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Business News/ Companies / News/  Tata Motors to reduce suppliers to cut costs, ensure quality
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Tata Motors to reduce suppliers to cut costs, ensure quality

Auto maker aims to have one supplier for each part that goes into making a car to ensure consistent quality and pare costs

To make the company’s organization more efficient, Tata Motors MD Karl Slym has divided the back-end work, production and strategy into three divisions—the heads of which report directly to him. Photo: Pradeep Gaur/Mint (Pradeep Gaur/Mint)Premium
To make the company’s organization more efficient, Tata Motors MD Karl Slym has divided the back-end work, production and strategy into three divisions—the heads of which report directly to him. Photo: Pradeep Gaur/Mint
(Pradeep Gaur/Mint)

New Delhi: To streamline its supply chain, Tata Motors Ltd plans to reduce the number of parts suppliers by one-third in three-four years as it gears up to introduce new cars.

The auto maker, which has seen domestic market share fall in recent times, aims to have only one supplier for each part that goes into making a car to ensure consistent quality and reduce costs.

“This was conveyed to us during the last meeting that we had with the management earlier this week. They have roughly 1,200 vendors and want to bring that number down significantly," said a top executive of an auto parts manufacturer. “It is not going to happen immediately but in a phased manner, as that will hurt a lot of tier-II and tier-III vendors."

Tata Motors is expected to hold another meeting with vendors in November, when a clearer picture will emerge, said a second executive with another parts supplier.

“The overall number of Tata vendors is likely to come down to 300-400," this person said. The executives spoke on condition of anonymity.

Karl Slym, managing director and chief executive of Tata Motors, confirmed the development on the sidelines of the annual conference of trade body Automotive Component Manufacturers Association in New Delhi.

“It is a strategy," Slym said. “Instead of eight suppliers for one product, we will have one."

The firm has started working on an advanced modular product platform, which will allow it to manufacture at least four to eight products after 2015-16, The Economic Times reported on 2 September.

Until then, the company will introduce upgraded models of its existing portfolio.

Since joining the firm in October last year, Slym has been trying to identify problem areas, build new teams and chalk out strategies, investment and product plans.

He identified three problem areas—poor quality, a lack of model upgrades and the perception that the company’s cars were only good for being used as taxis—and also outlined plans for creating three divisions to centralize Tata Motors’ operations as part of the makeover, Mint reported on 14 January.

To make the company’s organization more efficient, Slym has divided the back-end work, production and strategy into three divisions. The heads of these divisions report directly to him.

The latest move by Tata Motors might still be too late for it to catch up with rivals in the near future, according to Deepesh Rathore, an independent auto consultant.

“It is good they are at least informing vendors before actually putting the system in place," Rathore said. “Some firms have already done it without even informing vendors."

In the four months ended 31 July, Tata Motors has seen its share of the passenger car market drop to 8.9% from 11.8% at the end of the previous fiscal on 31 March, Mint reported on 20 August.

Rathore said steps have been taken in the positive direction under the new management but the firm still has a long way to go. “At the moment, they can only consolidate and these efforts will take time to yield results.

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Published: 06 Sep 2013, 12:57 AM IST
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