For Tata Motors, collaboration is the mantra during Covid

Tom Flack pauses for a brief moment before answering the question.

“Not having parts is far more expensive than expensive parts,” says the President and Chief Purchasing Officer of Tata Motors when asked if he has seen anything as dire as Covid-19 during his career.

“The worst thing that can happen to you is a fire because you lose everything. You have to start all over and most of the parts that we make usually involve some expensive tooling,” elaborates Flack. Even if a company can “go get a copy of those tools” made on shorter lead times, being out of the market because of a fire “is just doomsday”.

In his critical role, which involves constant interactions with ancillary suppliers and working towards a robust costing base, Flack knows what he is talking about. “This moment in time is interesting… it’s a fire in the sense that everything is closed but the tools are not damaged,” he says, during a video interview.

Additionally, the markets are also closed with all competitors up against an unknown foe that is wreaking havoc across the world. “So I think, for us, the realisation is that it is terrible but we are all in it together. And we have been using that mantra over the past several weeks, working more collaboratively than ever,” continues Flack.

Incredible ability to sustain

Reiterating that the company is “pretty good” both at crisis management and working through creative solutions, he says the top priority at this point in time is supply protection. This has led to a greater sense of collaboration within the industry when everyone is literally on the mat “Some of the engagements that I have done with our industry groups (during Covid-19), I would never do in normal times,” says Flack. The key is to take care of suppliers and ensure that everyone within the ecosystem is connected.

“If one of them goes down, they affect five of us as OEMs, so we need to be careful when thinking about this,” he says. Citing an example, he brings up Mahindra & Mahindra, which is a rival at the product/retail level as well as in the customer space.

“However, if both of us have a supplier going down, and neither of us can produce because one of us chose to do something not supportive, then we are actually hurting both of us,” explains Flack. Hence, the renewed effort to get everyone on board during this crisis.

“You would not believe the response of some of these large Tier-1 supplier heads. They are keenly aware of whatever it takes to bond together and take care of their smaller Tier-2 (counterparts) also,” he says.

It is this trait, coupled with the sheer resilience of the supplier community, that has left Flack impressed. “What I see in India here is the unbelievable ability to sustain in a crazy market even before the virus struck. There is a vibrancy in the supplier community to tolerate and cope with this craziness,” he says.

According to Flack, there are some really “powerful bosses” in the Indian supplier community who will take their people through this period, thanks to their laser-like focus. “It is incredible to see how calm they are during this crisis,” he says.

Yet, the grim reality remains that the going will be tough for many months to come once operations resume in a battered market. “I think the operating practice that you deploy is to assess your business, what we call finding your waterline,” says Flack.

This will involve how “far down you can go and sustain”. In his view, all companies have an innate survival instinct, which becomes a “very great form of passion” for the leaders of operating teams. “How they use it is up to them but finding their waterline is key,” he says.

Even before Covid-19 began to scorch the Indian landscape, the auto industry was already in the midst of a slowdown and manufacturers were gearing up for the new Bharat Stage VI emissions era. “So we already had two forms of a storm brewing around. And then right on top of BS-VI, you now have the virus,” elaborates Flack.

To automakers, this could not have come at a worse time, especially when they were looking to recover investments on BS-VI. Some “already had real trouble” getting rid of their older BS-IV inventory because of the muted industry.

It is this reality, reckons Flack, that makes the impact of Covid-19 more “chronic or acute” for India compared to other markets like China, Europe or the US. Of course, it would be “painful” for them too but automakers in these regions can still overcome it because they will come off from a “very healthy base”.

India, on the contrary, has been through a tougher time, which means the remedial measures will need to be different. “You cannot take moves on restructuring people and that cost is going to remain. Yet, you have got to find a way to redeploy your people,” says Flack. Essentially, this means finding a way “to reinvent yourself” right now. In the process, some consolidation will also happen, which is but inevitable because of the heavy investments incurred on migrating to global standards of safety and emissions.

“There was already a lot of chatter around consolidation in the supply base and that will probably just heighten. As far as we go, it will be a rough few months,” cautions Flack. Even as factories open up, there will be fear and anxiety, which is perfectly understandable.

“That fear might be a very disruptive thing. As you go down from a Tata Motors to a Tier 1/2/3 supplier, you get into less sophistication, less sense of control over employees and their feelings about work and so on,” he explains.

Consequently, it will be a rocky ride for some months before things gradually begin “going in slow mode”. Beyond these internal challenges, the other reality to reckon with is a lacklustre market.

“It wasn’t great before this and there is no reason to believe that this (the period post-Covid) is going to trigger a market boom. There are some views that the market will have some recovery but certainly not in the first three to six months,” says Flack.

In short, the new normal means that companies need to plan carefully for operations and focus on keeping inventories low. This will ensure that “we can keep our working capital fresh and have a keen sense of operational efficiencies”.

In the process, this also becomes an opportunity for suppliers to “sort of” redefine themselves when they face the reality of low volumes.

Tata Motors has been having constant discussions with individual suppliers to work towards this goal.

“If you do that and get through it, you emerge a lot stronger when the market does return. Then you then start to add investments in areas with a new sight on efficiency and keep yourself strong for a while,” says Flack.

Evolving as export hub

The topic veers around to China and the heat it is facing from many parts of the world, especially the US, for its alleged role in the Covid-19 pandemic. Would this translate into an opportunity for India to move centre stage in the sourcing game? Flack admits this is not the easiest of questions to answer.

“I see a trend, though, but am not sure how this will play out. One, we see China having a rough time — a lot of people wanting to get away from China for obvious reasons that are out there,” he says.

Should this happen, there is a likelihood of India becoming, “I wouldn’t say the next China”, but a really good export hub, which is something it has been trying to achieve for years now. “It is unbelievable to see how much India has grown over the years, especially the strength of some suppliers,” says Flack.

According to him, the country is perhaps 60 per cent on its way as an industry to “having the ability to be a proper export hub”. Flack is all praise for the levels of evolution over the years. “You have to physically go see some of the factories that are now in your country and the R&D capabilities to appreciate what I am saying. It is a very impressive journey that has been going on,” he says.

With its “incredible breadth of engineering talent” and people that can obviously put together world-class components, Flack reaffirms his point, citing the endless number of companies that have global R&D centres in India.

“The list is too long to even name them. It has been a quiet emergence of a very strong supply base that could rival most markets,” he says. To most companies, India can become what “we call a cost advantage”, not just for labour but for running an R&D operation. “If you can take that leap, it is a big leap,” he adds.

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