Tata Nano - OEM, Supplier Relationship

(source :SupplierBusiness.com newsletter, 14th January)
Tata divided the components into two types – proprietary designs and Tata Motors design. For proprietary design components, Tata went with established suppliers such as Bosch (which supplies the engine management system and has significantly contributed to the future diesel engine). Bosch split the development between its design centres in Bangalore and Germany. Using local design capabilities was a crucial decision, as most global design centres were accustomed to designing high-end systems, employing development staff at a significantly higher wage levels.

For components and systems designed in-house, Tata Motors chose suppliers with strong process capabilities who could give valuable suggestions and improve on the designs. Nearly everything has been sourced locally and the Nano will have 97% local content from day one. Tata’s supplierswere an integral part of not only the design and development process, but also purchasing.

While Tata started work with 600 suppliers and a total of 1,800 supplier-part combinations, these were eventually narrowed down to 100 suppliers for the platform.

Hydro-forming is used for all the Nano’s tubular structures, resulting in weight reductions and simple production processes and stamping has been replaced by roll-forming process. Roll forming allows a common tooling for a number of parts, fewer operations and better productivity. Tata not only worked on its own processes but also helped its vendors innovate.

Cost saving was also achieved by using thinner materials wherever the design allowed, so the bumpers are only 2.5mm thick, against 3mm on the Tata Indica super mini.

Half of the 100 vendors for the project are co-locating with Tata in a 350-acre vendor park in SIngur next to the new Tata plant. Instead of annual contracts, Tata went with long term volume contracts with its suppliers, driving down the costs even further. The suppliers received significant volume commitments from Tata Motors, with about 75% of the components being single-source and about 90% of the total car being outsourced.

A three-shift operation and consolidated purchasing with suppliers allowed for a further reduction in costs.

While the first plant at Singur will eventually have a capacity of 350,000 units, Tata wants to set up three other plants in different parts of India to sell a million units per year eventually. With four plants in various locations, the company aims to save significantly on logistics and inter-state taxation.

Tata’s current challenge is to have all the suppliers in the vendor park up and running by the start-of-production of the plant. With the Nano, Tata is aiming for a less than 100 ppm rejection rate (better than existing Tata plants) and a ten-fold improvement in warranty costs.

Delphi Experience on Tata Nano - Keeping instrumentation simple

Speaking about the company’s experience with cost control for the Rs 1-lakh car, Mr Ashok B. Ramaswamy, President and Managing Director, Delphi India, said that there was a considerable amount of lateral thinking that the Indian development team had to do to come up with ideas for crashing the cost structure.

So, the instrument cluster was kept basic with just a speedometer, odometer and turn indicator signals being featured. The other ways by which Delphi cut costs for the component supplied was by eliminating screws and replacing them simply with panels and parts that just snap on firmly.

Also the clear plastic panel that covers the display was curved at an angle to eliminate reflections and glare, a simple solution compared to the usual anti-glare coatings and so on.

Mr Ramaswamy felt that Tata Motors choose Delphi’s solution because of its expertise in systems integration capabilities.

He also mentioned that while the company’s US-based product development teams are used to working on feature-rich, content-rich products, the Indian product teams are more focused on cutting costs.

This was a big reason why, though the Indian team is also used to developing global products, it was also able to think innovatively to develop low-cost technology solutions such as the Nano instruments and the engine management systems for fuel-injected two-wheeler engines.

Ratan Tata on Assembly of the car

"The first thing I would like to do is get a mature product in the Indian market and seed this market effectively. My aim was that I would produce a certain volume of cars and create a very low cost, very low break-even-point plant that a young entrepreneur could buy. A bunch of entrepreneurs could establish an assembly operation and Tata Motors would train their people, would oversee their quality assurance and they would become satellite assembly operations for us. So we would create entrepreneurs across the country that would produce the car. We would produce the mass items and ship it to them as kits. That is my idea of dispersing wealth. The service person would be like an insurance agent who would be trained, have a cellphone and scooter and would be assigned to a set of customers. This is just a concept. He will deal with their problems on a self employed basis and would be paid by the assembler and the customer.

It would be satisfying if the small car created 10-15 satellite groups of young engineers who could get together and do a business. They would never be able to get normally into assembly of cars. I think it will be a very satisfying thing for me to see them succeed.

What we will do outside India will be a conventional distribution system. Find an assembly plant and assemble the product in the conventional form."
(excerpts from Mr. Ratan Tata interview in ToI)