Indian Automotive Sector Supply Chain

Challenges & Opportunities

By

Mr. Subir Shah

Senior Consultant, Transportation & Logistics Practice
8th December, 2011

Agenda

Indian
Automotive
Industrys Supply
Chains
Challenges &
Opportunities

Indian Automotive Supply Chain:

Current Scenario

Key Opportunities for

Improvements

High growth, increasingly competitive sector will put

tremendous pressure on Infrastructure by 2015
Product Segment-wise Contribution to Turnover of Automotive Industry, 2010-2015
120
Total Turnover CAGR (2010-2015) = 11.1%

100% = 113.0

Industry Turnover
($ Billion)

100
80

64.4

57.0%

100% = 66.7

60
39.1

58.6%

40
48.6

20
27.6

43.0%

41.4%

0
2010

2015

Auto Components

Automobiles

Share of Auto Components in Overall Industry Turnover is Likely to Increase in the coming years due to
steady rise in sourcing of components from India by Global Automotive Majors
Source: Frost & Sullivan

Supply Chain Flow Indian Automotive Industry

SUPPLIER
(Raw Materials)

SUPPLIER
(Sub Assembled
Components)

MANUFACTURING
PLANT

Need for Efficient Transportation

(Road & Rail)
CENTRAL
WAREHOUSE

Need for Robust Port

Infrastructure

DOMESTIC
AUTOMOBILE
MANUFACTURERS
STATE / REGIONAL
WAREHOUSE

Need for GST

CLEARING &
FORWARDING
AGENTS

DOMESTIC
CONSUMERS
(Aftermarket)

DOMESTIC
DISTRIBUTORS

FOREIGN
DISTRIBUTORS

DOMESTIC
RETAILERS
(Aftermarket)

FOREIGN
CONSUMERS
(Aftermarket)

FOREIGN
AUTOMOBILE
MANUFACTURERS

Source: Frost & Sullivan

With some key game changers getting delayed, there is a

need to infuse efficiency into the Supply Chain

The much-awaited DFC

The even more-awaited GST

Srinagar
Amritsar Shimla
Haridwar
Chandigarh
Delhi
Jaisalmer
Jaipur

Lucknow

Ahmedabad

Darjeeling
Dispur
Patna

Gandhinagar
Bhopal

Ranchi
Kolkata

Surat

Raipur
Nagpur

Bhubaneshwar
Aurangabad
Mumbai
Pune Gulbarga
Current State-level
Vishakhapatnam
Hyderabad
Distribution Centers
Goa
Vijayawada
Expected Future Hubs
Bengaluru
after GST
Tirupati
Mangalore
Implementation
Chennai
Mysore
Expected Major
Regional Zones after
Coimbatore
Kochi
GST
Madurai
Thiruvananthapuram

Source: Frost & Sullivan

Bottlenecks in the Infrastructure is a major reason for

inefficiencies in Supply Chain
Key Challenges Faced by Users of Logistics Services in the Indian Automotive Industry
Safety of goods during transit and warehousing

78%

Skill and expertise level of labour handling logistics needs

76%

Inability of Service Provider to provide complete multi modal transportation

solution
Slack delivery period and inefficiency of logistics service providers in
adhereing to timelines

75%
70%

Cost of outsourced logistics is high

63%

Logistics service providers are unable to keep up with the evolving volumes
& technical requirements

50%

Lack of sufficient warehousing capacity is a cause of concern

43%

There is a need for integrated supply chain systems, but lack of funds is a
major challenge

43%

Risk of information leak to competitors within the same industry

35%
0%
20%
40%
60%
80%
100%
Share of End-user Responses Stating the Challenge as Important (%)

There is a need to manufacture ways to improve timelines and efficiencies despite the infrastructure
issues
Source: Frost & Sullivan

Agenda

Indian
Automotive
Industrys Supply
Chains
Challenges &
Opportunities

Indian Automotive Supply Chain:

Current Scenario

Key Opportunities for

Improvements

Key Opportunities for Improvements

1. Collaboration

amongst End users

2. Collaboration

amongst End users and LSPs

Dont waste time on Infrastructure

bashingYoud rather Collaborate !!

Majority of the automotive industry participants believe that

LSPs should initiate the collaboration in logistics activities, but
the contracts given to LSPs are mainly for 1 year

Typical Contract Period with Logistics

Service Provider (India), 2011

End-user Opinion on Initiation for Collaboration (India),

2011

1 year

LSPs
should
Initiate, 65%

63%

2 years

20%

3 years

Automobile
Industry
should
Initiate, 35%

15%

5 years

3%

0%

20%

40%

60%

80%

Share of Total Responses (%)

Source: Frost & Sullivan

Some of the key benefits from Collaboration that have

been identified through our research

End Users Perspective

Influencing suppliers quality

Secure reliable sources
Competitive per unit or per head price of purchased item or service
Improve delivery schedules
Access to suppliers new technology
Reduce internal procurement procedures and costs
Support JIT initiatives
Reduce administration procedures and costs (for example, ordering and
invoicing)

LSP Perspective

Secure buyer for product

Influence customers quality
Support customers JIT initiatives
Improve forecasts of requirements
Reduce ongoing administration
Reduce internal sales procedures and costs
Price improvement
Influence/gain access to customers new technology
Source: Frost & Sullivan

Value Added Logistics is where the true potential lies for

Maximizing profits for the industry
Functions where Collaborations with Competitors is Prevalent (India), 2010

Function / Segment
a) Transportation
In Domestic Long Haul Transportation
In Domestic Short Haul Transportation
In Domestic LCL Consignments Transportation
In International Air Cargo Transportation
In International Ocean Cargo Transportation
b) Warehousing
In National / Central Warehouses
In Regional Warehouses
c) Value Added Logistics Activities
In Packing
In Labeling
In Quality Check
In Order Management/Processing
In Customer Service or Support
In Vendor Management
In Return Goods Management
In Invoicing and Payment Management

Own Initiative or
Share of End-users Collaborating from LSP Side
58%

LSP

38%

LSP

13%
28%

Own
LSP

28%

LSP

10%

LSP
LSP

10%

10%
10%

LSP
LSP

8%
3%

Own
LSP

3%
3%

Own
LSP

3%

LSP
LSP

3%

Source: Frost & Sullivan

Top 3 expectations of OEMs as well as Component

Manufacturers suggest a more Collaborative Engagement
with an LSP

Expected Value Added Logistics Services from LSPs

43%

Education on GST System and Processes

51%

Support in Process Efficiency Improvement

71%

Support in Process Change/ Modification

57%

Support in Infrastructure Development

New Services due to Post GST Status

29%

Support in Information Systems Integration

35%

Customer Support

10%

Vendor Management

18%

Information Management

12%
0%

20%

40%

60%

80%

100%

Share of End-user Responses Stating they Need the Service (%)

Source: Frost & Sullivan

Multi-user Yards are the way forward for the industry

OEM (North)

OEM (South)

Component Manufacturer

OEM Dealer A
Pune
OEM (West)
Multi-User Yard (West)
Developed AND OR Managed by
LSP

OEM Dealer B
Mumbai

OEM Dealer C
Nasik

Storage of Finished Vehicles as well as Spares of multiple manufacturers in Multi User Yards
for deliveries on as required basis to dealers in the region
Source: Frost & Sullivan

Collaborative Logistics Moving up the Value Chain

Primary
Transportation
Secondary
Transportation
Transportation
Related

WH / Depot
Mgmt.
WH Design
WH & Secondary
Inbound JIT
Hubbing

Cycle count
Designing
inventory policy
Order processing
Demand Mgmt.
Documentation&
MIS

Warehouse
Related

Inventory
Management

Kitting
Repacking
Labeling
Inspection &
Quality check
Sales tax & Excise
registration &
Return filing
Banking
transaction

Value Added
Services Physical
& Financial

4 PL / Consulting
Logistics audit
Logistics process
design
Logistics
Performance
improvement
projects
Integrated
Logistics services

Solution
Development /
Consulting
Source: Frost & Sullivan

Thank You