Managing organizational challenges in India: a snapshot through auto industry

Apr 10, 2023Managing Organizational & Management Challenges in India

Managing Organizational & Management Challenges in India

Presented by:

Hardik Dave

Santosh Kumar Sahu

P E Kannan

TVS Motor Company Ltd.

AIMA – Robert Bosch 36th National Competition for Young Managers

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The theme has been broadly explained and discussed through practical

studies conducted in automobile industry, two-wheeler in particular - as an

apt example of India growth story, and reflective of Indian customer

sentiment through the years, and hence can be appreciated better.

Theme of Presentation:

“In the business world the rear view mirror is always clearer than

the windshield.”

– Warren Buffet

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Step 1 •Identifying bottlenecks and mapping related functions

Step 2 •Interaction with functional managers, zero down on major challenges

Step 3 •Cause & Effect analysis, historical study

Step 4 •Structuring Solutions to address challenges

Step 5 •Suggest solutions, get feedback from functions

Approach

Final Presentation

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Maximize stakeholder value

Challenges faced by an organization

Ensure availability ofmaterial

Maximize Revenues/Market share

Competitors’ products

Understanding customer

After sales Service

Market Expansion

Quality of Material

Resource constraints

Time of order – Lean / JIT

Market based pricing

Rising input costs

Manufacturing costs

Protect & Improve Margin

Sales Network / Channels

Optimize Marketing expenses

4


Manufacturer dominated market

Customer - centric

Economic Liberalization – 1991-92

JVs with foreign companies

Technology transfer and in-house R&D

High Competition and variety – 2000s

Econ

omie

s of

Sca

le

Inno

vative

Des

ign

& S

tyle

Rise in Disposable income

5

Shift in Market Orientation


Customer

Behaviour Pattern of Indian Customer:

Markets – Product

Demand

Maximize Revenues/Market Share

6


Sales-split of two wheelers in three broad categories

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UOM: %


Market forces (Threats): Porter’s model

Higher the Volume, Lower the costs

Product Differentiation / USP Create Entry Barriers / JVs

Adopt the substitutes, Diversify

First Mover, Acquisitions, Marketing Strategies

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Pri

ce

( Will

ingness

To P

ay)

Competitive Edge = Time Of Launch

PPM / Six Sigma (Perceived Customer Quality)

Hygiene Factor

Quality

Change in Business Orientation

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“Meeting demand in time, at the least cost”


Change in Product pricing

“ Manage cost to maintain / improve margin ”

Traditional pricing

Cost

Margin

= Price

Price

Margin

= Cost

Competitive pricing


Percentage change in prices since 2005 (base year)

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Cost structure in automobile (2W) industry

12


+

+

LabourConsum

ablePower &

FuelDepn R & M Rejection

Interest OthersMaterial

Cost

Conversion

Packing Logistics ProfitTier 2

LabourConsum

ablePower &

FuelDepn R & M Rejection

Interest OthersMaterial

Cost

Conversion

Packing Logistics ProfitTier 1

Total Cost of the product

OEM Material CostManufacturing

costLogistics

CostOther variable

costFixed Cost

Profit

+

Anatomy of cost structure

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How visible are these costs ???


Control total cost :

Design strategiesSourcing strategiesManufacturing strategiesSales & Marketing strategies

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Definition:

Design to cost is a concept that establishes cost elements as management goals to best balance between lifecycle cost and acceptable performance within a scheduled time frame (Ref: Cooper).

It is a process that constrains design options to a fixed cost limit.

The cost limit is usually what the buyer can pay or what the marketplace demands.

An affordable product is obtained by treating target cost as an independentdesign parameter that needs to be achieved during design and development.

Key to Product cost control: Design To Cost

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Design to cost

Design to cost plays a major role in setting product target cost

Traditional approach Target cost approach

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Product requirementProduct requirement

Product designProduct design

Get` quote from supplier & settle the price

Get` quote from supplier & settle the price

Make / Buy

Make / Buy

Start development with supplier

Start development with supplier

Process designProcess design

ProductionProduction

Periodic cost reductionPeriodic cost reduction

Product requirementProduct requirement

Arrive at Target contribution

Arrive at Target contribution

Balance target cost & requirement

Balance target cost & requirement

Explore product & process design alternatives &

design

Explore product & process design alternatives &

design

ProductionProduction

Periodic cost reductionPeriodic cost reduction

Make / buyMake / buy

Target costingTarget costing

Cost projections

Cost projections

DFMEA & VA / VE

DFMEA & VA / VE


Design Approach:

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Design strategies :

Design strategies

Commonize

Managing Wastes (COPQ)

Benchmarking

Value engineering

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Sourcing strategies :

Sourcing strategies

Localization

E – Bidding / Group buying

Global sourcing

Maximize fiscal

benefits

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Apr 10, 2023Managing Organizational & Management Challenges in India 20

MBE (Management by Exception) applied based on Pareto principle in terms of costs booked under different cost centres


Seven-step Tool management system

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Higher the Uptime Higher the volumes


Higher Volumes

Asset Base

Fixed Costs

Increase Asset Turnover

Maximize margin / unit

Optimum Asset Utilization


Cate

gory

Pen

etr

ati

on

Brand stature

Hig

h

Low

Low

High

Guerilla Tactics

- Price Penetration

- Sales Incentives

- Aspirational Features

(Wego)

Wild Cards

Check future scope

Dull Bright

(Liquidate) (Spend

more on Mktg.)

White Spaces

(Capitalize on market opportunities)

Focus on Market Expansion activities

Stars

Marketing based on rival moves

(Or maintain Status Quo)

Protostars

Brand vs. Penetration Matrix: Basis for determining Marketing activities


Model to estimate Sales & Marketing Spend

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Areas Challenges Solutions

Sales & Distribution

• Servicing orders on time –

Logistics

• High variety

• High attrition of sales staff

• Improper financial decision

making, thereby inadequate

working capital

• High dependence on metros

• Scientific planning of logistics,

transport in SKD/CKD form

• Order clubbing – Milk Runs

• Role of OEM in recruitment,

compensation

• Financial planning support by

OEM

• Expansion in rural markets

(SKD/CKD)

After Sales service

• Retention of skilled manpower

• No intervention by OEM in

recruitment process

• Availability of proper gadgets &

tools

• Customer complaints

• New Technology for customers /

service personnel

• Basic HR policy can be mandated

& monitored by the OEM

• One-time subsidy for purchase of

proper gadgets & tools

• Easy access to company

technicians by dealer staff for

complexities

• Handy literature for reference

Sales & Service


Cost Efficiency

Maximize Stakeholder Value

Revenue Growth

Price Availability BrandServiceQuality

Operations Management

Processes

People Management

Asset Management & Optimization

Innovation Processes Work Culture

Organization Structure System & Process Flows

Financial

Customer

Internal Process

Learning & Growth

Market ExpansionFinance

Marketing

Operations / R&D

Strategy

(through all the functions)

Solu

tion Fe

edback

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STANDARDISE THE PROCESS AND IMPLEMENTATION

STANDARDISE THE PROCESS AND IMPLEMENTATION

CORPORATE OBJECTIVES/ STRATEGIC GOALS

CORPORATE OBJECTIVES/ STRATEGIC GOALS

DEPARTMENTS/FUNCTIONS = DECISION UNITS

DEPARTMENTS/FUNCTIONS = DECISION UNITS

FUNCTIONAL

OBJECTIVES/

TARGETS

FUNCTIONAL

OBJECTIVES/

TARGETSBASED ON DECISION PACKAGEBASED ON DECISION PACKAGE

ACTIVITY-1ACTIVITY-1 ACTIVITY-2ACTIVITY-2 ACTIVITY-3ACTIVITY-3

ACTIVITY PLANNING/MAPPING OF

COST DRIVERS

ACTIVITY PLANNING/MAPPING OF

COST DRIVERS

EVOLUTION OF METHODS/COSTSEVOLUTION OF

METHODS/COSTS

BASIS OF RESOURCE

ALLOCATION

BASIS OF RESOURCE

ALLOCATIONCOST- BENEFIT ANALYSIS (PERFORMANCE MANAGEMENT)COST- BENEFIT ANALYSIS (PERFORMANCE MANAGEMENT)

MEETS FUNCTIONAL OBJECTIVES?

MEETS FUNCTIONAL OBJECTIVES? NO

YES

Bu

sin

ess P

rocess R

een

gin

eeri

ng

: A

Str

uctu

red

A

pp

roach

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Features Traditional Mass Production New ways of Mass ProductionMarket dominance • Producer – governed • Driven by customer wants

Production • Low-cost, consistent quality,

standardised products

• Affordable, high-quality, customised

products to suit demand

Market trends • Homogeneous markets with low

product variety

• Stable demand

• Long product life cycles

• Heterogeneous markets and segments of

one brand

• Demand fragmentation

• Short product life cycles

Productivity and Innovation

• Operational efficiency premier –

Separate Innovation & Production

• Long runs - Standardisation

• High inventories: build to plan

• Insulated development / Vendor is

only a low-cost producer

• Total process efficiency premier -

Integration of innovation and production

• Lot sizes of one – Flexible production

• Lean / JIT: make to order

• Integrated Development / Vendor is a

design partner

Labour Relations • Lack of investment in worker skills

• Poor management /employee

relations

• High utilization of and investment in

worker skills

• Sense of community

Mass Production Challenges – Sum-up


Design to Cost

Innovation: Develop new product with customers and suppliers

simultaneously

Smaller Supplier Base, lower managing costs & better control

Global supply chain management with modern methods

Manufacturing strategy: Mass Customisation, Lean Manufacturing, Agile

Manufacturing

Use of E-Business tools for effectiveness of time, effort and costs

Performance Measurement and effective reporting structure – Reflective of

organisation objectives and goals

Empowered work teams with sufficient autonomy and responsibility

Concentrate on businesses or sectors which are relatively recession proof, and

have them as a part of product portfolio

In a nutshell:


Thank you

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“Knowing is not enough, we must apply.

Willing is not enough, we must do.”

- Johann Wolfgang

Managing organizational challenges in India: a snapshot through auto industry

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