Saturday, August 16, 2008

Innovation is the key in times of gloom : A check on the auto industry

In recent weeks, General Motors announced a $15 billion loss(read related article) while Ford suffered a $8.7 billion loss. Their Japanese counterparts Toyota and Maruti Suzuki experience huge drops in their profits, 39% and 17% respectively. [Note : Toyota beats everyone else because of their strategy based on contradictions]
Steel prises are rising, inflation is rising, savings of the people are reducing, interest rates and loans are becoming expensive and global recession is setting in. In short, there could not be a gloomier time than this for the auto industry. But the never-say-die spirit of the automakers is helping turn the tide.
I'm reminded of a beautiful quote given by Albert Einstein, which the auto makers seemed to have followed to the core :
Out of clutter find simplicity;
From discord find harmony;
In the middle of difficulty lies opportunity.
Maruti and other competitors, like Tata, are focusing on using alternative materials for components for raw materials while Honda and GM reducing their administration expenses by reforming canteen menus and starting in-house training centers for their employees.
Just a few days ago, some companies were employing very innovative practices like energy efficient pumps, ventilators, and non-artificial and eco-friendly towers for cooling office premises!
At such times of inflation, most companies are reducing the number of workers, and trying to extract as much work in order to improve the bottom line of the business.
I've got a few ideas of my own too! (which auto industries can follow)
  1. Reduce inventory costs by getting all the suppliers closer to your manufacturing unit (Japanese firms do this all the time - it is believed that this helps keep inventory costs to a bare minimum, in short, make the product when the product is demanded)
  2. Distribution Systems should be highly efficient and must save fuel in the case of transporting cars from the factory to car outlets. Bigger trucks and computerised systems are a must. Famous example : UPS (United Parcel System in USA saves millions of dollars each year this way)
  3. Inviting employees to make decisions. Sometimes the best ideas come from the people whom you least expect to deliver them...
  4. On a light note, executives of the companies should shed those formal shirts, ties and courts to more comfortable clothes in order to avoid using excessive air conditioning.
I'm waiting for the best suggestions to come from you people! Any comments, writings, please post them!!

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