Spend analysis of leaf springs procurement

Commercial Vehicles Business Unit
(CVBU- PUNE)
A PROJECT REPORT ON
PRICE AMENDMENT ANALYSIS OF FORGING PARTS &
SPEND ANALYSIS OF LEAF SPRINGS PROCUREMENT
BY
AMIT P. JAIN
(VISHWAKARMA INSTITUTE OF MANAGEMENT, PUNE)
In Partial Fulfillment of M.B.A. course, University of Pune
PROJECT GUIDE:
MR. AMIT MADANKAR
(Manager, MPC Dept,)
JUNE - JULY 2006

ACKNOWLEDGEMENT
I would like to express my gratitude to Mr. V.N. Bedekar (General Manager
(Matls)) & Mr. A.P. Renavikar (Asst. General Manager (Matls)) for giving me an
opportunity to work on such an existing project. I also convey my sincere thanks to Mr.
Amit A. Madankar (Manager (Matls)) & Mr. Abhijeet A. Gadgil (Asst. Manager
(Matls)), moreover their precious guidance, valuable advice & suggestions from time to
time not only kept me on track, gave the right directions to my project but also inspired
me to take-up any Herculean task in future. I am also grateful to them not only for the
guidance in the project but also for involving me in their day to day work schedules &
arming me with the unique kind of experience which will prove to be very precious &
important from futuristic career point of view.
I would also like to take this opportunity to convey my special thank to Ms.
Purvee B. Parekh (Matls Officer), Mr. Mahesh V. Karekar (Officer (Matls)), Mr. Vinod
F. Moras (Materials Officer) & Mr. Rakesh Kondekar (Tech. Vocational Apprentice)
without the assistance of whom it would have been a very difficult task to complete this
project. They have been a constant source of help throughout the project.
Last but not the least I acknowledge & convey my sincere gratitude to everyone in
the MPC dept. to involve me with them & providing very needful help from time to time.
In the end I would like to thank Prof. Mr. Vhatkar & Prof. Mrs. Gote for their
kind support & co-operation during my project.
Thanking you
Amit P. Jain

INDEX
Sr. Topic Page
No. No.
01. EXECUTIVE SUMMARY 01-02
ABBREVIATIONS & MEANINGS 03-05
02. OBJECTIVE 06-13
2.1 Price Amendment Analysis of Forging Parts 06
2.2 Spend Analysis of Leaf Springs 09
03. TATA MOTORS LTD. 14-25
3.1 Company Profile 14
3.2 Milestones 16
3.3 Pune Plant 21
3.4 Commercial Vehicles by Tata Motors 23
04. INTRODUCTION & BACKGROUND 26-30
4.1 Cost Erosion in TATA Motors 26
4.2 Direct Material Costs 27
4.3 Material Pricing Committee 29
05. STEEL 31-35
5.1 Steel for Automobiles 31
5.2 Fluctuating Steel Prices 32
5.3 Effect on Automobile Industry & Role of Automotive Managers 33
5.4 The Project 34
06. FORGINGS & LEAF SPRINGS 36-47
6.1 Forgings 36
6.1.1 What is Forging? 36
6.1.2 Utility of Forgings 37
6.1.3 Forging Users 37
6.1.4 Types of Forging Processes 38
6.2 Leaf Springs 45
6.2.1 Suspension Systems 45
6.2.2 What is Leaf Spring? 45
6.2.3 Types of Leaf Springs 46
07. PROCUREMENT FUNCTION 48-53
7.1 Scientific Procurement 48
7.2 Objectives of Scientific Purchasing 48
7.3 Purchase as a Profit Centre 49
7.4 Procurement at TML, CVBU PUNE 51
08. WORKING 54-83

8.1 SAP 54
8.2.1 Information Aggregation 55
8.2.1.1 Price Increment Workings 55
8.2.1.2 Identification of parts from SAP 57
8.2.2 Information Analysis 59
8.2.2.1 Screening of Materials 59
8.2.2.2 Analysis of Screened Parts 60
8.2.2.3 Price Validity Date Checking 61
8.2.2.4 Identification of Price Amendments 62.
8.2.2.5 Identification of Last Supply Date 63
8.2.2.6 Parts Selection for Price Reduction 64
8.2.3 RFQ Analysis 66
8.3.1 Business Turnover Analysis of Vendors 68
8.3.3.1 Information Aggregation 68
8.3.1.2 Information Consolidation 70
8.3.1.3 Information Analysis 71
8.3.2 Preparation of Spend Matrix & Analysis 77
8.3.2.1 Information Aggregation 78
8.3.2.2 Identification of Alternate Suppliers 81
8.3.2.3 Identification of Vehicles for respective leaf spring 82
8.3.2.4 Analysis of Suppliers whole business 82
09. LIMITATIONS 84
10. RECOMMENDATIONS 85
11. SUMMARY 86-87
11.2.1 Turnover analysis 86
11.2.2 Preparation & Analysis of Spend Matrix 87
12. BIBLIOGRAPHY 88

Project Report
June-July 2006 -1-
01. EXECUTIVE SUMMARY
The project is PRICE AMENDMENT ANALYSIS OF FORGING PARTS &
SPEND ANALYSIS OF LEAF SPRINGS PROCUREMENT carried out at TATA
MOTORS LTD., Pune CVBU.
Forging parts play very vital role in any automobile vehicle. Forged components
are commonly found at points of shock and stress such as wheel spindles, kingpins, axle
beams and shafts, torsion bars, ball studs, idler arms, pitman arms and steering arms.
Another common application is in the power train, where connecting rods, transmission
shafts and gears, differential gears, drive shafts, clutch hubs & universal joints are often
forged. Hence pricing of these parts can affect significantly the automobile industry.
Typically all these items are forged from carbon or alloy steel. Also other materials such
as aluminum and micro alloyed steels are seeing great advances in forged auto and truck
applications. Thus for forging parts steel & its different grades are the most important
constituents.
Leaf springs are the most important constituents for suspensions systems in all
commercial vehicles. Leaf springs are the types of springs still in use & found mostly in
all small, medium &heavy commercial vehicles. a leaf spring can be made from several
leaves stacked on top of each other in several layers, often with systematically shorter
leaves which are again made up of mainly alloy steels. In TML different types of leaf
springs are used in different vehicles manufactured at TML, CVBU Pune
Both the exercises are mainly concerned with the continuously fluctuating steel
prices in the global market. With the fluctuations in the prices it is required to give price
increments to the suppliers or demand for price reductions accordingly taking into
consideration different criterion. As mentioned earlier since steel forms the most
important constituent of all forging parts & leaf springs, for strategic price amendments it
is necessary to carry out Price Amendment Analysis & Spend Analysis exercises which
can be helpful in systematic analysis of parts to be considered for price reduction in case
of forging parts & strategies for future negotiations with the vendors.
The incident of steel price reductions occurred last year rather first time in last

Project Report
June-July 2006 -2-
two decades. Hence for forging parts this analysis is to be carried out for demanding price
reductions. It has been carried out in several steps which can be broadly specified as:
1. Information aggregation
2. Information analysis
Whereas the spend analysis of leaf springs is carried out taking into consideration
probability of suppliers demanding for price increments in view of the recent steel price
increments after last years price moderations. The major steps included in it are:
1. Business Turnover analysis of Leaf Spring Vendors with TML, CVBU Pune
2. Preparation of Spend Matrix & Analysis
3. Identification of alternate vendors for all parts in Spend Matrix
The project is carried out at TATA Motors Limited, Commercial Vehicles
Business Unit Pune, in the period of two months from June 3, 2006 to August 1, 2006.

Project Report
June-July 2006 -3-
ABBREVIATIONS & MEANINGS
ABBREVIATIONS
TML Tata Motors Limited
CVBU Commercial Vehicles Business Unit
MPC Material Pricing Committee
RFI Request For Information
RFQ Request For Quotation
PO Purchase Order
SOB Share of Business
MEANINGS
1. Contract Contract is an agreement having legal recognition between TML &
the Vendor, bounded on both for purchasing particular part, raw material,
subassemblies or assemblies. Following contents are mentioned in any contract:
1. Purchasing Document Type- Identifier allowing differentiation between
the various kinds of purchasing document in the SAP system. On the basis
of the purchasing document type, purchase order, an RFQ and a
scheduling agreement can be distinguished. PMK, PMKO etc. Code
indicates for which plants (P-Pune, J-Jamshedpur etc.) also whether the
procurement is for one time or continuous.
2. Vendor Code & Vendor s name,
3. Purchasing Group - Key for a buyer or a group of buyers, who is/are
responsible for certain purchasing activities.
4. Agreement Start & End Date,
5. Short Description of the material or a part,
6. Material Group,

Project Report
June-July 2006 -4-
7. Price per unit,
8. Target quantity agreed with the vendor,
9. Total value of all materials to be released against the contract etc.
2. Event An Event is an auction where suppliers submit bids interactively in a
real-time, online marketplace. The most common bidding format used for an
auction is the Reverse Auction where suppliers compete by reducing their bids.
3. RFI The Request for Information is a supplier questionnaire that helps the
buyer in determining if the supplier is qualified enough to be invited for the event.
Through the information solicited through the RFI, the supplier can be assessed
on several parameters such as manufacturing capabilities, designing and tooling
infrastructure, employee skill level, financial status, existing clientele etc so as to
determine the potential of suppliers to deliver quality goods and services. The RFI
is usually floated when information is required from a new supplier.
4. RFQ The Request for Quotation is a document describing the items and
services that the buyer wants to purchase as well as the commercial terms, quality
norms and technical specifications for the same. It includes all the information
that the supplier needs so as to prepare accurate quotes for the event.
5. Purchase Order - A request or instruction from a purchasing organization to a
vendor (external supplier) or a plant to deliver a quantity of material or to perform
services at a certain point in time. It is a formal document prepared by the buying
department on behalf of the company to authorize a vendor to supply goods &
services in the quantities, at the time & the price specified & therein the
document. It contains the relevant information to understand clearly the
requirement of supply as per specification.
a. Part no & description of items.
b. Reference to Tata Std/ Indian Std/ International Std
c. Requirement of test certificate
d. Special quality/ test inspection requirement

Project Report
June-July 2006 -5-
e. Delivery terms
f. Payment terms
g. Visit of buyers at supplier s premises if contractually agreed with
customer
h. Special packing & dispatch instructions, if any,
i. Applicability of excise, ST, octoroi, discounts, tooling costs, development
costs, penalty etc.
j. Warrantee clause
k. Special comments, if any
l. For special characteristic items/ processes, the quality requirements like
method of inspection/ any special processes of manufacturing to be
indicated etc.
6. Scheduling Agreement - Outline agreement on the basis of which materials are
procured at a series of predefined points in time over a certain period. It is a
record maintained to keep track of a consignment received in the company until
the goods received against it are accepted & taken into stock (or rejected or
returned back to the supplier)
7. Spend - It is the expenditure of Tata Motors on the manufacturing or operating
input chosen for the event. Spend is determined on the basis of the expenditure
incurred for the input during the past 6-12 months and by extrapolating the same
for the contract period. A cross verification, where required, is done with the
projected vehicle production plan for the year.

Project Report
June-July 2006 -6-
02. OBJECTIVE & SCOPE
2.1 PRICE AMENDMENT ANALYSIS OF FORGING PARTS
Objective:
Competitive quotations by the suppliers for the purchase of any part or material
generally form the basis of price fixation for that part. However, with passage of time &
changes in business conditions, requests for price increase are received from suppliers.
Requests for price increase may be received on account of the following reasons:
Increase in cost of raw materials & brought out parts
Increase in labor wage bill
Changes in tax structure
Initial failure to estimate the costs correctly & accurately
Added work content.
Renegotiations are not always for price increments. With technological improvements or
softening of general market, buyers may seek to obtain price reductions. Price
negotiations is a very sensitive issue. It is not an ordinary activity. It involves
preparation, presence of minds, knowledge of suppliers strong & weak points etc.
As discussed in the topic of Steel there are continuous fluctuations in the steel
prices over last few years. Most of the times there were price increments. Incidentally
the corresponding price increment are required to be given to the suppliers or price
reductions have to be taken from the vendors for the parts or raw material having steel as
a vital ingredient, depending on the market price of steel. Practically it is not possible to
amend the prices at each fluctuation since these occur at very short intervals. But the
amendments are carried out at some regular intervals or according to the time demands
for which the entire price fluctuations occurred in the meanwhile period passed from the
last amendments till the date are required to be taken into consideration.
Similar price fluctuations were also there in the year 2005. But in mid 2005, from
April 2005 to February 2006 (except August, Sept. 2005), sudden price moderations of

Project Report
June-July 2006 -7-
steel prices occurred & the steel prices fell. (Refer table 2.1). The percentage price
changes during this period are shown in the following table.
Months
Steel
Coil
Rolled
Steel
Plate
Rolled
Steel
Coil Rod Sections
Apr-05 -2.98 -1.20 -3.33 -2.67 -2.69
May-05 -3.39 -2.02 -2.62 -0.42 -1.46
Jun-05 -8.86 -4.53 -8.07 -8.26 -6.60
Jul-05 -9.54 -5.89 -7.70 -2.54 -5.30
Aug-05 2.03 1.98 2.00 1.42 2.05
Sep-05 2.98 1.80 1.64 10.75 11.15
Oct-05 -0.19 -0.59 -0.97 -0.42 0.99
Nov-05 0.00 -1.78 0.00 -2.33 -2.93
Dec-05 -0.58 -2.56 -1.14 -3.25 -0.34
Jan-06 -0.78 0.31 0.82 0.00 1.35
Feb-06 -1.37 -0.46 -0.98 0.22 0.00
Mar-06 2.58 0.77 2.14 3.36 1.66
Table 2.1 Percentage change in Steel Prices from April 05 to March 06
Steel is the most vital & important ingredient of any of the forging part & the
forging parts are one of the most important & vital ingredients of any automotive like
axles, gears, shafts, connecting rods, nuts & bolts & to name the few. Also forging parts
are required to be purchased in the huge quantity. Thus any reduction in the forging parts
can reduce the cost of production on any automotive & finally of an organization as a
whole. Hence taking into consideration above fall in the steel prices it was necessary to
take price reductions for the forging parts from all respective vendors. But there are
certain criteria for deciding for which parts & from which vendors the price reductions
can be obtained or asked. Following are the most important criterion to be checked upon
before asking for a price reduction for a particular forged part from the particular vendor.
1. Validity of the particular Part- It is to be checked whether the part considered is
yet used or not in the vehicles manufactured by TML.
2. Price Validity Date- Date from which the existing price of the part or a material to
be considered is valid or other conditions applicable.
3. Price Amendment History- It is of vital importance to check whether the part to be

Project Report
June-July 2006 -8-
considered had been offered the price increment in the period when the steel
prices were rising in the past. Because the part for which the price increment had
not been offered by TML in the past, the price reduction can also be not
demanded from vendors & has to continue the procurement at the same prices.
4. Last Supply Date- It is necessary to check the last supply date in order to ensure
that the supply of a particular material is still on.
In the following topics working on these entire criterions which also form the
elements of Price Amendment Analysis is mentioned in detail.
All the information is available on the system database (SAP) of Tata Motors which is to
be scrutinized according to the requirement.
Scope:
This exercise is not at all concerned with selection or development of the vendors.
Also it does not cater to design or design changes of the parts. But it is necessary to check
whether there is a change in the previous design of a specific part or assembly to be
procured from the vendor. The exercise is mainly to analyse the previous price
amendments & select the parts to be considered for the price reduction demand. Also the
price reduction to be demanded should be calculated on the basis of per unit price
reduction of steel in the market. The reduction to be demanded is calculated by
considering the input weight required for the part to be considered for price reduction.
There is no need of zero based costing calculations. If needed the task is given to ADD
personnel.

Project Report
June-July 2006 -9-
2.2 SPEND ANALYSIS OF LEAF SPRINGS
TML CVBU, Pune is engaged in manufacturing number of commercial vehicles.
There are about 10 basic models & different variants of each. Leaf spring is an integrated
part of almost each vehicle. Different types of leaf springs are required for different types
of vehicles depending on their design, functioning, working conditions, load carrying
capability etc. Also in some of the vehicles front & the rear leaf springs are of different
types. Some of these different types of leaf springs used in the different vehicles
manufactured by TML, CVBU unit are as follows:
Sr.No. Fitment Leaf Spring Type
1
VICTA/SUMO
AMBULANCE
Assy. Rear Spring Parabolic
2
SUMO 4X4
ECONOMY/ ARMY
Assy. Rear Spring
3 SPACIO GOLD Assy. Rear Spring Parabolic
4
SUMO 4X4
DOMESTIC TC
Assy. Rear Spring
5
TATA MOBILE
FACELIFT(EXPORT)
6 207 DI AZADI Assy. Rear Spring
7
207 FLAT
LOADBODY
Assy. Rear Spring (Parabolic)
8
TATA MOBILE
EGYPT
Table 2.2 Leaf Spring used in different vehicles at Tata Motors, CVBU
Thus there are many different kinds of leaf springs used in all these vehicles
which are to be procured from different vendors. For determining the future strategy for
procurement of the leaf springs, capability of different vendors, SOB determination etc. It
is necessary to have analysis of all purchases & amount spent for leaf springs till now.
This spend analysis is also useful during the price negotiations with the vendors. As
mentioned in 2.1 negotiation requires good initial preparation, knowledge of suppliers
bargaining strength, strong & weak points, presence of mind etc. The spend analysis
exercise carried out here forms the part of the same preparation. It reveals the picture

Project Report
June-July 2006 -10-
about total spends by TML, CVBU Pune on leaf springs aggregate as well as vendor wise
individually each year from 2003 onwards till 1st
quarter of this financial year(2006-
2007), SOB of each vendor, trend of performance of each vendor each year, their
competitiveness etc.
2.2.1 Reasons for Spend Analysis
The reasons for doing a spend analysis for the item category is to know the
following:
The financial procurement value or spend for contract period:
For small C class items (i.e. those comprising only 10% of any vehicle s direct
material cost) which go into a large number of vehicles and whose validity (number
required for the vehicle) differs per vehicle, the spend can be estimated on the basis of the
existing one year spend by extrapolating the same for the contract period.
In case of A and B class items while one can initially estimate the spend as done
for C class items; at a later stage when the item category has been finalized and the
RFQ is to be prepared, it is necessary to cross check this information by identifying the
exact vehicle application and the validity and calculate the spend based on the vehicle
production plan for 6-12 months by extrapolating the same for the contract period. In
some cases the production plan may be adjusted to factor in a higher/lower anticipated
demand for a particular vehicle. The MIS PERSONNEL must identify the information
pertaining to validity and application from DENIS i.e. the production management
system of Tata Motors.
Note: The supplier s spend can also be included in the event for some item categories.
For e.g. an event for air bubble bags was conducted to obtain a price reduction on the
same being consumed by TML as well as the Tier 1 supplier and the supplier was asked
to pass on the reduction obtained in the form of the reduction in the final purchase price
for the item being procured from him.
The number of items to be developed for each item category:
This is to be done to assess the development load vis a vis the spend. An ideal
item category is one which covers a huge spend for a small number of items.

Project Report
June-July 2006 -11-
The extent of competition for that item category, i.e. the number of vendors and their
share of business(SOB):
The greater the competition for the category the better is your bargaining power.
Here it can also be determined if potential suppliers need to be identified for the item
category.
Note:
1. Potential suppliers will usually need to be identified if the number of capable
incumbent vendors is below 3. It is advisable to have at least 5 competent suppliers
for the final online bidding process. However, events in the past have been conducted
successfully even with 2 suppliers by using the Jo Jeeta Wohi Sikander strategy
where it is clearly mentioned in the RFQ that the L1 bidder will be awarded 100%
SOB.
2. A mix of new and incumbent vendors reduces the possibility of grouping and
cartelization among existing vendors.
3. Generally the competition will be low for items that are proprietary in nature and
hence it should be assessed at this stage if offline negotiations should be the preferred
option over online negotiations.
The share of business needs to be assessed to determine how the spend is
distributed among the incumbent suppliers for that item category and therefore who are
the key suppliers that should be a part of the event. One also needs to assess what % of
the total turnover of each supplier comes from that item category and therefore the
bargaining power of TML vis a vis each supplier can be assessed. A supplier will be
more interested in offering competitive prices if he has a huge stake in the item category
that is being taken up for the event.
Evaluation of impact on supplies of other item categories:
A list of all the suppliers and the various item categories supplied by them under
the item category class is to be prepared (this can be done using the Pivot Table). This
will help the EVENT SPONSOR and ADD in evaluating the impact on the supplies of
other item categories.

Project Report
June-July 2006 -12-
To determine the e-sourcing solution to be used for the item category:
On the basis of the nature of the item category, the financial spend identified, the
availability of quality suppliers and the kind of service required from a 3rd party for the
event, a decision will be taken by the EVENT SPONSOR pertaining to the e-sourcing
solution to be used for the event.
To determine if an exhibition is to be conducted for the item category
An exhibition is usually required to be conducted if the EVENT SPONSOR and
the ADD personnel need to better understand the development issues pertaining to the
item category being taken up for the event. If a standard item is being taken up for the
event, this step is not required.
To determine if the event requires other plants to be included:
There may be some item categories which are common to the commercial vehicle
plant and the passenger vehicle plant or item categories that are common to the
commercial vehicle plants at different locations. It is important to determine this as for
e.g. it is not advisable to have different suppliers supplying the same item to the car plant
and the commercial vehicles plant at Pune. Because, while it defeats the objective of
vendor rationalization, one would lose also out on the advantage of high bargaining
power possible due to clubbing of purchases.
To do a preliminary technical feasibility analysis:
On the basis of the existing knowledge of the ADD personnel, the item category
list/part list can be pruned further in case significant development issues are identified.
The format in which the SPEND ANALYSIS is to be presented to the EVENT SPONSOR
and the ADD is as under:
Sr.
No.
Category
Spend for 24
months (Rs. Lakhs)
No. of
Items
Major Suppliers SOB
P00680 V63060 A66510
1 Clips 12316708 26
45% 30% 17%
M06750 P00680
2 Cable Ties 5149489 6
54% 46%
P64390 P02230
3 Duct 3164926 19
73.50% 26.50%

Project Report
June-July 2006 -13-
J60670 M06750 P02230
4 Washer 3093990 14
19% 45% 12%
Table 7.3 SPEND ANALYSIS format
While the above presents the summarized details, for the purpose of enabling the
preliminary technical feasibility analysis it is advisable to present the categorized master
database format for each item category to the ADD personnel as under.
Table 7.4 Master Database Format for each Item Category
Note:
At the end of the spend analysis the EVENT MANAGER should be confident about 2
things:
There is definitely a scope for price reduction
The price reduction will be sustainable at the suppliers end
Scope:
Similar to previous one this exercise is also not at all concerned with selection or
development of the vendors. Also it is does not cater to design or design changes of the
any of the leaf springs. But it is necessary to cross check which type of leaf springs are
used in which types of vehicles & their different variants. The exercise is mainly related
to analysis of spend incurred on all the suppliers of the leaf springs. Also it is concerned
with the analysis of the vendors from their annual reports, balance sheets & related
financial statements. It includes finding out of the total business of any supplier how
much business has been provided by TML & who are the other major business providers
of these suppliers, their SOB in TML etc.
Categ
ory
Part
No
Descript
n
Cum rcts Cum
rct val
Sob (%) Base rate (Rs)
Qty
From t
o
(Rs) Vendo
r 1
Vendor
2
Vendor
1
Vendor
2
Clips Small
Clip
Plastic
Clip

Project Report
June-July 2006 -14-
03. TATA MOTORS LIMITED
3.1 COMPANY PROFILE
TATA MOTORS LIMITED is India s largest automobile company, with
revenues of Rs.24, 000 crores (USD 5.5 billion) in 2005-06. It is the leader by far in
commercial vehicles in each segment, and the second largest in the passenger vehicles
market with winning products in the compact, midsize car and utility vehicle segments.
The company is the world s fifth largest medium and heavy commercial vehicle
manufacturer.
The company s 22,000 employees are guided by the vision to be best in the
manner in which we operate; best in the products we deliver and best in our value
system and ethics.
Established in 1945, Tata Motors presence indeed cuts across the length and
breadth of India. Over 3.5 million Tata vehicles ply on Indian roads, since the first
rolled out in 1954. The company s manufacturing base is spread across Jamshedpur,
Pune and Lucknow, supported by a nation-wide dealership, sales, services and spare
parts network comprising about 1,200 touch points.
Tata Motors, the first company from India s engineering sector to be listed in the
New York Stock Exchange (September 2004), has also emerged as a global automotive
company. In 2004, it acquired the Daewoo Commercial Vehicles Company, Korea s
second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles
Company has already begun to launch new products. In 2005, Tata Motors acquired a
21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, with
an option to acquire the remaining stake as well. Hispano s presence is being expanded
in other markets.
These acquisitions will further extend Tata Motors global footprint, established
through exports since 1961. The company s commercial and passenger vehicles are
already being marketed in several countries in Europe, Africa, the Middle East,
Australia, South East Asia and South Asia. It has assembly operations in Malaysia,
Kenya, Bangladesh, Spain, Ukraine, Russia and Senegal.

Project Report
June-July 2006 -15-
Tata Motors has a global presence with exports of vehicles to several countries in
Europe, Africa, South America, Middle East, Asia and Australia and assembly
operations in Malaysia, Bangladesh, Kenya, South Africa, Ukraine and Russia. The
Company's vehicles are known for their reliability, durability, safety, comfort and value
for money.
The foundation of the company s growth over the last 50 years is a deep
understanding of economic stimuli and customer needs, and the ability to translate them
into customer-desired offerings through leading edge R&D. With 1,400 engineers and
scientists, the company s Engineering Research Centre, established in 1966, has
enabled pioneering technologies and products. It was Tata Motors, which developed the
first indigenously developed Light Commercial Vehicle, India s first Sports Utility
Vehicle and, in 1998, the Tata Indica, India s first fully indigenous passenger car.
Within two years of launch, Tata Indica became India s largest selling car in its segment
The pace of new product development has quickened. In 2005, Tata Motors
created a new segment by launching the Tata Ace, India s first indigenously developed
mini-truck. The years to come will see the introduction of several other innovative
vehicles, all rooted in emerging customer needs. Besides product development, R&D is
also focusing on environment-friendly technologies in emissions and alternative fuels.
Through its subsidiaries, the company is engaged in engineering and automotive
solutions, construction equipment manufacturing, automotive vehicle components
manufacturing and supply chain activities, machine tools and factory automation
solutions, high-precision tooling and plastic and electronic components for automotive
and computer applications, and automotive retailing and service operations.
True to the tradition of the Tata Group, Tata Motors is committed in letter and
spirit to Corporate Social Responsibility. It is a signatory to the United Nations Global
Compact, and is engaged in community and social initiatives on human rights, labor and
environment standards in compliance with the principles of the Global Compact.
Simultaneously, it also plays an active role in community development, serving rural
communities adjacent to its manufacturing locations.
With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.

Project Report
June-July 2006 -16-
3.2 VISION & MISSION
Mission: Drive Business Excellence. The stated goal of
the Tata Group is to secure positions of leadership for its
companies in the industries they operate in. Driving this
ambition is the quest for business excellence across all
enterprises within the group, and one of its chief navigators is
G. Jagannathan, CEO of Tata Quality Management Services.
To foster a long term relationship so as to introduce a broad range of innovative
products & services, that would benefit our customers & other stakeholders.
Vision: To be the Most Sought after Organization for Enabling Tata Group
Companies Achieve Industry Leadership.
Quality of products and Services: A Tata company shall be committed to supplying
goods and services of the highest quality standards, backed by efficient after-sales
service consistent with the requirements of the customers to ensure their total
satisfaction. The quality standards of the company's goods and services should meet the
required national standards, and the company should endeavour to achieve international
standards.
3.3 MILESTONES
It has been a long and accelerated journey for Tata Motors, India's leading
automobile manufacturer. Some significant milestones in the company's journey
towards excellence and leadership:
1945 Tata Engineering and Locomotive Co. Ltd. established to manufacture
locomotives and other engineering products.
1948 Steam road roller introduced in collaboration with Marshall Sons (UK).
1954 Collaboration with Daimler Benz AG, West Germany, for manufacture of
medium commercial vehicles. The first vehicle rolled out within 6 months
of the contract.

Project Report
June-July 2006 -17-
1959 Research and Development Centre set up at Jamshedpur.
1961 Exports begin with the first truck being shipped to Ceylon, now Sri Lanka.
1966 Setting up of the Engineering Research Centre at Pune to provide impetus
to automobile Research and Development.
1971 Introduction of DI engines.
1977 First commercial vehicle manufactured in Pune.
1983 Manufacture of Heavy Commercial Vehicle commences.
1985 First hydraulic excavator produced with Hitachi collaboration.
1986 Production of first light commercial vehicle, Tata 407, indigenously
designed, followed by Tata 608.
1989 Introduction of the Tatamobile 206 - 3rd LCV model.
1991 Launch of the 1st indigenous passenger car Tata Sierra.
TAC 20 crane produced.
One millionth vehicle rolled out.
1992 Launch of the Tata Estate.
1993 Joint venture agreement signed with Cummins Engine Co. Inc. for the
manufacture of high horsepower and emission friendly diesel engines.
1994 Launch of Tata Sumo - the multi utility vehicle.
Launch of LPT 709 - a full forward control, light commercial vehicle.
Joint venture agreement signed with M/s Daimler - Benz / Mercedes -
Benz for manufacture of Mercedes Benz passenger cars in India.
Joint venture agreement signed with Tata Holset Ltd., UK for

Project Report
June-July 2006 -18-
manufacturing turbochargers to be used on Cummins engines.
1995 Mercedes Benz car E220 launched.
1996 Tata Sumo deluxe launched.
1997 Tata Sierra Turbo launched.
100,000th Tata Sumo rolled out.
1998 Tata Safari - India's first sports utility vehicle launched.
2 millionth vehicle rolled out.
Indica, India's first fully indigenous passenger car launched.
1999 115,000 bookings for Indica registered against full payment within a
week.
Commercial production of Indica commences in full swing.
2000 First consignment of 160 Indicas shipped to Malta.
Indica with Bharat Stage 2 (Euro II) compliant diesel engine launched.
Utility vehicles with Bharat 2 (Euro II) compliant engine launched.
Indica 2000 (Euro II) with multi point fuel injection petrol engine
launched.
Launch of CNG buses.
Launch of 1109 vehicle - Intermediate commercial vehicle.
2001 Indica V2 launched - 2nd generation Indica.
100,000th Indica wheeled out.
Launch of CNG Indica.
Launch of the Tata Safari EX

Project Report
June-July 2006 -19-
Indica V2 becomes India's number one car in its segment.
Exits joint venture with Daimler Chrysler.
2002 Unveiling of the Tata Sedan at Auto Expo 2002.
Petrol version of Indica V2 launched.
Launch of the EX series in Commercial vehicles.
Launch of the Tata 207 DI.
2,00,000th Indica rolled out.
5,00,000th passenger vehicle rolled out.
Launch of the Tata Sumo'+' Series
Launch of the Tata Indigo.
Tata Engineering signed a product agreement with MG Rover of the UK.
2003 Launch of the Tata Safari Limited Edition.
The Tata Indigo Station Wagon unveiled at the Geneva Motor Show.
On 29th July, J. R. D. Tata's birth anniversary, Tata Engineering becomes
Tata Motors Limited.
3 millionth vehicle produced.
First CityRover rolled out
135 PS Tata Safari EXi Petrol launched
Tata SFC 407 EX Turbo launched
2004 Tata Motors unveils new product range at Auto Expo '04.
New Tata Indica V2 launched
Tata Motors and Daewoo Commercial Vehicle Co. Ltd. sign investment
agreement

Project Report
June-July 2006 -20-
Indigo Advent unveiled at Geneva Motor Show
Tata Motors completes acquisition of Daewoo Commercial Vehicle
Company
Tata LPT 909 EX launched
Tata Daewoo Commercial Vehicle Co. Ltd. (TDCV) launches the heavy
duty truck 'NOVUS' , in Korea
Sumo Victa launched
Indigo Marina launched
Tata Motors lists on the NYSE
2005 Tata Motors rolls out its 500,000th Passenger Vehicle
The Tata Xover unveiled at the 75th Geneva Motor Show
Branded buses and coaches - Starbus and Globus - launched
Tata Motors acquires 21% stake in Hispano Carrocera SA, Spanish bus
manufacturing Company
Tata Ace, India's first mini truck launched
Tata Motors wins JRD QV award for business excellence.
The power packed Safari Dicor is launched
Introduction of Indigo SX series - luxury variant of Tata Indigo
Tata Motors launches Indica V2 Turbo Diesel.
One millionth passenger car produced and sold
Inauguration of new factory at Jamshedpur for Novus
Tata TL 4X4 , India 's first Sports Utility Truck (SUT) is launched
Launch of Tata Novus
Launch of Novus range of medium trucks in Korea , by Tata Daewoo

Project Report
June-July 2006 -21-
Commercial Vehicle Co. (TDCV)
2006 Tata Motors unveils new long wheel base premium Indigo & X-over
concept at Auto Expo 2006
Indica V2 Xeta launched
Passenger Vehicle sales in India cross one-million mark
Tata Motors and Marco polo, Brazil, announce joint venture to
manufacture fully built buses & coaches for India & markets abroad
3.4 PUNE PLANT
Tata Motors owes its leading position in the Indian automobile industry to its
strong focus on indigenisation. This focus has driven the Company to set up world-class
manufacturing units with state-of-the-art technology. Every stage of product evolution-
design, development, manufacturing, assembly and quality control, is carried out
meticulously. Company s manufacturing plants are situated at Jamshedpur in the East,
Pune in the West and Lucknow in the North.
The Pune unit is spread over two geographical regions- Pimpri and Chinchwad &
has a combined area of around 510 acres. It was established in 1966 and has a
Production Engineering Division, which has one of the most versatile tool making
facilities in the Indian sub-continent. It houses a Vehicle manufacturing complex which
is one of the most integrated automotive manufacturing centers in the country
producing a large variety of individual items and aggregates. It is engaged in the design
and manufacture of sophisticated press tools, jigs, fixtures, gauges, metal pattern &
special tools, as well as models for the development of new ranges of automobile
products. Its capabilities have enabled Tata Motors to introduce new products and
improve existing ones without resorting to imports of dies or fixtures.
Over the years, this division has developed expertise in design and manufacture of
automated dies, fixtures and welding equipment. Its large design group is fully
conversant with state-of-the-art CAD facilities and manufacturing facilities comprising of
light and heavy CNC machine shops, jigs boring room, plastic template shop, wood

Project Report
June-July 2006 -22-
pattern and model pattern shop, five axis precision machine tools and laser control
machines. To cope with such a diverse range, four assembly lines have been established,
one each for MCVs and HCVs, LCVs, Utility vehicles and one for Passenger Cars
(Indica and Indigo).
The Passenger Car Division in 'K' block executes the entire process of car
manufacture over five shops - the engine shop, the transmission shop, press and body
shops, paint shop and the trim and final assembly shop. The shops are fully automated
ensuring that there is minimal chance for error in the manufacturing processes.
After the car is completely assembled, it goes through several checks like wheel
alignment, sideslip test, brake test, shower test, and a short test run before it is ready for
dispatch. All systems such as materials management, maintenance and other activities are
computerized, enabling smooth operations and minimum inventory needs.
The Electronics Division is engaged in the production of a wide variety of
Machine Tool Controllers, PLCs, Test rig instrumentation, Servomotors, Proximity
Switches. In addition, it has developed a number of components such as flashers, horns,
timers that are used in Tata Motors' vehicles.
Industry experts rate the fully automated Foundries at Chinchwad and Maval
among the best, worldwide. The Iron Foundry produces 30,000 Tons of high precision
castings per year at Chinchwad and Maval Foundry produces 12000 Tons per year of
spheroidal Iron castings. These include Cylinder Blocks, Cylinder Heads, Gear Box
Housing, etc. To dispense with the need for outsourcing, an Aluminium Foundry with an
annual capacity of 1200 Tonnes has also been established.

Project Report
June-July 2006 -23-
3.5 COMMERCIAL VEHICLES BY TATA MOTORS
Tata Motors is India's largest manufacturer of commercial
vehicles, with a 59-per cent market share, and it ranks among
the top six manufacturers of medium and heavy commercial
vehicles in the world. The company manufactures a wide range
of commercial vehicles, the most prominent of which are
featured here.
The company has over 130 models of light, medium and heavy
commercial vehicles, ranging from two tonnes to 40 tonnes,
buses ranging from 12 seaters to 60 seaters, tippers, special
purpose vehicles, off-road vehicles and defense vehicles.
Light commercial vehicles
Tata 207 DI single cab: 497 SP, diesel and direct injection engine, vacuum-
assisted hydraulic dual-circuit breaks with tandem master cylinder.
Tata 207 DI crew cab: 497 SP, diesel, direct-injection engine with vacuum-
assisted hydraulic dual-circuit breaks with tandem master cylinder.
SFC 407 EX turbo truck: 497 SP turbo (India 2000)
engine, vacuum-assisted hydraulic dual-circuit breaks
with tandem master cylinder.
SFC 407 turbo truck: 497 SP turbo engine with
vacuum-assisted hydraulic dual-circuit breaks with tandem master cylinder;
available in cab load-body, cab chassis, truck cowl and bus cowl versions.
SFC 709 E truck: 497 D-four cylinder engine with vacuum-assisted hydraulic
dual-circuit breaks with tandem master cylinder; available in cab chassis and cab
load-body versions.
LPT 709 E truck: 497 D-four cylinder engine with dual-circuit full air S-Cam
brakes; available in cab chassis and cab load-body versions.

Project Report
June-July 2006 -24-
SFC 709 E aerial lift turbo truck: 497-turbo engine with vacuum-assisted
hydraulic dual-circuit with automatic brake adjuster.
LPT 407 turbo truck: 497 SP turbo engine with vacuum-assisted hydraulic dual-
circuit with automatic brake adjuster; available in cab load-body, cab chassis
version.
Intermediate commercial vehicles
LPT 1109 turbo truck: 497 turbo four-cylinder engine with
dual-circuit full air S-Cam brakes.
LP 1109 turbo truck: 497 turbo four-cylinder engine with
dual-circuit full air S-Cam brakes.
Medium and heavy commercial vehicles
LPT 1615 TC turbo heavy-duty truck: Cummins 6 BT 5.9 TC water-cooled,
turbo-charged diesel engine with 6 inline cylinders, dual-circuit full air S-CAM
service brakes.
SE 1613 TC turbo truck: Cummins 6 BT 5.9 TC water-cooled, turbo-charged
diesel engine. With 6 inline cylinders and dual-circuit full air S-CAM service
brakes.
LPT 1613 TC turbo truck: Cummins 6 BT 5.9 TC
water-cooled, turbo-charged diesel engine with 6 inline
cylinders and dual-circuit full air S-CAM service
brakes.
LPT 2515 TC turbo truck: Cummins 6 BT 5.9 TC water-cooled, turbo-charged
inter cooled diesel engine with 6 inline cylinders and dual-circuit full air S-CAM
service brakes.
LPT 2516 TC: With Cummins 6 BT AA 5.9 TC water-cooled, turbo-charged,
inter-cooled diesel engine with 6 inline cylinders and dual-circuit full air S-CAM
service brakes.

Project Report
June-July 2006 -25-
Buses
SFC 407 turbo mini- bus: 497 SP turbo water-cooled direct injection diesel
engine with vacuum-assisted dual circuit hydraulic with tandem master cylinder.
LPO 1510 CGS bus (CNG bus): 6B 5.9 CNG NA
engine with 6 inline cylinders, fully duplicated full air S-
CAM brake system.
LP / LPO 1510 Bharat stage II bus: 697 NA engine
with 6 inline cylinders, fully duplicated full air S-CAM
brake system.
LPO 1616 TC inter luxury Bharat stage II bus: With Cummins 6 BT AA 5.9
TC water-cooled, turbo-charged, inter-cooled diesel engine and 6 inline cylinders
and dual-circuit full air S-CAM service brakes.
Defense vehicles
Tata 407 (4x4) soft-top troop carrier: 4 SP turbo engines with vacuum-assisted
independent hydraulic brakes.
Tata 407 / (4x2) hard-top troop carrier: 4 SP TC engine with vacuum-assisted
hydraulic dual circuit breaks and tandem master cylinder (exhaust brake optional).
Tata SD 1015 TC (4x4): Cummins 6 BT engine with air
over hydraulic breaks with independent hydraulic circuit
for front and rear.
Tata LPTA 1621 TC (6x6): Cummins 6 BT engine with
dual circuit full air S-CAM brakes and provision for trailer brakes.

Project Report
June-July 2006 -26-
04. INTRODUCTION & BACKGROUND
4.1 COST EROSION
The people at Tata Engineering do not fancy the phrase cost cutting , for no other
reason than that they see it as inadequate, even misleading in their context. Cost erosion
is the preferred terminology at India s largest automotive company, simply because it
better captures the breakthrough exercise that has shaved more than Rs. 600 crore off
Tata Engineering s expenses over the last two years. What s cut can grow back; what s
eroded is gone forever.
The cost-erosion initiative, which began in April 2000, is arguably the most
important element in a remarkable revival that has seen Tata Engineering recover from a
loss of Rs. 500 crore in the year ended March 2001 to a profit of Rs. 28 crore in the first
quarter of 2002-03. A quality improvement program based on the Six Sigma model, and
the developments of new products are the other components of this revival, but it is in
cost reduction that the gains have come thickest and fastest.
Prakash M. Telang, senior vice president (manufacturing) (currently President),
was designated the cost-erosion champion and put in charge of the entire initiative. Four
specific areas were identified as the target zones of the cost-erosion fusillade that Tata
Engineering launched in April 2000.
Direct material costs (which constitute roughly 65 per cent of all costs);
Variable conversion costs (power, fuel, water, tools, etc);
Fixed costs (labor, marketing, corporate expenses, plant operations, research and
development);
Financial restructuring (working capital, debt restructuring, balance sheet, etc).
This project is mainly focused on direct material costs as forging parts & leaf
springs both are the direct materials (being the part of the vehicle) & catered by Material
Pricing Committee Department. The department is responsible for almost all the direct
materials & their costs. Following is given the brief about how cost erosion has been
implemented for direct materials & the work done by MPC department regarding the

Project Report
June-July 2006 -27-
same under Sr. Manager (now Asst. General Manager) Mr. Atul Renavikar.
4.2 DIRECT MATERIAL COSTS
Since materials accounted for a bulk of the company s expenses, getting the
initiative on track here was crucial. It started with Ravi Kant, Tata Motor s executive
director (commercial vehicles division), assembling a team of 23 young achievers
(average age 30) in April 2000 and giving them three days to come up with ideas on how
to reduce direct materials costs by 10 per cent a year for 2000-2001 and 2001-2002.
Atul P. Renavikar, currently the Asst. General Manager (e-procurement,
Materials Pricing Committee), was one of the young guns picked for the exercise. "We
burnt plenty of midnight oil and after three days we were ready with ideas and
proposals," he says. "We had a road map." Mr. Kant liked the group s ideas enough to
give the go-ahead for a pilot cost-reduction project.
The team, comprising engineers, managers and shop-floor workers, was pared
down to eight members for the pilot project, which essentially involved exploring ways
to minimize Tata Engineering s costs on vehicle parts supplied by vendors from across
the country.
The team started with three major models, one each from the light commercial
vehicle, medium and heavy commercial vehicle, and passenger car families. This made
sense because the cost-reduction possibilities identified with these could be applied to a
whole lot of variants in the three vehicle categories
"We took apart each of these models, down to the last nut and bolt," says Mr.
Renavikar. "This helped us improve our own understanding of these vehicles and we
compared them with some benchmark vehicles, our own and the competition s." This
was followed by analyses of various kinds: zero-based costing (building the cost of the
products from scratch, from the value of the components that go into its making),
purchase-rate analysis, rate-to-weight study and value-for-money scrutiny.
The information thus gleaned came in handy when the team began renegotiating
rates with vendors, but there was more dissection before that happened. A value-chain
analysis revealed the scope for reducing incremental taxation. In the automobile

Project Report
June-July 2006 -28-
industry, value additions go through different stages and there is taxation at every stage.
"We reduced the taxation by integrating some of these value additions at the suppliers
end," says Mr. Renavikar.
Other approaches followed:
Value engineering the system of identifying alternative materials, designs,
technologies and processes was reinforced.
SWOT (strengths, weaknesses, opportunities, threats) analysis of vendors the
team worked out a strategy to maximize Tata Engineering s equation with
vendors by tracking the relationship between its bargaining power and its
purchasing value.
The single-source advantage moving from multiple vendors to a single
vendor.
Reducing imports by indigenizing wherever possible.
Suppliers looking for alternate suppliers if regular vendors could not, or
would not, reduce costs.
E-procurement the reverse-auction process, where vendors bid online to
supply requirements.
Once the pilot project was completed, the initiative in reducing direct material
costs was spread across the company. A total of 16 cross-functional teams went to work
on nibbling away at a total figure of about Rs. 4,000 crore. Each team was headed by a
leader, who was typically about 35 years old. The value teams were organized around
the aggregates: engine, gearbox, axle, etc. The commodity teams considered things
such as electrical parts, tyres, air-conditioners, seats, plastic pieces, etc.
Additionally, line-of-business teams were established. Earlier Tata Motor had
one structure to cater to all its vehicle classes, which meant there wasn't enough focus on
different automobile families. Now the company structured its marketing along different
lines of business. Price increases were factored into the overall cost-erosion venture.
"This meant that any cost increase in our products had to be negated by cutting more
costs elsewhere," says Mr. Renavikar.

Project Report
June-July 2006 -29-
The results and the savings were quick to show. Direct material costs went
down by about Rs. 200 crore in 2000-01 and by Rs. 168 crore the following year.
The project is the part of the same cost erosion program which
is an ongoing & continuous process. It is mainly concerned with the
forging parts & leaf springs. The prices of both these items are
dependent on steel prices in the market which are highly fluctuating.
Since forged parts constitute the major part of any vehicle, the price
fluctuations in these items can affect the cost of production very
significantly. The exercise carried out here is for the purpose of strategic tackling with
this instability & maintaining stability in the cost of production.
Net Raw Material consumption inclusive of processing charges increased by
18.6% to Rs.14,632.65 crores in 2005-06, from Rs.12,341.14 crores in 2004-05. This
was largely a result of high steel prices during the first quarter of the year and sharp
increase in the prices of other commodities like aluminium, copper and rubber.
However, the Company managed to maintain its ratio of net raw material consumption
to net turnover at 70% in 2005-06 on account of the on going cost reduction programme.
As a part of the cost reduction programme, the Company initiated global sourcing,
vendor rationalization and value engineering during 2005-06.
Let s have a look at brief introduction & functioning of Material Pricing
Committee Dept. at Tata Motors, CVBU Pune where this project has been carried out.
4.3 MATERIAL PRICING COMMITTEE (MPC)
Traditionally, purchasing was regarded as one of the activities of the production
management. Now it is being considered too specialized activity to be treated as line
function. Many a progressive managements have already realized that in lieu of
changing business conditions, growing competition, continual escalation in the cost of
inputs, purchasing must be given status equal to that of other major functions (i.e.
production, sales & finance).
Traditionally, the prices of procured items at Tata Motors were being finalized by
the Material Pricing Committee (MPC) using the knowledge of the manufacturing

Project Report
June-July 2006 -30-
process and zero based costing followed up with negotiations with the vendors. While
this was a time tested procedure, there was a growing need to rationalize the vendor base
as over the years the vendor base had become voluminous. Also there was a cost
reduction and quality enhancement drive in progress as mentioned before.
The MPC department is mainly concerned with the following functions:
1. Vendor Management
2. New Vendors Development
3. Item Development
4. Tooling Assistance to Vendors
5. Procurement from Suppliers
6. Monitor & Improve Vendor Performance
All above mentioned functions are performed in assistance with each other by
different divisions which include ADD (Ancillary Development Dept), Auto Materials,
ERC, MPC, SPD, QA etc. Thus procurement at Tata Motors not just a commercial
activity, but is a techno-commercial activity. More & more technical persons are being
inducted into the department. These efforts have resulted in bringing the complete
professionalism in the personnel & hence to the department as well.

Project Report
June-July 2006 -31-
05. STEEL
As mentioned above forging parts & leaf springs required for the automobiles
form very significant parts of the vehicles & their prices mainly depend on the steel
prices in the market. Thus study & analysis of the trend of the steel prices in the recent
past & in the coming future is of vital importance in this context before proceeding
further.
5.1 STEEL FOR AUTOMOBILES:
Steel has been the primary raw material for vehicle production since the invention
of the automobile. The choice of steel is not because it was the all-around perfect
material, but rather because it was better than other options. Imagine what would have
happened if early automotive industry pioneers had more material options to chose from
for the mass production of cars. Steel would not have been the obvious choice. Its
drawbacks include:
Steel is difficult to form or press
Steel is heavy
Steel needs elaborate paint processes to prevent rust.
Despite its deficiencies, steel continues to maintain several advantages over plastics:
Steel enjoys lower material costs
Steel can provide faster production rates
Steel is more easily painted than plastics and provides a superior surface finish
Steel is easily recycled. In fact, most mini-mill steel producers around the globe
rely on recycled scrap materials as the primary input for steel production.
Over time, with the aid of computer modeling to create optimum structures, steel
has been able to respond to the threat of aluminum. The result has been a decrease in steel
sheet thickness, which decreases part weight and maintains strength.
Steel is also cost efficient when the combination of price per pound, strength,
stiffness and resistance against fatigue are factored in. Steel has maintained its position in

Project Report
June-July 2006 -32-
body and chassis applications where stiffness and strength of steel are necessary, by
applying steel in well-engineered shapes for stress-bearing parts.
5.2 FLUCTUATING STEEL PRICES:
Steel company profitability has improved dramatically over the past few years,
and perhaps the most significant reason is because of the dramatic increase of hot-rolled
steel prices, which is the industry benchmark for pricing. Hot-rolled steel prices have
moderated slightly in 2005 to around $600/ton from the highs reached in September 2004
of $756/ton. On a historical basis, however, these prices remain high.
The following data reveals the buoyant price fluctuations of steel since January
2005 till April 2006 (shown in the graphical format at the end of the topic for better
visualisation)..
World Steel
Prices
US $/tonne
Hot
Rolled
Steel Coil
Hot
Rolled
Steel
Plate
Cold
Rolled
Steel
Coil
Steel
Wire
Rod
Medium
Steel
Sections
Jan 2005 650 756 746 494 651
Feb 2005 635 740 739 489 634
Mar 2005 638 753 750 487 632
Apr 2005 619 744 725 474 615
May 2005 598 729 706 472 606
Jun 2005 545 696 649 433 566
Jul 2005 493 655 599 422 536
Aug 2005 503 668 611 428 547
Sep 2005 518 680 621 474 608
Oct 2005 517 676 615 472 614
Nov 2005 517 664 615 461 596
Dec 2005 514 647 608 446 594
Jan 2006 510 649 613 446 602
Feb 2006 503 646 607 447 602
Mar 2006 516 651 620 462 612
Apr 2006 538 670 636 460 631
Table 5.1 Steel Price Fluctuations

Project Report
June-July 2006 -33-
All steel prices are in $/metric tonne. Steel price information updated July 2006.
Source: MEPS Steel Prices On-line. To obtain current steel prices including forecasts,
please visit http://www.meps.co.uk/world-price.htm.
5.3 EFFECT ON AUTOMOBILE INDUSTRY & ROLE OF AUTOMOTIVE
MANAGERS:
The automobile industry is one of the biggest consumers of steel products &
growing at a CAGR of around 17%. The growth curve of India Auto Inc. has been on an
upswing for the past few years due to higher disposable income, demographic change,
soft interest loan, better road connectivity. Continuing the upswing, the sector posted an
impressive 13.5 per cent growth in 2005-06, says the SIAM.
Year 2002-03 2003-04 2004-05 2005-06
In Number 6.2 7.24 8.4 Mn 9.7 Mn
Table 5.2 Production Trends in Automobiles (In No.s)
Source: SIAM
Demand for automobiles is likely to grow at 13% over the next year. Around 8-9% of the
steel produced is consumed by the automobile sector accounting for 2.8 mn tones. The
overall effect of increased steel prices is that automotive OEMs and suppliers must find
ways to better manage steel costs. Automotive managers should focus on two things to
manage steel input costs, benchmarking and complexity reduction.
Benchmarking: There is still a high degree of secrecy involved in the actual pricing of
steel. Other non-ferrous metals have futures markets that offer OEMs immediate price
transparency when determining their commodity purchases. While steel spot prices are
extremely volatile, what OEMs actually pay and what producers actually receive is
largely determined by a pre-defined contract. These contracts are unique to each steel
supplier and customer. The actual price that an OEM pays to procure steel, therefore, is a
blend of various contract prices along with spot prices. A variety of analytical modeling
techniques can be used to determine the best-in-class price for particular grades of steel
for a given specification. These tools are important as steel prices appear to remain high
into the foreseeable future.

Project Report
June-July 2006 -34-
5.4 THE PROJECT:
This project mainly caters to forging parts & leaf springs used in the automobiles
manufactured at TATA Motors as mentioned above. It concerns about the steel price
fluctuation since 2005 & its effect on these constituents. For forging parts taking into
consideration the slight moderations in the steel prices in 2005, the exercise has been
carried out for some of the suppliers of forging parts to identify the parts for which the
price reduction has to be taken. For that it also takes into consideration the previous price
amendments of the required concerned parts.
This is not a one time project & the same exercise has to be carried out whenever
there are price amendments to be observed for any category of materials or parts. Thus it
is also the part of regular work of the MPC department.
For leaf springs, the exercise of spend analysis has been carried out. The spend
analysis mainly reveals the spend on different types of leaf springs & their vendors,
SOBs of different vendors etc. It also gives the idea about competency level of different
vendors thro Pareto analysis. The objective behind preparing this spend analysis is to
decide the strategy for future purchases & negotiations with these suppliers.

Project Report
June-July 2006 -35-
SteelPriceFluctuation
638
518517517514510
503
516
756753
744
696
670
599
611
621
615615
607
620
636
494
489487
474472
433
422
428
474472
461
446446
462460
547
614
503
493
545
598
619
650
635
SteelCoil,
538
655
668
680
740
729
676
664
647649
RolledSteelPlate,
646651
725
706
649
739
746750
608
RolledSteelCoil
613
447Rod
631
Sections
612
602602
594
596608
536
566
606
615
651
634632
400
500
600
700
800
Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06
Month&Year
Price(US$/tonne)

Project Report
June-July 2006 -36-
06. FORGINGS & LEAF SPRINGS
6.1 FORGINGS
6.1.1 What is Forging?
Forging is the process by which metal is heated and is shaped by plastic
deformation by suitably applying compressive force. Usually the compressive force is in
the form of hammer blows using a power hammer or a press. It is a manufacturing
process where metal is pressed, pounded or squeezed under great pressure into high
strength parts known as forgings. The process is normally (but not always) performed hot
by preheating the metal to a desired temperature before it is worked. It is important to
note that the forging process is entirely different from the casting (or foundry) process, as
metal used to make forged parts is never melted and poured (as in the casting process).
Forging refines the grain structure and improves physical properties of the metal.
With proper design, the grain flow can be oriented in the direction of principal stresses
encountered in actual use. Grain flow is the direction of the pattern that the crystals take
during plastic deformation. Physical properties (such as strength, ductility and toughness)
are much better in a forging than in the base metal, which has, crystals randomly
oriented.
Forgings are consistent from piece to piece, without any of the porosity, voids,
inclusions and other defects. Thus, finishing operations such as machining do not expose

Project Report
June-July 2006 -37-
voids, because there aren't any. Also coating operations such as plating or painting are
straightforward due to a good surface, which needs very little preparation.
6.1.2 Utility of Forgings
Forgings yield parts that have high strength to weight ratio-thus are often used in
the design of aircraft frame members. The forging process can create parts that are
stronger than those manufactured by any other metalworking process. This is why
forgings are almost always used where reliability and human safety are critical. But you'll
rarely see forgings, as they are normally component parts contained inside assembled
items such a airplanes, automobiles, tractors, ships, oil drilling equipment, engines,
missiles and all kinds of capital equipment - to name a few.
A Forged metal can result in the following
Increase length, decrease cross-section, called drawing out the metal.
Decrease length, increase cross-section, called upsetting the metal.
Change length, change cross-section, by squeezing in closed impression dies. This
results in favorable grain flow for strong parts
6.1.3 Users of Forgings
Forged parts vary in size, shape and sophistication - from the hammer and wrench
in toolbox to close tolerance precision components in the Boeing 747 and NASA space
shuttle. In fact, over 18,000 forgings are contained in a 747. Some of the largest customer
markets include: aerospace, national defense, automotive, and agriculture, construction,
mining, material handling, and general industrial equipment. Even the dies themselves

Project Report
June-July 2006 -38-
that make forgings (& other metal and plastic parts) are forged.
Forgings in Automotives: The characteristics of forged parts strength, reliability and
economy are what makes them ideal for vital automotive and truck applications. Forged
components are commonly found at points of shock and stress such as wheel spindles,
kingpins, axle beams and shafts, torsion bars, ball studs, idler arms, pitman arms and
steering arms. Another common application is in the powertrain, where connecting rods,
transmission shafts and gears, differential gears, drive shafts, clutch hubs & universal
joints are often forged. Although typically forged from carbon or alloy steel, other
materials such as aluminum and microalloyed steels are seeing great advances in forged
auto and truck applications.
6.1.4 Types of Forging Processes
Impression Die Forging:
Impression die forging pounds or presses metal between two dies (called tooling)
that contain a precut profile of the desired part. Parts from a few ounces to 60,000 lbs.
can be made using this process. Some of the smaller parts are actually forged cold.
Graphical depiction of process steps:
Animated Sequence Video
Impression-die forging of steel, aluminum, titanium and other alloys can produce
an almost limitless variety of 3-D shapes that range in weight from mere ounces up to
more than 25 tons. Impression-die forgings are routinely produced on hydraulic presses,
mechanical presses and hammers, with capacities up to 50,000 tons, 20,000 tons and
50,000 lbs. respectively. Part geometry's range from some of the easiest to forge simple
spherical shapes, block-like rectangular solids, and disc-like configurations to the most
intricate components with thin and long sections that incorporate thin webs and relatively

Project Report
June-July 2006 -39-
high vertical projections like ribs and bosses. Although many parts are generally
symmetrical, others incorporate all sorts of design elements (flanges, protrusions, holes,
cavities, pockets, etc.) that combine to make the forging very non-symmetrical. In
addition, parts can be bent or curved in one or several planes, whether they are basically
longitudinal, equidimensional or flat. Most engineering metals and alloys can be forged
via conventional impression-die processes, among them: carbon and alloy steels, tool
steels, and stainless, aluminum and copper alloys, and certain titanium alloys.
Cold Forging:
Most forging is done as hot work, at temperatures up to 2300 degrees F, however,
a variation of impression die forging is cold forging. Cold forging encompasses many
processes -- bending, cold drawing, cold heading, coining, extrusions and more, to yield a
diverse range of part shapes. The temperature of metals being cold forged may range
from room temperature to several hundred degrees.
1. Forward Extrusion 2. Backward Extrusion 3. Upsetting or Heading
Cold forging encompasses many processes bending, cold drawing, cold heading,
coining, extrusion, punching, thread rolling and more to yield a diverse range of part
shapes. These include various shaft-like components, cup-shaped geometry's, hollow
parts with stems and shafts, all kinds of upset (headed) and bent configurations, as well as
combinations. Often chosen for integral design features such as built-in flanges and
bosses, cold forgings are frequently used in automotive steering and suspension parts,
antilock-braking systems, hardware, defense components, and other applications where
high strength, close tolerances and volume production make them an economical choice.

Project Report
June-July 2006 -40-
Open Die Forging:
Open die forging is performed between flat dies with no precut profiles is the dies.
Movement of the work piece is the key to this method. Larger parts over 200,000 lbs. and
80 feet in length can be hammered or pressed into shape this way.
Shafts:
1. Starting
stock, held by
manipulator.
2. Open-die
forging.
3. Progressive
forging.
4. Lathe
turning to near
net-shape.
Discs:
1. Starting
stock.
2. Preliminary
upsetting.
3. Progressive
upsetting/
forging to disc
dimensions.
4. Pierced for
saddle/mandrel
ring hollow
"sleeve type"
preform.
Saddle/Mandrel Rings
1. Preform
mounted on
saddle/mandrel.
2. Metal
displacement-
reduce preform
wall thickness
to increase
diameter.
3. Progressive
reduction of wall
thickness to
produce ring
dimensions.
4. Matching to
near net shape.

Project Report
June-July 2006 -41-
Hollow "Sleeve Type" Forging
1. Punched or trepanned disc on
tapered draw bar.
2. Progressive reduction of outside
diameter (inside diameter remains
constant) increases overall length of
sleeve.
Open-die forging comprises many process variations, permitting an extremely
broad range of shapes and sizes to be produced. In addition to round, square, rectangular,
hexagonal bars and other basic shapes, open-die processes can produce:
Step shafts solid shafts (spindles or rotors) whose diameter increases or decreases
(steps down) at multiple locations along the longitudinal axis.
Hollows cylindrical in shape, usually with length much greater than the diameter
of the part. Length, wall thickness, ID and OD can be varied as needed.
Ring-like parts can resemble washers or approach hollow cylinders in shape,
depending on the height/wall thickness ratio.
Contour-formed metal shells like pressure vessels, which may incorporate
extruded nozzles and other design features.
Seamless Rolled Ring Forging:
Seamless rolled ring forging is typically performed by punching a hole in a thick, round
piece of metal (creating a donut shape), and then rolling and squeezing (or in some cases,
pounding) the donut into a thin ring. Ring diameters can be anywhere from a few inches
to 30 feet.

Project Report
June-July 2006 -42-
1. The ring rolling process typically
begins with upsetting of the starting
stock on flat dies at its plastic
deformation temperature - in the
case of grade 1020 steel,
approximately 2200 degrees
Fahrenheit.
2. Piercing involves forcing a
punch into the hot upset stock
causing metal to be displaced
radially, as shown by the
illustration.
3. A subsequent operation,
shearing, serves to remove the
small punchout ...
4. ...producing a completed hole
through the stock, which is now
ready for the ring rolling
operation itself. At this point the
stock is called a preform.

Project Report
June-July 2006 -43-
5. The doughnut-shaped preform is
slipped over the ID roll shown here
from an "above" view.
6. A side view of the ring mill and
preform workpiece, which
squeezes it against the OD roll
which imparts rotary action...
7. ...resulting in a thinning of the section and correspondence increase
in the diameter of the ring. Once off the ring mill, the ring is then ready
for secondary operations such as close tolerance sizing, parting, heat
treatment and test/inspection.
Rings forged by the seamless ring rolling process can weigh < 1 lb up to 350,000
lbs., while O.D. s range from just a few inches up to 30-ft. in diameter. Seamless ring
configurations can be flat (like a washer), or feature higher vertical walls (approximating
a hollow cylindrical section). Heights of rolled rings range from less than an inch up to
more than 9 ft. Depending on the equipment utilized, wall-thickness/height ratios of rings
typically range from 1:16 up to 16:1.
Even though basic shapes with rectangular cross-sections are the norm, rings
featuring complex, functional cross- sections can be forged to meet virtually any design
requirements. A key advantage to contoured rings is a significant reduction in machining

Project Report
June-July 2006 -44-
operations. Custom-contoured rings can result in cost-saving part consolidations.
High tangential strength and ductility make forged rings well-suited for torque-
and pressure-resistant components, such as gears, engine bearings, wheel bearings,
couplings, rotor spacers, sealed discs and cases, flanges. Materials include not only
carbon and alloy steels, but also non-ferrous alloys of aluminum, copper and titanium, as
well as nickel-base alloys.

Project Report
June-July 2006 -45-
6.2 LEAF SPRINGS
6.2.1 Suspension Systems
At the core of every suspension system are the springs. Suspension systems utilize
three types of springs-coil, leaf (both mono and multi-leaf) and torsion bar. This is the
component that maintains proper riding height while absorbing all levels of shock force.
If worn out or damaged, other elements of the suspension will shift out of their correct
positions, subjecting them to increased wear which they are not designed for. This will
severely affect the vehicle's ride and handling.
Larger, heavier vehicles require stiffer springs than a lightweight vehicle. Spring
rate is classified as the amount of deflection displayed under a specific load. In reference
to the law of physics, a weight or force applied to a spring will compress it proportionally
to the force applied. The spring will return to its original position once the force is
removed, if not overloaded.
6.2.2 What is Leaf Spring?
Leaf springs are the first type of spring used on vehicle suspensions and are still
in use today, however, they are more commonly found on light duty trucks, SUVs, vans
and on some passenger vehicles (on the rear only). It is also one of the oldest forms of
springing, dating back to medieval times. A leaf spring is a simple form of spring,
commonly used for the suspension in wheeled vehicles. A leaf spring may be considered
as a beam of uniform strength composed of leases of equal thickness where the fiber
stress is the same throughout the length of the beam.
Sometimes referred to as a semi-elliptical
spring or cart spring, it takes the form of a slender
arc-shaped length of spring steel of rectangular cross-
section. The centre of the arc provides location for the
axle, while tie holes are provided at either end for
attaching to the vehicle body. For very heavy
vehicles, a leaf spring can be made from several
leaves stacked on top of each other in several layers, often with systematically shorter

Project Report
June-July 2006 -46-
leaves. Leaf springs can serve locating and to some extent damping as well as springing
functions.
There are a variety of leaf springs, usually employing the word "elliptical".
"Elliptical or "full elliptical" leaf springs referred to two circular arcs linked at their tips.
This is joined to the frame at the top center of the upper arc, the bottom center is joined to
the "live" suspension components, such as a solid
front axle. For heavy vehicles, they have the
advantage of spreading the load more widely over
the vehicle's chassis, whereas coil springs transfer
it to a single point. The drive axle is clamped to
the leaf springs and the shock absorbers normally
bolt directly to the axle. The ends of the leaf springs are attached directly to the chassis,
as are the tops of the shock absorbers. The main drawback with this arrangement is the
lack of lateral location for the axle, meaning it has a lot of side-to-side slop in it.
6.2.3 Types of Leaf Springs
Two basic types of leaf spring are Multi-leaf and Mono-leaf.
Multi-leaf springs are made up of several flat steel leaves bound together and
retained with a bolt or clips. The main leaf is the one leaf that is the full length of the
spring from the front mounting bushing to the rear mounting shackle. Each leaf bound to
the main leaf is gradually shorter which gives the spring a tapered profile. Each leaf
added to the spring assembly contributes to its stiffening ability. Because of the curved
construction of the leaf spring, it is also referred to as a semi-elliptical spring.
Mono-leaf, or single-leaf springs are thick in the center and taper off at each end,
which provides a variable spring rate for good load carrying capability as well as a good
ride. Mono-leaf springs are also less noisy while producing less static friction of multi-
leaf springs. Leaf eye at the rear of the spring leaf is secured to the vehicle frame using a
shackle. The spring shackles allow some movement fore and aft in response to the
physical forces on acceleration, deceleration and braking.

Project Report
June-July 2006 -47-
A more modern implementation is the Parabolic Leaf Spring. This design is
characterised by fewer leaves whose thickness varies from centre to ends following a
parabolic curve. In this design, inter-leaf friction is unwanted, and therefore there is only
contact between the springs at the ends and at the centre where the axle is connected.
Spacers prevent contact at other points. Aside from a weight saving, the main advantage
of parabolic springs is their greater flexibility, which translates into vehicle ride quality
that approaches that of coil springs. There is a trade-off in the form of reduced load
carrying capability, however.
Different Varieties of Leaf Springs
1. Double Eye Spring 2. Open Eye Slipper Springs
3. Hook End Slipper Spring 4. Radius End Slipper Spring
5. Flat End Slipper Spring 6.H.D. Slipper Style Springs

Project Report
June-July 2006 -48-
07. PROCUREMENT FUNCTION
7.1 SCIENTIFIC PROCUREMENT
Procurement or purchasing in essence is the task of buying goods of right quality,
in the right quantities, at the right time & the right price. These essentials of scientific
procurement are though complimentary yet achievement of one does not guarantee the
other. The buyer may have a source capable of giving quality product but he may not
have enough capacity to meet quantity requirements in time or the source may have the
capability to supply goods of right quality & in the right quantities but he may not supply
at the right price or at the right time. But if the buyer has right kind of sources, then he
can get the goods of right quality, in the right quantities, at the right time & at the right
price. To conclude, for scientific purchasing, greater emphasis has to be placed on
locating, selecting, developing & retaining right kind of suppliers.
7.2 OBJECTIVES OF SCIENTIFIC PURCHASING
1. To maintain continuity in respect of supply of materials to support the production
schedule & the company s operations.
2. To procure at a competitive price the needed materials, supplies, tools & services
of the right quality, in the right quantity & at the right time.
3. To avoid duplication, waste & obsolescence in respect of materials.
4. To maintain standards in quality of material based on suitability of use.
5. Developing good & reliable suppliers, & ensuring satisfactory vendor
relationship.
6. To maintain company s competitive position by controlling costs relating to
materials & thereby maximizing profits.
Diagram 7.1 shows 5 Rs of purchasing principles

Project Report
June-July 2006 -49-
Diagram 7.1 Purchasing Principles
7.3 PURCHASE AS A PROFIT CENTRE
Purchase department in almost all companies is the biggest spending dept. Almost
50 to 60% of the company s income is spent on materials. The very fact that the purchase
department is responsible for such a high percentage of the company s money highlights
its role in the profit making potential of the company. The purchase department is though
a cost centre, but considering its role to save company s money, it should be looked upon
as a profit centre. Every rupee saved in buying goes to the profit column of the balance
sheet. Hence the efficient performance of the purchasing function is vital for the efficient
functioning of the whole organization. Purchasing is no longer a clerical function, but a
dynamic discipline which can play a major role in the company s growth. The purchase
dept should employ different cost saving techniques & contribute to the corporate
profitability resulting in the growth of the economy. Diagram 7.2 shows general
purchasing cycle.
5 R s OF
PURCHASING
RIGHT
PRICE
RIGHT
TIME
RIGHT
QUALITY
RIGHT
QUANTITY
RIGHT
SOURCE

Project Report
June-July 2006 -50-
Diagram 7.2 PURCHASING CYCLE
Establish
Procurement Need
Order
Preparation
Market research/
Source selection
Follow up Receiving &
Inspection
Invoicing &
Payment
Scrutiny of purchase
requirement

Project Report
June-July 2006 -51-
7.2 PROCUREMENT AT TML, CVBU PUNE
As mentioned earlier, traditionally, the prices of procured items at Tata Motors
were being finalized by the Material Pricing Committee (MPC) using the knowledge of
the manufacturing process and zero based costing followed up with negotiations with the
vendors. While this was a time tested procedure, there was a growing need to rationalize
the vendor base as over the years the vendor base had become voluminous. Also there
was a cost reduction and quality enhancement drive in progress. It is a committee of
members of various functional areas such as purchase, manufacturing, finance, technical
etc. to discuss the cost details of an item & accord approval to the price asked for by the
prospective supplier. Salient features of the working of the price panel are as:
I. Usage value above which the panel is to approve of the price specified.
II. Vendor development department is required to give cost break up to the secretary
of the price panel
III. Members of the panel meet to scrutinize & discuss the cost aspects.
IV. Price panel if convinced about the details, accords the approval to the proposal.
Purchase order is then raised.
V. If members are not convinced, the supplier is called for discussions.
Price may be finalized either though the system of Competitive bidding (E-
Sourcing at Tata Motors) or through the Process of Negotiations with the prospective
suppliers, or through the process of negotiations with the prospective suppliers, or
through the combination of both.
In case of Competitive bidding (tendering) in the absence of negotiations price
paid under the system is usually the lowest of the prices submitted by the potential
suppliers while under negotiation the final price is arrived at after discussion.
Both methods competitive bidding through E-sourcing as well as negotiation are
useful under different conditions. Some conditions (or situations) favour competitive
bidding while others call for negotiations.
Tata Motors found E-sourcing as one of the tools by which Tata Motors could

Project Report
June-July 2006 -52-
achieve all these in the procurement function. The main benefits targeted were:
Cost reduction
Increased transparency
Shortening the procurement cycle
Rationalizing the vendor base by identifying and retaining the right vendors
Cleaning up the data base relating to design and specifications of the components
After considering various options, Tata Motors tied up with M/s FreeMarkets in
the year 2001 for e-sourcing. Between Jan 2002 and Dec 2003, Rs.1445 crs of spend has
been covered by TML through the Ariba procurement suit.
Broadly speaking, there are for 2 types of purchases in Tata Motors:
Auto Purchases: These are manufacturing inputs such as the raw materials and
components going directly into manufactured product.
Non Auto Purchases: These include Operating inputs such as Maintenance,
Repair and Operating (MRO) supplies, Capital goods such as plant and machinery
and Services for e.g. travel related services.
Again these Auto purchases & Non Auto purchases are categorized in number of
different kinds of materials like tyres, proprietary items, forging parts, sheet metal parts
etc. Also these parts are to be procured & purchased in huge quantity. Many other
different functions related with the same are also to be performed viz. vendor
management, development of new vendors for particular type of parts or raw material,
development of new items, tooling assistance required to be given to vendors, monitoring
& improving vendor performance to achieve cost reduction etc. For facilitating smooth
functioning of all these activities of procurement as well as related to procurement, these
different functions are distributed within MPC department as follows. Following tree
diagram (Diagram 7.3) reveals the structure & functioning of each element within the
department.

Project Report
June-July 2006 -53-
General Manager
(Mr. V.N. Bedekar)
Asst. General Manager
(Mr. Atul P.
Renavikar)
Divisional
Manager
(Mr. M.B. Gare)
Manager
(Mr. J.S.
Chuttar)
Senior Manager
(Mr. U.N. Dixit)
Pricing E-
sourcing
Systems ICR*
Engine
Proprietary
Casting
Non-Auto
Purchases
Sheet
Metal
1. Tyres &
Proprietary items.
2. Forging &
machined items
3. Rubber & Plastics
BROAD STRUCTURE OF MPC DEPARTMENT AT TML, CVBU
.
*- Integrated Cost Reduction
Diagram 7.3 Broad Structure Of MPC Department

Project Report
June-July 2006 -54-
08. WORKING
8.1 SAP
All the information required for both the assignments is mostly gathered using
SAP system. Hence it is essential to have some briefing about SAP.
All day to day transactions, expenses, purchase orders releases, RFQs, contracts
made, material received & to be received are stored on the system daily from different
departments of the company for the future purpose which can be retrieved whenever
required. MIS PERSONNEL is to be guided to collate the data from the SAP system. The
SAP systems of concern to us at Tata Motors are:
SAP 3.1: For information prior to 31st July 2003
SAP 4.6: from 1st August 2003
Instead of consolidating the data from the old and the new SAP systems; for the
purpose of simplicity, the data (for e.g. from 1st August 2003 to Jan 2004) can be
obtained from SAP 4.6 and extrapolated for the duration of the contract.
8.1.1 Necessity of SAP
In the automotive industry, where traditional business models are transforming
into transparent, customer-driven value chains, success depends on speed. Speed in
product development, speed in assembly, and speed in delivery and service to dealers and
customers. To stay on the fast track to success, integration of OEMs, suppliers, dealers,
and customers is essential.
SAP for Automotive industry is designed to streamline and improve disjointed
business practices -- enabling to manage multitiered networks of customers, suppliers,
and partners closely. This solution set facilitates seamless integration and collaboration
across multiple internal and external organizations. And it includes best practices that
support critical business processes -- providing full visibility into enterprise data and
increasing speed and flexibility worldwide.
With SAP for Automotive solutions, local needs and centralize control can be

Project Report
June-July 2006 -55-
balanced while opening the door to innovation in industry growth areas. SAP solutions
provide user-friendly access to information and applications all based on Web-enabled
technology.
8.2 PRICE AMENDMENT ANALYSIS OF FORGING PARTS
As mentioned earlier in topic 5.4, this project is not a one time project & the
similar exercise has to be carried out before whenever similar kind of price amendments
whether price increase or reductions are to be observed. The whole exercise can be
broadly categorized into 2 parts.
1. Information Aggregation &
2. Information Analysis
8.2.1 Information Aggregation
This is the most crucial step because it will build the foundation for all proceeding
steps to be performed for both of these exercises. The project starts with the collection of
information regarding who are the suppliers of forging parts to TML, CVBU Pune i.e.
just collection of all forging part suppliers names. Also it comprises of details regarding
the parts supplied by these vendors, detail of contracts, scheduled agreements etc.
8.2.1.1 Price Amendment Workings
The aggregation of information starts with the collection of Price Amendment
Working (PI Working) files (also known as the Master File ) of all vendors. There are
about fifty vendors of forging parts. For every vendor there is a separate file. It is
available as an excel sheet. The file includes the information regarding all parts supplied
by the supplier to the Pune plant along with their part numbers & short description
supplied by the particular supplier. The parts in the file are only those parts which have
gone the price amendments (which are mostly increments) in the past as on 1st
April
2004. It also reveals the information of materials specifications used for the particular
part, input weight & finished weight. There is a difference in the input weight & finished
weight since some of the material is removed during the forging & the machining
processes. Table 8.1 gives the format & idea of contents of the working file. Contract
numbers have also been mentioned in some of the PA working files.

Project Report
June-July 2006 -56-

Project Report
June-July 2006 -57-
It can be observed clearly from the table that the file gives the detailed
information as on which date the price amendments has been occurred, hence how much
amendment per unit kg had to be carried out & finally what is the revised price &
applicable from which date etc.
After collecting PI working files of all vendors each vendor is considered one by
one for further analysis.
8.2.1.2 Identification of Parts from SAP
As mentioned earlier in 8.1 SAP is the main database storage & processing
system used at TML, CVBU Pune. PA working file of any vendor does not give
information about all the parts supplied by any particular vendor. But it is required to
check each & every part for the price reduction. Such identification of all the parts
supplied by each vendor can be done using query ME3L (Purchasing Documents per
Vendor) (in SAP 6.4. This query is also known as Outline Agreements per Vendor .
Inputs required to be entered for getting the relevant parts & the details pertaining to their
contract & scheduled agreement are:
1. Vendor Code allotted to every vendor by TML viz. A02540 for M/s Ahmadnagar
Forgings Ltd etc. It is the compulsory field to be filled up for ME3L query.
2. Document type i.e. PMK, PMKO etc. P represents for Pune plant. For this
particular project everywhere P* is to be entered. Because all types of documents
are required for analysis here.
The snap of the screen of SAP showing inputs required to be entered according to
the need is as shown in Pic. 8.1. The information obtained has to be downloaded in the
format of excel sheet as the format & the manner in which the information is obtained
can t be used as it is. SAP facilitates the downloading of this information in the excel
sheet using Save command in System menu. In excel the data is arranged accordingly to
have better visualization & understanding using Sort command. Also unnecessary
columns are deleted.

Project Report
June-July 2006 -58-
Pic. 8.1 Screen showing inputs to be entered for ME3L query
After rearranging the data according to requirement the file takes the form as shown in
the table 8.2
Document
No.
Part No.
Document
Type
Supplier
Code
Part Description Price Effective Date
Xxxxxxxxxx xxxxxxxxxx PMK R61321 SEALING PLUG 23.39 02.11.2004
xxxxxxxxxx xxxxxxxxxx PMKO R61321
HEXBOLT
M14X1.5X90IS13726 8.8
60.21 20.06.2005
HEX NUT M18X1.5 IS13722
B8 SS9400
24.50 26.12.2004
HEX NUT M24X1.5 IS13722-
10-SS8451-8CH
46.87 16.07.2005
xxxxxxxxxx xxxxxxxxxx PMK R61321
CLEVIS PIN 6f8X12X9.5
TS17606
1.52 17.06.2003
xxxxxxxxxx xxxxxxxxxx PMK R61321 ADJUSTING SCREW 14.63 17.06.2003
xxxxxxxxxx xxxxxxxxxx PMK R61321 ADJUSTING NUT 5.69 17.06.2003
xxxxxxxxxx xxxxxxxxxx PMK R61321 ADAPTOR 7.69 27.07.2003
xxxxxxxxxx xxxxxxxxxx PMK R61321 ADAPTER 7.69 27.07.2003
xxxxxxxxxx xxxxxxxxxx PMK R61321 SHIFTER PIECE 19.32 09.01.2005
xxxxxxxxxx xxxxxxxxxx PMK R61321 PLUG 16.37 17.06.2003
PROTECTIVE SLEEVE -
UPPER 48.08 17.06.2003
xxxxxxxxxx xxxxxxxxxx PMK R61321
PROTECTIVE SLEEVE-
LOWER 42.95 17.06.2003
Table 8.2 Downloaded from SAP

Project Report
June-July 2006 -59-
The downloaded information is of all the Contracts & Scheduled Agreements
of all the parts supplied or supposed to be supplied by considered vendor which can be
chosen using Choose button as can be seen in the pic. 8.1
The file name is given such that it can be easily recognized by its naming itself, of
which vendor the particular file belongs to. Viz. A61321A badPoandContr22Jun06.xls
The table is sorted by Ascending Part No.s & then by descending prices.
8.2.2 Information Analysis
8.2.2.1 Screening of Materials
The analysis is to be carried out for each & every part, however smaller or larger
or however cheaper or costlier it may be, supplied by all the vendors. The information
gathered also contains all such parts. Some of the suppliers are engaged in supplying
more than 200 parts to TML, Pune CVBU. Thus it could be a hectic & time consuming
job to analyse each & every part. But there is a way out. It is not necessary to carry out
analysis of each & every contract. There are two screening tests to drop some of the
materials/parts from analysis list.
1. Duplication Check
2. vlookup.
1. Duplication Check - Using IF command duplication check is carried out for part
numbers to identify different types of purchases for the same part or the same
material like Continuous purchase (Document Type PMK) & One time purchases
(Document Type PMKO). The purpose is to avoid the repetition of work for the
same parts. It is carried out in the SAP downloaded file itself.
2. vlookup - The Price Increment file comes into picture at this step. It gives
readymade data of those materials which have been already given price
increments. So these are the parts surely to be considered for the price reductions.
The question arises about those parts/materials which are present in the SAP
downloaded file but not in PI Working file. These are generally those
parts/materials

Project Report
June-July 2006 -60-
I. Which were not given price increment effective from 1st
April, 2004 or
II. Which are being procured from the supplier after 1st
April, 2004 or any other
similar type of reason.
Microsoft Excel facilitates this screening by vlookup command which is done
again in the SAP downloaded file itself. Thus only those parts/materials not present in the
PI working file are taken for the further analysis.
8.2.2.2 Analysis of Screened Parts
Analysis of all screened parts is required to be carried out one by one. It is again
done using SAP. For the analysis & the identification of the basic prices & description of
each part query ME3M (Purchasing Documents for Materials) is used. The query is also
known as Outline Agreement by Material .
The important inputs required to be entered for getting required information are:
1. Material or Part Number The number is allotted to each & every part/material
which is also used by the vendors for the design, drawing, communication,
negotiations as well as transaction purposes. It is the compulsory field to be filled
up for this query.
2. Document Type It is similar as explained for query ME3L . Here also the type
entered is P* as all documents of a concerned parts procured at Pune plant are
required irrespective of whether it is the continuous procurement or one time
procurement.
3. Vendor Code There may be a possibility that a single part is being supplied by
more than one supplier. It is generally done so as to ensure uninterrupted supply
of parts/materials for smooth functioning of production taking into consideration
the increasing work load due to all round spreading business of TML &
increasing demand from the market. Also there may be any unpredicted problem
occurrence from any of the vendor s side. But since just a single supplier is under
consideration at a time, the information related to just that supplier is needed.
Otherwise SAP provides information of all suppliers & it becomes cumbersome
to sort out that information.

Project Report
June-July 2006 -61-
4. Choose In the choose function RFQ is also checked in the checkbox, as RFQs of
these materials are also needed for further analysis.
Pic.8.2 shows the snap of the screen of SAP displaying the inputs to be fed for getting
data from ME3M query.
Pic. 8.2 Screen showing inputs to be entered for ME3M query
After entering all the required details the screen displaying RFQ details, Agreements &
Scheduled agreements & executing, is shown in pic. 8.3
8.2.2.3 Price Validity Date Checking
The effective dates obtained during information aggregation stage might be
misleading. It should be noted that it is the date when firstly the particular material has
been procured or purchased. In the outline agreements it indicates start of the stipulated
validity period of an outline agreement. It is the date as of which services can be
performed or materials delivered. It does not indicate the validity starting of existing
price which has been obtained through SAP. But we are concerned about the date from

Project Report
June-July 2006 -62-
which the existing price of the part/material is valid or effective.
Pic. 8.3 Screen Displaying Contract, RFQ & Scheduling Agreements of U Clamp supplied
by one of the vendors.1
Price validity can be checked in the document in item condition using PB00 (for
Document type PMK) or PB25 (for Document type PMKO) condition according to the
contract type. The document can be opened using Display Document (top left button in
pic. 8.3 above Contract). Validity date of the existing price is recorded in the SAP
downloaded file against the concerned Part Number.
8.2.2.4 Identification of Price Amendments
The procedure for obtaining all price amendments for the taken Part/Material from the
concerned vendor is exactly same as used for price validity date checking. It gives the
date on which the price increment or price reduction took place, the old price as well as
the new price which has to be again noted in the SAP downloaded file of the particular
vendor against the concerned part number. The remarks given for different conditions are
as follows:
1
Vital information is erased for confidentiality reasons. Same practice is followed at all places.

Spend analysis of leaf springs procurement

Spend analysis of leaf springs procurement

Recommandé

Recommandé

Contenu connexe

En vedette

En vedette (19)

Similaire à Spend analysis of leaf springs procurement

Similaire à Spend analysis of leaf springs procurement (20)

Plus de Supa Buoy

Plus de Supa Buoy (20)

Dernier

Dernier (20)

Spend analysis of leaf springs procurement