Introduction We study the evolution of the supply chain management of Tata Motors Ltd. using a combination of firm product specific data measures, firm level performance and industry performance. Our goal is to assess the current state of Tata Motors Ltd. and identify both the potential and the management realities associated with developing globally competitive auto supply chains. We use empirical data and anecdotal information to offer our best guess answers to the following questions: Will the future of Tata Motors Ltd. be that of a globally competitive car producer that can offer quality at a competitive price point?
Will the company mainly compete at the component level, focusing on design intensive and process intensive engineered products? Will the domestic car market provide sufficient incentives for the company`s suppliers and distributers? OBJECTIVE “To study the Supply Chain Management of Tata Motors Ltd. ” METHODOLOGY: The study can be said to be exploratory in nature as it is unknown to the researcher if any such study had been conducted in the past and thus has not been considered here. It is also descriptive in nature as it lays down the SCM activity of Tata Motors Ltd. and its prospects and potentialities.
The research plan has been designed keeping in mind both the qualitative and quantitative data that the researcher had to deal with during the analysis phase. In order to get the picture of the SCM activities of Tata Motors Ltd. a meeting was held with Mr. Nilimoy Nath, Manager- Fleet Sales, Tata Motors Ltd. Research instrument: ?Structured Interview (personal). Data Collection: Primary Data: Structured interview and questionnaire distribution. Secondary Data: Statistical data from Tata Motors Regional office, Guwahati and official websites. SIAM (Society of India Automobiles) websites.
Overview of India Auto mobile Industry Indian automobile industry is riding high with overwhelming economic growth rate of 7-8% till 2008. The industry has been growing at around 16% per year from 2002-03 to 2005-06 in terms of production, after which the production is more or less uniform at around 11 million per year. If we take the growth from 2002-03 to 2008-09, it has grown 77. 95%. Booming IT/ITES sector, manufacturing industry (namely textile, pharmaceutical and engineering) and real estate have contributed to this high growth in automobile industry in the country.
This is easy to understand because the per capita disposable income of the people has gone up remarkably. Over the last five years, per capita personal disposable income has gone up by around 8%, which has increased purchasing capacity of the people in the country. Other factors have also contributed to this high growth in Indian automobile sector. These include lowering age of first car users, shorter replacement cycles, rising duel income families, new technology, which is lowering cost of ownership, low car penetration in the country and most importantly growing steel production in the country.
In addition, wide variety and easily available financing options are also some of the major reasons for surge in demand for automobiles in India. In terms of production, commercial vehicles have registered a growth rate of 104. 78% from 2002-03 to 2008-09; while passenger vehicles have registered a growth rate of 154. 2% in the corresponding years. Three Wheelers and Two Wheelers have also shown the same trend of growth of 81. 06% and 65. 84% respectively. Table 1: The production profile of vehicles in India
Category2002-032003-042004-052005-062006-072007-082008-09 Passenger Vehicles723,330989,5601,209,8761,309,3001,545,2231,777,5831,838,697 Commercial Vehicles203,697275,040353,703391,083519,982549,006417,126 Three Wheelers276,719356,223374,445434,423556,126500,660501,030 Two Wheelers5,076,2215,622,7416,529,8297,608,6978,466,6668,026,6818,418,626 Grand Total6,279,9677,243,5648,467,8539,743,50311,087,99710,853,93011,175,479 Source: SIAM Exports of Automobiles from India The significant development in Indian automobile sector is the outstanding growth of its exports. Automobile Exports registered a growth of 23. 1 percent during the current financial 2008-09. The growth was led by Passenger Vehicles segment which grew at 53. 73 percent. Two wheelers and Three wheelers Vehicles exports grew by 4. 85 percent and 22. 5 percent respectively. But Commercial vehicles have shown a decline in the Exports by 27. 67 percent in the corresponding year. The figure given above is a small indication of Indian automobile sector is going global as in the year 2002-03 to 2008-09 Passenger Vehicles export have registered a growth of 366. 27 percent, Commercial vehicles by 248. 20 percent, Three wheelers Vehicles by 242. 45 percent, and Two wheelers by 458. 86 percent.
As a whole the Automobile Exports registered a growth of 398. 09 percent in the corresponding year. Table 2: Automobile Exports Trends Category2002-032003-042004-052005-062006-072007-082008-09 Passenger Vehicles72,005129,291166,402175,572198,452218,401335,739 Commercial Vehicles12,25517,43229,94040,60049,53758,99442673 Three Wheelers43,36668,14466,79576,881143,896141,225148074 Two Wheelers179,682265,052366,407513,169619,644819,7131004174 Grand Total307,308479,919629,544806,2221,011,5291,238,3331,530,660 Source: SIAM Introduction: Tata Motors Ltd. Tata Motors Limited is India’s largest automobile company, with consolidated revenues of Rs. 0,938. 85 crores (USD 14 billion) in 2008-09. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world’s fourth largest truck manufacturer, and the world’s second largest bus manufacturer. As of March 31, 2009, Tata Motors had approximately 49,473 permanent employees, including approximately 25,835 permanent employees at our consolidated subsidiaries, guided by the vision to be “best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics. Established in 1945, Tata Motors’ presence indeed cuts across the length and breadth of India. Over 4 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) and Dharwad (Karnataka). Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The company is establishing a new plant at Sanand (Gujarat).
The company`s dealership, sales, services and spare parts network comprises over 3500 touch points; Tata Motors also distributes and markets Fiat branded cars in India. Tata Motors, the first company from India’s engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a business comprising the two iconic British brands that was acquired in 2008.
In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea’s second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market, while also exporting these products to several international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, and subsequently the remaining stake in 2009. Hispano’s presence is being expanded in other markets.
In 2006, Tata Motors formed a joint venture with the Brazil-based Marcopolo, a global leader in body-building for buses and coaches to manufacture fully-built buses and coaches for India and select international markets. In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company’s pickup vehicles in Thailand. The new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with the Xenon having been launched in Thailand in 2008. Tata Motors is also expanding its international footprint, established through exports since 1961.
The company’s commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. It has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and Senegal. With over 2,000 engineers and scientists, the company’s Engineering Research Centre, established in 1966, has enabled pioneering technologies and products. The company today has R&D centres in Pune, Jamshedpur, Lucknow, in India, and in South Korea, Spain, and the UK.
It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India`s first Sports Utility Vehicle and, in 1998, the Tata Indica, India’s first fully indigenous passenger car. Within two years of launch, Tata Indica became India`s largest selling car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, India’s first indigenously developed mini-truck. In January 2008, Tata Motors unveiled its People’s Car, the Tata Nano, which India and the world have been looking forward to.
The Tata Nano has been subsequently launched, as planned, in India in March 2009. A development, which signifies a first for the global automobile industry, the Nano brings the comfort and safety of a car within the reach of thousands of families. The standard version has been priced at Rs. 100,000 (excluding VAT and transportation cost). In May 2009, Tata Motors introduced ushered in a new era in the Indian automobile industry, in keeping with its pioneering tradition, by unveiling its new range of world standard trucks called Prima.
In their power, speed, carrying capacity, operating economy and trims, they will introduce new benchmarks in India and match the best in the world in performance at a lower life-cycle cost. In June 2009, the exciting new range of premium luxury vehicles from Jaguar and Land Rover were introduced for the Indian market. These include the Jaguar XF, XFR and XKR and Land Rover Discovery 3, Range Rover Sport and Range Rover. Production: Table 3: The Production profile of Tata Motors Ltd. CategoryFiscal 2009Fiscal 2008 Units%Units% Passenger Cars166,96233182,29130. 5 Utility Vehicles39,0497. 750,130 8. 4
Light Commercial Vehicles160,78731. 9173,38229. 0 Medium and Heavy Commercial Vehicles138,60127. 1191,39432. 1 Total505,399100597,197100 With above production the company has exported 43,533 units of vehicles in 2009 and 66,650 units of vehicles in 2008. Market Share in India: Table 4: Market Shared of Tata Motors in India Category20092008 Passenger Cars13. 214. 2 Utility Vehicles17. 620. 1 Light Commercial Vehicles65. 464. 4 Medium and Heavy Commercial Vehicles61. 960. 4 Total24. 426. 1 The years to come will see the introduction of several other innovative vehicles, all rooted in emerging customer needs.
With the foundation of its rich heritage, Tata Motors today is etching a refulgent future. Facilities: We currently operate four principal automotive manufacturing facilities in India. The first facility was established in 1945 at Jamshedpur in the State of Jharkhand in eastern India. The company commenced construction of a second facility in 1966 (with production commencing in 1976) at Pune, in the State of Maharashtra in western India, and a third in 1985 (with production commencing in 1992) at Lucknow, in the State of Uttar Pradesh in northern India.
The company has set up the our fourth manufacturing plant in Uttarakhand, in India commenced operations in fiscal 2008. The Jamshedpur, Pune and Lucknow manufacturing facilities have been accredited with ISO/TS 16949:2000(E) certification. The process of setting up a plant in Sanand in Gujarat, for the manufacture of the Nano has already started. The company has set up plant for the manufacture of Tata Marcopolo buses under our joint venture with Marcopolo at Dharwad in Karnataka. It have also set up research and development facilities in the United Kingdom. The manufacturing facilities of TDCV are based in Gunsan, South Korea.
TDCV has received the ISO/TS 16949 certification, an international quality systems specification given by SGS UK Ltd. , an International Automotive Task Force (IATF) accredited certification body. It is the first Korean automobile original equipment manufacturer to be awarded the same. The newly acquired Telcon subsidiaries have their operations based at Zaragoza, Spain which are in the business of manufacture of concrete Transit mixers, dry bulk tanks, pumps, compactors and Tandem Rollers of various capacities for road making and at China which engaged in manufacturing of Compactors.
Fiat India Automobiles Limited, our joint venture with Fiat Group Automobiles S. p. A, has its manufacturing facility located at Ranjangaon, Maharashtra. The plant would be used for the manufacture of Tata and Fiat branded cars as well as engines and transmissions for use by both the partners. Installed Capacity: The total vehicle production capacity in India determined on the basis of two production shifts per day and including capacity for the manufacture of replacement parts, is 870,156 units annually.
In addition, the company also has vehicle production capacity of 20,000 units annually in South Koreathrough the manufacturing facilities of TDCV. Its Marcopolo plant has capacity of 6,600 units; it also have bus body building capacity of 330 units in Spain and 240 units in Morocco, and the joint venture in Thailand has capacity of 25,000 units the following table shows the installed capacity as of March 31, 2009, and production levels by plant and product type in fiscal 2009 and 2008: Table 5: Tata Motors Production Plants PlantCapacity20092008 Jamshedpur
Medium and Heavy Commercial Vehicles108,00064,39695,145 pune Medium and Heavy Commercial Vehicles, Light Commercial Vehicles, Utility Vehicles, Passenger Cars513,125307,279436,177 Lucknow Medium and Heavy Commercial Vehicles, Light Commercial Vehicles, Utility Vehicles30,00021,29526,900 Pantnagar Medium and Heavy Commercial Vehicles, Light Commercial Vehicles, Utility Vehicles210,00095,54623,136 Jamshedpur & Dharwad Construction Equipment9,7764,9487,364 Lucknow & Dharwad Bus bodies6,600873- Republic of Korea Gunsan Medium & Heavy Commercial Vehicles20,0009,34111,821 Spain
Buses and bus body330151222 Morocco Buses and bus body2403761 Thailand Pick-up trucks25,00087027 Supply Chain Management of Tata Motors Ltd. Components and Raw Materials Inventory Management: The principal raw materials and components required are steel sheets and plates, castings, forgings and items such as tires, batteries, electrical items and rubber and plastic parts. Those inventories are classified into two types: 1. Buffer inventories 2. Anticipation inventories And the company maintains 10-20% of inventory in stock, with a Reorder Level (ROL) of 20% of the total sales.
The company maintain a lead time of 15-30 days with EOQ of 1. 75 times of the monthly target. The company spending in the storage is 30 lakhs per month. The company provides insurance coverage for the inventory. The company face an inventory shortage of the finished goods in the North East India frequently of about 3-4 time a week this contributed by the high demand of the product in this region. In general the stock report is prepared every 15 days with a Periodic Review System for managing inventory. Suppliers: The company has an extensive supply chain for procuring various components.
They also outsource many of the manufacturing processes and activities to various suppliers. In such cases, they provide training to outside suppliers who design and manufacture the required tooling and fixtures. The company has long term purchase agreement for some critical components such as power trains and engines. The raw materials, components and consumables that are sourced, include steel (sheet-metal, forgings and castings), tires and tubes, batteries, fuel injection systems, air-oil filters, consumables (paints, oils, thinner, welding consumables, chemicals, adhesives and sealants) and fuels.
The company also requires aggregates like axles, engines, gear boxes and cabs for our vehicles, which are manufactured either by the company itself or by the subsidiaries and affiliates. The factors that are being consider while purchasing are: 1. Price 2. Features 3. Availability Most commodities have had huge price volatility during fiscal 2009. The company established contracts with the commodity suppliers to cover the company`s own as also its suppliers’ requirements to moderate the effect of such high volatility.
The suppliers are selected through tender and normally give 60-90 days of credit period, depending on the number. The company has undertaken an e-commerce initiative through the development of a business-to-business site with the assistance of the subsidiary, TTL (Tata technology Ltd. ), for electronic interchange of data with the suppliers. This has enabled the company to have real time information exchange and processing to manage the supply chain effectively. The company also uses external agencies as third party logistic providers.
This has resulted in space and cost saving. As part of the company`s strategy to become a low-cost vehicle manufacturer, it have undertaken various initiatives to reduce our fixed and variable costs including an e-sourcing initiative started in 2002 through which it procure some supplies through reverse auctions. Tata AutoComp Systems Ltd. , or TACO, in which now the company have 30. 56% ownership stake, manufactures auto components and encourages the entry of internationally acclaimed auto component manufacturers into India by setting up joint ventures with them.
Some of these joint ventures include: Tata Johnson Controls Limited for seats, Knorr Bremse CV Systems for commercial vehicle air brakes, Tata Yazaki Autocomp Limited for wiring harnesses, JBM Sangwoo Limited for pressed components and Tata Toyo Radiators Limited for radiator assemblies. These joint ventures supply components for the company. The company import some components that are either not available in the domestic market or when equivalent domestically- available components do not meet the quality standards.
The company also imports products to take advantage of lower prices in foreign markets, such as special steels, wheel rims and power steering assemblies. The company has established a procedure for ensuring quality control of outsourced components. Products purchased from approved sources undergo a supplier quality improvement process. They also have a program for assisting vendors from whom they purchase raw materials or components to maintain quality. Each vendor is reviewed on a quarterly basis on parameters of quality, cost and delivery.
Preference is given to vendors with QS-9000 certification. They also maintain a stringent quality assurance program that includes random testing of production samples, frequent re-calibration of production equipment and analysis of post-production vehicle performance and ongoing dialogue with workers to reduce production defects. Further, they have established a Strategic Sourcing Group for certain regions to consolidate, strategize and monitor the supply chain activities with respect to major items of purchase as well as major inputs of technology and services.
The Strategic Sourcing Group is responsible for recommending, for the approval by the Management Committee, the long-term strategy and purchase decision for these items, negotiation and relationship with vendors with regard to these items, formulating and overseeing the purchasing policies, norms in respect of all items, evolving guidelines for vendor quality improvement, vendor rating and performance monitoring and undertaking company-wide initiatives such as e-sourcing and supply chain management/policies with respect to vehicle spare parts. hey are also exploring opportunities for global sourcing of parts and components from lower cost countries, and have embarked on a vendor management program that includes vendor base rationalization, vendor quality improvement and vendor satisfaction surveys. They initiated steps to include the supply chain in their initiatives on social accountability, environment management activities including tree plantation, energy conservation etc. Tata Vehicles — Sales and Distribution:
Demand for Tata vehicles in the Indian market is subject to seasonal variations. Demand generally peaks between January and March, although there is a decrease in demand in February just before release of the Indian Fiscal Budget. Demand is usually lean from April to July and picks up again in the festival season from September onwards with a decline in December due to year end. The sales and distribution network of Tata Motors in India comprised over 1,500 sales outlets for passenger and commercial vehicle business.
In line with the growth strategy, the company has formed a 100% subsidiary, TML Distribution Company Limited, or TDCL, in March 2008 to act as a dedicated logistics management company to support the sales and distribution operations of the vehicles in India. TDCL set up stocking points for both commercial vehicles and passenger vehicles, in the places of manufacture and also at different places throughout India. TDCL help improve planning, inventory management, transport management and on-time delivery. The inventory forecast is generated through the use of SAP from the feedback given from the dealers and walk in customers.
Additionally, the company has completed the initial rollout of a new customer relations management system, which has been certified by Oracle as the largest Siebel deployment in the automotive market at all the company`s dealerships and offices across the country. Being implemented in phases since 2003, the combined online customer relations management system initiative supports users both within the Company and among the distributors in India and abroad. This has helped the company in increase the customer satisfaction in providing the service as well as after sale service.
The company uses a network of service centers on highways and a toll-free customer assistance center to provide 24-hour on-road maintenance (including replacement of parts) to vehicle owners. Financial Issues Through the company`s vehicle financing division a wholly owned subsidiary, Tata Motors Finance Limited, or TMFL the company also provide financing services to purchasers of vehicles through the company`s independent dealers, who act as the company`s agents, and through the company`s branch network.
During fiscal 2008 and 2009, approximately 34% and 31%, respectively, of the vehicle unit sales in India were made by the dealers through financial arrangements of the financing divisions. Total vehicle finance receivables outstanding as at March 31, 2009 and 2008 amounted to Rs. 158,803 million and Rs. 163,960 million, respectively. Recommendations As per the study conducted if was found that in North East Region of India frequent stock out problems occurs but because of the monopoly enjoy by the company in commercial vehicles there is not serious loss.
The problem can be solved by increasing the inventory level and improving the forecasting technique for the region. Conclusion It is the result of the implementation of a good supply chain philosophy that the company could achieve some level of success in maintaining customer satisfaction and increase in the market share which ultimately leads to growth in the bottom line. The result can be seen from the fact that the company won SPJIMR Supply Chain Excellence Awards 2006 showcasing the greatest of Indian success stories in supply chain management practices.
