Supply Chain Management In Tata Motors Limited

A report submitted in fulfillment of the project for SUPPLY CHAIN MANAGEMENT - PART A

Submitted To Prof. Ravi Shankar

Submitted By:
Rohit Gupta (WMP 6041)

INDIAN INSTITUTE OF MANAGEMENT LUCKNOW-NOIDA CAMPUS Date: 12-03-2012

Supply Chain Management in Tata Motors Limited

Background Tata Motors Limited is Indias largest automobile company, with revenues and profits of $19,376 million and UD $538 million respectively in 2009-10. Tata Motors started operations in 1945 as Tata Locomotive and Engineering Company Limited. In 1960, company name is changed to Tata Engineering and Locomotive Company Limited and finally to Tata Motors Limited in 2003. Company entered commercial vehicle sector in1954 after forming a joint venture with DaimlerBenz that lasted till 1969. It is a leader in commercial vehicle in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize cars and utility vehicle segments. The company is worlds fourth largest truck manufacturer, and the worlds second largest bus Vehicles, Tata Motors provide the wheel for manufacturer. Indias growth.

With more than 130 models covering a wide range of Commercial Vehicles, Passenger Cars and Multi-Utility The Companys 23,000 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. Tata Motors, the first company from Indias engineering sector to be listed in New York Stock Exchange (September 2004), has also emerged as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in UK, South Korea, Thailand and Spain. Tata Motors is also expanding its international footprint, established through export since 1961. The companys commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, South East Asia and South America. It has franchisee/joint venture assembly operations in Malaysia, Kenya, Bangladesh, Ukraine, Russia and Senegal. In more than six decades of its operations, it has grown both organically and inorganically. In 2004, Tata Motors bought Daewoos truck manufacturing unit in South Korea followed by the acquisition of the Hispano Carrocera in South Africa. In 2008, it acquired prestigious brands Jaguar and Land Rover from Ford Motor Company. While the Jaguar/Land Rover acquisition shows that Tata Motors is ready to be considered as a global player, it is however, the launch of Tata Nano that exposes Tatas strategic superiority in the supply chain context. The key indicator for this: The Nano is priced at a mere $2500. To become profitable after accounting for materials, overhead and taxes, the Nano must have a highly reliable and low cost supply chain network that must churn the demand that it has to generate.

Supply Chain Management in Tata Motors Limited

Sustainable Supply Chain Tata Motors approach to manage risks in the supply chain has been focused towards maintaining relations based on mutual respect and equal opportunities with their suppliers and partners. Their endeavour is to partner with suppliers who bring expertise and innovative solutions. E-commerce initiative had been taken through the development of a business-to-business site for electronic interchange of data with the suppliers in India. This enabled the company to have real time information exchange and processing to manage supply chain effectively. Further, external agencies are used as third party logistic providers to reduce space and save costs. They are also exploring opportunities for global sourcing of parts and components from lower cost companies, and embarked on a vendor management program that includes vendor base rationalization, vendor quality improvement and vendor satisfaction surveys. About 60% of the procurement in terms of value is from locally based vendors (within same state of operation), many of who supply exclusively to Tata Motors and in turn Tata Motors ensure that they are provided with a steady source of income through ever expanding operations of the company. Tata Motors is also working with their channel partners to reduce climate change impact on the supply chain. Through their unique initiative, Green Dealership, they are creating awareness and promoting good environment practices and management systems in supply chain. The initiative also aims at disseminating information on energy conservation which could provide potential financial savings for channel partners. Tata Motors have initiated the Product Development / Engineering programs for their suppliers which include 3D design visualization capability, enriching digital content by adding behavior to digital models, knowledge based engineering tools and enhanced digital collaboration. A supplier portal, which facilitates close collaboration from design / development stage to production planning and scheduling is also introduced.

Supply Chain Management in Tata Motors Limited

Procurement Process 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 suppliers 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. Some of the key features of Tatas Procurement process are: 1. E-procurement initiatives. 2. Long term relationships with a stable and loyal pool of suppliers. 3. Technology driven procurement SAP and VCM. 4. Strategic subsidiaries and JVs TACO group of companies, Tata Cummins.

Supply Chain Management in Tata Motors Limited

Vendor Management Manufacturing a car requires a large no. of small and large ancillaries which cannot be produced inhouse due to various constraints. Hence some of these small parts are outsourced to various vendors. The parts procured from these vendors should be as per the quality standards maintained by Tata Motors. Vendor development group identifies the appropriate vendor and ensures proper quality standards. The team evaluated and selected vendors who could deliver quality at the required price and then worked with them to ensure that the parts were made to the right critical parameters on the drawings given by ERC. Tata Motors sources from vendors who focus on their own R & D to reduce cost. Most of the vendors develop products with Tata Motors itself and quite a few were given designs by Tata Motors. TML also helped the vendors find international partners to make products that would meet their requirements. Some of the vendors who supply to Tata Motors also did competitive buying of material from China and Thailand. In 1997, Tata Motors promoted Tata Autocompsystems Limited (TACO) with the objective of forming joint ventures with international auto component manufacturers and giving a special thrust to vendor development.

Vendor Parks Creating shared value Vendor parks have been established in the vicinity of company manufacturing operations and vendor clusters have been formed at facilities at Pantnagar and Sanand. This initiative is aimed at ensuring flow of component supplies on a real-time basis, there-by reducing logistics and inventory costs as well as lowering uncertainties in the long distance supply chain. At Sanand, adjacent to plant boundary, a vendor park with all basic amenities has been established which would house vendors supplying exclusively to Tata Motors. The aim is to source 60% of the components from the vendor park, thus increasing the resource efficiency. A registered co-operative society is formed by the vendors and there is a management committee that is having the representation from TML and the vendor co-operative society.

Supply Chain Management in Tata Motors Limited

Material Management Tata Motors uses SAP 4.6C Material Management (MM) module for: materials planning and control purchasing goods receiving inventory management invoice verification

Various spare parts for the machines and other necessary equipments are ordered by the maintenance and T & PS departments through central maintenance shop and purchase department. Quotations are invited from the interested parties and after the negotiations one party is finalized to procure the material.

Nanos Supply Chain The major aspects of the Nanos supplier network are: 1. Proximity to assembly plant. 2. Local and single sourcing. 3. Tata group subsidiaries. 4. Two and Three wheeler market suppliers. There were two primary challenges for Tata Motors. The first was to contain the prices, because every time there was a change in design or specification, the cost changed. The second and unique challenge was to convince the vendors about the volumes. A major task was to interact with them, to figure out their processes and optimum capacity to which they could deliver. A lot of engineering has been contributed by our suppliers. Tata Nanos supplier network consists of approximately 100 tier-one suppliers. The supplier selection process was highly selective. Invitations were extended to almost 1000 suppliers but the selected 100 were based on their expertise, capacities and reliability in terms of quality. The suppliers also took part in the design process of the Nano through unique vendor initiatives such as 3P Production, Preparation and Process Methodology, used by Toyota for its supplier base. In addition, suppliers were also asked to set up facilities near the assembler. Fifty suppliers were confirmed to have co-located with the Nanos assembly plant in Singur. Of
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Supply Chain Management in Tata Motors Limited

these 15-20 are integrated facilities. Other subsidiaries are considered to be close enough. For instance, the Tata Steel plant is in Jamshedpur which is approximately 250 Kms. from Singur but with access to rail networks. The supplier proximity was achieved by offering long term contracts and giving significant commitments on volume. Most of the suppliers are also single sources for the components and only 3% of the components are imported. For all the outsourced design components, it was made sure that the suppliers were well established and that there was a local presence. An example is the alliance with Bosch for the engine management system which had centres in both Bangalore and Germany. Other than Tata Steel, several other subsidiaries of Tata such as Tata Auto Comp Systems (TACO) and HV axles were also involved. Beside the Tata subsidiaries, Tata also has some unique suppliers providing components for the Nano. Some of them are suppliers for two wheeler and three wheeler industries.

References
http://www.tatamotors.com/know-us/company-profile.php http://www.indiastudychannel.com/projects/4754-Tata-motors.aspx http://www.icmrindia.org/casestudies/catalogue/Operations/OPEA003.htm http://suppliers.tatamotors.com/Project_Docs/appeal_on_Certification.pdf http://suppliers.tatamotors.com/Home/frm_main.aspx http://www.tatamotors.com/sustainability/pdf/GRI-09-10.pdf http://www.tata.com/company/Articles/inside.aspx?artid=pJI3huSRc+0=