Anniversary Edition-An Interview with an Industry Veteran (Mr. Neeraj Tiwari, Manufacturing Director Fiat, China) on the Growth of the Automobile Sector and the Need for Sustainability

Interview: Tacit Knowledge I Time to Read: 5 mins

We turn an year this month and while the world battles the pandemic, Done And Done thought of utilising this time to garner knowledge capital in the form of insights and interviews and the like from none other than those who've seen it all! So sit back and unwind with this interview. 

Note: Views represented are of the interviewee, Done and Done may not necessarily endorse the same

Mr. Neeraj Tiwari (Manufacturing Director at FCA Fiat Chrysler Automobiles JV) is a seasoned subject matter expert in the Operations and Supply Chain function with a rich experience running over 30 years in the automobile industry.

Starting his career as an Industrial Engineer with the Tatas (in fact Voltas was under the Tatagroup back then) in 1989 through to 1994. Concepts of productivity, time studies and union discussions had just started picking up. The need for high volume production as well as balancing it with quality were a key focal area. Naturally it was a time when machine and labour productivity were both accelerating and debottlenecking the labour issues was important to the functioning of operations. It's then that he worked upon a couple of projects on the same and witnessed robotic productivity to increase by 2-3 times. Critical manual operations transitioned to automation. With the traction of globalization, many joint ventures began in the Indian automobile scene. With Honda's interest to bring their culture of kaizens, coupled with the personal know-how in productivity Neeraj moved to Honda and claims it did great wonders for his career. Witnessed the practical applications of the terms of continuous improvement and found the way of working to be indeed very systematic, he understood the importance of teamwork and productivity furthermore. Soon the TVS group started bringing the quality circle initiatives, ISO 9000 and QMS protocols started around the same time to ensure standardisation. In the years of 1994-97 Neeraj moved from two wheelers to the four wheelers division and also moved (in 1996) to Mitsubishi which happened to have a joint venture with Hindustan Motors. The aspects of manufacturing essential products: powertrains, engines and setting the process by answering the key questions of "how to make a plant lean", allowed Neeraj to witness the landscape of the Indian automobile industry transition with global concepts implemented from Japan, South Korea etc. Involved in Business Process Re-engineering (earlier known as manufacturing system re-engineering) caused a lot of movement of machinery, people, de-centralisations of engine plants etc. De-centralisation became a key strategic move and increased the speed of decision-making. Everything began getting de-centralised inclusive of HR, after sales markets, quality apart from production of power trains and gearboxes. Cellular manufacturing just started and processes got a mega-push. People started understanding the product, the need for process and its adherence. Soon the decisions were supported and takt time, response times changed. Direct manpower were reduced by 30% while indirect manpower by 15%; machines were made redundant. Ultimately 5S became easier to implement and this is when new customers: such as Ford, Eicher Motors started flowing in. Measuring became important and KPIs were introduced.

Neeraj claims that all this was not possible without people. While process is key, people ought to be sensitised and sensitive to it as well. Once that happens, ownership begins naturally. He also thinks these applications of 5S to a business' functioning, balance sheet is a powerful tool towards clearing it up and making it lean. And that frugal manufacturing doesn't imply frugal thinking. Least cost of processes, 0 defects etc. should be talked. Once conversations are initiated and struck, action follows suit.

With him having witnessed History during the globalisation of the Indian automobile and radical shifts in this sector, Done And Done seeks out insights and views on the present day supply chains and the areas that could and should witness a sea-change in the near future. The Founder's association with Neeraj goes back to as a student and teacher's around 5 years back, and Neeraj was more than happy to don the hat once more. After all when in doubt who does one turn to? An expert in the domain of course! Following is an excerpt of the interview:-

D&D: "Sustainability" is considered a jargon & CSR initiative more than a way to carry out business. As a head of a leading automobile's supply chain operations how much do you agree/disagree?

Neeraj: CSR is becoming the game changer, customers would like to be associated with socially responsible companies. Post COVID - 19 we will witness this more as firms had manufactured PPEs, masks and ventilators with the intent to promote the Indian manufacturing prowess. Firms that have not carried out any lay-offs and have increased pay packages want to be positioned as an ethical brand.

D&D :Given Done And Done's ethos towards embedding sustainability, sustainable measures and alternatives within a supply chain's operations and processes-what areas across a supply chain do you think have a major scope towards sustainable alternatives, that should be delved upon furthermore?

Neeraj: For an automobile company (OEM) 70% is usually the bought out material cost, 12% is the manufacturing cost, 5% is labour cost, 5% is logistics cost, 4% is R&D and the rest follows suit. Firms would focus on the major contributors, while material costs can't be altered across all commodities always, the major focus then shifts on Value Additions/Value Engineering for the bought out material. Thus, leading to educate the suppliers towards best practices the same way as before for WCM/TPM etc. While it takes effort in hand holding them the results are mutually beneficial. This is followed by manufacturing. It becomes the nodal point for Safety, Quality, Environment, Cost, Morale. You may not get drastic direct material cost saving because of lack of controls and ownership and diluted share of suppliers' market share, but have a better handle of legislative requirements/ sustainability/quality and reliability.

D&D: Elaborate on how green procurement has added monetary benefits to firms & what were the initial challenges faced towards receiving a buy-in to this transition

Neeraj: Procurement is not a process that's carried out independently. Usually it needs input from the operations store on the quantum of inventory required, its replenishment cycle. For a new material, it requires inputs from the R&D and marketing team as well, so as to commit the nature of timeline. While tenders are floated and a suitable vendor is selected on the basis of quality, reliability, proximity, delivery, cost for green procurement these fields are initiated at a sustenance standpoint as well. Hence at the agreement stage. Green norms account for the packaging, transportation and reverse logistics inclusive of disposal. Outsourcing and processing scrap also fall into the purview of inspections these days. 

D&D: Logistics costs, (you had mentioned amount to approx. 5% of the total supply chain costs in a business-while a negligible amount for OEMs); for firms that are heavily dependent on transportation (Eg. e-commerce, logistics providers etc.) how would you recommend them to transition towards sustainable measures? What measures would you suggest? Do you think transitioning to EVs itself would lead to a lower fuel rate instead in the long run?

Neeraj: Logistics costs depend upon who is the one paying for it. An OEM's incoming logistics cost is typically borne by the firm. Taking an example form China, transportation happens to be completely loaded and the vehicles open horizontally as the vehicle fleet is owned. So, this ensures complete utilisation of space and no partially loaded vehicle trips wasting fuel. Outbound logistics, is not under the firms purview essentially. Penalties is predominantly how adherence to agreements is ensured. Electric Vehicles for commercial vehicles is not something witnessed; however it could be seen in the distant future. If a firm owns their fleet they can experiment, however I do not see it in the Indian space soon due to major cost investments and time-consuming legislations.

D&D: Production processes rely heavily on capital & utilities which is where firms focus towards sustainable measures while transitioning. What other aspects would you recommend at a product design level for sustenance? Any examples on how much cost reductions have occurred post it?

Neeraj: Yes, essentially firms do focus on CAPEX towards solar panels and water re-cycling measures. When it comes to the product; the process is checked by a Value Stream Map-during this process if an alternative method that is more sustainable comes to the forefront then it is accepted after putting it to test. Leaner products are an outcome of these activities.

D&D: Any examples of completely foregoing a sub-function that has led to major cost reductions at a sustainable standpoint? (Eg. eliminating middlemen for vendor pools/eliminating a warehouse altogether/outsourcing production etc.)

Neeraj: Elimination of a warehouse is a best-practice that Honda follows. It ensures there are no inward inspections and just audits. Materials are sent straight on the manufacturing line. The costs saved are approx. 2-3% on reduction of inventory, manpower for inspection and storage space is saved- a big learning form the Japanese method of functioning.

Another area is of cross-brand productions. As a result of joint ventures, many firms have products of one firm produced in another firm's location. Its beneficial to maximise on the manufacturing capabilities.

D&D: Packaging & distribution constitute the major functions post production. Have you seen firms save costs by outsourcing their distribution centre's      operations or owning warehouses, or owning dealerships? 

Neeraj: The distribution centres dealerships and warehousing are not what firms would want to own as these areas depend on the customer's volumes.

D&D: Reverse logistics is a concept that ensures sustenance in a way, any other concepts within the supply chain that you know of that would ensure sustenance?

Neeraj: Frugal manufacturing is a minimalist approach. It does not imply frugal thinking. It is to use the least amount of resources to maximise output. So, that is a concept that Indian automobile firms for that matter any manufacturing firm must adopt. Another area is of course of green procurement that we touched upon before. Given its maximum potential for the highest contributing cost factor-it could be a game changer in the long-run.