261535033-Supply-Chain-Management-Tata-Motor.docx

Executive Summary Supply chain management has been defined as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally. The automobile industry is a pillar of the global economy, a main driver of macro-economic growth and stability and technological advancement in both developing and developed countries, spanning many adjacent industries. In this project, we have taken India’s leading automobile manufacturer, Tata Motors Limited (TM L)

for analysing Supply Chain Management in Automobile Industry and found out the following. Tata Motors Limited products are sold and serviced through a network of authorized dealers and service centers across the domestic market, and a network of distributors and local dealers in international markets. The company monitors the performance of its dealers and distributors and provides them with support to enable them to perform to the expectations. Any under-performance by the dealers or distributors could adversely affect TML’s sales and results of operations. The company relies on third parties to supply raw materials, parts and components used in the manufacture of products. Furthermore, for some of these parts and components, the company is dependent on a single source. The company’s ability to procure supplies in a cost effective and timely manner is subject to v arious factors, some of which are not within its control. While the company manages its supply chain as part of the vendor management process, any significant problems with supply chain in the future could affect the results of operations. Impact of natural disasters and man-made accidents, adverse economic conditions, decline in automobile demand, lack of access to sufficient financing arrangements, could have a negative financial impact on the Company’s suppliers and distributors, in turn impairing timel y availability of

components, or increases in costs of components. In managing a complex supply chain, the Company has developed close relationships with both direct and indirect suppliers. The Company continues to develop long-term strategic relationships with suppliers to support the development of parts, technology and production facilities

Contents EXECUTIVE SUMMARY SUMMARY .......................................... ................................................................ ............................................ ............................................. ........................... .... 1 INDUSTRY OVERVIEW ........................................... ................................................................. ............................................ ............................................. ........................... .... 3

KEY STATISTICS. ....................................................................................................................................... ....................................................................................................................................... 3 EVOLUTION OF INDIAN AUTOMOBILE SECTOR ................................................................... .............................................................................................. ........................... 5 MAJOR MARKET PLAYERS ............................................................ ......................................................................................................................... ............................................................. 5 GROWTH DRIVERS ........................................................... .............................................................................................................................. ........................................................................ ..... 7 TATA MOTOR - COMPANY BACKGROUND BACKGROUND............................................ ................................................................... ......................................... .................. 8 SUPPLIERS & OEM MANUFACTURES MANUFACTURES ........................................ .............................................................. ............................................ .............................. ........ 9

PROVISIONS RELATING TO SUPPLY OF PRODUCTS ............................................................... .......................................................................................... ........................... 9 PRICES ................................................................ ...................................................................................................................................... ................................................................................... ............. 9 PAYMENT TERMS ............................................................ ............................................................................................................................... ...................................................................... ... 10 LOCAL FACILITY ............................................................... ..................................................................................................................................... ...................................................................... 10 SERVICE AND REPLACEMENT PARTS, SPARES PARTS AND SERVICE SUPPORT .................................................... 10 10 PRODUCT SPECIFICATIONS ........................................................... ...................................................................................................................... ........................................................... 11 FORECAST AND ORDERS. ......................................................................................................................... ......................................................................................................................... 11 PACKING AND TRANSPORT ........................................................... ...................................................................................................................... ........................................................... 11 DELIVERY CLAUSES. ................................................................................................................................ ................................................................................................................................ 11 PROCESS FLOW CHARTS ................................................... ......................................................................... ............................................ .................................... .............. 12

SUPPLY CHAIN FLOW: INWARDING TO DISPATCH ............................................................... ........................................................................................ ......................... 12 SUPPLY CHAIN FLOW: PROCUREMENT TO PAYMENT .................................................................................... ................................................................................... 12 ENTERPRISE RESOURCE PLANNING ........................................................... ........................................................................................................... ................................................ 13 VALUE CHAIN.................................................... ........................................................................... ............................................. ............................................ ............................ ...... 14

INBOUND LOGISTIC ...................................................................... ................................................................................................................................ .......................................................... 15 OPERATIONS. ............................................................................................................... ........................................................................................................................................ ......................... 15 OUTBOUND LOGISTIC ................................................................... ............................................................................................................................. ..........................................................15 MARKETING & SALES ................................................................... ............................................................................................................................. .......................................................... 15 SERVICE .............................................................. .................................................................................................................................... ................................................................................. ........... 16 PROCUREMENT ............................................................... ..................................................................................................................................... ...................................................................... 16 TECHNOLOGY & DEVELOPMENT ...............................................................................................................16 HUMAN RESOURCE .................................................................................................................. ............................................................................................................................... .............. 16 SUPPLY CHAIN ........................................... ................................................................. ............................................ ............................................ .................................... .............. 17

IMPLICATION OF SUPPLY CHAIN MANAGEMENT – WORLD MARKET ................................................................ 17 ENVIRONMENT OF SUPPLY CHAIN – TATA MOTORS LTD ...............................................................................18 DRIVERS OF SUPPLY CHAIN. ..................................................................................................................... ..................................................................................................................... 19 CASE STUDY.......................................................... ................................................................................ ............................................ ............................................ ......................... ... 22 REGULATIONS REGULATIONS ............................................ .................................................................. ............................................ ............................................ .................................... .............. 23 REWARDS AND RECOGNITION RECOGNITION.......................................... ................................................................ ............................................ .................................... .............. 24 REFERENCES REFERENCES .......................................... ................................................................. ............................................. ............................................ ....................................... ................. 25

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Supply Chain Management – Tata Motors Limited

Industry Overview Automotives contributes to several important dimensions of nation building right from generation of government revenue to creating economic development and encouraging people development along with fostering research and development and innovation. Automobiles depend heavily on consumer trends and tastes. The large pool of skilled manpower and growing technology poses heavy demand for automobiles in India which will list our country one amongst the top five auto producers by the year 2015. The liberalization of the Indian industry saw significant growth in the Indian Automotive Industry. Today, the Indian Automotive Industry is a significant contributor to the Indian economy, contributing nearly 5% to the country’s GDP and

about 17-18% to the kitty of indirect taxes to the Government. Income and the cost of ownership are the two factors which are majorly affecting the demand for the automobiles. With its wide penetration and strong influence on the country’s economic and industrial

development, the auto sector is indeed one of the major drivers of our economy. Moreover, economic liberalization coupled with its technological, cost and manpower advantage has made India one of the prime business destinations for many global automotive players. The sector has moderate direct employment and significant indirect employment; it is estimated that the sector provides direct and indirect employment to over 13 million people. With many new launches in the luxury and premium carmakers segment, the Indian market condition plays a catalyst role in the growth of the industry. The top-end carmakers have posted double-digit growth for the quarter ended June 30, 2013, with firms like Honda at 45 per cent and Audi recording higher sales and revenue growth of about 26 to 28 percent in this quarter itself. India is emerging as an export hub for sports utility vehicles (SUVs). Global automobile majors are looking to leverage India's cost-competitive manufacturing practices and are assessing opportunities to export SUVs to Europe, South Africa and Southeast Asia too. India is also one of the key markets for hybrid and electric medium-heavy-duty trucks and buses.

Key Statistics The Indian automobile industry produced a total 1.69 million vehicles including passenger vehicles, commercial vehicles, three wheelers and two wheelers in August 2013 as against 1.56 million in August 2012, registering a growth of 8.18 percent over the same month last year. The cumulative foreign direct investment (FDI) inflow into the Indian automobile industry during April 2000 to July 2013 was recorded at US$ 8,932 million, amounting to 4.5 pe r cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce. The overall automobile exports grew by 2.03 per cent during April-August 2013. Furthermore, the production of passenger vehicles in India was recorded at 3.23 million in 2012-13. Automobiles production increased at a compound annual growth rate (CAGR) of 12.2 per cent over FY05-13, while the export volumes increased at a CAGR of 19.1 per cent. As per the SIAM’s (Society of Indian Automobiles Manufactures) report, automobile sector is going to witness a strong growth in FY14. The key points for this forecast is – 

Auto sales across categories are estimated to rise 6-8 per cent in FY14


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

Passenger vehicles are projected to grow 5-7 per cent in FY14 Passenger car segment is estimated to expand 3-5 per cent •

•



SUVs are projected to increase 11-13 per cent

Commercial vehicles are forecast to rise 7-9 per cent LCVs are estimated to grow 10-12 per cent •



MCVs and HCVs are projected to increase 1-3 per cent



Three wheelers are estimated to rise 3-5 per cent in FY14



Two-wheelers are expected to grow 6-8 per cent in FY14

30%

Growth Forecast for Sales

25%

20%

15%

% 7 2

% 6 2

10% % 2 1

5%

% 8

% 4

0%

% 3

FY09

FY10

FY11

FY12

FY13

FY14E

% Forecast for the Auto Segment Growth 0 5

% 3 3

% 3 1

% 5 % 2 0 2

% % 3 3 3 3 % 8 % 2 5 2

% 5 % 0

FY09

% 0 3 -

4

% 6 1 % 3 % % 0 0

FY10

Passenger Vehicle

FY11

FY12

Commercial Vehicle

% 2

% 5 % 3

FY13 % 2 -

Three Wheelers


% % 9 % % 7 5 6

FY14E

Two Wheelers

Evolution of Indian Automobile Sector

2007 onwards 1993 - 07 - More than 35 marktet players

1983 -92

Before 1982

- Close market - Five Players - Long waiting period and outdated models

- Joint venture : Indian government and Suzuki formed Maruti Udyog; commenced production in 1983 - Component manufacturers enter the market via JV

- Sector de-licensed in 1993

- Removal of import control

- Major OEM started assembly operation in India

- Indian companies gaining acceptance on global scale

- Import permitted from April 2001

- Setting up of national Automotive Board to act as faciltator between the government and industry

- Introduction of value added tax in 2005

- Buyer's market

- Seller's market

Major Market Players Segments

Indian Origin

Foreign Origin

Cars/ SUVs

Hindustan Motors Mahindra & Mahindra Maruti Udyog Ltd Tata Motors Ltd

Ford Hyundai Suzuki Honda Toyota GM

Commercial Vehicles

Ashok Leyland Swaraj Mazda Tata Mahindra & Mahindra

Skoda Tatra Volvo Mitsubishi


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Cars & Utility Vehicles

Other 22%

Maruti Suzuki 36%

Toyota 5% TATA 7% M&M 9%

Hyundai 21%

Source: SIM, December 2013

LCV, M&HCV Eicher Force Others 3% 3% 5% Ashok Leyland 12% TATA 53% M&M 24%

Source: SIM, December 2013

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Growth drivers

More than 125 Fortune 500 (including large auto companies) have R&D centres in India

Companies can leverage India’s acknowledged

leadership in IT industry

Skilled labour costs amongst the lowest in India

Continuing in economic reforms and policies related to investments

Proven Product development capabilities Stable Economic Policies

Competitive Manufacturing Costs Most leading component manufacturers are QS & ISO certified

Indian Auto Hub

High Quality Standards 11 Indian component manufactures have won Deming Award

Shipments to Europe cheaper than those from Brazil and Thailand

Proximity to Markets

Large & growing domestic demand

Availability of Manpower

Proximity to Asian economies & emerging markets like Africa

Demand growth of 14% CAGR makes India one the fastest growing markets

0.4 million engineering graduates every year

7 million enter workforce every year


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Tata Motor - Company Background Established in 1945, Tata Motors’ presence cuts across the length and breadth of India. Over 8 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The Company’s

manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Sanand (Gujarat) and Dharwad (Karnataka). The Company’s dealership, sales, services and spare parts network comprises over 6,600 touch points.

Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand, Spain, South Africa and Indonesia. Among them is Jaguar Land Rover, acquired in 2008. Tata Motors Limited is India’s largest automobile company. It is the leader in commercial vehicles

and among the leaders in passenger vehicles in India with winning products in the compact, midsize car and utility vehicle segments. It is also the world’s fourth largest bus and fifth largest truck

manufacturer. Tata Motors in 2005 was ranked among the top 10 corporations in India with an annual revenue exceeding INR 320 billion. Tata Motors is committed to improving the quality of life of communities by working on four thrust areas – employability, education, health and environment. Highlights of the company (as a TATA Motor Group) in FY2012 -13 Market Capitalisation (as on 31st March 2013)

INR 79,274 cr

Total revenue

INR 1,89,629 cr INR 9,893 cr

Consolidated Profit

Production Capability: Domestic and International

Units produced

Units Sold

Commercial vehicle

606,983

589,897

Passenger Vehicle

580,334

598,082

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Suppliers & OEM Manufactures Provisions relating to Supply of Products Tata Motors purchase Products from supplier, subject to supplier meeting system specifications, quality, reliability, performance, delivery, price requirements etc. of Tata Motors as detailed in various sections in this General Terms and Conditions, RFQ, Drawings, Tata Motors Standards, Purchase Orders and other agreements, such as Purchase Agreement, Supply Agreement etc. that may have been executed with the supplier. 

Supplier must extend the status of a very important global customer to Tata Motors and deal with Tata Motors as the supplier would deal with other similar customers. Such status, however, neither confers any legal rights on Tata Motors nor does it impose any legal liability on supplier.



Supplier must not supply to any third party without prior written consent from Tata Motors, if the products in Purchase Order are manufactured using any of the following: •

•

•





 

Any intellectual property rights of Tata Motors or its promoters. Secret knowledge of manufacturing processes (know-how) of Tata Motors. Dies, moulds, models, patterns, jigs, tools or accessory equipment that were acquired from without payment obligation or fully paid by Tata Motors.

Similar products or their packaging supplied by supplier to the third parties shall not bear any mark or reference of, either intellectual property rights of Tata Motors or the Promoters of Tata Motors. The items agreed to be sold and supplied by the supplier must be delivered at designated points within Tata Motors premises at various locations or any other location specified for Spare parts. The supplier needs to supply components in reusable containers. Exceptions, if any, will have to be informed to buying agency in advance and mutually agreed upon. Each shipment by the supplier must be made under separate invoice.

Prices Initial price for every item shall be settled between Tata Motors and the supplier, based on the quotation and detailed cost break-up provided by the supplier and mutually agreed between Tata Motors and the supplier. Tata Motors then release Purchase Order on the supplier for the price thus settled. Unless agreed to specifically, any qualifying terms and conditions of the Supplier contained in their quotations / purchase order acceptance or any other form of communication shall not govern the business with Tata Motors. Together with Tata Motors, the supplier is expected to commit offsetting inflationary increases in costs through productivity gains and reducing cost further through value engineering, six sigma and Kaizen exercises, increased volumes of procurement from Tata Motors leading to lower Fixed cost per unit, achievement of higher productivity, effect of learning curve and by initiating other cost reduction measures, and Supplier agrees to bring down the prices as per the targets set from year to year with help of these measures.


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

If there are changes in the said Product specifications, which are approved by Tata Motors, to improve quality, reliability, performance and / or delivery requirements, the impact will be reviewed jointly and if found appropriate, the Tata Motors will carry out the consequential amendments in the Purchase Order.



Unless specifically agreed, unit rate applicable for serial production goods will also be applicable for all requirements on prototypes and for service and replacements.



Price revision effected for an item, due to Value Engineering exercises or changes in supply conditions or specifications shall normally be considered only once a year, or at intervals mutually agreed upon.



Any applicable development expense, such as Styling, Engineering, Integration, Validation, tooling etc., is settled with the Supplier considering the supplier delivers the product achieving the specified system level targets.

Payment Terms 

Local Products: Payment will be made as per payment terms as mentioned in the Purchase Order, by the respective purchasing agencies in Tata Motors, which are made in Indian Rupees for all procurements done in India, and is generally made within 30 days of satisfactory acceptance of Products at Tata Motors i.e. 30 days after Goods Inward Notification, against documents such as (i) Lorry receipt / Rail receipt (ii) Commercial invoice (iii) Packing list etc.



Imported Products: Payment will be made as per payment terms as mentioned in the Purchase Order. The payment terms are generally against irrevocable letter of credit or cash against documents. Payments shall be released within 30 working days from submission of documents such as (i) Bill of Lading/Airway bill, (ii) Commercial invoice, (iii) Packing list, and (iv) Certificate of Origin etc.



For the development cost to be paid in foreign currency, the agreed cost is always gross of the Withholding tax as applicable under Double Taxation Avoidance Treaty between India and supplier’s country of origin.

Local Facility Supplier shall normally establish its manufacturing facilities near assembly location of Tata Motors with an objective of JIT supplies to Tata Motors. In the event Supplier’s manufacturing location is not in the vicinity of Tata Motors’ ordering plant, supp lier shall establish storage facility near the

ordering plant of Tata Motors to provide uninterrupted and streamlined supply of materials. In case the initial supplies are imported, in its endeavour to remain price competitive, supplier shall aggressively explore possibility of setting up facilities in the same country of Tata Motors’ ordering plant in the earliest possible time for which the supplier shall commit to a time-bound action plan for setting up a local production facility.

Service and Replacement Parts, Spares Parts and Service Support 

At the request of Tata Motors during the period after Tata Motors complete current model purchases, say 15 years, supplier shall make supplies to fulfill Tata Motors past model service and replacement requirements at the prices specified in a purchase order plus actual cost differentials for packaging and transport. During the final year of such period, the Supplier

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and Tata Motors shall negotiate in good faith with regard to the Supplier’s continued

manufacture of service and replacement supplies. 

Supplier must provide such sale and after-sale service related information as mutually agreed by the parties, such as (but not limited to) parts, catalogue, workshop manual, training manual and maintenance guide, diagnostic equipment etc.

Product Specifications The products to be sold and supplied by the supplier to Tata Motors against the released Purchase Orders terms shall meet the specifications as finalised and agreed in writing between the supplier and Tata Motors hereto on completion of development work on the Product. Product specification, thus finalised, is generally documented in the form of drawings. Supplier is expected to participate in preparing this drawing jointly with Tata Motors, although the responsibility of approval and release of such drawings and specs sheets is solely with Tata Motors. The specifications can not be changed unilaterally by the supplier without prior written approval from Tata Motors.

Forecast and Orders Actual purchase / supply of components shall be made against specific purchase orders. Tata Motors provide an annual non-binding forecast to the supplier. The supplier for planning purposes only may use this forecast. Volume projection provided in by Tata Motors (including spare parts) is not a commitment by Tata Motors to purchase the quantities specified. Supplier acknowledges that Volume Projections, like any other forward looking projections, are based on a number of economic and business factors Initially Purchase order / Scheduling is released by Tata Motors like an open order. After start of production of the Product, Tata Motors issue monthly supply schedule, time to time, with specific quantities to be delivered at a time.

Packing and Transport 

For Local supplies, supplier shall supply components in reusable containers. Exceptions, if any, will have to be informed to buying agency in advance and mutually agreed upon.



Supplier shall provide a mutually agreed Unique Identification mark including location of Identification (such bar code, color code etc) on each and every Product supplied, which shall be as agreed upon jointly before start of serial production supply.



Unless agreed otherwise, product prices are inclusive of such marking fees.

Delivery Clauses Supplier must supply products as per Tata Motors schedules as indicated in Purchase Order or as communicated from time to time. Supplier is expected to agree on a specific logistics protocol with Tata Motors prior to commencement of production.


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Process Flow Charts Supply Chain Flow: Inwarding to Dispatch

VQA (Material Inspection)

ASSEMBLY (Production)

STORES (Acknowledgement)

VEHICLE (Inspection)

CRDO (Goods Inwarding)

FINAL DELIVERY (Sales)

Supply Chain Flow: Procurement to Payment

SRM SCHEDULES (Supplier Relationship Mgmt)

CRDO (Goods Inwarding)

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MRP (Material Req Planning)

VQA (Material Inspection)


SALES PLAN (Corp. SHQ)

BMS (Payment by Bank)

Enterprise Resource Planning Timelines

Legacy Systems Tata Motors Lucknow first to implement SAP 3.1H Largest single server implentation Upgraded to SAP ECC 6.0

Before 1999 1999 1999 – 2008 2008 onwards

ERP as a Catalyst to Growth 

Top to Bottom View of Company Performance



Alignment of Strategies & Operations



Improved Financial performance and Corp. Governance



Reduces costs thru increased flexibility & transparency



Integrated & Real Time Data & MIS Statements

 

Gains from Higher ROI Optimized IT expenses



Reduce Risks thru SOX compliance & ERM

Advantage of ERP 

Fully Integrated functional modules



Bill-of-Material (BoM) linked Real-Time consumption

 

Maintaining accurate Inventory levels at all stages Automated payments to all Channel Partners



Process automation augmented by Bar-Codes, RFID tech



Executive MIS thru Business Warehouse Employee Self Service thru SAP HR



SAP Module – Driving TML business


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Value Chain Value chain analysis is much important for each organisation as its divide firm in to various distinct activities carry out by the organisation such as, designing, manufacturing, marketing etc. The concept of value chain is developed from accounting practices which helps to analyse the value added to organisation at every stage of manufacturing or services or marketing. (Cowe, 2008) The value chain involves two types of activities: Primary activities & Support activities. Primary activities change inputs (Inbound logistics, operation, outbound logistics, marketing and sales, service) into outputs and bring them to customer. All this primary activities are carried out by use of support activities which are firm infrastructure, Human resource management, technology development and procurement. Every single activity in value chain can contribute to firms relative cost position and create a basis for differentiation’ (Porter, 1985 In Cow e, 2008, p.178). Value chain analysis makes possible for the organisation or management to find out activities which adding value to the organisation and activities that may destroy the value rather than creating and thereby helps to identify the source of competitive advantage.

Transporters, Convoy Drivers Association

Dealer Network, Marketing Research Firms, Vehicle Financing

SAP VCM Inbound

Outbound Operations

Logistics

Marketing

Service

Logistics SAP CRM - DMS

Suppliers, Contractors

Strategic Alliances

Regional Warehouses, Dealer Workshops, Distributors, TASS

As per TML, company's 24,000 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." TML considers adding value process which can help to improve work progress and in general supply chain. TML focus on development of, technical capabilities via training centres and association with

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technical institutes & management capabilities via training programmes at premier business schools. They also carry out career advancement schemes. Along with all this HR Management carry out various activities for their staff which results in increased efficiency, effectiveness, engagement, superior performance, productive and cordial relationship and thus increase organisational capabilities in performing various primary activities such as operations, marketing, sales etc.

Inbound Logistic 

Long-term contract with service provider’s – transporters and agents.



Personnel at regional offices for overseeing the smooth transit of goods. Transparency and monitoring through deployment of IT – all transactions through SAP.

  

DTL (daily transport logistics) supplies for critical high value items. Efficient storage facilities – easy storage and retrieval.

Operations 

Capital Equipment Manufacturing division – tooling development capabilities of global



standard. Apprentice Trainee Course – ensuring stable source of skilled manpower.





Kaizen & TPM (total productive management) team – continuous drive to improve efficiencies. Automated manufacturing processes.



Distributed manufacturing – Assembly units at South Africa, Thailand, Bangladesh, Brazil etc.



Maintenance – technical competence. Capacity Utilization – Mercedes Benz cars make use of Tata Motors paint shop facilities.



Outbound Logistic 

Stockyards, all across the country.



Long-term contracts with transporters – higher volume of business to transporters ensures



competitive price. Regional Sales Office and Vehicle Dispatch Section linked through SAP. Efficient security system for prevention of any kind of pilferage.



Marketing & Sales 

Structured approach to understanding the requirements of individual customers – QFD’s



conducted at regular intervals. Clear identification of product requirements, leading to development of innovative products – Tata 207 DI, Tata Ace



Pan India presence and global footprint.



Independent teams for addressing the requirements of institutional customers – Defense, State Transport Units

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Helping to augment the scarce resources – Fiat selling vehicles through Tata dealerships, in return Tata has access to Fiat’s technology and unutilized capacity.



Quick assessment of the changing market dynamics and consumer preferences – Tata 407 LCV

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Large network of dealers – use of technology (CRM-DMS).


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Service 

Easy availability of spare parts.



Efficient collection of data from field and communication to the respective plants. Pan India presence, as well as global presence.

  

Large network of workshops – Dealer workshops and TASS. Training facilities – for dealer end and TASS personnel.

Procurement  

E procurement initiative. Global Sourcing Team – China, a key destination for sourcing essential items like tires, power steering units etc., Steel procured from Belarus



Long-term relationships with a stable and loyal pool of suppliers.

 

Technology driven procurement – SAP and VCM. Strategic subsidiaries & JV’s – TACO group of companies, Tata Cummins



Centralized Strategic Sourcing for key components – FIP’s, Steel etc.



Group resources – Tata Steel and Tata International.



Localized supplier base at mfg. locations – low inventory levels.

Technology & Development 

Approximately 2% of the annual profits of the company invested in research and development.





Knowledge portal – helps employees keep abreast with the latest technologies. Extensive prototype building and testing facilities. Strategic partnerships – MDI (France), Fiat etc.



Formal benchmarking process.



“Technology Day” organized across all plant locations.



Human Resource  

Vast pool of technically competent engineers and managers. Focus on development of technical capabilities – Technical Training Center’s, Alliance with technical Institutes

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

Focus on development of managerial capabilities – MTC’s, TMTC, executive training programs at premier business schools



Career advancement schemes – ESS, FTSS


Supply Chain Implication of supply chain management – World Market Recent emphasis on global climate change is increasing pressure on automobile executives to make the right decisions in many areas, including R&D and manufacturing. In fact, emission-level targets, currently in question, threaten the entire structure of the auto industry. These challenges hit an industry already plagued with high costs, low profit margins, and accelerated competition. New entrants from China and India are working aggressively to capture the share of the global market, following the path taken by the Japanese in the 1980s and the Koreans in the 1990s – both of whom went beyond their domestic market by focusing on the United States first, and then Europe later. General macroeconomic and financial circumstances are not necessarily favorable. The cost of energy and raw material continues to increase due to rising global demand. Strong fluctuation in exchange and interest rate pose another challenge and are difficult and costly against which to hedge. In this dynamics business environment, a superior supply chain is one critical element to helping automakers differentiates themselves from the competition. In fact, many of trends in the auto industry are reinforcing the need to redefine supply chain strategies, layout, and operations. The most complex challenges automakers faces are summarized:

External

Customer

•Legislation (environment,

•Stagnanting demand and

safety, others) •Raw material and energy cost •Exchange and interest rates

prices pressure in established market. •Segmentation and polarization (low cost vs. premium) •Decreasing loyality

Competition •Quickly entering into every

segment •Moving targets - everyone optimising or restructuring. •Global game (for example: aggressive asian companies, new entrants)

Industry •Global overcapacity •Complex alliances,

Partnerships, M&As •Consolidating ecosystems (Supliers, Dealers group)

Figure: Global challenges in automotive industry Source: IBSG, 2012


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Based on these challenges, eight major trends affecting the automotive supply chain Demand – side trend

Supply – side trend

Uneven growth

Differentiated outsourcing

Fragmentation

Low – cost country sourcing

Accelerated volatility

Risk Management

Importance after market

Transparency/ accountability

Figure: trends that have implication on supply chain Source: IBSG, 2012

Environment of Supply chain – Tata Motors Ltd Sourcing is very important and critical function for Tata Motors. Different agencies participate during the entire product life cycle. It starts as early as early vendor introduction when the product is in concept stage. Strategically important sources with a potential of developing relationship into strategic alliances are finalised during this step. Quantum of outsourcing work and nature of technology to be developed decides the corresponding development agency. After which specific nodal agency is responsible for development of parts and aggregates till the product is brought to the level of regular procurement. Further, on the nature parts/aggregate, either central materials agency or the sourcing group attached to the respective factory (where the part will be consumed) will initiate the process for regular procurement. Quality assurance plays an important role of establishing quality of new parts developed. It also keeps vigilance for maintaining consistency in regular suppliers. Cost is an important parameter of our business model. In recent past, Macro level parameters such as commodity prices, oil prices, fluctuations in foreign exchange rates and slacking domestic demand has resulted into tremendous pressure on product costing as it is very difficult to TML to pass it to end customer. The matter of cost increase or decrease is addressed by a separate agency that initiate and settle cost saving activities. E sourcing tool is effectively used to reduce cost of procurement. Tooling division provides necessary tooling as per the policy and planning done by project planning team. Sourcing team co-ordinates with these different internal agencies to smoothly execute the project and meet the project time lines. If insisted by suppliers, productivity improvement cell plays an important role of helping vendors for improving productivity by special task force, which works at supplier’s locations.

At appropriate phase, respective sourcing agency co-ordinates for fulfilling on field spare part requirements, both local and overseas. Similarly a centralised import cell co-ordinate all import related activates.

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Drivers of Supply Chain Supply chain structure

E fficiency

Inventory

Information

Responsiveness

Transportation

Sourcing

Facilities

Pricing

Logistical Drivers

CrossFunctional Drivers

Inventory 

Inventory "stockage" exists in all supply chains because of a mismatch between supply and demand. Mismatches are often intentional, such as the case when cost effectiveness dictates batch sizes or when future demand is unclear and immediate customer delivery is required. The spread of inventory throughout the supply chain includes raw materials, work in process, and finished goods by suppliers, manufacturers/repairers, distributors, and retailers. Inventory also has a significant impact on the material flow time of a supply chain. A major conclusion for those who manage inventory is that decreasing inventory (without increasing cost or decreasing responsiveness to the customer) can provide a significant flow time advantage in performance in the supply chain.

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Inventory also plays a significant role in a supply chain's ability to support a firm's competitive strategy. If a business requires a very high level of responsiveness, the company can use inventory to achieve this responsiveness by locating large stocks of inventory close to the customer. In a pull or just-in-time environment, suppliers may elect to locate inventories within a customer's stockroom with scheduled shipments on an hourly or minute-by-minute basis. An extreme case is a supplier co-locating their specialized manufacturing within the factory of their customer, providing instant responsiveness to the customer's demand. Conversely, a business can also use inventory to become more efficient by decreasing inventory through centralized stocking. The tradeoff is efficiency versus responsiveness.

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A supply chain manager must make routine decisions to create a more responsive and more efficient supply chain. These decisions typically focus on decreasing procurement, repair or delivery cycle inventory, safety inventory, and seasonal inventory.


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Transportation 

Transportation moves the product between different locations in a supply chain and significantly affects both responsiveness and efficiency.

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Quicker methods (modes of transport, different amounts) increase supply chain responsiveness but decrease efficiency.

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The type of transportation can also affect inventory and facility location. For example, international transactions are the current commercial trend, but the supply chain manager must plan for travel time and customs processing.

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Transportation is prominent in a company's competitive strategy when considering customer need. If a firm's competitive strategy targets a customer that demands high responsiveness and that customer is willing to pay for this level, then they can use transportation as a driver for increasing supply chain responsiveness.

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The fundamental trade-off for transportation is cost (efficiency) versus speed (responsiveness). A transportation cost analysis must consider the effects of speed on inventory required.

Facilities 

Facilities include all locations in the supply chain to store, assemble, or fabricate inventory. In DoD, it is where personnel repair weapon systems and secondary items. The two major types of facilities are: (i) Manufacture/repair sites; (ii) Storage(warehouse, distribution) sites

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Whatever the function, decisions regarding location, capacity, and flexibility of facilities significantly affect supply chain performance. For example, a company can increase responsiveness by setting up warehouses near its customers instead of creating only one remote stock facility. This usually decreases cost while increasing responsiveness. Since facilities are a key driver of supply chain performance, factors such as location, capacity, manufacture/repair methodology, and warehousing methodology also affect supply chain performance by way of the facilities component.

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In DoD, depot and field repair facilities are cornerstones of the supply chain.

Information 

Even though information does not have a physical presence, it is still a major supply chain driver. Information deeply affects every part of the supply chain in several ways.

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Information serves as the connection between the supply chain's various stages, allowing them to coordinate their actions and bring about many of the benefits of maximizing total supply chain profitability. Information is also crucial to the daily operations of each stage in a supply chain, such as the case for production scheduling, order status, and inventory status.

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A growing trend is the importance of information and information systems in balancing responsiveness versus efficiency. The tremendous growth of information technology as a functional discipline and a science is testimony to the impact that information has on the effective and efficient operation of a business.

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Similar to all other drivers, businesses must trade-off between efficiency and responsiveness when trying to include more supply chain information.


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A key decision regarding information is determining what information is most valuable in decreasing cost and increasing responsiveness within a supply chain. This decision depends on the supply chain structure and market segments served. For example, some companies target customers who require costly customized products. These companies might find that an investment in information helps them to respond more quickly to their customers' needs.

Sourcing 

Set of business processes required to purchase goods and services i n a supply chain

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Supplier selection, single vs. multiple suppliers, contract negotiation Sourcing decisions are crucial because they affect the level of efficiency and responsiveness

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in a supply chain 

In-house vs. outsource decisions- improving efficiency and responsiveness

Pricing 

Pricing determines the amount to charge customers in a supply chain

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Pricing strategies can be used to match demand and supply Firms can utilize optimal pricing strategies to improve efficiency and responsiveness

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Low price and low product availability; vary prices by response times


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Case Study TATA Nano and Supply Chain

As Ratan Tata unveiled the Rs 1 lakh [US$ 2500] car, every automobile company was stunned by the process which enabled the Tata Nano to be designed at this phenomenally low price. It was done by a relentless focus on costs and eliminating waste and redundancy. The secret of designing the Tata Nano is a concept called Target Pricing or Target Costing. Target pricing process attempts to determine what features and functions the customer wants in a car. Does consumer want 2 doors or 4 doors? What should be the engine capacity? Should the windshield wipers have 2 blades or 1? What instruments should be provided? Once the features and functions are finalized target costs are assigned to each and every component/system – transmission system, instruments, engine, body, interiors, and electrical systems. The sub-teams then design the components/systems within the target cost. They look at every bolt and nut and keep driving cost out of the components/ system. For example the Nano has a variable transmission instead of the standard gears. It has instrument clusters which do not have anti-glare coating and does not use screws for fixing. This same concept, of relentless focus on costs and ‘scraping the barrel’ mentality can be applied to

supply chains! Cost and waste is driven out of supply chains by reducing inventory, eliminating waiting times and delays, increasing utilization of warehouse and trucks, optimizing location of warehouses and plants, drawing up the optimum transportation network, utilizing backhauls etc. Reducing inventory reduces the working capital cost, reduces warehousing costs and obsolescence costs. To reduce inventory, demand fluctuation will have to be reduced, reliability of inventory replenishment will have to increased, Inventory Record Accuracy will have to be above ~95% and supply chain length will have to be reduced. Reducing supply chain times reduces inventory and increases responsiveness. To eliminate waiting times and delays the complete supply chain process will have to be mapped. For this a lead time map is used. Delays like waiting for loading or unloading and waiting for documents can be minimized. Transit times can be reduced [not by fast and rash driving] but by using AC cabins and double-drivers. Also, backhauls are a way to reduce costs. Truck utilization can be improved by using truck optimization softwares. Similarly, warehouse space can be utilized more efficiently by increasing storage height- by increasing the rack heights or having a mezzanine. On a strategic level, Supply Chain Network Design - locating plants, contract manufacturers, Distribution Centers and warehouses- is important because 70% of the cost of a supply chain is fixed at the design stage. So while Tata Nano has created a breakthrough in car manufacture by reducing the cost of a car significantly, it has led me to think about doing a Tata Nano with my supply chain.

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Regulations Environmental RegulationsThe automotive industry is subject to extensive governmental regulations regarding vehicle emission levels, noise, safety and levels of pollutants generated by the production facilities. The proposed tightening of vehicle emissions regulations will require significant costs for compliance. While the Company is pursuing various technologies in order to meet the required standards in the various countries in which the Company sell our vehicles, the costs for compliance with these required standards can be significant to the operations and may adversely impact the results of operations. 

To comply with current and future environmental norms, the Company may have to incur additional capital expenditure and R&D expenditure to upgrade products and manufacturing facilities, which would have an impact on the Company's cost of production and the results of operations and may be difficult to pass through to its customers. If the Company is unable to develop commercially viable technologies within the time frames set by the new standards, the Company could face significant civil penalties or be forced to restrict product offerings drastically to remain in compliance. The Company's product development plan is structured to allow it to develop vehicles which comply with current and expected future environmental regulations particularly in the United States covered by the CAF… and in

other countries such as China. 

All manufacturing divisions are certified for ISO 14001:2004 ñ environmental management system standard and OHSAS 18001:2007 - safety and occupational health management system standard. Our Pantnagar, Dharwad and Sanand plants are also certified for ISO 50001:2011 energy management system standard. In order to ensure reliable and responsible suppliers for automotive production and service parts, Tata Motors have mandated that all of its suppliers adopt the ISO 9001/TS 16949 quality management system

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frameworks. Company also encourage its dealers to adopt quality, environmental and safety management systems. Concorde Motors, a wholly owned subsidiary of TML, is certified for all three management systems making it the only company in the auto retail industry in India

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to achieve this distinction. The Supplier is not expected to start production-intent supplies to Tata Motors till the time the PPAP (Production Part Approval Process), as per QS9000 quality systems, is completed

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and formally approved by Tata Motors Company complies to regulations like Companies Act, SEBI Act, Depositories Act, Listing Agreement and rules, regulations and guidelines under these Acts.

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Compliance such as on Tata Code of Conduct, and other industrial practices, Purchase Order, Purchase Agreement, Confidentiality Agreement or any other related Agreement or

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understanding with the Supplier in relation with the Product. Supplierís Financial Health Reports from independent auditors Process Audit towards supply quality or productivity.

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Kaizen / Productivity Improvements Events

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Quality Certifications such as ISO/QS/TS etc Phytosanitory Certificate: For imported supplies, the supplier must ensure to provide

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phytosanitory certificate from the Country of Origin, to comply with requirements from


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Indian authorities, if articles have been packed with packing materials of plant origin used for packing which include hay, straw, wood shaving, wood chips, saw dust, wood waste, wooden pallets, dunnage mats, wooden packages, coir pith, peat or sphagnum moss etc. or the supplier may use pressed pallets instead of wooden pallets for packing.

Rewards and Recognition 

Tata Genuine Parts was conferred with 2 awards in the Sustainable Packaging Excellence and Supply Chain Technology Advancementí categories, at the 2nd Asia Manufacturing Supply Chain Summit. Tata Genuine Parts also won the Loyalty Award in the Best Technology used in a loyalty program category

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Tata Motors has been chosen in the ëAnnual Gartner Top 25 Asia Pacific Supply Chain organizations for 2012, at its Supply Chain Executive Conference held in Sydney (Australia).

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Tata Motors (Lucknow) has won Gold at the Indian Manufacturing Excellence Awards(IMEA) in the mega large business category (automotive sector).

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The Amity Business Excellence Award was conferred to Tata Motors during the IT Summit Confluence 2012.

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Tata Motors Customer Care (CVBU) won the international Customer Service Excellence Award (Large Business) at the 11th Annual Australian Service Excellence Award, 2012. Tata Motors won this award for the second year running.

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References 

Supply Chain Management: Strategy, Planning and Operation by Sunil Chopra

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Supply Chain Management : Text and Cases by Janat Shah

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http://www.inf.ed.ac.uk/publications/thesis/online/IM070456.pdf

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http://www.ibisworld.com/industry/global/global-computer-hardware manufacturing.html

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Tata Motors – Company website

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http://www.tatamotors.com/sustainability/pdf/annualSustainabilityReport2012-13.pdf

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http://suppliers.tatamotors.com/Home/frm_main.aspx

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http://suppliers.tatamotors.com/Project_Docs/rfq_terms_conditions.pdf akwl.org/events/erp/TataMotors-Mr%20Rakesh%20Sharma.pp

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www.scribd.com/doc/51631737/Supply-chain-of-tata-motors

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en.wikipedia.org/wiki/Supply_chain_management

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Global challenges in automotive industry Source: IBSG, 2012


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261535033-Supply-Chain-Management-Tata-Motor.docx

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