Tata Motors - Nano by gauravjindal

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									      TATA MOTORS HAS UNVEILED THE WORLD'S
            CHEAPEST MOTOR NANO CAR




       The case discusses the making of Tata Nano, the world's cheapest car,
manufactured by India based Tata Motors. On March 30, 2009, Tata Nano was
launched with an ex-factory price tag of INR 100,000 (about US$ 2000). The case
explains   the   design     and     development    process   of   Tata   Nano.

The car was the result of a five year research and development project carried out by
Tata Nano development team. While developing the car, Tata Motors and its suppliers
constantly made efforts to reduce the costs while ensuring quality of each and every
component including engine, steering, wheels, tires, windshield washing system, gear
shifter etc.


THE MAKING OF TATA NANO
INTRODUCTION
      Tata Nano is a proposed city car — a small, affordable, rear-engined, four-
passenger car aimed primarily at the Indian market.
ABOUT PLANT
   Investment of 1500cr. rupees by Tatas.
   Shifting cost of the plant from singur is around 500 cr.
   Total area of plant is 1000acres out which 300 acres were alloted for
    assembling of various parts and rest 700 acres for manufacturing.
                         ALLIANCE BUSINESS SCHOOL


AIM OF MAKING


      The project to create the world's cheapest car inspired by the number of Indian
  families with two-wheeled rather than four-wheeled transport.


TECHNICAL SPECIFICATION AND FEATURES
Technical features of tatanano car are:
     First car in india with rear engine and rear wheel drive.
     Engine with 623cc
     A 33bhp car
     Having fuel efficiency 21.97km/ltr in city and 25.5km/ltr on highway.
     First car with 2 cylinder non opposed petrol engine.
     Acceleration: 0-70 km/h in 14 seconds.
     Maximum speed: 105 km/h.
     Trunk capacity: 15 L.
     Front brake: disc
     Rear brake: drum
  Supplier Relation E.Balasubramanian , head of sourcing for the project, was not a
popular man with vendors and there were problem in order to get vendors to pare
merging and persuade them to produce components at lower cost .
  The vendors had to invest in new processes and methods to reengineer their
products to specifications that were rigidly guided by cost , performance and regulatory
compliances.
  However A three-shift operation and consolidated purchasing with suppliers provided
them with lots of relief.


STRATEGIES APPLIED
       Tata divided the components into two types – proprietary designs and Tata
  Motors design. For proprietary design components Tata went with established
  suppliers such as Bosch which supplies the engine management system and has
  significantly contributed to the future diesel engine.
       For components and systems designed in-house, Tata Motors chose suppliers
  with strong process capabilities who could give valuable suggestions and improve
  on the designs. Nearly everything has been sourced locally and the Nano will have
  97% local content from day one. Tata’s suppliers were an integral part of not only
  the design and development process, but also purchasing.


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                                                      TATA NANO CAR           Page 2
                         ALLIANCE BUSINESS SCHOOL

SUPPLIERS TO TATA NANO
      Bosch 8. Freudenburg
      Caparo 9. GKN
      Continental 10. ItwDeltar
      Delphi 11. INA
      Denso 12. Johnson Controls
      Fag 13. Mahle
      Ficosa 14. Saint gobain and many more
        Where Bosch a German based automotive company it supplies gasoline
injection system, starter, alternator, brake system. Caparo vehicle technologies : a
Europe based company. It supplies inner structural panels. Continental motors: it is a
Europe based company. It supplies fuel level sensor, gasoline fuel supply system and
etc.


WHY TATA NANO IS SO CHEAP?


The below diagram is self-explanatory, where the following features have been modified
to reduce the cost:
       No air conditioning on standard model
       Windows wind by hand
       Manual steering no air bag
       624cc two cylinder engine in boot giving max speed of 70km/h
       Plastic and adhesive replaces welding
       Bodywork made of sheet-metal and plastic




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                                                    TATA NANO CAR           Page 3
                        ALLIANCE BUSINESS SCHOOL

  DISTRIBUTION STRATEGY


  Tata nano has applied the open distribution innovation which helped the company
to reach maximum to the customers. Following are the reson to apply the open
distribution strategy:
    To mobilize large no of third parties to reach remote rural consumers
    Tailor the products and service to more effectively serve their needs and add
     value to core product through ancillary service.
    To increase modularity
    Creative use of information technology



COMPETITORS:



        Rival    car    makers    including Bajaj Auto, Fiat, General      Motors, Ford
Motor, Hyundai and Toyota Motor have all expressed interest in building a small car that
is affordable to more middle-class consumers in emerging markets. The bulk of demand
there is for small cars because people are much more sensitive to fuel prices Honda
and Toyota are leading the way on so called cleaner gasoline-electric hybrids, and
some environmentalists argue getting prices down on these technologies is where
efforts should be concentrated. Inexpensive and eco-friendly electric-cars like Tara
Tiny, Oreva Super (both reportedly even cheaper than Tata Nano) and REVA pose
even more significant danger to Nano. There are also rumours of Maruti
Suzuki introducing a lower priced version of Alto to counter Tata Nano.




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                                                     TATA NANO CAR            Page 4
                         ALLIANCE BUSINESS SCHOOL

KEY FACTS EXTRACTED FROM THE CASE:

   Cost saving has been achieved in all departments i.e. design, development,
      purchasing, production, materials, logistics and sales.
   The design aimed at minimising the total number of components with a target of
      each component having a dual functionality.
   Components used in the car have been divided into proprietary and Tata Motors
      design. Tata went with ventures with many companies like bosch which supplies
      the engine parts. So by doing this TataNano has reduced its cost on
      manufacturing the car.
   Suppliers have good process capabilities and Tata motors have narrowed down
      suppliers to a total of 100 from 600.Suppliers are located locally and Tata motors
      maintain close relationship with the suppliers by involving them in design and
      development process.
   Tata Nano described as ―Gandhian engineering principles‖ where the air
      conditioning, power brakes, radios, etc.—are missing for entry level model to
      reduce the cost.
   Tata aims to set up plants in four locations in the country to save transportation
      costs.
   Nano’s modular design is constructed of components that can be built and
      shipped separately to be assembled in a variety of locations.
   Outsourcing taken up in a big way.
   Car promotes open distribution i.e. it mobilises large number of third parties to
      reach remote rural consumers, tailor products and services to more effectively
      serve their needs and add value to the core product through ancillary services.




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                                                     TATA NANO CAR            Page 5
                           ALLIANCE BUSINESS SCHOOL

                            QUESTIONS & ANSWERS

1. WHAT ARE THE TECHNICAL FEATURES OF THE TATA’S NANO CAR?

Ans. The technical features of the car includes following:

Engine:2 cylinder petrol with Bosch multi-point         fuel       injection(single injector)
all aluminium 33 horsepower.Value Motronic engine management platform from Bosch
2 valves per cylinder overhead camshaftPower: 35 PS (35 hp/26 kW) @ 5250 rpm.
Initially, the Nano team thought that they would outsource the engine. However, after
considering all the engines that could be suitable for Nano, they decided to create an
engine on their own. In the year 2005, they started working on the new engine...

Layout and Transmission: Rear wheel drive, 4-speed manual transmission

Steering: mechanical rack and pinion w/o servo, Turning radius: 4 metres, In the Nano,
the steel rod of the steering was replaced with a steel tube. This helped to reduce the
weight of the car. Rane Group, the supplier of these tubes, redesigned them to make
them of one piece instead of the usual two pieces.

Performance: Acceleration: 0-60 km/h (37 mph): 8 seconds. Maximum speed:
105 km/h (65 mph), Fuel efficiency (overall): 23.6 kilometres per litre.

Wheels and Tyres: The wheels for the Tata Nano were supplied by Wheels India,
promoted by the TVS Group. The company developed a lighter wheel as compared to
other cars.

Seating Systems and Interiors:The seating systems were supplied by Tata Johnson
Controls Automotive. The front seats of the Nano were based on a single support
structure as an alternative of 'individual rail'.

       In an effort to reduce costs, the Nano team laid emphasis on each specific
component of the car. For example, in order to reduce the weight of the car and save
costs, the Engine Induction System was made of plastic instead of aluminium.




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                                                       TATA NANO CAR              Page 6
                         ALLIANCE BUSINESS SCHOOL

2. HOW COULD TATA MOTORS MAKE A CAR SO INEXPENSIVELY?

Ans. Tata motors made a car so inexpensively because of the following reasons:

    The car is smaller in overall dimensions than the Maruti, but it offers about 20%
      more seating capacity as a result of design choices such as putting the wheels at
      the extreme edges of the car
    The Nano is also much lighter than comparable models as a result of efforts to
      reduce the amount of steel in the car including the use of an aluminium engine
      and the use of lightweight steel where possible
    Tata Nano described as ―Gandhian engineering principles‖ where the air
      conditioning, power brakes, radios, etc.—are missing for entry level model to
      reduce the cost.
    Nano’s modular design is constructed of components that can be built and
      shipped separately to be assembled in a variety of locations. Outsourcing taken
      up in a big way.
    No air conditioning on standard model

    Windows wind by hand

    Manual steering no air bag

    624cc two cylinder engine in boot giving max speed of 70km/h

    Plastic and adhesive replaces welding

    Bodywork made of sheet-metal and plastic




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                                                    TATA NANO CAR            Page 7
                         ALLIANCE BUSINESS SCHOOL

3. EXPLAIN THE TATA MOTORS VENDOR MANAGEMENT POLICY?

Ans.. Key features of the policy are:

    It locates the vendors locally by co-locating them with the plant so as to save on
      logistics cost.
    Tata Motors has defined criteria for choosing suppliers i.e. those who have high
      process capabilities.
    It involves suppliers in the design and development process of the car.
    It locates the vendors locally by co-locating them with the plant so as to save on
      logistics cost.
    Tata Motors aims to achieve a low vendor base as it considers it effective for
      attaining long term objective of cost reduction and quality improvement. Thus it
      reduced its network of 600 suppliers to 100.
    Tata believes in entering into long term contracts with the suppliers instead of
      annual contracts which again aims at low costs in the long run.
    Tata Motors not only works upon its own processes but even helps vendors
      innovate in their processes so to enhance their process capabilities.

   Thus vendor management policy adopted by Tata Motors in case of Nano by
   building strong relationships with the suppliers i.e. promoting SRM (Supplier
   Relationship Management) as Nano has about 90% of the total car being
   outsourced.




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                                                     TATA NANO CAR             Page 8
                         ALLIANCE BUSINESS SCHOOL



4. WHAT OTHER CAR MAKERS CAN LEARN FROM TATA MOTORS NANO
PROJECT?

Ans.Lot of innovation should learn by the car makers that have been done by tata
motors Nano. They are:

    The innovative cost saving in all departments ranging from design, development,
      purchasing, production, materials, logistics and sales.
    Find ways to help customers and others on the edge to tinker with your products.
      Modular and open product designs help engage large numbers of motivated
      users in tailoring and pushing the performance boundaries of your products,
      leading to significant insight into unmet customer needs and creative approaches
      to addressing those needs
    Pay attention to institutional innovation. Western executives often become too
      narrowly focused on product or process innovation. Far higher returns may come
      from investing in institutional innovation-redefining the roles and relationships
      that bring together independent entities to deliver more value to the market. Tata
      is innovating in all three dimensions simultaneously
    Rethink distribution models. In our relentless quest for operating efficiency, more
      standardization and fewer business partners in our efforts to reach customers. As
      customers gain more power, they will demand more tailoring and value-added
      service to meet their needs. Companies that innovate on this dimension are likely
      to be richly rewarded.
    Following are the open design architecture which allows much greater
      opportunity of developing a more tailored product for users.




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