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Tata Cummins Ltd. Case Study Group No.

8, PPC, 9th July 2013 B12001 | B12002 | B12003 | B12067 | B12091 Case Summary Tata Cummins Limited is a joint venture between Tata Motors and Cummins India Limited. The plant at Jamshedpur has monthly capacity of 10000 (90% of output goes to Tata Motors) and the plant at Phaltan (Maharashtra) has a capacity of 10000 (50% of output goes to Tata Motors). After the economic slowdown, the demand of TCL engines has gone down drastically to around 8000 units per month. This has resulted in only 40% plant utilization. Initial Thoughts on Approaching the Issue A complete cost analysis should be carried out for TCL1 and TCL2. This should include production costs, labour costs (higher in TCL1), transportation charges, government benefits (viz. rebates by Maharashtra Govt. in TCL2) and other costs. Moreover, demand forecasting for major customers may be carried out, preferably location wise, to estimate the demand clusters, hence arriving at the distribution of production of engines between TCL1 and TCL2. Till now the JV commitments of upto 14000 engines [9000(TCL1)+5000(TCL2)] to Tata Motors may have made Cummins focused towards Tata Motors as their major customers. However, in the recessionary scenario, engine requirements of Tata Motors fell by almost 50%, to about 6000 engines per month. In these cases, Cummins should try to widen its loyal customer base and increase the engine supply to these customers, so that the overall demand for Cummins engines increase and the dip in demand from Tata Motors can be compensated. In case TCL2 can feasibly meet the overall demand (without compromising on margins due to transportation costs), TCL1 may opt for a brief shutdown for carrying out major plant re-modeling which may include technology upgradation, scheduling, setup time reduction, etc. This would not have been possible earlier when the demand was high. About Tata Cummins, Jamshedpur The TCL plant in Jamshedpur is basically a batch shop as it predominantly manufactures two types of engines viz. 4 cylinder and 6 cylinder engine. The plant is well automated and has an efficient ERP named to AMS to the control the functioning of the plant .On an average the throughput time is four hours. The plant has a monthly capacity of producing around 10000 units with around 435 units being produced by in one shift. o Inventory The plant had to maintain an inventory of around 400 parts to counter the sudden change in order. There is a continuous review of the inventory with the required inventory being reordered when the quantity reached below a particular level.

Inventory management was a major issue for the plant as it required a lot of space and there was a good chance of deterioration in the quality due to oxidation and rusting. Hence the inventory was used in a FIFO manner. o Future plans Currently the plant had enough capacity to meet the demand for next few years. Hence there was no plan for expansion or installing more capacity. But they had a proposal for modernizing some subsections of the plant to meet the changing specifications. o Good things about the plant The plant is clean, safe, orderly and well lit. The air quality is good within the plant. As the plant is air conditioned ,the temperatures within the plant are suitable for the workers to work at their optimum efficiency. Although there was continuous noise in the plant, but it was much lower than other plants and the overall noise level was acceptable. Everything had its own place within the plant and everything was put back diligently in its place. The assembly line is designed very efficiently as the engine has to move only for short distance between two successive phases. The instruments used by the workers are placed such that it requires minimum movement of the workers. As there is cross training of employees within the teams , they have become adept at doing more than one job and seem to be committed. The huge electronic display which give details such as cycle time, critical application, jobs done, target etc is very good way of keeping the workers and the line managers up-to-date about the process.LOTO(Lock out Tag out) process is a good initiative to ensure worker safety. o Scope for improvement Initially the setup required to switch between batches was around 24 hours. This was huge. Now it has been brought down to 4 hours. Efforts can be made to bring it down further by using six sigma or other techniques. Although raw material sourcing is done from across India to reduce the dependency on few vendors, managing number of members and maintaining cordial relationship with them might be an issue.