SIMS

WORLD CLASS MANUFACTURING ASSIGNMENT-1

INDIA-GLOBAL SMALL CAR HUB
SUBMITTED TO Prof. Mr. Hemant S Pundle

G U Naveen DIVISION - F ROLL NO. - 09 BATCH 2011-2013

1) What advantages does India have to become Global small car hub? How does it compare with China?
Solution Indian is always been the home for small car which is demonstrated by success of M800. The following main advantages which India has to become Global small car hub. A. Demand: A Large Consumer Pool- Domestic Demand and Export Potential Domestic Demand On the basis of Purchasing Power Parity (PPP), India is currently worlds fourth largest economy, and will be the third largest economy by 2050. It joined the group of $1 trillion economies in 200739 and has since been posting a healthy GDP growth rate of above 8% per annum and is expected to continue in the following decades. Due to this growth potential; which offers tremendous opportunities, the global automakers have been showing keen interest to invest in India. It is estimated that the Indian automobile industry would grow to $40 billion by 2015 from $7 billion in 2008. Example Maruti Suzuki (Invest $3 billion for 250,000 cars per annum); Hyundai (New plant at cost of INR 4,000 crore), Nissan, TATA Motors (New plant at coast of$240 million); Toyota( Invested INR 3200 crore) general Motors, Nissan- Renault, Volkswagen, Honda and Ford. Rising middle-class aspirations and sustained increases in disposable income characterise the longterm India growth story. The need for low-cost regular mobility, along with growing aspirations, has opened up significant opportunities in the small car space. Assume that no household owns more than one car. The remaining 23.4 million households that do not own a car currently, but have rising disposable incomes and aspirations, reflect a significant opportunity for the small car segment in the country. Export Potential Globally, the industry is witnessing a shift in demand for fuel-efficient products. Concerns around environment protection and climate change are gaining momentum and have started to alter the demand pattern, at least in mature markets. This, accompanied with fluctuating gasoline prices, is causing a shift of preference toward smaller and fuel-efficient modes of transport. B. Supply: A Low-Cost Manufacturing Base Innovation: In India, low wages for qualified engineers ($3 per hour, compared with $48 in Western Europe and $36 in Japan and Korea) make the country attractive as an offshoring destination for R&D Supply base development: India is most likely to become a significant base for component exports. Indias sheer size and its large market provide distinctive advantages to companieschoosing it as a global supply base Assembly: The labor-cost advantage for India will be significant for years to come. Manufacturing companies in India pay as little as $1 or $2 per hour in wages, versus $37 in Western Europe, $26 in North America, and $19 in Japan and Korea Distribution: Given the population of India across urban, suburban, and rural areas, the carmakers need to improve their distribution networks and strategies. A manufacturer can reduce the shipping cost by shipping the parts and assembling at regional centers, instead of assembling at factory

 Sales and marketing: Carmakers in India must develop new marketing techniques to sell low-cost car models to the vast rural and urban population. Competing with China - Among the BRIC countries, China is the one country that India is most often compared with. The median age in India is 24 years as compared to 37 years in China. Low-cost skilled workforce is available in abundance in India. When compared to the China, Indias main competitor; the cost of quality work force in India is much lower. Although India scores less China on various parameters, there is a clear difference of scale. China's GDP is three times that of India. China is also active in foreign markets, investing three times more than India in such markets. Foreign Direct Investment (FDI) in China is 10 times that of FDI in India. In 2009, the Chinese auto industry produced 13.8 million units (cars and commercial vehicles) as against 2.6 million units produced in India. As such, while India is considered China's closest competitor, it has a long way to go before it surpasses China.

2) What needs to be done by a). Government of India. b)The car manufacturers (OEMs).c). Indian auto components Industry. d). Education & training institutes to make India Global small car hub?
Solution Government of India 2011 union budget Government has not changed or hiked the excise duties, which comes as a relief to the auto sector. This means, while the excise duty on the small cars will remain at 10 per cent, large cars and SUVs will continue to attract 22 per cent of excise duty. What needs to be done Government should reduce it more so that it will be help full for the Indian sector to become a Global small car hub Government should develop a specialized institution in automotive sector for education, training and development, market analysis and formulation and dissemination of courses in automotive sector through ITIs and ATIs . Government should build strong Transportation and Infrastructure facility compare to international level which will attract more market and demand. Indian Government should entertain and welcome scrappage incentive programme like European governments The car manufacturers (OEMs) - The presence of automobile manufacturers in these clusters has resulted in the development of world-class automotive Original Equipment Manufacturers (OEMs) in respective regions. The export earnings from this automobile sector are 3.5 billion US $ out of which the share of auto component sector 1.8 billion US$. What needs to be done Indian OEMs need to increase the required capabilities in product design, manufacturing, quality and delivery to meet foreign manufacturing standards more deliberately and with best quality. Indian OEMs needs to implement advance technology and world class manufacturing system with cheap labour as an advantage to beat the competitors.

 Indian OEMs needs to focus on their competitiveness in manufacturing respective components like Break, Steering system, etc so that they could expand their market to globally by providing world class quality in less price. Indian OEMs needs to improve the quality as per the global quality benchmarks, all of them should emphasise on TQM and SIX Sigma methodology Education & training institutes - India provides the worlds largest pool of qualified engineers. What needs to be done Education pattern needs to be change so that the pool of specialized and industry specific trained manpower can be increased. National Level, Automotive Institute should be created to meet the requirement of education and training, market analysis and projections and for formulating and supervising the running of various courses in automotive sector through ITIs and ATIs.

3) Discuss role of innovation and R&D to make India Global small car hub? How prepared are we?
Solution - The launch of the Nano - Tata Motors Rs1 lakh car - has demonstrated to the world the capabilities of Indian engineers and the excellent combination of frugal engineering with world-class research and development (R&D). Post the launch of Nano, low cost, innovative design services and economies of scale have transformed the image of Indian automobile industry. Every global manufacturer has now set its eyes on the rapidly growing Indian automotive industry to capitalise on cost-competitiveness. The past six years saw some significant developments, including establishment of the National Automotive Testing and R&D Infrastructure Project (NATRiP), setting up of International Centre for Automotive Technology (ICAT), Automotive Mission plan (AMP) and National Skill Development Corporation. NATRIP was envisaged for setting up state of the art testing and homologation centres at Manesar in Haryana, Oragadam in Chennai and Pune. ICAT was set up with an objective of having our own world class proving ground with digital testing infrastructure. To focus on development of India as a manufacturing hub, AMP was drafted which also identified setting up of Automotive skill development corporation for developing skills in the sector. Indian companys start emphas ising on in R&D and Innovation for example Maruti Indias R&D capabilities have helped it redesign the ZEN without any external help. The same set of engineers was responsible for designing Swift and the SX4. Currently, Indias auto component industry has almost 21 Deming prize winners and additional 153 who have won the prestigious TPM Excellence award from the Japan Institute of Plant Maintenance. India has to dramatically scale up in terms of R&D and design capability. Suzukis has already made the first move by investing in R&D centre in India. For the initiated, one-fourth of Suzukis global R&D engineers are reportedly in India. Tata Motors Nano was the first to file for the patents on its innovation. Moreover, the court battle between TVS and Bajaj Auto brought to the fore that the twin-carburetor was another pioneering Indian innovation.

However, all these need to be scaled up significantly. Although, foreign players like Suzuki and Hyundai have been driving the growth prospects in India; however Indian players like Tata and Mahindra are also catching up (TATA introducing TATA pixel in Europe market and Mahindra introducing First Small Electric Car Mahindra Reva NXR). The decision of Tata to buy global brands like Jaguar has helped the company further expand the footprint in global markets and similarly Mahindra with collaboration of Renault is planning to launch RENAULT YENI.

4) Will Indian Automobile Industry become Global Small Car Hub? Give your views, sighting appropriate reasons
Solution- Emergence of India as a prime hub for automobiles and auto-component production has changed the scenario of automobile industry all over the world, though the Indian car industry is still in embryonic stage. There is no exaggeration to say that Indian auto markets have never been important to the global car makers. But because of emerging economy, global automobile companies re-formulate their strategies so as to get into the growing market, this is the reason why leading companies like General Motor, Toyota, Audi, BMW, Mercedes, Honda and Suzuki have decided to role out new, compact, and economical car concepts. India has become important to the whole world and this is becoming like an export hub for especially small cars and components globally. Never before Auto majors have launched cars specifically for Indian consumers but now they appear to be giving immense importance to Indian market. India has become a very large and stable market so every company wants to enter the Indian market. 2009 when the entire world was in paroxysm of recession, however Maruti Suzuki Ltd sold 1 lakh cars in a single month in Dec'09. The successful launch of Tata Nano has brought about a new revolution in the small car segment. Seeing the overwhelming response from consumers, many other players in the industry are engineering their plans to launch cars in the small & compact segment in the next few years. Some of them have come up with new line of small cars which are roving the Indian road. Indian automotive industry has reached another milestone when Ford India promulgated to establish low displacement engine manufacturing unit in order to meet exporting need. This low displacement engine hub would be generating 250,000 engines for supplying them to Ford's plants in South Africa, Australia, The Philippines, Vietnam and Malaysia and in some other countries in the Asia Pacific region as well. The Ford Chennai hub would also manufacture about 200,000 cars of different varieties to tap into the speedily growing Indian market for small and medium cars. After Nissan Motors, Mahindra & Mahindra has also set up future-ready manufacturing plant in Chakan, Maharashtra that will help the company to produce complete range of products under one roof. This plant is equipped with initial capacity of three lakh units annually, M&M will manufacture products ranging from the 0.75-tonne Maxximo to the 49-tonne Mahindra Navistar truck and its sports utility vehicle (SUV) range as well. A number of automotive plants have been set up in the South Indian City Chennai by the auto Czars like Nissan motors, Daimler, Ford, BMW, Hyundai and Mitsubishi that has marked a beginning of a new epoch in automotive sector in India. Chennai appears to be a royal house for the seven out of the top 20 auto majors which are operating in the city. But the problem is that the city is still devoid of Vehicle testing facilities. But

this hurdle seems to be resolved, because the government has devised a project called NATRIP "National Automotive Testing Research & Development Infrastructure Project" that is a stepping stone to the automotive sector for creating a state of the art Testing, Validation and R&D infrastructure in the country. Labour issue this is the major problem which can hampered the dream of India of become a global hub for small car. A resent strike in Maruthi Suzuki India, maneser plant is one of the examples of that. The risk of union-related labour problems is omnipresent in India, since many labour unions are affiliated with political parties. As a result, local politics frequently interferes with business operations. However government has to play a crucial role by investing more money and open up more opportunity to make dream comes true.

5) Which WCM practices have been adopted by Indian Auto Industry?

Solution The last few years have witnessed revolutionary changes in the management systems and Manufacturing innovations of the worldwide automotive industry. In this competitive environment Indian auto industry is also doing outstanding work especially in small car section, but to become global hub India has to go a long way. WHAT IS WORLD CLASS: According to Schonberger (1986) the WCM status can be achieved by any of the two parallel paths: The quality path, and the JIT production path. He argues that continual improvement in quality, reduced cost, lead-time, customer service and flexibility will lead to "world Class status". If A WCM effort fails to make it easier for marketing to sell the product, then something is wrong. According to Gunn (1987), World-Class manufacturing rests on three pillars: Computer-integrated manufacturing (CIM), total quality control (TQC) and just-in-time (JIT) production methods According to Maskell, World-Class manufacturing (WCM) generally includes the following: A new approach to product quality, Just in time (JIT) production techniques, Change in the way the workforce is managed and A flexible approach to customer requirements Indian auto industry are using almost all the world class manufacturing practices like JIT,Kaizan, kanban, Small lot size manufacturing, Statistical Process Control, Six Sigma & its Methodologies, Lean Manufacturing & Waste Elimination etc. But we arent able to implement these practices convincingly because we are using these practices for the last say 15 to 20 years where as foreign companies are using these practices for the last 50-60 years. To gain the benefits of WCM, Indian industries must be willing to modify their procedure and operation, training of employee to create favourable environment. So we still have to go a long way, to make India a small car hub we need to implement all the WCM practices convincingly to bring down the product cost, to reduce the scrap wastage, to make better, cheaper and greener small cars.