tatanano strategic cost management

8/11/2019 tatanano strategic cost management

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strategic cost management

By Mover Imtiazali (15) Finance

Priyanka Singh (16) Finance


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OVERVIEW

The mission began in 2003.The objective, to build acheap peoples car. To provide the 2 wheeler rider- asafer, cleaner, all weather and comfortable 4 wheeled

driving option.

The car that was unveiled in Jan 2008 was sleekand stylish, neither inferior in quality nor flimsy and metsafety and environmental standards. The world wassurprised.

How did the Tatas manage? The creation of Nano isone of innovation and ingenuity.

Here is how a dream was made into reality.


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Everyday we invite people to come andexamine the two Nano cars kept at our

Pune research centre, one a complete

prototype and the other a dissectedversion.

We ask them, "How can we make more

savings?

- Ravi Kant, MD, Tata Motors


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A BRIEF INTRODUCTION

Description Maruti 800 Tata Nano

Length 3335 mm 3100 mm

Breadth 1440 mm 1500 mm

Height 1500 mm 1600 mmWheelbase 2175 mm 2230 mm

Engine 796 cc,3 cylinder 624 cc, 2 cylinder

Mileage 15 km/hr 20 km/hr (to be

substantiated)

Weight 650 kg 600 kg

Past - Premier and AmbassadorPresent- Almost all global auto companies

With the launch of Nano the heat is on.


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BUSINESS PARTNERS

The role of the suppliers are as important as the oneplayed by the Nano team.

Initially the suppliers were skeptical. But the Tataspersisted.

They went back to the drawing boards and redesignedcomponents specially for the Nano. Rest is history.

Every partner has a story to tel l on their Nano endeavor.

GKN Driveline spent a year developing 32 variants tocreate the perfect driveshaft.

Rane group replaced the steel rod of the steering with atubea major cost saver.


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SIMPLE SIMON

Elimination of the unwanted & unnecessary.

Incorporating only the essential.

Reduction of technical complexities.

Only one wiper.

No left side mirror.

More plastics especially in the interiors.

Bulbs that meet regulations than long life.


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LOGISTICS AND SUPPLY CHAIN MANAGEMENT

I. Mother plant Manufacture the complete car.

Parts supply base, make CKD sets & send to 5 other

plants in different parts of India.

I. Centralization of purchase .

II. 97% parts locally sourced.

III. Only 20 companies to supply 70% of components.

IV. Volume commitments. 75% from single source.

V. Half the vendors will be located near the mother plant.


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NUMBERS GAME

Sky is not the LIMIT

To build an economy of scale

Rock bottom price.

Sleek and stylish with good looks Value for money

20% more legroom, headroom & sitting capacity than Maruti800, its nearest competitor.

Euro III compliant.

Full wrap frontal collision test as per US & Europeanstandards.

Suspensions and tires of good quality to take on the Indianroads.

A small trunk for a small car.


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TEAMWORK

Objective: To create a low cost car, complying with regulatoryrequirements and having enough power to accelerate and runthe car.

The team:An ambitious, talented and go getting team, led by a 32

year old, Girish Wagh. 500 engineers with an average age of 25-30 years.

A core team of 5 engineers- industrial design, transmission,

body, vehicle integration and safety regulation met daily at 3 pmto discuss the latest and chalk out a plan for the short term.

Many failures, but each time they got going again.

The goal was clear, do the impossible.


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LEADERSHIP

VISION- Break new ground, move away from being mundane andemerge a leader in its area.

IDENTIFICATION- A car for the burgeoning Indian middle classespecially from the 2 wheeler segment which should be

affordable.

MISSION- Gandhian principles of extreme frugality, economy ofscale , a will to challenge, working hand in hand with their

partners.

Even as the auto experts & companies doubted the 1 lakhcar, the Tata's worked silently and tirelessly having totalconviction in their goal.


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ON A THIN MARGIN

Tatas will barely make any profit in the initial stage. Afew experts also predict that they will loose money, as aone lakh car is not feasible.

But what they are heavily banking on are the highvolumes, 2.5 lakh in the initial year and scaling it up to 5lakh.

A low profit model is not a major concern. The concernis to meet the sales target and economy of scale.


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RESULTS MAY SPEAK----

They came, they saw and they _____?

Is it Conquered?

----And there are more questions which need to be answered.

Is it really a one lakh rupees car ?

Can they sell it at one lakh rupees & for how long?

Does the car have technical strength to last on the tough Indianroads?

One thing is for certain, the Tata's have succeeded in makinga low cost car with their ingenuity and innovation.

As for the other uestions onl time will tell.


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REFERENCES

1.AnalysisTatas cost reduction techniques in one lakh rupee Nanowww.techon.nikkeibp.co.jp/english/NEWS_EN/20080129/146543

2.BI costthe Tata Nano way, Shailesh Kosambiawww.dmreview.com/bnews/10001090-1.html

3.Lessons to learn from Tatas Nano, Business Week online -25/3/08www.search.rediff.com/money/2008/mar/25nano.html

4.Tata Nano-innovation around costLoiswww.grabbinglightning.com/tata-nano-innovation-around-cost/

5.Tata Nanothe secrets of the $2500 car feb 2008; Nick Kur czewski

www.autoobserver.com/2008/02/tata-nano-the-secretsof-the-2500-car.html

6. The story behind Tata Nano; Manjeet Kr iplani , Business Week online

www.rediff.com/money/2008/may/14tata.html

7. Not so nano - the tata nano (the 1-lakh car)www.carwale.com/research/preview/tatanano/?_kk=nano%20car& _kt=194c

a159-4e4d-4b51-a8b3-873fbe37697& gclid=cmtnjusel5ycfqe_egod6uvs6a

8. Europeans win big with Tata Nano, Automotive news Europe, 15/3/08

www.tatanano.inservices.tatamotors.com/tatamotors/index.php?option=com_content& task=view& id235& itemid=208

9.www.tatanano.com
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tatanano strategic cost management