UNIDO Partnership Programme for the Indian Automotive Component Industry

The global automotive industry is today in the midst of a transformation on all fronts -  technology,  quality and productivity.  Several international car producers have established manufacturing facilities in India.  At the same time, the automotive components  sector  is  opening up  for competition  in the coming years, consequent upon the WTO  regime.  Recognising the urgent need for the Indian automotive component industry to be globally competitive, as also the need to embrace globally accepted best practices not only in their own operations, but also to vertically extend such practices to their sub-suppliers, the United Nations Industrial Development Organisation) (UNIDO), jointly with the Government of India, and the Automotive Component Manufacturers Association  of India (ACMA) launched the UNIDO Partnership Programme for the Indian automotive Component Industry . The objective of the programme is to strengthen the capacity of Indian small and medium auto component suppliers to meet the requirements of vehicle manufacturers, and to enhance their productivity and performance levels so as to facilitate their inclusion in the domestic as well as the global automotive supply chains.

Phase 1 of the programme was taken up in 1999 in the western region as a demonstration programme in which 20 companies participated.  About 40 companies took part in Phase 2 ( 2003-2005), and the programme is in  Phase 3 now with 58 companies participating across the country.

The UNIDO Partnership Programme was given shape by the following “road map” envisaging training inputs to firms that would go through a process of implementation having tangible performance enhancing results and an impact leading ultimately to a paradigm shift:

The cluster approach is best summed up as “ Getting together, Working together and Achieving together”. One cluster comprises 8 to 10 companies, grouping dependent upon the geographical location of the companies selected, and for each cluster, national engineers (counselors) having expertise in TPM/TQM etc are appointed, working under the guidance of senior counselors and industry experts. The national engineer visits the company and helps translate the training inputs.

In-plant training and shopfloor interventions are provided in the following modules: employee involvement  (Kaizens – Q circles, safety); 5S (maintenance of model machine, daily management discipline, waste elimination); quality management (Poka Yoke, process capability, standards); inventory management (containerization, SMED, red tag); productivity improvement ( multi-machine manufacturing, flow manufacturing); and sustenance (alignment with cluster activities).

Pricewaterhouse Coopers Impact Assessment of the Auto Component Programme:

Some Excerpts

  • 15 of the 30 firms that data was available for on the indicator of sales turnover have grown at a rate above the industry growth rate of 62.58 % for the two year period between 2002-03 and 2004-05. In     fact, these 15 firms have registered revenue enhancements that significantly exceed the industry growth rate over the period.
  • Many customer acquisitions, some of them big brands such as Caterpillar, Volvo, General Motors, Valeo, Ingersoll Rand etc may be attributed to the programme. Apart from the improvements achieved on quality and other parameters, the intervention transformed the look and feel of shopfloors to such an extent that customers who would otherwise not be inspired to place an order with participant firms felt confident that the firm could deliver to expectation.
  • 50 % of participating firms added in excess of 9 new products, and available data shows that firms added from 2 to 143 new products over the course of the programme.
  • Measured on 5 indicators – Labour productivity, Overall equipment effectiveness, Machine breakdown hours, Absenteeism and 5S, available evidence suggests that the programme has helped firms to enhance labour productivity and that these enhancements have come about as a result of a combination of various training interventions. These initiatives ranged from organizing the workplace better by putting in place such enablers as shadow boards that helped to reduce “searching time” for tools and waste elimination to targeted activities undertaken in flow manufacturing and SMED.
  • Firms have achieved substantial improvements in quality…. Firms have also been awarded quality certifications over the course of the programme, for many of which they derived support from the training intervention. The names of different certifications achieved by the number of firms (indicated in brackets) are as follows: TS-16949 (18); ISO 9001 (14); QS 9000  (5); ISO 14000 (6); and OHSAS (4).
  • About 50 % of firms have shown a percentage increase in inventory turn ratio (ITR) of above 95 %. A firm in the northern region attributed a 13 to 14 % cost reduction in direct and indirect raw material cost to mudas and kaizen ideas that came from operators.
  • The programme has helped to bring about a cultural change for many firms… Workers adopted technical changes and inspite of unionized activities that restricted output, were willing to increase production.

The benefits of the programme are seen in a) reduction in absenteeism, b) improvements in work place and work practices, c) total employee involvement, d) reduction in number of accidents, e) decline  in in-house rejections, f) reduction in customer returns, g) reduced inventory levels, h) reduction in set up time, i) fewer machine breakdowns, and j) improvement in productivity. According to ACMA, the intangible benefits have been even higher – measured in terms of a clean working environment, improved relations between the management and employees, transformation in work culture, openness and the desire to learn and share, and trust and respect for each other.  And it is a journey that is continuing as the automotive SMEs sustain these  gains and learn to remain in business and grow in today’s increasingly competitive environment.


Shopfloor of an Auto Component Unit in Ambattur/Chennai