2011 CONFERENCE REPORT
More automation to come as OEMs tackle quality and swings in demand
NEW DELHI, 8 DECEMBER 2011: Carmakers operating in India will increasingly automate their production processes to drive up quality, but also to retain crucial flexibility in a market subject to sharp swings in customer demand. If you don't have flexibility "you are asking for trouble," says Ford India's executive director for manufacturing, Tom Chackalackal. He adds that his company's "gamble" on a flexible engine production line had paid off in the recent dramatic swing to diesel, now 70% of Ford India's output.
On quality, the tier supplier base remains a drag on OEMs' ability to improve their final product. "Concern for customers drives quality," said MM Singh, executive director for production for India's biggest OEM, Maruti Suzuki. "One defect report from a dealer is too much. Building so many cars, one problem could wipe out 1,000 cars."
These were the principal messages delivered by a series of senior vehicle manufacturing executives speaking in New Delhi at the 2011 AMS India conference, the fourth in the annual series. Two days of presentation, discussions and networking saw over 350 delegates wrestle with the unique production challenges presented by India's swings in both volume growth and model mix.
Indeed Tata Motors' general manager for production planning, Mohan Savarkar, told delegates that he ranked his three principal challenges as flexibility and scaleability – up and down – plus quality.
Hyundai's co-ordinator for manufacturing engineering, Rajkumar Balusamy, revealed how exploding demand for a niche vehicle led his company into adding CKD to its existing plant. The Sante Fe SUV had been expected to sell 500-600 units per annum, satisfied by imports. Instead the company received 535 orders in the two weeks after launch, and has now created a 4,500 unit CKD operation.
Magna Steyr's general manager for India, Anil George, told delegates that rising numbers of model options and shorter runs meant plants should be flexible enough to make just 10,000 units.
"The market is changing too quickly to predict," Singh told the conference."What will happen next year? I don't know," adding that a new flexible BIW line at the carmaker's Gurgaon plant is near 100% automated. "I'm building 10,000 cars a month [on this line], up to three different models. If the market doesn't want that many, do I have to send my people home for a month?"
For years, carmakers in India have believed that the availability of cheap labour would support the production needed to match the country's flourishing car market. Annual sales growth of 26% – including up to 70% in the admittedly narrow premium sector – was seen in the year to March 2011. Even with a cooling economy as a result of government increases in interest rates, car sales are still expected to see a further 14% growth in the current year to March 2012.
But faced with unpredictable month-to-month sales figures, and the related need for production flexibility, these same carmakers have come to the collective realization that they need to incorporate additional robotics across their facilities in order to deliver the required vehicle numbers at the right quality and market price.
This marks a sea change in how OEMs in India regard robotics. Planned addition of further equipment had always been linked to labour costs, which are undoubtedly increasing (India's wage inflation runs ahead of its 9% general inflation). Along with labour turnover, that remains an eventual justification for more capital expenditure.
But now the drive is on for the 'perfect body', said Chakalackal. "Precise body dimensional integrity is a global challenge," he told the conference. "If you get it right then everything that follows is interchangeable and standard." He highlighted the introduction into India of the new Fiesta, the first global platform vehicle to be built by Ford India – and so a vehicle where there are no variations or engineering changes allowed.
And the story on quality is not all bad. Quality levels are leading to 3000 cars per month being exported to 30 countries, said Chackalackal. "Made in India used to have its problems in Ford," he told delegates, "but we've overcome that."
Obtaining defect-free parts remains the big challenge in quality, and variations within tier suppliers' output remains on the urgent 'to do' list for India. Rajeev Wasan, senior vice-president of manufacturing at Honda Siel, which operates two joint-venture plants near Delhi, said he would like to increase the percentage of locally-sourced parts, but the right suppliers are not there.
Despite Honda India being badly affected by supply cuts stemming from natural disasters in Japan and Thailand, the company has struggled to find replacements. But the demand is there. Wasan told delegates: "If you find you can achieve the [part] quantity and quality in the local market, you go for it!"
Maruti Suzuki's Rajiv Gandhi, production manager at the Gurgaon plant, noted that the OEM sometimes needed to show companies how to produce parts to the level of quality required. But this is accepted if it produces the desired quality levels. Using the analogy of a children's three-legged race, he noted that "we have to run at the same speed [as our suppliers]".
Premium carmakers operating in India have additional quality concerns, which are related to the overall expectation of their products. A small example from Markus Venitz, general manager for quality at BMW's CKD plant in Chennai, was the car's horn. Drivers in Europe rarely use it, but drivers in India do. It would let down the brand if a horn designed for European usage levels stopped working in heavy Delhi traffic, he observed.
But some of the parts supply issues are more fundamental, because some products are simply not available in India. An example from Honda's Wasan is that no local producers are currently able to deliver high-strength steel (HSS). The carmaker is forced to use standard steels due to this lack of availability coupled with the cost of imports.
Tata's Savarkar provided an overall conclusion: "Industry growth [in India] is not to its full potential because of supplier restrictions."
In an appropriate analogy given the conference location, OEMs at the conference were also encouraged to address the 'elephant in the room' of service levels from their equipment suppliers.
Lack of support from manufacturing equipment providers based outside India has long been a problem, and many are only now setting up effective service networks in India. Chackalackal said they have too often regarded sales "as a one-off order", with the after-sales service being seen as a different business. Obtaining foreign parts is especially challenging in India because of customs delays on imports.
Ford has gone so far as to consider buying additional robots in order to dismantle them for spare parts. Maruti's Gandhi bemoaned the absence of local automation suppliers. "I hardly see any Indian suppliers on my new line," he commented.
Maruti's response is to do some automation itself. Gandhi revealed that 25 engineers were creating IR400 million (about $8 million) of output from a dedicated internal unit.
India remains a cost-led market where a finished vehicle's sticker price plays a decisive role in the purchase decision. At the AMS India conference, carmakers outlined how their different approaches to building cars would help them achieve the required price point.
On the one hand, Maruti Suzuki's Rajiv Gandhi highlighted that, while marketing and business strategies were valuable when implemented on a global scale, management of individual manufacturing facilities would remain a local business. And there continue to be savings to be found. As part of this local strategy, MM Singh added that over the past two years he had been able to reduce the cost of his pressing tools by 70%, savings which he claimed would be passed on to Maruti customers.
One of the Q&A sessions, featuring (from left) Hyundai, Maruti Suzuki, Honda Ciel, Magna Steyr and IBM
In a similar vein, Magna Steyr's Anil George told delegates that engineering standards developed round the world must be 'frugalised' before being transferred to India.
At the other end of the scale, Ford's Tom Chackalackal outlined how the carmaker would use economies of scale to achieve discounts for tooling. "When toolmakers deliver six or seven sets of the same dies to plants all over the world, it improves value." Essentially, this is a further element of the company's 'One Ford' programme. Reminding all the delegates, both from within the country and around the world, of the importance of controlling finished vehicle cost, he stated: "India is a country of value. Everything you do must add value."
• AMS India conference also featured 12 individual workshop sessions, covering specific technologies from stamping and welding to paintshop and robotics, looking at the different production characteristics of heavy vehicles and electric cars, and addressing issues like energy saving and reductions in waste.
• The conference opened with an introductory cocktail reception on the evening prior to the first day, and featured a gala dinner at the end of the first day, both designed to encourage networking and the forging of new business relationships among delegates.
Networking continued at the conference gala dinner, complete with entertainment Bollywood-style
This year's AMS India conference saw the launch of special awards to recognize the contribution that speakers made during the conference to three key overall issues; environment, safety and innovation.
In partnership with Siemens, and presented by the company's CEO Industry Sector for the South Asia Cluster, Heiner Roerhl, and his colleague the CEO Industry Automation, Bhaskar Mandal, the AMS Siemens Awards were made to the three speakers whose presentations and Q&A contributions were judged by the Editors of AMS to be the best during the conference.
Environment: the AMS Siemens Award went to Markus Hachmoeller (pictured), manager of thermal technology at XL Solar Systems. In partnership with equipment provider Eisenmann, the company has developed and installed a solar technology that can deliver sufficient renewable energy to operate power-intensive paintshops and other areas across vehicle manufacturing facilities.
Safety: Ford's executive director for manufacturing in India, Tom Chackalackal, won the AMS Siemens Award for Safety for his description of his focus on reducing accidents, and the systematic approach to achieving this. Chackalackal identified for delegates that most accidents happen in non-standard processes, and that the company measures 'near-misses' as well actual harm as a way of alerting workers to the issues of safety. Ford's run-rate is between 1.0-1.3 near misses per employee per month, he candidly told the conference.
Innovation: Mahindra's development and engineering of its first SUV to use a monocoque chassis led to the AMS Siemens Award for Innovation being won by Selvam Ganesan, who is manager of central manufacturing and engineering at the OEM. Ganesan outlined how Mahindra had achieved new levels of resistance spot weld integrity using an adaptive process control. The resulting vehicle, the XUV 500, is the first Indian-produced car to achieve a five-star NCAP rating.