The automotive sector was de-licensed by the Indian government in 1991. This opened up the sector for 100% foreign direct investment through the automatic route. Owing to its deep forward and backward integration with several key segments of the economy, the industry has a strong multiplier effect on the country’s economy and is said to be a major growth driver. The well developed Indian automotive industry ably plays this catalytic role by producing a wide variety of vehicles such as passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles, three wheelers, scooters, motorcycles, mopeds, etc.

India continues to consolidate its position on the global front being one of the world’s top ten auto-producing countries. India, the seventh largest vehicle producing nation in the world, now accounts for 5% of global auto production, up from 1.4% at the beginning of 2000, according to Society of Indian Automobile Manufacturers (SIAM). The sector contributes over 5% to the country’s GDP and nearly 20% to the revenue from indirect taxes, and provides employment to over 12 million people.

A steady growth in the sector has attracted big investments especially from various foreign auto majors through direct investments or private equity. Some of the major investments are from vehicle manufacturers such as Maruti Suzuki, Hyundai, Nissan-Renault, Volkswagen, Volvo, Tata Motors, Toyota Motors, Honda Motors, Jaguar Land Rover, BMW and Mahindra & Mahindra, as well as from auto component manufacturers like Bosch Group, JK Tyre, Amtek Auto, Jamna Auto, Pawan Kumar Ruia Group, Firefly Energy India and Pragati Automation Pvt Ltd (PAL).

Avenue for exponential growth:

The Indian automotive sector has been aptly described as the sunrise sector. India’s auto market grew at 32% in 2010 according to SIAM. According to the data released by SIAM, in Dec 2010, the total sales of vehicles across categories registered a growth of 30.5% over the same period in 2009. The industry has been growing at around 30% in the ongoing fiscal as well. Car and motorcycle sales in India are setting new records with rising incomes, cheap lending by banks and launch of new models.

The Indian auto components industry which feeds the automotive vehicle manufacturing companies is one of the fastest growing manufacturing sectors and is both forward and backward integrated with the other engineering and manufacturing divisions in the country.

The Automotive Mission Plan (AMP) 2006-2016 which has been put forth by the Ministry of Heavy Industries & Public Enterprises envisions India “To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016”. It has proposed to make India a manufacturing and export hub for small cars, multiutility vehicles, two and three-wheelers, tractors and components. The plan provides a road map to help transform India into a global automobile player. It envisages an investment of US$ 40 billion out of which an estimated US$ 12 billion is in 2010-11, according to a report from ACMA.

Exports from the auto component industry are estimated to be worth US$ 5 billion in 2010-11, according to the ACMA report and are expected to grow to US$ 30 billion by 2020. India’s share in the global auto components market is expected to rise from 0.9 % in 2008–09 to 2.5% in 2015.

The growth trends in the auto sector as a whole and in the auto component industry segment in particular are depicted below.

Destination India:

Indian automotive companies are fully capable to produce vehicles / automotive components compliant with global automotive standards, e.g. Japanese Industrial Standard (JIS), Deutsches Institutfür Normung (DIN), European emission regulations etc. Furthermore, India has proven product-development capabilities, lower manufacturing costs due to economies of scale, low design, research and labour costs, local sourcing of tools and components, and proximity to emerging automotive markets. This has made the country an attractive destination as a global manufacturing base and an outsourcing hub for original equipment manufacturers (OEMs), especially after the global economic downturn.

 

Role of ERP in Automotive Industry:

Oracle Enterprise Resource Planning (ERP) software provides a companywide business visibility interlinking all functional areas such as sales, service and distribution, manufacturing, purchasing, stores, quality, finance & accounts, human resource development etc. and works on a unified Customer database and a single Supplier database for the entire company. It is designed to work based on the best business practices prevalent in the industry the world over. Data security is addressed thru a comprehensive portfolio of security solutions deployed by Oracle and using privileged user access controls provided thru system administrator.

Details are available at: Oracle Database Security

All major business processes practiced in the industry can be mapped in Oracle ERP. The Oracle Discrete Manufacturing module specifically captures the automotive manufacturing process. It works seamlessly integrated with the other modules such as Oracle Purchasing, Oracle Advance Supply Chain Planning, Oracle Order Management & Shipping Execution, Oracle Enterprise Asset Management and Oracle Financials.

In addition to providing a user-friendly environment, the Oracle ERP software can be tailored to incorporate specific needs of companies both large and small, progressively expanded, in the ‘horizontal’ sense to embrace additional organizational functions, as well as ‘vertically’ to integrate other stages of the production process.

On account of its modular structure, the ORACLE ERP software can cater to Automotive industries of all kinds, from vertically integrated companies to those specializing in single stage of the production process.

On the whole, ORACLE ERP helps to drive the entire organization on a single platform, provides an improved supply-demand linkage with remote locations, enables informed management decisions based on real time access to accurate data, and enables cutting down of material and resource wastages thru effective utilization as well as thru reduction of communication gaps and paperwork.

For its clients in the automotive industry, the ERP solution package which Filix recommends includes the relevant Oracle E-Business Suite (Release 12) modules as per their relevant industry segment:

• Vehicle manufacturing

  Essential: Oracle Flow Manufacturing, Oracle Order Management & Shipping Execution and Oracle Financials.

  Optional: Oracle Project Management, Oracle Supply Chain & Order Management Analytics, Financial Intelligence, Customer Relationship Management (Oracle Sales / CRM On-Demand), Service Management, Oracle Enterprise Asset Management, Human Capital Management (for large organizations) / Oracle HR / Oracle Payroll (for others).

   

• Component (batch) manufacturing

  Essential: Oracle Purchasing, Oracle Advance Supply Chain Planning, Oracle Discrete Manufacturing, Oracle Order Management & Shipping Execution, Oracle Enterprise Asset Management and Oracle Financials.

  Optional: Oracle Project Management, Oracle Sourcing, Oracle i-Supplier portal, Oracle i-Procurement, Landed Cost Management, Procurement & Spend Analytics, Oracle Supply Chain & Order Management Analytics, Financial Intelligence, Customer Relationship Management (Oracle Sales / CRM On-Demand), Service Management, Oracle Enterprise Asset Management, Human Capital Management (for large organizations) / Oracle HR / Oracle Payroll (for others).

Filix has wide ranging experience from end-to-end implementation to post-implementation support in the Indian Automotive industry. Clients utilizing Filix services benefit from our knowledge base and rich experience in implementing all the above mentioned modules, mapping of the client business processes with the standard Oracle product functionality as well as from Filix expertise in development of Customized forms and reports.

Users of Oracle Financials at these clients benefit from this core strength of Filix team. This includes, to name a few, handling of complex India localization and taxation scenarios of Service Tax and TDS, Budgeting, Fixed Asset depreciation scenarios and making the users comfortable in using the Oracle Financial Statement Generator to analyze the financial data such as expense, income, taxes, inventory and project wise expenses.

Customized Reports like AP to GL Reconciliation Report, AR vs COGS Reconciliation Report, Receipt/Purchase Register, Sales Register, are only a few out of the list of reports developed to suit specific needs of our clients from the Automotive process industry. Filix can also provide training (on demand) to IT team members of clients so that they can create customized reports on their own using Oracle BI Publisher.

Users of Oracle Financials at these clients benefit from this core strength of Filix team. This includes, to name a few, handling of complex India localization and taxation scenarios of Service Tax and TDS, Budgeting, Fixed Asset depreciation scenarios and making the users comfortable in using the Oracle Financial Statement Generator to analyze the financial data such as expense, income, taxes, inventory and project wise expenses.

With its custom-built products which integrate seamlessly with the Oracle E-Business Suite application, Filix has deployed its technical expertise to map typical business processes being practiced at clients.

Some of these bolt-on applications are used:

• Capture and track daily currency exchange rates
• Track bank wise export packing credit (epc) limit and stock value
• Track negotiated invoices against forward purchase contract (fpc)
• Execute the epc availment process
• Capture customer specified product specifications which are entered in the system by design department and utilized by production department.

Implementation approach:

Filix services are available for the ‘big-bang approach’ as well as for the ‘staged approach’ for ORACLE ERP implementation, based on client’s business needs. However, Filix recommends the 'staged approach' for its prospective clients in the Automotive sector in India. This approach helps to get the basic business processes (Purchasing, Inventory Management, Manufacturing and Finance) mapped and working in ORACLE ERP before moving on to utilize the larger benefits such as Business intelligence etc.