Auto component cluster at Chennai Key cluster actors



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Auto component cluster at Chennai

1. Key cluster actors: The key cluster actors in Chennai auto component cluster are about 40 large and Medium enterprises, Vendors to these large firms, Small firms catering to replacement markets, Job shops in metal cutting, grinding, metal forming, foundries, Heat treatment units, Forging units, OEM manufacturers of vehicles- as customers and Material supplier. Most of the 40 large and medium enterprises in this category are sub assembly manufacturers supplying to OEMs in India. Each of the larger units have 100-200 vendors who serve them. Small firms catering to replacement markets are estimated to be more than 200 in numbers. There are about 1000 job shops that serve the industry. However most of them cater to not only automobile industry but also other engineering industry. To support these industries there are approximately 31 foundries in the cluster. About 21 of them are SMEs. About 100 heat treatment units support the cluster. Dealers and alloy casters are the major conduits for material suppliers. Most of the units buy the material through the dealer of big manufacturers. Raw materials like steel and Fe-alloys are principally sourced from SAIL, and its suppliers. For Non-Ferrous alloys like Aluminium, there are local re-melting units & Foundries that manufacture the alloys & ranges with different composition based on the requirements of the manufacturers.




2. Major problems faced

2.1 Poor networking amongst different stakeholders: Although the cluster is richly endowed with various institutions to support the cluster firms, not much networking was happening at the cluster level. A platform was essentially missing where the institutions could be in touch with the cluster firms on a continuous basis and respond to changing needs of the cluster firms.

2.2 Weak marketing linkages for small firms. In the cluster small firms were facing problems in marketing of their products. This was mainly because they were more like job shops and were not delivering a sub assembly. Moreover most of the units did not have any scientific method for marketing. They were depending upon word of mouth approach. Due to limited market capacity utilization was low. The awareness about newer markets was not there.

2.3 Low usage of BDS: Most of the entrepreneurs in small industries were not used to using outside expertise for improvement in their businesses. However fast changing scenario in auto-component industry was putting up lot of pressure on these firms to change and upgrade their practices, quality and delivery mechanisms. The principal companies were trying hard to impress upon their vendors the need for using periodicity tools like 5s, QC Tools, Single piece flow, certifications, energy audits etc. However this culture of using BDS expertise to upgrade was largely missing in the cluster. BDS also did not see smaller units as their market.

2.4 Lack of second line management in small industries: The small units quite often lack a second line management system and all operations depend upon the sole entrepreneur. This leads to lot of problems in terms of business not getting critical and strategic inputs from the entrepreneur. The training schemes avaible have no such programme wherein small businesses can get their managers trained on second line management.
3. MAJOR ACTIVITIES TO SOLVE THE PROBLEMS

3.1 Creating a platform for networking amongst firms and institutions: SISI Chennai organized 8 awareness programmes and 10 seminars/ workshops wherein a total of about 600 firms were provided opportunities to network with Institutions. About 20 units were LINKED with NSIC and other nationalized banks for a uptake of app s 4 Crores of credit under CLCSS. 5 firms sought support from SIDBI for energy audit. Institutions like SIDBI, NSIC etc, sponsored quite a number of the above programmes. The training schedules were often drawn as the need of the principal company. Institutions like CIPET, CSIO and ATI were also roped in cluster development.
3.2 Improving marketing linkages for small firms: A Group of 7 firms from diverse functions was brought together to form a consortium called CEN. The group printed a common marketing brochure and hoisted their details on a web site. They started participating I high-end exhibitions including international exhibitions. Similarly 20 firms in Perungudi industrial estate were brought together in to a consortium called Perungudi Engineering cluster. After printing a common brochure they opened a common marketing office and appointed a full time person. This group too started participating in exhibitions. Both of these groups also started approaching big manufacturer for sub contracting relationships. Based upon the need of a principal company –Ashok Leyland, 3 groups of foundries were promoted for sub contracting linkages with the principal. This helped the principal in their process of tierisation of vendors. ThDue to group working lot of enquires were generated due to cross-references.
3.3 Increasing the usage of BDS: Lucas TVS was grapping with the issue of upgrading practices of their vendors. They had formed a group called LESA, which was not taking off. CDA met the concerned authorities and offered to synergise the cluster approach with LESA. BDS like 5s, energy auditing, automation and QC techniques were brought to LESA and matchmaking done. Later LESA took up issues like Single piece flow, TPM and activities were driven on a group approach. Similarly for Perungudi Engineering cluster and CEN BDS were deployed for improving manufacturing practices. Experts from IIP-Indian Institute of Packaging were taken to 4 firms for inputs on packaging. Initially some part of expenditure was borne by the programme to kick-start the usage. BDS of different kinds were grouped together in to consortia so as to improve availability of BDS to cluster actors.
3.4 Design and execution of customized training programmes: CDA identified the need for specialized training inputs as and when expressed by the cluster actors. Suitable curriculum was designed in consultation with beneficiaries. 3 courses of Manager Development Programmes were conducted benefiting 46 managers drawn from about 40 small units. Similarly there was a problem of CNC programmers amongst the LESA firms. A special course was got conducted at advanced training Instituion benefiting 16 firms.
3.5 Reorganizing foundry vendors of a principal in to tiers:
4. Results:

The results of CDP intervention may be summarized as follows.



    1. Firm level impact indicators.

  • 3 firms helped to build linkages with Bangalore machine tool industry and Bobsty Pune equipment manufacturer for orders. Regular enquires are getting generating. Orders worth of 200 Lakhs received benefiting 2 firms.

  • 4 firms helped to build linkage with Merchant exporter .One firm has received export order worth of 120 Lakhs per annum. Second unit received and executed orders worth of 35 lakhs.

  • 1 firm has been facilitated to build linkage with auto component cluster in Chennai. Enquires worth 105 Lakhs have been received. 45 Lakhs orders have already materialized.

  • 140 lakhs worth of export enquiries generated for 4 firms. A visit was orgasied for the buyer to these 4 units.

  • TNFC a consortium of 6 firms have participated jointly in three exhibitions – Indus Expo 2003, vendor development cum exhibition at Visakhapatnam. And Foundrex 2004 at Hyderabad, 120 Lakhs worth of enquires generated. 70 Lakhs orders have been finalized.

  • TNFC has been linked with NSIC for marketing assistance. TNFC has registered with Ordnance factory-Medak and Vishakhapatnam Steel plant. Enquires worth 11lakhs have been generated from Vishakhapatnam steel plant.

  • Enquires worth 260 lakhs have been generated for 5 firms through reverse auctions.

  • 3.9 Lakhs has been saved by 9firms on account of common procurement of coke. Common procurement of crucibles has saved Rs 2.20 lakhs per year for 3 firms.

  • Brain storming sessions lead to savings in usage of coke- 1.35 Lakhs per year for 1 firm.

  • Through reverse auctions 3 firms saved Rs. 3.5 lakhs.

  • Savings on account of Energy audit are more than Rs 1 lakhs per year for 3 firms.

  • Walk through energy audits helped 4 units to save Rs. 1 lakh per year.

  • One unit on implementation of lean cost solutions saved Rs 80 lakhs.

  • Process improvement helped 3 units reduce their rejection percentage from 6% to 4%.

  • 10 units got ISO 9000 Certification. Joint negotiation with consultants saves Rs 1 lakhs.

  • Redesign of coke fired pit furnaces in 2 unit led to improved melting output per kg of coke by 36%. This has saved Rs. 36000 per annum.

  • 5 units have shifted from Graphite crucible to silicon carbide crucible. This has lead to an increase of 20-25% productivity in terms of additional capacity.

  • Awareness and interaction with SIDBI on Credit linked capital subsidiary scheme lead to disbursement of Rs 6.3 lakhs to 3 Units under capital subsidy scheme.




    1. Cluster level impact indicators.

  • BDS usage in the cluster has gone up

  • Exposure visit to Belguam & Kolhapur has helped 5 firms to improve shop floor lay out leaing to productivity improvement.

  • Lot of small units have developed linkages with export market.

  • Domestic market has expanded from Andhra to other states.

  • Entrepreneurs realized the importance of exhibiting their products in exhibitions

  • Having realized the need for an association, the foundries are grouping together under a new association

4.3 Sustainability indicators: -

  • TNFC –a consortium of non-ferrous foundries is taking joint initiatives.

  • Linkages with support institution like SIDBI, NSIC SISI have strength.


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