In light of growing competition, ancillaries are being asked to upgrade their technology to sustain margins

Tractor manufacturers in the northern region have told their component suppliers to upgrade their technology and ensure better resource management to sustain existing margins.

The ancillaries have been told that in light of fierce competition and the proposed implementation of the more stringent Bharat (Trem) Stage III A emission norm for tractors with sub-50HP engines from October 2010, only technology upgradation and better resource management can sustain margins.

There is a consensus among the leading tractor manufacturers in the region that the time is ripe to cut the number of suppliers and retain only the most efficient and viable vendors, in order to meet the challenges of a competitive market.

Growth of at least 20 per cent is envisaged by the tractor industry in 2011-12. All tractor manufacturers are gearing up to optimise their cost structures.

The Mahindra and Mahindra Swaraj Division, the market leader in the northern belt, has taken the initiative to communicate with the vendors.

“Proper manpower management is an important aspect that the ancillaries need to look into. Most SMEs depend on migrant labour and face labour shortages in the lean season. We apprised them of the need to plan ahead to meet this constraint to maintain the flow of supplies,” said Mandeep Sachdeva, senior vice-president (source), M&M Swaraj Division, Mohali.

He added that process control was also an area of vital concern. The deployment of CNC (computerised numerically controlled) machines cannot give the desired results if the machines are handled inefficiently.

Vendors with common problems are called in groups by the original equipment manufacturers (OEMs) to spread the message of quality consciousness.

The public sector player HMT Tractors Limited, Pinjore, has streamlined the cash flow to the ancillaries, which had got disrupted for a while. This has helped the small players to install better machines, said one of the vendors.

The company has indicated to its suppliers that they should be prepared to match the new emission norms for tractors, which are closer to Euro IV norms.

“Investments in the form of new tooling, fixtures and changes in the process of manufacturing will be required. We will be in a position to give the SMEs exact requirements for the Bharat TREM III A norm by the end of this month,” said Prakash Sharon, executive director of HMT Pinjore (Tractor Division).

Hoshiarpur-based Sonalika Tractors is also searching for vendors with a better attitude to work. “We want a long-term association with our component suppliers. The time has come when small outfits need to spruce up their operations in terms of better quality control, better systems and better manpower organisation,” said A S Mittal, vice- president of Sonalika.

Mittal added, “Small players who can sustain cost-competiveness in the long run should be members of the team. The less efficient players may be trimmed.”

Apart from the resilient domestic market, manufacturers also expect growth in export orders. It will be a case of survival of the fittest for SMEs that supply components to manufacturers of tractors.