Executive Summary

Tata Motors is a $42 billion dollar organization and a global leader in manufacturing

covering a wide range of vehicles. Their brand can be found in over 175 countries around the

globe and has proven to be a main competitor in the global car industry.

The major goal that Tata Motors has been trying to globally accomplish over the past few

years is to be a multi brand company. With being the largest company in India, they have

strived to make this goal successful. Unfortunately, with some countries’ barrier to entry

being very different than what they are used to, Tata needs to make a major adjustments if

they want to compete and be the multi brand company they are striving to become.

Tata Motors strives on giving their consumers cutting-edge innovation with their

cars providing an improve quality of life to the communities that they serve. The global car

and automotive manufacturing industry has been dealing with the increase price of steel,

making the price of cars increase. With disposable incomes being so low, consumers risk the

chance in using their money towards buying new cars. The car industry is also dealing with

global interest rates; making the demand of big ticket item. With positive trends such as

technological advances and environmentally friendly consumers, the industry has been

adjusting to these changes to keep up with what the consumers wants. If the company wants

to succeed globally with their products some strategies that they should be thinking about is

updating their safety standards and the structure of their designs when in manufacturing. As a

company they need to think globally if they want to succeed with their products, so by

working on their brand name marketing wise, they could be a huge competitor worldwide.

Strategic sourcing is a core activity in purchasing and supply management. It is a complex commercial
process requiring extensive knowledge and competence. It can be defined as ‘satisfying business needs
from markets via the proactive and planned analysis of supply markets and the selection of suppliers
with the objective of delivering solutions to meet predetermined and agreed business needs’. Strategic
sourcing is a logical process involving the application of tools by skilled, competent and knowledgeable
people; however, developing and implementing strategic sourcing is a functional process. Strategic
sourcing is an institutional procurement process that continuously improves and re-evaluates the
purchasing activities of a company. In a production environment, it is often considered one component
of management.

Introduction
1. Evolution of Tata Motors

Tata Motors was incorporated on 1st September 1945, headquartered in Mumbai, India. Its
product variants include buses, passenger cars, coaches, trucks, sports cars, vans, military
vehicles, and construction equipment. In 2008, Tata Motors purchased the British premium car
manufacturing firm Jaguar and Land Rover and the South Korean commercial motor vehicle
maker Tata Daewoo. Tata Motors formed a joint venture with Marcopolo S.A. (Tata Marcopolo),
in construction-equipment area it has formed a joint venture with Hitachi (Tata Hitachi
Construction Machinery), and in automotive manufacturing with Fiat Chrysler. The company
made its first commercial motor vehicle in 1954 in partnership with Daimler-Benz AG. Then,
Tata Motors entered the passenger vehicle segment in 1988 with the launch of the Tata Mobile.
In 1991, with the launch of the Tata Sierra, it became the first indigenous competitive automobile
maker. In 2004, the firm signed a joint venture with Daimler-Benz for making Mercedes Benz
passenger cars in India. In 2008 the firm brought out Tata Nano, the cheapest car (Sushil & Garg,
2019)

2. Company Overview

Industry Overview

External environment has many influences on Industry to run that effectively. It involves many
factors outside the organizations that can give opportunities or pressure to the Industry. The
overall success of any business organizations depends on its consciousness about its
surroundings, environment and flexibility to cope up with the changing environment. Industry
environment may be defined as combination of some factors that cannot be controlled in nature
and it affects on organizational decisions; these are economical, demographical, legal and
governmental, social and cultural and so on (All Answers Ltd, 2021).

Problem of Statement

The top five global procurement challenges are – visibility, cost containment, risk management,
increasing customer demands and globalization. The surge in demand has put sudden pressure on
the existing Indian auto and auto component manufacturers, with hardly any integration, to
quickly adopt global standards and practices and introduce or vitalize supply chain. Lack of
visibility at the customer end, packaging complexities due to language and cultural diversity,
quality challenges due to resource shortcomings, large number of fragmented suppliers which
impede effective collaborations, complex tariffs and duties, logistics and a multilevel distribution
system impacting price of products are some of the significant supply chain challenges. The
biggest challenge being integration of end-to-end supply chain followed by managing in-bound
logistics, product and part proliferation. The automotive industry is already facing challenges
such as intense competition, new entrants, quality concerns, supplier and market complexities,
along with the added pressure of attaining profits. Technology has also brought about an
increase in demand for next-gen mobility, electric and hybrid vehicles which is a major sign
that automotive manufacturers need to re-think their strategies and business
models(Bhattacharya, 2014).

Problem Statement

Chips Shortage

the
"chips shortage" trends appeared in the second half of 2020 actually started in the automobile industry.
Generally, hundreds of chips are required for producing one
car. Affected by both the COVID-19 and trade frictions, the industrial chain normality of the
long-term tight supply and demand balance between upstream chip suppliers and downstream car
manufacturers in the automotive industry has been broken. From the second half of 2020, many
automobile manufacturers have no choice but to close partial production lines affected by the chip
supply issues. (Wu, Zhang and Du, 2021)
Procurement strategies

The buyer–supplier relationship

The decision to outsource an item leads to one of two possible ends: either long-term collaborative
supplier relationships or competitive spot bidding (Van Tulder & Mol, 2002). Since the price reduction
pressure on suppliers is an important contributing factor for helping a buyer keep costs low (Henke,
Parameswaran, & Pisharodi, 2008) and partnerships with suppliers are resource intensive, a close
relationship with a supplier can be justified only when the costs of extended involvement are exceeded
by the relationship benefits (Daly & Nath, 2005; Gadde & Snehota, 2000). Actually, a buyer can only be
highly involved with a limited number of suppliers and needs a variety of relationships, each providing
different benefits (Gadde & Snehota, 2000). Despite declarations of friendship and faithfulness, the
fundamental rules of economics cannot be ignored or broken (Rese, 2006). Thus, the transactional
approach is more appropriate when the items being furnished are not critical (Svensson, 2004). This
combination of factors led to a situation that Kamp (2005) called the “instability of B2B relationships”,
which led the suppliers and the buyers to have a lack of confidence in the stability of their standing
business relationships. However, the author also recognizes that the instability of this network may
improve the network's overall competitiveness(Pereira et al., 2011)

Supplier Selection

‘supplier selection is purchasing‘s most important responsibility’.

The selections of suppliers are strategic decisions to be made by an organization with long-term or short term implications.
These decisions are highly complex and the most difficult responsibility of the organization and depends on a wide range of
criteria such as price, quality, reliability, service, track record, adequate financial resources and ability to comply with the
delivery requirements etc. How an organization weigh up the importance of these different criteria will be based on business‘
priorities, strategy and characteristic of organization (Sagar and Singh, 2012)

For Example Supplier selection for the Tata Nano was highly selective and resulted in a tier one supplier
network consisting of just one hundred suppliers. However, this enabled Tata Motors to allow single
sourcing of components which in turn helped to give the volume commitment that was needed for the
suppliers to move to facilities close to Singur. More importantly, the suppliers' roles in the design process
enabled the selection process to identify the suppliers with the capability to manufacture the required
demand for the Nano without compromising quality
Well renowned suppliers such as Bosch and Caparo were selected even though they were international
players. But by requiring a local presence, Tata Motors was able to reduce costs associated with
importing parts and transportation and reduced the woes associated with moving parts from ports to
the inland plants. The local presence made sure that the design focused on costs as usually global design
centers focus on costlier, sophisticated systems and employ personnel on higher pay scales. Further
more, the unique vendor initiatives such as 3P adopted for the supplier base and the suppliers'
willingness to relocate with Tata Motors to Singur is indicative of the fluid supplier-assembler
relationship that Tata Motors has with its suppliers. The Nano is still in its early stages of commercial
production; however, excerpts from the various strategies and the frameworks mentioned above can be
used to analyze how its supply chain is unique or similar to other automotive supply chains. This is
elaborated in the next section.( Palathinkal, 2008)

Tata Procurement process

Tools and Techniques

Tata Motors used the e-sourcing of Ariba Sourcing to manage the procurement of direct materials,
indirect goods, services and MRO. The e-sourcing Tata Motors started with direct materials as it
comprised three-quarters of the vehicle cost (Supply Chain Europe 2007). E-auctions create an
environment where suppliers bid against each other for a contract. This environment encourages
competition with the result that goods and services are offered at their current market value (CIPS). In
order to hold a successful e-auction event, the procurement must understand the supplier market,
identify potential suppliers, assess their capabilities and the total cost of doing business with suppliers,
present suppliers with a complete set of prints, specifications and requirements, and honestly
communicate the way in which competing suppliers will be judged and selected. Online auctions can be
efficient and bring cost saving if the process is executed properly. Hence, a critical component to a
successful auction is a dedicated buyer who is willing to allocate sufficient resources to design an
equitable and well-specified auction event. However, price is only one dimension in a buyer-supplier
relationship. There is a need to incorporate non-price attribute into the assessment of auction success
The advantages of e-sourcing by using the tools of e-bidding or e-tendering are summarised as follows:
1. Procurement professionals do not have to take the suppliers to visit the site. 2. It is sufficient to obtain
a blueprint with all technical specifications for various types of items, brands and models indicated as
per requirement, and forward to all qualified suppliers for quotation. 3. In the event, any supplier who
needs more information can indicate their requests in the bulletin board. The reply will be notified to all
invited suppliers. The case study also found that e-sourcing could reduce costs in the following ways: 1.
Reduce time in obtaining quotations. 2. Reduce manpower. 3. Create level playing field with proper
control. 4. Demonstrate fairness and transparency with audit trails. 5. Eliminate accusations or
allegations of unfair practice(Au Yong, 2019).

Procurement Policy of Tata motors

Tata Motors shall adopt a Holistic approach to the procurement process by:

1.Evaluating ‘environmental performance’ of Vendors, Contractors and Service Providers along with
quality and cost and giving priority to Vendors/Contractors and Service Providers and ‘green’ Products;

2.Involving Vendors , Contractors and Service Providers to improve their environmental performance by
establishing an Environment Management System.

3.Encouraging vendors,Contractors and Suppliers to minimize logistics and packaging material.(Tata

Motors ,2021)
Sushil, & Garg, S. (2019). Internationalization of Tata motors: Strategic analysis using flowing stream
strategy process. International Journal of Global Business and Competitiveness, 14(1), 54–70.