Tata Indica - The Making Of The Small Car
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VENDOR DEVELOPMENT
Once Telco made its make-or-buy choices, the next step was to identify
the vendors. Most of the parts that went into making Telco were sourced
locally. Except for some sheet metal parts, cylindrical gaskets, and
belts--which accounted for 2% of the component value, the Indica was totally
indigenous[1]. K. Mahesh, CEO, Sundaram Brake Linings, said, “Localisation of
components is the most important challenge a new manufacturer faces. It is a
time-consuming and painstaking process.”
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Telco employed a simple yardstick for selecting
suppliers: the ability to supply components at the negotiated quality,
cost, and quantities. In the first stage of selection, an initial
assessment team from Telco evaluated the supplier. This was followed by
self-evaluation of the supplier, based on a format provided by Telco.
Then there was a quality systems survey, carried out by a Telco quality
audit team.
This was followed by design validation. And then there was a
manufacturing validation to ensure that the supplier was following the
proper manufacturing processes. This was followed by the Production Part
Approval Process (PPAP), which certified the production quality. R.
Chakraborty (Chakraborty), senior deputy general manager, materials &
supplier quality improvement group, said, “When a vendor reached this
stage, our comfort level in dealing with him goes up considerably, with
regard to quality and his ability to supply material to us. |
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We feel that he has a proper production process in
place to ensure quality and timely supplies.” Only a handful of vendors
met Telco's stringent requirements. Telco set up Supplier Quality
Improvement Teams to improve the vendors'systems to ensure that they
produced defect-free parts.
It applied a 13-step Quality Improvement Programme, covering supplier
self-evaluation, thorough design-validation, and audit of supplier
quality. Another key to Telco's successful vendor-base was a modern
system of process management. Telco's target-costing was broken up into
vendor-wise cost targets, and the suppliers had to carry out their own
value-engineering exercises to lower cost and improve quality.
For example, India Pistons, which supplied the pistons and piston rings,
walked away with the Indica order because it benchmarked itself against
supplies to Maruti Udyog; whereas the other vendors benchmarked
themselves against pistons supplied to Telco's commercial vehicles.
India Pistons invested Rs 1.5 million in toolings, and Rs 25 million in
a separate line at its Maraimalai Nagar (Tamil Nadu) facility. N.
Venkatramani, CEO, India Pistons, commented, “TELCO is very particular
about logistics, that raw materials have a supply trace, be ready for
assembly, need no inspection. It is a demanding customer.”
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SUPPLY CHAIN
LEVERAGING THE SUPPLY CHAIN
QUESTIONS FOR DISCUSSION
[1] The
only other new small car that came close was Hyundai Motor India's Santro,
which had a 78% local content. Daewoo Motors'Matiz was just 35% local.
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