Supply Chain

Management
Linking Ideation to Profitability
SCM
“The process of planning, implementing & controlling
the efficient, cost effective flow & storage of raw
materials, finished goods & related information from
te point of origin to the point of consumption for the
purpose of conforming to customer requirements.”
A new business model, not just a business function
Minimizes system-wide costs
Balances high customer service and low costs
How SCM leads to profitability ?
Increase in sales achieved through:
Sales Time to market faster
· Better quality
· Innovation and design
· Improved customer service
· Customer fulfilment flexibility
· Responsiveness – shorter cycles and lead times

Lower total costs achieved through:

Acquisition cost reductions
· Process cost reductions
· Better asset utilization
· Lowering cycle time costs
· Lowering quality costs
· Lowering conversion costs
Cost
· Removing non-value-added costs
· Lowering supply chain costs
Correlation between Companies‘ Financial
success and their supply chains
Critical drivers of shareholder value
1. Classification of Companies as regards Supply Chain
Performance/Financial Performance
2. Relationship between Supply Chain Performance
and Financial Performance
SCM in Tata Nano:
Linking Ideation to Profitability
Ideation
Linking ideation to profitability
Idea of Producing a Rs. 1 lakh Car

Required most Efficient & Effective SCM

In order to make the Project Profitable

How could Tata Motors make a car so inexpensively?
No Radio, Power windows, air conditioning, anti lock brakes, air bags,
remote locks or power steering.

Rear wheel drive: manually actuated 4-speed trans axle that gives the car
better fuel efficiency

Wheel Bearing: Wheel bearing is strong enough to drive the car at

72kmph but would quickly wear out at higher speeds.

Analogue speedometer, odometer and fuel gauge.

Single windscreen wiper

Drivers of Supply Chain
Facility Location
Transportation
Sourcing & Vendor Mgt.
Inventory
Information
Pricing
Logistics
Facility Location
• Multi – modal connectivity
Infrastructure and
Connectivity
• Rajkot
Supplier proximity and • Land for supplier parks
convenience
• Industrial and Labor environment.
Business Environment • Ahmadabad

• Gujarat Industrial Development Corporation (GIDC)

Government Regulation • Land
and Support
• Gujarat Agriculture University (GAU)
Land

• Delhi-Mumbai Industrial Corridor (DMIC)

Future Prospects • Special Investment Region (SIR)
Transportation
• Increased modularity • Truck optimization
• Local 3PL leveraged softwares
• Lead Time Map

network
ion
Open transportat
Distribution
Optimal

Model
Assembly Shorter
Distributed Lead TImes

• Most of the suppliers are located • 97% local vendors

across India. • Almost half located in
• JIT and JIS requirements Vendor Park
Sourcing & Vendor Management
97% parts sourced from local
suppliers.

Innovation in mfg. processes

done locally to avoid extra costs

Long term volume contracts

rather than annual contracts

75% single source components

Sourcing & Vendor Management
car parts from vendors who did their own R&D for
them to reduce cost
helped vendors find international partners to make
products that met the company's requirements
Customers outsource their work to IT vendors who
does BI work at offshore at lower cost
NANO – IT strategy
Tata Motors investment in IT for efficient supply chain
Implementation of SAP 3.1 and 4.6c (Asia’s largest
implementation)
NANO – IT strategy
SRM platform used for sustainable savings and value
generation
Benefits
Reduction in procurement cycle time
Improve process by e-procurement
Real time supplier integration with business
Knowledge sharing
NANO – IT strategy
SAP WM with mobile data entry is combined with RF
Technology (barcodes) to automate warehouse
operations
Benefits
Improved throughput at warehouses by RF enabled
processes
Capability enhancement to handle more parts and team
size
Real time inventory tracking
NANO – IT strategy
Knowledge based engineering in CAD/CAM with help of
KNEXT – in house software
Benefits of KBE
30% reduction in cycle time
Designer’s knowledge and company’s best practices
retained
 Pricing
NANO supply chain strategy
 Pricing:
Cost of the supply chain
Conventional Strategy
Calculate Production
costs + Margin = Price

Tat
a
Na
no’
s
str
ate
gy
Set
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=>
Wo
rk
bac
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ard
s&
Ch
alle
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ppl
iers
to
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er
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ts
 Pricing:
Cost of the supply chain
70% of the cost of the supply chain
is fixed at the design stage

Upstream Supply chain time

Lead Time map
Downstream: Functional Collaboration
with Suppliers at an early stage
Bosch & Delphi – low cost components
Scm tata
Tata refined the manufacturing process
emphasized innovation
sought new design approaches from suppliers
How could Tata Motors make a car so inexpensively?
No Radio, Power windows, air conditioning, anti lock brakes, air bags,
remote locks or power steering.

Rear wheel drive: manually actuated 4-speed trans axle that gives the car
better fuel efficiency

Wheel Bearing: Wheel bearing is strong enough to drive the car at

72kmph but would quickly wear out at higher speeds.

Analogue speedometer, odometer and fuel gauge.

Single windscreen wiper

Why a new Plant ?
Volume Requirement

Strategic decision:

Nearness to raw materials

Connectivity

Proximity to ancillary units

Why West Bengal?
Nearness to source
of raw material
Availability of
required Size/Area of
land
Government
Subsidies
Connectivity via
Road, Sea
Cheap labour.
Vendor Management Policy
company helped vendors find international partners
to make products
competitive buying of material
IT vendors perform Business Intelligence at a lower
cost
Sustaining the political controversies
Design Goals
Tata refined the manufacturing process, emphasized
innovation and sought new design approaches from
suppliers.

Car has a “modular design”

As much a “distribution revolution” as it is a “product

revolution”
'Open distribution' innovation:

increased modularity (both in products and processes)

aggressive leveraging of existing third-party, often
noncommercial, institutions in rural areas to more
effectively reach target customers
creative use of information technology, carefully
integrated with social institutions, to encourage use and
deliver even greater value.
Modular designs combined with creative leverage of
local third-party institutions help participants to get
better faster.
Nearness to source of raw material
Singur close to Tata’s
traditional base and
nursery for new
enterprises, the Tata’s
network of iron and
steel industries in the
region of Jamshedpur,
in Jharkhand.
Singur - Jamshedpur
280 Kms. (approx)
Government subsidies
100% exemption from Excise Duty for 10 years
100% exemption from Corporate Income Tax
for first 5 years and 30%
exemption for next 5 years
650 acres of land on lease for 90 years @
Rs.8,000 per year per acre for first 45 years,
Rs.16,000 per year per acre thereafter
Power Subsidy
Availability of required Size/Area of
land
997 acres of land assured by West Bengal
Government
645.67 acres of land for mother plant
Plans to have ancillary units in the same area
Schools, hospitals, training facilities etc also to be
built
Connectivity
Connected by NH-2 New Delhi Kolkata National
Highway

Connected to Gujarat, Maharashtra,

Chhattisgarh, Orissa and Jharkhand by NH-6

Haldia Port for overseas exports

Cheap Labour
47.3% Unemployment prevailing in state

17.9% employed work for less than Rs.1000/month

Poor working conditions

Engineering the Nano
Wheel Mounting
Bulb
Wiper
Bumper
Central Locking System
Air Conditioner
Power Windows
TATA NANO
Idea generation
Target Pricing
So cost prevention n cost reduction 2 b resorted to
Idea  SCM  Profitability
How?
Materials used
Transportation n material handling minimized
Ancilliary industry set up in singur