Tata Nano and the supply chain

untitled.jpg As Ratan Tata unveiled the Rs 1 lakh[US$ 2500] car, I thought about the process which enabled the Tata Nano to be designed at this phenomenally low price. It was done by a relentless focus on costs and eliminating waste and redundancy.

The secret of designing the Tata Nano is a concept called Target Pricing or Target Costing.

Target Pricing process attempts to determine what features and functions the customer wants in a car. Do consumer want 2 doors or 4 doors? What should be the engine capacity? Should the windshield wipers have 2 blades or 1? What instruments should be provided?

Once the features and functions are finalized target costs are assigned to each and every component/system – transmission system, instruments, engine, body, interiors, electrical systems. The sub-teams then design the components/systems within the target cost. They look at every bolt and nut and keep driving cost out of the components/ system.

For example the Nano has a variable transmission instead of the standard gears. It has instrument clusters which do not have anti-glare coating and does not use screws for fixing.

This same concept, of relentless focus on costs and ‘scraping the barrel’ mentality can be applied to supply chains!

Cost and waste is driven out of supply chains by reducing inventory, eliminating waiting times and delays, increasing utilization of warehouse and trucks, optimizing location of warehouses and plants, drawing up the optimum transportation network, utilizing backhauls etc.

Reducing inventory reduces the working capital cost , reduces warehousing costs and obsolescence costs . To reduce inventory, demand fluctuation will have to be reduced, reliability of inventory replenishment will have to increased, Inventory Record Accuracy will have to be above ~95% and supply chain length will have to be reduced.

Reducing supply chain times reduces inventory and increases responsiveness. To eliminate waiting times and delays the complete supply chain process will have to be mapped. For this a lead time map is used. Delays like waiting for loading or unloading and waiting for documents can be minimized. Transit times can be reduced [ not by fast and rash driving ] but by using AC cabins and double-drivers. Also, backhauls are a way to reduce costs.

Truck utilization can be improved by using truck optimization softwares . Similarly, warehouse space can be utilized more efficiently by increasing storage height- by increasing the rack heights or having a mezzanine.

On a strategic level, Supply Chain Network Design – locating plants, contract manufacturers, Distribution Centres and warehouses- is important because 70% of the cost of a supply chain is fixed at the design stage.

So while Tata Nano has created a breakthrough in car manufacture by reducing the cost of a car significantly, it has led me to think about doing a Tata Nano with my supply chain.

Advertisements

33 thoughts on “Tata Nano and the supply chain

  1. I found your analysis of the supply chain aspect of Nano very interesting. Would like to know more. I am also interested in the source of your information. Can you share?

  2. Hi there. Interesting observations, but most of them are just suggestions or guesses rather than actual information from some sources. Can you please elaborate a bit on the actual scenario of Tata Nano Supply Chain?

    • Pooja,

      Please let me know what specific details about the Nano supply-chain you require.

      Thanks,

      Regards,

      Ramnath

      • Dear Ramnath

        Can you please let me know the lessons to be learnt in Supply chain management from Tata Nano.

  3. Hi there. Interesting observations, but most of them are just suggestions or guesses rather than actual information from some sources. Can you please elaborate a bit on the actual scenario of Tata Nano Supply Chain?

  4. We are a bunch of volunteers and starting a brand new scheme in our community.
    Your website offered us with helpful information to work on.

    You have performed an impressive job and our whole neighborhood will be grateful to you.

  5. I really love your website.. Very nice colors & theme.
    Did you develop this web site yourself? Please reply back as I’m wanting to create my own personal blog and would like to learn where you got this from or what the theme is named. Kudos!

  6. Magnificent goods from you, man. I’ve understand your stuff previous to and you are just extremely magnificent. I actually like what you’ve acquired here, certainly like what you are saying and the
    way in which you say it. You make it enjoyable and you still care for to keep it sensible.
    I can’t wait to read much more from you. This is really a wonderful web site.

  7. Do you have a spam problem on this website;
    I also am a blogger, and I was wanting to know your situation; we have created some nice practices and we are
    looking to trade strategies with other folks, please shoot me an email if interested.

  8. I was curious if you ever considered changing the page layout of your website?

    Its very well written; I love what youve got to say.
    But maybe you could a little more in the way of content so people could connect with
    it better. Youve got an awful lot of text for only having 1 or two
    pictures. Maybe you could space it out better?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s