The Hindu Business Line : Tata Motors scouts overseas for e-sourcing of components

In e-sourcing, bids are put online for every project. The supplier with the most competitive pricing, quality assurance and prompt delivery of goods gets the order.

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Mumbai Jan. 22 Tata Motors is scouting overseas for e-sourcing (online sourcing) of components. It is now looking at countries such as China, Thailand and Russia to source components at the most competitive prices without any compromise in quality.

These countries are key players for capital goods purchase (machinery) in new plants and components for the new product range.

Local suppliers

Tata Motors currently e-sources direct (batteries, tyres, bearings, etc.,) and indirect (hand gloves for the workmen, helmets, uniforms, etc.,) materials from local suppliers in the country.

The company initiated e-sourcing of components in 2002 with software help from Freemarket USA (Freemarket was later sold to ARIBA, another software solutions provider, in 2004) on a contractual basis for two years. Since then the auto major has renewed it twice.

In e-sourcing, bids are put online for every project. The supplier with the most competitive pricing, quality assurance and prompt delivery of goods gets the order.

The supplier has to supply the goods within in the period specified in the letter of intent.

Since 2002, the company has undertaken 2,000 projects with a total turnover of Rs 6,000 crore or roughly 20-25 per cent of total sourcing, thus saving Rs 450 crore, according to information from the company.

There are two advantages in e-sourcing. First and foremost, the process takes less time.

For example, the conventional method is that of contacting one party after another for the best quote. Based on their response, the quotes are studied and certain clauses with regards to delivery of order are negotiated. If approved upon, the order is passed.

In an e-sourcing arrangement, the buyer passes a project or a tender to several prospective vendors on an Internet platform.

Thus, at a single given point of time several vendors are aware of the project and are able to quote their best prices in the shortest time possible.

They can view only their own quote. Malpractice of knowing the competitor's pricing is at a minimal level in such situations, quite contrary to the conventional process.

Extend initiative

On the local front, Tata Motors now plans to extend its e-sourcing initiative to various services such as logistics and catalogue buying.

For every project initiated the company is looking at best prices quoted from various logistics solution providers, with prompt delivery of products.

Thus, the company is looking at a complete value chain package in procurement and prices of components.

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