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Indian Auto-Component Supply Chain at the Crossroads

Author

Listed:
  • Karthik Balakrishnan

    (Stern School of Business, New York University K-73, New York, New York 10012)

  • Sridhar Seshadri

    (Stern School of Business, New York University K-73, New York, New York 10012)

  • Anshul Sheopuri

    (Stern School of Business, New York University K-73, New York, New York 10012)

  • Ananth Iyer

    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47007)

Abstract

We trace the evolution of the auto-component supply chain in India beginning with the opening of the economy in 1990 by using a combination of data on firm and sector performance, customer-satisfaction surveys, and interviews with experts. During the past decade, the industry has made remarkable progress on multiple fronts. This is particularly true with regard to quality---10 firms in this industry have won the coveted Deming prize during the past six years. Surprisingly, we first observe that the financial performance of the firms that won the Deming prize (i.e., Deming firms) shows no definitive differences from the performance in the rest of the industry. We then analyze the productivity growth at the firm level across two five-year intervals using a total-factor productivity model. Our results suggest that productivity improved much more during the second period, which is the interval in which most of the firms won the Deming prize. We also analyze the impact of winning the award on profitability and suggest that new firms were able to grow faster in the improving business environment. To “externally” validate our findings, we compare the auto sector in India with that in China. Despite a 10-year disadvantage because of costs that are beyond the control of the firm, the auto sector in India seems to be competitive with that sector in China on all firm-specific factors. In summary, we suggest that firms in this sector have taken the first step by becoming competitive in the areas of cost and quality. We suggest that they are now at a crossroads and must make several choices to leverage these quality gains into a profitable, global supply chain strategy.

Suggested Citation

  • Karthik Balakrishnan & Sridhar Seshadri & Anshul Sheopuri & Ananth Iyer, 2007. "Indian Auto-Component Supply Chain at the Crossroads," Interfaces, INFORMS, vol. 37(4), pages 310-323, August.
    • Handle: RePEc:inm:orinte:v:37:y:2007:i:4:p:310-323
    DOI: 10.1287/inte.1070.0282
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    References listed on IDEAS

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    1. Kevin B. Hendricks & Vinod R. Singhal, 1997. "Does Implementing an Effective TQM Program Actually Improve Operating Performance? Empirical Evidence from Firms That Have Won Quality Awards," Management Science, INFORMS, vol. 43(9), pages 1258-1274, September.
    2. John Sutton, 2004. "The Auto-component Supply Chain in China and India - A Benchmark Study," STICERD - Economics of Industry Papers 34, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    3. Sutton, John, 2004. "The auto-component supply chain in China and India: a benchmark study," LSE Research Online Documents on Economics 2292, London School of Economics and Political Science, LSE Library.
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    Cited by:

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    2. Saswati Tripathi & Bijoy Talukder, 2023. "Supply Chain Performance and Profitability in Indian Automobile Industry: Evidence of Segmental Difference," Global Business Review, International Management Institute, vol. 24(2), pages 371-392, April.
    3. Joshi, Deepika & Nepal, Bimal & Rathore, Ajay Pal Singh & Sharma, Dipti, 2013. "On supply chain competitiveness of Indian automotive component manufacturing industry," International Journal of Production Economics, Elsevier, vol. 143(1), pages 151-161.
    4. Singh, Neelam, 2013. "Automotive Industry Response to its Global QMS Standard ISO/TS-16949," MPRA Paper 51342, University Library of Munich, Germany.
    5. Matthias Thürer & Balram Avittathur, 2017. "How do Indian firms source from China? Implications on cross-border supply chain management," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 44(4), pages 247-258, December.
    6. DeCampos, Hugo A. & Rosales, Claudia R. & Narayanan, Sriram, 2022. "Supply chain horizontal complexity and the moderating impact of inventory turns: A study of the automotive component industry," International Journal of Production Economics, Elsevier, vol. 245(C).

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