2nd Assignment

Group 10 - PPC Assignment Company Selected – Tata Motors, Pune Right supply chain – responsive vs efficient Suppliers – Kraljix Matrix Policies Standards – crash test , fuel efficiency, material test, drive test, NVH – Noise, vibration harshness test, CPU test, Brake test, emission test

A. Classification of Shops (Product Process Matrix) Products manufactured were passenger cars like Indica, Indigo, Manza and Vista. The plant in totality is Line manufacturing. But since it is a big manufacturing unit which has various plant within plants. Such as: 1) Weld Shop – Line Manufacturing 2) Paint shop – Line Manufacturing 3) Press Shop – Batch Manufacturing 4) Engine Shop – Line Manufacturing 5) Final Assembly line – Line Manufacturing The cycle time of Final Assembly line is 67 seconds and it has approximately 223 stations. B. Manufacturing and Supply Chain 

Decoupling Point For Tata Motors this point lies at the dealership because that is where the company faces the first point of contact with the real customer.

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Product Postponement The point where the product ceases to be generic is the point of product postponement. For this plant, where we have 4 different cars manufactured in the same production line, this point comes much earlier in the process. For Indica-Indigo and Vista-Manza family of cars this lies in the Weld Shop, where the under body is welded, which is same for a family of cars. If we consider the variants of the cars, then this just comes at the point where the final assembly begins, because operations of further ahead are based on variants of the cars.

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Decoupling Point/Product Postponement

Product Postponement

Decoupling This has customer lead time of around 2 weeks, and manufacturing lead if much more than 2 weeks (not sure about the exact time). So supply chain is predominantly run with the help of Sales Forecasts.

Customers 

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Dealers

Area Offices

Regional offices

Corporate Head quarters

Manufactu ring Plant

Bull Whip Effect

These are the various stages through which a Sales Forecast data has to pass through before manufacturing begins. Even if we approximate that at least 4 centers modify the data with 5% variability, we can observe a 20% error in forecasting (upside and downside). So these frequent change in demand forecast and production schedule creates a bull whip effect. The offices in order to be more responsive tend to inflate the demand to an extent which impacts the following metrics: Performance Measure Supply chain responsiveness Supply Chain costs Cash to cash cycle time Inventory days of supply 

Impact of Bull Whip Effect Increased Increased Increased Increased

Product – Bill of Material per vehicle Item Engine Sheet Metal Tyres Paint Seats Brake system Wiring Harness Interior fitments

% of total cost 24% 7% 4% 7% 8% 3% 2.5% 5%

Glass ECU Stereo Systems 

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2% 2% 2%

Supplier It has around 238 suppliers in the final assembly shop. 17 items are Just In Time items, and they also constitute the bottle neck items, since shortage of any of these leads to halt in production. There are few items in the strategic list like ABS, AMT, ECU etc. for which there are only few suppliers across the globe. I am not sure about the decentralized buying decisions, but most of the other items come into the leveraged category. Is this the Right Supply Chain? Taking into account the forecasting errors that are generally seen, so to meet the customer needs, this supplier chain is more responsive by keeping inventory. In its current state this supply chain is the right supply chain. Resilience Risks can be in the through a random phenomenon, accidents, government and politics, Non-compliance, Competition, Economy, Social disconnect, internal disruptions etc. The outcomes might be evaluated by estimating the occurrence of the event and how severe the consequences can be. One can be resilient by either having capacities of redundancy or by being flexible. Tata Motors has lot of overcapacity, but whether all the models can be manufactured everywhere is a big question. So it is not resilient in the terms of capacity redundancy. The systems though are flexible, but not the copy exact that we find in Coke or Intel. The level of part standardization across the family of vehicles is also poor. The product postponement is clearly not visible. On the whole this appears to be a supply chain with poor resilience.

C. Policies 

General 1. Work in shifts of 8 hours 2. Plant to start at 6:30 am 3. Meals to be served near the workplace 4. Plant to remain shut on Thursday and work on weekends

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Production Planning and Control 1. Indica and Vista Family to have different lines in Weld Shop 2. Paint Shop to have more buffer than any other shop in the plant

3. All the models can be assembled in a single line, care taken to mix basic and high end models. High end models require more time for ABS fitment etc. creating a bottle neck. 4. Engine to be procured from Fiat 5. Another facility in Ranjangaon to be utilized for production of new models 6. Shifting of SUVs to Pantnagar, Uttaranchal 

Innovation 1. Process innovation – Quality circles, Kaizen activities 2. Product Innovation – Suggestion Schemes 3. HorizonNext – Policies that are under this are aimed at thinking ahead of the pack and being better than the best. Nano AMT, Zest and Bolt are the products under HorizonNext.

D. Standards 1. Vehicle before being delivered to Customer has to undergo various tests such as Crash test, Noise Vibration and Harshness test, Drive test, Brake test, Emission test, ECU testing 2. The vehicle has to be ARAI certified for mileage and engine standard compliance 3. It cannot be delivered to a distributor without OK tag from the internal quality team E. Visual F. Strengths    

India’s biggest Automobile company Trust and faith in its Brand – Tata Wide expertise in making trucks and high distribution reach in Rural areas Advanced Research and Development centre

G. History and Geography   

Established in the year 1945, as a truck manufacturer Got into Car manufacturing with widely acclaimed Indica in the year 1998 Is situated in Chinchwad, Pune, Maharastra. The belt boasts of many other OEMs and supplier clusters, that assures part availability at low costs

H. Financial Ratios Ratio Inventory Turnover

Formula COGS/Average Inventory

Valu e 9.08

Comments Better than industry average of 7.37

Days of Inventory (DOI) Days of sales outstanding (DSO)

365/Inventory Turnover

40.20

Better than industry average of 50

365/Debtors Velocity

15.00

Comparable to industry average of 14.5

Days of Payables Outstanding (DPO) Cash Conversion Cycle

WIP Inventory Turnover Plant Turnover/Utilization Ratio Trading ratio Manufacturing labour ratio Power and fuel consumption ratio Technology updation ratio

I. Business Model

365/Creditors Velocity DOI+DSO-DPO Cost of Production/WIP Inventory Cost of Production/Depriciation Finished goods bought/Net sales Manufacturing wages and salaries/Net sales Consumption of power and fuel/Net sales Gross addition to fixed assets (including capital work-inprogress)/ Accumulated depreciation

48.00 7.20

54.77

Low value of CCC denotes that company converts resource inputs into cash flows in less time High value denotes less WIP Inventory

9.94 0.15 0.07 0.01 0.67

As this ratio is