Tata Motors is in the process of setting up at least seven regional stockyards as it seeks to move to a leaner and efficient distribution system. This will ensure its vehicles reach dealers much faster and delivered to buyers in a maximum of three days.
The move is also aimed at reducing the financial burden on dealers as it takes care of inventory costs, said Mayank Pareek, president, passenger vehicles business, Tata Motors. The company already has an operational stockyard in Guwahati and will have another three by the end of the current financial and the rest by the middle of next year, Pareek said.
“For far-off locations in the east, sometimes, it can take up to 21 days for vehicles to reach there. That means 21-day inventory is lying on the wheel. It is adding to the interest costs in this period,” Pareek told Business Standard.
Irrespective of which part of the country a vehicle is booked, a regional stockyard will ensure the vehicle reach the customer within three days of booking. “This will bring down the inventory carrying costs substantially,” he said, adding, these stockyards will be set up and managed by third-party logistics providers.
The initiative is part of the company’s strategy to focus on retail sales, and this will lead to a leaner and efficient system based on demand forecast and big data, Pareek said. “For any model, you have 7 to 8 trims and the same number of colour options. If you multiply, the combinations become 56. It’s practically difficult for any dealer to keep 56 variants of a model. It’s uneconomical and inefficient,” he said.
In Guwahati, where Tata Motors already has an operational stockyard, the new model has helped dealers pare inventory costs by almost a third, claims Pareek.
The maker of Tiago and Harrier models seems to have taken a leaf out of car market leader, Maruti Suzuki India, which adopted the de-centralised model of distribution almost six years ago. It currently has several such stockyards at multiple locations across India.
Tata Motors has taken this step at a time when passenger vehicles sales India are going through a prolonged slowdown amid poor consumer sentiments and anaemic economic growth. India’s economy advanced 4.5 per cent in the September quarter of FY20. Besides poor sales, a liquidity squeeze and tightening of credit norms by lenders have also affected automobile dealers.
“The dealer has forgotten the core job of generating demand, selling the vehicle and addressing the after-sales requirements. He is forever in managing the books, saving interests costs and trying to avoid a default,” said Pareek, adding that the new structure will allow the dealer to focus on the core job. He conceded that as the result of the change in focus from wholesale to retail, Tata Motors has had to forfeit volumes and market share.
The firm’s PV sales in the seven months to October dropped 41 per cent year-on-year to 81,576 units. This was much sharper than the broader market, which fell 20.2 per cent in the same period, according to Society of Indian Automobile Manufacturer Association (Siam). It crimped 39 per cent year-on-year in November.
But Pareek appeared confident that in the long term, the strategy to focus on retail sales will pay off. He expects the pain to continue for the current quarter as the stock correction reaches the final lap. Sales are expected to be on track after the transition from BS-IV to BS-VI is behind, he added.