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SUMMER TRAINING PROJECT (SYNOPSIS) Cost reduction in electrical equipments usedin Tata Motors MUVs (Multi Utility Vehicles

) Undertaken at Tata Motors,CVBU Plant,Pimpari Submitted in the partial fulfillment for the award of the degree of MASTER OF BUSINESS ADMINISTRATION Under the Supervision Internal Guide: Prof. M.K.Gandhi External Guide: Mr. A.B. Gandhi (Asst. General Manager)External co-ordinator: Mr. S.R.Wani (Asst. Manager) Submitte

Objectives of project: The main objectives of the project are, • To study cost reduction techniques used in Operations/Production. • To find out various areas where production cost can be reduce withoutdisconcerting quality of product. • To apply cost reduction techniques to reduce production cost. • To increase the profitability of organization. Need of the project: There can be following reasons why a company might need to cut costs,

Externally driven: • Top of the technology and process3. Internally driven: • Keep improving processes • Employee suggestions2. the following 3 dimensions of Cost reduction hasto consider. Competitor driven: • Benchmarking against competitors .• To create additional cash reserves • To reduce price of product or service • To bring expenses in line with revenues • To eliminate unnecessary expenses or wasteful spending • To increase company value • To reduce manufacturing costs to stay competitive • To become more efficient Steps to be follow during project: While doing project.1.

• Through observation at actual working place. apply cost reduction techniques andfind out cost reduction elements. • Discussion with other officials. • Manuals of all vehicles.All data collection has to do throughPrimary data: Data which is collected on our own is called primary data.Present the data in comparative manner according to vehicles.Do analysis based on comparison.• Real time dataThe steps are.5. Methodology: Cost reduction can be done through. • Group discussion with co-trainees. • Discussion with workers working at assembly line and at store.Modification4. 1. • Referring various files already made by companies officers. Personally visit to assembly lines i.2. Pimpari.List down all electrical equipments used in vehicles.1.3.InnovationFollowing methods of cost reduction in Operations/Production can be useduring project.Elimination3. .Find out equipments from list which are most costly and alsoequipments which has scope to reduce the cost.6.e.Reduction2.4. Secondary data: Already existing data is called secondary data. Trim line and Chasis line of allMUVs of CVBU plant of Tata Motors. • Personal interaction with company guide.

Hence 2-months span is short to implycost reduction ideas. This is also a drawback of large scale company.But that ideas company can implement in coming days or on their newproducts. . Any small change in product has influence on various departments from ERC to Supplier.• Standardization • Lean manufacturing • Product rationalization • Supply chain management • Eliminating wastages • Negotiation with supplier • Bulk buying from same supplier • Replace equipment with low cost product Limitations: There is time limitation to actual implementing the ideas generatedthrough project.

and avoiding time-draining attempts to reduce cost afterdesign. scrutinizing highoverhead sales. The concept/architecture phase alonedetermines 60% of cost! See how Design Determines Cost* Cost is very hard to remove later after products are designed The Results: * Significant cost reductions by design for parts. cutting production throughputtimes by 90 percent. avoid low-bidding* so that vendors will help with designImplement standardization and good product portfolioplanning for the best focus* Total cost measurements (#8) to quantify all costs affected by design* Correcting Counterproductive Policies. vendors. See full article oncounterproductive policies. 2. Design for Lean. or moving production offshore. quality. cutting errors and scrap in half errors The Results: * Significant cost reduction possible by raising labor productivity and eliminating waste* Even greater returns when lean is extended to a Build-to-Order business model (See # 3Overhead Cost Reduction below) How to Reduce Manufacturing Cost: * Implement Lean Production Activities Supportive to Lean Production: * Design product families for lean production* Concurrently Engineer flexible processes* Implement standardization (#4) to enable dock-to-line distribution* Rationalize products (#5) to eliminate the most unusual products with the most unusual partsand processes* Total cost measurements (#8) to quantify all costs related to manufacturing* Keep control of . labor. or prototypes into viable products. quantifying all costs. going for the low-bidder.* Implement Design for Manufacturability ( DFM ). and productdevelopment. New ventures and startups will be able to implementthese principles right away. emphasizing thoroughup-front work. avoid distantoutsourcing and offshoring* If outsourcing. etc.1. HALF COST PRODUCTS Cost reduction can result in significant product cost saving.optimize theconcept/architecture phase* To convert ideas. and Design for Quality* For dramatic cost reduction . Cost Reduction by Design Cost Reduction Opportunities: * Product development determines 80% of product cost. research. How to Reduce Product Cost by Design: * Practice Concurrent Engineering with early and active participation of manufacturing.purchasing. use commercializationtechniques to ensure success Activities Supportive to Low Cost Product Development: * Co-locating Engineering with Manufacturing ensures the best teamwork.Cost reduction . and lifecycle cost saving when companies interested in cutting cost implement all 8 the elements of thefollowing cost reduction strategy: New article on recession strategies that improve cost. by prioritizing portfolio planning. profits. Lean Production Cost Reduction Cost Reduction Opportunities: * Lean production benefits include doubling labor productivity. choose local vendors which ensures early and active vendor participation inproduct development teams* Pre-select Vendor/Partners who will help develop products.Reduce your manufacturing cost. material overhead. Cost reduction can result in significant product cost saving. reducing inventories by 90 percent. designing for lean production can maximize lean savings (See # 2 Lean ProductionCost Reduction below).half cost to order-of-magnitude . and flexibility for immediate resultswith little capital cost. Established companies may have to first correct counterproductivepolicies. manufacturing cost saving. Our cost reduction program shows 8 strategieson how to significantly reduce cost.

avoid off shore manufacturing 4. Overhead Cost Reduction Cost Reduction Opportunities: * Standard products can be build to-order without forecasts or inventory and specials can bemass-customized on-demand.avoid long and distant supply chains 3. operations (#2and #3).avoid long and distant supply chains. avoid outsourcing for cost. Standardization Cost Reduction Cost Reduction Opportunities: * Standard part lists can be 50 times less than proliferated lists. on-demand resupply* Better responsiveness leads to more sales How to Reduce Overhead Cost: * Implement Build-to-Order and Mass Customization to build products on-demand withoutforecasts or inventory Activities Supportive to Build-to-Order & Mass Customization: * Implement lean production (#2) * Rationalize products (#5)* Total cost measurements (#8) to quantify overhead costs* Keep control of manufacturing in-house or with vendor/partners. Supply Chain Management Cost Reduction Cost Reduction Opportunities: * Supply Chain Simplification can greatly simplify Supply Chain Management* Spontaneous supply chains can pull parts into production on-demand without forecasts orinventory . Product Line Rationalization Cost Reduction Cost Reduction Opportunities: * Focus on the most profitable products. see articles on Build-to-Order and Mass Customization The Results: * Inventory carrying costs can be eliminated* Procurement costs can be reduced with automatic. see article onNegative Effects of Mergers and Acquisitions 5. see Standardization Results* Standard parts are easier to get and fewer types need to be purchased. avoid outsourcing for cost. see StandardizationBenefits The Results: * Economies of scale result from larger purchases* Material overhead of the standard parts can be one-tenth that of proliferated lists How to Reduce Cost with Standardization: * Implement Standardization with a practical procedure has been developed to standardize partand materials for new designs Activities Supportive to Standardization: * Rationalize products (#5) to eliminate or outsource the most unusual products that have themost unusual parts and materials* Total cost measurements (#8) to justify standardization efforts and encourage pickingstandard parts* Don¶t merge acquired products into the same plant or build others¶ products.manufacturing in-house or with vendor/partners. see How Rationalization can Triple Profits! The Results: * Eliminate the "loser tax" on cash-cows to subsidize low-margin products* Identify and remove products that are losing money on a total cost basis* Reduce overhead demands and costs for hard-to-build "loser" products* Free up valuable resources to work on cost saving efforts in engineering (#1). and supply chain management (#6) How to Reduce Cost with Product Line Rationalization: * Implement Product Line Rationalization to eliminate or outsource lowprofit products thathave high overhead demands and are not compatible with cost reduction strategies Activities Supportive to Product Line Rationalization: * Product Portfolio Planning focuses new product development* Total cost measurements (#8) to identify opportunities and supports rationalization decisions 6.

and encourages all cost decisions to be made on basis of total cost How Not to Lower Cost. compromises. Don't outsource or offshore manufacturing for cost. everyone must make decisions based on total cost thinking* Senior management understands the importance of quantifying total cost. purchase orders. the results arequantified. in some cases reducing quality costs can double profits How to Reduce the Cost of Quality: * Eliminating quality costs starts with designing in quality* Quality costs in manufacturing can be eliminated with Six-Sigma programs* Rationalizing away unusual products raises net factory quality and avoids wasting qualityresources on inherently lower quality products Activities Supportive to Quality Cost Reduction: * Total cost measurements (#8) to quantify the Cost of Quality 8. but can substantially raisemany less-obvious costs and compromise other important goals like quality. which will not result in a net cost savingsbecause of hidden overhead costs and because it inhibits. inventory. implements totalcost measurements. see article on How Not to Lower Cost Don't use low-bidding. transferring. The Results: * Quality costs can be greatly reduced. which only appears to save one category of cost. Short-sighted attempts prevent real cost reduction Don't try to remove cost after the product is designed because cost is designed into the productand hard to remove later. see article onNegative Effects of Mergers and Acquisitions 7. and expediting costs How to Reduce Cost in Supply Chain Management: * Design products around standard parts to simplify Supply Chain Management* Standardize parts to focus Supply Chain Management on high-volume. and missingout on the major contributions that vendor/partners can make when they help productdevelopment teams design products. supporting. hardest-to-get parts* Establish Vendor/Partnerships.Further. see article on Low-Bidding. easy to get parts* Rationalize away the most unusual products which have the most usual. which saves more money than low-bidding Activities Supportive to Supply Chain Cost Reduction: * Total cost measurements (#8) to encourage and justify standardization and rationalization* Don¶t merge acquired products into the same plant or build others¶ products. or thwarts 6 out of the 8cost reduction strategies (presented on the home page) due to the following reasons: Outsourcing or offshoring manufacturing separates manufacturing from engineering and thusthwarts Concurrent Engineering and compromises the 80% of the cost determined by the design. and dealing with quality and .The Results: * Material overhead can be reduced by a factor of 10 for standard parts and materials* Purchasing leverage results from high quantities of standard parts* Automatic resupply eliminates forecasts. Total Cost Measurement to Support All Cost Reduction Activities Cost Reduction Opportunities: * Total cost measurements are imperative to encourage and support the above activities toreduce all cost categories The Results: * All the above cost reduction activities are encouraged and supported. thus encouraging more total cost reductions. delivery. Quality Cost Reduction Cost Reduction Opportunities: * The Cost of Quality can be 15% to 40% of revenue. How to Reduce Cost with Total Cost Measurements: * Implement total cost measurement with the easy-to-implement cost driver approach Activities Supportive to Total Cost Measurements: * Until total cost can be quantified.

A summary is presented of various costs in different phases of the product life cycle and how they are shared among the manufacturer. we point out some of the possible disadvantages of component standardization. see Overhead CostReduction summary and the Build-to-Order article and Mass Customization article. which may increase a company's partproliferation. title.. Then. company.* Make it hard to implement standardization because contract manufacturers' preferred partsprobably won't correspond to your standard parts. All of these effects conspire to: * Compromise Lean Production. Finally. Further. Finally. which is opposed to the one piece flow aspects of LeanProduction. types of products. in order to realize the production benefits of standardization. Keywords  Component standardization. If all 8 cost reduction strategies are implemented. so.* Make it hard to optimize supply chains. we explain how the component standardization reduces the costs of different phases of the product life cycle. For more information call or e-mail:Call Dr. phone. Anderson. see Lean Production Cost Reduction summary and the article onLean Manufacturing* Make if impossible to implement Build-to-Order and Mass Customization. See the article: Good Ethics is GoodBusiness. P. and needs/opportunities. see the article on outsourcing andthen. . see Quality Cost Reduction summary and the article Designing in Quality. Don't try to save cost with unethical business practices. see Supply Chain Management Cost Reductionsummary and details in the articles on outsourcing and offshoring. Anderson at 1-805-924-0100 to discuss implementing these techniques or e-mail him atanderson@build-to-order-consulting. for additional considerations for may be batched for shipping. outsourcing or offshoring manufacturing removes production from the controlof the OEM manufacturer. See Cost Reductionby Design summary and the article Design for Manufacturability Outsourcing or offshoring manufacturing to distant contract manufacturers increases the deliverytime.comphone: 1-805-924-0100fax: 1-805-924-0200 Abstract This paper studies the effects of component part standardization on life-cycle costs. part numbers may have to be changed. fASME. manufacturing. the cost savings will be much greater thanappeared possible through outsourcing or offshoring.E. which makes it hard to pull parts just-in-time and makes build-to-order problems of remotemanufacturing absorbs many resources in engineering (in one case. Anderson with your name. David M. and society. CMCwww. read the article on offshore manufacture. Don't take prototypes into production without commercialization.HalfCostProducts. Also see article on "How not tocommercialize products" Correcting counterproductive policies may be a prerequisite to designing Half-Cost Products. andpurchasing whose time would be better spent developing low-cost products. Copyright 2010 by David M.* Make if hard to maximize quality and implement Six Sigma without data and control overmanufacturing. Three possible situations for component standardization are discussed. user. For more. 75%).

Learning curves for standardized and unique components. (b) Learning curves for standardized components.  Component commonality. (a) Learning curves for unique components. Life-cycle costs Figures and tables from this article: Fig. Figure options . 3. 2. 1. Rapid introduction of upgraded products with standardized components. Excess processing due to standardized raw material with unique components. Figure options Fig. Figure options Fig.

Figure options Fig. Effect of component standardization on degree of automation. . 6. Figure options Fig. (a) Two products with unique components. Probability of success of a system with unique components and with standardized components. Delayed product differentiation through standardization. Figure options Fig. 7.Fig. 5. (b) Two products with a standardized component. 4. Two-product two-level model with unique components and a standardized component.