Executive Summary Supply chain management has been defned as the "design, planning, execution, control, and monitoring o supply chain activities with the objective o creating net value, building a competitive inrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring perormance globally. globally. The automobile industry is a pillar o the global economy, a main driver o macroecon macroeconomic omic growth and stability stability and technologi technological cal advanceme advancement nt in both developing and developed countries, spanning many adjacent industries. !n this project, project, we have taen !ndia#s !ndia#s leading leading automobile automobile manuacturer manuacturer,, Tata $otors $otors %imite %imited d &T$%' &T$%' or analys analysing ing Supply Supply (hain (hain $anage $anageme ment nt in )utomo )utomobil bile e !ndustry and ound out the ollowing. Tata Tata $otors %imited products are sold and serviced through a networ o author authorize ized d dealer dealers s and servi service ce cente centers rs across across the domes domestic tic mar maret, and a networ o distributors and local dealers in international marets. The company monitors the perormance o its dealers and distributors and provides them with support to enable them to perorm to the expectations. )ny underperormance by the dealers or distributors could adversely a*ect T$%#s sales and results o operations. The company relies on third parties to supply raw materials, parts and compon component ents s used used in the manu manuact actur ure e o produ products cts.. +urther urthermor more, e, or some some o these parts and components, the company is dependent on a single source. The company#s ability to procure supplies in a cost e*ective and timely manner is subject to various actors, some o which are not within its control. hile the company manages its supply chain as part o the vendor management process, any signifcant problems with supply chain in the uture could a*ect the results o operations. !mpac !mpactt o natu natura rall disas disaste ters rs and and man manma made de acci accide dent nts, s, adve advers rse e econ econom omic ic conditions, decline in automobile demand, lac o access to su-cient fnancing arra arrang ngem emen ents ts,, coul could d have have a nega negati tive ve fnan fnanci cial al impa impact ct on the the (omp (ompan any# y#s s suppliers and distributors, in turn impairing timely availability o components, or increases in costs o components. !n managing a complex supply chain, the (omp (ompan any y has has deve develop loped ed clos close e relat elatio ions nshi hips ps with with both both direc directt and and indir indirec ectt suppliers. The (ompany continues to develop longterm strategic relationships with suppliers to support the development o parts, technology and production acilities
Contents EXECUTIVE SUMMARY..................... SUMMARY............................................... ................................................... ..........................2 .2 INDUSTRY INDUSTRY VERVIE!........................ VERVIE!.................................................. .................................................." ........................" /0 S T)T!ST!(S T)T!ST!(S.................... /0 ............................... ..................... ..................... ..................... ..................... ..................... ..................... .................... ......... 1 /23%4T!35 3+ !56!)5 )4T3$37!%/ S/(T38................................................................9 $):38 $)8/T ;%)0/8S..................... ................................ ..................... ..................... ...................... ..................................... .......................... 9 <83T= 68!2/8S.................... ............................... ...................... ..................... ..................... ..................... .................................... .......................... >
TATA MTR # CM$ANY CM$ANY %AC&'RUND............................................... %AC&'RUND............................................... ( SU$$)IERS * EM MANU+ACTURES.............................. MANU+ACTURES......................................... .................... ......... ,-
;832!S!35S 8/%)T!5< T3 8/%)T!5< T3 S4;;%0 3+ ;8364(TS.........................................................?@ ;8!(/S...................... ................................ ..................... ..................... ..................... ..................... ..................... ..................... ........................... ................. ?@ ;)0$/5T T/8$S..................... ............................... ..................... ..................... ..................... ...................... .................................... ......................... ?? %3()% +)(!%!T0..................... ................................ ..................... ..................... ..................... ............................................... ..................................... ?? S/82!(/ )56 8/;%)(/$/5T ;)8TS, S;)8/S ;)8TS )56 S/82!(/ S4;;38T......................?? ;8364(T S;/(!+!()T!35S..................... ................................ ..................... ..................... ..................... ..................... ........................ .............?A ?A +38/()ST )56 386/8S..................... ................................ ...................... ..................... ..................... ..................... ......................... ............... ?A ;)(!5< )56 T8)5S;38T.................... ............................... ..................... ..................... ..................... ..................... ......................... ..............?A ?A 6/%!2/80 (%)4S/S..................... ............................... ..................... ..................... ..................... ..................... ..................... ....................... ............?A ?A $RCESS $RCESS +)! CARTS........................ CARTS.................................................. ............................................ ..................,/ ,/ 5)86!5< T3 6!S;)T(=..........................................................?C S4;;%0 (=)!5 +%3B !5)86!5< T3 S4;;%0 (=)!5 +%3B ;83(48/$/5T T3 ;)0$/5T......................................................?C /5T/8;8!S/ 8/S348(/ ;%)55!5< ..................... ............................... ..................... ..................... ..................... ........................?1 .............?1
VA)UE CAIN.......................................... CAIN................................................................... .......................................... .................,0 ,0
!573456 %3
!$;%!()T!35 3+ S4;;%0 (=)!5 $)5)$/5T F 38%6 $)8/T.....................................?> /52!835$/5T 3+ S4;;%0 (=)!5 F T)T) $3T38S % T6.................................................?G 68!2/8S 3+ S4;;%0 (=)!5.................... ............................... ..................... ..................... ............................................ ................................. A@ CASE STUDY.................... STUDY.............................................. .............................................................. ....................................... ...2/ 2/ RE'U)ATINS...................... RE'U)ATINS............................................... ................................................... .................................... ..........2" 2" RE!ARDS RE!ARDS AND REC'NITIN......... REC'NITIN................................... ................................................. .........................20 ..20 RE+ERENCES....................................................................................2
Su334y C5ain Mana6ement 7 Tata Motors )imite8
A
Contents EXECUTIVE SUMMARY..................... SUMMARY............................................... ................................................... ..........................2 .2 INDUSTRY INDUSTRY VERVIE!........................ VERVIE!.................................................. .................................................." ........................" /0 S T)T!ST!(S T)T!ST!(S.................... /0 ............................... ..................... ..................... ..................... ..................... ..................... ..................... .................... ......... 1 /23%4T!35 3+ !56!)5 )4T3$37!%/ S/(T38................................................................9 $):38 $)8/T ;%)0/8S..................... ................................ ..................... ..................... ...................... ..................................... .......................... 9 <83T= 68!2/8S.................... ............................... ...................... ..................... ..................... ..................... .................................... .......................... >
TATA MTR # CM$ANY CM$ANY %AC&'RUND............................................... %AC&'RUND............................................... ( SU$$)IERS * EM MANU+ACTURES.............................. MANU+ACTURES......................................... .................... ......... ,-
;832!S!35S 8/%)T!5< T3 8/%)T!5< T3 S4;;%0 3+ ;8364(TS.........................................................?@ ;8!(/S...................... ................................ ..................... ..................... ..................... ..................... ..................... ..................... ........................... ................. ?@ ;)0$/5T T/8$S..................... ............................... ..................... ..................... ..................... ...................... .................................... ......................... ?? %3()% +)(!%!T0..................... ................................ ..................... ..................... ..................... ............................................... ..................................... ?? S/82!(/ )56 8/;%)(/$/5T ;)8TS, S;)8/S ;)8TS )56 S/82!(/ S4;;38T......................?? ;8364(T S;/(!+!()T!35S..................... ................................ ..................... ..................... ..................... ..................... ........................ .............?A ?A +38/()ST )56 386/8S..................... ................................ ...................... ..................... ..................... ..................... ......................... ............... ?A ;)(!5< )56 T8)5S;38T.................... ............................... ..................... ..................... ..................... ..................... ......................... ..............?A ?A 6/%!2/80 (%)4S/S..................... ............................... ..................... ..................... ..................... ..................... ..................... ....................... ............?A ?A $RCESS $RCESS +)! CARTS........................ CARTS.................................................. ............................................ ..................,/ ,/ 5)86!5< T3 6!S;)T(=..........................................................?C S4;;%0 (=)!5 +%3B !5)86!5< T3 S4;;%0 (=)!5 +%3B ;83(48/$/5T T3 ;)0$/5T......................................................?C /5T/8;8!S/ 8/S348(/ ;%)55!5< ..................... ............................... ..................... ..................... ..................... ........................?1 .............?1
VA)UE CAIN.......................................... CAIN................................................................... .......................................... .................,0 ,0
!573456 %3
!$;%!()T!35 3+ S4;;%0 (=)!5 $)5)$/5T F 38%6 $)8/T.....................................?> /52!835$/5T 3+ S4;;%0 (=)!5 F T)T) $3T38S % T6.................................................?G 68!2/8S 3+ S4;;%0 (=)!5.................... ............................... ..................... ..................... ............................................ ................................. A@ CASE STUDY.................... STUDY.............................................. .............................................................. ....................................... ...2/ 2/ RE'U)ATINS...................... RE'U)ATINS............................................... ................................................... .................................... ..........2" 2" RE!ARDS RE!ARDS AND REC'NITIN......... REC'NITIN................................... ................................................. .........................20 ..20 RE+ERENCES....................................................................................2
Su334y C5ain Mana6ement 7 Tata Motors )imite8
A
In8ustry vervie9 )utomotives contributes to several important dimensions o nation building right rom generation o government revenue to creating economic development and encouraging people development along with ostering research and development and innovation. )utomobiles depend heavily on consumer trends and tastes. The large pool o silled manpower and growing technology poses heavy demand or automobiles in !ndia which will list our country one amongst the top fve auto producers by the year A@?H. The liberalization o the !ndian industry saw signifcant growth in the !ndian !ndian )utom )utomoti otive ve !ndust !ndustry ry.. Today, oday, the the !ndian !ndian )utomo )utomotiv tive e !ndust !ndustry ry is a signif signifcan cantt contri contribut butor or to the !ndian !ndian econom economy, y, contrib contributi uting ng nearly nearly HI to the coun counttry# ry#s <6; and and abo about ?E? ?E?> >I to the the itt itty y o indi indirrect ect tax taxes to the the percent in this Luarter itsel. itsel. !ndia is emerging as an export hub or sports utility vehicles &S42s'.
&ey Statistics The !ndian automobile industry produced a total ?.9G million vehicles including passenger vehicles, commercial vehicles, three wheelers and two wheelers in )ugust A@?C as against ?.H9 million in )ugust A@?A, registering a growth o >.?> percent over the same month last year. The cumulative oreign direct investment &+6!' inJow into the !ndian automobile industry during )pril A@@@ to :uly A@?C was recorded at 4SN >,GCA million, amounting to 1.H per cent o the total +6! inJows &in terms o 4SN', as per data published by 6epartment o !ndustrial ;olicy and ;romotion &6!;;', $inistry o (ommerce. The overall automobile exports grew by A.@C per cent during )pril)ugust A@?C. +urthermore, the production o passenger vehicles in !ndia was recorded at C.AC
Su334y C5ain Mana6ement 7 Tata Motors )imite8
C
million in A@?A?C. )utomobiles production increased at a compound annual growth rate &()<8' o ?A.A per cent over +0@H?C, while the export volumes increased at a ()<8 o ?G.? per cent. )s per the S!)$#s &Society o !ndian )utomobiles $anuactures' report, automobile sector is going to witness a strong growth in +0?1. The ey points or this orecast is F
)uto sales across categories are estimated to rise 9> per cent in +0?1 ;assenger vehicles are projected to grow HE per cent in +0?1 ;assenger car segment is estimated to expand CH per cent S42s are projected to increase ???C per cent (ommercial vehicles are orecast to rise EG per cent %(2s are estimated to grow ?@?A per cent $(2s and =(2s are projected to increase ?C per cent Three wheelers are estimated to rise CH per cent in +0?1 Twowheelers are expected to grow 9> per cent in +0?1 • •
•
'ro9t5 +orecast :or Sa4es C@I AHI A@I ?HI
AEI
A9I
?@I ?AI
HI @I
1I +0@G
1
>I CI
+0?@
+0??
+0?A
+0?C
Su334y C5ain Mana6ement 7 Tata Motors )imite8
+0?1/
'ro9t5 +orecast :or t5e Auto Se6ment H@I
CCI
CCI CCI A>I AHI AHI A@I ;assenger 2ehicle (ommercial 2ehicle ?CI HI +0@G @I
?9I heelers Three
CI +0?@
+0??
@I +0?A @I
AI
HI CI
+0?C AI
Two heelers GI EI HI9I +0?1/
C@I
Su334y C5ain Mana6ement 7 Tata Motors )imite8
H
Evo4ution o: In8ian Automo;i4e Sector
A@@E onwards ?GGC @E
?G>C GA
7eore ?G>A (lose mar"et +ive ;layers %ong waiting period and outdated models SellerMs mar"et
:oint venture B !ndian government and Suzu"i formed $aruti 4dyogK commenced production in ?G>C (omponent manufacturers enter the mar"et via :2 7uyerMs mar"et
Sector de licensed in ?GGC $ajor 3/$ started assembly operation in !ndia !mport permitted from )pril A@@? !ntroduction of value added tax in A@@H
$ore than CH mar"tet players 8emoval of import control !ndian companies gaining acceptance on global scale Setting up of national )utomotive 7oard to act as faciltator between the government and industry
Ma
Indian Origin
Cars/ SUVs
=industan $otors $ahindra D $ahindra $aruti 4dyog %td Tata $otors %td
Commercial Vehicles
)sho %eyland Swaraj $azda Tata $ahindra D $ahindra
9
Foreign Origin
+ord =yundai Suzui =onda Toyota <$ Soda Tatra 2olvo $itsubishi
Su334y C5ain Mana6ement 7 Tata Motors )imite8
Cars * Uti4ity Ve5ic4es
3therK AAI $aruti SuzuiK C9I ToyotaK HI T)T)K EI $D$K GI
=yundaiK A?I
Sou rceB S!$, 6ecember A@?C
)CV> M*CV
+orceK CI 3thersK CI /icherK HI )sho %eylandK ?AI T)T)K HCI $D$K A1I
Sou rceB S!$, 6ecember A@?C
Su334y C5ain Mana6ement 7 Tata Motors )imite8
E
>
Su334y C5ain Mana6ement 7 Tata Motors )imite8
'ro9t5 8rivers
(ompanies can leverage !ndia#s ac"nowledged leadership in !T industry
$ore than ?AH +ortune H@@ &including large auto companies' have 8D6 centres in !ndia
$ost leading component manuacturers are OS D !S3 certifed
(ontinuing in economic reorms and policies related to investments
;roven ;roduct development capabilities
S"illed labour costs amongst the lowest in !ndia
Stable /conomic ;olicies
(ompetitive $anuacturi ng (osts
?? !ndian component manuactures have won 6eming )ward
Shipments to /urope cheaper than those rom 7razil and Thailand
In8ia n Auto .u;
=igh Ouality Standards
;roximity to $ar"ets
%arge D growing domestic demand
)vailability o $anpower
;roximity to )sian economies D emerging mar"ets li"e )rica
6emand growth o ?1I ()<8 ma"es !ndia one the astest growing mar"ets
@.1 million engineering graduates every year
E million enter wor"orce every year
Su334y C5ain Mana6ement 7 Tata Motors )imite8
G
Tata Motor # Com3any %ac=6roun8 /stablished in ?G1H, Tata $otors# presence cuts across the length and breadth o !ndia. 3ver > million Tata vehicles ply on !ndian roads, since the frst rolled out in ?GH1. The (ompany#s manuacturing base in !ndia is spread across :amshedpur &:harhand', ;une &$aharashtra', %ucnow &4ttar ;radesh', ;antnagar &4ttarahand', Sanand &. Tata $otors %imited is !ndia#s largest automobile company. !t is the leader in commercial vehicles and among the leaders in passenger vehicles in !ndia with winning products in the compact, midsize car and utility vehicle segments. !t is also the world#s ourth largest bus and fth largest truc manuacturer. Tata $otors in A@@H was raned among the top ?@ corporations in !ndia with an annual revenue exceeding !58 CA@ billion. Tata $otors is committed to improving the Luality o lie o communities by woring on our thrust areas F employability, education, health and environment. i654i65ts o: t5e com3any ?as a TATA Motor 'rou3@ in +Y2-,2 #,/ Mar=et Ca3ita4isation ?as on /,st Marc5 2-,/@ Tota4 revenue Conso4i8ate8 $rot
!58 EG,AE1 cr !58 ?,>G,9AG cr !58 G,>GC cr
$ro8uction Ca3a;i4ityB Domestic an8 Internationa4 Commercia4 ve5ic4e $assen6er Ve5ic4e
?@
4nits produced 9@9,G>C H>@,CC1
4nits Sold H>G,>GE HG>,@>A
Su334y C5ain Mana6ement 7 Tata Motors )imite8
Su334iers * EM Manu:actures $rovisions re4atin6 to Su334y o: $ro8ucts Tata $otors purchase ;roducts rom supplier, subject to supplier meeting system specifcations, Luality, reliability, perormance, delivery, price reLuirements etc. o Tata $otors as detailed in various sections in this
Supplier must extend the status o a very important global customer to Tata $otors and deal with Tata $otors as the supplier would deal with other similar customers. Such status, however, neither coners any legal rights on Tata $otors nor does it impose any legal liability on supplier.
Supplier must not supply to any third party without prior written consent rom Tata $otors, i the products in ;urchase 3rder are manuactured using any o the ollowingB •
•
•
)ny intellectual property rights o Tata $otors or its promoters. Secret nowledge o manuacturing processes &nowhow' o Tata $otors. 6ies, moulds, models, patterns, jigs, tools or accessory eLuipment that were acLuired rom without payment obligation or ully paid by Tata $otors.
Similar products or their pacaging supplied by supplier to the third parties shall not bear any mar or reerence o, either intellectual property rights o Tata $otors or the ;romoters o Tata $otors.
The items agreed to be sold and supplied by the supplier must be delivered at designated points within Tata $otors premises at various locations or any other location specifed or Spare parts.
The supplier needs to supply components in reusable containers. /xceptions, i any, will have to be inormed to buying agency in advance and mutually agreed upon.
/ach shipment by the supplier must be made under separate invoice.
$rices !nitial price or every item shall be settled between Tata $otors and the supplier, based on the Luotation and detailed cost breaup provided by the supplier and mutually agreed between Tata $otors and the supplier. Tata $otors then release ;urchase 3rder on the supplier or the price thus settled.
Su334y C5ain Mana6ement 7 Tata Motors )imite8
??
4nless agreed to specifcally, any Lualiying terms and conditions o the Supplier contained in their Luotations P purchase order acceptance or any other orm o communication shall not govern the business with Tata $otors. Together with Tata $otors, the supplier is expected to commit o*setting inJationary increases in costs through productivity gains and reducing cost urther through value engineering, six sigma and aizen exercises, increased volumes o procurement rom Tata $otors leading to lower +ixed cost per unit, achievement o higher productivity, e*ect o learning curve and by initiating other cost reduction measures, and Supplier agrees to bring down the prices as per the targets set rom year to year with help o these measures.
! there are changes in the said ;roduct specifcations, which are approved by Tata $otors, to improve Luality, reliability, perormance and P or delivery reLuirements, the impact will be reviewed jointly and i ound appropriate, the Tata $otors will carry out the conseLuential amendments in the ;urchase 3rder.
4nless specifcally agreed, unit rate applicable or serial production goods will also be applicable or all reLuirements on prototypes and or service and replacements.
;rice revision e*ected or an item, due to 2alue /ngineering exercises or changes in supply conditions or specifcations shall normally be considered only once a year, or at intervals mutually agreed upon.
)ny applicable development expense, such as Styling, /ngineering, !ntegration, 2alidation, tooling etc., is settled with the Supplier considering the supplier delivers the product achieving the specifed system level targets.
$ayment Terms
?A
%ocal ;roductsB ;ayment will be made as per payment terms as mentioned in the ;urchase 3rder, by the respective purchasing agencies in Tata $otors, which are made in !ndian 8upees or all procurements done in !ndia, and is generally made within C@ days o satisactory acceptance o ;roducts at Tata $otors i.e. C@ days ater
!mported ;roductsB ;ayment will be made as per payment terms as mentioned in the ;urchase 3rder. The payment terms are generally against irrevocable letter o credit or cash against documents. ;ayments shall be released within C@ woring days rom submission o documents such as &i' 7ill o %adingP)irway bill, &ii' (ommercial invoice, &iii' ;acing list, and &iv' (ertifcate o 3rigin etc.
Su334y C5ain Mana6ement 7 Tata Motors )imite8
+or the development cost to be paid in oreign currency, the agreed cost is always gross o the ithholding tax as applicable under 6ouble Taxation )voidance Treaty between !ndia and supplier#s country o origin.
)oca4 +aci4ity Supplier shall normally establish its manuacturing acilities near assembly location o Tata $otors with an objective o :!T supplies to Tata $otors. !n the event Supplier#s manuacturing location is not in the vicinity o Tata $otors# ordering plant, supplier shall establish storage acility near the ordering plant o Tata $otors to provide uninterrupted and streamlined supply o materials. !n case the initial supplies are imported, in its endeavour to remain price competitive, supplier shall aggressively explore possibility o setting up acilities in the same country o Tata $otors# ordering plant in the earliest possible time or which the supplier shall commit to a timebound action plan or setting up a local production acility.
Service an8 Re34acement $arts> S3ares $arts an8 Service Su33ort
)t the reLuest o Tata $otors during the period ater Tata $otors complete current model purchases, say ?H years, supplier shall mae supplies to ulfll Tata $otors past model service and replacement reLuirements at the prices specifed in a purchase order plus actual cost di*erentials or pacaging and transport. 6uring the fnal year o such period, the Supplier and Tata $otors shall negotiate in good aith with regard to the Supplier#s continued manuacture o service and replacement supplies. Supplier must provide such sale and atersale service related inormation as mutually agreed by the parties, such as &but not limited to' parts, catalogue, worshop manual, training manual and maintenance guide, diagnostic eLuipment etc.
$ro8uct S3ecications The products to be sold and supplied by the supplier to Tata $otors against the released ;urchase 3rders terms shall meet the specifcations as fnalised and agreed in writing between the supplier and Tata $otors hereto on completion o development wor on the ;roduct. ;roduct specifcation, thus fnalised, is generally documented in the orm o drawings. Supplier is expected to participate in preparing this drawing jointly with Tata $otors, although the responsibility o approval and release o such drawings and specs sheets is solely with Tata $otors. The specifcations can not be changed unilaterally by the supplier without prior written approval rom Tata $otors.
+orecast an8 r8ers )ctual purchase P supply o components shall be made against specifc purchase orders. Tata $otors provide an annual nonbinding orecast to the supplier. The supplier or planning purposes only may use this orecast.
Su334y C5ain Mana6ement 7 Tata Motors )imite8
?C
2olume projection provided in by Tata $otors &including spare parts' is not a commitment by Tata $otors to purchase the Luantities specifed. Supplier acnowledges that 2olume ;rojections, lie any other orward looing projections, are based on a number o economic and business actors !nitially ;urchase order P Scheduling is released by Tata $otors lie an open order. )ter start o production o the ;roduct, Tata $otors issue monthly supply schedule, time to time, with specifc Luantities to be delivered at a time.
$ac=in6 an8 Trans3ort
+or %ocal supplies, supplier shall supply components in reusable containers. /xceptions, i any, will have to be inormed to buying agency in advance and mutually agreed upon. Supplier shall provide a mutually agreed 4niLue !dentifcation mar including location o !dentifcation &such bar code, color code etc' on each and every ;roduct supplied, which shall be as agreed upon jointly beore start o serial production supply. 4nless agreed otherwise, product prices are inclusive o such maring ees.
De4ivery C4auses Supplier must supply products as per Tata $otors schedules as indicated in ;urchase 3rder or as communicated rom time to time. Supplier is expected to agree on a specifc logistics protocol with Tata $otors prior to commencement o production.
?1
Su334y C5ain Mana6ement 7 Tata Motors )imite8
$rocess +4o9 C5arts Su334y C5ain +4o9B In9ar8in6 to Dis3atc5
V A
STORES
CRDO
(Acknowledgement)
(Goods Inwarding)
ASSEMBLY
VEHICLE
FINAL DELIVERY
(Production)
(Inspection)
(Sales)
Su334y C5ain +4o9B $rocurement to $ayment
SRM SCHEDULES (Supplier Relationship Mgmt)
CRDO
MRP
SALES PLAN
(Material Req Planning)
(Corp. SHQ)
VQA
(Goods Inwarding)
BMS (Payment by Bank)
(Material Inspection) 7 Tata Motors )imite8 Su334y C5ain Mana6ement
?H
Enter3rise Resource $4annin6 Time4ines %e:ore ,((( ,((( ,((( 7 2--1 2--1 on9ar8s
%egacy Systems Tata $otors %ucnow frst to implement S); C.?= %argest single server implentation 4pgraded to S); /(( 9.@
ERP as a Catalyst to Growth
Top to 7ottom 2iew o (ompany ;erormance )lignment o Strategies D 3perations !mproved +inancial perormance and (orp.
Advantage of ERP
+ully !ntegrated unctional modules 7illo$aterial &7o$' lined 8ealTime consumption $aintaining accurate !nventory levels at all stages )utomated payments to all (hannel ;artners ;rocess automation augmented by 7ar(odes, 8+!6 tech /xecutive $!S thru 7usiness arehouse /mployee Sel Service thru S); =8
SAP Module – Driving TML business
?9
Su334y C5ain Mana6ement 7 Tata Motors )imite8
Va4ue C5ain 2alue chain analysis is much important or each organisation as its divide frm in to various distinct activities carry out by the organisation such as, designing, manuacturing, mareting etc. The concept o value chain is developed rom accounting practices which helps to analyse the value added to organisation at every stage o manuacturing or services or mareting. &(owe, A@@>' The value chain involves two types o activitiesB ;rimary activities D Support activities. ;rimary activities change inputs &!nbound logistics, operation, outbound logistics, mareting and sales, service' into outputs and bring them to customer. )ll this primary activities are carried out by use o support activities which are frm inrastructure, =uman resource management, technology development and procurement. /very single activity in value chain can contribute to frms relative cost position and create a basis or di*erentiation# &;orter, ?G>H !n (owe, A@@>, p.?E>'. 2alue chain analysis maes possible or the organisation or management to fnd out activities which adding value to the organisation and activities that may destroy the value rather than creating and thereby helps to identiy the source o competitive advantage.
Transporters, Convoy Drivers
Dealer Network, Marketing Research Firms, Vehicle
SAP, VCM
!nbound
3utbound 3perations
%ogistics
$areting
Service
%ogistics SAP, CRM - DMS
Regional Warehouses, Dealer Workshops,
)s per T$%, companyMs A1,@@@ 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
Su334y C5ain Mana6ement 7 Tata Motors )imite8
?E
value system and ethics." T$% considers adding value process which can help to improve wor progress and in general supply chain. T$% ocus on development o, technical capabilities via training centres and association with technical institutes D management capabilities via training programmes at premier business schools. They also carry out career advancement schemes. )long with all this =8 $anagement carry out various activities or their sta* which results in increased e-ciency, e*ectiveness, engagement, superior perormance, productive and cordial relationship and thus increase organisational capabilities in perorming various primary activities such as operations, mareting, sales etc.
In;oun8 )o6istic
%ongterm contract with service provider#s F transporters and agents. ;ersonnel at regional o-ces or overseeing the smooth transit o goods. Transparency and monitoring through deployment o !T F all transactions through S);. 6T% &daily transport logistics' supplies or critical high value items. /-cient storage acilities F easy storage and retrieval.
3erations
(apital /Luipment $anuacturing division F tooling development capabilities o global standard. )pprentice Trainee (ourse F ensuring stable source o silled manpower. aizen D T;$ &total productive management' team F continuous drive to improve e-ciencies. )utomated manuacturing processes. 6istributed manuacturing F )ssembly units at South )rica, Thailand, 7angladesh, 7razil etc. $aintenance F technical competence. (apacity 4tilization F $ercedes 7enz cars mae use o Tata $otors paint shop acilities.
ut;oun8 )o6istic
Stocyards, all across the country. %ongterm contracts with transporters F higher volume o business to transporters ensures competitive price. 8egional Sales 3-ce and 2ehicle 6ispatch Section lined through S);. /-cient security system or prevention o any ind o pilerage.
Mar=etin6 * Sa4es
?>
Structured approach to understanding the reLuirements o individual customers F O+6#s conducted at regular intervals. (lear identifcation o product reLuirements, leading to development o innovative products F Tata A@E 6!, Tata )ce ;an !ndia presence and global ootprint. !ndependent teams or addressing the reLuirements o institutional customers F 6eense, State Transport 4nits
Su334y C5ain Mana6ement 7 Tata Motors )imite8
=elping to augment the scarce resources F +iat selling vehicles through Tata dealerships, in return Tata has access to +iat#s technology and unutilized capacity. Ouic assessment o the changing maret dynamics and consumer preerences F Tata 1@E %(2 %arge networ o dealers F use o technology &(8$6$S'.
Service
/asy availability o spare parts. /-cient collection o data rom feld and communication to the respective plants. ;an !ndia presence, as well as global presence. %arge networ o worshops F 6ealer worshops and T)SS. Training acilities F or dealer end and T)SS personnel.
$rocurement
/ procurement initiative.
Tec5no4o6y * Deve4o3ment
)pproximately AI o the annual profts o the company invested in research and development. nowledge portal F helps employees eep abreast with the latest technologies. /xtensive prototype building and testing acilities. Strategic partnerships F $6! &+rance', +iat etc. +ormal benchmaring process. RTechnology 6ay organized across all plant locations.
uman Resource
2ast pool o technically competent engineers and managers. +ocus on development o technical capabilities F Technical Training (enter#s, )lliance with technical !nstitutes +ocus on development o managerial capabilities F $T(#s, T$T(, executive training programs at premier business schools (areer advancement schemes F /SS, +TSS
Su334y C5ain Mana6ement 7 Tata Motors )imite8
?G
Su334y C5ain Im34ication o: su334y c5ain mana6ement 7 !or48 Mar=et 8ecent emphasis on global climate change is increasing pressure on automobile executives to mae the right decisions in many areas, including 8D6 and manuacturing. !n act, emissionlevel targets, currently in Luestion, threaten the entire structure o the auto industry. These challenges hit an industry already plagued with high costs, low proft margins, and accelerated competition. 5ew entrants rom (hina and !ndia are woring aggressively to capture the share o the global maret, ollowing the path taen by the :apanese in the ?G>@s and the oreans in the ?GG@s F both o whom went beyond their domestic maret by ocusing on the 4nited States frst, and then /urope later.
A@
Su334y C5ain Mana6ement 7 Tata Motors )imite8
Externa4
Customer
T %egislation &environment, safety, others' T 8aw material and energy cost T /xchange and interest rates
T Stagnanting demand and prices pressure in established mar"et. T Segmentation and polarization &low cost vs. premium' T 6ecreasing loyality
Com3etition
In8ustry
T Ouic"ly entering into every segment T $oving targets everyone optimising or restructuring. T
T
+igureB
Su334y 7 si8e tren8
4neven growth 6i*erentiated outsourcing +ragmentation %ow F cost country sourcing )ccelerated volatility 8is $anagement !mportance ater maret TransparencyP accountability +igureB trends that have implication on supply chain SourceB !7S<, A@?A
Environment o: Su334y c5ain 7 Tata Motors )t8 Sourcing is very important and critical unction or Tata $otors. 6i*erent agencies participate during the entire product lie cycle. !t starts as early as early vendor introduction when the product is in concept stage. Strategically important sources with a potential o developing relationship into strategic alliances are fnalised during this step. Ouantum o outsourcing wor and nature o technology to be developed decides the corresponding development agency. )ter which specifc nodal agency is responsible or development o parts and aggregates till the product is brought to the level o regular procurement. +urther, on the nature partsPaggregate, either central materials agency or the
Su334y C5ain Mana6ement 7 Tata Motors )imite8
A?
sourcing group attached to the respective actory &where the part will be consumed' will initiate the process or regular procurement. Ouality assurance plays an important role o establishing Luality o new parts developed. !t also eeps vigilance or maintaining consistency in regular suppliers. (ost is an important parameter o our business model. !n recent past, $acro level parameters such as commodity prices, oil prices, Juctuations in oreign exchange rates and slacing domestic demand has resulted into tremendous pressure on product costing as it is very di-cult to T$% to pass it to end customer. The matter o cost increase or decrease is addressed by a separate agency that initiate and settle cost saving activities. / sourcing tool is e*ectively used to reduce cost o procurement. Tooling division provides necessary tooling as per the policy and planning done by project planning team. Sourcing team coordinates with these di*erent internal agencies to smoothly execute the project and meet the project time lines. ! insisted by suppliers, productivity improvement cell plays an important role o helping vendors or improving productivity by special tas orce, which wors at supplier#s locations. )t appropriate phase, respective sourcing agency coordinates or ulflling on feld spare part reLuirements, both local and overseas. Similarly a centralised import cell coordinate all import related activates.
AA
Su334y C5ain Mana6ement 7 Tata Motors )imite8
Drivers o: Su334y C5ain Supply chain structure Efficiency
Responsiveness
Logistical Drivers
Cross-
nventory
!nventory "stocage" exists in all supply chains because o a mismatch between supply and demand. $ismatches are oten intentional, such as the case when cost e*ectiveness dictates batch sizes or when uture demand is unclear and immediate customer delivery is reLuired. The spread o inventory throughout the supply chain includes raw materials, wor in process, and fnished goods by suppliers, manuacturersPrepairers, distributors, and retailers. !nventory also has a signifcant impact on the material Jow time o a supply chain. ) major conclusion or those who manage inventory is that decreasing inventory &without increasing cost or decreasing responsiveness to the customer' can provide a signifcant Jow time advantage in perormance in the supply chain.
!nventory also plays a signifcant role in a supply chainMs ability to support a frmMs competitive strategy. ! a business reLuires a very high level o responsiveness, the company can use inventory to achieve this responsiveness by locating large stocs o inventory close to the customer. !n a pull or justintime environment, suppliers may elect to locate inventories within a customerMs stocroom with scheduled shipments on an hourly or minutebyminute basis. )n extreme case is a supplier co locating their specialized manuacturing within the actory o their customer, providing instant responsiveness to the customerMs demand. (onversely, a business can also use inventory to become more e-cient by decreasing inventory through centralized stocing. The tradeo* is e-ciency versus responsiveness.
) supply chain manager must mae routine decisions to create a more responsive and more e-cient supply chain. These decisions typically ocus
Su334y C5ain Mana6ement 7 Tata Motors )imite8
AC
on decreasing procurement, repair or delivery cycle inventory, saety inventory, and seasonal inventory. Trans!ortation
Transportation moves the product between di*erent locations in a supply chain and signifcantly a*ects both responsiveness and e-ciency.
Ouicer methods &modes o transport, di*erent amounts' increase supply chain responsiveness but decrease e-ciency.
The type o transportation can also a*ect inventory and acility location. +or example, international transactions are the current commercial trend, but the supply chain manager must plan or travel time and customs processing.
Transportation is prominent in a companyMs competitive strategy when considering customer need. ! a frmMs competitive strategy targets a customer that demands high responsiveness and that customer is willing to pay or this level, then they can use transportation as a driver or increasing supply chain responsiveness.
The undamental tradeo* or transportation is cost &e-ciency' versus speed &responsiveness'. ) transportation cost analysis must consider the e*ects o speed on inventory reLuired.
"a#ilities
+acilities include all locations in the supply chain to store, assemble, or abricate inventory. !n 6o6, it is where personnel repair weapon systems and secondary items. The two major types o acilities areB &i' $anuacturePrepair sitesK &ii' Storage&warehouse, distribution' sites
hatever the unction, decisions regarding location, capacity, and Jexibility o acilities signifcantly a*ect supply chain perormance. +or example, a company can increase responsiveness by setting up warehouses near its customers instead o creating only one remote stoc acility. This usually decreases cost while increasing responsiveness. Since acilities are a ey driver o supply chain perormance, actors such as location, capacity, manuacturePrepair methodology, and warehousing methodology also a*ect supply chain perormance by way o the acilities component.
!n 6o6, depot and feld repair acilities are cornerstones o the supply chain.
nfor$ation
A1
/ven though inormation does not have a physical presence, it is still a major supply chain driver. !normation deeply a*ects every part o the supply chain in several ways.
!normation serves as the connection between the supply chainMs various stages, allowing them to coordinate their actions and bring about many o
Su334y C5ain Mana6ement 7 Tata Motors )imite8
the benefts o maximizing total supply chain proftability. !normation is also crucial to the daily operations o each stage in a supply chain, such as the case or production scheduling, order status, and inventory status.
) growing trend is the importance o inormation and inormation systems in balancing responsiveness versus e-ciency. The tremendous growth o inormation technology as a unctional discipline and a science is testimony to the impact that inormation has on the e*ective and e-cient operation o a business.
Similar to all other drivers, businesses must tradeo* between e-ciency and responsiveness when trying to include more supply chain inormation.
) ey decision regarding inormation is determining what inormation is most valuable in decreasing cost and increasing responsiveness within a supply chain. This decision depends on the supply chain structure and maret segments served. +or example, some companies target customers who reLuire costly customized products. These companies might fnd that an investment in inormation helps them to respond more Luicly to their customersM needs.
Sour#ing
Set o business processes reLuired to purchase goods and services in a supply chain Supplier selection, single vs. multiple suppliers, contract negotiation Sourcing decisions are crucial because they a*ect the level o e-ciency and responsiveness in a supply chain !nhouse vs. outsource decisions improving e-ciency and responsiveness
Pri#ing
;ricing determines the amount to charge customers in a supply chain ;ricing strategies can be used to match demand and supply +irms can utilize optimal pricing strategies to improve e-ciency and responsiveness %ow price and low product availabilityK vary prices by response times
Su334y C5ain Mana6ement 7 Tata Motors )imite8
AH
Case Stu8y TATA Nano an8 Su334y C5ain
)s 8atan Tata unveiled the 8s ? lah U4SN AH@@V car, every automobile company was stunned by the process which enabled the Tata 5ano to be designed at this phenomenally low price. !t was done by a relentless ocus on costs and eliminating waste and redundancy. The secret o designing the Tata 5ano is a concept called Target Pri#ing or Target Costing. Target pricing process attempts to determine what eatures and unctions the customer wants in a car. 6oes consumer want A doors or 1 doorsW hat should be the engine capacityW Should the windshield wipers have A blades or ?W hat instruments should be providedW 3nce the eatures and unctions are fnalized target costs are assigned to each and every componentPsystem F transmission system, instruments, engine, body, interiors, and electrical systems. The subteams then design the componentsPsystems within the target cost. They loo at every bolt and nut and eep driving cost out o the componentsP system. +or example the 5ano has a variable transmission instead o the standard gears. !t has instrument clusters which do not have antiglare coating and does not use screws or fxing. This same concept, o relentless ocus on costs and X scraping the barrel’ mentality can be applied to supply chainsY (ost and waste is driven out o supply chains by reducing inventory, eliminating waiting times and delays, increasing utilization o warehouse and trucs, optimizing location o warehouses and plants, drawing up the optimum transportation networ, utilizing bachauls etc. 8educing inventory reduces the woring capital cost, reduces warehousing costs and obsolescence costs. To reduce inventory, demand Juctuation will have to be reduced, reliability o inventory replenishment will have to increased, !nventory 8ecord )ccuracy will have to be above ZGHI and supply chain length will have to be reduced. A9
Su334y C5ain Mana6ement 7 Tata Motors )imite8
8educing supply chain times reduces inventory and increases responsiveness. To eliminate waiting times and delays the complete supply chain process will have to be mapped. +or this a lead time map is used. 6elays lie waiting or loading or unloading and waiting or documents can be minimized. Transit times can be reduced Unot by ast and rash drivingV but by using )( cabins and doubledrivers. )lso, bachauls are a way to reduce costs. Truc utilization can be improved by using truc optimization sotwares. Similarly, warehouse space can be utilized more e-ciently by increasing storage height by increasing the rac heights or having a mezzanine. 3n a strategic level, Su334y C5ain Net9or= Desi6n locating plants, contract manuacturers, 6istribution (enters and warehouses is important because E@I o the cost o a supply chain is fxed at the design stage. So while Tata 5ano has created a breathrough in car manuacture by reducing the cost o a car signifcantly, it has led me to thin about doing a Tata 5ano with my supply chain.
Su334y C5ain Mana6ement 7 Tata Motors )imite8
AE
Re6u4ations /nvironmental 8egulationsThe automotive industry is subject to extensive governmental regulations regarding vehicle emission levels, noise, saety and levels o pollutants generated by the production acilities. The proposed tightening o vehicle emissions regulations will reLuire signifcant costs or compliance. hile the (ompany is pursuing various technologies in order to meet the reLuired standards in the various countries in which the (ompany sell our vehicles, the costs or compliance with these reLuired standards can be signifcant to the operations and may adversely impact the results o operations.
A>
To comply with current and uture environmental norms, the (ompany may have to incur additional capital expenditure and 8D6 expenditure to upgrade products and manuacturing acilities, which would have an impact on the (ompanyMs cost o production and the results o operations and may be di-cult to pass through to its customers. ! the (ompany is unable to develop commercially viable technologies within the time rames set by the new standards, the (ompany could ace signifcant civil penalties or be orced to restrict product o*erings drastically to remain in compliance. The (ompanyMs product development plan is structured to allow it to develop vehicles which comply with current and expected uture environmental regulations particularly in the 4nited States covered by the ()+[ and in other countries such as (hina. )ll manuacturing divisions are certifed or !S3 ?1@@?BA@@1 \ environmental management system standard and 3=S)S ?>@@?BA@@E saety and occupational health management system standard. 3ur ;antnagar, 6harwad and Sanand plants are also certifed or !S3 H@@@?BA@?? energy management system standard. !n order to ensure reliable and responsible suppliers or automotive production and service parts, Tata $otors have mandated that all o its suppliers adopt the !S3 G@@?PTS ?9G1G Luality management system ramewors. (ompany also encourage its dealers to adopt Luality, environmental and saety management systems. (oncorde $otors, a wholly owned subsidiary o T$%, is certifed or all three management systems maing it the only company in the auto retail industry in !ndia to achieve this distinction. The Supplier is not expected to start productionintent supplies to Tata $otors till the time the ;;); &;roduction ;art )pproval ;rocess', as per OSG@@@ Luality systems, is completed and ormally approved by Tata $otors (ompany complies to regulations lie (ompanies )ct, S/7! )ct, 6epositories )ct, %isting )greement and rules, regulations and guidelines under these )cts. (ompliance such as on Tata (ode o (onduct, and other industrial practices, ;urchase 3rder, ;urchase )greement, (onfdentiality )greement or any other related )greement or understanding with the Supplier in relation with the ;roduct. Supplier]s +inancial =ealth 8eports rom independent auditors ;rocess )udit towards supply Luality or productivity.
Su334y C5ain Mana6ement 7 Tata Motors )imite8
aizen P ;roductivity !mprovements /vents Ouality (ertifcations such as !S3POSPTS etc ;hytosanitory (ertifcateB +or imported supplies, the supplier must ensure to provide phytosanitory certifcate rom the (ountry o 3rigin, to comply with reLuirements rom !ndian authorities, i articles have been paced with pacing materials o plant origin used or pacing which include hay, straw, wood shaving, wood chips, saw dust, wood waste, wooden pallets, dunnage mats, wooden pacages, coir pith, peat or sphagnum moss etc. or the supplier may use pressed pallets instead o wooden pallets or pacing.
Re9ar8s an8 Reco6nition
Tata
Su334y C5ain Mana6ement 7 Tata Motors )imite8
AG