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– Bijoy Ghosh

Mr R. Seshasayee, Managing Director, Ashok Leyland, handing over a copy of ISCAN (Indian Supply Chain Analytic Network) to Mr M.F. Farooqui (left), Principal Secretary, Govt of Tamil Nadu, in the presence of Mr R. Dinesh, Event Chairman, Auto SCM India 2008, at the inaugural session of Auto SCM India 2008, in Chennai on Thursday.

Our Bureau

Chennai, Nov 6 The auto industry has been caught unawares with high levels of inventory , said Mr R. Seshasayee, Managing Director of Ashok Leyland and past President of CII.

Delivering the keynote address at the inaugural session of Auto Supply Chain Management (SCM) seminar on ‘Outbound SCM perspective for after market and OEM – competitiveness through cost effective SCM, organised by CII Institute of Logistics, he said during the last one month the commercial vehicle industry collapsed by 40 to 50 per cent. This was like tsumani as the intensity of the collapse was not understood early.

In a way the current situation, which is the most difficult financial situation in the world, is useful for the industry as it can learn to optimise resources. Therefore, it is necessary to speed up supply and eliminate inventory, he said.

Indian industry cannot be competitive without required infrastructure and in a recession it is necessary to focus on building infrastructure so as to capitalise on it when the economy rolls back. The average speed truck in the highways has got reduced from over 40 kmph to less than 30 kmph due to lack of segregation of highways. It is necessary to segregate roads besides creating smart highways with more use of electronics and automation.

The incremental cost would be less than 10 per cent for creating smart highways, which can detect vehicles and assess load and allow them to cruise without halting for toll payment, he said. With several companies in the country developing similar systems for overseas applications, it would be conducive for them to develop for local market, “but what we need is the political will,” he said.

Tax barriers are as prohibitively expensive as physical barriers, he said. “Although we have committed to move towards general sales tax it is necessary to get reassurance from the Government that it is implemented by 2010 and CST removed by then,” he said.

The CST situation has resulted in inefficient operation of automobile manufacturing companies with several regional offices being set up as it was not possible to cater to customers across the country from one State. These fiscal anomalies need to be addressed so that the competitiveness of Indian industry can be reinforced, he said.

It is necessary to have rhythmic production system for automobile companies in the shop floor in order to avoid redundancies in terms of capacities. With the current situation it is even necessary to adopt these principles in supply chain also to stay afloat, he added.

The Principal Secretary – Industries, Tamil Nadu, Mr M.F. Farooqui, said there were opportunities during crisis and asked the industry to gear up with strategies that would reap benefits when the economy rolls back. Despite slowdown in the economy, the Ministry of Heavy Industries and the Planning Commission have projected that auto sector was poised for a four-fold growth by 2016.

While revenue from auto industry will cross $145 billion, the component industry will be $2.3 billion, he said. The contribution from this sector to GDP will be doubled from the current level of 10 per cent, he said. Though the economy seems to be sluggish, the State Government is still getting proposals for investments, he said.

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