Automobile company

C: Can you tell me something about the client? What kind of automobiles it manufactures? Where is it based out of ?

I: The client is an end-to-end automobile manufacturer. They manufacture 4-wheeler vehicles and trucks. They’re based in India. The R&D department is based out of Pune.

C: Okay. Can you tell me why the clients wish to reduce costs? Is it because of higher costs in comparison to competitors, or is there some other motivation? Also, by what % and within how much time do we want to reduce costs?

I: Client’s costs are higher than competitors. They want to reduce costs by 20% within a span of 3-4 years.

C: Okay. Now coming to the operations within R&D, I can think of two major ones: first for development of new products and second would be for enhancement of existing products. Is there any other operation that I am missing, or any particular that I should look at?

I: Good question. That’s correct. These are the two. The costs are primarily high in the new product department. We can focus on that for this case.

C: Sure, thank you! I do not have much experience within this industry. So can you help me with the steps/ subprocesses involved so that I can look out one by one?

I: Sounds fair. So, the following steps are involved: design on paper, modelling, working prototype and testing.

C: Okay, thank you. So, you mentioned 4 major steps. To reduce costs as per the industry standards, I’ll first try to figure out where exactly are we exceeding the costs and then come up with recommendations.

I: Sounds good.

C: Okay. So I will go though each step one by one and compare them on the following 4 parameters with respect to the industry: People, process, machines & technology, other operating costs (like land, electricity, etc.). Should I go ahead ?

I: Sure.

C: Ok. I will first look at the design on paper. Are our costs higher for this step ?

I: No.

C: Ok, is there a particular step I should look at ?

I: Step 3.

C: Great. Step 3 is development of a working model. I will look at the 4 parameters. Are we following an efficient process? Is the costs for people higher?

I: We spend more amount on the people involved.

C: Okay, is the compensation paid by us higher?

I: No.

C: Then I can think of two factors due to which we could be facing higher costs. Either we have more people or our people are working greater hours.

I: The people with us are working much more for the same deliverable. As an industry standard, one model takes around 12 months. We are taking 24 months. This is why the cost is higher. Can you give some recommendations now ?

C: Sure, but first, I want to understand the reason for this drastic difference.

I: Sure, our design team is operating out of Germany, and the modelling team is in Pune, so there’s lack of coordination.

C: And why are they based in Germany?

I: The client couldn’t find efficient designers in India back when the plant was established. Since then, it has been working like this.

C: Okay, thank you. So, to resolve this problem, I’d look at two possible ways. We can either enhance the coordination between Germany and Pune folks or we can setup the design team to India. For the first way, I’d suggest mandatory monthly/quarterly visits by the design team to India. There can also be unplanned visits immediately. The process for the same should be very efficient. Going by the second way, to setup design team in India, we can either bring the German folks to India, or we can hire people from India itself with supervision from a few senior German leaders. Fields like design have been gaining popularity and we can expect to find good talent.

I: Ok, that’ll be all. Thank you !