The cheapest car on earth and other thoughts

The Nano is generating such hype, that one can only wait and watch how Tata is going to make it into a success. Quite interestingly, the Tata share prices seem to have dropped after the launch, and this reflects the really difficult proposition that the Tatas have conjured up for themselves, in terms of finances. While the rationale behind such a car eludes me, (there is quite a gap between the premium segment bike prices and the Nano), some of the design decisions which went into the car just to squeeze pennies are highly disturbing. Hollow tubes, adhesives, ball bearings, there are quite a few places where ‘optimization’ has been done. Price is a factor, undoubtedly, but is it the only one ? This seems more like a ‘use and throw (very fast)’ product, with planned obsolescence being used in not-very-subtle ways. Sourcing components for such a product is going to be a very aggressive endeavour, and may run into the kinds of issues Wal-Mart has run into. The World is Flat has a section which is practically a hagiography of Wal-Mart, showing how they do everything possible to cut prices, and ‘benefit’ the consumer. Oh, they are running into some problems, but they’ll do good, seems to be the opinion of the Great Friedman. The problems range from using slave labor, environmental issues, sexual harassment, but oh, these are not that important when compared to the fact that the consumer gets a cheaper product. Thankfully, not everyone is as stupid as the ‘consumer’.

Predatory practices which benefit one section of people at the expense of another are not anything new. They used to go under the mask of colonialism before, the label has changed to supply chain management now. While supply chain management by itself is not degenerate, companies like Wal-Mart tend to push it to such an extent as to forget that the purpose is to make things efficient in terms of money and not ethics. Was reading an essay by J. C. Kumarappa, called ‘Clive to Keynes’, which is a description of the various frauds that the British perpetrated on the Indian taxpayers from 1800’s onward. This shows how British practices ‘evolved’ from barefaced looting by Clive to more subtle embezzlement and mismanagement during Keynes’ time. In all the cases, the main idea is to deliberately ignore certain facts to ensure that something else is optimized. Even in supply chain management, if someone can source parts at 1$ when the prevailing price is 1.50$, one is happy to have ‘optimized’ the chain, but what gets ignored is, really, hard to ignore.

Like the previously referenced wikipedia entry on obsolescence notes, competitive markets tend to make more durable products, using higher grade materials rather than oligopolies or monopolies, which can indulge in what literally amounts to fraud. Only a Tata or a Wal-Mart can do what they are doing and get away with it. Hopefully, your next visit to Metro or Big Bazaar is more informed than your previous ones :)

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