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.

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.

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

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

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

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

Indias 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 <1, the company is not

investing much towards modernisation of
plant and machinery