The better half via @tatacompanies

It is a company that started its operations less than a decade ago and in the brief span has charted its course on the world map. Tata Autocomp Systems (TACO) has travelled the long road. In the competitive auto components industry, the company has strengthened its position in the domestic market and forged joint venture partnerships in order to become a major global player. There are a few processes that were brought into play to make this possible.

The auto comp industry is subject to a three-level global tierisation. On the first rung are those manufacturers who supply directly to the automaker. This is followed by the second rung that comprises of component manufacturers who supply to the first tier; this is followed by the third rung that supplies to the second tier. TACO is at the tier one level in India and tier two level globally.

The company now aspires to become a tier one supplier globally. A step towards that direction was taken recently with a $100 million order from Ford for supply of plastic parts. At the tier two level, TACO is supplying wiring harness to Yazaki, its Japanese partner. Yazaki, in turn, supplies its products to Toyota and Nissan. This is worth between seven and eight million dollars in the current year, but the company expects it to grow to $100 million per annum in future. Another example of its tier two business is a partnership with Ficosa. Tata Ficosa will become the sole supplier for the internal rear view mirror, for Ficosa customers worldwide.

"Having now paved the way into international businesses, the next challenge for TACO is to become a one-stop-shop supplier," says DS Gupta, managing director of TACO. "Traditionally, automakers are not keen to outsource from only one region, be it India, China or Thailand. They want suppliers who can give them inputs from multiple locations. Hence, one of the vital challenges for a company like TACO is to spread out of the home country and locate at multiple locations."

The major players of the auto industry are present in the US, Europe and Japan. It is, therefore, important for the company to set up shop in Asia and the West. In Asia, TACO is looking at setting up offices in Thailand, China, Taiwan, Vietnam, Malaysia and Korea.

"In order to become well entrenched in these markets, it is important to understand the value chain," says Mr Gupta. The value chain comprises of three operations: engineering, manufacturing and supply chain management (SCM). Engineering includes product development, complete engineering, prototyping, testing and validation. Manufacture comprises of producing and actual manufacture, while the SCM involves delivery and logistics.

The company uses this value chain to service its customers in the US and Europe. Like software, India is price competitive in engineering. India’s engineering cost is 50 per cent to that in the US. India enjoys the unique position of having cost and capability, as opposed to China (a major player in the industry), which is cost competitive, but lacks the capability and know-how. India’s capability is at par with that of the West.

On the other hand, when it comes to actual engineering and production, other Asian countries have certain advantages that India can use to its benefit. TACO has spotted some of the advantages in its partner countries. Malaysia produces cheap rubber, China has raw materials for plastic, while Taiwan is well known for actual assembly of electronic components. The challenge for the company is to manage the entire competitive advantage. It is not enough to be cost competitive only in India; it must bring the cost competitive advantage from other countries within its fold. This will affect its competitive advantage globally.

The West lacks the cost advantage, but has the advantage of superior technology and engineering. For TACO it is now imperative to interface with a few design houses and access their capability. The company should be able to use the core facility and learn to build capability at low cost. TACO has recently acquired an order from General Motors and Ford. It is in the process of setting up a corporate office in the US that will oversee operations both in the US and Europe. The company also proposes to set up manufacturing and engineering offices in Germany and France in the near future.

Mr Gupta says that one of the most valuable lessons learnt from joint venture businesses is to work with business processes. He upholds General Motors and Ford for their strong business processes. "People do not plan the nitty-gritty of operations in India. Along the way one has learnt that there is a huge penalty for not getting it right the first time, as you are not given a second chance," says he.

Mr Gupta points to one of TACO’s valuable joint ventures, Johnson Control International, which figures in the Fortune 200 list as the best managed company. The company has offered important lessons in managing processes, which Mr Gupta hopes will cascade down the company. "If we have to become a global company, we have to meet the requirement of 100 parts per million. One of the lessons we have learnt from our partners is quality consciousness," says Mr Gupta. "Yazaki has cut the cost of productivity and has managed to generate greater productivity. In the business of wiring harness, you account for the man-hours spent in manufacture and production. The total cost of production is divided by the number of employees, to arrive at the cost per hour. The global benchmark is $x per hour. If TACO can hit the target, we can achieve the target of $100 million by March 2007."

Despite the global recession in the auto industry, TACO has managed to survive and grow by focusing on quality, cost and delivery (QCD). The company has created values for its customer by pushing quality through the Six Sigma programme. "Customers such as Toyota and GM have shown confidence in our strong sequential delivery system. Sequential delivery system is a global norm, and by adhering to it, TACO illustrates its strength in QCD. As a result of this, the company has been growing at a CAGR of 30 per cent per annum," elucidates Gupta. The company’s turnover was Rs817 crore in 2002-03, and this year it is expected to gross between Rs1,100 and 1,200 crore.

"Difficult times test a company's instinct for survival. We have not only survived but have also done better than the previous year," adds Mr Gupta.

Clearly, TACO has come a long way in positioning itself as a unique company that provides end-to-end solutions. In its early days, the company was known for supplying components, but today an automaker can depend on the company to deliver the complete solution.

Finally, Mr Gupta insists that to affect globalisation a company should be able to manage profitability and become independent in technical output. Presently, TACO is dependent on its many joint ventures (JV) to gain tech know-how; but Mr Gupta envisions a time when the company will create its own R&D unit in areas where it does not have JV partners. "Today we are dependent on the JVs for technology. We should be able to chisel this down to depending on them only for the core technology, and eventually become completely independent," says he. "JVs have added value to TACO. They have helped us build an operating system to make us globally competitive."

Best mate
Since its inception two-and-a-half years ago, Tata Johnson Controls' (TJC) three-pronged value system has helped add immense value to its parent company, Johnson Control International (JCI). By managing time and streamlining product development, TJC has helped cut costs.

The engineering division of TJC is 270-employee strong. The cumulative workforce saves 50 per cent cost to TJI, and helps the company save $10 million globally every year. The company has initiated working in shifts to affect time compression, without a corresponding increase in workforce.

Apart from this, TJC understands the necessity to respond to the customer's need for a successful product design. To achieve this, the company has initiated Product Design for Six Sigma. This maps the way in which TJC adds value to its consumers. Many common routine activities are carried out by layout engineers. These activities are then developed into niche designs. To resolve this, a common template has been created to avoid the initial duplication of work. Routine tasks are automated, so that engineers can focus on innovation. TJC's business operating system is in sync with over 200 plants globally.

R Vasudevan, chief executive officer, TJC, feels that the company has benefited from exposing its middle management to the best practices in the world. At the manufacturing end, the process of rolled through put yield was initiated. This process measures loss of work and re-work. The company has inculcated the JCMS process of manufacturing, which controls material flow, wastage and focuses on problem solving.

"The biggest challenge in manufacturing in recent times has been the ability to satisfy the end customer on the face of steep rise in steel prices. We have initiated a few value additions in our products," says Mr Vasudevan.

To be a successful global player, it is important to benchmark global standards, as also to break away from it to become a leader. Given this reality, how does TJC define globalisation?

For KR Murli, chief executive, Engineering Division, TJC, the answer rests simply in facilitating the parent company to expand into disparate markets. "It involves being able to operate in various cultures with different capabilities. The expectations of the Korean market is different from that of the Japanese market," says Mr Murli. "A truly global company is one that can hop into disparate regions and produce something truly world class."

JCI provides the front-end support to markets in the Asia Pacific region. It is paving the way for TJC to come into this region. The challenge for TJC is to introduce the IT and engineering expertise of the US to the local communities. "Eventually, we will become a team of people that has successfully done business in the US and Europe, but at the same time has the capability for deeper dispersion in local markets," he adds.

With every destination it reaches, TJC becomes a window for the parent company. Today the company works at General Motors, Isuzu and Proton at local costs. It focuses on building its employees towards multi-tasking. In doing this, common resource pools have been identified, so that groups of employees can be pulled away for an assignment at a moment's notice. Over the last two years, TJC has mapped the skill-sets of its people. Consequently, it takes the company just about a couple of hours to put together a team, should a fresh project come up suddenly. "In the last one year we have not refused a single business," asserts Mr Murli.

Other articles on the Tata group and globalisation:

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	Tata International:	International explorer
	Tata Steel:	Stealing the show
	Tata Motors:	Riding the global wave
	Indian Hotels:	Sovereign splendour
	Tata Tea:	The world in a teacup
	Tata Technologies:	Future of auto tech
	Tata BP Solar:	Sunny side up

The better half

"Difficult times test a company's instinct for survival. We have not only survived but have also done better than the previous year," says DS Gupta, managing director of Tata Autocomp Systems