Outsourcing, a key component in TN’s automotive growth story

Multiple factors which have made the outsourcing model a success include the culture of nurturing enterprises, smaller players getting organised and following the quality practices. Enterprises have become agile and adaptive as the newer standards for businesses have come into force.

The start-up bug that has caught everyone today had its origins in manufacturing though it was not properly articulated. For, large corporates such as Ashok Leyland and TVS had started outsourcing in manufacturing many decades ago. From a total lack of professional approach when the foundation for the growth story was laid, the scenario has changed completely. 

“Back then, 45 years ago, Small Scale Industries (SSIs) had a workforce that was not well-qualified. In the absence of industry, workshops were not preferred by first-generation engineers, who either joined larger companies or had intention to start their own companies,” says National Institution For Quality and Reliability (NIQR) VP S Ramachandran. Having served ALL for 37 years, he recounts the instance of the commercial vehicle major putting the outsourcing model to work. 

“In the late sixties, things were different. Reliable suppliers were sought by the industry and with companies embarking on major growth and expansion plans in the seventies, it made sense to outsource manufacturing activity that would allow companies to focus on advanced technologies. Retired employees or those in the phase of retirement or experienced people were encouraged to start their own units,” he said. 

Established players sold machineries to people at “reasonable” prices. Expertise in specialised precision work turned these entities into exclusive ancillary units. “It was a blend of entrepreneurship with outsourcing driving the business model,” Ramachandran said, noting that specialists in operating ‘turning lays’ for instance had 10 machines available to them. 

“This way, an employee graduated from remaining a foreman all his life to a boss!” he says.  TVS too followed suit outsourcing machine processes that started nurturing ancillary units. “Long-term lease, outright purchase depending on convenience, unique tooling technology knowledge transfer and such practices led to a well-developed industry that we see today,” Ramachandran said, pointing to the “tierisation” that this approach led to. 

Suppliers to OEs were classified under three tiers, with tier I including the likes of TVS, ALL; Tier II having a batch of companies that included TVS group companies except TVS Motor and Tier III constituting 5,000 plus units that are now categorized as small and medium enterprises for they have evolved from the state of an SSI. Ramachandran is the quality consultant for Super Auto Forge, which is now almost a Rs 500 crore company, symbolising the development of other auto corridors such as Oragadam, Sriperumbudur, Maraimalainagar and Tiruvottiyur.