|
Sudipta
Basu
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
D. S. 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 Rs
817 crore in 2002-03, and this year it is expected to
gross between 1,100 and 1,200 crore.
"Difficult times test a
company's instinct for survival. We have not only survived
but 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 K. R. 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 Murali. "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 Murali.
|
Other articles on the Tata Group and globalisation:
Uploaded
on February 18, 2004
|
