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Auto parts vendors feel the heat over quality

Wed, Aug 31 2016. 05 06 AM IST

Car makers including Mahindra, Tata Motors and Maruti Suzuki are cracking the whip on vendors over faulty car parts
New Delhi: Indias car makers, grappling with quality issues,are
applying pressure on vendors found guilty of supplying faulty parts,
forcing firms to recall cars.
There is a general culture where we say that it is okay. Our tolerance
to poor quality is higherthanthe Germans and the Japanese, said
Pawan Goenka, executive director of Mahindra & Mahindra Ltd, the
largest maker of tractors and sport utility vehicles (SUVs) in India.

Between July 2012 and May 2016, car makers in India

recalled as many as 2.24 million cars. Photo: Reuters

performance.

Goenkas assessment of the situation is apt considering that car

makers recalled as many as 2.24 million vehicles citing safety
concerns between July 2012 and May 2016. The move has forced
companies, including Mahindra, Tata Motors Ltd and Maruti Suzuki
India Ltd to turn the heat on their vendors.
Mumbai-based Tata Motors on Monday said it will have significantly
less tier-I suppliers (the ones who sell parts directly to the companies)
as it looks to identify suppliers who not only have strong technical and
commercial capabilities but very strong delivery cost and quality

I need suppliers with capability to deliver more than just translation of a drawing into a component, and this is what you dont normally find if
you apply a build-to-print approach. You have suppliers that can translate drawing into parts, and I would like to get suppliers who can actually
translate functional requirements into a module, said Guenter Butschek, managing director and chief executive, Tata Motors.
Im going to reduce the number of direct suppliers, it doesnt mean that overall number of suppliers is going to reduce.
The company has 1,300 direct suppliers.
In the agreement between car companies and their vendors, the onus for vehicle recall is on suppliers. If a component is found faulty and the
vehicle is recalled because of that, the supplier is supposed to bear the expenses. Since the auto component industry functions at multiple
levelswhere a tier-III vendor supplies tier-II, who in turn supplies the tier-I vendor, and then the component reaches an OEMchances of
defects passing undetected are high.
In India, the situation is worse as tier-II and tier-III vendors are often financially weak and are unable to invest enough in people, technology
and machinery.
But, in todays context, quality is no longer a differentiator. It is a basic requirement and therefore it cannot be compromised. The end product in
front of the customer is only as good as the weakest point of the overall product, which is the component.
That means you need to have suppliers in place that meet the highest global quality standards. If I look into my supplier base, these is to a
large extent not the case, Butschek added.
To be sure, Tata Motors is not the first company to crack the whip on its vendors. On 1 August Mint reported that Maruti Suzuki will stop
offering contracts to auto component makers that fail to meet its zero-defect policy, as part of its efforts to avoid car recalls.
However, unlike the rest of the industry, Tatas problems also stem from its legacy products, such as Indica and Indigo, which were launched a
long time ago.
As we phase out old products, some of the suppliers will just be phased out with the products and will most probably just not show up because
their performance cant be demonstrated in the new supplier base, Butschek said.
According to Goenka of Mahindra, problems at the suppliers end orginate from inadequate skill set in the value chain where people are not
properly trained, and he ruled out price-sensitiveness of Indian market as a factor that leads to compromise on quality.
Tier-I vendors suffer from tier -II and tier-III taking shortcuts, Goenka said. What is changing now is that customers are not accepting the
poor quality. Their tolerance levels have significantly gone down.

01-Sep-16 12:40 PM

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Arvind Balaji, the president of Automotive Component Manufacturers Association, or Acma, said the next phase of growth in his industry will
require additional competencies for us to become natural partners of choice for our customers.
We are conscious of the need to transform ourselves. While doing so, we must also recognise that zero defect is now the requirement for
anything that we wish to achieve, he added.

01-Sep-16 12:40 PM