As the auto industry gradually resumes business, find out how a major like Tata Motors prepares to restart its journey.
It’s widely accepted that data is the new oil. But like oil, data has to be refined to be of value. That’s what a team at Tata Motors did earlier this month, to enhance the parts procurement operations of the company. The times continue to be challenging but this development has made lives of Tata Motors’ chief procurement officer Thomas Flack and team a little easier.
The newly developed supply chain mapping system essentially profiles exactly who the OEM buys what from and where, and in what currency against what contracts. The finance department can then look at how to actually model currency exposure and hedge operations. For instance, if lockdown restrictions ease in Pune but not in Chennai, the supply chain mapping tool can actually run data analytics against all of the vehicles codes that Tata Motors has and then tell which vehicle configurations can be manufactured with the parts supplied by the vendors who have started operations.
Such a tool will not only help an OEM to restart operations with relatively less problems but will also enhance overall operations and efficiency, including proper clarity of the tiers in the supply chain. This will also help in reducing the risk of large scale manufacturing disruptions like the one experienced after the 2011 earthquake and tsunami in Japan, when the shortfall of an electronic component from a Tier 4/5 Japanese supplier led to disruptions in many places. “Those kind of moments are eye- openers to us as a business that, often at times, we don't focus on the depth that we need to go. And one of the powerful tools that you have now at your fingertips is data analytics,” Flack tells Autocar Professional.
Tata Motors has around 400 suppliers, or ‘parent vendors’ as they are called in the company. This number was around 1,400 when Flack joined the company three years ago. He is the former global purchasing director at Ford Motor Company, where he had a 14-year stint. He has experience of fighting a crisis or two, like the global financial meltdown of 2007-08.
Learnings from JLR in China
OEMs and suppliers are gradually reopening in India, but it may take a couple of months or more to reach regular levels of operations. Or, perhaps, there will be a new normal in at least some parts of the manufacturing operations and supply chain.
The first wave of disruptions in India started in February, when the Coronavirus outbreak disrupted life in China. Now that operations have been on there for some time now, there could be some learnings from companies in China.
In Tata Motors’ case, it is looking at Jaguar Land Rover’s business in China to gain some lessons. “No one's ever done a mass shutdown mass restart, so there's no point in trying to figure this out on your own. So we went around and benchmarked everything that was happening, (with) specific focus in China. We have JLR operations in China and lots of suppliers in China that they work with. We could benefit from their experience,” says Flack.
Fighting shoulder-to-shoulder
Currently, working capital is the biggest challenge for most. Since there's interdependence between OEMs and suppliers, there’s also mutual support. Flack says Tata Motors is working on a “lot of creative instruments” to support vendors’ cash flow. One of them is ‘dynamic discounting’, which offers companies more flexibility in paying their suppliers with varying degrees of discount.
Flack likens the current phase of restarting, ramping up of operations to a “big symphony orchestra” The team is taking the current phase as a “positive challenge”, to be overcome with some new methods.
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