Engaging Suppliers

to ensure Manufacturing

competitiveness

V Kovaichelvan

Sr Vice President – HRD & TQC

TVS Motor Company, Hosur - India

Slide no 2

INDIA – The present & future…

Third largest economy by 2050… …with the fastest growth rate

China US India Japan Brazil Russia UK Germany France Italy0

10,000

20,000

30,000

40,000

50,000

GDP (USD BN)

India China Brazil Russia US UK France Germany Italy Japan0%

2%

4%

6%

8%

10%

Projected GDPGrowth Rate

Source: Goldman Sachs BRIC Report, Merrill Lynch

Indian economy is growing at an average rate of 8%, for the past 3 years and it is likely to continue….

Source: CMIE

Slide no 3

Highest proportion of population below 35 years (70%)

>6035-5915-340-14

India

China

USA

EU

0 25 50 75 100

% of Population (2005)

Source: ICICI Venture Fund

The world’s youngest population is in India.. The world’s youngest population is in India..

Slide no 4

130 m plus people will get added to working population by 2009!

The youth work, earn &

spend at the same time

73

240

365

365

87

295

449

391

2003 2009E0

500

1,000

1,500

Population (Million)

0-1415-3435-59>60

working population

Source: ICICI Venture Fund

Slide no 5

Leading to demand for the products

New Demand Replacement Demand

Rising income levels

Increasing Youth

populationLack of adequate public

transport Favourable Demographics

Cheaper models –increased affordability falling interest rates

Customer has more choices – Shorter Replacement

Cycle

EXPO

RTS

Source: ENAM Estimates

Slide no 6

Largest three wheeler market in the world

2nd Largest two wheeler market in the world

4th Largest passenger car market in Asia

4th Largest tractor market in the world

5th Largest commercial vehicle market in theWorld

Indian auto Industry

Source: ACMA

Slide no 7

Pass. vehicle production (Nos in ‘000)

0

500

1,000

1,500

2,000

2,500

3,000

MUV 's 49 67 134 134 113 123 127 105 114 146 182 207 277

Pass Cars 264 348 407 401 390 574 513 564 608 842 1028 1575 2654

94~ 95

95~ 96

96~ 97

97~ 98

98~ 99

99~ 00

00~ 01

01~ 02

02~ 03

03~ 04

04~ 05

09~ 10

14~ 15

Projected CAGR• MUV’s = 6%• Pass Cars = 11%

Source: McKinsey Report

Slide no 8

Auto-component production (in $ Mn.)

Projected CAGR 16.5%

Source: McKinsey Report

Export of auto-components growing @ 34%

Slide no 9

The Environment

• Hyper-competition in every sector– Automobiles, Airlines, Telecom, Consumer durables, Garments,

Media, IT

• Globalization– Indian multinational emerging through M&A or organic growth– Most global players operating from India– Global sourcing from India both by OEMs and tier-1 suppliers– MNCs setting up R&D centres in India

• Shortened business cycles– Only top players survive in every sector– Scale not only in India but in global level necessary for survival

Slide no 10Source : ACMA

OEMs sourcing from India

Slide no 11

Tier 1 suppliers souring from India

Source : ACMA

Slide no 12

Automotive design centres in India• MNCs setting up Global automotive research Centers .

• Base for design Prototyping, testing and validation

• Excellent skills for IT and automotive engg

Slide no 13

• Sudden spurt in demand for talent • Education system is ill-equipped- both in number and skills• Gap in employable graduates • Industry need to create a foundation before deployment • Shortage of talent leads to high attrition

Talent crunch

Slide no 14

The TVS group…

35 companies, US $ 3.3 bn revenue, 30,000 + employees

Strong foundation for org culture - customer focus, employee

engagement, process orientation

Slide no 15

Two parts of my presentation

One from a OEM perspective i.e TVS Motor company

Other from supplier perspective i.e Sundaram Clayton

Slide no 16 Source: SIAM

Two wheeler industry

360420

469

548

631

706

0

200

400

600

800

01-02 '02-03 03-04 '04-05 '05-06 '06-07

Motorcycles Ungeared scooters Mopeds Geared Scooters

Monthly Average Sales (‘000 Nos)

2W industry growing at a CAGR of 14 %

Slide no 17

Issues with suppliers• Surprises in delivery and quality • Inability to achieve expected cost reduction • Delays in development of new product • Ability to achieve target cost and quality right first time for

new products• Inability to contribute upstream during design stage

Slide no 18

Issues with OEMs• Instability in volumes; inability to forecast• Failure of new products • Inconsistent supplier policy on selection or share

of business; Lack of long term strategic relationship with suppliers

• Inadequate investment to improve suppliers

Slide no 19

Supplier development • Supplier development task force • Improve quality capability

• Quality levels less than 100ppm• Implement and sustain a robust QMS • Improve the skills of workmen and engineers to sustain Q

• Need to move to self-certification• Improve QC methodologies• Improve and sustain process capability • Implement calibration of gauges, tools and fixtures

• Improve product development capability• Improve competency of engineers who participate on

concurrent development with OEM• Implement more robust APQP and PPAP and adhere

Slide no 20

Supplier development • Improve cost capability

– Improve ability identify waste and eliminate them– Improve ability to do VA/VE on their products or with OEMs– Ability to achieve target cost for new products– Create a culture of continual improvement involving all employees

• Improve risk management capability– Ability to assess risk and actions to de-risk– Ability to manage information relating to vital business

performance real time– Set up IT system to aid timely decision making