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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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

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)...

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

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."...

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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