Presentation with an overview of the challenges faced by a typical Indian organization having grown through monopolistic environment of post-independence era to the most recent customer-driven competitive setup. Followed by an in-depth analysis of the problems, root cause study & innovative solutions to tackle them in opportunistic ways.

1. AIMA – Robert Bosch 36th National Competition for Young Managers
Presented by:
Hardik Dave
Santosh Kumar Sahu
P E Kannan
TVS Motor Company Ltd.
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2. Theme of Presentation:
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.
“In the business world the rear view mirror is always clearer than the
windshield.”
– Warren Buffet
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3. Approach
• Identifying bottlenecks and mapping related functions
Step 1
• Interaction with functional managers, zero down on major
Step 2 challenges
• Cause & Effect analysis, historical study
Step 3
• Structuring Solutions to address challenges
Step 4
• Suggest solutions, get feedback from functions
Step 5
Final Presentation
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4. Challenges faced by an organization
Protect & Maximize Revenues/ Ensure availability of
Improve Margin Market share material
Understanding customer
Market based pricing Quality of Material
Competitors’ products
Resource constraints
Rising input costs After sales Service
Market Expansion Time of order – Lean / JIT
Manufacturing costs Sales Network / Channels
Optimize Marketing expenses
Maximize stakeholder value
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5. Shift in Market Orientation
Customer - centric
High Competition and variety – 2000s
Rise in Disposable income
Technology transfer and in-house R&D
JVs with foreign companies
Economic Liberalization – 1991-92
Manufacturer dominated
market
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6. Behaviour Pattern of Indian Customer:
Price
Conscious
Low
Varied
Tastes Customer Running
Costs
Maximize
Play Safe Revenues/Market Share
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7. Sales-split of two wheelers in three broad categories
UOM: %
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8. Market forces (Threats): Porter’s model
Product Differentiation / USP Create Entry Barriers / JVs
Higher the Volume, Adopt the substitutes,
Lower the costs Diversify
First Mover, Acquisitions, Marketing Strategies
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9. Change in Business Orientation
Competitive Edge = Time Of Launch
PPM / Six Sigma (Perceived Customer Quality) Quality
Hygiene Factor
“Meeting demand in time, at the least cost”
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10. Change in Product pricing
Cost
Traditional pricing Price
Margin
Price
Cost
Competitive pricing
Margin
“ Manage cost to maintain / improve margin ”
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11. Percentage change in prices since 2005 (base year)
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12. Cost structure in automobile (2W) industry
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13. Anatomy of cost structure
Total Cost of the
product
How visible are these costs ???
+
Manufacturing Logistics Other variable Fixed
OEM Material Cost Profit
cost Cost cost Cost
+
Conversion
Material
Tier 1 Cost Consum Power &
Packing Logistics Interest Others Profit
Labour Depn R & M Rejection
able Fuel
+
Conversion
Material
Tier 2 Cost Consum Power &
Packing Logistics Interest Others Profit
Labour Depn R & M Rejection
able Fuel
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14. Control total cost :
Design
strategies
Sourcing
strategies
Manufacturing
strategies
Sales & Marketing
strategies
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15. Key to Product cost control: Design To Cost
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 independent
design parameter that needs to be achieved during design and development.
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16. Design to cost
Traditional approach Target cost approach
Product requirement Product requirement
Product design Arrive at Target
contribution
Make /
Buy Balance
target cost
&
requirement
Start development with Process design
supplier
Make / buy Explore product & Cost
projections
process design
Get` quote from supplier & settle alternatives &
Target
the price design DFMEA &
costing
VA / VE
Production Production
Periodic cost reduction Periodic cost reduction
Design to cost plays a major role in setting product target cost
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17. Design Approach:
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18. Design strategies :
Commonize
Managing
Value Design Wastes
engineering strategies (COPQ)
Benchmarking
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19. Sourcing strategies :
Localization
Maximize E – Bidding
fiscal
Sourcing / Group
benefits strategies buying
Global
sourcing
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20. MBE (Management by Exception) applied based on Pareto principle in terms of costs
booked under different cost centres
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21. Seven-step Tool management system
Higher the Uptime Higher the volumes
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22. Optimum Asset Utilization
Maximize
margin / unit
Fixed
Costs
Asset
Base
Increase Asset
Turnover
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23. Brand vs. Penetration Matrix: Basis for determining Marketing activities
Protostars Stars
Guerilla Tactics Marketing based on rival moves
High
- Price Penetration (Or maintain Status Quo)
- Sales Incentives
Category Penetration
- Aspirational Features (Wego)
Wild Cards White Spaces
Check future scope (Capitalize on market opportunities)
Focus on Market Expansion activities
Low
Dull Bright
(Liquidate) (Spend more on Mktg.)
Low High
Brand stature
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24. Model to estimate Sales & Marketing Spend
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25. Sales & Service
Areas Challenges Solutions
Sales & • Servicing orders on time – Logistics • Scientific planning of logistics,
Distribution
• High variety transport in SKD/CKD form
• High attrition of sales staff • Order clubbing – Milk Runs
• Improper financial decision making, • Role of OEM in recruitment,
thereby inadequate working capital compensation
• High dependence on metros • Financial planning support by OEM
• Expansion in rural markets (SKD/CKD)
After Sales • Retention of skilled manpower • Basic HR policy can be mandated &
service
• No intervention by OEM in recruitment monitored by the OEM
process • One-time subsidy for purchase of
• Availability of proper gadgets & tools proper gadgets & tools
• Customer complaints • Easy access to company technicians
• New Technology for customers / by dealer staff for complexities
service personnel • Handy literature for reference
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26. Maximize Stakeholder Value
Finance Cost Efficiency Market Expansion Revenue Growth
Financial (through all the functions)
Marketing Price Quality Service Availability Brand
Customer
Operations Asset Management Innovation
Operations / Management & Optimization Processes Work Culture
Processes
R&D
Internal Process
Learning & Growth
People Management Organization Structure System & Process Flows
Strategy
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27. CORPORATE OBJECTIVES/
STRATEGIC GOALS
FUNCTIONAL DEPARTMENTS/FUNCTIONS
OBJECTIVES/ = DECISION UNITS
TARGETS
BASED ON DECISION PACKAGE
ACTIVITY
PLANNING/MAPPING OF
COST DRIVERS
ACTIVITY-1 ACTIVITY-2 ACTIVITY-3
EVOLUTION OF
METHODS/COSTS
BASIS OF
RESOURCE
COST- BENEFIT ANALYSIS ALLOCATION
(PERFORMANCE MANAGEMENT)
MEETS
FUNCTIONAL
OBJECTIVES? NO
YES
STANDARDISE THE PROCESS AND
IMPLEMENTATION
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28. Mass Production Challenges – Sum-up
Features Traditional Mass Production New ways of Mass Production
Market dominance • Producer – governed • Driven by customer wants
Production • Low-cost, consistent quality, • Affordable, high-quality, customised
standardised products products to suit demand
• Homogeneous markets with low • Heterogeneous markets and segments of
Market trends
product variety one brand
• Stable demand • Demand fragmentation
• Long product life cycles • Short product life cycles
• Operational efficiency premier – • Total process efficiency premier -
Productivity and
Innovation Separate Innovation & Production Integration of innovation and production
• Long runs - Standardisation • Lot sizes of one – Flexible production
• High inventories: build to plan • Lean / JIT: make to order
• Insulated development / Vendor is • Integrated Development / Vendor is a
only a low-cost producer design partner
• Lack of investment in worker skills • High utilization of and investment in
Labour Relations
• Poor management /employee worker skills
relations • Sense of community
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29. In a nutshell:
 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
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30. “Knowing is not enough, we must apply.
Willing is not enough, we must do.”
- Johann Wolfgang
Thank you
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