VALUE ENGINEERING VALUE ENGINEERING PROJECT PROJECT

TATA NANOTATA NANOPRESENTED BY:PRESENTED BY:

Kartik Ayyar (PRN 08020771001)Kartik Ayyar (PRN 08020771001)Arpit Desai (PRN: 08020771002)Arpit Desai (PRN: 08020771002)

Abhishek Kumar (PRN 08020771003)Abhishek Kumar (PRN 08020771003)Deepak Kumar (PRN: 08020771004)Deepak Kumar (PRN: 08020771004)

What is Value Engineering?What is Value Engineering? The systematic application of recognized The systematic application of recognized

techniques thattechniques that a) identify the function of a product or a servicea) identify the function of a product or a service b) establish a monetary value for that function, b) establish a monetary value for that function,

and and c) provide the necessary function reliably at the c) provide the necessary function reliably at the

lowest overall costlowest overall cost A process that can improve quality, A process that can improve quality,

constructability and lower life-cycle costsconstructability and lower life-cycle costs

Why do Value Engineering?Why do Value Engineering?

To identify and remove unnecessary To identify and remove unnecessary

costs without compromising the costs without compromising the

quality and reliability of the design. quality and reliability of the design. It can be applied during conceptual It can be applied during conceptual

design (top down)or design design (top down)or design

refinement (bottom up).refinement (bottom up).

Value Engineering Is:Value Engineering Is:

Systematic problem solving processSystematic problem solving process Multi-discipline team approachMulti-discipline team approach Value orientedValue oriented Function-based analysisFunction-based analysis Free of normal design restrictionsFree of normal design restrictions

Value Engineering is Not:Value Engineering is Not:

A Design Review or Plan Review A Design Review or Plan Review

◦ It is not intended to correct omissions and errors in the It is not intended to correct omissions and errors in the

design, nor to review calculations made by the designer.design, nor to review calculations made by the designer.

A Cost Cutting ProcessA Cost Cutting Process

◦ It does not cut cost by sacrificing quality, reliability, or It does not cut cost by sacrificing quality, reliability, or

performance.performance.

Routinely Done on all DesignsRoutinely Done on all Designs

◦ It is not part of the normal design process, but a formal It is not part of the normal design process, but a formal

cost and function analysis of select projects.cost and function analysis of select projects.

What is the biggest What is the biggest number you can make number you can make

using three using three 22s?s?

Common AnswersCommon Answers

2 + 2 + 2 2 + 2 + 2 = 6= 6 2 x 2 x 2 2 x 2 x 2 = 8= 8 [(2)[(2)22]]2 2 = 16= 16 22 + 2 22 + 2 = 24= 24 22 x 2 22 x 2 = 44= 44 222222 = 222= 222 22222 2 = 484= 484 222222 = 4,194,304= 4,194,304

Outside the box answersOutside the box answers 22(2x2)!(2x2)! = 16,777,216= 16,777,216 222!222! = 1.1205 x 10= 1.1205 x 10426426

22(22)!(22)! = ∞= ∞ LogLog-1-1[hypcos 2[hypcos 2(22!)(22!)]] = ∞= ∞

And for value engineering we need to think And for value engineering we need to think outside the box…….outside the box…….

xx

Description about NanoDescription about Nano The project has literally become India's claim-for-fame in The project has literally become India's claim-for-fame in

the international-media due to Tata Motors' innovation in the international-media due to Tata Motors' innovation in developing the car, as well as keeping it low in price.developing the car, as well as keeping it low in price.

The car itself is expected to boost the Indian Economy, The car itself is expected to boost the Indian Economy, create entrepreneurial-opportunities across India, as well as create entrepreneurial-opportunities across India, as well as expand the Indian car market by 65%. expand the Indian car market by 65%.

The car was envisioned by renowned industrialist, Ratan The car was envisioned by renowned industrialist, Ratan Tata, Chairman of the Tata Group and Tata Motors, who has Tata, Chairman of the Tata Group and Tata Motors, who has described it as an eco-friendly "people's car". described it as an eco-friendly "people's car".

Nano has been greatly appreciated by many sources and Nano has been greatly appreciated by many sources and the media for its low-cost and eco-friendly initiatives which the media for its low-cost and eco-friendly initiatives which include using compressed-air as fuel and an electric-version. include using compressed-air as fuel and an electric-version.

Tata Group will mass-manufacture the Nano in very large Tata Group will mass-manufacture the Nano in very large quantities, particularly the electric-version, and, besides quantities, particularly the electric-version, and, besides selling them in India, to also export them world-wide.selling them in India, to also export them world-wide.

Competencies of Tata NanoCompetencies of Tata Nano Pricing strategyPricing strategy

Tata initially targeted the vehicle as "the least expensive Tata initially targeted the vehicle as "the least expensive production car in the world"— aiming for a starting price of in the world"— aiming for a starting price of 100,000 rupees or approximately $2300 US despite rapidly rising 100,000 rupees or approximately $2300 US despite rapidly rising material pricesmaterial prices

Export expectationExport expectation Being worlds cheapest car it is expected that not only India demand for Being worlds cheapest car it is expected that not only India demand for

Nano will go rise at global level. Since it meeting Euro-4 norms at this Nano will go rise at global level. Since it meeting Euro-4 norms at this price so this is taking as a future of small car segment .price so this is taking as a future of small car segment .

Reputation and Acceptance of Tata After launchReputation and Acceptance of Tata After launch

“ “TATAs have shown the world what Indian engineering is truly capable TATAs have shown the world what Indian engineering is truly capable of delivering highly competitive products. of delivering highly competitive products. ””

Enthusiastic supportEnthusiastic support

Tata Motors Tata Motors is receiving preliminary and some very enthusiastic is receiving preliminary and some very enthusiastic support in the media and officials, even from support in the media and officials, even from Europe, for the , for the electric-version from India as well as other-nations. The electric-version from India as well as other-nations. The enthusiasm is even higher than that for the petrol-versionenthusiasm is even higher than that for the petrol-version

Target Market • The low-cost car is clearly

intended for the masses. For the family of four that would otherwise ride on a scooter, precariously balancing a tiny tot on the front and a baby on the wife’s lap. For the first-time car buyer in India - a huge market despite the increasing number of cars in the urban and semi-urban areas.

• Its Also attract the small cars buyers like maruti 800.

It should not emit poisonous fumes.

Must meet the mandatory Emission norms.

I should be able to sit comfortably in it with my family.

It should have adequate space to at least 4 persons.

THE ORDER QUALIFIERSTHE ORDER QUALIFIERS It must be a safe car.

Must meet the mandatory Safety Standards.

It should look like a car and not a contraption.

To have a good ergonomic shape.

The expectations were very clearly spelt out and had

to be met. T

he scepticism was very evident and so

the car had to conform

to all the regulatory norm

s.

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THE ORDER WINNERTHE ORDER WINNER

PRICE TAG

OF

Rs 1 Lac

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THE COST REDUCTION PARADIGMTHE COST REDUCTION PARADIGM

Value Engineering Alternatives:

The Alternatives are:

The Guiding factor was that the cost has to be minimised for each component yet maintaining its basic functionality.

Reduce Consumption of Material being used.

Alternate Suppliers to get same material at less prices. Use alternate materials.

Eliminate use of Material.

Eliminate a process.

Or a Combination of the above.

The target w

as very

clearly defined th

at with

in

the given cost

structure of 1

Lac all the

components have to

be allocated a

maximum pric

e and the sa

me had to be

achieved using th

e available alte

rnativ

es.

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THE COST REDUCTION PARADIGMTHE COST REDUCTION PARADIGM

Locational Imperatives:

The Decisions were:

The Guiding factor was that the tax structure, on materials and manufacturing, must support the final cost of Rs 1 Lac

Establish factory in a tax free zone.

Get the tax advantages on infrastructure development.

Get the suppliers to establish base near the factory.

Get special concessions from State Govt.

In short select a manufacturin

g location where all

the advantages could be achieved.

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Their willingness to work on tight cost and time deadlines.

THE COST REDUCTION PARADIGMTHE COST REDUCTION PARADIGM

Supply Chain decisions:

The Decisions points were:

Guiding factor was that the suppliers to be selected on the basis of their acceptance to work on tight cost guidelines.

Suppliers’ Technical capability to tweak the design.

Their willingness to be a part of the prestigious project.

Their willingness to establish their facilities near the car manufacturing plant.

In short select suppliers fro

m the perspective of

deriving maximum leverage out o

f partn

ership

clearly with

the objective of swim to

gether,

creating a W

IN WIN situ

ation.

THERE HAD TO BE NO QUESTION OF SINKING

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THE CAR PER SETHE CAR PER SE

Engine Capacity Bosch 624 c.c. twin cylinder

Low capacity, Lighter ,sufficient with better Power weight ratio Rear Engine to reduce the transmission length using a balancer shaft.

4 Speed Manual Gear Box

All Aluminum Engine

Higher thermal conductivity than cast iron, Lighter and so better mileage

Engine Management System by Bosch

Superb control over emission and smooth acceleration.

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THE CAR PER SETHE CAR PER SE Dimensions L: 3.1m, W: 1.5m, H: 1.6m

Less length but more inner cabin space due to height. Comfortable leg room.

Independent Front & Rear Suspension Mcpherson Strut in Front & Coil spring & trailing arm in rear.

Better ride than Maruti 800. Single piece ribbed steel body with safety

features such as crumple zones, intrusion resitant doors, seat belts, strong seats & anchorages.

Safety requirements are adequately met. 23

AN EPITOME OF SMART ENGINEERINGAN EPITOME OF SMART ENGINEERING

Single Wiper in place of two.

Cost effective yet functionality is met

Tube less Tyres

Weight reduced by 2 Kg. Cost reduction 200 Rs. And in line with modern vehicles

Instrument console in the centre

Elegant to look at and can be used both in Left Hand & Right hand version.

The list goes on and on.

The Final verdict

THE CAR COSTS Rs 1 lac

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What makes it so cheap !What makes it so cheap ! The Tata Nano uses plastics and adhesives The Tata Nano uses plastics and adhesives

rather than welding.rather than welding. introducing the car with an artificially low price introducing the car with an artificially low price

through govt-subsidies and tax-breaks, orthrough govt-subsidies and tax-breaks, or using vertical-integration, orusing vertical-integration, or partially using inexpensive polymers or partially using inexpensive polymers or

biodegradable plastics instead of a full metal-biodegradable plastics instead of a full metal-body.body.

It has no AC, no power steering, no power It has no AC, no power steering, no power windows, no power bells and whistles.windows, no power bells and whistles.

Techniques usedTechniques used

Creative thinkingCreative thinking Life cycle costLife cycle cost

Creative thinkingCreative thinking Thinking outside the patent boxThinking outside the patent box How could Tata Motors make a car so inexpensively? How could Tata Motors make a car so inexpensively? It started by looking at everything from scratch, applying It started by looking at everything from scratch, applying

what some analysts have described as 'Gandhian what some analysts have described as 'Gandhian engineering' principles - deep frugality with a willingness to engineering' principles - deep frugality with a willingness to challenge conventional wisdom. challenge conventional wisdom.

A lot of features that Western consumers take for granted - A lot of features that Western consumers take for granted - air conditioning, power brakes, radios, etc - are missing air conditioning, power brakes, radios, etc - are missing from the entry-level model.from the entry-level model.

More fundamentally, the engineers worked to do more with More fundamentally, the engineers worked to do more with less. The car is smaller in overall dimensions than the less. The car is smaller in overall dimensions than the Maruti, but it offers about 20 per cent more seating Maruti, but it offers about 20 per cent more seating capacity as a result of design choices such as putting the capacity as a result of design choices such as putting the wheels at the extreme edges of the car.wheels at the extreme edges of the car.

A modular design revolutionA modular design revolution The Nano is constructed of The Nano is constructed of

components that can be built and components that can be built and shipped separately to be assembled shipped separately to be assembled in a variety of locations in a variety of locations

In effect, the Nano is being sold in In effect, the Nano is being sold in kits that are distributed, assembled, kits that are distributed, assembled, and serviced by local entrepreneurs.and serviced by local entrepreneurs.

CostingCosting

To Satisfy customer

TRANSPORTATION

Easy

Low Cost

HOW WHY

Basic Functions

Supporting Functions

Assure Convenience

APPERANCE

Safety

Better Mileage

Better control

Better Look

Prevent Road accidents

While Driving

Improve Efficiency

Less Fuel Consumption

Customer Oriented FAST

(TATA NANO)

Comfortness

Facilitate Application

Future of Nano (conclusion)Future of Nano (conclusion) Emerging markets are a fertile ground for innovation. The Emerging markets are a fertile ground for innovation. The

challenge of reaching dispersed, low-income consumers in challenge of reaching dispersed, low-income consumers in emerging markets often spurs significant innovation.emerging markets often spurs significant innovation.

As customers gain more power, they will demand more As customers gain more power, they will demand more tailoring and value-added service to meet their needs. tailoring and value-added service to meet their needs. Companies that innovate on this dimension are likely to be Companies that innovate on this dimension are likely to be richly rewarded.richly rewarded.

World is getting tougher day by day being unique is a World is getting tougher day by day being unique is a competitive advantage. Expectations to Nano has proved competitive advantage. Expectations to Nano has proved this .this .

After 100 years to Henry Ford , Tata has proved him again After 100 years to Henry Ford , Tata has proved him again not only he came out of the expectations but also came out not only he came out of the expectations but also came out with a platform for Indian auto sector .with a platform for Indian auto sector .

So this as per this project conclusion can be draw So this as per this project conclusion can be draw as a future car not only of Indian but also if as a future car not only of Indian but also if exported than could be to the world.exported than could be to the world.

Key RisksKey risks to our rating include:· Delay in the launch of small car ‘Nano’· Unanticipated increase in the prices steel, aluminium, other non-ferrousmetals, rubber, and engineering plastics· Fluctuations in auto loan interest rates