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Welcome to

“Seminar on Material Cost Management”

Moving Closer to Supplier – Customer Location

2

Tata Motors –widest range of vehicles

3

• Total Vehicle Sales – 506,421 nos.

Commercial Veh - 265,373 nos. Passenger Veh - 207,512 nos

• 5 Manufacturing plants

Tata Motors – Key Numbers (FY 09)

Lucknow

Dharwad

Pune

Jamshedpur

Pant nagar

Existing

In progress

Proposed

Sanand

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Support for growth in Multiple Locations in India & Abroad,

Support Introduction of Record No. of Products & Variants,

Vendor park Concept at New Locations.

2005-2008

Global sourcing, Early Vendor Integration, Outsourcing, Focus on quality, Increasing Geographies for sales and manufacturing2002-2005

Era of consolidation driven by Vendor Base Rationalization, strengthening Quality Systems and reducing costsLate 1990s till 2002

Development of Aggregates/ Modules, Support Localization in new geographies identified, Commodity Org. Structure, Green Supply Chain

Future Outlook

Rapid growth of ancillary base driven by high growth rates1980s to early 90s

Early beginnings of Ancillary Development Activities1970s

Limited supplier capabilities, Era of vertical Integration1950s and 60s

TrendsPeriod

CVBU has pioneered the vendor development activity in the Indian Automotive Industry..

Vendor Management

�Global Sourcing/Joint Sourcing

�Early Vendor Involvement

�Strategic Outsourcing

�Vendor base rationalization

�Vendor capability up-gradation

(CII clusters)

�Category Management

�Long term relationship with vendors

� VA/VE Initiatives

�e-Procurement

Turnaround Consolidation Growth

Roadmap for deployment of Sourcing Initiatives in-line with CVBU strategy

�Vendor Quality

�Vendor Rating�ICR

�Vendor Satisfaction

�People Development

�World class products

�Non-vehicle business

�International business

�Globally benchmarked

processes

�Cost Reduction

Turnaround (00-01) Domestic Growth (04-05) International Growth (11-12)

�Strengthening the

Sales and service

Network

�Products appropriate

to market needs

CVBU strategy

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Direct Inputs (95% of spend)

•Raw Materials – Steel, Aluminium etc.

•Components and assemblies – Sheet metal, Forgings, Castings etc.

•Proprietary Auto Parts – Fuel Injection Eqpmt, turbochargers, Tyres,

Batteries etc.

•Consumables – Paints, Greases and Lubricants

•Standard Items – Fasteners etc.

Indirect Inputs

•Consumables – Tools, Cutting Oils, Stationary, Spares

•Machinery and equipment

CVBU purchases a variety of products and services..

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With Direct Material procurement alone of magnitude as below, CVBU has one of the largest

purchasing budgets in Indian Industry..

CVBU Direct Material Purchase

0

5000

10000

15000

20000

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

(Est.)

Year

Rs. Crores

With Material cost alone,

contributing 65% of CVBU costs,

vendor management assumes a

critical dimensions.

DM Purchase

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Others

14%

Proprietary

15%

Rubber & Plastics

16%Machining

16%

Sheet Metal

13%

Raw Material

3%

Casting Forging

16%

Fasteners

7%

Supplier Base CVBU

Supplier Base

Auto Materials

Buying overview - Zone wise

Maharashtra

53%

Chattisgarh

0%

Bihar

2%

Goa

1%Delhi

1%Andra Pradesh

3% Gujarat

0%

Gujrat

3%

Hariyana

5%

Imports

1%

Himachal Pradesh

0%

Jharakhand

7%

Madhya Pradesh

3%

West Bengal

0%

Uttar Pradesh

1%

South

18%

Punjab

1%

Rajastan

2%

Orisa

0%

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2000 2001-02 2003-04 2006-07

Kolhapur Chennai

BanglorePune Mumbai

50+

202933Suppliers

3-42-33-412No. of

Milk

Runs

Logistic contract 3 PLHired Vehicles

Milk Route

UnderImplementation.

Implemented

Chennai 17 Suppliers

B’lore 8 Suppliers

Evolution of Logistics Initiatives at TML

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For Cockpit

•Part design and integration

•Air Flow Management

•GD & T Studies

•CAD modeling and CAE Simulations

•Complete integration of all dashboard components

For Seating•Styling•Part design •CAD modeling and CAE Simulations

For Cooling Module

• System design, and CAE Simulations•Integration of Radiator, Condenser and Fan modules

Value Added ProcurementFunctions are now available as Systems and modules and not just parts, with

styling, designing and engineering done by the suppliers. For Automakers, it is

a big saving on reduced transactions with simplified responsibility allocations

and for suppliers, it is a bigger business of full systems against parts.

12Strategic Sourcing

Procurement as Higher Level Assemblies – some

examplesEarlier Now

Dashboard

Cross Car Beam

Airbags

Hood

Cluster Cover

Facia Centre Cluster

Glove box

Lower CoverNacelle

Received Drier

Fan Motor

Fan

Radiator

Condenser

One part –One supplier

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Higher Level Procurement Examples – Corner Module

Strut

Knuckle Brake Disc

Sub Frame

Hub

Corner Module

Existing IndicaNew Indica –

Design

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Outsourcing

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Critical Components to be Offloaded

Fully Assembled for specific models. ( 207 / 407 )Rear Axles13

Outsourcing of subassembliesCabs and Cowls14

Ready for fitmentPropeller Shaft12

Fully AssembledFrame11

Fully finished Out Sourcing, Assembly - In houseGear box Housing2

Pressed and Sub assembledPressings ( Except skin panels )10

Fully MachinedFront Axle beams9

Fully finishedStub Axle8

Fully finishedConnecting Rods7

Fully finishedCamshaft6

Fully finishedCrankshaft5

Roughing - O/S , Finishing - I/HCylinder Block4

Roughing - O/S ,Valve Seat, Valve Guide fitment &

finishing - I/HCylinder Head3

Fully finished - Out SourcingGears, Shafts1

Condition of supplyComponentSr.

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Modules/ Subassemblies to be Outsourced--

Radiator, Condenser, Fans, Shroud, Wiring HarnessCooling Module4

Assembled, Inflated,Balanced Tyre Wheel assembliesTyre Wheel Assembly5

Assy of Front Brake caliper, steering Arm, Stub Axle etcCorner Module4

Piston, Pin, Circlips, Con Rod, Cap, Bolts, Rings duly graded Piston Con Rod Assy1

Assembly Dash with Cross bar beam, Instrument Cluster,

Shroud,Clock, Aux Switches etcCockpit3

Semi-trailing Arm subassembly Rear Suspension Indica2

Door Assembly CompleteDoor Assembly1

TCF Line 53 Modules /

subassemblies like

Condition of supplyComponentSr.

No.

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Cockpit

Lighting Suspension

System

Climate Control

Power Steering

Seating

System

Sealing System

Door Module

Occupant

Restraint System

Cooling Module

Driver Information

System

Transaxle

Electrical

Architecture

Interiors

Exteriors

Steel

NVH Solutions

Deployment of Early Vendor Integration - Examples

Engine Mounts

Braking and ABS

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Introduction of New concept

Vendor Park

Introduced first in Uttarakhand Plant at

Pantnagar

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Advantages of Vendor Park concept –

Project inception stage –

1. Rigorous monitoring of progress across all vendor base is possible,

enabling better adherence to meet SOP.

2. Common facilities and resources are employed.

3. Collaborative approach towards all Infrastructure development with local

government.

Post Productionisation

1. Inventory control optimisation

2. Quick flow of communication , avoidance of Whip effect

3. Complete alignment to OE plant in terms of capacity / capability ramp up.

4. Bare minimum material movement reducing logistic costs.

5. Extensive use of common services like surface treatment , steel service

providers

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De-risking of Supply Chain Management

• Identification of Supply Chain Risks

• Evaluation of Impact and likelihood

• Identify “A” category risk area

• Workout plan to reduce likelihood

• Monitor Progressively

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Thank you