I'm not sure how many people can remember the Yugo, a car imported from Central Europe -- back before that was cool -- that offered a base price of something like $3990, as I recall. The irony of the absolute piece of crap wheels was that it arrived in the U.S. market right around the time the iron curtain was crashing down, revealing how utterly devoid of quality and workmanship anything produced by the Ruskies was (except atomic weapons, that is). The only reasons that Yugo captured the headlines, in fact, was its cheap price tag -- roughly half that of an entry-level Honda or VW at the time. But cheapness showed in every way, from its steel wheels that were delivered rusty -- or broken in, as someone once told me -- to its crush-friendly roll cage that made riding in a typical convertible safer than hurdling down the freeway in the Soviet's finest. In today's inflation-adjusted dollars, a typically equipped Yugo would probably retail for around $6500, or about the same amount it would take to put the Spend Fool on the bicycle he'd really like to peddle up and around New England's hills.
Now, imagine taking a Yugo and producing it for less than half the cost. If you applied traditional Western thinking, you'd be left with nothing but a front-end assembly and maybe a battery if you're lucky. But Indian entrepreneurialism is hoping to turn this type of thinking on its head. An article in yesterday's New York Times featured a story on Tata's new $2500 car, revealing far more about the sources of cost cutting than previous stories on the same subject. My old colleague Daryl Rolley is quoted extensively in the piece -- nice job, Daryl, BTW -- but what's more interesting to me are the specifics around engineering out cost as well as the guiding philosophy behind the vehicle. To wit, the Times notes that "Some analysts are predicting that just as the Japanese popularized kanban (just in time) and kaizen (continuous improvement), Indians could export a kind of 'Gandhian engineering,' combining irreverence for conventional ways of thinking with a frugality born of scarcity."
So was Gandhi a Spend Management philosopher? Maybe. But the proof of his vision is in the details. Consider how "to save $10, Tata engineers redesigned the suspension to eliminate actuators in the headlights, the levelers that adjust the angle of the beam depending on how the car is loaded." And in "lieu of the solid steel beam that typically connects steering wheels to axles, one supplier, Sona Koyo Steering Systems, used a hollow tube ... Tata [also] chose wheel bearings that are strong enough to drive the car up to 45 miles an hour, but they will wear quickly above that speed, reducing the car's life span." Clearly, this is not an econobox that would survey the interstates of North America. But that's not the point.
Even if the little Tata ends up being an absolute piece of junk by Western engineering and safety standards -- which it no doubt will -- it will nevertheless break entirely new ground from a total cost perspective. Without question, Tata's "nothing is holy" philosophy behind engineering out cost rather than engineering it in is groundbreaking. From a Spend Management perspective, it's a lesson we should all take to heart. But perhaps most important to remember, it's not one born of technology or even expert supply chain thinking and dogma, but one of philosophy.
- Jason Busch