The coronavirus crisis has, perforce, put the brakes on the growth pace of the automobile sector. As companies slowly but surely pick up pace to remain upbeat despite the obstructions on its way, ŠKODA Auto Volkswagen India has resorted to continuously innovate in order to ensure continuity of supplies to production lines. In this conversation with Steffen Heim, Executive Director – Corporate Purchasing, ŠKODA Auto Volkswagen India, we unearth the secret to getting past such turbulent times, explore the impact of the lockdown on the auto sector and catch a glimpse of what to expect from the company’s India 2.0 project. Excerpts follow:
The automobile industry has been hit hard due to the COVID-19 pandemic and the April sales figures of the entire industry have gone down to zero. What has been the impact of the pandemic and the resultant lockdown on the supply chain of your company?
At ŠKODA Auto Volkswagen India, we are in the middle of an important phase of our India 2.0 project. This project involves upgradation of our production line for which many of the required tools and components were imported from Europe and Asian countries. Fortunately, we more or less managed these just before the major lockdowns happened in these countries.
However, as the pandemic grew in the western part of the world, closure of factories in Europe started becoming a concern. While for global OEMs, complex Supply chains create a dynamic sourcing footprint, the pandemic created a situation where serial lockdowns affected sourcing these components, and getting them to our production facilities. Issues ranging from material shortage, to extended freight timelines vastly disrupt supplies. This required us to continuously innovate to ensure continuity of supplies to production lines, by arranging special as well as looking for alternate sourcing of raw material or components. Resuming operations after lockdown has its own complexities as it requires OEMs to coordinate with hundreds of local and global suppliers, logistics partners and thousands of employees. Labor movement within India has also created shortage of manpower at several component manufacturers and it will continue to hinder production volumes as supplier and logistics partner work on optimizing the available workforce.
How do you plan to optimise your supply chain? Are your optimisation methods based on cost saving or on agility?
ŠKODA Auto Volkswagen India as a part of the Volkswagen group is able to tap into a complex global network of suppliers to cater to the best quality products, while offering us the cost benefit of volume sourcing. While pandemics as the current one can affect manufacturing operations like ours, a geo singular event can impact supply chain and hence the advantage to retain a plan ‘B’ for every scenario. This has been our approach to ensure production continuity and while we are also practicing high level of localisation going up to 95% for the upcoming MQB A0 products as part of the India 2.0 project, as supply chain experts, we have to provision for any and every contingency.
The automobile sector has to oscillate between catering to the demand whilst ensuring that the supply keeps up with the pace. What are the challenges that you face in keeping with the demand and time constraints?
The domestic as well as the global market have been affected by reduced demand over the last couple of years and it has only worsened because of the Covid-19 pandemic. There is a weak consumer sentiment in the country because of the complete nationwide lockdown with no clear indication around how and when would the economic situation get back to normal and demand will resume the trendthat we have seen thus far in the country. For manufacturers, it does mean that the pace of operation has to be adjusted continuously based on market indicators to gauge the demand and supply cycle which once broken takes complex paths.
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