Case Study: Indian Auto Component Industry on Achieve Excellence

November 25, 2016by Faber Infinite1

The Indian auto component industry has been experiencing a healthy growth over the last few decades. Some of the factors attributable to this include: a buoyant end-user market, improved consumer sentiment and return of adequate liquidity in the financial system.

The auto-components industry accounts for almost seven per cent of India’s Gross Domestic Product (GDP) and employs as many as 19 million people, both directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an ever increasing development in infrastructure  and adding to this the Make in India initiative is fuelling the momentum of progressing forward to make India a favorable destination for investment.

Major investments are being made into the Indian auto components sector for example: MRF Ltd is planning to invest Rs 4,500 crore (US$ 660.231 million) in its two factories in Tamil Nadu as part of its expansion plan. Hero MotoCorp is investing Rs 5,000 crore (US$ 733.59 million) in five manufacturing facilities across India, Colombia and Bangladesh, to increase its annual production capacity to 12 million units by 2020.

Challenges on the way

Over the last few years, the automotive components industry has scaled three times to US$ 39 billion in 2015-16 while exports have grown even faster to US$ 10.8 billion. This has been driven by strong growth in the domestic market and increasing globalization (including exports) of several Indian suppliers.

It has been projected that the Indian Auto Component industry is expected to grow by 8-10 per cent in FY 2017-18 which is commendable, based on higher localization by Original Equipment Manufacturers (OEM), higher component content per vehicle, and rising exports from India, as per ICRA Limited.

According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is expected to register a turnover of US$ 100 billion by 2020 backed by strong exports ranging between US$ 80- US$ 100 billion by 2026, from the current US$ 11.2 billion.

Also, as per Mr. Arvind Balaji, President, ACMA (Automotive Component Manufacturers Association Of India) 2015-16 was a challenging year, the auto component industry had registered a satisfactory growth of 8.8 per cent in 2015-16. Further, while overall exports from India witnessed de-growth of 9.58 per cent, the Indian auto component industry exports grew by 3.5 per cent.

The threat of other competitive countries and the internal country policies affecting the sector directly or indirectly, the loop holes are stretching the limbs behind and withdrawing  its roots  of development.  On one side the automobile industry is flourishing, hence the Indian auto component/ parts which is a spine of Indian automobile industry should be extremely competitive and effective.

5 key points to Improvement in growth
  • Major machine challenges are high maintenance cost, old machines and low productivity of machine which accounts for 26%, 20% and 17% respectively
  • Some other issue faced by the organization is frequent breakdown (15%), high workforce to operate (12%) and low automation or no automation (10%)
  • Supply Chain challenges included challenges due to Inventory management, Material handling, Customer demand and Transportation.
  • Inventory challenges included challenges related to Demand variability, Extended response time, Lack of visibility of supply chain, Lack of collaboration between partners, -Quality level and reliability of service from suppliers.
  • Supplier related challenges included challenges related to delayed delivery, improper Quality raw material, Non Availability, High price of product
Solutions for building momentum

In today’s global competitive business scenario, customer satisfaction at competitive prices and world class quality through on time delivery can provide a clear lead to the organization amongst the competitors. This competitive advantage on a continual basis will provide a platform for sustainable development. An integrated staged approach for the transformation journey can create an efficient working environment. The application will deliver more rational and optimum benefits.

To achieve improvements, it is imperative that the approaches are not defined narrowly and that a cross-functional team (CFT) infrastructure should be created to ensure that benefits of the application can be exploited properly.

Further implementation of focused approaches likes Total Productive Maintenance (TPM), Value Stream Mapping (VSM) and Time and motion study in the existing system can give phenomenal results in domains of machine performance, material flow and manpower productivity respectively. There by addressing 3Ms of operations.

Improve Optimization of Manpower Productivity

By analyzing the process into different levels, a standardized system can be devised to identify and resolve the existing bottleneck. This includes the study of customer demand, examining the external as well as internal conditions, combining different operations together to increase the productivity per person and also per station. The implementation route map provides the change process to align accountability and progressively ratchet up operational capability. Integrating these principles can help organizations, to optimize available resource and produce world class products as per changing market demand with proper optimization of manpower productivity.

By implementing these set of tools a significant impact can be seen in potential of reducing working capital requirements and improve profitability. Also futile time in between the shifts and in each shift wasted by per person can be reduced. This is possible through better material flow management from upstream operations leading to greater production and enhancing better movements of operators while designing the process flow.

About the Author:
Faber Vishal Kulkarni is one of the founding members and Director of Faber Infinite Consulting, with operations in Asia Pacific, Africa & Middle East. He holds a masters degree in Operations Management with his 1st degree being in Production Engineering.
This article was originally published in Business Standard. Original link available here – click here.

by Faber Infinite

Faber Infinite is an International Business Management Consulting Organization offering consulting solutions and services for Increase Profitability in Business.

One comment

  • charu

    April 25, 2017 at 12:30 pm

    hi thanks for sharing with us. Indian auto component industries are performing very well to provide better parts for automobile industries to improve their services. It is also contributing to the GDP of the country at large scale.

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