Tuesday, June 17, 2014

Tata Motors

Tata Motors, Driving India


"The automotive industry in India is one of the largest automotive markets in the world," (wiki) and Tata Motors is the top automobile maufacturer in India. They lead India in commercial vehicles and they are among the leaders in passenger vehicles in each segment. Tata Motors also specializes in the manufacture of trucks and buses. As a result of this capability, they have attained a spot as the world’s fifth largest truck producer and the fourth largest bus producer. Founded in 1945 and rolling out their first vehicle only nine years later in 1954, Tata Motors has experienced rapid growth since that time. Their dominance of the Indian automotive industry has led to them achieving revenues of 38.9 billion dollars (U.S.) in 2013-2014. Through being listed on the New York Stock Exchange, a strategic alliance with Fiat in 2005, and the acquisition of numerous subsidiary and associate automobile companies such as Jaguar Land Rover, Tata Motors has also emerged as an international automobile company. In addition to India, Tata Motors Group now has operations in the UK, South Korea, Thailand, South Africa and Indonesia and the entire enterprise now employs over 60,000 workers (company profile). What is fascinating about Tata Motors is that in select markets, they offer the Tata Nano. The Tata Nano is the World’s first $2,500 car, and the company believes it will be the People’s Car and bring automobile ownership within reach of thousands of poor families across the Globe. This is somewhat analogous to Henry Ford’s introduction of the Model T in the United States and has the potential to be truly revolutionary.

        One of the keys to Tata Motors success is their excellent supply chain. The reason that they can offer the Nano for $2,500 is their excellent backend supply chain network. A unique aspect of Tata Motors supply chain that differentiates them from many of their competitors is how early they work with their suppliers in determining cost estimates. With the Nano, they worked very early with their suppliers in arriving at the cost estimate of the car. In an unusual move for an automotive company, they determined the complete functional requirements of the Nano’s parts before ever giving a hint to the public about the development of the vehicle. Tata Motors leverages state of the art software programs to help manage their supply chain costs. A key to the management of their supply chain expenditures is their use of Ariba Spend Management software as reported by a 2005 Business Wire article. Ariba provides useful sourcing and commodity knowledge to help reduce the bottom line costs of companies considerably. According to the same Business Wire article, the Ariba platform has helped reduce costs by helping Tata Motors find new suppliers, rationalize its supply base, and run on-line markets (business wire).

A large reason that their supply chain helps them succeed is it allows them to keep their costs down  by only spending on the essentials. One of their primary objectives has always been achieving the highest operational efficiencies at the lowest cost. They believe in “lean” and just-in-time manufacturing systems, because they are very cost conscious about fixed expenses such as overhead or extra inventory costs and therefore manufacture strictly against actual customer orders. Tata Motors has incorporated this strategy in their launch of the Tata Nano, and they first intend to secure the customers by charging nominal booking amounts. Then, they plan on delivering the cars gradually as and when they are manufactured at the company’s choosing. Because their Nano concept is so revolutionary and they have no direct competition at present, it should be relatively easy for them to reserve the bookings such that even if competitors enter the market, they will still maintain their customers of first lot (academia article).
Many aspects of Tata Motors contribute to its successful business and supply chain management.  One aspect that is desired by Tata Motors is extremely capable vendors.  They use a strategy called “New Supplier Selection Process”, this includes an in depth assessment on TCoC clauses which include safety, child labour, forced labour, and human rights aspects.  Another reason their vendors are successful is due to the amount of communication they have with the supplier companies.  Some examples of this high level communication are monthly vendor meetings discussing Tata Motors’ growth plan, Tata Motors also has a Vendor Council which meets quarterly, and they have built vendor parks with all of their new plants which improves supplier relations and solves logistics issues (sustainability).
Tata Motors faces several major threats to its supply chain.  One of those threats is the issue of land acquisition in India.  Since there are very few large landowners in India, any land acquisition requires dealing with hundreds of small individual landowners.  An example of land issues faced by Tata Motors is when they attempted to obtain 997 acres for a planned factory in West Bengal.  To obtain the land they had to work with the state government to consult with 13,000 farmers for rights to the land.  After all of this, Tata Motors faced trouble with allegedly not paying the farmers enough or forcing them to sell their land (supply chain quarterly).   

 These are a few links for videos.



Posted by at

1 comment:

Subscribe to: Post Comments (Atom)