Trailing, Tata Motors gears for efficiency race

Trailing, Tata Motors gears for efficiency race
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First Published: Tue, Feb 06 2007. 08 11 AM IST
Updated: Tue, Feb 06 2007. 08 11 AM IST
NEW DELHI: Tata Motors Ltd is rolling out a major initiative that will boost employee productivity at its car factory. It will do this through automation and by asking more suppliers to provide pre-assembled components .
Using a very rudimentary measure of employee productivity, Tata’s employees are almost 28% less efficient than rival Maruti Udyog Ltd, which is the country’s largest car maker, selling one out of every two cars sold .
Maruti rolls out 650,000 cars a year with 4,000 workers at its Gurgaon plant. Tata Motors, which employs 1,760 workers at its Pune factory, produces 225,000 cars a year. That means each Maruti worker is producing, on average, 163 cars, while a Tata Motors worker is producing 128. Both employee numbers are for those working directly on the shop floor.
That is about to change, says Tata Motors, the country’s second largest passenger-vehicle maker. An expansion of capacity in Pune to 300,000 by year-end means that the same Tata Motors worker will soon produce 170 cars.
“We are an old company,’’ said Praveen Kadle, executive director of finance at Tata Motors. “There is always room for improvement.’’
Kadle said the company is now going to introduce “low-cost automation”. It will also work closely with suppliers to reduce the number of people who work on putting a component together.
Tata Motors’ employees have to put together more components to assemble the cars because its suppliers deliver a larger number of sub-parts that the workers then put together. At Maruti, vendors supply bigger portions of a car that then get assembled.
Kadle says that cost-per-employee as a proportion of Tata Motors’ sales is dipping, by almost 10 percentage points each year. In the nine months ended December, that figure was 5.5%of sales. Its revenue in the period was Rs 19,250 crore. This figure includes all employees making a wide spread of Tata vehicles. Trucks, of which it is the largest manufacturere, typically take longer to assemble.
At Maruti, which only makes passenger vehicles, employee costs as a percentage of sales is 2%.
Tata Motors has already reduced the number of its vendors to 1,000 from 1,600 five years ago. A smaller supplier base make each supplier responsible for a larger portion of a car, reducing the need for the car-maker to spend time on assembling sub-components in its factory. So, a single vendor could supply an entire door , or a larger portion of it, to the company, instead of a dozen vendors supplying different components of a door such as panels, wiring and glass.
Productivity measured by the number of cars produced per employee is “a key determinant of margins, but it is cumbersome to get this data, ” says S Ramnath, an analyst at SSKI Securities. “We prefer to use employee costs as a percentage of sales.”
Maruti dominates the car market with its compact cars ranging from the Alto to the Zen. Its cheapest car, though, is the 800 brand, which sells at around Rs2 lakh. Maruti sources design and technology from its Japanese parent. Tata’s only compact car, the Indica, sells its most basic model at Rs2.2 lakh and its only import is the design.
“Maruti is based on the Japanese system of production and uses resources more efficiently,” says Ashutosh Goel, analyst with Edelweiss Securities. “They also have a leaner base of vendors.” Indeed, Maruti says it has pared its supplier base to 280 from over 350 a couple of years ago.
While Tata Motors is stepping up productivity in Pune, it is likely to lag behind Maruti’s productivity—again just measured by the number of employees and their production—at its new Singur factory in West Bengal.
When it is completed sometime in 2008, the factory is slated to manufacture what is expected to be India’s cheapest car. Tata Motors has said it will hire 2,000 people to make 250,000 cars a year, 38 fewer cars per worker than Maruti .
“Productivity is only one parameter, we have to look at other factors when we set up a factory,” said a Tata Motors spokesperson.
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First Published: Tue, Feb 06 2007. 08 11 AM IST
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