strategic cost management

By Mover Imtiazali (15) Finance

Priyanka Singh (16) Finance


OVERVIEW
The mission began in 2003.The objective, to build a
cheap peoples car. To provide the 2 wheeler rider- a
safer, cleaner, all weather and comfortable 4 wheeled
driving option.

The car that was unveiled in Jan 2008 was sleek
and stylish, neither inferior in quality nor flimsy and met
safety and environmental standards. The world was
surprised.

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

Here is how a dream was made into reality.


Everyday we invite people to come and
examine the two Nano cars kept at our
Pune research centre, one a complete
prototype and the other a dissected
version.
We ask them, "How can we make more
savings?

- Ravi Kant, MD, Tata Motors

A BRIEF INTRODUCTION


Description
Maruti 800 Tata Nano
Length 3335 mm 3100 mm
Breadth 1440 mm 1500 mm
Height 1500 mm 1600 mm
Wheelbase 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 Ambassador
Present- Almost all global auto companies
With the launch of Nano the heat is on.
INNOVATION & COST EFFICIENCY
Innovation has been the hallmark in the quest for the
Nano. It has focused on creating cost effective solutions. A
new brand of innovation that makes more out of less.

34 patents have been filed.
Inexpensive solutions availing the existing infrastructure of
Tata motors.

Modular design: Components in kit forms that can be
easily shipped, assembled and serviced even by local
entrepreneurs.
Light weight welded steel platform. Minimum use of steel
to reduce weight.
Adoption of rear engine, rear wheel drive.
Elimination of propeller shaft.

BUSINESS PARTNERS
The role of the suppliers are as important as the one
played by the Nano team.
Initially the suppliers were skeptical. But the Tatas
persisted.
They went back to the drawing boards and redesigned
components specially for the Nano. Rest is history.

Every partner has a story to tell on their Nano endeavor.

GKN Driveline spent a year developing 32 variants to
create the perfect driveshaft.
Rane group replaced the steel rod of the steering with a
tube a major cost saver.
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.
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.

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 Maruti
800, its nearest competitor.
Euro III compliant.
Full wrap frontal collision test as per US & European
standards.
Suspensions and tires of good quality to take on the Indian
roads.
A small trunk for a small car.


TEAMWORK
Objective: To create a low cost car, complying with regulatory
requirements and having enough power to accelerate and run
the 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 pm
to 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.

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

IDENTIFICATION- A car for the burgeoning Indian middle class
especially from the 2 wheeler segment which should be
affordable.

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

Even as the auto experts & companies doubted the 1 lakh
car, the Tata's worked silently and tirelessly having total
conviction in their goal.
ON A THIN MARGIN
Tatas will barely make any profit in the initial stage. A
few experts also predict that they will loose money, as a
one lakh car is not feasible.

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

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

One thing is for certain, the Tata's have succeeded in making
a low cost car with their ingenuity and innovation.
As for the other questions only time will tell.
REFERENCES
1.Analysis Tatas cost reduction techniques in one lakh rupee Nano
www.techon.nikkeibp.co.jp/english/NEWS_EN/ 20080129/146543
2.BI cost the Tata Nano way, Shailesh Kosambia
www.dmreview.com/bnews/10001090-1.html
3.Lessons to learn from Tatas Nano, Business Week online -25/3/08
www.search.rediff.com/money/2008/mar/25nano.html
4.Tata Nano-innovation around cost Lois
www.grabbinglightning.com/tata-nano-innovation-around-cost/
5.Tata Nano the secrets of the $2500 car feb 2008; Nick Kurczewski
www.autoobserver.com/2008/02/tata-nano-the-secretsof-the-2500-car.html
6. The story behind Tata Nano; Manjeet Kriplani, 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