 7!CFs8 *ith ne)li)ible i,port content3b-t had de4eloped the capability o.
desi)nin) and de4elopin) s-ch 4ehicles' The Co,pany pro)ressi4ely *idened its prod-ct ran)e to
co4er hea4y co,,ercial 4ehicles 7HCFs8 and li)ht co,,ercial 4ehicles 7#CFs83 i,ple,entin) one
e;pansion pro)ra, a.ter another'
To s-stain the -nrelentin) pace o. its )ro*th3 Telco added ,achinin)3 press and asse,bly
0
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capacities3 set -p its o*n .or)e and .o-ndries3 and 4irt-ally created the co-ntrys a-to,obile ancillary
ind-stry' The Co,pany e4en de4eloped .acilities .or desi)nin) and ,an-.act-rin) stateAo.AtheAart
,achine tools3 ,aterial handlin) e5-ip,ent3 dies and .i;t-res' To acco,,odate the Co,panys
)ro*in) acti4ity base3 a lar)e3 ,odern co,ple; *as set -p at %-ne in *estern India and a ne* plant
beca,e operational at #-c+no*3 in the north o. the co-ntry'
To pro4ide a b-siness .oc-s .or the Co,panys ,ain acti4ity areas3 Telco has created t*ob-siness
-nits A-to,obiles and Constr-ction E5-ip,ent both o. *hich ha4e notched -p recordAbrea+in)
res-lts'
Telco today has a do,estic ,ar+et share o. > in the !CFHCF se),ent3 > in the #CF se),ent
and 0/ in the ,-ltiA-tility se),ent' part .ro, co,,ercial 4ehicles3 *hich ran)e .ro, 1 ton to 02
tons F
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Co,pany c-rrently co,,ands a >1 share in the e;ca4ator ,ar+et and ? in the cra*ler cranes
,ar+et in India' The hydra-lically operated constr-ction e5-ip,ent ,ade by the co,pany is in
collaboration *ith Hitachi Constr-ction !achinery #i,ited o. Kapan' There are a,bitio-s plans .or
*idenin) the ran)e o. e;ca4ators ,ade by the co,pany and .or addin) ne* lines o. constr-ction
e5-ip,ent' recent addition to the e;ca4ator ran)e is "ac+hoe #oader'
Telco is one o. India:s lar)est pri4ate sector co,panies' >'0 billion3 it is the
co-ntry:s leadin) co,,ercial 4ehicle ,an-.act-rer and the *orlds si;th lar)est a-to,obile co,pany'
The *idely s-ccess.-l Tata Indica3 *hich is E-ro 1 and / co,pliant3 is the co-ntrys .irst
indi)eno-sly desi)ned3 de4eloped and ,an-.act-red passen)er car' The co,pany also
,a+es se4eral other passen)ers 4ehicles3 incl-din) the Sa.ari3 the S-,o3 the Sierra3 the Tata Estate3
and the Tata,obile pic+A-p'
The co,panys prod-cts ha4e recei4ed *ide acceptance not only in India b-t also in ,ar+ets in the
!iddle East3 sia3 .rica and E-rope
#hapter 2(* Areas of business
The co,pany ,an-.act-res ,edi-,3 hea4y and li)ht co,,ercial 4ehicles3 ,-ltiA-tility
4ehicles and passen)er cars' It also ,a+es )eneral and special p-rpose ,achines .or
a-to,oti4e applications at its ,achine tool di4ision' These incl-de NCCNC hori=ontal and inline
,achinin) centers3 .le;ible ,an-.act-rin) syste,s3 CNC cylindrical )rindin) ,achines3 and robots .or
*eldin)3 c-ttin)3 paintin) and other applications'
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In 13 the co,panys re4en-es .ro, its .o-r ,an-.act-rin) plants at three locations in India *ere Rs
>>'0 billion 7B1320'2 ,illion8' In 13 they *ere Rs ?'/> billion 7B130 ,illion8' 7The a4era)e
e;chan)e rate in 1 *as Rs /'1 to one US dollar'8
In the year ended 01 !arch /???3 the co,panys total e;ports *ere *orth abo-t Rs 2?2'20 crore3
a)ainst abo-t Rs >??' crore in the pre4io-s year'
$o)ations
The co,panys ,an-.act-rin) plants in India are at Ka,shedp-r in "ihar3 %i,pri and
Chinch*ad near %-ne in !aharashtra3 and #-c+no* in Uttar %radesh' .i.th ,an-.act-rin) .acility is
bein) set -p at Dhar*ad in &arnata+a'
#ollaborations
The Co,pany has technical tieA-ps *ithG
The Instit-te o. De4elop,ent in -to,oti4e En)ineerin)3 S'%''3 Italy3 .or assistance in
s,all car body desi)n and stylin)L
Nachi 9-ji+oshi Corporation3 Kapan3 .or robots .or *eldin)3 paintin) and other
a-to,oti4e applicationsL
#e !ote-r !oderne3 9rance3 .or the de4elop,ent o. diesel and petrol en)ines .or
passen)er carsL and
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Robert "a-sch ,bH3 er,any3 .or application *or+ on the en)ine ,ana)e,ent
syste, .or %# petrol en)ines
#hapter 2(. Tata Motors ;Su))essful #ar %ndi)a
TE#CO la-nched Indica *hen the TT )ro-p *as in red' Telco chair,an Ratan Tata said that the
1?? cc car Indica *o-ld dri4e the co,pany o-t o. the red'
Tata3 *hile tal+in) to reporters at the IET9 : in a 4ideocon.erence .ro, !-,bai said that the
o4er*hel,in) response o. o4er 1'/2 la+h initial boo+in)s .or the Indica had co,e as a s-rprise' MIt
see,s *e to-ched the national chord so,e*here as people responded to the .act that this is the .irst
Indian car3M said Tata' MIndica is not the end o. the road .or Telco *hen it co,es to passen)er cars' It is
j-st the be)innin)3 as there are ,ore to co,eM3 said Tata3 addin) that the co,pany *as *or+in) on
another ,idAsi=e car a.ter Indica'
Telco had to prod-ce >?3??? cars a year to brea+Ae4en' The )ro-p created t*o
or)ani=ations *ithin Telco3 one dealin) *ith co,,ercial 4ehicles and the other *ith passen)er cars'
The co,pany -nder too+ a ,ajor restr-ct-rin) e;ercise *hereby the passen)er car and co,,ercial
4ehicles di4isions *o-ld .-nction as t*o separate b-siness -nits' Telco had a strate)y to )o .or e;ports
a.ter addressin) the initial re5-ire,ents o. the do,estic ,ar+et'
A3ards and Re)ognition
In !ay /??? 3Tata En)ineerin) and #oco,oti4e Co,pany #td' 7Telco8 *on a national a*ard .or
s-ccess.-l indi)eno-s technolo)y -sed in the Indica car project' The a*ard titled :National a*ard .or
s-ccess.-l co,,erciali=ation o. indi)eno-s technolo)y by an ind-strial concern: .or indi)eno-s
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de4elop,ent and co,,erciali=ation o. Tata Indica car *as presented by the ,inister .or h-,an
reso-rce de4elop,ent3 science and technolo)y and ocean de4elop,ent3
Dr' !-rli !anohar Koshi'
In No4e,ber 1 Telco *as a*arded the :Depart,ent o. scienti.ic and ind-strial research
national a*ard .or indi)eno-s desi)n o. the Tata Indica' It *as the .irst co,pany in India to i,ple,ent
strin)ent e,ission nor,s *ell ahead o. the ,andate dates'
&romotions
The Indica ad4ertisin) ,ade interest .or the car )o into o4erdri4e' The ca,pai)n re4ol4ed aro-nd the
pre,ise that the Indica *o-ld not j-st ,eet people:s e;pectations3 it *o-ld e;ceed the,' E4ery
ad4ertise,ent has a story to tell
&re laun)h #ampaign
The Indica ca,pai)n be)an in the ri)ht earnest in Dece,ber 1' It *as ad4ertised as the la-nch o. a
car that *ill spell doo, .or the s,all cars' It *as directly ai,ed at !ar-ti ??' The ad line -sed in the
.irst ca,pai)n *as Car ,a+ers *ill s-ddenly re,e,ber all the thin) they .or)ot to )i4e yo-(' This
hinted that Indica *o-ld ha4e ,ore .eat-res than any o. the e;istin) s,all cars' Indica -sed the catch
lines li+e !ore car per Car( !ore drea,s per car( to s-))est that Indica *ill be bi))er in si=e to the
e;istin) s,all cars yet be in the s,all car cate)ory' It co,petes *ith the ,id si=e cars on si=e and )i4e
the, a r-n .or their ,oney *ith its cheaper price ta)'
t the la-nch o. the car TE#CO clai,ed that the people *o-ld ne4er ha4e to s-..er .ro, a s,all car
a)ain and that the n end o. the year 718 *o-ld be the end o. the s,all cars'
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#hapter 9 Tata %ndi)a 0 The Ma4ing Of The Small #ar
3ith objective of minimizing costs.
The research pro4ides an -nderstandin) o. the iss-es concernin) the s-pply chain ,ana)e,ent
syste, at Telco in re)ard to its s,all car3 Indica' It o-tlines ho* Telco3 b-ilt the s-pply chain .or the
car by le4era)in) its e;istin) co,petencies and ho* it trans.or,ed itsel. .ro, an inte)rated tr-c+
,an-.act-rer to an a-to,obile inte)rator and .ro, a prod-ctAcentric co,pany to co,petenceA centric
co,pany' The case disc-sses 4ario-s co,ponents o. the s-pply chain and e,phasises ho* Telco
orchestrated the, *ith the objecti4e o. ,ini,i=in) costs'
(Telco)s Indica not only has a new plant and a new set of people manning the plant, but also new
manufacturing philosophies, new systems and new processes in place, as it gets ready to take on its
competition in the millennium to come.*
- Business India, March 22, 1999.
In the early 1?s3 Telcos Chair,an Ratan Tata 7Tata83 *as .lirtin) *ith the idea o.
de4elopin) a s,all car' "y ,idA1 a r-di,entary desi)n *as in place' In 123 Telco anno-nced
that it planned to b-ild a car *hich *o-ld be priced close to the !ar-ti ??3 shaped li+e the en3 and
spacio-s as an ,bassador'
%rod-cin) the ne* s,all car Indica represented a di..erent +ind o. challen)e .or Telco' Sho-ld Tata
s-cceed3 he *o-ld chan)e the .ace o. Telco' s a tr-c+A,a+er3 Telco *as so inte)rated that it e4en ,ade it
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o*n castin)s and .or)in)s' s an a-to,a+er3 it *o-ld ha4e to .oc-s on the 4al-e chain that stretched bet*e
ra* ,aterials and a.terAsales ser4ice as *ell as asse,blin) the parts into the co,plete a-to,obile'
9or its ne* 4ent-re3 Telco o-tso-rced ? o. the co,ponents 713/?? o. its 132??Apl-s parts83 .ro, /??Aodd
4endors' To de4elop the Indica3 Telco had to co,bine the learnin)s .ro, its predecessors *ith its o*n -ni5
s-pply chain ,ana)e,ent strate)ies to ens-re a s-stainable lo*Acost plat.or,'"y learnin) to b-ild and ,ana)e a s-pply chain3 it *o-ld set the )ro-nd .or le4era)in) the capabilities
o. the a-to,oti4e co,ponentA,an-.act-rers *ho already operated in its tar)et ,ar+ets' In other
*ords3 Telco planned to -se its s+ills as an inte)ratorAAbrin)in) to)ether prod-cts and ser4ices .ro,
both -pstrea, and do*nstrea, operations3 and pac+a)in) the, .or the c-sto,er -nder a brand na,e
in its ne* 4ent-re'
lobally3 a car co-ld be b-ilt in ,onths *ith an in4est,ent o. US B 0 billion 7Rs 1/'2 billion8'
Indica3 *as b-ilt in 01 ,onths on a b-d)et o. Rs 1 billion' This see,ed to ha4e been possible by
.oc-ssin) on the s-pply chain
#hapter 9(' T- OUTSOUR#%! STRATE
9or Telco3 o-tso-rcin) see,ed to be one o. the ,ost di..ic-lt aspects o. prod-cin) the Indica' Unli+e
)lobal a-to,obile ,ajors3 9ord !otors or eneral !otors3 *hich had a )lobal 4endorAbase that co-ld
be replicated on a s,aller scale in India3 Telco had to create a 4endorAbase .ro, scratch' !oreo4er3 it
did not ha4e the e;pertise either to desi)n a car or to b-ild an en)ine .or it'
)ainst this bac+)ro-nd3 Telco had to ta+e its pri,ary V,a+eAorAb-y decisions .or the +ey inp-tsA
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Telco t-rned to the Italian co,pany3 I'DE'3 .or the prod-ctAdesi)n' It bo-)ht the en)ine .ro, the
Instit-t 9rancais d- %etrol o. 9rance3 and applied its en)ineerin) s+ills to adapt the en)ine
re5-ire,ents' The trans,ission *as de4eloped inAho-se at its En)ineerin) Research Centre 7ERC83 at
%-ne' O. the Rs /'2 billion it spent on desi)nin) the Indica3 the ,ajor share *ent in b-yin) desi)n
tools and trainin) its en)ineers in ne* s+ills' Telcos en)ineers tra4eled re)-larly to the sites o. its
technolo)y s-ppliers3 to recei4e trainin) be.ore the act-al deli4ery o. the ,achines'
Telco also o-tso-rced its asse,bly line .ro, Nissans plant in -stralia .or j-st Rs ?? ,illion' Telco
transplanted it at its .actory at Chi+li near %-ne3 *hich *as ne*ly set -p .or Indica' ne* asse,bly
line o. the sa,e proportions *o-ld ha4e cost at least Rs billion' )ain3 o. the 0 presses .or the
Indica3 only 1 *as ne*3 ac5-ired .or Rs ?? ,illion3 *hile the other / *ere bo-)ht secondAhand .ro,
!ercedesA"en= and ,odi.ied to s-it the Indica'
Telcos en)ineers and the ERC did the application en)ineerin)3 pro)ra,,in)3 installation3 and
co,,issionin) to sa4e aro-nd 2 o. the technolo)y costs' The toolin) .or the car too *as s-pplied
internally by Telcos ,achine tool di4ision' To ,ana)e the s-pply chain better3 Telco +ept the n-,ber
o. s-ppliers .or Indica to j-st /?? as co,pared to abo-t 13??? .or tr-c+s' !ost o. the parts *ere
s-pplied by Telcos traditional s-ppliers6 TFS3 Rane ro-p and Tata -to Co,ponent Syste,s
7Taco8 *ho *ere sin)le so-rce s-ppliers' %ressed parts3 asse,blies3 and dri4e sha.ts *ere so-rced
.ro, sin)le 4endors'
#hapter 9(* 8!DOR D8$O&M!T
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Once Telco ,ade its ,a+eAorAb-y choices3 the ne;t step *as to identi.y the 4endors' !ost o. the parts
that *ent into ,a+in) Telco *ere so-rced locally' E;cept .or so,e sheet ,etal parts3 cylindrical
)as+ets3 and beltsAA*hich acco-nted .or / o. the co,ponent 4al-e3 the Indica *as totally
indi)eno-sW1X' &' !ahesh3 CEO3 S-ndara, "ra+e #inin)s3 said3 #ocalisation o. co,ponents is the
,ost i,portant challen)e a ne* ,an-.act-rer .aces' It is a ti,eAcons-,in) and painsta+in) process'(
Telco e,ployed a si,ple yardstic+ .or selectin) s-ppliersG the ability to s-pply co,ponents at the
ne)otiated 5-ality3 cost3 and 5-antities' In the .irst sta)e o. selection3 an initial assess,ent tea, .ro,
Telco e4al-ated the s-pplier' This *as .ollo*ed by sel.Ae4al-ation o. the s-pplier3 based on a .or,at
pro4ided by Telco' Then there *as a 5-ality syste,s s-r4ey3 carried o-t by a Telco 5-ality a-dit
tea,'
This *as .ollo*ed by desi)n 4alidation' nd then there *as a ,an-.act-rin) 4alidation to ens-re that
the s-pplier *as .ollo*in) the proper ,an-.act-rin) processes' This *as .ollo*ed by the %rod-ction
%art ppro4al %rocess 7%%%83 *hich certi.ied the prod-ction 5-ality' R' Cha+raborty 7Cha+raborty83
senior dep-ty )eneral ,ana)er3 ,aterials $ s-pplier 5-ality i,pro4e,ent )ro-p3 said3
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It applied a 10Astep Q-ality I,pro4e,ent %ro)ra,,e3 co4erin) s-pplier sel.Ae4al-ation3 thoro-)h
desi)nA4alidation3 and a-dit o. s-pplier 5-ality' nother +ey to Telcos s-ccess.-l 4endorAbase *as a
,odern syste, o. process ,ana)e,ent' Telcos tar)etAcostin) *as bro+en -p into 4endorA*ise cost
tar)ets3 and the s-ppliers had to carry o-t their o*n 4al-eAen)ineerin) e;ercises to lo*er cost and
i,pro4e 5-ality'
9or e;a,ple3 India %istons3 *hich s-pplied the pistons and piston rin)s3 *al+ed a*ay *ith the Indica
order beca-se it bench,ar+ed itsel. a)ainst s-pplies to !ar-ti Udyo)L *hereas the other 4endors
bench,ar+ed the,sel4es a)ainst pistons s-pplied to Telcos co,,ercial 4ehicles'
India %istons in4ested Rs 1'2 ,illion in toolin)s3 and Rs /2 ,illion in a separate line at its !arai,alai
Na)ar 7Ta,il Nad-8 .acility' N' Fen+atra,ani3 CEO3 India %istons3 co,,ented3 TE#CO is 4ery
partic-lar abo-t lo)istics3 that ra* ,aterials ha4e a s-pply trace3 be ready .or asse,bly3 need no
inspection' It is a de,andin) c-sto,er'(
Telco e4en in4ol4ed its 4endors in the desi)nAprocess to )i4e s-ppliers ,ore lead ti,e to inno4ate3 and
.or better s-pply chain coordination' Co,,ented T'&' "alaji3 CEO3 #-casATFS3 *hich s-pplied
electrical co,ponents and .-elAinjection syste,s .or the Indica3 "y ,a+in) 4endors its partner early3
TE#CO ens-red both 5-ality and priceAcon.or,ity' #ate in4ol4e,ent *o-ld ha4e yielded di..erent
res-lts'(
!'S' &-,ar3 Director $ CEO3 Rane TR< Steerin) Syste,s 7Rane83 *hich s-pplied the steerin) syste,s .o
added3 TE#CO has been e;tre,ely s-pporti4e3 ,a+in) a4ailable its entire R$D reso-rces to o-r en)ineers
the best e;periences *e ha4e had in prod-ctAde4elop,ent'( Telco *anted Rane to desi)n a syste, that *o-
pec-liarities o. Indian road conditions'
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"esides o..erin) both ,an-al and po*er syste,s3 Rane also had to co,e o-t *ith a le.tAhand dri4e 4ariant .
,ar+et' Rane had to )o deep into application en)ineerin) beca-se the .ront a;leA*ei)ht o. the Indica *as he
its en)ineAdisplace,ent3 hi)her' Indica *as not only co,pact3 *hich le.t less space3 b-t also hea4y3 *hich s
syste,' Telco *anted Rane to bench,ar+ the ,ane-4erability o. the Indica a)ainst the en3 a ,-chAli)hterRane too+ abo-t 1> ,onths to de4elop and )et the steerin) syste, appro4ed3 spendin) close to / ,anA
years on it' It spent Rs 1> ,illion on de4elop,ent costs .or the po*er steerin) syste,AAincl-din)
toolin) and diesAAand Rs 1? ,illion .or the ,an-al steerin) syste,' Said %'R' Sarathy3 %resident3 Rane
7!adras83 TE#CO )a4e -s priceAtar)ets'
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re5-ired len)th3 and the )rindin) *as done to only the o-ter dia,eter'
nd the co,pany sa4ed 12 beca-se o. this sin)leApiece .lo* techni5-e' &' %andarinath3 Dep-ty
eneral !ana)er 7Research83 S"#3 co,,ented3 Telco is a transparent co,pany' It allo*ed -s to -se
all their .acilities as lon) as it helps de4elop a better prod-ct' O-r en)ineers spent se4eral *ee+s
*or+in) *ith Telcos en)ineers on per.ectin) the bra+eAlinin)s'(
#hapter 9(. SU&&$E #-A%!
To +eep its transaction costs lo*3 Telco con.i)-red its s-pply chain on a j-stAinAti,e basis' ll hi)hA
4al-e co,ponents *ere deli4ered daily3 and in the case o. nearby s-ppliers3 t*ice a day' Fendors *ho
*ere located .ar a*ay .ro, %-ne set -p local *areho-ses near the plant'
The rationale .or the relocationG transportation costs alone acco-nted .or 2 o. the total lo)istics
costs .or a co,pany3 delays in s-pplies added to costs in ter,s o. ,achine do*nAti,e at the plant'
!ean*hile3 on the shop .loor3 *here the asse,bly line *as located3 Telco had done a*ay *ith the
traditional store .-nction'
There *as no ,aterial store in the %-ne plant o. Telco' The tr-c+ loaded *ith the ,aterial .irst
entered the .actory at the ,aterial )ate *here there *as a doc-,entation center' person at this
center chec+ed *hether the ,aterial *as sched-led to arri4e or not3 by +eyin) in the part n-,ber and
the s-pplier code'I. the ,aterial *as not sched-led to arri4e3 the doc-,ents *ere not processed .-rther and the tr-c+
*as not allo*ed to enter the .actory pre,ises' Once it *as cleared at the )ate3 the tr-c+ proceeded to
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the recei4in) center'
Once the ite,s *ere -nloaded3 -npac+ed and cleared .or 5-antity and 5-ality3 they *ere ,o4ed into
the transit area' 9ro, there they *ent into *hat *as called the Vs-per ,ar+et' The s-per ,ar+et *as
close to the asse,bly line' In the s-per ,ar+et3 the ,aterials *ere arran)ed in s-ch a *ay that the
*or+ers co-ld easily access all the ,aterial re5-ired on the asse,bly line *itho-t *astin) ,-ch ti,e
and e..ort'
The bene.its o. this j-stAinAti,e in4entory syste, *ere that the in4entories *ere lo* and so the
interest costs *ere also lo*' )ain the ,anpo*er re5-ired to handle the in4entories *as also lo*'
9or Telco3 a cr-cial lin+ in the s-pply chain *as its ability to .orecast de,and acc-rately3 *hich *o-ld
help the 4endor plan his prod-ctionAsched-le in ad4ance3 th-s lo*erin) costs' Telco and Concorde
e,ployed ,ar+et research a)encies to help .orecast de,and thro-)h trend analysis3 -sin) the
historical data techni5-e'
It -sed a co,ple; *eb o. correlation in4ol4in) the co-ntrys econo,ic sit-ation3 co,petitors
prod-cts3 and their US%s' To ens-re 5-ic+ .lo* o. in.or,ation alon) the 4al-e chain3 Telco
electronically lin+ed its de,and .orecasts to prod-ction3 and bac+*ards to its s-ppliers'
ll its dealers *ere lin+ed to the plant thro-)h FSTs7/8 connected by eA,ail to relay de,and
patterns onAline to the %-ne plant' This red-ced the orderAprocessin) ti,e by ?' nalysts .elt that
by bein) online3 Telco *o-ld sa4e a ,ini,-, o. days .ro, the orderAtoAdespatch leadAti,e'9or speedy deli4ery3 Telco resorted to interAlocation trans.ers o. the prod-ct bet*een dealerships' This
*o-ld ens-re ,o4e,ent o. the prod-ct to a place *here there *as ,ore de,and'
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This *o-ld ,a+e a bi) di..erence to .inished )oods in4entory ,ana)e,ent once Telco started
prod-cin) at opti,-, capacity' Telco also tri,,ed costs by ,a+in) Concorde leaner than other
dealerships3 *ith j-st 0 le4elsG ,ana)in) director3 )eneral ,ana)ers3 and ,ana)ers708' Each o.
Concordes718 )eneral ,ana)ers *or+ed as pro.itAcentre heads o. their indi4id-al b-siness re)ions3
and reported directly to the ,ana)in) director'
dded3 '&' Seth3 eneral !ana)er 7Delhi83 Concorde3 The co,pany *anted to create a lean and
responsi4e net*or+3 *ith the pri,ary objecti4e bein) to ,eet c-sto,er re5-ire,ents as 5-ic+ly as
possible'(
718 Telcos dealer .or Indica' It had dealerships and /2 o-tlets'
7/8 Fery S,all pert-re Ter,inal 7FST8 is a satellite co,,-nications syste, that ser4es ho,e
and b-siness -sers' FST end -ser needs a bo; that inter.aces bet*een the -sers co,p-ter and an
o-tside antenna *ith transcei4er' The transcei4er recei4es or sends a si)nal to a satellite transponder in
the s+y' The satellite sends and recei4es si)nals .ro, an earth station co,p-ter that acts as a h-b .or
the syste,' Each end -ser is interconnected *ith the h-b station 4ia the satellite' 9or one end -ser to
co,,-nicate *ith another3 each trans,ission has to .irst )o to the h-b station *hich trans,its it 4ia
the satellite to the other end -sers FST' FST handles data3 4oice and 4ideo si)nals'
708 !ost other carA,ar+eters in the co-ntry operated *ith a ,ini,-, o. 2 le4els'
#hapter 9(/ $8RA%! T- SU&&$E #-A%!
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Indica ,ar+ed the be)innin) o. Telcos dri4e into Indias a-to ,ar+et as an inte)rator *ith a ,-ltiA
prod-ct port.olio' nalysts .elt that the co,petencies that Telco had )ro*n in the process o. ,ar+etin)
Indica *o-ld be the core aro-nd *hich it *o-ld b-ild its .-t-re car b-siness' nalysts also .elt that
Tata *o-ld -se the s-pply chain that .ed the Indica to .eed a *hole ran)e o. Telco cars o. the .-t-re'
D'C' nand3 CEO3 nand ro-p3 said3 Telcos capacity *ill be tested by ho* ,any ne* ,odels it
can co,e -p *ithAAand ho* soon' Is Telco in a position to do soP 9o-r years a)o3 I *o-ld ha4e said
no' Today3 I a, not )oin) to -nderesti,ate their capacity' They ha4e de,onstrated it'(
"-siness Today *rote3 #e4era)in) the lo*Acost s-pply chain that it has b-ilt3 Telco *ill la-nch a
series o. other carsAApriced both belo* and abo4e the Indica3 straddlin) the entire spectr-,AAeach o.
*hich *ill be pro)ressi4ely easier to inte)rate'( The s-pply in.rastr-ct-re *o-ld beco,e econo,ical
as the 4ol-,e o. the b-siness that Telco o..ered its 4endors increased'The 4ol-,e o. b-siness *o-ld increase *ith a lar)er n-,ber o. cars' The learnin) that it *as
e;tractin) .ro, the Indica s-pply chain *o-ld also be a4ailable to the co,pany as it ,o4ed into other
prod-cts'
There see,ed to be a distinct opport-nity .or a s,aller3 cheaper car3 positioned as an entryAle4el .or
the .irstAti,e b-yer' nalysts .elt that Telcos s-pply chain ,ana)e,ent *o-ld beco,e the pi4ot
aro-nd *hich it co-ld asse,ble its passen)erAcar b-siness'
#hapter 9(2 #ost #uttingTo c-t costs3 Tata !otors tried inno4ati4e techni5-es s-ch as =eroAbased costin)' The co,pany:s en)ineers
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*or+ed the cost o. co,ponents all o4er a)ain' 9or e;a,ple3 earlier3 Tata !otors paid .or its .or)ed co,pon
on a costApl-s basis as clai,ed by a 4endor' Under the ne* syste,3 it paid a price dependin) on the *ei)ht
.or)in)3 leadin) to sa4in)s o. /2' %ra+ash ! Telan)3 senior 4ice president 7,an-.act-rin)83 *as appointed
the :costAerosion cha,pion: and p-t in char)e o. the entire initiati4e' 9o-r speci.ic areas *ere identi.iedG
ADirect ,aterial costs Red-ction %rojects
AIn4entory nalysisAK-st in Ti,e
ATransporation nalysis
AStoc+ +eepin) Unit nalysis'
#hapter 9(9
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#hapter 9(7 #ost Redu)tion in nergy #onsumption
"y i,ple,entin) 4ario-s ener)y conser4ation projects there has been a consistent decrease in the
speci.ic Electrical and Ther,al Ener)y Cons-,ption'
>?
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%rod-cti4e !aintenance8 ,ethodolo)y'"y -sin) T%! ,ethodolo)y plant has i,ple,ented ,ore than
/?? +ai=ens 7 s,all i,pro4e,ents8 li+eG A Re,o4al o. -n*anted ,otors3 Contin-o-s to inter,ittent
operatin)
o. ,otors3 Ti,er .or "lo*ers Heaters3 %ro4idin) air press-re re)-lators3Stoppin) idle r-nnin) o.
,otors3
%hoto cell control .or li)htin)3 Co,binin) acti4ities etc'
nergy Management &oli)y
Y %ro,ote Ener)y sa4in) and conser4ation o. reso-rces'
Y "ench ,ar+ speci.ic ener)y cons-,ption *ith National $ International standards3 and settin) -p
syste,s to achie4e the,'
Y Increase -se o. nonAcon4entional so-rces o. ener)y $ alternate .-el so-rces'
Y Co,ply *ith the Ener)y #e)islation and other re)-lations'
Y Cond-ct re)-lar Ener)y -dits to red-ce ener)y *asta)e in all areas'
Y %ro,ote a*areness a,on) all e,ployees thro-)h lea.lets3 se,inars3 co,petitions and co,pany
4isits'
Y Reco)nise ener)y conser4ation initiati4es ta+en by e,ployees and a*ard the,'
Y Red-ce *aste )eneration and pro,ote disposal3 re-se and recyclin) in an En4iron,ent .riendly
,anner'
Y !a+e an e..ort to red-ce the cost contin-o-sly e4ery year by adoptin) e..ecti4e Ener)y
!ana)e,ent
>/
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Syste,('
nergy #onser,ation A)hie,ements
D-rin) the period bet*een /??0A/??2 !ahindra $ !ahindra #td' has i,ple,ented aro-nd 0/?
proposals
thro-)h En)ineerin) initiati4es3 *or+,ens s-))estion sche,es3 -ditors reco,,endations and T%!
,ethodolo)y res-ltin) into total sa4in) o. Rs 2 la+hs *ith an in4est,ent o. Rs 10 la+hs' This has
res-lted in a red-ction o. 12 in speci.ic electrical ener)y cons-,ption and 1 in speci.ic ther,al
ener)y cons-,ption'
#haptera 9(7(* le)tri)al Sa,ing ; > #ompressed Air?
'( S)re3 #ompressor 3ith 8ariable Frequen)y Dri,e
Before %nstallation :
For **@@ )fm output )ompressed air requirement= plant 3as running
four )ompressors ha,ing total motor )apa)ity of 9.@ hp(
Motor #apa)ity L 9.@ hp
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&o3er #onsumption per Annum L *2(.* $a4hs 4h
Operating #ost L Rs( '@7(9. $a4hs H Annum
After %nstallation:0
S)re3 )ompressor 3ith 8FD running in )ombination 3ith e5isting
)ompressors ha,ing total motor )apa)ity of 2'9 hp (
Motor #apa)ity L 2'9 -&
&o3er )onsumption per annum L *@(76 $a4hs 4h
Operating #ost L Rs (.2 $a4hs H Annum
Sa,ing L Rs( '6(*@ $a4hs H Annum
b8 Electrical Sa4in)s !eas-res G
1' Inte)rated 7 IT 8 )-n in place o. Con4entional )-n .or Spot %T un?
&o3er Rating :0 .. C8A
le)tri)al #onsumption :0 @('9 $a4hs H annum
>
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%nstalled 9 nos of %T uns(
Total Sa,ing :0 .(.7 $a4hs C- H annum
Rs( '/(.* $a4hs H annum
*( %nstalled Steffa #ontrol ,al,e for Optimum utiliGation of #hilled 3ater in
#entral
A# &lant
Installed Ste..a Control Fal4e .or opti,-, -tili=ation o. chilled *ater
at Central ir Conditionin) %lant'
Sa4in) GA 02 &
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con4erted to %N .irin) by installin) .-el e..icient b-rners'
"e.ore GA Electrical Heatin)
Electrical Cons-,ption 0'2 #a+hs & #a+hs ann-,
.ter GA %N Heatin)
Ther,al Cons-,ption 1'?> #a+hs SC! ann-,
Cost GA Rs' '? #a+hs ann-,
Sa4in) GA Rs' 2'>? #a+hs ann-,
#hapter 9(7(. Thermal sa,ing -eat Re)o,ery
1. Conversion of Thermopac from LDO to PNG with Heat Recovery
"e.ore GA Ther,opac -sed .or heatin) o. Ther,ic 9l-id
>>
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%re4io-sly *as r-nnin) on #DO'
#DO Cons-,ption 12 #ts day
Cost o. #DO Rs' /2'1 #a+hs ann-,
.ter GA Ther,opac -sed .or heatin) o. Ther,ic .l-id
Con4erted to %N .irin) *ith Heat Reco4ery
Syste,'
%N Cons-,ption SC! day
Cost o. %N Rs' /?'2? #a+hs ann-,
Sa4in) GA Rs' '> #a+hs ann-,
*( -eat pump using atmospheri) heat for 3ashing ma)hines
"e.ore A Use o. >> +* electrical heaters .or *ater heatin) in *ashin)
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,achine'
.ter Heat %-,p -sin) at,ospheric heat to rise the te,perat-re o.
*ater .ro, 0/ Z to >? Z .or *ashin) ,achine a4oidin) electrical heaters'
Sa4in) [ 1' #a+hs &
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Y "-ildin) !ana)e,ent syste, .or e..ecti4e air conditionin)
'
#hapter 9(7(2 nergy #onser,ation &lans and Targets
Energy Conservation eas!res"nticipate# $p%anne#&
"nticipate#savings 'n
Energy $Rs.%a(hs&
"ppro).Pro*ect
'nvestment $Rs.La(h&
Pro*ectcommencem
+ comp%etioyear
Centralization of compressor house at utilitycompressor house 25 75 ,--
Fuel Cells for Power & Heat generation 104 50 ,--!nstall waste heat reco"ery for C#C 2 furnace an$preheat %uench oil 772 10 ,--
'eplacing open type (urners )y close type)urners at *+C Furnace 2,5 45 ,--
Heat pump for washing machine , 15 ,--
-apour +)sorption *ystem for air con$itioningin .ransmission P/ 42 21 ,--/
-aria)le Fre%uency ri"es for #ray Primer(ooth haust (lowers in Paint *hop 10 2, ,--/
*olar 3ater heating system for washing machine 10 175 ,--/
>
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Chapter 0 2OT "na%ysis of Cost Re#!ctionTechni3!es
in
"!tomo4i%e
Chapter 0 2OT "na%ysis of Cost Re#!ctionTechni3!esin
"!tomo4i%e
Overview on the a!tomotive sector
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The a-to,oti4e ind-stry is torn bet*een tryin) to red-ce costs on the one hand and3 on the
other3 dealin) *ith the hi)h price o. per.or,anceAenhancin) technolo)y and en4iron,ental
co,pliance' &ey dri4ers in the a-to,oti4e ind-stry areG
Y Red-ced air poll-tion
Y Red-ction o. *ei)ht
Y Recyclability
Y Sa.ety
Y "etter per.or,ance and en)ine e..iciency 7.-el sa4in)8
Y esthetics
Y #on)er ser4ice li.e
1
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SOT analysis on the automoti,e se)tor
II.1. Frames and body
718 Nano,aterials presently ind-strially -sed
Concernin) the ,aterials -sed .or .ra,es and body3 poly,er nanoco,posites play an
essential role''
ngines and po3ertrain
The ne* de4elop,ent in en)ine and po*ertrain technolo)ies has the objecti4es to i,pro4e
ther,al and ,echanical e..iciency3 per.or,ance3 dri4ability and reliability as *ell as to red-ce
/
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e,issions and costs'
&aints and )oatings
718 Nano,aterials presently ind-strially -sedo %roperties o. traditional ,aterials chan)e and the beha4io-r o. s-r.aces start to do,inate the
beha4io-r o. b-l+ ,aterials' S-ch e..ects incl-de -ltra4iolet 7UF8 bloc+in)3 antiAstatic3 and cond-cti4e
capabilities' %aints and coatin)s ind-stries *ere a,on) the .irst to ta+e ad4anta)e o. these capabilities
three years a)o' Co,panies also .o-nd that *ith the incorporation o. nanoparticles3 thin .il, coatin)s
ha4e stron)er bonds and better .le;ibility3 *ith little cost di..erences' These coatin)s are s,oother3
stron)er3 and ,ore d-rable'
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o In the past .e* years E-ropean elasto,er and inor)anic o;ide prod-cers ha4etea,ed to prod-ce3 -sin) an e,pirical approach3 the )reen tire *hich isbased on nanoAstr-ct-red silica rein.orced hydrocarbon elasto,ers'
#hapter Re)ommendation
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#hapter Re)ommendations
The a-to,obile co,ponents ind-stry is co,posed o. Tier 1 ,an-.act-rers positioned directly belo*
the
a-to,obile ,an-.act-rers and Tier / ,an-.act-rers and lo*er that are positioned beneath the Tier 1
prod-cers3
.or,in) b-siness relationships in the shape o. a broadAbased pyra,id *ith a-to,obile ,an-.act-rers
at the top' It
is co,,on .or Kapanese a-to,obile co,ponent ,an-.act-rers to be soAcalled +eirets- prod-cers3
*hich ha4e
stron) b-siness ties *ith a speci.ic a-to,obile ,an-.act-rer'
The b-siness per.or,ance o. the a-to,obile co,ponent ,an-.act-rers is stron)3 b-t R$I cannot be
opti,istic abo-t the .-t-re b-siness en4iron,ent' ,idst increasin)ly intense )lobal co,petition
bet*een
a-to,obile ,an-.act-rers3 the per.or,ance o. the a-to,obile ,an-.act-rers3 *hich are the ,ain
c-sto,ers3 has
a si)ni.icant in.l-ence on the per.or,ance o. co,ponents ,an-.act-rers' In addition3 *ith earnin)s .or
a-to,obile ,an-.act-rers the,sel4es bein) s5-ee=ed by the intensi.ication o. co,petition3 the
de,ands ,ade
on co,ponent ,an-.act-rers in ter,s o. price ha4e beco,e e4en ,ore strin)ent' !oreo4er3 addin) in
the
c-rrent rise in the price o. ra* ,aterials s-ch as steel3 al-,in-,3 and copper and it see,s that
earnin)s are bein)s5-ee=ed .ro, both -pstrea, and do*nstrea, directions'
In this to-)h b-siness en4iron,ent3 R$I considers that the presence o. a .inancial base that can
acco,,odate strate)ic in4est,ent *ill ha4e a ,ajor i,pact on .-t-re credit*orthiness .or co,ponents
co,panies'
2
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Ratin) %oints .or the -to,obile Co,ponents Ind-stry
,aluation of Business Base
In e4al-atin) the b-siness base .or the a-to,obile co,ponents ind-stry3 R$I .oc-ses on three areas
*hich
are the relationship *ith the a-to,obile co,panies that are the ,ajor c-sto,ers3 the str-ct-re .or
)lobal s-pply o.
prod-cts3 and the i,portance o. the prod-cts'
Sales .or co,ponents ,an-.act-rers are si)ni.icantly a..ected by ho* ,any ,odels they can obtain
orders
.or at the la-nch o. ne* 4ehicles or ,odel chan)es and ho* sales )o .or each o. the ,odels .or *hich
they
recei4e orders' lobal prod-ction and sales o. ne* cars is risin) o4erall3 b-t there are ,ajor disparities
bet*een
indi4id-al ,an-.act-rers' There.ore3 it is necessary to analy=e str-ct-re o. sales and trends .or each
a-to,obile
,an-.act-rer and assess the possibility o. chan)es in .-t-re sales *hile considerin) e;ternal .actors
s-ch as the
trac+ record and .-t-re projections o. each a-to,obile ,an-.act-rer in the la-nch o. ne* ,odels and
the e..ecto. en4iron,ental restrictions' -to,obile ,an-.act-rers ha4e soAcalled close co,ponent
,an-.act-rers typi.ied
by ToyotaAa..iliated Denso and isin Sei+i' "ein) a close ,an-.act-rers does not necessarily
)-arantee orders'
Ne4ertheless3 the close ,an-.act-rers -lti,ately ha4e a hi)h share o. deli4eries3 b-siness 4ol-,e is
o.ten stable3
and .-t-re order ris+ is li,ited to so,e e;tent' Ho*e4er3 there are also .ields in *hich independent
,an-.act-rers
ha4e an o4er*hel,in) share dependin) on the prod-ct3 and it can be considered that order ris+ is also
s,all .or
independent ,an-.act-rers in these cases'
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ha4e also been a))ressi4ely pro,otin) the establish,ent and e;pansion o. prod-ction centers
o4erseas' Caterin)
to the )lobal strate)y and )lobal opti,al proc-re,ent o. a-to,obile ,an-.act-rers is essential to
,aintain and
e;pand orders in the .-t-re3 and it is i,portant to assess the state o. the )lobal str-ct-re .or the s-pply
o. prod-cts
o. the co,ponents ,an-.act-rers'
The i,portance o. the prod-cts that a co,pany handles is also an +ey point' s the strin)ency o.
de,ands
.ro, a-to,obile prod-cers r-ses3 ,ajor disparities in pro.itability .or each co,ponent ha4e started to
appear
dependin) on .actors s-ch as the added 4al-e o. a prod-ct or di..erences in e..orts to i,pro4e costs in
prod-ction'
It is i,portant to .orecast .-t-re pro.itability ta+in) into consideration the nat-re o. the prod-ct3 its
i,portance in
an a-to,obile o4erall as a part3 and .-t-re technolo)ical directions'
#hapter (' Main %ndi)ators\ Net debtoperatin) cash .lo* ratio3 Net debt
\ Operatin) cash .lo*3 capital e;pendit-re
\ E5-ity capital3 e5-ity capital ratio
\ Operatin) pro.it on sales3 R$D e;pendit-re on sales ratio
\ Sales and operatin) inco,e 7loss8 by re)ion3 proportion o. o4erseas sales
\ Share o. ,ain prod-cts 7)lobal3 .or c-sto,er8
\ %rod-ction and sales o. ,ajor c-sto,ers
#hapter (* Fo)us on Mo,es to Strengthen Ties 3ith
Automobile Manufa)turers
In order to s-r4i4e )lobal co,petition3 so,e Kapanese a-to,obile ,an-.act-rers are tryin) to boost
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prod-ct stren)th by .or)in) e;tre,ely close ties *ith hi)hly co,petiti4e co,ponent ,an-.act-rers'
The role
played by co,ponent ,an-.act-rers in the de4elop,ent o. ne* ,odels3 pri,arily in s-ch .ields as the
en4iron,ent3 sa.ety3 and co,.ort3 is beco,in) increasin)ly i,portant3 and there are instances o.
a-to,obile
,an-.act-rers ,o4in) to boost ties3 incl-din) on the capital .ront3 *ith co,petiti4e co,ponent
,an-.act-rers'
R$I is .ollo*in) the i,pact that this trend is ha4in) on the co,petiti4e en4iron,ent bet*een
a-to,obile
co,ponent ,an-.act-rers'
#hapter (. %n,estment Margin is Cey to Sur,i,al
bility to )enerate cash .lo* is the ,ost i,portant .actor' In response to prod-ction increases by
a-to,obile ,an-.act-rers3 each o. the co,ponent prod-cers ha4e also stepped -p capital e;pendit-re3
pri,arily
to boost capacity both in Kapan and o4erseas' Ho*e4er3 the sharp increase in capital e;pendit-re has
been a hea4y
b-rden on .inances in the a-to,obile co,ponents ind-stry3 *hich has ,any co,panies that are s,all
in scale
co,pared to a-to,obile prod-cers and that co,pare -n.a4orably in ter,s o. .inancial base' In order to
i,ple,ent strate)ic in4est,ent incl-din) rationali=ation3 ,aintenance and inno4ation3 and initial
in4est,ent in
addition to establishin) centers in )ro*th ,ar+ets3 it is necessary to sec-re stable cash .lo* in e;cess
o. a certain
a,o-nt e4ery .iscal year3 and this co-ld be ter,ed a condition .or s-r4i4al'
#hapter (/ Fo)us on Adequa)y of quity #apital
Sales credit and in4entory ris+ is relati4ely s,all .or co,ponent ,an-.act-rers'
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so,e open ,ar+et sales3 the ,ajority o. sales credit is .or a-to,obile ,an-.act-rers3 and the ris+ o.
bad debts is
lo* *hen li,ited to Kapanese a-to,obile prod-cers' !oreo4er3 co,pared to other ind-stries3 sales
credit
collection period is o.ten short and its ter,s are also .a4orable' In4entory is ordered prod-ction .or
a-to,obile
,an-.act-rers3 so R$I considers the ris+ o. abolition and i,pair,ent to be e;tre,ely s,all'
R$I also considers that e5-ity capital as a ris+ b-..er is an i,portant .actor' R$I assesses e..ecti4e
e5-ity
capital ta+in) o.. balance sheet debt into acco-nt as a ris+ b-..er .or acco,,odatin) asset i,pair,ent
ris+ and
e;traordinary losses' Ne4ertheless3 the le4el o. ris+ b-..er re5-ired 4aries dependin) on the b-siness
ris+ o.
indi4id-al co,panies' I. the c-sto,er is a ,an-.act-rer that is contin-in) to increase prod-ction3 the
ris+ that the
co,ponent ,an-.act-rer *ill abolish .acilities is e;tre,ely s,all' Ho*e4er3 *hen the c-sto,er is a
,an-.act-rer that is carryin) o-t lar)eAscale restr-ct-rin)3 it is necessary to consider the e..ect o. the
restr-ct-rin)
plans on the rate o. operations at the co,ponents ,an-.act-rer and to e;a,ine the ris+ o. abolition o.prod-ction
.acilities and the ade5-acy o. e5-ity capital'
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?
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#hapter 6( Bibliography
B%B$%ORA&-E
Che*3
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#hapter '@( Referen)es
#hapter '@ RFR!#S
http:HH333(intelligen()omH
http:HH333(bitpipe()omHrlistHtermHManufa)turing0%ndustry(html
http:HHs)itation(aip(orgHgetabsHser,letHetabsSer,letprog[
http:HH333(3330manufa)turing)enter()omHmanufa)turing0industries(html
0
http://www.intelligen.com/http://www.bitpipe.com/rlist/term/Manufacturing-Industry.htmlhttp://scitation.aip.org/getabs/servlet/GetabsServlet?proghttp://www.www-manufacturingcenter.com/manufacturing-industries.htmlhttp://www.intelligen.com/http://www.bitpipe.com/rlist/term/Manufacturing-Industry.htmlhttp://scitation.aip.org/getabs/servlet/GetabsServlet?proghttp://www.www-manufacturingcenter.com/manufacturing-industries.html8/12/2019 Vinit Singh
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http:HH333(rfid+ournal()omHindustrysummitsHmanufa)turing(php
333(e%n,entory#ontrol(info
333(training0
)lasses()omH)ourseNhierar)hyH)oursesH297Ncost_reduction_techniques(
333(ri)s(orgH(((H
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#hapter ''( Anne5ure
#hapter ''( Anne5ure
2
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! set -p a technical centre at "an)alore that beca,e .-lly operational in Septe,ber /??0' The
centre .oc-ses on both R$D and en)ineerin)3 and ta+es -p hi)hA4al-e *or+ to co,ple,ent c-rrent
research pro)ra,,es3 as *ell as ne* e;ploratory research projects'