Supply Chain Management

Case Study – Tata NANO

Submitted To:

Prof. T V Prakash Rao

Submitted By:
GAURAV KUMAR
08PG304
INTRODUCTION:

The Tata Nano is a rear-engined, four-passenger city car built by Tata Motors, aimed primarily at the
Indian market. The car is very fuel efficient, achieving around 26 kilometres per litre on the highway and
around 22 kilometres per litre in the city. It was first presented at the 9th annual Auto Expo on January
10, 2008, at Pragati Maidan in New Delhi, India.

The introduction of the Nano received media attention due to its targeted low price. The Financial Times
reported: "If ever there were a symbol of India’s ambitions to become a modern nation, it would surely
be the Nano, the tiny car with the even tinier price-tag. A triumph of homegrown engineering, the
$2,500 Nano encapsulates the dream of millions of Indians groping for a shot at urban prosperity." The
car is expected to boost the Indian economy, create entrepreneurial-opportunities across India, as well
as expand the Indian car market by 65%. The car was envisioned by Ratan Tata, Chairman of the Tata
Group and Tata Motors, who has described it as an eco-friendly "people's car".

To achieve its design goals, Tata refined the manufacturing process, emphasized innovation and sought
new design approaches from suppliers. The car was designed at Italy's Institute of Development in
Automotive Engineering — with Ratan Tata requesting certain changes, such as the elimination of one of
two windscreen wipers. Many components of the Nano are made in Germany by Bosch, such as Fuel
Injection, brake system, Value Motronic ECU, ABS and other technologies.

More than the product, Tata Motors will fundamentally revolutionize the distribution model, the go-to-
market strategy. The car has a “modular design, ” The modules will be made in a central manufacturing
plant and sent as kits to be locally assembled by hundreds of thousands of entrepreneurs closer to the
customers. Tata Motors will learn more about customer needs and tastes than anyone in the world. The
Tata Nano is as much a “distribution revolution” as it is a “product revolution”.
 1. What are the technical features of the Tata’s Nano car?

According to Tata Group's Chairman Ratan Tata, the Nano is a 33 PS car with a 623 cc rear engine
and rear wheel drive, and has a fuel economy of 4.55 L/100 km (21.97 km/L) under city road
conditions, and 3.85 L/100 km on highways (25.97 km/L). It is the first time a two-cylinder non-
opposed petrol engine will be used in a car with a single balancer shaft. Tata Motors has reportedly
filed multiple patents related to the innovations in the design of Nano, with powertrain design alone
having 34 patents. The head of Tata Motors' Engineering Research Centre, Girish Wagh has been
credited with being one of the brains behind Nano's design.

According to Tata, the Nano complies with Bharat Stage-III and Euro-IV emission standards.

Speed of Tata Nano:

Top speed - 105kmph

Dimension:

Length: 3.1m

Height: 1.6 m

Width: 1.5 m

Engine specifications for Tata Nano:

Rear-wheel drive

2-cylinder, 624 cc

33 bhp

Multi point fuel injection petrol engine

Engine is rear mounted

1st time a 2-cylinder gasoline engine was being used in a car with single balancer shaft

Anti-vibe balancer shaft

Safety features for Tata Nano - The 1 Lakh car:

Sheet metal body

Crumple zones

Intrusion resistant doors

Seat belts
 Strong seats and anchorages

Rear tailgate glass bonded to the body

Tubeless Tyres

How green is Tata Nano?

Tailpipe emission exceeds current regulatory requirements

Lower overall pollution level than two-wheelers

Fuel efficient (20 km/litre), ensures low carbon dioxide emissions

Front Bonnet

Holds Battery

Wind-Shield washer bottle

Room for single suitcase

Spare wheel

2. How could Tata Motors make a car so inexpensively?

This is how Tata Nano Saves cost?

No Radio, Power windows, air conditioning, anti lock brakes, air bags, remote locks or power

steering.

Rear wheel drive: manually actuated 4-speed trans axle that gives the car better fuel

efficiency

Wheel Bearing: Wheel bearing is strong enough to drive the car at 72kmph but would quickly

wear out at higher speeds.

Analogue speedometer, odometer and fuel gauge.

Single windscreen wiper

At about $2,500 retail, the Nano is the most inexpensive car in the world. Its closest competitor, the
Maruti 800, made in India by Maruti Udyog, sells for roughly twice as much. To put this in perspective,
the price of the entire Nano car is roughly equivalent to the price of a DVD player option in a luxury
Western car. The low price point has left other auto companies scrambling to catch up. The other
reasons were:

a) Thinking outside the patent box:

How could Tata Motors make a car so inexpensively? It started by looking at everything from
scratch, applying what some analysts have described as 'Gandhian engineering' principles - deep
frugality with a willingness to challenge conventional wisdom. A lot of features that Western
consumers take for granted - air conditioning, power brakes, radios, etc - are missing from the entry-
level model.

More fundamentally, the engineers worked to do more with less. The car is smaller in overall
dimensions than the Maruti, but it offers about 20 per cent 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 amount of
steel in the car (including the use of an aluminum engine) and the use of lightweight steel where
possible. The car currently meets all Indian emission, pollution, and safety standards, though it only
attains a maximum speed of about 65 mph. The fuel efficiency is attractive - 50 miles to the gallon.

Tata Motors has filed for 34 patents associated with the design of the Nano, which contrasts with
the roughly 280 patents awarded to General Motors every year. Admittedly that figure tallies all of
GM's research efforts, but if innovation is measured only in terms of patents, no wonder the Nano is
not of much interest to Western executives.

Measuring progress solely by patent creation misses a key dimension of innovation: Some of the
most valuable innovations take existing, patented components and remix them in ways that more
effectively serve the needs of large numbers of customers.

b) A modular design revolution

But even this broader perspective fails to capture other significant dimensions of innovation. In fact,
Tata Motors itself did not draw a lot of attention to what is perhaps the most innovative aspect of
the Nano: its modular design.

The Nano is constructed of components that can be built and shipped separately to be assembled in
a variety of locations. In effect, the Nano is being sold in kits that are distributed, assembled, and
serviced by local entrepreneurs.

As Ratan Tata, chairman of the Tata group of companies, observed in an interview with The Times of
London: "A bunch of entrepreneurs could establish an assembly operation and Tata Motors would
train their people, would oversee their quality assurance and they would become satellite assembly
operations for us. So we would create entrepreneurs across the country that would produce the car.
We would produce the mass items and ship it to them as kits. That is my idea of dispersing wealth.
The service person would be like an insurance agent who would be trained, have a cell phone and
scooter and would be assigned to a set of customers."

In fact, Tata envisions going even further, providing the tools for local mechanics to assemble the
car in existing auto shops or even in new garages created to cater to remote rural customers.

With the exception of Manjeet Kripalani, BusinessWeek's India bureau chief, few have focused on
this breakthrough element of the Nano innovation.

This is part of a broader pattern of innovation emerging in India in a variety of markets, ranging from
diesel engines and agricultural products to financial services. While most of the companies pursuing
this type of innovation are Indian, the US engineering firm, Cummins demonstrates that Western
companies can also harness this approach and apply it effectively.

In 2000 Cummins designed innovative 'gensets' (generation sets) to enter the lower end of the
power generator market in India. These modular sets were explicitly designed to lower distribution
costs and make it easy for distributors and customers to tailor the product for highly variable
customer environments. Using this approach, Cummins captured a leading position in the Indian
market and now actively exports these new products to Africa, Latin America, and the Middle East.
c) 'Open distribution' innovation:

Tata have called this 'open distribution' innovation because it mobilizes large numbers of third
parties to reach remote rural consumers, tailor the products and services to more effectively serve
their needs, and add value to the core product or service through ancillary services. Three
innovations in products and processes come together to support 'open distribution':

increased modularity (both in products and processes)

aggressive leveraging of existing third-party, often noncommercial, institutions in rural areas to
more effectively reach target customers
creative use of information technology, carefully integrated with social institutions, to
encourage use and deliver even greater value.
Modular designs combined with creative leverage of local third-party institutions help
participants to get better faster. Companies such as Tata and Cummins are going far beyond
'customer co-creation' in the narrow sense of soliciting isolated ideas from customers.Instead,
they are building long-term personal relationships with customers, enriched by the specialised
capabilities of broad networks of third parties that generate much deeper insight into customer
needs and afford opportunities to tailor value.

Such innovations are quite different from those in the retail distribution systems pioneered by
companies such as Dell and the leading big-box retailers. These US companies developed completely
self-contained and highly standardized facilities and services for customers. But the open-
architecture approach pioneered by Indian companies may offer much greater opportunity to
deliver more tailored value to customers than the closed-architecture US approach.

d) Welcoming users back into the design loop:

The Tata Motors/Nano approach contrasts with the strategy of most other manufacturers. For more
established automakers each new model represents an advance in tight integration, with more and
more of the functionality deeply embedded in electronics that truly represent a 'black box' to the
customer.

The days of customising cars to personalise them and push their performance limits are rapidly
receding into distant memory for the average customer. Yet, as Kathleen Franz, makes clear in her
wonderful book, Tinkering: Consumers Reinvent the Early Automobile, it was the open design of
early automobile models that blurred the lines between consumption and invention and led to a
wave of innovations that were later embraced by the auto industry.
3. Explain Tata Motors Vendor Management Policy.

Tata Nano got some car parts from vendors who did their own research and development for them
to reduce cost. Some vendors developed products with Tata Motors, and quite a few were given
designs by Tata Motors. The company even helped some vendors find international partners to
make products that met the company's requirements. Some vendors who supplied parts to Tata
Nano did competitive buying of material from countries like China and Thailand. This is very similar
to leveraging an onsite offshore model in IT. Customer can outsource their work to IT vendors who
can than do some part of the BI work at offshore at lower cost. This model would give companies
huge savings as the cost of developing and supporting BI applications would be drastically lower
when done offshore in countries like China and India. Most of the offshore vendors also promise
certain productivity gains over a period of time for customers. This is achieved through the
automation of some long-running manual task and also by cross-training resources to reduce effort.

For the first time in India, those on the fringes of the middleclass can hope to fulfill their aspirations
of owning a Tata Nano car due to low cost. Similarly, if we are able to reduce the BI cost drastically,
this technology would cover a very large segment of the population on the affordability parameter.
Just as the mobile revolution heralded inclusion in communication, making a telephone affordable
to even a student, affordable BI can make every common man take advantage of it. BI usage would
improve common man’s quality of life by helping him to make the right personal decisions. Most of
us could make better decisions in managing our personal finance, investment decisions, spending
habits, insurance policies, vehicles or even which companies to work for using BI solutions. Tata
Nano achieved the low price tag through sheer design innovation and not cutting corners on
essentials.

4. What other car makers can learn from Tata Motors Nano project?

 Emerging markets are a fertile ground for innovation. The challenge of reaching dispersed,
low-income consumers in emerging markets often spurs significant innovation. Western
executives should be careful about compartmentalizing the impact of these innovations on
the edge of the global economy. As we suggested in Innovation Blowback, these innovations
will become the basis for 'attacker' strategies that can be used to challenge incumbents in
more developed economies. What's initially on the edge soon comes to the core.
 Find ways to help customers and others on the edge to tinker with your products. Modular
and open product designs help engage large numbers of motivated users in tailoring and
pushing the performance boundaries of your products, leading to significant insight into
unmet customer needs and creative approaches to addressing those needs.
 Pay attention to institutional innovation. Western executives often become too narrowly
focused on product or process innovation. Far higher returns may come from investing in
institutional innovation - redefining the roles and relationships that bring together
independent entities to deliver more value to the market. Tata is innovating in all three
dimensions simultaneously.
 Rethink distribution models. In our relentless quest for operating efficiency, we have gone
for more standardization and fewer business partners in our efforts to reach customers. As
customers gain more power, they will demand more tailoring and value-added service to
meet their needs. Companies that innovate on this dimension are likely to be richly
rewarded.