Project Of: Process Improvement in Auto parts Industry of Pakistan

to face Globalization

D E V E L O P E D B Y:

The leaders Group: BBA-F06

Hafiz Waqar Akhtar 026

Waqas Javed 076

Zaryab Hassan 074

Contacts:
Waqar7618@live.com
0323-6215250

SUPERVISED BY :
Mr. Faisal Shah

COMSATS Institute of Information Technology

Process Improvement in Auto parts Industry of Pakistan to face
Globalization

Abstract:
Automobiles are the integral part of every one’s life and having very much
importance. In Pakistan, automobiles industry is growing day by day but at turtle
speed compared to annual global turnover. In automotive industry, most of profit
derives from downstream activities like spare parts manufacturing. In Pakistan
more than 50% of spare parts are manufactured in unorganized way and this
situation open the door of imports from Thailand, China, Korea and Malaysia etc.
By introducing new processes and technologies Pakistan would be able to reduce
cost and to face globalization and capture the domestic market. Most importantly,
industry needs to be organized and government should have a major role in it. In
this report, we discuss about the problems which auto parts manufacturer faced in
Pakistan and detailed suggestions to improve them.

Introduction: $2.67 billion in 2006-07 which is very

Automobiles are now the part of low when compared to annual global

every one’s life. Automobile sector is turnover of $460 billion. Increasing

a deadly need for distribution of demand of Automobiles create a

goods as well as transportation. This huge potential of Auto Parts

industry serves as a hub of other manufacturers. Auto part sector is

industries. Pakistan Automobile mainly related with automobiles (no

industry is growing rapidly by of vehicle produced). ”In mature

producing Cars, Light Commercial automotive markets, more then

Vehicles (LCVs), Trucks &Busses, seventy percent of profit derive from

Tractors and Motor Cycles. Sale of downstream activities, with spare

vehicles in September 2009 was parts being a key driver” (IBM

53488 units as compared to 38387 Corporation 2008) Currently five

units’ sale in November 2008. Gross hundred organized units of original

sale of Pakistan automobiles were equipment manufacturer (OEMs)

and twelve hundred units of
unorganized small and medium industry can perform better and will
manufacturer of replacement market able to capture the maximum
parts are functioning, some segment of domestic market and
Organized manufacturers are face globalization, with the help of
registered vendor for OEM’s and process improvement in
functioning on large scale, but Technological know how.
unorganized units owned by small
and medium businesses by which Problems in Existing Structure:
ninety five percent business are self Pakistan Automobile industry is
financed. Falling trade barriers, growing, total vehicle sale in
Structural disadvantage in certain September 2009 was 53488 units as
area (lack of utilities, clusters & compared to 38387 units’ sale in
Roads etc.), High Cost of doing November 2008, for sustaining this
Business (High power Cost, financial growth local industry have to
cost, obsolete skills, law & order improve their products quality with
situation and technology), lacks of low cost as compared to competitors
technology, innovation & human Local manufacturer competing not
skills. Domestic market growing at only with domestic firms but also with
27% per annum but will lag in international firms. The local
capacity, Domestic market size manufacturers face globalization and
incompetent to deal with the export have the pressure of producing
opportunity. Unorganized sector is better quality with low cost, the
manufacturing under outdated constraints come in the way are: lack
processes of production, this of technology and expertise,
situation open the door of imports resource and financial issues, poor
from China, Indonesia, Malaysia, branding and lack of government
Thailand, Taiwan and India, for support and lack of growth
satisfying the domestic demand at environment, see table 1 . Global
low cost. By Introducing new Exports of auto sector are over USD
processes and reformation older 600 billion while Pakistan share is
processes, Pakistan auto parts Approximately USD50 million.
 and strategy level too that not meets
Table 1 the requirements of low cost and
Gap area Local Global better quality.
Production/ Labor intense Technology Customer Need Corporate Strategy
productivity intense
Cost High Cost Low cost Alignment
Quality Physical fit but International
no quality Quality Operations Strategy
Core
standard standards Compete
Economy Lack of Economy ncies

of scale economy of of scales Decisions

scale
Capacity Less Flexible
Processes, Infrastructure, and Capabilities
Capacity capacity

Investment 95% small MNC’s

& family Huge Cost competency: “Expense Eat
owned investment profit” Cost is the key element in
competition especially when a
Customer Requirements:
business is engaged in global
Customer wants quality and valuable
competition. Analysis of cost is
products, requirements of customer
mandatory for cutting cost; organized
must consider when strategy
and planned program for maintaining
formulates. Alignment of different
record is helpful tool for save time
strategy is necessary for meeting
and energy.
requirements. ”Conformance to
Requirements” Manufacturing
Proposed Solution to reduce cost
typically consists of a complex
and increase productivity to face
organization of technology, people
globalization:
and practices. If technology, people
• Supply chain Initiative to Face
and practices are developed and
Globalization
operated effectively the firms can get
• Manufacturer-Supplier
Competitive advantage. Pakistan
Relation for strengthen Supply
auto parts manufacturer use old and
Chain
dated processes at operational level
 • Information Technology
structure for full watch to
supply chain
• Technological improvements
for improving quality
meeting requirements.
Supply chain Initiative to Face
Globalization: Manufacturing spare
parts for the global automotive has
already been working to improve
their performance through supply
chain initiatives, which include the
following:
• Evaluate and redesign of
the resource at the global
and the market.
• Develop and strengthen
the system of legacy.
spare parts and access to
the growth of quick
formulas appropriate. (IBM
Global Business Services)
Manufacturer-Supplier Relation
and
In rapidly growing industries in
emerging markets, and developing
relations between the manufacturer
and supplier of permanent is a
critical component to the ability of the
manufacturer to gain a competitive
advantage. And partnership, like the
relationship is now considered the
most preferred pattern of relationship
between manufacturers and
suppliers because it encourages the
exchange of knowledge, which is a
source of competitive advantage.
(Szwejczewski et al., 2005; Dyer and Hatch, 2004)

• Improving the sources that Information Technology structure

focus on pricing and for full watch to supply chain:
location of the resource Many of the old systems run by

• Improve forecasting, which original equipment manufacturers

reflect full supply chain that are causing limited to service

availability (the resource requirements. Information

by the dealer) technology systems for the

• Warehouse activities management of spare parts must

Outsourcing it requires address six key areas:

less cost to maintain • The material master record

resources. • Inventory forecasting

• Proper branding: Create • Inventory visibility

separate trade marks and • Order fulfillment / return
 • Dynamic pricing only able to compete low-end parts
• Integration of system and because of low technological know
process how, developed countries have

• full inventory visibility across advanced technological resources

the network after the sale, by and established market network. The

Information technology links local vendors strongly need

between dealers and OEM's, technological know how to improve

(IBM Global Business Services) quality for competing into higher-end
parts. Pakistan’s industry is suffering
Technological improvements: The the problems of Law and order,
productivity improvement is never political instability and Energy crises;
ending ride. Successful process in existing environment competition
improvement program must consist by cost advantage is much difficult.
of continuous improvement, Auto parts especially after sale
commitment from top management, components require quality
and a sustainable improvement competitiveness and this can be
organization. If the process achieved by new technologies and
improvement journey is carefully better method of operations,
planned and executed, painstaking improvement in existing processes
investment in initial cost, effort, and and replace old process with new
people may be rewarded by great technologies.
results. (Pradeep Patra and Sunitha CIM- Computer Integrated
Bartaki (2009)
Manufacturing: In short, CIM -
The search for increasing quality
Computer Integrated Manufacturing
levels turned to new methods for
computer is who plans, organizes
improving processes, such as
and facilitates all decisions at all
integration with CIM(computer
levels in the organization through
integrated Manufacturing) and Lean
integrated links all the computers
Manufacturing (LM) and six
and systems within the framework of
Sigma(SS), Lean Six Sigma(LSS)
a comprehensive communication
Competition in Export Marker:
plan, in addition to integration and
Pakistan auto parts exporters are
the establishment of manufacturing not added) in the customer's
industry in the form of large, or as a perspective, linking the necessary
strategy unit business. Handsome steps for the production of goods in
and integration in the first spoke with the flow of value, so the move
CAD / CAM, which has evolved later without interruption, bypass roads,
with other methodologies, including and back, or refuse to wait, and the
the DFMA (design and flow of demand-driven. (The
manufacturing of the Association). International Baccalaureate Silva,
CAD (computer-aided design) and Batalha GF, M. Stipkovik Filho, S
CAM (Computer Aided Ceccarelli, JB Angus Fesz M. (2009)
Manufacturing) is a CAD / CAM Conclusion:
pronounced together as an Pakistan is facing a hell of problems
integrated system. (I.B. Silva, G.F. in auto parts manufacturing.
Batalha, M. Stipkovik Filho, F.Z. Ceccarelli,
However Pakistan is generating lot
J.B. Anjos, M. Fesz (2009))
of profit from this but needs lot of
LM - Lean Manufacturing:
improvement when we talk about
Principles for the LM gained a
global markets’ revenues in this
reputation in the 1980s with the
sector. Almost 70% manufacturing
results of the research project
units are unauthorized and do their
conducted by the Massachusetts
work in an unorganized way which
Institute of Technology (MIT), who
affects the quality of product. By this,
studied management practices and
we can’t export and opens the door
programs for improvements adopted
of imports from India, China,
by the market leaders in the supply
Malaysia, Thailand etc. So we need
chain of cars and found that the
to improve it and revenues would be
adoption of these principles often
matched with global markets profits.
contributed to their competitiveness.
Although our domestic market is
The main motive of the way LM is to
growing at 27% per annum but we
reduce the time lag between the
lag in capacity. Unorganized sector
request of the customer and delivery
is manufacturing under outdated
by getting rid of waste. They promote
processes of production. By
to determine what adds value (and
Introducing new processes and forecasting, inventory visibility,
reformation older processes, Order fulfillment/ return, dynamic
Pakistan auto parts industry can pricing and integration of system
perform better and will able to and process. The local vendors
capture the maximum segment of strongly need technological know
domestic market and face how to improve quality for
globalization and with the help of competing into higher-end parts.
process improvement in Auto parts manufacturing industry
Technological know how. Cost is should avail the latest
another key element in competition. technologies like CIM
Different methods should have been (COMPUTER INTEGRATED
used to reduce cost and increase MANUFACTURING) who plans
productivity. They are: organizes and facilitates all
1- Supply chain initiative to face decisions at all levels in the
globalization organization through integrated
2- Manufacturer-Supplier relation links all the computers and
3- Information Technology systems within the framework of
structure for full watch to a comprehensive communication
supply chain plan. DFMA is new methodology
4- Technological improvements (design and manufacturing of the
These all ways would be association) which includes
beneficial for local industry and CAD/CAM as an integrated
helps to develop and strengthen system which increases the
the system of legacy, improve the technical efficiency. Pakistan is
sources and forecasting which also facing the problems of Law
reflect full supply chain and Order, political instability and
availability. One of gap is energy crises. Many problems
Information technology structure. are there but this would be
There are different key areas for eliminated by the improvement
the management to address like and Government help.
Material master record, inventory References:
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