In fast-moving mass production industries like automobiles, production schedules are rigid and optimised for efficiency. Similarly, supply chains work on schedules decided months in advance on the basis of demand projections. However, carmakers are now looking to redesign these systems to cater to an unpredictable demand environment.
Information technology firms servicing automakers said they have received requests from companies looking to quickly move to agile manufacturing processes and supply chains along with undertaking cost reduction initiatives.
Automakers are immediately interested in two initiatives, according to Maneesh Pant, vice president at Capgemini India. “One is continuing the broken supply chain, and another is making manufacturing more agile. Focus is shifting from pure production performance to surviving in an environment of unpredictable change by being able to react quickly to changing market conditions,” he said.
Smaller lot sizes, shorter times to market and lower manufacturing cost will drive automobile manufacturers towards the adoption of agile and lean manufacturing, said Pant.
Japanese automaker Toyota Motor Corporation’s Indian unit is among those closely monitoring the market situation. “Our manufacturing side is prepared to quickly act upon changes or rearrangements that might be required to meet market demands there onwards,” said Naveen Soni, senior vice president, sales and service, Toyota Kirloskar Motor. “We have also been studying ‘best practices’ of other Toyota affiliates in markets that have already revived, like China, post Covid-19 conditions.”
Maruti Suzuki, Mahindra and Mahindra, and Tata Motors did not respond to ET’s queries.
The automobile sector could face instability for 12-18 months after the lockdown ends, said Ravi Bhatia, president, JATO Dynamics, a global automotive consultancy firm.
“In order to respond to this, OEMs (original equipment manufacturers) are looking at agile manufacturing and more automation. And this will require them to retrain and retool their operations,” Bhatia said, citing conversations with industry insiders. “They will need to keep a close eye on trim level demand and sales to avoid build-up of inventory in the factory or at dealerships.”
According to a note by analysts at brokerage firm Dolat Capital there may be a few more technology trends in the offing for further cost reduction. Virtual tours of vehicles or negotiations over video calling services at dealer outlets may become more common in the coming few months.
Capgemini’s Pant expects a heavy focus by automakers on forecasting of raw material prices using neural network-based artificial intelligence. This would help them prepare for hikes in prices and better allocation of spends.
Not just cost reduction in manufacturing, automakers are also looking to reduce the total cost of ownership for their clients over making their vehicles more feature-rich.
“If I were pitching to my clients two months back about optimising their supply chain and reducing the total cost of ownership (TCO), they would’ve said no as they were looking at implementing 5G (connectivity) in their car,” he said. “The discussions are completely changing.”