Major auto component companies lead in adoption of IT applications

NEW DELHI, INDIA: Indian auto component companies are at very different levels of IT implementation and the IT strategy of many firms is not based on a judicious process improvement strategy.

According to a study on ‘IT adoption in the Indian auto component industry’ by Nasscom, large firms are ahead of their SME counterparts in adoption of all IT application systems with Enterprise Resource Planning (ERP) being the most-widely adopted IT application in the industry.

“However, very few firms adopt a clutch of applications to maximise the potential of efficiency gains, and this obviously has an adverse effect on the efficacy of IT adoption. In the adoption of networking and groupware systems also, large firms are generally ahead of the small and medium firms,” it said.

During the year 2005-06, a majority of the auto component manufacturers surveyed had their annual IT budgets to the tune of Rs 20 lakh, with hardware forming a major proportion of IT investments. The annual IT budget is expected to increase for a majority (almost 90 percent) of auto component manufacturers in the coming years.

Most critical challenge

The study found that Supply Chain Management (SCM) was ranked as the most critical challenge by Business Unit heads. Some of the other challenges were fluctuations in raw material costs, meeting customer demands for product quality and timelines and procurement of raw materials – reiterating the importance of supply chain.

“The three most critical business processes identified by the firms are order receipt and demand management, production planning and order processing,” the report said.

It suggested that the IT had the potential to act as a force multiplier for the Indian auto component industry and enable the sector to achieve its target of becoming a $40-billion industry by 2015.

Key bottleneck

“Quick access to reliable business information is a key bottleneck as the auto component firms possess disparate systems including manual paper based processes that lead to disconnect among the supply chain constituents impeding real time decision making. Business Unit heads expect IT to play an important role in addressing their business challenges. They key expectations of the BU heads from IT are meeting customer requirements for timely delivery and product quality, tracking production cost and quick access to business information,” it said.

Creating escrow fund

The study suggested that the government should create an escrow fund with tax money that a firm can avail for new skill building and skill upgradation programmes.

“Government can also establish a fund for enabling investment in IT solutions by SMEs, similar to the Technology Upgradation Fund established for the textiles industry,” it added. 

Source: Agencies