Lessons of the Tata Nano and Rethinking Big Three Supply Chains
Jessie Scanlon penned a rather interesting article in BusinessWeek last week (What Can Tata’s Nano Teach Detroit?) which many supply chain professionals associated with the Detroit Big Three automakers should read. Beyond the notions of the introduction of the Nano in India, there is the challenge of what can Detroit learn from the Tata Nano?
As the author points out: ” Tata didn’t set the price of the Nano by calculating the cost of production and then adding to margin. Rather it set $2500 as the price that it thought customers could pay and then worked back, with the help of partners willing to take on a challenge, to build a $2500 car that would reward all involved with a small profit“. The article further makes a case that the Big Three management are disconnected from the needs of consumers, as well as means for “rethinking the supply chain’.
I tend to agree. Because of its low price point, the Nano ships as a kit to a local facility, where it is assembled, avoiding the need for building and operating large final assembly operations This distribution model is very similar to how foreign manufacturers have introduced their new models to the Chinese market, by shipping kits to their foreign subsidiaries. The article rightfully points out that if the Big Three wants to expand its market to emerging markets such as India and China, as well as protecting the U.S. domestic market, there are implications for rethinking the supply chain and final distribution model.
Some specific challenges come to my mind:
Why is it that the Chevrolet Volt, GM’s planned extended range electric vehicle targeted to retail close to $40,000? Is this about targeting what the consumer wants to pay, and what the supply chain can deliver?
Why is that Ford cannot come up with a more affordable, fuel efficient and green alternative to its workhorse Crown Victoria? Every major U.S. city has fleets of Crown Vic taxis and police vehicles, yet the market lacks affordable alternatives in fuel efficiency.
Why is it that so many Tier One suppliers are at risk of financial collapse? Is this a failure in supplier collaboration or rethinking the supply chain?
It continues to amaze me that auto dealerships throughout the U.S. continue to be inventory stocking points for finished models. Have any other viable distribution alternatives been explored and piloted for smarter inventory management?
Perhaps we do have a management problem. Perhaps the Big Three is too invested in past thinking about consumer needs, sales, distribution and supply chain structure.
You are welcomed to share your views in the Comments associated with this posting.