An article from the Economist Intelligence Unit FROM LEAN TO SMART How hyperconnectivity is reshaping Tata’s global manufacturing base W hen Tata, the Indian conglomerate, introduced its Nano budget car in 2010, it was hailed as a triumph of lean manufacturing: the company applied production techniques that allowed it to set a price of just US$2,500 in its home market of India, offering family transport for the same price as a small motorbike The Nano was designed from the outset to be cheap to manufacture, with no boot lid and even the same shape of doors fitted on the left- and right-hand sides to reduce the number of components used The company then teamed up with Rockwell Automation, an American provider of industrial automation and information solutions, to create a highly automated plant using connected production techniques Tata’s boss at the time, Ratan Tata, liked to compare himself to Henry Ford, the pioneer of mass-produced cars, and in many ways this new plant was the new-tech version of old mass-production techniques: it was designed to churn out huge numbers (initially, sales were hoped to hit 1m units a year) of a standardised, simplified design From a production point of view the results were initially impressive, with the Nano retailing for less than a quarter of the price of a European micro car such as the Smart Forfour However, sales have recently been less perky, slumping to little more than 20,000 in the 2014 financial year SPONSORED BY The business challenge of the Nano was to provide a very affordable product for a single market, namely India, and the lean manufacturing techniques adopted by Tata were ideal for that challenge However, another section of the business—luxury vehicle firm Jaguar Land Rover (JLR), which Tata acquired from Ford in 2008—is faced with an altogether different mission: to become a multinational © The Economist Intelligence Unit Limited 2015 Hyperconnected organisations brand with a presence in key developing markets such as China and Brazil For this, it is adopting production and sales techniques that reflect the hyperconnectivity of the current era Tata decided to invest its way out of trouble after a request for a UK government bail-out of the then loss-making firm was rejected in 2009, and it has thrown money at production and in-car entertainment technology, as well as at developing a new line of vehicles This involved a seven-year programme to migrate data to a common platform, simplifying a muddle of inherited systems that had resulted in some 600 separate data silos struggling to communicate with each other Now, manufacturing operations are streamlined around a common set of business processes and business data definitions Global sales operations down to dealership level use a common global business template And vehicle design and engineering is being automated around a single data backbone, meaning that all of the engineering teams enjoy real-time access to the same set of vehicle data These three big tasks are a work in progress, but some tangible benefits can already be seen Lionel Grealou, global head of product lifecycle management at Tata Technologies, says that “such data integration allows workforce productivity to be improved.” For example, he claims time savings of 40% for some design functions Just as importantly, the setting up of such globally integrated systems allowed first sales and then production to be globalised, in an era when car sales are wilting in many developed markets and thriving in emerging ones The most striking example here is China, which now accounts for close to one-quarter of JLR sales from a very low level just a few years ago Here, the company was able to ramp up sales because dealers were connected to the central system And last year the company announced the opening of a plant in Changshu, a two-hour drive from Shanghai, with a capacity to make 130,000 vehicles a year (around 30% more than it sold in the country in 2014) A joint venture with China’s state-owned Chery Automobile, production will be aimed solely at the local Chinese market This year JLR plans to open a US$290m plant in Brazil, with the capacity to produce around 24,000 vehicles Currently, JLR sells only around 10,000 cars in a country whose luxury car market is booming As in China, local production is essential to cost competitiveness and market share It is a big move for a company whose production has so far been centred on the UK, where Tata has invested heavily And crucially, a more integrated data platform allows JLR not only to increase efficiency but also to monitor production quality at its foreign plants “You know of any problems in real time and can share the information between different teams—from production engineers to designers—instantly,” says Mr Grealou This could be especially important in China, where quality issues have adversely impacted sales Here, the challenge is not just to save money through local production but also to transfer JLR’s increasingly stringent production standards © The Economist Intelligence Unit Limited 2015 Hyperconnected organisations to the Chinese plant, while facing stiff competition from the likes of BMW as well as a slowing economy Equally, designs must be tailored to local tastes for China to realise its undoubted sales potential Mr Grealou emphasises the design flexibility made possible by hyperconnectivity, not least by the mass of sensors that are now being fitted to modern cars: according to MEMS Journal, an industry publication, in 2014 the average vehicle housed 60-100 sensors, measuring everything from engine performance to tyre pressure It expects that number to surge to 200 per car, so that by 2020 the automotive industry will use around 22bn sensors each year, generating an extraordinary amount of data “The challenge is to analyse and use the data now being generated, not just to gather it,” Mr Grealou says As well as allowing improvements to product design and reliability, the ability to gather real-time data on customer behaviour and demands allows products to be tailored to consumer demand, offering the kind of personalisation that is being chased by everyone, from car makers to retailers Tata needs to get to grips with this if it is to globalise the JLR brand and reinvent the Nano so that it appeals to buyers in India and beyond © The Economist Intelligence Unit Limited 2015 ... be tailored to consumer demand, offering the kind of personalisation that is being chased by everyone, from car makers to retailers Tata needs to get to grips with this if it is to globalise... just to gather it,” Mr Grealou says As well as allowing improvements to product design and reliability, the ability to gather real-time data on customer behaviour and demands allows products to. .. that number to surge to 200 per car, so that by 2020 the automotive industry will use around 22bn sensors each year, generating an extraordinary amount of data “The challenge is to analyse and