Tata Indica: The Making of the Small Car
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Case Details:
Case Code : OPER002
Case Length : 08 Pages
Period : 1990 - 2001
Organization : Telco
Pub Date : 2003
Teaching Note : Available
Countries : India
Industry : Automobile
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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The Outsourcing Strategy
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For Telco, outsourcing seemed to be one of the most difficult aspects of
producing the Indica. Unlike global automobile majors, Ford Motors or General
Motors, which had a global vendor-base that could be replicated on a smaller
scale in India, Telco had to create a vendor-base from scratch. Moreover, it did
not have the expertise either to design a car or to build an engine for it.
Against this background, Telco had to take its primary 'make-or-buy' decisions
for the key inputs-design, engine, and transmission. Telco decided to shop
globally for the best deals and use its own expertise to make whatever
modifications were needed (Refer Table III for the components outsourced by
Telco)...
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Vendor Development
Once Telco made its make-or-buy choices, the next step was to identify the
vendors. Most of the parts that went into making Telco were sourced locally.
Except for some sheet metal parts, cylindrical gaskets, and belts--which
accounted for 2% of the component value, the Indica was totally indigenous.
K. Mahesh, CEO, Sundaram Brake Linings, said, "Localisation of components is
the most important challenge a new manufacturer faces. It is a
time-consuming and painstaking process."...
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Supply Chain
To keep its transaction costs low, Telco configured its supply chain on
a just-in-time basis. All high-value components were delivered daily,
and in the case of nearby suppliers, twice a day. Vendors who were
located far away from Pune set up local warehouses near the plant. The
rationale for the relocation: transportation costs alone accounted for
45% of the total logistics costs for a company, delays in supplies added
to costs in terms of machine down-time at the plant.
Meanwhile, on the shop floor, where the assembly line was located, Telco
had done away with the traditional store function... |
Leveraging the Supply Chain
Indica marked the beginning of Telco's drive into India's auto market as an
integrator with a multi-product portfolio. Analysts felt that the competencies
that Telco had grown in the process of marketing Indica would be the core around
which it would build its future car business. Analysts also felt that Tata would
use the supply chain that fed the Indica to feed a whole range of Telco cars of
the future...
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