strive 5 - automobiles

Vol. 3, Issue 1, Oct. 2013

Theme: Automobiles

Emergence of Supply Chain & Operations in Indian Automotive Industry, Dr. Tapan Sahoo, VP, Maruti Suzuki

Supply Chain Performance Measurement System, Prof. Parikshit Charan, IIM Raipur

Interview with Mr. Sanjeev Khapre, VP, Exide Industries

Guru Mantra, Car Sharing

Operations and Supply Chain Club

IIM RAIPUR

INDIAN INSTITUTE OF MANAGEMENT RAIPUR

IIM Raipur

Guru Mantra – Car

Sharing

Summer Internship

Experience

Book Review – Lee

Iacocca

Debate – Two Wheeler or Four

Wheeler

Crossword

Regular

Features

Specials

The Scenario of Hybrid

Cars - Indian Context

Reverse Logistics in

Indian Automotive

Industry

The Ford’s T model on the cover page was the 1st affordable car introduced in America in 1908; it changed the way

Americans lived. It marked the beginning of an era which changed the way of personalized transportation. In similar lines

this edition on Automobiles takes its readers through breakthrough changes that are happening in the industry in the field of

technology, business practice, supply chain, operations and business model.

On the Cover Page

Emergence of Supply Chain & Operations in Indian

Automotive Industry - Dr. Tapan Sahoo (VP,

Maruti Suzuki)

Charging You Up

Interview with Mr. Sanjeev Khapre (EVP, Exide

Industries India Ltd.)

17

23

Supply Chain Performance Measurement System

(SCMPS) – The Supply Chain Excellence Way –

Prof. Parikshit Charan , IIM Raipur

01

Evolution of Supply

Chain in Automotive

Industry

Green Revolution Part

- III

Trends

Contents

39

43

07

13

27

31

49

53

57

STRIVE Vol. 3 Issue 1 | Oct 2013 |

From The Editors

The Indian Automotive Industry is in the middle

of a crisis. With car sales falling continuously

for 9 consecutive months, the automotive

industry is paralyzed and is already in a fix

about whether the bottom of the crisis has been

hit or is the scenario set to continue. A slight ray

of hope with the month of August 2013 as the

car industry has snapped the decline with a

growth in sales of 15% year on year, and the two

wheelers with 4% growth year on year. With the

short and medium term actions on restructuring

underway it is time for the managers to also

think about the long-term perspective to

compete in the industry. It is in such time of

crisis that most of the optimization happens in

the way of conducting business. More emphasis

is laid down to reduce the cost so as to increase

the bottom-line.

With the already existing question of whether

automotive market would return to its pre-crisis

state, it is time for the present day managers to

think about new business models that would

change the future of mobility solutions so as to

create a paradigm shift in the automotive

business world. In addition to this the

automotive industry also faces enormous

restrictions in the form of environmental laws

and regulations which has to be complied.

It is in this view that, OPEP, the Operations and

Supply chain club of IIM Raipur, has come up

with Strive – the bi annual e magazine to share

the current trends in the field of automobiles

from the industry and academia perspective

through this fifth edition.

The magazine has insights from Dr. Tapan

Sahoo, Vice President (Engineering, Research,

Design & Development) at Maruti Suzuki India

Limited, on the changes the industry has

undergone in the last decade in the domain of

both its operations and supply chain

management. Also, Mr. Sanjeev Khapre, Chief

Technology (Executive Vice President) with

M/S Exide Industries Limited, is sharing his

viewpoints on energy management and future of

automobile industry.

From the view point of academia, Prof. Dr.

Parikshit Charan, Chairperseon of Operations

and Systems area shares the importance of the

right performance metric systems in the supply

chain.

The students have also written articles on the

contemporary topics of ‘Hybrid Cars’, ‘Reverse

Logistics in Automotive Industry’. Also we have

specials on ‘Evolution of Supply Chain in

Automotive Industry’ and ‘Green Revolution –

III’.

‘Guru Mantra’ handles the new emerging

business model of Car Sharing as a mobility

solution. In ‘Book Review segment we have the

‘Auto Biography of Lee Iacocca’ reviewed. Two

of the students who had interned in the field of

Operations with automotive firms have shared

their experience of their projects.

We are thankful to Prof. B. S. Sahay, Director,

IIM Raipur for his motivation and support. We

also thank Prof. Parkshit Charan for guiding us

throughout. We also thank all our authors for

taking out time from their schedule and

contributing to the magazine. Our editorial

would be incomplete without acknowledging the

support of Subhash Kumar, Vanamamalai,

Thousif, Ankit Saxena and Neha Khapre in

bringing out this issue and the whole Team

OPEP for their commitment and dedication

towards the club activities.

Manoj H. & Ruchi Sao

Editors

Prof . B.S. Sahay


Director’s Message

I am happy to see Indian Institute of Management

Raipur grow from its modest beginning to its present

day. In this journey students have played a key role

through various clubs activities.

OPEP, the Operations and Supply Chain Club of the

Institute has worked hard to make their presence felt in

pan IIM operations arena. Our students have

successfully launched four issues of the biannual e-

Magazine ‘STRIVE’.

Since 2010, the Club is releasing its biannual E-

Magazine STRIVE with each edition focusing on one

specific field. The fifth edition of STRIVE is focusing

on Operations and Supply Chain in the automobile

sector. I hope that this magazine will give you a brief

insight into the current and future trends of automotive

industry in India.

I wish OPEP a great success in their endeavor and hope

that you enjoy reading this publication.

Prof. B.S. Sahay

Director

IIM Raipur

1

SUPPLY CHAIN PERFORMANCE MEASUREMENT SYSTEM

(SCPMS) –THE SUPPLY CHAIN EXCELLENCE WAY

Dr. Parikshit Charan has completed his graduation from Jain

Narain Vyas University in Industrial and Production Engineering

followed by Post-Graduation from Malaviya National Institute of

Technology in Manufacturing Systems and Engineering and his Ph.D

from Indian Institute of Technology Delhi in Supply Chain

Management. At present he is the chairperson of Operations and

Systems area at Indian Institute of Management Raipur.


2


Supply Chain Performance Measurement System (SCPMS)

–The Supply Chain Excellence Way

In today’s world, supply chain (SC) is

playing a strategic role in increasing

organizational effectiveness and

accomplishment of organizational goals

such as enhanced competitiveness, better

customer service and increased profitability.

There is an emerging requirement to focus

on the performance of the extended supply

chain or network in which company is a

partner. Firms have now realized the

potential of SC, but many of them still lack

in selecting the proper performance

measures for a fully integrated supply chain.

A key feature of present day business is the

idea that companies compete through their

supply chains (Christopher and Towill,

2001), and success or failure of supply

chains is ultimately determined in the

marketplace by the end consumer.

A good supply chain management (SCM)

program will bring about improved cross-

functional, inter-organizational process

planning and control, and enhanced supply

chain integration. Supply chain performance

measurement system can facilitate inter-

understanding and integration among the

supply chain members. It also provides

insight to reveal the effectiveness of

strategies and to identify potential

opportunities. It makes an indispensable

contribution to decision making in SCM,

particularly in re-designing business goals

and strategies, and re-engineering processes.

Saad and Patel (2006) observed that in

general the understanding of supply chain

and its implementation in Indian scenario is

not very good. Moreover, in most cases

efforts to measure performance were

confined to only organizational boundaries

rather the whole supply chain, though there

are using some kind of performance

measurement system to measure supply

chain performance. Some of the peculiarities

of Indian automobile sector are: large

number of auto assemblers, low

technological capability, poor quality, lack

of reliability in terms of delivery, large

number of players in automobile component

sectors, small capacity of auto ancillary

firms leading to shortages and lack of

availability of components, and lack of

partnership among partners in the supply

chain (Saad and Patel, 2006).

With the opening up of the Indian economy

due to liberalization, the Indian automobile

industry is flooded with automobile

manufacturers like General Motors Corp.,

Hyundai, Fiat, Honda, Toyota Motor Corp.,

Volkswagen AG, Daimler Chrysler etc.,

setting up manufacturing bases in India. On

the other hand, liberalization have fueled the

growth of Indian automobile industry along

with its supply chain partners, which

according to Automotive Mission Plan

(AMP) 2006-16 envisages an investment of

$ 40 billion. As projected in the document,

the turnover of the automobile industry

3

would increase to $145 billion by 2016 from

the current $35 billion, accounting for 10

percent of the GDP (Ministry of Heavy

Industries & Public Enterprises,

Government of India, 2007). But due to

recent economic crisis, automotive sector’s

contribution to GDP growth rate is 5%

(Shukla and Banerjie, 2009). Thus, the

competition among the firms is very intense,

prompting them to be innovative in order to

reduce costs, enhance quality, and improve

their performance and responsiveness to

customers’ demand. To achieve these goals,

existing firms as well as new entrants needs

to improve their supply chains performance.

Gunasekaran et al. (2004) have suggested

that in order to evolve an efficient and

effective supply chain, SCM needs to be

assessed for its performance. Ren et al.

(2004) put similar views forward when they

stated that design, implementation and use

of adequate performance management

system (PMS) could play an important role

if supply chains are to succeed in an

increasingly complex, interdependent and

changing world. For that selecting supply

chain performance measurement system

which is appropriate for a particular supply

chain is of paramount importance.

Cousins et al. (2008) reported that

performance measurement covers the array

of individual performance measures,

performance measurement systems and

frameworks, and their interactions with a

large number of other variables.

Performance measures assist decision

makers to plan, control and direct the

activities of the organization (Cousins et al.,

2008). Cousins et al. (2008) have reported

that performance measurement has a

positive impact on supply chain

performance.

Drawing from the relational view of

competitive advantage, which has its roots

in the resource-based view (RBV) of the

firm, Lee et al. (2007) found that strong

supplier, customer and internal linkages

enhance supply chain performance which

further lead to cost containment and

performance reliability. Similarly, they

found that there is partial support for strong

customer linkage enhancing supply chain

performance in cost-containment and

performance reliability. Further, they found

that there is partial support for strong

supplier linkage enhancing supply chain

performance in cost-containment and

performance reliability, and there is partial

support for strong internal linkage

enhancing supply chain performance in cost-

containment and performance reliability.

Tangen (2004) suggested that a PMS should

support strategic objectives and have

appropriate balance.

To gain an insight into SCM practices in

India, with a focus on supply chain

performance measurement system, a

questionnaire-based survey was undertaken

to address various issues related to supply

chain performance measurement systems of

select Indian manufacturing industries. The

questionnaire was tested for (i) content

validity, and (ii) construct validity. The

following findings are based on

approximately two hundred responses:

The findings indicate that Indian companies

are moving ahead to adopt the supply chain

practices and these are in line with the

practices elsewhere. Yet, a lot need to be

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done, so that collaborative relationship

develops throughout the chain. It is observed

from the survey that firms have upgraded

their internal capabilities in terms of

computer hardware, internet, extranet, ERP

etc., but have been less successful in

utilizing their capabilities for external co-

ordination. The survey also found that a

majority of the companies use some form of

supply chain performance measures, but

only a few have moved towards the adoption

of the requisite software and integration of

these software with their supply chain

partners to measure the supply chain

performance. Out of one hundred and twelve

widely used measures, order fill rate was

considered as the most important indicators

for the performance evaluation of a supply

chain. Yet, when it came to measurement,

cost was the most widely used evaluation

criteria. This reveals that Indian industries

have still not moved away from the

traditional way of evaluating supply chain

based on cost. The observation of Saad and

Patel (2006) is valid in the Indian context, as

Indian industries are not adopting the supply

chain philosophy in a holistic sense.

This survey also brings forth the point that

awareness about supply chain performance

measurement system is very low in the

Indian context. Therefore, creating

awareness can play a big role in the effective

implementation of the PMS in the SC. This

in turn could lead to effective integration

and synchronization among partners,

thereby, eliminate excess inventory, reduce

lead times, increase sales, and improve

customer service (Agarwal and Shankar,

2002; Anderson and Lee, 1999).

SCPMS implementation works when there

is a focus on tangible and intangible

benefits. SCPMS, as part of a firm’s

resource portfolio, may not meet the

resource-based view criteria when acting

alone. Due to the relatively low barriers to

imitation and acquisition by other firms,

SCPMS-based advantage tends to diminish

quickly. The value of SCPMS can be

augmented only when it is embedded in an

organization through resource

complementarity and co-specialization. The

study, examines the implementation of

SCPMS and selection of performance

measures from the four perspectives of

balanced scorecard in the supply chain.

Through embedding SCPMS in a firm’s

supply chain process, SCPMS can facilitate

the development of higher-order

organizational capabilities, namely supply

chain capabilities, which are firm specific

and hard to duplicate across organizations.

The advantage achieved through the

adoption of sophisticated technologies and

the synergistic benefits achieved through an

integrated system provide the sources of

sustained competitive advantage for a firm.

In discussion with the respondents, many

felt that SCPMS implementation is

desirable; the drive to implement it has been

rather uneven. Some respondents were not

yet fully convinced of the need for supply

chain wide PMS. While these managers had

no objection to sharing some data, they were

not quite ready (or fully convinced of the

need) to provide suppliers access to sensitive

and proprietary data pertaining to core

competence areas. Thus, SCPMS at the

implementation stage did not include

suppliers as part of basic implementation

5

team. Rather in rare instances when

performance measurement in supply chain

took place, it was more of a related with cost

as primary focus. All the respondents agreed

that while considering supply chain

performance measures they are not

considering a holistic view.

Supply chain performance measurement is

an issue that is gaining importance in the

spheres of supply chain management

research. Modern supply chains are very

complex, with many parallel physical,

financial, and information flows occurring,

thereby, requiring parallel control of

physical goods, logistical information,

payments and ownership rights in order to

ensure that products are delivered in the

right quantities, to the right place, at the

right time, in a cost-effective manner. For

that selecting the right performance

measures and metrics for the given supply

chain and then prudently applying them in

practice for a continuous improvement is

very important.

Slone et al. (2010) opined that supply chain

excellence is the most underutilized tools

which 21st century organizations have at

their disposal. Further, supply chain

excellence DNA can be acquired with:

hiring and grooming talent with supply

chain acumen, and converting board room

into supply chain champions; select and

apply the right technologies; eliminate

cross-functional disconnects; collaborate

with internal and external customers; and

implement a disciplined process of project

and change management (Slone et al. 2010).

Supply chain up-gradation is a continuous

process; therefore, the research may

continue to include new challenges and the

use of new technologies in meeting these

challenges. The organizations should

develop and adjust to these dynamics,

uncertain and unpredictable environment to

survive in the market. As Charles Darwin

has said: “It is not the strongest of the

species that survives, not the most

intelligent, but the one most responsive to

change”


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7

Devasheesh Nautiyal has completed his graduation in

Computer application from Graphic era Institute of Technology

Dehradun. He has a work experience of 33 months in iGate computer

systems. He is now pursuing his first year of post-graduation course

from Indian Institute of Management Raipur. His interest lies in

operations and finance. He could be reached at

[email protected]

HYBRID CARS

The Scenario of Hybrid Cars- Indian Context

Abstract: The article illustrates the evolution of transportation through history and explains the current

issues being faced to create a sustainable transportation system. Hybrid transportation technology is

being termed as the solution to our current environmental problems. India being the second largest

population with a large market for four wheelers has a very small presence in the hybrid market. We

evaluated multiple parameters which are acting as barriers to successful adoption in India with some

proposed improvements.


mailto:[email protected]

8


Hybrid Cars

The Scenario of Hybrid Cars –Indian Context

In evolutionary context, it is a fact that

humans have not evolved at all or even

shown ‘green shoots’ towards the ‘next

stage’ of our evolutionary progress in

10,000 years of our existence. We grew

faster and stronger and are currently

competing to outsmart none other but

ourselves and yet cannot outrun a stallion

nor crush rocks with our bare hands.

Confused? Look all around you, if closely

observed you will see our unique way of

evolving, possibly faster than any other

species. To gain speed we built cars or ride a

horse, to crush rocks we user hydraulic

cranes and crushers. We grow inorganically

by absorbing the resources around us

provided by nature. Feeding the long

accumulated resources to the tools or to the

machines that helps us make these tools.

One of the first areas where we have shown

a consistent need to improve and shown

significant development has been transport.

The most popular invention of the early man

was the wheel which led to carts and cars

and so on. Once powered by animals, today

we have fossil fuels powering our cars,

ships, locomotives, and aircrafts. Recently

we witnessed spiking demand in fuel prices

further exaggerated by the short supply and

increased demand for the fuel. It is logical

for us to pursue cleaner and efficient

substitutes to our exhaustible fossil fuel

sources already showing signs of stress. We

introduced a relatively

new player in the

market to sustain our

transport needs of

present and future.

Enter ‘Hybrid Cars’,

solution to our energy

woes, these vehicles

may look as simple as

a normal car but have

been internally

designed in a way to

reduce dependence on

the conventional

sources of fuel while

ensuring sustained

performance. The

internal combustion

engines are included in

some models to

complement or to supplement as and when

required. With Indian energy consumption

in volume for the transportation sector

Source: Multiple Sources

9

skyrocketing from 5043 Kilotonne (kT) in

1971 to 40,830 kT in 2008, we cannot

afford to ignore the fact that the pressure on

our fossil fuels needs to be redirected to

other alternatives, introducing an alternative

and efficient source of energy for our

transport will greatly help the cause. With

the west and the far-east (read Japan)

already leading the way, India can also play

its part being the one of the fastest growing

economies and harboring one of the largest

potential markets for vehicular purchases.

On the global front, the picture does not

look rosy, as the energy consumption

projections for as far as year 2035 do not see

the Natural gas and Liquids contract much

further.

In the Indian context, the prominent issues

faced in establishing an efficient and

sustainable ecosystem for eco-friendly

transport alternatives have been discussed

below in brief:

Manufacturing: One of the most debated

and ignored sectors of the Indian growth

story, failing to promote the manufacturing

sector along with the service sector possibly

plays the biggest spoilsport for the hybrid

car market here, something we will realize

as we progress in the article. We have not

been able to promote manufacturing of most

of the high end technology products

including hybrid cars, with the exception of

Reva and the less renowned Hybrid Scorpio

from Mahindra. Instead of manufacturing,

we import them as CBU (Completely Built

Units) attracting 110%

import duty on each car.

These results in severely

inflated product prices, for

e.g. Toyota Prius, the

global leader in terms of

hybrid car sales costs a

whopping USD 62,000 as

compared to USD 33,000

in the United States of

America and around USD

23,000 in Japan.

Surprisingly (or not), Prius

is the least sold car in India.

TYPE OF

VEHICLE

CAP ON

INCENTIVES

Low-speed electric

two wheelers

INR 4,000

High speed electric

two-wheelers

INR 5000

Seven-seater three-

wheelers

INR 60000

Electric Cars INR 100000

Policy Initiatives: Indian policies for

manufacturing hybrid cars till January 2013

were not encouraging to say the least. The

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idea to incentivize the manufacturing and

import of hybrids was discussed way back in

2011 during the tenure of Mr. Praful Patel as

the Public Enterprises Minister.

However, the incentive was considered too

small to lure the automakers.

Companies like Honda, Siel and TVS

Scooters launched their electric and hybrid

vehicles but received poor response from

customers as the prices were much higher

than the petrol variants of these vehicles.

The high import prices already drove Honda

CIVIC Hybrid away from India as they did

not find the proposition financially feasible.

It was only in 2013 that the government took

concrete pro- manufacturing steps by

committing USD 4.1 billion over the next 8

years to promote electric and hybrid vehicles

in India to reduce dependency on traditional

fuels.

Infrastructure: The Hybrid vehicles,

especially the electric ones need hybrid

specific support infrastructure to sustain.

You may bring the best vehicle of its class

in India but it will not help if the owner

cannot find the charging station or the know

how to repair.

Considering this from a ‘different’

perspective, it is a good strategy to maintain

exorbitant duty on the CBUs till we develop

sustainable infrastructure. The duty would

limit the inflow of too many hybrid vehicles

in India. Otherwise, it would not be wise the

flood the market with affordable products

that the consumers may be able to buy but

the infrastructure cannot sustain.

2008 2035E

11

Source: CMIE Economic Outlook

As per the case with Reva, there are not

many electrical charge points available in

the public domain. RECC the manufacturers

of Reva have partnered with multiple petrol

pumps and some malls in Bengaluru to

provide charging points in public that would

charge your car in 5 minutes. At the moment

the onus of providing refueling points seems

to lie with the manufacturers rather than the

administration. Hopefully this trend will

discontinue soon.

Conclusion: Indian passenger and

commercial vehicle manufacturing industry

is the third largest car exporter in Asia and

the sixth largest manufacturer in the world

with 3.6 million units produced in 2011. We

have our basics covered in the car

manufacturing industry; promoting

production of hybrid vehicles in India is the

next step. With the second largest

automobile consumer market after China,

India is definitely a place to be as the market

remains largely untapped. Steps like

reducing the subsidy in import of hybrid

technical parts is

a welcome step

but we can do

more.

We need to

create an

environment

where companies

can manufacture

or import

products and sell

them at

sustainable price

that would help

them maintain

their business. The educated

Indian customer is sensitive to the

environment and will readily adopt a better

alternative, but not at the cost of

convenience and scrupulousness. The

initiatives by the government raise hope of

better times to come. Importers and

manufacturers still believe that the Indian

story will turn around. With RECC and

Toyota holding on to the hope of growth, I

hope we don’t let them down.

Brining prospect of a better hybrid growth in

India, Toyota in August 2013 decided to

assemble and sell petrol-electric Camry

hybrid in India to reduce price to Indian

customers. At 29 lakhs it will be dirt cheap

as compared to the 40 lakhs Toyota Prius (1

USD = 65.70 INR).

STRIVE Volume 3 issue 1

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References:

Content Reference:

1. http://economicoutlook.cmie.com/

2. http://www.thetruthaboutcars.com/20

12/06/indias-least-selling-car-toyota-

prius/

3. http://articles.economictimes.indiati

mes.com/2008-11-

13/news/27694534_1_honda-s-civic-

hybrid-honda-siel-cars-india-eco-

friendly-cars

4. https://en.wikipedia.org/wiki/Autom

otive_industry_in_India#Electric_ve

hicle_and_Hybrid_vehicle_.28xEV.2

9_industry

5. http://goodtimes.ndtv.com/blog_mor

e_comment.aspx?blog_id=252

6. http://articles.economictimes.indiati

mes.com/2011-02-

13/news/28540682_1_hybrid-cars-

hybrid-vehicle-toyota-prius-hybrid

7. http://indiatoday.intoday.in/story/bud

get-2012-2013-electric-hybrid-cars-

to-get-boost/1/168393.html

8. http://www.hybridcars.com/india-to-

invest-more-than-4-billion-to-

promote-ev-hybrid-industry/

9. http://www.eia.gov/forecasts/aeo/er/e

arly_fuel.cfm

10. http://data.worldbank.org/indicator/I

S.ROD.ENGY.KT?cid=GPD_31

Image References:

http://www.as-

mediadesign.de/Human_evolution.jp

g

http://savemoney.my/wp-

content/uploads/2012/07/WK10_Hy

bridCar2.jpg

http://economicoutlook.cmie.com/

http://www.thetruthaboutcars.com/2012/06/indias-least-selling-car-toyota-prius/



http://articles.economictimes.indiatimes.com/2008-11-13/news/27694534_1_honda-s-civic-hybrid-honda-siel-cars-india-eco-friendly-cars





https://en.wikipedia.org/wiki/Automotive_industry_in_India#Electric_vehicle_and_Hybrid_vehicle_.28xEV.29_industry




http://goodtimes.ndtv.com/blog_more_comment.aspx?blog_id=252

http://goodtimes.ndtv.com/blog_more_comment.aspx?blog_id=252

http://articles.economictimes.indiatimes.com/2011-02-13/news/28540682_1_hybrid-cars-hybrid-vehicle-toyota-prius-hybrid




http://indiatoday.intoday.in/story/budget-2012-2013-electric-hybrid-cars-to-get-boost/1/168393.html



http://www.hybridcars.com/india-to-invest-more-than-4-billion-to-promote-ev-hybrid-industry/



http://www.eia.gov/forecasts/aeo/er/early_fuel.cfm

http://www.eia.gov/forecasts/aeo/er/early_fuel.cfm

http://data.worldbank.org/indicator/IS.ROD.ENGY.KT?cid=GPD_31

http://data.worldbank.org/indicator/IS.ROD.ENGY.KT?cid=GPD_31

http://www.as-mediadesign.de/Human_evolution.jpg



http://savemoney.my/wp-content/uploads/2012/07/WK10_HybridCar2.jpg



13

REVERSE LOGISTICS IN INDIAN AUTOMOTIVE INDUSTRY

Abstract: This article depicts the need for reverse logistics in Indian automobile sector. It

showcases the road map of future automobile market and challenges which must be

overcome. Investments in reverse logistics can be the game changer in automobile segment

in India. It would create a WIN-WIN situation for all the stakeholders of Automobile

segment.


Amit Kumar Gandhi has completed his graduation in mechanical

Engineering from Veermata Jijabai Technological Institute Mumbai.

He has a work experience of 22 months in Blue Star Ltd. He is now

pursuing his first year of Post-Graduation course from Indian Institute

of Management Raipur. His interest lies in operations and finance. He

could be reached at [email protected]



14


Reverse Logistics in Indian Automotive Industry

Reverse logistics is defined as “The process

of planning, implementing, and controlling

the efficient, cost effective flow of raw

materials, in-process inventory, finished

goods and related information from the

point of consumption to the point of origin

for the purpose of recapturing value or

proper disposal.”

Reverse logistics includes all of the

activities of logistics. The difference is that

reverse logistics encompasses all of these

activities as they operate in

reverse (from consumer to

manufacturer).

Reverse Logistics in Indian

Automobile:

Scrapped vehicles are cut

and sold as scrap by low-

tech units in the

unorganized sector using

crude polluting

techniques. Scientific

recycling could result in

reduction of global

warming and greenhouse

gases. Captain N. S.

Mohan Ram, Chairman, SIAM is of

the opinion that about 7-10 % of the

cost of vehicle can be recovered

through modern techniques.

Two wheeler / four wheeler is one of

the most significant buying decision

for Indian customer hence its price

has significant impact on them.

Resources are scarce whereas

demands are increasing.

Sales of passenger car and van

segment was2.5 millionin2012-13

which has grown by 97% compared

to 2003-04. Total of more than 180

million sold from 2000. While

Average expected life is 10-15 years.

Easy Resale / Disposal will

Encourage customer to buy, will

switch more easily in less time

Implementation Strategy: The

Strategy of Reverse Logistic will only

work if following stakeholders are

confident of the systems and support

for cause which makes a win-win

situation.

Customers: Given the assurance by

the Manufacturer / Dealer.

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

Passenger cars & Vans Sales - India

Sales Cummulative sales

Source: www.industryoutlook.cmie.com/

15

Customers must buy the

remanufactured part / automobile or

the second hand replacement offered

to them.

Government: Government should

support for the manufacturer in terms

of regulatory law and taxes for resale

/ reuse of the used part based on its

efficiency.

Service Providers: Should return the

defective parts which they replace

while servicing the automobile and

are repairable and should also

encourage customer to donate

unwanted / defective parts which can

reused. They should also encourage

customers to use such parts.

Scrap Dealer: End of vehicles or

vehicle parts are mostly sold to scrap

dealers hence they can act as gate

keeper of that part which can go to

manufacturer or which are to be send

for recycling. As they have the high

volume of useable part they can help

to improvise reverse logistics.

Quality Checks: While reusing the

refurbished part it is important the

Automobile’s Efficiency is not

decreased.

Challenges:

Meeting Customer Expectations:

Reverse logistics being a service

industry, meeting customer demands

with effective and efficient use of

resources including distribution

capacity, labor and inventory is

necessary. While giving them

required quality of part.

Manual/Labor Work: Right from

collection of part from customer to

identify the useful Part/ one has to

disassemble the parts to delivery of

such part to service center or

Manufacturer.

Valuation: Determining the cost of

the part at the time of collecting it

from customer is very difficult &

will vary from very person to person.

Infrastructure: Lack of

infrastructure facility creates

difficulties for new business set up.

As handling of goods collected from

customer required entire new facility

to be replaced/ rectify the defective

parts, warehouses to keep parts in

stock and redeploy when required.

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Current Disposal Scenario of the

Indian Automobiles

Scrap/Destroy

Third Party Sale (Secondary

Markets)

Third Party Disposal

Salvage

Secure Disposal

Reasons for Returning Automobile

Incorrect Order/ Order processing Errors

Damaged/Defective Goods

Contractual Agreements (mostly for

Dealers) like Excess Stock, Stock

Adjustments, obsolete.

Service/Maintenance

Factory Repair – Return to vendor for

repair


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Unorganized Retail: There are

massive supply and return issues

with 70% of growing population,

living in rural areas, hence the reason

that only 5% of sales are through

organized retail channel. 95% of

sales are from unorganized retail

channel.

Indian consumers are good at maximizing

the benefit of any purchased product. They

use the product as long it works even if its

efficiency or performance is decreased or

new technology has arrived in market they

are reluctant to change. Even after product

has become obsolete they sell the product in

scrap market or sell in resale market.

Reluctant to change the product forced

Indian auto manufacturer to make this

market the organized market E.g. Maruti

True Value, Tata Motors Assured, Hyundai

Advantage. This has market has helped

manufacturer to increase the sales of cars to

some extend as people replace their car’s/

bikes within few years after purchase as they

get better resale value. To further increase

sales of Automobile manufacturer should

move to reverse Logistics.

Apple Inc. has been able to increase to

the sale of its products & increase in profit

margin through its refurbished market.

Every customer want to use the latest

technology knowing this what apple did is

created its refurbished market where

customer can sell it apple product to Apple

Inc., company will upgrade the same

product as per latest technology and sell it in

refurbished product. The consumer who is

unable to afford latest technology will buy

refurbished product, while consumer who

are able to set bear difference between the

products he selling & new product will buy

the latest product. It’s a win/ win situation

for all. The same principle can be applied to

Indian Automobile sector. Manufacturer

should start refurbish market where the car

is collected from customer upgraded &

resold to in market.

Reusing & Recycling of resources reduces

environmental pollution impact which can

generate carbon credit which gives

commercial advantage. As it create the new

market of refurbished automobile increases

employment rate. Reverse logistics creates

WIN- WIN situation for all the stake holders

of Automobile industry.

References:

1. Going Backwards: Reverse Logistics

Trends and Practices By rogers and

Tibben-Lembke, 1998.

2. www.livemint.com/Politics/LmlyZ0l

7Q3ZVEcA71p6W6K/A-mountain-

of-hurdles-confronts-efforts-to-

recycle-old-cars.html

3. http://store.apple.com/us/browse/hom

e/specialdeals/mac

http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCsQFjAA&url=http%3A%2F%2Fwww.rlec.org%2Freverse.pdf&ei=AH0PUr7UMdHjrAfJ24HgAw&usg=AFQjCNHt8FjLiM301XQR4jOLT86yu3seiw

http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCsQFjAA&url=http%3A%2F%2Fwww.rlec.org%2Freverse.pdf&ei=AH0PUr7UMdHjrAfJ24HgAw&usg=AFQjCNHt8FjLiM301XQR4jOLT86yu3seiw

http://www.livemint.com/Politics/LmlyZ0l7Q3ZVEcA71p6W6K/A-mountain-of-hurdles-confronts-efforts-to-recycle-old-cars.html




http://store.apple.com/us/browse/home/specialdeals/mac

http://store.apple.com/us/browse/home/specialdeals/mac

17

Dr. Tapan Sahoo is leading the Automotive Electrical, xEV and

electronics technology domain as vice president at Maruti Suzuki India’s

R&D center. His research papers in the areas of strategic technology

management, xEV technologies and automotive product development

have been published in national and international journals of repute. He

is the Co-chair of the Frontier Technology Group of SIAM (Society of

Indian Automobile manufacturers).He is the secretary of Society of

Automotive Engineers (SAE) Northern Indian Section. He is an Electrical

Engineer from UCE-Burla. He has completed his MBA and Ph.D. from

IIT Delhi.

EMERGENCE OF OPERATIONS AND SUPPLY CHAIN IN

INDIAN AUTOMOTIVE INDUSTRY

The Journey of Indian Automobile Industry over the Last Decade

Abstract: In this article the author briefs about the growth of Indian automotive industry

and the multitude of factors that are responsible for its growth. He writes about how the

entry of global players has changed the automotive industry’s operation and supply chain.

He also explains the current practices in the area of green supply chain and impact of

technology in the automotive industry.


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Emergence of operations & supply chain in Indian

automotive industry

Automotive industry in India has evolved

dramatically since inception, particularly in

the last one decade. Despite the global

economic crisis, most segments of the

industry had double digit CAGR in last

decade. The high growth can be attributed to

factors such as the increased economic

activity, increasing customer aspirations,

high growth potential, and entry of global

players. Today, India is proud of the status

the industry has achieved, though it still has

a long way to go.

India’s Global Position

Segment India’s Position

Two wheelers Second

Passenger cars Sixth

Trucks Fourth

Tractors Second

The growth of the industry in India, which

started with establishment of Maruti Udyog

Limited in 1983, also paved the way for

introduction of modern management and

supply chain practices.

Growth Scenario & Potential: Long ago,

Peter Drucker called the auto industry, “The

mother of all industries”, and that was not

an understatement. As per the Automotive

Mission Plan (AMP) 2006-2016, automobile

industry in India is expected to contribute to

about 10% of GDP by 2016, with target

output of $145 billion. AMP envisages 2

fold increase in GDP contribution, 3 fold

increase in employment, 5 fold increase in

industry revenue and 9 fold increase in

exports during this period. This will have

multifaceted impact in the way industry

operates in India. Let’s have a look at the

growth of automobile industry in India in

the last decade.

CAGR in last decade

Segment CAGR Percentage

Two wheelers 12%

Passenger cars 14%

HCV 6%

LCV 35%

In case of passenger cars, the industry size

has grown to 3.2 million in 2013. This

growth was possible because the overall

vehicle penetration is very low in India.

Today it stands at approx. 18 cars per 1000

persons. Comparing this with any emerging

countries in Asia, India is still at a low

penetration level. The case with other

segments is similar. Low penetration levels

clubbed with long term economic growth,

rising disposable incomes and a young

population gives rise to a positive outlook

for the industry in long term.

Industry Dynamics: Considering the huge

opportunities and growth potential, the past

decade witnessed entry of almost all major

global players in the Indian market. Parallel

to these developments, the technology and

regulatory framework of the country was

undergoing a major change. Introduction of

Emission norms in line with EU, mandate of

basic safety norms and inherent change in

competitive dynamics among global and

regional players had a significant effect on

19

operations and supply chain practices. Not

only OEM’s, but it also impacted the

component suppliers in India to a great

extent. Most importantly, component

supplier in India had to:

Increase their technology absorption

and development capability

Enhance the Quality level

Manage and reduce their cost

This was necessary to remain competitive

enough to compete against the global

component manufacturers that had entered

into India, following the footsteps of global

OEM’s.

The technology strategies deployed by

component manufacturers are:

Develop capabilities in house

Enter into a TA (Technical

agreement) with technology provider

Form a JV with global partner

Acquires companies overseas

Evolution of Supply Chain: Original

equipment manufacturer (OEM) on the other

side had to manage the existing and new

global suppliers, which were introduced for

new technology products. So, in the overall

supply chain, the number of component

supplier increased, which logically got the

industry to restructure itself by way of

Tierisation and Consolidation.

When we look back, we can see that the

supply chain grew at a manageable pace

during the liberalization phase. But when the

industry globalized in India, we could see a

clear trend of Tierisation. The value addition

done by component suppliers changed

dramatically during this phase. For example,

OEM today design and develop passenger

cars, Tier I design and develop the systems

and modules like the A/c system, Tier 2

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develops a component like compressor and

Tier 3 three will do housing casting. On the

other hand, we see a trend of vertical

integration of operations at OEM/ some

supplier end to better control and manage

costs.

Growth in domestic and export volumes had

its own set of challenges, both for OEM’s

and suppliers. Added to this due to cyclic

nature and global economic crisis, the

industry went through a slowdown and

surged back. Besides managing and meeting

the fluctuating demand challenges,

mitigating the risk of volatility in raw

material and volatility in the foreign

exchanges put a greater responsibility on

OEMs. OEMs had to support not only Tier I,

but also the Tier II or III component

manufacturers to increase their operational

capabilities so that they are able to meet the

challenges. Hence, overall industry has gone

from a transactional relationship to more

collaborative relationship leading to overall

growth.

However, there are many challenges that the

industry is facing today and has to face in

future. The success of the industry will

depend how all partners in the supply chain

meet the key challenges.

1. Quality & Cost

2. Managing Risk

Key Challenges:

Quality and Cost:Like we discussed before,

there has been growing emphasis and focus

on Quality due to increasing customer

demands, focused effort to increase exports

and competitive dynamics. At the same

time, it has been real challenge to provide

better value to the customers, thereby

putting pressures on cost reduction activities

across the supply chain. But at the same

time cost has to be reduced. So, efforts have

been made to implement quality systems as

per latest globally recognized standards.

Quality Status of component industry

Certification / Award Name Number

ISO 9001 576

TS 949 467

ISO 14001 208

OHSAS 105

Deming Award Winners 2

Japan Quality Winners 4

TPM Award winners 15

Shingo medallions 2

Also, efforts are being put to adopt and

adapt Lean operations management practices

like JIT, Kanban and improve efficiency

across the value chain. There is a greater

emphasis on localization of components by

OEMs. In addition, there is an emerging

trend of early involvement of vendors in the

product development cycle to design parts

collaboratively between OEMs and

suppliers. However, current supplier

capability still remains a challenge.

Managing Risk: Second issue is of

managing risk. Risk is associated with

markets in which product is sold, economic

fluctuations, disruption in operations due to

unforeseen events like natural disasters.

When global OEMs entered Indian market,

they did so not only take advantage of

inherent domestic demand, but also to take

advantage of lower manufacturing costs and

21

make India as an export base. The required

thrust for this was also given in the AMP

2006-2016. The key differentiator between

the domestic and international market is the

requirement of regulations. Each country has

its own set of regulation and meeting these

requirements is a must for being eligible for

exports. Therefore, risks associated with

exports have to be very well understood and

mitigated. For example, legal issues like

product liability clause can make companies

go bankrupt in case of major quality

problems in vehicles/ components. Also, in

case of Europe, there is regulation for end of

life of vehicle (ELV). Hence, recyclability

and reusability norms have to be met. The

industry in India need to understand these

challenges well and mitigate associated

risks.

The second important risk which is required

to be mitigated is the impact of foreign

exchange. For example, electronic

components and a lot of raw materials are

not produced in India today. Due to the

volatility in the foreign exchange, it has

become difficult to manage cost and price

relationship. Therefore, there has been a lot

focus given by OEMs for localization of

components. Localization of child parts is

therefore another area which needs to be

looked into seriously by the automotive

supply chain. It also provides a great

opportunity to budding entrepreneurs to

invest in these areas.

Emerging Practices

Green Supply Chain: One of the key drivers

in the automotive industry has been the

environmental regulations. There have been

serious efforts to reduce CO2 emissions of

vehicles in Europe, Japan and other

countries and India is not far behind.

Products like hybrid and electric vehicles

have been developed worldwide to mitigate

the impact. The emphasis on “going green”

is not restricted to products only, but is

extending to the entire supply chain.

Therefore, we see the emergence of green

supply chain practices in India as well.

Technology: The evolution in technology

has happened over the last years which have

definitely influenced the operations and

supply chain management. Radio frequency

identification (RFID), Enterprise resource

planning (ERP), and similar technologies

have helped the OEMS to improve their

operations and supply chain. OEMs are

deploying IT solutions to accurately capture

real time demand and then link it to

production planning, in order to achieve

high efficiency of the supply chain.

However, meeting the growing customer

expectations and demand volatility will

continue to remain a challenge.

Conclusion: And miles to go before I

sleep… The automotive industry in India

has evolved over the last decade and is

based today on a strong foundation.

Concerted efforts need to be put on all

dimensions for the industry to lead the

growth of 21st century India.

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23

Interview With:

Mr. Sanjeev Khapre

Executive Vice President & Chief Technology, Exide Industries Limited

Mr. Sanjeev Khapre is the Executive Vice President & Chief

Technology at M/S Exide Industries Limited which is India’s No 1

Lead Acid battery manufacturing company. He is a B.Tech in

Chemical Engineering from Laxminarayan Institute of Technology

Nagpur.

Mr. Khapre started his career with M/S Albright Moraraji &

Pandit Limited, a subsidiary of Dharamasi Morarji Limited,

Ambarnath, as a Trainee Engineer & worked in various capacities

with Amar Dye Chem & Borax Morarji Ltd. He moved in to Lead Acid

Battery manufacturing industry in the year 1981 with Willard India

Limited.

Mr. Khapre has been associated with Battery Industry for the

past 32 years and he held various positions like Technical Manager,

Executive Manufacturing, Vice President etc.

Currently he is located at Pennsylvania USA, at East Penn

Battery Manufacturing, world’s no 2 Battery Company, on behalf of

Exide Industries. East Penn being Exide’s technical collaborators. Mr.

Khapre holds the responsibility of introducing latest technology in

battery manufacturing for automotive as well as industrial

applications.


24


1. What are the challenges that Exide had

to face in order to rise to the position it is

now?

A: Exide's motto has always been – ‘Good

quality product at affordable price’ and this

has been our guiding principle in product

design.

2. How is the concept of recycling and bio

degradation used in the batteries

industry?

A: Lead acid batteries are not bio degradable

but can be recycled. Lead can be recycled

through the smelting process and can be

reused. Every battery carries a recyclable

symbol both nationally as well as

internationally. The body of the battery is

plastic and can be recycled. The electrolyte

used is Sulphuric Acid and this can be

recovered. So if we look at it this way,

batteries are recyclable.

3. Can you tell us about any recent

development in production of Liquid

fuel cells (hydrogen) for hybrid

automobiles?

A: Although there are research works in

progress in the area of fuel cell technology

and in other eco-friendly battery

technologies, they are not commercially

viable. There are a few safety concerns with

the fuel cell technology. So at this point of

time lead acid batteries are the most reliable

and commercially viable technology

available.

4. What in your opinion would be the

safest energy options in the near future

in place of traditional fuel cells?

A: Solar and Wind are currently among the

safer options. Nuclear energy has many

hazards. As solar and wind power are

natural, they are the way forward. There is a

lot of emphasis being placed on solar power

by the government, so we are working

towards making it commercially viable and

successful.

5. Where do you see the automobile

industry is heading with the above

mentioned energies made commercially

available?

A: Automobile industry is looking at solar

and electric energies as the future, for

example: electric and hybrid cars. The

industry is looking at Li-ion batteries to

power the electric vehicles. So automobile

industry is undergoing a key change in terms

of alternative sources of energy and in the

coming years I'm sure these technologies

will become part of mainstream vehicles

production.

“Business has to

be looked at from

a human angle

also.”

6. Though the concept of electric car is

present in India for a while now it is far

from creating a breakthrough change.

What according to you are the major

challenges that are faced by electric car?

25

A: Electric vehicles are still an expensive

proposition in terms of manufacturing costs

when compared to conventional vehicles. If

the Government provides subsidies to

manufacturers and consumers to make it

commercially viable, then the segment can

quickly pick up in India. China and Italy

have been successful in launching electric

bikes because the respective governments

have supported the initiative. But in India

there is no distinction for such products in

terms of manufacturing or consuming.

7. What are the eco-friendly practices

adopted by Exide industries?

A: Battery being an energy storing device,

we consume a lot of energy. So the focus

has been on reducing the consumption of

energy in our transformation process by

looking and alternatives like solar energy,

wind energy, recycling of materials and

waste heat recovery. So such methods are

adopted to make our value chain process

more eco-friendly.

8. Nowadays, a lot is happening and is

being talked about in the field of energy.

How should the academic focus be given

on this sector for the continuous growth?

A: The current challenge faced by the

energy sector is of energy becoming more

and more expensive. So elite educational

institutions like the IIMs and IITs should

focus on how to make energy available at an

affordable price and also find alternate

sources of commercially viable energy. That

will be the biggest challenge.

9. What is the one advice that you would

give to young managers aspiring to join

the supply chain management sector?

A: Today, the most important feature of

management is human understanding and

human relationships. Understanding the

employees and developing a healthy

relationship with them is very critical

irrespective of what business or sector you

are working in. It is important to understand

the human aspects of that particular

industry- who are the stakeholders involved,

the end users and who will be the

benefactors and if you use your resources to

develop products or services keeping in

mind the human aspects involved in it then it

will be a great success because at the end of

the day any product or service is used by a

human being, so this should be the main

driving force. Thus, business has to be

looked at from a human angle also.

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27

gle.

Guru Mantra is the special article from the OPEP team which explains in detail a new

emerging area.

GURU MANTRA

Car sharing-the new business model

in India


28


Guru Mantra

Q) Sir, the business model of Car sharing

has created a lot of interest among many

entrepreneurs in the recent times. What is

it all about?

Car Sharing is a business model of renting

cars for a short period of time to customers/

users. Initially, the concept was started by a

group of people in order to commute on an

ad-hoc basis. Now, the car sharing concept

is acting as a substitute to the personal

ownership and gives the users the benefit of

having a leisurely and affordable access to a

multitude of options on vehicles.

Q) What are its benefits?

The benefits to the individuals are to enjoy

the benefits of a car without facing the

hassles of owning one. Thus, Car Sharing is

emerging to be the future of mobility

solutions with addressing the issues of

congestion in urban areas and also a

powerful way to control greenhouse gases.

Q) How successful would it be?

Car Sharing is expected to attain 420%

growth by end of this decade. i.e., from 2.3

million subscribed users currently to 12

million users worldwide. Also the global

revenue based on car sharing is expected to

zoom from $ 1 Billion to $ 6.2 Billion by

2020[1]

. For future applications, most of the

car sharing companies have started investing

in plug-in hybrid electric vehicles (PHEV).

This is done with the view to reduce the

consumption of fuel. Also since most of the

car sharing would happen for short journeys,

they could collect the cars and keep them

charged for the next trips.

Q) When did the practice of car sharing

begin?

The first program of car sharing refers to the

Car Sharing program of

“Selbstfahrergenossenschaft" in Zurich in

the year 1948. In 1960, there were studies

conducted to see the possibility of having

computer based transportation system which

are precursors to the current model. In early

1970’s projects like Procotip in France and

Witkar in Amsterdam were underway. In the

year 1977, the official British experiment

named “Share-a-car” was conducted

Q) Can you say some existing practices of

car sharing?

Zipcar is the major player in the business of

car sharing. It was recently acquired by Avis

Budget group. Hertz on Demand (formerly

known as Connect by Hertz), We Car by

Enterprise Rent-A-Car, Uhaul Car Share

owned by U-Haul and Avis on Location by

Avis are some of the other players globally.

Q) Sir, why is it really necessary for the

automotive OEM’s?

The future of mobility is set to change. More

and more urban dwellers are having an

aversion towards owning a car due to space

constraints and other factors [2]

. The

commuters expects the ‘mobility as a

service’ (MaaS) rather than as a product.

They want to access the transport through

29

other means and the trends and macro

economic factors are set to drive the same

Q) Are there any automotive players in

this business?

Daimler's car2go, BMW's DriveNow and

Volkswagen's Quicar are some of the

OEM’s who have ventured into this business

model to provide Mobility as a service.

Q) What is the potential in a country like

India?

There are online platforms which integrates

the idea of car sharing in India. The

potential should set to grow only with more

players entering the market. For a country

which has witnessed a tremendous

revolution in automobile sector with many

OEM’s entering, the car sharing is just an

impending business that is set to go big.

Q) Is this business model only set for

mega cities?

The business model suits only the mega

cities as megacities offers a more conducive

environment for car sharing concept. The

mobility service demand is seen high in only

mega cities.

Q) What care should be taken in

designing the model?

Care should be taken in designing the

solution for a megacity as no one size fit all

solution is possible. The design of the city

plays a greater role in finalizing the solution

for the city. For example, the city of

Mumbai is completely different in

geographic and demographic parameters

from Tokyo. Hence these have to be taken

into considerations for successful

implementation of the model

REFERENCES:

[1] Car sharing services will surpass 12

million members worldwide by 2020. (n.d.).

Retrieved September 21, 2013, from

Navigant Research:

http://www.navigantresearch.com/newsroom

/carsharing-services-will-surpass-12-

million-members-worldwide-by-2020

[2] Mathieu Meyer. (2013). Global

Automotive Executive Survey. KPMG.

Retrieved September 21, 2013, from

KPMG:

http://www.kpmg.com/global/en/issuesandin

sights/articlespublications/global-

automotive-executive-

survey/pages/default.aspx

[3] Winterhoff, M., Kahner, C., Ulrich, C.,

Sayler, P., & Wenze, E. (2013). Future of

Mobility 2020. Arthur D' Little. Retrieved

September 21, 2013, from Arthur D' Little:

www.adlittle.com/downloads/tx.../ADL_Fut

ure_of_Mobility_2020.pdf

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http://www.navigantresearch.com/newsroom/carsharing-services-will-surpass-12-million-members-worldwide-by-2020



http://www.kpmg.com/global/en/issuesandinsights/articlespublications/global-automotive-executive-survey/pages/default.aspx




http://www.adlittle.com/downloads/tx.../ADL_Future_of_Mobility_2020.pdf‎

http://www.adlittle.com/downloads/tx.../ADL_Future_of_Mobility_2020.pdf‎

30


31

MARUTI SUZUKI INDIA LTD

Summer internship experience

Umang Agarwal is a PGDM student of 2012-14 batch of IIM

Raipur. He did his B.Tech in Automobile Engineering from SRM

University Chennai and has keen interest in Operations. He plans to

start his own venture in near future. He can be reached at

[email protected]

Production Management System (PMS)

3K

Kimeraareta Koto Ga - What has been decided

Kihon Dori - As per the standard

Kichin To Mamoru - Must be followed

3G

Genchi - Actual place

Genbutsu - Actual thing

Genjitsu - Actually

5S

Seire - Proper selection

Seiton - Arrangement

Seiso - Cleaning

Seiketsu - Cleanliness

Shitsuki - Discipline


32

Control Chart


Summer Internship Experience – Maruti Suzuki

Summer Internship plays a crucial role in

the life of a management student as it gives

a chance to showcase and implement the

knowledge acquired in the first year of

MBA. My internship at Maruti Suzuki

India Ltd. (MSIL) gave me that opportunity

in the domain of Operations Management.

As a fresher, I did not have any experience

of working in a company and the internship

helped me understand the organizational

working and dynamics.

Maruti is a company that has successfully

implemented the best of processes in its

Production Management System (PMS).

Tools, techniques and concepts like 3K

(Kimeraareta Koto Ga, Kihon Dori, Kichin

to Mamoru), 3G (Genichi, Genbutsu,

Genjitsu), 3M (Muda, Mura, Muri), 5S

(Seiri, Seiton, Seiso, Seiketsu, Shtisuke) and

many more are being used by the company

on a daily basis to maintain its high quality

and efficiency. In such a highly

sophisticated company, it can be

extremely difficult to identify

areas of improvement. My project

titled “Establishing

Management Controls for

Enhancing the Body Accuracy

using Statistical Process

Control” was based on this idea

where I had to create a system

that would identify defective

areas in the weld shop and

suggest ways of solving that

defect.

Statistical Process Control (SPC) is a

method which is used in industries where

high precision and accuracy is required. It

involves monitoring the production by

taking periodic samples and plotting them

on a chart in order to see if the process is

within the control limits. The tool thus helps

in detecting and preventing poor quality of

products. Variation in a process is bound to

be present and could be due to two reasons.

One is the inherent random variability which

can be due to the machinery, engineering,

operator, etc. which cannot be resolved.

Other is the unique variability due to broken

machinery, operator fatigue, lack of training,

etc. which can be resolved.

Apart from SPC, I used Process Capability

(Cp) as a means of measuring the variation

in the production process. The Cp value

helps determine if the process is efficient

enough such that the natural variability in

the process does not exceed the tolerance

limits.

Using the two processes, the defective

points were identified in the weld shop

which was then grouped in parts based on

33

the company specifications. A criticality

factor was found which showed the severity

of the process defect. The areas with the

highest criticality were to be treated on a

priority basis followed by the areas with

lesser criticality. Hence, a dashboard was

created which showed which part defects

were to be resolved at a given time. Car part

pictures were embedded into the system that

would show the exact location of the area

that is defective and needs action.

This control gave confidence to the shop

floor managers to carry out the corrective

actions. Also, the control gave a target area

to the managers for the future where they

could focus and do a regular check to

identify the reason for the defects. It can be

seen that the problems that existed were

mainly due to two reasons:

1. Vendor/supplier problem

2. Inbound manufacturing problem.

To find the actual problem, we had to take a

perfect dimensioned part and carry out the

manufacturing processes. By taking the

measurement, the reason for the defect was

known which could then be resolved to

perfection.

The benefit of applying this process was that

it was an iterative tool. As time progresses

and production continues, the output will

change. The tool will give the target areas

based on the deviations and defects in the

jigs and processes. Hence, this gives a scope

of continuous improvement in the process

till a long way. Even if we reach a point

when all the points are totally under control,

Nelson’s other rules (SPC rules) can be

brought into the picture to take quality of the

bodies to the next level.

The biggest achievement for me was the fact

that before leaving the organization, I could

see the project being implemented into the

production system. A manual was created

which would guide the employees in

learning the working of the system and

using it effectively. Overall, the internship

was a once in a life time experience which I

shall cherish.

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35

`

HERO MOTOCORP

Summer Internship Experience

This article has been written by Subhash Kumar. He is an

Electrical Engineer from B.I.T.,Sindri (Dhanbad) and has worked in

Tata Motors Limited for 5 years. His interest areas are Operations

and Supply Chain. He can be reached at

[email protected]

Inventory Management

Data collection from SAP, Store & PPC department

Visual observation of site

Modifications in existing situation.

Ex: space requirement &

availability

Reduction in Inventory norms

Development of inventory norm

model



36


Summer Internship Experience – Hero MotoCorp

I did my summer internship at Hero

MotoCorp Ltd, Gurgaon in Strategic

Sourcing and Supply Chain Department. It

had been a great learning experience to work

with the world's largest manufacturer of two

- wheelers, based in India. Each day of those

two months during my internship was full of

challenges and excitement.

I did my project on “Analysis of present

inventory norms of bought out parts at

HMCG, comparison with space

availability and to propose an optimal

solution”. The aim of the project was to find

out the gap present between availability and

requirement of storage space if the materials

are stored as per existing inventory norm

and to find out ways wherein maximum

quantity can be stored in such a way that

store space utilization is optimum.

The project journey started with detailed

discussion with project guide regarding

project methodology and project timelines.

At the first stage Data collection from SAP,

Stores and PPC department was done and

then visit and observation was made for

different packaging type and storage areas in

the plant.

As per guidelines from my guide I divided

the project into two parts. In the very first

part I focused on existing situation at the

company i.e., space availability as of now in

store for both type of parts-Bin and Trolley

as well as if the parts are procured and

stored as per existing inventory norm then

how much space will be required. Once I got

this result, I was in a position to compare the

requirement of the space versus availability

of space then it was clear to me that there is

a shortage of space even if the company

store materials as per inventory norm.

In the second part of the project my focus

was to work on solution part wherein I

worked on all the possibilities by which we

can save the space. The reduction of

inventory norm was a quick fix solution, so

there was high probability of missing out

many other possibilities, hence me and my

“The reduction of inventory

norm was a quick fix solution,

so there was high probability

of missing out many other

possibilities, hence I and my

guide decided to consider this

option at the last stage only.”

37

guide decided modifying the inventory norm

at the last stage only. I visited many times to

store, observed the various aspects of

material storage. I took advice from my

faculty mentor as well. Then it was clear to

me that parts arrangement in bins or trolleys

and subsequently the bins or trolleys

arrangement in the available space needs

optimization. We found cases wherein not

only inefficient use of bin or trolley was

there but also available space was also not

properly used. We worked on many ideas

like tunnel racking, adding layers in bins,

allocation on bin as per envelope size of

parts etc., and it saved us space.

At the last stage I developed the inventory

norm model considering it as in dependent

variable and cost, location of vendor, SOB,

quality were considered as independent

variables. When we worked further we

found that for many parts inventory norm

can be reduced and this will give us direct

savings of space. I discussed with many

SCM managers and checked for its

feasibility since situation varies case to case.

During the internship I got the opportunity

to meet managers and officers of different

department who were having a rich and

extensive knowledge of their respective

area. Each of them offered me their

extended support. As a tool of self-

evaluation and monitoring the progress I

adopted Daily Work Management approach

wherein I note down each day activity and

evaluated the planned versus actual task.

The whole project gave me deep insight of

inventory management and the

understanding that there is always scope of

improvement in store for maximization of

storage capacity by improving the space

efficiency, shelf efficiency and packaging

mode efficiency. Apart from this inventory

norm for parts needs regular check as

supplier location, cost, and SOB etc. change

with time.

It was really a great enriching experience

and exposure to know how the practical

world is different form theoretical world.

The concepts and model which we learn in

books gives us guidelines and confidence to

apply in the real world – industry.

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39


Green Revolution

Part -III

Ruchi Sao is a graduate in Chemical Engineering from Institute of

Chemical Technology; she has worked in United Phosphorus Limited for

two years and is now pursuing her first year Post Graduation course

from Indian Institute of Management Raipur. Her areas of interest

include Operations and Supply Chain Management. She could be

reached at [email protected]

GREEN REVOLUTION PART-III

Is India Ready for the Next Revolution - Hybrid Cars?

Abstract: Electric cars have long been trying hard to penetrate the market but with minimal

success. This article discusses the present trends in electric car industry in India and provides

insights on the growth potential for these cars in future.


40


Green revolution part - III

1940 & 1970 were the years of green

revolution where all the forces of research,

development and technology were used with

an objective to increase the agricultural

productivity. The year 2013 could also be

quoted as the year of green revolution.

Green because it’s eco-friendly and

revolution in context to automobiles.

Now what is this revolution in

automobiles?

This revolution is that of Electric Cars.

Electric cars were developed way back in

1934 but because to its limitations over

gasoline cars, it lost its value. But now the

world realizes the need for social

responsibility and eco-friendly atmosphere,

one of the ways to achieve this is the use of

electric cars.

As the name goes, electric cars run on

electrical energy which is stored in Lithium

ion batteries which are rechargeable. The

biggest advantage of it is no pollution and

not impact of oil prices which are of major

concern to mango people of India. The

problems that caused the near death of

electric cars were:

High cost compared to other gasoline

vehicles

The disinterest of dealers

The mentality of owner.

But now, the world is ready to move ahead

of gasoline cars, so the solutions developed

for these problems are:

1) Battery Problem: It was found earlier

that batteries would run for 160,934 km

maintaining a decent average for the car.

But these same batteries have a huge

replacement cost starting from 5, 50,000

for Nissan leaf.

But after lot of research in lithium ion

batteries, German scientists have

developed the battery that would work

with more than 85% of its capacity even

after 27.4 years of every day charging

and discharging. Also the power

densities of these batteries are 1,100

watts per kilogram which would result in

short charging time and more

acceleration speed. Indeed, this

invention is very recent and its

implementation is still under

consideration.

2) Dealer Problem: Most dealers have a

great know-how of gasoline vehicles but

when asked about electric vehicles they

have no idea as to its functions, how will

it fulfill buyers need and how will its

performance be after some years. The

solution is to make dealers aware of all

its functions and parameters by the

manufacturers so that the transparency

between manufacturer and buyer

increases.

3) Owner Problem: This is basically an

attitude problem. If on someday the

owner wakes up late one fine morning

and gets ready in hurry for office, take

out his electric car and starts driving in

hurry to reach office. At that point it

could be irritating to travel at such low

speeds and be overtaken by others by

41

Number of registered vehicle in India 2011

other gasoline vehicles. Hence if electric

vehicle are to be, there has to be a

significant change in owner’s behavior,

which would come through time and

patience.

According to 2011 census, in India 4.7% of

households have cars/jeeps/vans. Per capita

income was Rs. 68,747 in 2012-2013. For a

common man who wants to buy car

irrespective of its engine in range of 6 L, the

options which are sought after mainly

includes Maruti Swift and Alto.

Fuel Price / L Average Cost /

Km

Petrol Rs. 68 Rs. 4.5

Diesel Rs. 52 Rs. 2.7

Electric Rs. Rs 0.5

Above data look impressive, right?

But even if buyer gets attracted to the above

data still it would be difficult for any buyer

to actually purchase it because one of the

reason being lack of government

intervention. Government does not provide

any rebate to buyer of electric cars it is been

offered in US and china. Hence there is lack

of interest from manufacturer side. Many

big players like general motors, Nissan

backed out due to such market conditions.

Mahindra REVA has set up a plant in

Bangalore with a motive to produce 30,000

vehicles per year. Mahindra’s e20 is the

electric car which was launched in India in

late march 2013 with government providing

around 29% of subsidy on sales of electric

cars. But every new technology is initially

resisted as it takes time for people to accept

it and realize its long term benefits.

Very soon large number of electric cars

will be running on Indian roads. This hope is

because of the benefits that this car has.

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Source: http://mospi.nic.in/Mospi_New/upload/SYB2013/CH-20-MOTOR%20VEHICLES/MOTOR%20VEHICLE-WRITEUP.pdf


http://mospi.nic.in/Mospi_New/upload/SYB2013/CH-20-MOTOR%20VEHICLES/MOTOR%20VEHICLE-WRITEUP.pdf

42


There always involves a trade-off between

the battery cost and the oil prices. But when

looked on a longer run the fluctuations in oil

prices are never to be predicted, it may

increase or may decrease. But in case of

electric cars expected life of car is 8 years

minimum, with no maintenance cost and

fuel cost. With the emerging technologies

and great benefits let’s hope this car and

many more electric cars will initiate another

green revolution in India.

References:

1. http://inhabitat.com/german-

scientists-create-lithium-ion-battery-

that-can-charge-an-electric-car-for-

27-years/

2. http://www.howstuffworks.com/will-

electric-cars-require-more-

maintenance.htm

3. http://www.plugincars.com/electric-

car-dealers-must-address-concerns-

about-batteries-126992.html

4. http://www.business-

standard.com/article/companies/why

-e-cars-struggle-in-india-

113031900146_1.html

5. http://www.business-

standard.com/article/economy-

policy/india-s-per-ome-rises-to-rs-5-

729-per-month-

113020700995_1.html

http://inhabitat.com/german-scientists-create-lithium-ion-battery-that-can-charge-an-electric-car-for-27-years/




http://www.howstuffworks.com/will-electric-cars-require-more-maintenance.htm



http://www.plugincars.com/electric-car-dealers-must-address-concerns-about-batteries-126992.html



http://www.business-standard.com/article/companies/why-e-cars-struggle-in-india-113031900146_1.html




http://www.business-standard.com/article/economy-policy/india-s-per-ome-rises-to-rs-5-729-per-month-113020700995_1.html





43

Aditya Polisetty is 2nd year PGDM student in IIM Raipur. He is

B.Tech graduate from NIT Jalandhar. He has worked in Hero

Motocorp Ltd in R&D. He is passionate about automobiles and

motor racing. He can be reached at

[email protected]

EVOLUTION OF SUPPLY CHAIN IN AUTOMOTIVE

INDUSTRY

Abstract: This article discusses the various stages of development in the concepts,

philosophies and practices in the field of Supply Chain Management across the world in the

automobile sector. Starting from simple supply chain of Ford the article discusses the

evolution of supply chain leading to the contemporary aspects of Green Supply Chain and

Triple Bottom Line principles.


44


Evolution of Supply Chain Automotive Industry

Automobile industry has evolved since the

late 19th

century. Technological innovations

were the rule of the game then. Only the rich

could afford to buy cars due their higher cost

of production. Henry Ford introduced the

concept of mass production in the

automobile industry to reduce the costs and

thus made the car affordable (Ford Model T)

for the average American. The raw materials

would enter from one side of the plant and

the finished goods would move out from the

other end. Ford believed in ‘all production

in’ (vertical integration) where in all the

components were manufactured within the

factory. ‘Mass Customization’ is the key for

his success. He used same platform for

various T models, with the help of which he

could retain the efficiencies of mass

production. This resulted in a simple supply

chain for Ford. By 1920Ford could capture

50% share in the car market.

General Motors, contrary to the Ford’s

philosophy believed in outsourcing. GM had

reliable suppliers for various components.

They could leverage this do research for

better and efficient performing components

and systems (transmission, axles etc.), which

helped them to produce better performing

and visually pleasing automobiles.

Chrysler which was lesser vertically

integrated than Ford and GM could seek

competitive advantage through flexibility in

product engineering and styling. This helped

them to bring new technology at a faster rate

than its competitors. Other distinguishing

factor for the success of Chrysler was the

strong dealership network it could build over

time.

Over time the Supply Chain Management

(SCM) has evolved by integration of various

domains, shifting its referred name from

45

various terms like ‘physical distribution

management’, ‘logistics management’,

‘business logistics management’, and

‘integrated logistics management’ to ‘supply

chain management’.

Prior to the 1950’s logistics was not

considered the function of the strategy

makers. In late 1950’s the companies of the

west looked to reduce the costs and

improving productivity. Very little efforts

were made to improve product quality and

process design. This resulted in huge

inventories, both the raw materials and

work-in-progress (WIP). During this period,

the physical distribution was given

importance and manufacturers looked to

reduce costs.

Drucker (1962) summarized distribution

functions commonly considered as ‘low

grade nuisances’. Warehousing was

considered as ‘necessary evil’ (Warman,

1971) and freight transport as ‘a dismal

calculus of rates and routes’(Alexander,

1969).In 1961, Reese, in the article

“Physical Distribution: The Neglected

Function” published in Inventory

Management, stated that for the average

firm, physical distribution consumed 25%

and 33% of each sales dollar. This amount is

third highest cost of doing business after

labor and materials.

In 1962, Peter Drucker, a management

expert, published an article in Fortune about

business logistics, or distribution (as called

during that period), which “is one of the

sadly neglected, most promising areas of

American Business”. Kotler (1967) has

divided the development of physical

distribution in three phases. The phases and

characteristics of physical distribution

development are given in Table – Phases

and Characteristics of Physical Distribution

Development.

By the 1970s due the combination of various

factors like Changes in the customer demand

patterns (increased variety of products),

Economic pressure (increasing logistics cost

and decreasing profit margin),

Technological changes (advent of electronic

data processing capability and growth of

transportation industry etc.) resulted in

rethinking the philosophy of Logistics.

With the advent of 1980s, there were

significant changes in the SCM. Inventory

management and Ware housing become the

part of corporate decisions. Measures like

central distribution, severe reduction in the

stock holding and use of computers for

information processing. Third Party

Logistics (3PL) were coming up during the

same time.

Phases and characteristics of physical distribution development

Phase Typical characteristics

Phase I: Shortage of Goods Main concern of firm was to enhance the level of production

Phase II: Transition Period Supply and demand were balanced

Phase III: Mass Production Sales limited by demand, than by the level of production

capacity

Source: Kotler (1967)

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46


Around the same time the Japanese were

working to smoothen the flow of material

and information. Toyota has developed the

Toyota production system. With the help of

which they could reduce the various wastes

(7 types – over production, waiting,

transportation, processing, stock at hand,

movement and making defective products )

and increase the overall productivity.

Similar philosophies like Lean

Manufacturing, Just-in-time, and Total

Quality Management (TQM) etc. were

developed by the other manufacturers.

Supply Chain Collaboration (SCC): The

open economy and globalization have taken

competition to a new level. Porter’s (1985)

value chain brought focus on strategic

networks advocating contracts between

coordination chains of organizations.

There are four levels in SCC, first is

communication, second is coordination

where the companies’ focus on intra and

inter organizational processes, third is

Intensive collaboration in which the partners

of the supply chain involve in a higher-level

partnership for strategic advantages and

fourth is Partnerships where the companies

share the investments, risks and profits.

Honda shares high level collaboration with

various organizations like Showa

(suspensions), Denso (electrical and

electronic components) and Nissin (brakes).

Advent of IT: The Information technology

has been the key enabler in helping the

improvements in the SCM. Electronic data

interchange (EDI) (reduced the use of

paper), bar coding, data warehousing, MRP

tools, ERP tools, etc. have helped the

organizations in using their resources

effectively and efficiently.

The Internet: The use of internet in SCM is

relatively recent phenomenon. Its principle

applications are in the areas of vendor

management, communication, procurement,

purchase, production scheduling,

transportation scheduling, vehicle tracking

and customer service.

The IT and internet has helped the

companies to reduce inventories and save lot

of cost. The EDI data is shared with vendors

thus VMI,JIT etc. were implemented

effectively.


47

Agile Supply Chains: Agility is the

capability of the company in the changing

market environment to profitably exploit

market opportunities, quickly flexibly;

respond to the customer needs and suffer

minimum cost using innovative solutions

and partnership cooperation. The agile

companies achieve lower production cost,

launch new products rapidly and gain the

maximum market share.

According to Christopher (2000), in the

developed world, it is not the companies that

compete but it’s their supply chains.

According to him an agile supply chain has

four key constituents – market sensitive, a

virtual supply chain (supply chain based on

information rather than inventory), process

integration and a network structure.

Green Supply Chain: With increased

environmental risks, Green Supply chain

management (GSCM) has evolved as an

important philosophy and strategy to reduce

the environmental pollution and increase the

sustainability.

The objective of GSCM is to reduce the

environmental impact at each and every

stage of the product life cycle i.e. Design,

raw material selection, manufacturing,

transportation, and the reverse logistics

(disposal of the product at the end of it life).

All the major automobile manufactures like

Toyota, Honda, and Volkswagen etc. have

embraced this philosophy. They have set

targets for each year and measure them

against the triple bottom line principles.

Conclusion: The supply chain strategy of

organizations have shifted from lean to

agile, where as in supply chain it is

technology from individual to inter-

organizational systems. Across the industry

in spite of the developments in technology

and infrastructure the SCM is plagued by

many challenges such as visibility, cost

containment, risk, volatile customer demand

and globalization. Along with these there is

ever increasing need to transform into green

supply chain.

Despite the widespread perception that

organizations should choose between being

environmental friendly and saving cost, they

can do both. One long term solution is to

have a ‘closed loop supply chain’ (ability to

re-use the product either by servicing or

remanufacturing it). However, this required

a dramatic shift in the consumer mindset

from ‘make-use-dispose’ to sustainable and

green solutions.

References:

1. “Evolution of Supply Chain

Management: Developments in

Academia and Industry” by

GunjanSoniand RambabuKodali.

2. “SUPPLY CHAIN AGILITY

CONCEPT EVOLUTION (1990-

2010)” byKristina Rimienė.

3. “Supply Chain Collaboration:

Evolution Management Framework”

by Dr. S. Jaya Krishna

4. “Co-evolution of Supply Chain

Strategiesand Technologies” by

Mohdzaher B. Mohdzain, Andrew D.

White and John M. Ward

5. “The Role of the Internetin Supply

ChainManagement” by Richard A.

Lancioni, Michael F. Smith and

Terence A. Oliva.

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49

BOOK REVIEW

Pulak Jain has completed her engineering in Electronics and

Communication from IGIT, GGSIPU Delhi. She is now pursuing her

second year post graduation course from Indian Institute of

Management Raipur. She could be contacted at

[email protected]


50


IACOCCA: AN AUTOBIOGRAPHY

IACOCCA is no usual autobiography which

tells the story of an individual taking on

tides of time, but rather it is a story of a

sharp shooting businessman whose life was

intervened with two iconic firms in

automobile industry, Ford and Chrysler.

Iacocca is the roller coaster ride of a

businessman who takes a company to the

top of its glory, gets fired from it and then

joins a bankrupt company which he again

takes to the top. The book fills you with the

thrill of moving through the economic

cycles of a company. It tells you how

desperate times demands desperate

measures. It tells you the story of an honest

employee who embraces the company he is

in and turns their fortunes with passion and

drive to be best.

Lee Iacocca is a first generation Italian-

American who loved cars. Hence after

completing his studies with Princeton, he

joined his dream company Ford as a student

engineer in August, 1946 but soon he

realized he didn’t want to just make the parts

of the car, he wanted to be in the middle of

action. Hence in the middle of his training,

he leaves Ford only to join it as a sales

person in Chester. Honing his skills he

steadily moved up the ranks and learning his

most crucial lesson of the automobile

industry that dealers are the guts of car

business, selling and servicing every car that

is churning out of the factory. Lee Iacocca

finally gained the national recognition in

1956, when he came up with the loan plan of

selling 1956 models with 20% down

payment followed by monthly installment of

$56 for three years. His plan ’56 for 56’

placed Philadelphia district at no. 1 position

for the Ford. It was surely his ticket to the

General Manager post at Ford and with the

support of Robert McNamara, former

president at Ford, he started working as the

division head at Ford.

After becoming the GM, he implemented a

quarterly review system making each

executive accountable to themselves. The

system prevented bad people to hide and

good people to get buried. After this he soon

flew to Europe to overlook the new car in

pipeline ‘Cardinal’ but soon realized it was a

loser. He set on his own projects and with

his team wanted to tap in the younger

market growing in America, who were in a

search of a car that was sportier and

luxurious car rather than an austere and

functional. Focusing on great styling, strong

performance and a low price he came up

with his first car ‘Mustang’ price at $2500

stated to be launched at ‘ The World’s Fair’

in 1964. Mustang was a clear winner with its

value proposition to both white collar and

blue collar population. Following the

Mustang success, Iacocca revived Lincoln-

Mercury line with the introduction of

Mercury cougar and Mercury marquis. He

also brought in Mark III which outsold

Cadillac Eldorado in its very first year. He

knew that these cars were profit makers as

what they made on selling one Mark could

only be made by selling 10 falcons. He

finally became the president of Ford in

December 1970 and took on to implement

his plan of cost cutting. His aim was to cut

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the operating expenses in all four areas –

timing foul ups, product complexities,

design costs and out molded ways of doing

business by $50 million. He focused on

freight and closing of the departments

making losses. But his journey at Ford

finally came to an end and he was fired from

Ford in 1975 over no particular reason.

At 54 Iacocca joined Chrysler, a company

taking its last breath. There were no systems

in place, the company has worst deficit in its

account, 80000 unsold vehicles and

practically no quality product on offer for

dealers. In the end business operations boils

down to three things: people, product and

profits. Working on this principal, Iacocca

first began to build his team. He brought in

significant people from Ford, his old partner

Hal Sperlich, Greenwald and the retired

directors of Ford. He sacked a lot of people

who were unproductive at Chrysler and also

found out talent who were buried

somewhere in the weak structure of

Chrysler. For product quality a joint UAW-

Chrysler Management Quality program was

set up to ensure no compromise on product

quality is done. Some discipline in the

manufacturing was required and 250 new

people were brought in to ensure quality in

the system. Chrysler replaced his two ad-

agencies Young & Rubicon and BBDO with

just one Keith and Eckhardt who worked

with the Chrysler team from the very

beginning with their products giving out the

signal that Chrysler was a no-nonsense

company.

They came up with first of its kind

marketing plan giving money back

guarantee and the campaign really kicked

off. With the economy falling apart and

leaving of Shah, the oil prices went sky

rocketing high. It badly hit Chrysler and

ultimately they had to go to the government

for help. Many people were against saving

Chrysler, and many people wanted it to die

its death. But with Iacocca’s argument they

were given a loan guarantee of $ 1.5 billion

from the entire U.S. congress in lieu that the

government owned everything Chrysler had

in case it fails to return the money. Finally

after their loan was set, Chrysler rolled out

the winner car ‘K-car’ America’s first fuel

efficient and front wheel driven small car. It

was priced at around $5880 making

accessories like air conditioning, automatic

windows as an option. By 1983 Chrysler

was back on its feet with a profit of $925

million and in July 1983 Chrysler paid back

their loan, so early and so huge an amount

that government didn’t know how to cash

that check.

Now it was again time for fun and Chrysler

brought in their new convertible, Lebaron

and for a change became a market leader.

Soon GM and Ford followed and started

bringing out their own convertibles.

Chrysler again brought out a new market

winner ‘Minivan’ which was refused by

Henry II when Iacocca was at Ford but

Dodge Caravan and Plymouth Voyager

turned out to be great fruit bearer at

Chrysler. Finally Iacocca propagates that

seat belts and not air bags are the key to

reducing traffic fatalities. While in the car

business, nobody wants any of its customers

to get hurt or make a car intentionally unsafe

in an accident. It’s a tough business to be in

and Iacocca’s story is a great way to have an


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insight into the exciting world of

automobiles.

The book gives real insight into the

automobile industry and tells you how a

heavy investment industry with passionate

people is run. Automobiles are an integral

part of a consumer’s life and automobile

industry survives on what the customer

demands, is it fuel efficient, is it style, is it

luxury? Car makers have to constantly

figure that out and this book only tells the

story of a person who tried to be close to his

customers and know what they want.

53

DEBATE TOPIC:

WHICH IS MORE CONVENIENT FOR INDIANS- TWO

WHEELER OR FOUR WHEELER?

Aashwij Mallya has completed his

graduation in Civil Engineering from Indian

Institute of Technology Roorkee. He has

worked in L&T for 3 years. He is pursuing

PGP in management from Indian Institute of

Management Raipur. He can be reached at

[email protected]

Sreejith Sreekumar is graduate in

Computer Science Engineering from

Amrita School of Engineering, Bangalore.

He has a work experience of 2 years with

Infosys Limited. He can be reached at

[email protected]


54


Four Wheeler Perspective

The Indian automotive industry has made

tremendous progress post the 1991

liberalization. At present 100% FDI is

permissible under the automatic route

leading to increase in the competition and in

turn benefiting the consumer. Gone are the

days when common man had limited options

like Ambassador or Premier Padmini for

buying four wheelers. Today the market is

filled with a plethora of companies like Tata

Motors, Maruti Suzuki, Hyundai, Honda,

Volkswagon, General Motors etc. which

cater to needs of all classes of the society.

Investment: Buying a car is similar to

making an investment as the value of car

depreciates over time. The utilities and value

provided by the car are the returns on the

investment. Cars also have a higher resale

value than motorcycles.

Family Size: For bachelors and small

families motorbike may seem more

convenient considering the price, lower

maintenance cost, lower fuel consumption

and better convenience. But this stage lasts

for a limited amount of time in an

individual’s life. For a typical Indian family

of more than four, motorcycle is highly

inconvenient. Ratan Tata was inspired for

making Tata Nano after watching the

difficulties faced by a family of four riding a

bike in congested roads on a rainy day.

SME’s Logistics: Four wheelers also offer

tremendous advantage over two wheelers for

SMEs to transport products. Pick-up trucks

like Tata Ace are highly essential for brick

and mortar companies for managing their

logistics.

Safety: From the safety point of view four

wheelers are way ahead than two wheelers.

Two wheelers are more susceptible to road

accidents than four wheelers. It is too risky

to drive motorbikes on major national

highways and on potholed filled roads on

rainy days. A recent study has shown that

death rate per 100 million person-miles of

travel of motorcycles is more than 35 times

that of cars.

Social Equalizer: Buying a new car

increases the social recognition of a person

among his peers. Owning a luxury car like

Audi or BMW is a symbol of wealth and

high standard of living of a person.

Economy: Manufacturing sector has

registered a growth of only 2.7%. RBI’s

rigid monetary policy (caused mainly

because of high inflation levels) is one of the

major reasons for lack of credit availability

in the market and poor performance of the

manufacturing sector. Car sales registered a

dip of 6.69% in the fiscal year 2012-13 for

the first time in the decade. High interest

rates (11-15%) and high fuel prices are the

major reasons for dip in car sales.

However, inflation levels have gone down

gradually over the past few months (it was

4.8% in June) and this has prompted the RBI

to reconsider its monetary policy. If the RBI

considers reducing the interest rates

drastically into future to pump cash in the

market, the production and sales of

automobile industry, especially that of cars

is likely to improve. So, four wheelers still

remain a convenient option for Indians than t

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Two Wheeler Prespective

The dominant product of the Indian

automobile industry is two wheelers which

has a market share of over 75%. India is the

second largest producer of two wheelers in

the world. The Indian two wheeler industry

posted a growth of 2.9% in 2012-13, an

expansion significantly lower than the

13.7% volume CAGR posted by the industry

over the last five years. This is often

mistaken as a change in preference of the

Indian customers towards four wheelers,

while the actual reasons are surging oil

prices, high interest rates, rise in cost of

inputs, delayed monsoons, etc.

There are multiple factors that attributes to

the preference of two wheelers over four

wheelers in the Indian context like economic

pricing, public safety issues, fuel efficiency,

convenience, size, loan repayments, etc.

Affordability: India is a country of

developing road networks and relatively low

income. Affordability is a major factor that

influences the consumer behavior in this

sector. Even the cheapest of the four

wheelers holds no competition to the

affordability and easy financing options

available for the two wheelers.

Operating Costs: The Indian consumer is

very sensitive to the operating costs which

includes fuel costs, service costs and spare

part cost and availability. The customer

friendly strategies adopted by the dealer and

the unmatched network of authorised and

unauthorised service stations keeps the costs

of owning a two wheeler much below a four

wheeler.

Convenience: Roads and traffic conditions

are major contributors to the choice of

personal vehicles. Two wheelers provide the

consumers with better maneuverability and

parking options on the congested Indian

roads. The consumers who own both four

wheeler and two wheeler prefer two

wheelers for short trips and four wheelers

for longer trips. This shows a higher

preference towards two wheelers since short

trips are frequented by majority of the

consumers.

Public Safety Issues: The public transport

system in India does not guarantee safety,

especially for women. This feeling of

insecurity and the untowardly incidents in

public transport during odd hours can be

limited by the use of personal vehicles. Two

wheelers are the preferred choice of personal

vehicle among the working women owing to

affordability and convenience factors.

India has a growing working-age population

who has a perception of status in owning a

specific personal vehicle and a negative

image of public and non-motorized mode of

transport. This is expected to stimulate the

burgeoning market for personal vehicles.

The rising prosperity, increasing

affordability and easy access to finance

might incre the four wh volumes. But the

primary choice of purchase for majority of

the consumers will continue to be two

wheelers due to the presence of huge rural

areas, the youth market and women who

prefer affordable, convenient, comfortable

and low cost mode of private transport.

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CROSSWORD


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ACROSS

3. This country awards MBNQA to recognize the performance excellence of the organizations in

it.

8. The city known as the world's traditional automotive center.

9. It is the machine design to affect the principle of Jidoka in TPS

12. Four car companies, called the "quattro" or "Auto Union" makeup this famous car company.

16. Ten US Army Air Force veterans of World War II recruited into Ford.

17. It is one of the highest awards of TQM

18. It is the famous model of volkswagen that has been produced for 65 years between 1938-

2003.

19. He published "The Principles Of Scientific Management ".

59

DOWN

1. This systematic technique for failure analysis was developed by the US army.

2. This company produced India's first iconic MUV.

4. This company developed JIT.

5. This company made the first ever diesel-engine passenger car.

6. The current Chairman and Chief Executive Officer of Nissan & Renault

7. This company developed the world's most advanced humanoid robot named ASIMO.

10. This car recently created a Guinness record by pulling a fully loaded cargo plane.

11. This famous German car company BMW is pursuing research in mobility for future related

to______management

13. He is the inventor of Toyota Production System.

14. Adolf Hitler gave a contract to this famous company to make a cheap and simple car.

15. The company named to DJSI for the 12th

straight year as one of the sustainability leaders.

17. This logistics company is the official partner of F1 for 8 impeccable years.


60


Solution to crossword

PAN IIM OPERATIONS MAGAZINE

On behalf of Pan IIM Operations group we invite articles for its annual

magazine- 'OPSWORLD' related to the theme 'Productivity &

Efficiency' for the upcoming issue.

Submit your articles relating to the theme by October 20th 2013 to

[email protected]


61

Team OPEP


Bharath Arava

Gautham Jayan

Sameer Pandey

Ruchi Marotrao Sao

Vanamamalai. R

Anubhav Sood

Manoj H

Subhash Kumar

Sujitha Tikka

Thousif Mohammed A

62

For Details, Contact Operations and Supply Chain Club

Indian Institute of Management Raipur

GEC Campus, Old Dhamtari Road, Sejbahar

Raipur 492015, India

Email: [email protected]

Cover Design:

Ankit Saxena & Manoj H


strive 5 - automobiles

Documents

indian automotive industry

car industry

evolution of supply

supply chain excellence

automotive market

automotive business

iim raipur interview

car sharing operations