Operations & Production Management

Inbound Logistics
Procurement
Vendor Management
In the Year 1997, Tata Motors promoted a company called “Tata
Autocompsystems Limited (TACO) “. The main objective was to serve form joint
ventures with international auto component manufacturers and streamlining the
vendor management processes for the company. 2 Tata Motors sources from
2 ICMR case study, Operation Management at Tata Motors, excerpts.
3 www.scribd.com/tatamotors
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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. 3
Manufacturing
In an automotive industry, the main emphasis on quality would be on the
manufacturing process. There would be about fifteen thousand accessories and
component parts to assemble and activate while we manufacture a car. Tata
motors believes in the indigenous development of manufacturing process and
development of technology. Unless many automobile companies, the strategy of
the firm is not to blindly adopt any new successful technology. It believes in
state-of-the-art technology. With reference to the product market matrix (with
product development, market development, market penetration and
diversification) which composes the merging of production and marketing
strategies Tata motors is seen to follow the diversification strategy wherein it
produces new products and gets into new market to target with the product.
Product development
New Product Development would involve idea generation, product screening,
concept testing, Business and financial analysis, product development, test
marketing and commercialization. An automobile product development cycle is
said to be consisting of concept stage (where the car starts), Advance
engineering (where the car takes shape), product engineering (where the details
are filled in), production engineering (where the car is worked out) and the
manufacturing stage (where all comes together) 3. Tata Motors Engineering
Research Centre in Jamshedpur focuses in upgrading the components and parts
with evolution of technology and also is one of the best in determining the needs
of a customer and developing a new product to cater to the needs. Tata Nano is
one such product from the stable of Tata motors. Besides this centre the
Research and development of Tata motors has become international with
centres
in Spain, UK and South Korea also.
Cost Cutting Techniques
After a rough fiscal year in 2001, Tata Motors realized that the only way to
survive this market was to cut down on costs. They started practicing an entirely
new way of procuring their supplies and hence gave rise to a unique way of
managing supplier relationship. The earlier traditional method that Tata Motors
gave the technical specifications to the supplier and the supplier who was
successful in acquiring the bid filled up the orders. However under the new
system Tata Motors simply provided the output they expected, and allowed the
suppliers to be as creative and innovative with their designs, materials, and
prices. In other words Tata Motors would simply describe the goal that they
34 http://msl1.mit.edu/TPP12399/Session01/lecture018.htm
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wanted to achieve with certain part and the suppliers would supply the parts
according their own convenience. For example instead of giving technical
specifications for the wind shield of Tata Indica, it would just describe the goal of
cleaning the windshield, and let the suppliers come up with ideas to meet those
goals in the most cost effective manner, without compromising on quality. This
practice led to huge cost savings in raw materials and the Tatas could deliver the
cheapest car of the world at just 2500$. By leveraging local design capabilities
and avoiding the dependency on high end design systems, Tata Motors has been
able to provide low cost solutions in a continuous and efficient manner. Also Tata
Motors tried the innovative method of Zero Based Costing. For example initially
TML paid for forged components on a cost plus basis, in the new system it
paid a price depending on the weight of the forgings.
Quality Management
The shifting of focus on TQM (Total Quality Management) and Six Sigma
principles by Tata Motors has been a gradual one since the year 2000. One
quarter of the work force undergo training to maintain and create high quality
products every year. The personnel are even sent to foreign manufacturer’s
locations, whenever a new machine would be imported, to undergo training.
Operations
Outbound Logistics

TATA MOTORS IN SERVICE INDUSTRY

Current purchasing process (followed in TML)

 Demand is given by the corporate office (marketing division).

 By 5th of every month, plan for next month needs to be sent by the buyers to the
suppliers.
 Then the suppliers plan their production accordingly and supply the materials
according to the material procurement schedule given by the buyers.
 According to the schedule, the purchase order (PO) is released with proper
documentation on request of the buyer.
 Documents are send through courier or taken personally by the buyer if the supplier
is local. E-mails are also used for the same.
 The buyers track the materials from the supplier end till the stores by phone or emails
 When the material reach the factory gate then the buyer again has to make
clearance at the factory gate and receive the material till it reaches the stores.
 As the material reaches the stores, the store people come into action. Here counting
is done and the stocks are updated in the system.
 As materials are consumed in the production the store manager has to inform the
particular buyer (through e-mail) of that material about the stock status keeping
safety stock in hand.
NOTE
 Here open order system is followed in world truck sourcing
 Supplier’s capacity is not a constraint in this system.
Problems faced by the Sourcing, Stores and Production teams.
1. Lack of proper structured data-base
2. Tracking materials becomes more tedious
3. Manually things are done like ordering and maintaining the inventory records
4. Actual receipt not as per scheduled receipt
5. Major break-downs at suppliers end
6. Lack of suppliers (due to there foreign commitments)
7. Demand forecast
8. Delay from suppliers side
9. actual receipt not as per scheduled receipt
10. Transportation problems
11. Delay in getting purchase order at suppliers end.
12. Line rejections
13. Quality check rejections
14. Major break-downs at suppliers end
15. Casting & forging industries have gone down during recession and now demand is far
more than supply.
16. Seasonal industries
17. During summer – due to excess heat production goes down.
18. During monsoon – lot’s of rejections are seen
19. Most of these industries have made commitment with foreign companies during
recession (at that time the domestic companies had cut down there production, so it
was easy for foreign companies to deal with these small companies).
20. These casting & forging companies are continuing to export their products, due to
which they are not taking orders from the domestic companies like TML.

Bar Code System Implementation in World Truck Store:

With its rapidly expanding business, the Tata Motors Ltd needs an efficient tracking system
to manage inventory and raw materials with complete visibility. Relying on its employee to
track and collect data manually is a major problem
Using a bar code system ensures we have the right merchandise in the right place at the right
price at the right time. The bar code system rectifies many shop floor problems (e.g. mistakes
when entering data manually) and most importantly, helps employees’ increases productivity
and in turn, improves the speed of operations.
Bar coding is the perfect solution for many day - to- day business problems, including:
• Tracking lost shipments
• Resolving receipts vs. invoice discrepancies
• Determining where goods are located at any point in time
• Tracking out-of-stock items
• Speeding returned goods to the selling floor
• Reducing long lines at the checkout counter
• Eliminating time-consuming paperwork
The bar code projects help keep track of every transaction in the factory involving the flow of
raw materials which can be divided into three parts-
 Input process,
 Work-in-process
 Output process.
At present in the working of the World Truck Plant the items when entered into the store
by the vehicle from the supplier is fed into the SAP from the respective GRN’s issued at
the CRS gate. The GRN contains the information of the number of challans which in turn
contains the data of the items and their quantities.
The items data thus is fed accurately into the database through SAP.
But the items in their outward journey from the store have no proper monitoring. The
items leaving are manually fed into a register and in cases of haste and emergency which
is often a case in the assembly lines even materials are taken out without proper entry into
the register.

This is caused as the manual data entry requires much time and effort and is prone to
errors. The production requirements are too demanding as the assembly line always is on
the move and the creation of one bottleneck situation at a station may hamper the
production of the entire line.
So the implementation of the barcode at the store gates would be an very effective
measure to keep track of the goods leaving the store and hence maintain exact record of
the inventory in hand. This in turn shall help in proper monitoring of items which are out
of stock or are close to being so and raise an alert for their replenishment and aid in the
smooth functioning of the assembly line.

Benefits of the sheet

• Structured data base easy to handle/update.
• Could be used by sourcing, stores & production at a time.
• Timely alerts to manage critical items.
• It focuses the holding cost.
• Provides ordering schedule.
• Maintains safety-stock.
• It nullifies the shock of major break downs .
Recommendations
• MRP may be implemented in SAP.
• The order will be generated automatically in SAP.
• Automatic inventory updatation through Bar-Code mechanism.
• Finding the root cause of the problems faced by the suppliers and solving them.
• Stick to the commitment.
• Prepare the vendors mentally before-hand.
• There must be the Win-Win strategy between the buyers and the suppliers
Assumptions and limitations
 Demand estimate is available well in advance
 The input data is correct ( eg – lead time )
 Lead time is in days.
 Initial data are entered correctly like scheduled receipts and opening stock.

Conclusion
Sticking to our objectives and after studding the entire sourcing processes, I came up with
some recommendations and a well structured MRP schedule which will definitely help the
sourcing team, the store and the production team in reducing the problems of the stock-outs.
The master template excel sheet which we prepared will provide a structured Data
base which is easy to handle and again easy to update time to time. This master template
could be used by the Sourcing department, stores, and the production at a time. It will give
timely alerts to manage the critical items very conveniently. It focuses on the holding cost
which is again of a greater use for the company to track materials cost-wise. It helps the
sourcing team by providing the well calculated ordering schedule. Here the safety-stock is
maintained which will help the production to run smoothly at the time of massive
breakdowns
and at the time of emergency.
After spending the two months of this summer with the sourcing department of the
world truck, and after studding the problems faced by different people in this supply chain we
came with some recommendations such as Electronic Ordering system. Automatic inventory
stock updation through Bar-Code Mechanism. Finding the root cause of the problems and
solving them wisely. In this industry we have to stick to our commitments for better corporate
relation and we should always think of in long terms. Sometimes we must prepare the
vendors mentally before-hand as we know that the production is going to ramp-up. The most
important thing which a automobile company must keep in mind is the Win-Win strategy
between the buyers and the suppliers when the business is done in long terms.
At last I want to say that my OJT in Tata Motors, at Sourcing department of World
Truck gave me a lot of exposure to the real inventory and sourcing problems which I can
never find in books. This journey of summer internship was really fruitful to me and will help
me a lot in my career ahead as I step in the corporate world.