The case discusses the making of Tata Nano, the world’s cheapest car, manufactured by India based Tata Motors. On March 30, 2009, Tata Nano was launched with an ex-factory price tag of INR 100,000 (about US$ 2000). The case explains the design and development process of TataNano. The car was the result of a five year research and development project carried out by Tata Nano development team.
While developing the car, Tata Motors and its suppliers constantly made efforts to reduce the costs while ensuring quality of each and every component including engine, steering, wheels, tires, windshield washing system, gear shifter etc. THE MAKING OF TATA NANO INTRODUCTION Tata Nano is a proposed city car — a small, affordable, rear-engined, four-passenger car aimed primarily at the Indian market. ABOUT PLANT ? ? Investment of 1500cr. rupees by Tatas. Shifting cost of the plant from singur is around 500 cr. Total area of plant is 1000acres out which 300 acres were alloted for assembling of various parts and rest 700 acres for manufacturing. AIM OF MAKING The project to create the world’s cheapest car inspired by the number of Indian families with two-wheeled rather than four-wheeled transport. TECHNICAL SPECIFICATION AND FEATURES Technical features of tatanano car are: ? ? ? ? ? ? ? ? ? ? First car in india with rear engine and rear wheel drive. Engine with 623cc A 33bhp car Having fuel efficiency 21. 97km/ltr in city and 25. 5km/ltr on highway.
First car with 2 cylinder non opposed petrol engine. Acceleration: 0-70 km/h in 14 seconds. Maximum speed: 105 km/h. Trunk capacity: 15 L. Front brake: disc Rear brake: drum Supplier Relation E. Balasubramanian , head of sourcing for the project, was not a popular man with vendors and there were problem in order to get vendors to pare merging and persuade them to produce components at lower cost . The vendors had to invest in new processes and methods to reengineer their products to specifications that were rigidly guided by cost , performance and regulatory compliances.
However A three-shift operation and consolidated purchasing with suppliers provided them with lots of relief. STRATEGIES APPLIED Tata divided the components into two types – proprietary designs and Tata Motors design. For proprietary design components Tata went with established suppliers such as Bosch which supplies the engine management system and has significantly contributed to the future diesel engine. For components and systems designed in-house, Tata Motors chose suppliers with strong process capabilities who could give valuable suggestions and improve on the designs.
Nearly everything has been sourced locally and the Nano will have 97% local content from day one. Tata’s suppliers were an integral part of not only the design and development process, but also purchasing. SUPPLIERS TO TATA NANO ? ? ? ? ? ? ? Bosch 8. Freudenburg Caparo 9. GKN Continental 10. ItwDeltar Delphi 11. INA Denso 12. Johnson Controls Fag 13. Mahle Ficosa 14. Saint gobain and many more Where Bosch a German based automotive company it supplies gasoline injection system, starter, alternator, brake system. Caparo vehicle technologies : a Europe based company. It supplies inner structural panels.
Continental motors: it is a Europe based company. It supplies fuel level sensor, gasoline fuel supply system and etc. WHY TATA NANO IS SO CHEAP? The below diagram is self-explanatory, where the following features have been modified to reduce the cost: ? No air conditioning on standard model ? Windows wind by hand ? Manual steering no air bag ? 624cc two cylinder engine in boot giving max speed of 70km/h ? Plastic and adhesive replaces welding ? Bodywork made of sheet-metal and plastic DISTRIBUTION STRATEGY Tata nano has applied the open distribution innovation which helped the company to reach maximum to the customers.
Following are the reson to apply the open distribution strategy: ? To mobilize large no of third parties to reach remote rural consumers ? Tailor the products and service to more effectively serve their needs and add value to core product through ancillary service. ? ? To increase modularity Creative use of information technology COMPETITORS: Rival car makers including Bajaj Auto, Fiat, General Motors, Ford Motor, Hyundai and Toyota Motor have all expressed interest in building a small car that is affordable to more middle-class consumers in emerging markets.
The bulk of demand there is for small cars because people are much more sensitive to fuel prices Honda and Toyota are leading the way on so called cleaner gasoline-electric hybrids, and some environmentalists argue getting prices down on these technologies is where efforts should be concentrated. Inexpensive and eco-friendly electric-cars like Tara Tiny, Oreva Super (both reportedly even cheaper than Tata Nano) and REVA pose even more significant danger to Nano. There are also rumours of Maruti Suzuki introducing a lower priced version of Alto to counter Tata Nano. KEY FACTS EXTRACTED FROM THE CASE: Cost saving has been achieved in all departments i. e. design, development, purchasing, production, materials, logistics and sales. ? The design aimed at minimising the total number of components with a target of each component having a dual functionality. ? Components used in the car have been divided into proprietary and Tata Motors design. Tata went with ventures with many companies like bosch which supplies the engine parts. So by doing this TataNano has reduced its cost on manufacturing the car. ? Suppliers have good process capabilities and Tata motors have narrowed down suppliers to a total of 100 from 600.
Suppliers are located locally and Tata motors maintain close relationship with the suppliers by involving them in design and development process. ? Tata Nano described as “Gandhian engineering principles” where the air conditioning, power brakes, radios, etc. —are missing for entry level model to reduce the cost. ? Tata aims to set up plants in four locations in the country to save transportation costs. ? Nano’s modular design is constructed of components that can be built and shipped separately to be assembled in a variety of locations. ? Outsourcing taken up in a big way. Car promotes open distribution i. e. it mobilises large number of third parties to reach remote rural consumers, tailor products and services to more effectively serve their needs and add value to the core product through ancillary services. STRATEGIES BY TATA MOTORS TATA MOTORS MAKE A CAR SO INEXPENSIVELY ? The car is smaller in overall dimensions than the Maruti, but it offers about 20% more seating capacity as a result of design choices such as putting the wheels at the extreme edges of the car ? The Nano is also much lighter than comparable models as a result of efforts to reduce the mount of steel in the car including the use of an aluminium engine and the use of lightweight steel where possible ? Tata Nano described as “Gandhian engineering principles” where the air conditioning, power brakes, radios, etc. —are missing for entry level model to reduce the cost. ? Nano’s modular design is constructed of components that can be built and shipped separately to be assembled in a variety of locations. Outsourcing taken up in a big way. ? No air conditioning on standard model ? Windows wind by hand ? Manual steering no air bag ? 624cc two cylinder engine in boot giving max speed of 70km/h ?
Plastic and adhesive replaces welding ? Bodywork made of sheet-metal and plastic MANAGEMENT POLICIES ? It locates the vendors locally by co-locating them with the plant so as to save on logistics cost. ? Tata Motors has defined criteria for choosing suppliers i. e. those who have high process capabilities. ? It involves suppliers in the design and development process of the car. ? It locates the vendors locally by co-locating them with the plant so as to save on logistics cost. ? Tata Motors aims to achieve a low vendor base as it considers it effective for attaining long term objective of cost reduction and quality improvement.
Thus it reduced its network of 600 suppliers to 100. ? Tata believes in entering into long term contracts with the suppliers instead of annual contracts which again aims at low costs in the long run. ? Tata Motors not only works upon its own processes but even helps vendors innovate in their processes so to enhance their process capabilities. Thus vendor management policy adopted by Tata Motors in case of Nano by building strong relationships with the suppliers i. e. promoting SRM (Supplier Relationship Management) as Nano has about 90% of the total car being outsourced.