ASSIGNMENT OF OPERATION MANAGEMENT

TOPIC: New Product Development Process Of Tata Nano.

Submitted to: Dr. Sanjay Kumar S.

Submitted by: Vivek kumar 02516603911

University School of Management Studies

Guru Gobind Singh Indraprastha University

New Product Development And Nano Idea Generation And Nano

A dream is born Says, I observed families riding on two- wheelers -- the father driving the scooter, his young kid standing in front of him, his wife seated behind him holding a little baby. Add to that the slippery roads & Night time too. It is downright dangerous. It led me to wonder whether one could conceive of a safe, affordable, all-weather form of transport for such a family. So when Tata Motors needed someone to take charge of the company's most ambitious plan yet to build the world's cheapest car ever Ravi Kant, who by then had become the company's managing director, again turned to Wagh. Wagh remembers what he learned marketing the little truck. "People want to move from two-wheelers to four-wheelers," he says. "Today they can't afford it." More and more can, but Indian car buyers today represent a tiny slice of a potentially giant market India has just seven cars per 1,000 people. India's auto industry has grown an average of 12% for the past decade, but just 1.3 million passenger vehicles were sold in India in the fiscal year ending March 2006. That means a billion Indians buy about the same number of cars in a year as 300 million Americans buy in a month. If four wheels cost as little as two wheels, that could change fast. About 7 million scooters and motorcycles were sold in India last year, typically for prices between 30,000 rupees and 70,000 rupees, about $675 to $1,600. Tata is targeting a price of 100,000 rupees one lakh, in Indian terms of measurement or about $2,500 at current exchange rates, for its small car. That sounds impossibly cheap in the West but remains three times higher than India's annual per capita income. The average pay for factory workers at Tata Motors is just $5,500 a year.

Idea screening
The next step was the screening of idea. How is this dream possible? What should they make?

 A scooter with two extra wheels at the back for better stability?  An Auto-rickshaw with four wheels?  A three wheeled car like a closed auto- rickshaw??  A four wheeled car made of Engineering Plastics?  A Four wheeled rural car?  Rolled up Plastic curtains in place of windows?  Openings like Auto rickshaws from the side  A four wheeled open car with safety side bars?
But the market wanted a car and if they build a people s car it should be a car and not something that people would say, Ah! That s just a scooter with four wheels or an auto-rickshaw with four wheels & not really a Car. Trying to build a car cheap enough for motorcycle buyers seems to make sense now but seemed crazy several years ago when Rattan Tata, longtime chairman of Tata Motors and scion of the nation's giant Tata Group conglomerate, first mentioned his dream of building a one-lakh car in 2003. "They are still saying it can't be done," he says, insisting that it can and will. "Everybody is talking of small cars as $5,000 or $7,000. After we get done with it, there will hopefully be a new definition of low-cost."

Concept Testing And Developing

Before starting the project, Wagh did something no one at Tata Motors ever had: He talked to customers. The three-wheeler men inevitably insisted on a cheap, dependable truck that could go from village to market carrying, say, a ton of onions or potatoes, one night, as sunset approached, Wagh stuck with one rickshaw driver. He says, "I kept asking the question. Why? Why? Why do you want a fourwheeler?" Wagh remembered. Finally, he got the real answer. It turned out it wasn't really a problem of transportation of vegetables If I had a four-wheeler, I would have better marriage prospects in my village," the young man said. Drivers of three-wheelers are looked down upon in India. Wagh realized that four wheels had emotional, not just practical, appeal.

Thus the new product was now to be developed. But what type of product? The car to cost Rs. 1 lakh on road.  The car should be built on a different platform than conventional ones.  It must be meeting all the safety and regulatory requirements.  It has to be built on a scale which shall be more than double the earlier launches of similar products and the ramp up must be smooth.  The car has to be designed so that it can be exported to other countries as the domestic demand may not materialize as per projections.  The car must be a beacon for the Indian Automobile industry and prove to the world that we are capable to take any challenge and come out worthy winners.
That quest to build the world's cheapest car hasn't ended. The Nano should be available this fall, but the mission began back in 2003, when Rattan Tata, chairman of Tata Motors and the $50 billion Tata conglomerate, set a challenge to build a "people's car". Tata gave an engineering team, led by 32-yearold star engineer Garish Wagh, three requirements for the new vehicle: It should be low-cost, adhere to regulatory requirements, and achieve performance targets such as fuel efficiency and acceleration capacity. The design team initially came up with a vehicle which had bars instead of doors and plastic flaps to keep out the monsoon rains. It was closer to a quadricycle than a car, and the first prototype, even a bigger engine, which boosted the power by nearly 20 per cent, was still dismal. "It was an embarrassment," says Wagh. But failure didn t stop them they quickly realized it was necessary to bring everyone on board, "else it leads to last-minute heartache and delays". Every morning, he would spend an hour or two on the floor of the Pune factory, insisting that everyone involved designers, manufacturing teams, and vendor development people be there to accelerate decision-making and problem-solving. Over time, Wagh's team grew to comprise some 500 engineers, an impractically large group to gather on a daily basis. So instead, a core team of five engineers gathered every day at three pm to discuss the latest developments. Each engineer represented a different part of the car: engine and transmission, body, vehicle integration, safety and regulation, and industrial design.

The body had to be changed because Rattan Tata, over six feet tall himself, wanted it to be easy for tall people to get in and out of the car. "Imagine the plight of the body designer he went through hundreds of iterations, then at the last minute the car length was increased by 100 millimeters!" Wagh says. The attention to detail paid off: When the car rolled onto the dais at the Auto Show in New Delhi in January, and Rattan Tata stepped out of the driver's seat with ease, it made an immediate impact. What shook the automobile world most was the fact that the designers seem to have done the impossible: The sleek, sophisticated Nano doesn't look flimsy or inexpensive. If it had been an upgraded scooter on four wheels, Tata still would have been applauded for making a family of four safer on Indian roads. The Nano, however, affords both safety and status. "The innovation wasn't in technology; it was in a mindset change". Business Analysis Cost Since the car had to be built within a cost of Rs. 1 Lac, no conventional design would work as the costs shall be higher and so the entire car has to be redesigned. The design has to question the need of each and every component from the point of view of its necessity of existence and also the minimum requirements of its functionality. Value Engineering concepts have to be deployed to finalize the minimum requirements. Disruptive Technology: Is a Technology that brings radical change by introducing new ways of doing things usually at a Technology that is:

 Significantly cheaper than existing Technology.  Is much higher performing?  Has greater functionality and  Is more convenient to Use.  Brings to market a totally different Value proposition than the one available and can change the Paradigm about a product.

The Guiding factor was that the cost has to be minimized for each component yet maintaining its basic functionality. The Alternatives are:

 Reduce Consumption of Material being used.  Alternate Suppliers to get same material at fewer prices.  Use alternate materials.  Eliminate use of Material.  Eliminate a process Or a Combination of the above.
The design was outsourced to Italy's Institute of Development in Automotive Engineering, but Tata himself ordered changes along the way. Most recently he vetoed the design of the windshield wipers. His solution: a single wiper instead of two, giving the car a cleaner look. THE COST REDUCTION PARADIGM Value Engineering Alternatives: The target was very clearly defined that within the given cost structure of 1 Lac all the components have to be allocated a maximum price and the same had to be achieved using the available alternatives. The Guiding factor was that the tax structure, on materials and manufacturing, must support the final cost of Rs. 1 Lac. The Decisions were:

 Establish factory in a tax free zone.  Get the tax advantages on infrastructure development.  Get the suppliers to establish base near the factory.  Get special concessions from State Govt.  In short select a manufacturing location where all the advantages could be achieved.

In short select a manufacturing location where all the advantages could be achieved.

Total sales estimation Now the question was, how much to produce

 It was estimated that the demand for the peoples car shall be at least twice the demand for Maruti 800, the lowest end car. Initial projections were at about 500 K cars per year.  The basic reason was the conviction that the target price shall redefine the 4 - wheeler segment.  The price decision of Rs 1 lakh is definitely going to make a lot many people transit to 4wheeler fold and that shall explode the demand.  F only 10% customers of 9 Million two wheeler market transit to 4-wheelers it shall amount to 50% of the passenger car market share.  It was decided to set up plants with 5 lacs cars per annum capacity and ramp the same up in stages, in line with increase in market demand.
The initial response to the Nano has been overwhelming and the tiny, Noddy-land car is expected to help the company cross several milestones. With revenues at Rs 1,29,994 crore for the financial year 2006-7, and group companies enjoying a market capitalization of Rs 2,51,487 crore as on January 10, 2008, the Tata Group is on a strong footing, contributing more than 3 per cent to India's GDP. Nano, being the world's cheapest car, has made international players sit up in amazement and the company has received proposals from some African, Latin American and Southeast Asian countries to manufacture the car there.

Product Development

And finally the product was developed with the following features.  Engine Capacity Bosch 624 c.c. twin cylinder  Low capacity, Lighter, sufficient with better Power Rear Engine to reduce the transmission length using a balancer shaft.  4 Speed Manual Gear Box  All Aluminum Engine  Higher thermal conductivity than cast iron, Lighter and so better mileage  Engine Management System by Bosch  Superb control over emission and smooth acceleration.  Dimensions L: 3.1m, W: 1.5m, H: 1.6m  Less length but more inner cabin space due to height. Comfortable leg room.  Independent Front & Rear Suspension McPherson Strut in Front & Coil spring & trailing arm in rear.  Better ride than Maruti 800.  Single piece ribbed steel body with safety features such as crumple zones, intrusion resistant doors, seat belts, strong seats & anchorages.  Safety requirements are adequately met.  Single Wiper in place of two.  Cost effective yet functionality is met  Tube less Tires  Weight reduced by 2 Kg. Cost reductions 200 Rs. And in line with modern vehicles  Instrument console in the centre  Elegant to look at and can be used both in Left Hand & Right hand version.