Competitive Advantage and Indian Automotive Industry: An Insight

Prof. Rajwinder Singh
Associate Professor

The Indian Auto Industry is among the largest manufacturing industries in the world. India emerged as the fourth largest exporter of passenger car after Japan, South Korea and Thailand in 2009. In 2010 it overtook Thailand to grab third position.

During the period of 2011 to 2012, the 3695 auto manufacturing factories with average annual revenue USD 6 million earned profit close to USD 400 thousand and industry grew at the rate of 16-18%. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 4 million by 2015. In the previous decades, this sector has performed well, however currently it has been experiencing flat or negative growth. The experts have recommended the need to focus on supply chain cost for gaining competitive advantage. The following points shall help the industry to improve in future:
  1. Reducing Overall Supply Chain Costs: The firms should identify the major supply chain cost components to isolate and eliminate them. The companies shall use tools and techniques to plan production, labour, material and transportation. The Master Production Scheduling, Aggregate Shipment Planning, Labour Planning, and Transportation Planning, all play a major role in reducing the total supply chain cost. Lower costs will allow you to be more competitive with your customers and potential customers.
  2. Better Customer Service: This element needs the focus on the right product at the right time at the right place to the right customer at the minimum cost. The companies shall hire the competencies by collaborating with the right partners. To better reach the companies shall choose careers based on the service levels, transit time, cost and quantity to be delivered. The help shall be taken by using the Management Science techniques for transportation, Assignament, Network Analysis and Simulation.
  3. High Efficiency Focus: “No Measurement No Improvements” The companies need to measure their productivity to identify the underperformaning units or areas. In the recent decades the Technology has dramatically increased the industrial efficiency. The use of IT has reduced the labour to a great extent and use of automotive manufacturing and robotics has cut the manufacturing time resulting more efficiency.
  4. Warehouse Management and Inventory Reduction: The warehouse management is also one of the important areas for  improvement. The use of IT  and softwares shall help to better manage the business. The companies shall do the analytical analysis to select the location and inventory levels for a warehouse. There should be a minimum pipeline inventory. It shall be done either by reducing the length of operation or reducing the transit inventory. Also, processing is small batch is more important to reduce the pipeline inventory.
  5. Accurate Forecasting: Forecasting is predicting the future demand. Once known the demand shall help to better manage the business. Hence, material, manpower, machinery, equipment and facilities shall be better arranged and managed once known the future demand. Also,  an accurate forecast of your inventory is increasingly important as the eCommerce freight ship continues to increase for the foreseeable future.
  6. Cash Flow Improvements: The companies need to select Prepaid or Postpaid, and Paid shipping or Free shipping  with due consideration of market competition to improve cash flows. The better understand of transportation accounting in Freight management, shall help to find the right balance between good customer service and overall profitability/cash flows with your transportation department.