Tuesday, January 21, 2014

Indian Auto Industry: The necessity of strong supply chain management for new products to be successful. Do we see a need for 3rd Party Logistic Companies?

Indian Auto industry faces steep growth curve as the lower-middle class earning increases. The below research papers from various sources explains the needs of new products and maintaining a strong supply chain strategy, its issues & challenges and few examples how companies are trying to overcome the challenges:

Two-Wheeler Industry: Growth Drivers Intact by ICRA:

Issues and Challenges of Supply Chain Management in India

The role of Supply chain in Indian Auto Sector

The below article explains how Mahindra & Mahindra is trying to overcome the challenges by a strategic initiative called Mahindra Logistics Limited (MLL). It started in 2000 to enhance focus on logistics services to both internal and external customers and to take care of Mahindra’s complex supply chain needs. It works as a 3PL company helping Mahindra Logistic Limited in operating its supply chain processes. Source: http://www.automotivesupplychain.org/features/190/77/The-Mahindra-Network/.
This supply chain model works really well.

In Indian Auto industry we have seen a lot of new product innovation. Below are some examples:
1.       Bajaj Pulsar: high sales, sports motor-bike accepted by middle class daily commuters, opened up a path for new range of sports two wheelers, changes the industry dynamics.
2.       Royal Enfield Bullet: It was highly successful in its old days but later other new age motor-bikes dominated its demand. Recently some innovative features have increased its demand again. Now Royal Enfield Bullet is getting transported to USA.(Source:  http://timesofindia.indiatimes.com/india/Royal-Enfield-Bullet-A-cult-motorcycle-from-India-takes-on-the-world/articleshow/28379244.cms)
3.       Tata Nano: Innovative low cost auto vehicle.

In all of the cases, the products were innovative but supply chain played a crucial role in determining their success and failure. Bajaj Pulsar was successful due to its strong distributor network, experienced management in supply chain. Royal Enfield Bullet faces supply chain problems when they wanted to double their capacity (Source: http://www.thehindubusinessline.com/companies/enfield-sees-supply-chain-a-hurdle-in-doubling-capacity/article2233579.ece). After applying strong supply chain management Bullet is now getting exported to other countries.

Nano faces technical glitches in its design with inexpensive raw materials and fails to predict demand correctly and was unable to reach expected sales (Source: http://www.marketing91.com/swot-tata-nano-failed-deliver/)

It’s interesting: Because we see a need for new 3PL companies?
The issues and challenges of supply chain in this industry definitely indicate towards more IT infrastructure initiative and more importantly the involvement of 3rd Party Logistics for success and growth of auto Industry. This also includes other manufacturing industries in India. This is interesting because it is an indication towards more spending in IT budget in near future. Also it opens up a new industry possibility of 3rd Party Logistic companies. It can be forecasted that we see more 3PL companies in India in near-future. There also can be similar scenario in other developing countries.


Below is a youtube video which gives an overview of 3PL companies:

Are we going see a huge growth in numbers of 3PL companies (3rd Party logistics which helps other manufacturing companies in handling their supply chain)? I think yes. I encourage others to post their view about it.


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