CASE STUDY: INFORMATION SYSTEMS AT TATA MOTORS

Tata Motors is one of India’s largest automobile manufacturers. They make a range
of automobiles including commercial trucks, passenger cars, utility vehicles,
commercial passenger cars and defence vehicles. In the financial year 2008–2009,
they had consolidated revenues of Rs 709 billion (about USD 16 billion). The
company manufactures its automobiles in several plants located in Pune and five
other towns in India. It markets its products not only in India and the Indian
subcontinent, but also across the world in Europe, Africa, and North and South
America, and East Asia.
Tata Motors gained worldwide prominence when, in 2009, it launched the Tata
Nano, the lowest cost passenger car in the world. The firm had to face considerable
challenges in the launch of the Nano, as there was political opposition to the physical
site they had chosen. There was also a lot of media attention on the potential
success of the car. The Nano was launched on schedule and in accordance with the
planned cost targets. Tata Motors relies extensively on an infrastructure of advanced
information systems (IS) to run its business. This infrastructure consists of many
computers, a network connecting all the computers, and complex software that
stores and processes data. The IS act as a digital nervous system that transmits
information across the various offices and branches of the firm, connecting its
suppliers, shop-floor workers, managers, retailers and customers. It informs the
employees about the activities of the firm, keeps track of material used and needed,
accounts for money spent and money received, reports about customer purchases
and relays data about service needs to various parties.
The IS at Tata Motors enable managers to view their business and operations in a
comprehensive manner and to take decisions accordingly. This is made possible by
specific IS capabilities and functions.
Tata Motors has a large network of vendors and suppliers who supply the
components that are used to assemble the automobiles. Typically, the firm has over
2000 vendors at any time. These vendors receiving information about component
needs at the production facility have to be informed of specific deliveries, have to be
paid, and have to be informed about parts delivered, among other things. Vendors
too have to inform Tata Motors about their supply position, their deliveries, payments
received, balance due, etc. An IS at Tata Motors, referred to as the supply chain
management system, is used to both receive and send information to the vendors
and keep track of all these exchanges. This system is quite beneficial to Tata Motors
as it has increased efficiencies as compared to the manual method by which the
same tasks were performed earlier. For example, the time required to pay vendors
has reduced from 48 to 24 h with the help of the system. An example of a typical
transaction in the supply chain management system is outlined below.
Consider a situation in which Tata Motors has to manufacture about 100 passenger
cars of a particular model in a two-week period. For this it has to obtain a part, say
door handles, from a vendor. The steps required to complete this acquisition consist
of several transactions, each of which is a step in the total assembly process.
Broadly, these steps are:
1. The company informs its production schedule for the particular passenger car to
the supplier. This will be in the form of a production plan that states how many
parts will be required on any given day in a two-week period, the inventories that
have to be maintained and the deadlines by which the parts have to be received.
2. The supplier will use this information to evaluate their own inventory. If they
already have some parts that they can despatch, they will inform Tata Motors
accordingly. If they have to manufacture a part, which will require time, then they
may inform the client of their own schedule of manufacture so that Tata Motors is
aware of their schedules. The details entered by the supplier in the system will
automatically be reflected in Tata Motors’ internal reports.
3. The supplier despatches a truck with a portion of the required parts. The
information related to the time of despatch, the number of parts being sent, the
identity of the truck, and the details of the documents carried by the truck (such
as the shipping invoice) are entered into the system.
4. When the truck arrives at the Tata Motors plant, the supplies are checked and
this information is recorded in the system. The supplier is informed of the receipt
of goods.
5. The parts are moved to the shop floor and checked for quality. Once the quality
check is completed, the parts are stored in the inventory at Tata Motors and the
records are updated to show the new levels. The system also generates a
message for the accounting system to pay the vendor.
6. The payment system checks the amount of payment to be made and informs a
local bank to make the payment. This payment is done automatically and the
account of the vendor is credited with the amount. Manual checking is only done
if there is a surplus or deficit with the account of the vendor and an alteration in
the payment account is required.
The exchange of information between Tata Motors and one of its vendors
concerning parts supply is depicted in Fig. 1.1.
For Tata Motors the IS not only enables the flow of information between the firm and
its vendors, it also enables all the firm’s activities to flow smoothly. Information
required for the activities and about the activities is managed by the IS.
Tata Motors also uses an IS to manage its marketing channel. The firm has an
extensive network of over 2000 dealer partners in India and abroad, and in 2009 had
about 30,000 computers connected to their system. The dealers sell and service
Tata Motors automobiles. Dealers report about orders, sales, payments, deliveries,
service requests and other data about their business to Tata Motors through the IS.
Tata Motors has to inform dealers about delivery of vehicles, shipping notices,
amounts received and amounts billed through the system.
Information from the dealers about demand for products helps Tata Motors plan its
production schedule. The information systems give precise information about what
products are demanded, and where and when they have to be delivered. This
information helps the firm understand its market better, plan for advertising and
promotion campaigns, and see patterns of demand over the years. The system also
helps the firm design its cars as they are able to learn about customer preferences
for features, such as the seating styles preferred, engine capacities preferred,
colours preferred, etc. Tata Motors can use such information to design its cars
according to market needs and also design its promotion campaigns.