SCM Assignment On:

TATA Automobiles Logistics System

An Assignment Submitted to
SHRI RAMDEOBABA COLLEGE OF ENGINEERING AND MANAGEMENT, NAGPUR.
(An Autonomous Institute of RashtrasantTukodjiMaharaj Nagpur University)

Submitted by
Prajwal.P.Rahangdale(102)

Under the Guidance of

Prof.M.R.Jain

Department of Industrial Engineering

Shri Ramdeobaba College of Engineering and Management

Shri Ramdeobaba College of Engineering and Management,
Nagpur
(An Autonomous Institute of RashtrasantTukodjiMaharaj Nagpur University)

Department of Industrial Engineering

CERTIFICATE

The Assignment on TATA Automobiles Logistics System submitted by

Prajwal.P.Rahangdale(102) of VI Semester in Industrial Engineering, is a record
of original work carried out by them. This work has been carried out under my
supervision at the Department of Industrial Engineering, Shri Ramdeobaba
College of Engineering and Management, Nagpur during the academic session
2020-21. The work is comprehensive, complete and fit for evaluation, to the
best of my knowledge.

Date: 05-02-2021

Prof. M. R. Jain
Department of Industrial Engineering
 DECLARATION

I herby declare that the Assignment on TATA Automobiles Logistics System

submitted herein for the partial fulfillment of VI Semester in Industrial
Engineering has been carried out by me in the Department of Industrial
Engineering of Shri Ramdeobaba College of Engineering and Management,
Nagpur. The work is original and has not been submitted earlier as a whole or
in part for the award of any degree / diploma at this or any other Institution /
University.

Date: 05-02-2021

Prajwal.P.Rahangdale(102)
 Table of Contents

ABSTRACT
INDUSTRY OVERVIEW
 KEY STATISTICS
 EVOLUTION OF INDIAN AUTOMOBILE SECTOR
 MAJOR MARKET PLAYERS
 GROWTH DRIVERS
TATA MOTOR - COMPANY BACKGROUND
 SUPPLIERS and OEM MANUFACTURES
 PROVISIONS RELATING TO SUPPLY OF PRODUCTS
 PRICES
 PAYMENT TERMS
 LOCAL FACILITY
 SERVICE AND REPLACEMENT PARTS, SPARES PARTS AND SERVICE SUPPORT
 PRODUCT SPECIFICATIONS
 FORECAST AND ORDERS
 PACKING AND TRANSPORT
 DELIVERY CLAUSES
PROCESS FLOW CHARTS
 SUPPLY CHAIN FLOW: INWARDING TO DISPATCH
 SUPPLY CHAIN FLOW: PROCUREMENT TO PAYMENT
 ENTERPRISE RESOURCE PLANNING
VALUE CHAIN
 INBOUND LOGISTIC
 OPERATIONS
 OUTBOUND LOGISTIC
 MARKETING & SALES
 SERVICE
 PROCUREMENT
 TECHNOLOGY & DEVELOPMENT
 HUMAN RESOURCE
SUPPLY CHAIN
 IMPLICATION OF SUPPLY CHAIN MANAGEMENT – WORLD MARKET
 ENVIRONMENT OF SUPPLY CHAIN – TATA MOTORS LTD
 DRIVERS OF SUPPLY CHAIN
ABSTRACT
Supply chain management has been defined as the "design, planning,
execution, control, and monitoring of supply chain activities with the objective
of creating net value, building a competitive infrastructure, leveraging
worldwide logistics, synchronizing supply with demand and measuring
performance globally.
The automobile industry is a pillar of the global economy, a main driver of
macro-economic growth and stability and technological advancement in both
developing and developed countries, spanning many adjacent industries.
The company monitors the performance of its dealers and distributors and
provides them with support to enable them to perform to the expectations.
Any under-performance by the dealers or distributors could adversely affect
TML’s sales and results of operations.
The company relies on third parties to supply raw materials, parts and
components used in the manufacture of products. Furthermore, for some of
these parts and components, the company is dependent on a single source.
The company’s ability to procure supplies in a cost effective and timely manner
is subject to various factors, some of which are not within its control. While the
company manages its supply chain as part of the vendor management process,
any significant problems with supply chain in the future could affect the results
of operations.
Impact of natural disasters and man-made accidents, adverse economic
conditions, decline in automobile demand, lack of access to sufficient financing
arrangements, could have a negative financial impact on the Company’s
suppliers and distributors, in turn impairing timely availability of components,
or increases in costs of components. In managing a complex supply chain, the
Company has developed close relationships with both direct and indirect
suppliers. The Company continues to develop long-term strategic relationships
with suppliers to support the development of parts, technology and
production facilities
Industry Overview
Auto motives contributes to several important dimensions of nation building right from
generation of government revenue to creating economic development and encouraging
people development along with fostering research and development and innovation.
Automobiles depend heavily on consumer trends and tastes. The large pool of skilled
manpower and growing technology poses heavy demand for automobiles in India which will
list our country one amongst the top five auto producers by the year 2015. The liberalization
of the Indian industry saw significant growth in the Indian Automotive Industry. Today, the
Indian Automotive Industry is a significant contributor to the Indian economy, contributing
nearly 5% to the country’s GDP and about 17-18% to the kitty of indirect taxes to the
Government. Income and the cost of ownership are the two factors which are majorly
affecting the demand for the automobiles.
With its wide penetration and strong influence on the country’s economic and industrial
development, the auto sector is indeed one of the major drivers of our economy. Moreover,
economic liberalization coupled with its technological, cost and manpower advantage has
made India one of the prime business destinations for many global automotive players. The
sector has moderate direct employment and significant indirect employment; it is estimated
that the sector provides direct and indirect employment to over 13 million people.
With many new launches in the luxury and premium carmakers segment, the Indian market
condition plays a catalyst role in the growth of the industry. The top-end carmakers have
posted double-digit growth for the quarter ended June 30, 2013, with firms like Honda at 45
per cent and Audi recording higher sales and revenue growth of about 26 to 28 percent in
this quarter itself.
India is emerging as an export hub for sports utility vehicles (SUVs). Global automobile
majors are looking to leverage India's cost-competitive manufacturing practices and are
assessing opportunities to export SUVs to Europe, South Africa and Southeast Asia too. India
is also one of the key markets for hybrid and electric medium-heavy-duty trucks and buses.
Key Statistics
The Indian automobile industry produced a total 1.69 million vehicles including passenger
vehicles, commercial vehicles, three wheelers and two wheelers in August 2013 as against
1.56 million in August 2012, registering a growth of 8.18 percent over the same month last
year.
The cumulative foreign direct investment (FDI) inflow into the Indian automobile industry
during April 2000 to July 2013 was recorded at US$ 8,932 million, amounting to 4.5 per cent
of the total FDI inflows (in terms of US$), as per data published by Department of Industrial
Policy and Promotion (DIPP), Ministry of Commerce.
The overall automobile exports grew by 2.03 per cent during April-August 2013.
Furthermore, the production of passenger vehicles in India was recorded at 3.23 million in
2012-13. Automobiles production increased at a compound annual growth rate (CAGR) of
12.2 per cent over FY05-13, while the export volumes increased at a CAGR of 19.1 per cent.
As per the SIAM’s (Society of Indian Automobiles Manufactures) report, automobile sector is
going to witness a strong growth in FY14. The key points for this forecast are –
 Auto sales across categories are estimated to rise 6-8 per cent in FY14
 Passenger vehicles are projected to grow 5-7 per cent in FY14
-Passenger car segment is estimated to expand 3-5 per cent
-SUVs are projected to increase 11-13 per cent
 Commercial vehicles are forecast to rise 7-9 per cent
-LCVs are estimated to grow 10-12 per cent
 MCVs and HCVs are projected to increase 1-3 per cent
 Three wheelers are estimated to rise 3-5 per cent in FY14
 Two-wheelers are expected to grow 6-8 per cent in FY14

30%

Growth Forecast for Sales

25%

20%

15%
27%

26%

10%
12%

5%
8%
4%

3%

0%
FY09 FY10 FY11 FY12 FY13 FY14E
 Growth Forecast for the Auto Segment

50%
33%

33%
33%
28%
25%

25%
20%

16%
13%

9%
7%

6%
5%

5%

5%
3%

3%
2%
0%

0%
0%
F

-2%
-30%

Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers

Evolution of Indian Automobile Sector

- More than 35
marktet players
- Sector de-licensed - Removal of import
in 1993 control
- Major OEM - Indian companies
- Joint venture : started assembly gaining acceptance on
Indian government operation in India global scale
and Suzuki formed - Import permitted - Setting up of national
Maruti Udyog; from April 2001 Automotive Board to
commenced - Introduction of act as faciltator
- Close market production in 1983 value added tax in between the
- Five Players - Component 2005 government and
- Long waiting manufacturers enter industry
period and the market via JV
outdated models - Buyer's market
- Seller's market

Major Market Players

Hindustan Motors
Mahindra & Mahindra
Maruti Udyog Ltd
Tata Motors Ltd
Ashok Leyland
Swaraj Mazda
Tata
Mahindra & Mahindra
Ford
Hyundai
Suzuki
Honda
Toyota
GM
Skoda
Tatra
Volvo
Mitsubishi

Growth drivers
 More than 125 Fortune Companies can leverage
500 (including large auto India’s acknowledged
companies) have R&D leadership in IT industry
centres in India

Skilled labour costs Proven Product Continuing in economic

amongst the lowest reforms and policies
development related to investments
in India capabilities

Stable
Competitive Economic
Manufacturing Policies
Costs
Demand growth
Most leading
component Indian of 14% CAGR
makes India one
manufacturers are
QS & ISO certified
Auto the fastest
High
Quality
Hub Large &
growing
growing
markets
Standards domestic
demand
11 Indian
component
manufactures have 0.4 million
won Deming Award engineering
Proximity Availability graduates every year
to Markets of Manpower

Shipments to Europe Proximity to Asian

cheaper than those from economies & emerging 7 million enter
Brazil and Thailand markets like Africa workforce every year

Tata Motor - Company Background

Established in 1945, Tata Motors’ presence cuts across the length and breadth of India. Over
8 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The Company’s
manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra),
Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Sanand (Gujarat) and Dharwad
(Karnataka). The Company’s dealership, sales, services and spare parts network comprises
over 6,600 touch points. Through subsidiaries and associate companies, Tata Motors has
operations in the UK, South Korea, Thailand, Spain, South Africa and Indonesia. Among them
is Jaguar Land Rover, acquired in 2008.
Tata Motors Limited is India’s largest automobile company. It is the leader in commercial
vehicles and among the leaders in passenger vehicles in India with winning products in the
compact, midsize car and utility vehicle segments. It is also the world’s fourth largest bus
and fifth largest truck manufacturer. Tata Motors in 2005 was ranked among the top 10
corporations in India with an annual revenue exceeding INR 320 billion. Tata Motors is
committed to improving the quality of life of communities by working on four thrust areas –
employability, education, health and environment.
Highlights of the company (as a TATA Motor Group) in FY2012 -13
Market Capitalisation (as on 31st March INR 79,274 cr
2013)
Total revenue INR 1,89,629 cr
Consolidated Profit INR 9,893 cr

Production Capability:
Domestic and International Units produced Units Sold
Commercial vehicle 606,983 589,897
Passenger Vehicle 580,334 598,082

Suppliers and OEM Manufactures

Provisions relating to Supply of Products
Tata Motors purchase Products from supplier, subject to supplier meeting system
specifications, quality, reliability, performance, delivery, price requirements etc. of Tata
Motors as detailed in various sections in this General Terms and Conditions, RFQ, Drawings,
Tata Motors Standards, Purchase Orders and other agreements, such as Purchase
Agreement, Supply Agreement etc. that may have been executed with the supplier.
 Supplier must extend the status of a very important global customer to Tata Motors
and deal with Tata Motors as the supplier would deal with other similar customers.
Such status, however, neither confers any legal rights on Tata Motors nor does it
impose any legal liability on supplier.
 Supplier must not supply to any third party without prior written consent from Tata
Motors, if the products in Purchase Order are manufactured using any of the
following:

-Any intellectual property rights of Tata Motors or its promoters.

-Secret knowledge of manufacturing processes (know-how) of Tata Motors.

-Dies, moulds, models, patterns, jigs, tools or accessory equipment that were
acquired from without payment obligation or fully paid by Tata Motors.

 Similar products or their packaging supplied by supplier to the third parties shall not
bear any mark or reference of, either intellectual property rights of Tata Motors or
the Promoters of Tata Motors.
 The items agreed to be sold and supplied by the supplier must be delivered at
designated points within Tata Motors premises at various locations or any other
location specified for Spare parts.
 The supplier needs to supply components in reusable containers. Exceptions, if any,
will have to be informed to buying agency in advance and mutually agreed upon.
 Each shipment by the supplier must be made under separate invoice.

Prices
Initial price for every item shall be settled between Tata Motors and the supplier, based on
the quotation and detailed cost break-up provided by the supplier and mutually agreed
between Tata Motors and the supplier. Tata Motors then release Purchase Order on the
supplier for the price thus settled.
Unless agreed to specifically, any qualifying terms and conditions of the Supplier contained
in their quotations / purchase order acceptance or any other form of communication shall
not govern the business with Tata Motors.
Together with Tata Motors, the supplier is expected to commit offsetting inflationary
increases in costs through productivity gains and reducing cost further through value
engineering, six sigma and Kaizen exercises, increased volumes of procurement from Tata
Motors leading to lower Fixed cost per unit, achievement of higher productivity, effect of
learning curve and by initiating other cost reduction measures, and Supplier agrees to bring
down the prices as per the targets set from year to year with help of these measures.
 If there are changes in the said Product specifications, which are approved by Tata
Motors, to improve quality, reliability, performance and / or delivery requirements,
the impact will be reviewed jointly and if found appropriate, the Tata Motors will
carry out the consequential amendments in the Purchase Order.
 Unless specifically agreed, unit rate applicable for serial production goods will also
be applicable for all requirements on prototypes and for service and replacements.
 Price revision effected for an item, due to Value Engineering exercises or changes in
supply conditions or specifications shall normally be considered only once a year, or
at intervals mutually agreed upon.
 Any applicable development expense, such as Styling, Engineering, Integration,
Validation, tooling etc., is settled with the Supplier considering the supplier delivers
the product achieving the specified system level targets.
Payment Terms
 Local Products: Payment will be made as per payment terms as mentioned in the
Purchase Order, by the respective purchasing agencies in Tata Motors, which are
made in Indian Rupees for all procurements done in India, and is generally made
within 30 days of satisfactory acceptance of Products at Tata Motors i.e. 30 days
after Goods Inward Notification, against documents such as (i) Lorry receipt / Rail
receipt (ii) Commercial invoice (iii) Packing list etc.
 Imported Products: Payment will be made as per payment terms as mentioned in the
Purchase Order. The payment terms are generally against irrevocable letter of credit
or cash against documents. Payments shall be released within 30 working days from
submission of documents such as (i) Bill of Lading/Airway bill, (ii) Commercial
invoice, (iii) Packing list, and (iv) Certificate of Origin etc.
 For the development cost to be paid in foreign currency, the agreed cost is always
gross of the Withholding tax as applicable under Double Taxation Avoidance Treaty
between India and supplier’s country of origin.
Local Facility
Supplier shall normally establish its manufacturing facilities near assembly location of Tata
Motors with an objective of JIT supplies to Tata Motors. In the event Supplier’s
manufacturing location is not in the vicinity of Tata Motors’ ordering plant, supplier shall
establish storage facility near the ordering plant of Tata Motors to provide uninterrupted
and streamlined supply of materials.
In case the initial supplies are imported, in its endeavour to remain price competitive,
supplier shall aggressively explore possibility of setting up facilities in the same country of
Tata Motors’ ordering plant in the earliest possible time for which the supplier shall commit
to a time-bound action plan for setting up a local production facility.
Service and Replacement Parts, Spares Parts and Service Support
 At the request of Tata Motors during the period after Tata Motors complete current
model purchases, say 15 years, supplier shall make supplies to fulfil Tata Motors past
model service and replacement requirements at the prices specified in a purchase
order plus actual cost differentials for packaging and transport. During the final year
of such period, the Supplier and Tata Motors shall negotiate in good faith with
regard to the Supplier’s continued manufacture of service and replacement supplies.
 Supplier must provide such sale and after-sale service-related information as
mutually agreed by the parties, such as (but not limited to) parts, catalogue,
workshop manual, training manual and maintenance guide, diagnostic equipment
etc.
Product Specifications
The products to be sold and supplied by the supplier to Tata Motors against the released
Purchase Orders terms shall meet the specifications as finalised and agreed in writing
between the supplier and Tata Motors hereto on completion of development work on the
Product. Product specification, thus finalised, is generally documented in the form of
drawings. Supplier is expected to participate in preparing this drawing jointly with Tata
Motors, although the responsibility of approval and release of such drawings and specs
sheets is solely with Tata Motors. The specifications cannot be changed unilaterally by the
supplier without prior written approval from Tata Motors.
Forecast and Orders
Actual purchase / supply of components shall be made against specific purchase orders.
Tata Motors provide an annual non-binding forecast to the supplier. The supplier for
planning purposes only may use this forecast.
Volume projection provided in by Tata Motors (including spare parts) is not a commitment
by Tata Motors to purchase the quantities specified. Supplier acknowledges that Volume
Projections, like any other forward-looking projections, are based on a number of economic
and business factors
Initially Purchase order / Scheduling is released by Tata Motors like an open order. After
start of production of the Product, Tata Motors issue monthly supply schedule, time to time,
with specific quantities to be delivered at a time.
Packing and Transport
 For Local supplies, supplier shall supply components in reusable containers.
Exceptions, if any, will have to be informed to buying agency in advance and
mutually agreed upon.
 Supplier shall provide a mutually agreed Unique Identification mark including
location of Identification (such bar code, colour code etc) on each and every Product
supplied, which shall be as agreed upon jointly before start of serial production
supply.
  Unless agreed otherwise, product prices are inclusive of such marking fees.
Delivery Clauses
Supplier must supply products as per Tata Motors schedules as indicated in Purchase Order
or as communicated from time to time. Supplier is expected to agree on a specific logistics
protocol with Tata Motors prior to commencement of production.
Process Flow Charts
Supply Chain Flow: Inwarding to Dispatch

VQA
(Material STORES CRDO
(Acknowledgemen (Goods Inwarding)
t)

ASSEMBLY VEHICLE FINAL DELIVERY

(Production) (Inspection) (Sales)

Supply Chain Flow: Procurement to Payment

SRM SCHEDULES
MRP SALES PLAN
(Supplier Relationship
(Material Req (Corp. SHQ)
Mgmt)
Planning)

CRDO BMS
VQA
(Goods Inwarding) (Payment by Bank)
(Material Inspection)
Enterprise Resource Planning
Timelines
Before 1999 Legacy Systems
1999 Tata Motors Lucknow first to implement SAP 3.1H
1999 – 2008 Largest single server implantation
2008 onwards Upgraded to SAP ECC 6.0
ERP as a Catalyst to Growth
 Top to Bottom View of Company Performance
 Alignment of Strategies & Operations
 Improved Financial performance and Corp. Governance
 Reduces costs thru increased flexibility & transparency
 Integrated & Real Time Data & MIS Statements
 Gains from Higher ROI
 Optimized IT expenses
 Reduce Risks thru SOX compliance & ERM
Advantage of ERP
 Fully Integrated functional modules
 Bill-of-Material (BoM) linked Real-Time consumption
 Maintaining accurate Inventory levels at all stages
 Automated payments to all Channel Partners
 Process automation augmented by Bar-Codes, RFID tech
 Executive MIS thru Business Warehouse
 Employee Self Service thru SAP HR
Value Chain
Value chain analysis is much important for each organisation as its divide firm in to various
distinct activities carry out by the organisation such as, designing, manufacturing, marketing
etc. The concept of value chain is developed from accounting practices which helps to
analyse the value added to organisation at every stage of manufacturing or services or
marketing. (Cowe, 2008)
The value chain involves two types of activities: Primary activities & Support activities.
Primary activities change inputs (Inbound logistics, operation, outbound logistics, marketing
and sales, service) into outputs and bring them to customer. All these primary activities are
carried out by use of support activities which are firm infrastructure, Human resource
management, technology development and procurement.
Every single activity in value chain can contribute to firms relative cost position and create a
basis for differentiation’ (Porter, 1985 In Cowe, 2008, p.178). Value chain analysis makes
possible for the organisation or management to find out activities which adding value to the
organisation and activities that may destroy the value rather than creating and thereby
helps to identify the source of competitive advantage.

Transporters, Convoy Drivers Dealer Network, Marketing

Association Research Firms, Vehicle
Financing

Inbound Outbound

Operations Marketing Service

Logistics Logistics

Regional Warehouses,
Dealer Workshops,
Suppliers, Contractors Strategic Alliances Distributors, TASS
As per TML, company's 24,000 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." TML considers adding value process which can help to improve work progress and in
general supply chain. TML focus on development of, technical capabilities via training centres and
association with technical institutes & management capabilities via training programmes at
premier business schools. They also carry out career advancement schemes. Along with all
this HR Management carry out various activities for their staff which results in increased
efficiency, effectiveness, engagement, superior performance, productive and cordial
relationship and thus increase organisational capabilities in performing various primary
activities such as operations, marketing, sales etc.
Inbound Logistic
 Long-term contract with service provider’s – transporters and agents.
 Personnel at regional offices for overseeing the smooth transit of goods.
 Transparency and monitoring through deployment of IT – all transactions through
SAP.
 DTL (daily transport logistics) supplies for critical high value items.
 Efficient storage facilities – easy storage and retrieval.
Operations
 Capital Equipment Manufacturing division – tooling development capabilities of
global standard.
 Apprentice Trainee Course – ensuring stable source of skilled manpower.
 Kaizen & TPM (total productive management) team – continuous drive to improve
efficiencies.
 Automated manufacturing processes.
 Distributed manufacturing – Assembly units at South Africa, Thailand, Bangladesh,
Brazil etc.
 Maintenance – technical competence.
 Capacity Utilization – Mercedes Benz cars make use of Tata Motors paint shop
facilities.
Outbound Logistic
 Stockyards, all across the country.
 Long-term contracts with transporters – higher volume of business to transporters
ensures competitive price.
 Regional Sales Office and Vehicle Dispatch Section linked through SAP.
 Efficient security system for prevention of any kind of pilferage.
Marketing & Sales
 Structured approach to understanding the requirements of individual customers –
QFD’s conducted at regular intervals.
  Clear identification of product requirements, leading to development of innovative
products – Tata 207 DI, Tata Ace
 Pan India presence and global footprint.
 Independent teams for addressing the requirements of institutional customers –
Defense, State Transport Units
 Helping to augment the scarce resources – Fiat selling vehicles through Tata
dealerships, in return Tata has access to Fiat’s technology and unutilized capacity.
 Quick assessment of the changing market dynamics and consumer preferences –
Tata 407 LCV
 Large network of dealers – use of technology (CRM-DMS).
Service
 Easy availability of spare parts.
 Efficient collection of data from field and communication to the respective plants.
 Pan India presence, as well as global presence.
 Large network of workshops – Dealer workshops and TASS.
 Training facilities – for dealer end and TASS personnel.
Procurement
 E procurement initiative.
 Global Sourcing Team – China, a key destination for sourcing essential items like
tires, power steering units etc., Steel procured from Belarus
 Long-term relationships with a stable and loyal pool of suppliers.
 Technology driven procurement – SAP and VCM.
 Strategic subsidiaries & JV’s – TACO group of companies, Tata Cummins
 Centralized Strategic Sourcing for key components – FIP’s, Steel etc.
 Group resources – Tata Steel and Tata International.
 Localized supplier base at mfg. locations – low inventory levels.
Technology & Development
 Approximately 2% of the annual profits of the company invested in research and
development.
 Knowledge portal – helps employees keep abreast with the latest technologies.
 Extensive prototype building and testing facilities.
 Strategic partnerships – MDI (France), Fiat etc.
 Formal benchmarking process.
 “Technology Day” organized across all plant locations.
Human Resource
 Vast pool of technically competent engineers and managers.
 Focus on development of technical capabilities – Technical Training Center’s, Alliance
with technical Institutes
 Focus on development of managerial capabilities – MTC’s, TMTC, executive training
programs at premier business schools
 Career advancement schemes – ESS, FTSS
Supply Chain
Implication of supply chain management – World Market
Recent emphasis on global climate change is increasing pressure on automobile executives
to make the right decisions in many areas, including R&D and manufacturing. In fact,
emission-level targets, currently in question, threaten the entire structure of the auto
industry.
These challenges hit an industry already plagued with high costs, low profit margins, and
accelerated competition. New entrants from China and India are working aggressively to
capture the share of the global market, following the path taken by the Japanese in the
1980s and the Koreans in the 1990s – both of whom went beyond their domestic market by
focusing on the United States first, and then Europe later.
General macroeconomic and financial circumstances are not necessarily favourable. The
cost of energy and raw material continues to increase due to rising global demand. Strong
fluctuation in exchange and interest rate pose another challenge and are difficult and costly
against which to hedge.
In this dynamics business environment, a superior supply chain is one critical element to
helping automakers differentiates themselves from the competition. In fact, many of trends
in the auto industry are reinforcing the need to redefine supply chain strategies, layout, and
operations.
The most complex challenges automakers faces are summarized:
 Customer
External Stagnanting demand and
prices pressure in established
Legislation (environment,
market.
safety, others)
Segmentation and
Raw material and energy cost
polarization (low cost vs.
Exchange and interest rates premium)
Decreasing loyality

Competition
Quickly entering into every
Industry
segment Global overcapacity
Moving targets - everyone Complex alliances,
optimising or restructuring. Partnerships, M&As
Global game (for example: Consolidating ecosystems
aggressive asian companies, (Supliers, Dealers group)
new entrants)

Figure: Global challenges in automotive industry Source: IBSG, 2012

Based on these challenges, eight major trends affecting the automotive supply chain

Demand – side trend Supply – side trend

Uneven growth Differentiated outsourcing
Fragmentation Low – cost country sourcing
Accelerated volatility Risk Management
Importance after market Transparency/ accountability
Figure: trends that have implication on supply chain
Source: IBSG, 2012
Environment of Supply chain – Tata Motors Ltd
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 finalized 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 supplier’s locations.
At appropriate phase, respective sourcing agency co-ordinates for fulfilling on field spare
part requirements, both local and overseas. Similarly, a centralized import cell co-ordinate all
import related activates.

Drivers of Supply Chain

Supply chain structure
Efficiency Responsiveness

Inventory Transportatio Facilities Logistical

n Drivers

Cross-
Information Sourcing Pricing Functional
Drivers
Inventory
 Inventory "stockage" exists in all supply chains because of a mismatch between
supply and demand. Mismatches are often intentional, such as the case when cost
 effectiveness dictates batch sizes or when future demand is unclear and immediate
customer delivery is required. The spread of inventory throughout the supply chain
includes raw materials, work in process, and finished goods by suppliers,
manufacturers/repairers, distributors, and retailers. Inventory also has a significant
impact on the material flow time of a supply chain. A major conclusion for those who
manage inventory is that decreasing inventory (without increasing cost or decreasing
responsiveness to the customer) can provide a significant flow time advantage in
performance in the supply chain.
 Inventory also plays a significant role in a supply chain's ability to support a firm's
competitive strategy. If a business requires a very high level of responsiveness, the
company can use inventory to achieve this responsiveness by locating large stocks of
inventory close to the customer. In a pull or just-in-time environment, suppliers may
elect to locate inventories within a customer's stockroom with scheduled shipments
on an hourly or minute-by-minute basis. An extreme case is a supplier co-locating
their specialized manufacturing within the factory of their customer, providing
instant responsiveness to the customer's demand. Conversely, a business can also
use inventory to become more efficient by decreasing inventory through centralized
stocking. The tradeoff is efficiency versus responsiveness.
 A supply chain manager must make routine decisions to create a more responsive
and more efficient supply chain. These decisions typically focus on decreasing
procurement, repair or delivery cycle inventory, safety inventory, and seasonal
inventory.
Transportation
 Transportation moves the product between different locations in a supply chain and
significantly affects both responsiveness and efficiency.
 Quicker methods (modes of transport, different amounts) increase supply chain
responsiveness but decrease efficiency.
 The type of transportation can also affect inventory and facility location. For
example, international transactions are the current commercial trend, but the supply
chain manager must plan for travel time and customs processing.
 Transportation is prominent in a company's competitive strategy when considering
customer need. If a firm's competitive strategy targets a customer that demands
high responsiveness and that customer is willing to pay for this level, then they can
use transportation as a driver for increasing supply chain responsiveness.
 The fundamental trade-off for transportation is cost (efficiency) versus speed
(responsiveness). A transportation cost analysis must consider the effects of speed
on inventory required.
Facilities
 Facilities include all locations in the supply chain to store, assemble, or fabricate
inventory. In DoD, it is where personnel repair weapon systems and secondary
 items. The two major types of facilities are: (i) Manufacture/repair sites; (ii) Storage
(warehouse, distribution) sites
 Whatever the function, decisions regarding location, capacity, and flexibility of
facilities significantly affect supply chain performance. For example, a company can
increase responsiveness by setting up warehouses near its customers instead of
creating only one remote stock facility. This usually decreases cost while increasing
responsiveness. Since facilities are a key driver of supply chain performance, factors
such as location, capacity, manufacture/repair methodology, and warehousing
methodology also affect supply chain performance by way of the facilities
component.
 In DoD, depot and field repair facilities are cornerstones of the supply chain.
Information
 Even though information does not have a physical presence, it is still a major supply
chain driver. Information deeply affects every part of the supply chain in several
ways.
 Information serves as the connection between the supply chain's various stages,
allowing them to coordinate their actions and bring about many of the benefits of
maximizing total supply chain profitability. Information is also crucial to the daily
operations of each stage in a supply chain, such as the case for production
scheduling, order status, and inventory status.
 A growing trend is the importance of information and information systems in
balancing responsiveness versus efficiency. The tremendous growth of information
technology as a functional discipline and a science is testimony to the impact that
information has on the effective and efficient operation of a business.
 Similar to all other drivers, businesses must trade-off between efficiency and
responsiveness when trying to include more supply chain information.
 A key decision regarding information is determining what information is most
valuable in decreasing cost and increasing responsiveness within a supply chain. This
decision depends on the supply chain structure and market segments served. For
example, some companies target customers who require costly customized
products. These companies might find that an investment in information helps them
to respond more quickly to their customers' needs.
Sourcing
 Set of business processes required to purchase goods and services in a supply chain
 Supplier selection, single vs. multiple suppliers, contract negotiation
 Sourcing decisions are crucial because they affect the level of efficiency and
responsiveness in a supply chain
 In-house vs. outsource decisions- improving efficiency and responsiveness
Pricing
 Pricing determines the amount to charge customers in a supply chain
 Pricing strategies can be used to match demand and supply
 Firms can utilize optimal pricing strategies to improve efficiency and responsiveness
 Low price and low product availability; vary prices by response times

END