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Challenges for Precision auto component industry in India
and STRATEGIES to succeed.
Prepared By :- Suhas Gokhale
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Applicability and SCOPE :- This is Applicable for ALMOST ALL automotive
component manufacturing companies in India. There are few exceptions of the companies
which has absolute or virtual monopoly market.
This is MORE APPLICABLE and FOCUSSED on JV’s established in collaboration with renowned Indian partner.
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Vision Statement# To become WORLD CLASS Export Oriented
Unit with at least 80 % exports (as per Govt norms)
# ‘State of art’ technology products.# Explore /exploit (?) strategic advantage of
LCCS (low cost country sourcing) from India.# Look for only niche market in India.
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Goal and Objective
# Make ‘numbers’(separate sheet attached)# EOU status ASAP (?)# Technology upgradation and ‘ABSOLUTE
FOOL PROOFING’ of Processes.# Specialised and niche products.# Certifications ( OHSAS , ISO 14000, SA)
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Today’s SituationTier I companies in India has major challenges as :-
# Quality :- Biggest challenge… 1) Process Consistancy and reliability. 2)Quality of outsourced processes and input matl.
# PRODUCTIVITY:-Low (see Productivity strategy slide)
# COST :- OE’s pressurises beyond limits.
# DELIVERY :- Low reliability –several internal and external factors.
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Quality :- Inconsistant,unreliable Why ? Why ???? # PROCESS :- Processes NOT stable. Cp/Cpk at
BEST at 1. Even in Deming award companies the situation is not good.
Hence process should be made very Robust (example:MICO --- now Bosch).
Inadequate fool proofing :- Management has no FAITH on fool proofing, investment limitations.
PEOPLE :- a) Training, process knowledge, commitment, temperory workforce.
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HUMAN RESOURCE Strategy :-
1) Attract BEST knowledge and skill sets. 2) At least 50 % permanent manpower. 3) At all KEY operations and workstations :- Operating
Engineers. 4) Salary and wages :- Better than ‘market’. 5) Robust recruitment and scrutiny. 6) Welfare :- subsidised food, medical aids,transport. 7) Work environment:- light,air,pollution. 8) IM activities :- KAIZEN, Quality Circle, TPM, 5 S in phased
manner as per CII’s 18 month programme.
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PRODUCTIVITY Strategy :-
Implement MOST (Maynard Operations sequencing technique). It works well (Ex: Mahindra, Crompton)
Productivity Targets. Focus on LCA (Low cost automation) Material yield improvement (better blank
layouts) Employee involvement : kAIZEN, TPM
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Production Planning Strategy :-
1) Plan for 16 hrs production only (night shift standby)
2) Keep 10 to 20 % capacity for ‘Urgent and critical; orders.
3) Follow ‘Theory of Constraint’ practices like DBR 4) ‘Bottleneck’ to shift towards ‘market’ from ‘shop’ 5) Monitor ‘Thru-put’ time and work on it. 6) DO NOT WORK ON OPTIMUM USE OF ALL
RESOURCES. Focus only on Bottleneck- rest will fall in place.
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Cost Estimation and Costing Strategy
1) Scientific capturing of ALL cost elements and monitor them.
2) Establish a system (with help of professional Cost auditor/cost engineer) :- laborious work.. Examples ;- Parkhi.
3) Monitor Product groupwise P/L. 4) ‘Exit’ plan for ‘low contribution products’ 5) Work on material cost optimisation and it’s
monitoring.
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PRICING STRATEGY :- 1) SELECTIVE CUSTOMERS :- Only ‘Quality’ focussed. 2) Long terms and strategic partnering. 3) Niche products offering ; ‘value for money’ 4) Focus on Exports to US,Europe for auto and non-
auto applications which will give better contribution.
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MARKETING and SALES Strategy :-
1) Exports :- 80 % plus 2) Look for non automotive market for better
margins. 3) Look for ‘non conventional applications’ like
aeronautical, construction machinery etc. 4) Look for smaller volume –high value addition
products :- India will never be able to beat China if volumes are ‘millions and billions’. Similarly China will not touched orders in hundreds and thousands.
5) Value added assemblies :- Duly checked-tested-certified and therefore DOL.
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KEY ‘NUMBERS’ to monitor :- Sales growth :- 30 % plus (YOY) Exports :- 70 % + Input material cost :- 50 % of sales revenue Wages :- 3% of sales revenue Salary :- 3% of sales revenue Factory overheads :- 8% of sales revenue Fuel(electricity,LDO):- 3% 0f sales revenue Sales,marketing OH:- 2% of sales revenue Cost of finance :- 4 % of sales revenue Gross margin :- 27% of sales revenue
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Recommendation#PROCESS :- Make manufacuring process absolutely ‘STABLE and ROBUST’.
Challenge and magnitude :- World leaders in quality like TOYOTO and several others had announced ‘recalls’.
I have visited approx. 1000 manufacturing companies in India and abroad. Out of which very few has ROBUST and FOOL PROOF processes.
How !!!!
8) TRAINING :- Train key people at USA for substantial period. Let them ‘inculcate’ the organisational culture.
9) PEOPLE :- a) Recruit Diploma engineers as Trainee engineers and then ‘Operating Engineers’ at KEY operations.
10) b) Pay people better than ‘market’ to retain talent. Take ‘Best’ people only.11) INVOLVEMENT :- This team shall built a very robust process. (It may be noted that
it CAN happen only with herculean efforts and focus of management. ) thru team efforts and activities like KAIZEN.
12) INVESTMENT :- Yes. Essential. For making processes fool proof and reliable. With pay back period of say 10 years.
13) STATE OF ART TECHNOLOGY :- Impossible to ‘imitate’ and take us to ‘virtual monopoly’.
14) SOURCING :- Reliable, NOT driven by PRICE ( Example of :- VW, Benz in India)15) CULTURE :- Quality driven culture.
