Post-Graduate Programme in Management(PGPM: 2014-16 Batch)

Term: IV (Jun-Aug 2015)

Management Development Institute - Gurgaon

Supply Chain Management

Case-07

Maruti Suzuki: Supply Chain Innovations

ID Name

1 14P095 Pulkit Jain

2 14P122 Abhijit Pradhan

3 14P135 Ashwini Jawale

4 14P136 Atul P Mishra

5 14P149 Mohit Maheshwari

6 14P150 Naman Singhal

7 14P160 Sachin PrasadPresentation Date: 5/8/2015

SCMCase Presentation

Insights from “The Maruti Story”

Logistics & Visual Cargo tracking

Green Initiatives

Supplier/ Vendor Relationship Management

E-Nagare System

JIT

Objectives

Introduction

Agenda

1981- MARUTI UDYOG LTD was incorporated. The company is engaged in the business of manufacturing, purchase and sale of motor vehicles and automobile spare parts

1982- License and Joint Venture agreement signed between Maruti Udyog Ltd. & Suzuki Motor Corporation Japan(SMC)• 1983- Rolled out the first Maruti 800

Since 2009-2010, MSIL sold more than one million units annually both for domestic and exports

MSIL have six plants, three located at Gurgaon, Haryana and other three located at Manesar Industrial Town, Haryana

MSIL manufactures over 1.1 million cars per year and offers 18 brands. MSIL boasts of dealer sales network of 1204 in 874 cities and service network of 3013 in 1436 cities

Introduction

• Maruti Suzuki India Limited has a nationwide dealer sales and service network.

• The innovations in Supply Chain & Logistics management have given positive results in terms of-– Enhancement of operational efficiencies– Cost reductions– Attaining customer satisfaction– Sustainable logistics operations

Objectives

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUND OPERATIONS OUTBOUND MARKETING SERVICES LOGISTICS LOGISTICS & SALES

Production Management System

MARGIN

Team building activities Variable- pay e-learning

Electronic Data Processing Data Management Software

Product Life Cycle Management Solution

Vendor quality system audits Maruti Center for Excellence Supplier Club

MARGIN

Partnership approach with all stakeholders

JIT

Effective Material Handling

Presence in 500 cities

with 1500+ distributors

True Value model

Maruti Finance

Anytime Maruti

Maruti on road

Sales operating Standards

Motor training Schools

Cashless insurance

Lean Manufact-

uring

Value Added Value Engg.

(VAVE)

Focus on Cost,

Quality & Safety

Value Chain

INBOUND LOGISTICS

• Just-In-Time (pioneered by Toyota)

• Huge savings on inventory management costs

• Sound demand management system

• Implementation of Logistics improvement systems

OPERATIONS

• Eliminates unnecessary costs using Lean Manufacturing

• Maintains constant prices by using Value Added Value Engineering

• K-Engine (fuel efficient) Plant used in many models & well received by customers

OUTBOUND LOGISTICS

• Presence in 500 cities• 300+ distributors• 1600+ service stations• 16 warehouses• True value dealership model• Decent margins to dealers

PRIMARY ACTIVITIES

MARKETING & SALES

• Anytime Maruti - 24*7 toll-free helpline to attend to customer grievances

• Maruti On road- Maintenance & Repair services

• Maruti Finance – Car finance in 166 cities in partnership with SBI

• Free test drive to customers

SERVICE

• Excellent after-sales service- 1600+ centers with detailed information on website

• Motor training schools• Cashless insurance- Inception of

two subsidiaries- Maruti Insurance Distributors Services Pvt. Ltd. & Maruti Insurance Brokers Pvt. Ltd.

•E-Nagare

•Visual Cargo Tracking

TECHNOLOGYDEVELOPMENT

•MACE•Shikha

r•Junkai

VA•Maruti

Production System

•Quality Circle Competition

PROCUREMENT

•Plants at Manesar & Gurgaon; 7600 employees

•Partnership approach with all stakeholders

•Production Management System aimed at achieving manufacturing supremacy through Japanese principles of 5S, 3G & 3K

FIRM INFRASTRUCTURE

•Innovation forms a core value & is highly encouraged

•Maruti Recruitment System (MARS)

•Classroom training is reinforced through e-learning modules

HUMAN RESOURCE MANAGEMENT

SECONDARY ACTIVITIESInsights from “The Maruti Story” Vendor Selection

• The Company has adopted the Japanese System, JIT to achieve higher operational efficiencies and reduce inventory carrying cost.

• JIT improves the return on investment of a business by reducing in-process inventory and its associated carrying costs.

• To achieve JIT material supplies, the company gives preference to locally based suppliers and encourages far distance suppliers to set up base close to Maruti Suzuki`s facilities.

• Over 76% of the company's 246 suppliers are located within 100 kms of radius.

• Have strategically located the suppliers of bulky components such as instrument panels, fuel tanks, bumpers, seats, etc. adjacent to the company's manufacturing facilities in the Suppliers' Park

JIT at MSIL

• Electronic Flow• Transformed the supply chain• Sequence of production plans from the vendor

to Maruti's shop floor, which now sits at a two hour cycle from 30 days in the past

• Reduced the inventory hold up

E-Nagare System

All packing has been converted into

Reusable packing

Check the pollution level of trucks getting

into Maruti

Kaizen theme & conserve usage of Material and yield

improvement

Help suppliers get ISO 14000

certification

Green Initiatives

Tier I, II & III Suppliers

Localization of suppliers, reduced:• Inventory capital lock up• Exposure to foreign exchange fluctuations

76% of suppliers located within 100 km of radius

Leader in Supplier Relationship Management

Maruti Production System • MPS based on lean manufacturing program• Vendors are given class room training• Focus on strengthening the company’s supply chain

“Shikhar” Initiative• ‘Poor’ vendors were identified & eliminated

Supplier & Vendor Relationship Management

Quality Circle Competition• Identify, discuss & resolve any one core business issue• Add value to the overall functionality & thereby increase efficiency

Junkai VA / Cost Workshops with vendors• To emphasis vendor productivity and quality• Three G- Genmab, Gembutsu, & Genjitsu

Maruti Centre for Excellence (MACE)• Provide training, support & consultancy to suppliers• Help vendors achieve world class standards in quality, cost & service

and technology orientation

Supplier & Vendor Relationship Management

12TH & 13TH JAN‘ 11

12

3

4

5

6

7

8

9

10

1112

13

14

15

16

17

18

19

20

21

22

63%

46%

73%

63% 100%

100%

100%

100%

77%

92%

100%

100%

100%

89%100%

17%100%

83%

100%

40%

100%

33%

Audit Score AchievedAudit PointsAudit Score

Achieved Score

Max. Score

Achieved

1 Production Preparation 10 16 63%

2 Initial Supply Control 6 13 46%

3 Initial Control- Changed Parts 8 11 73%

4 Preventive Measures for defects 12 19 63%

5 Education and Training 16 16 100%

6 Quality audit 15 15 100%

7 Supplier control 10 10 100%

8 Control of drawings and Engg Changes 4 4 100%

9 Inspection standard & Process Control Standard 10 13 77%

10 Operation Standard 11 12 92%

11 Observance of Operation Standard 5 5 100%

12 Role of Manager/ Supervisor 5 5 100%

13 Quality improvement of process 6 6 100%

14 Control of Manufacturing machine/ jig 8 9 89%

15 Control of Inspection equipment and Jig 11 11 100%

16 Statistical method 1 6 17%

17Prevention of missing process/ wrong assembling

8 8 100%

18 Control of non conforming product 5 6 83%

19 Storage of product 4 4 100%

20 First-in , First-out 2 5 40%

21 History management of A (Safety) parts 9 9 100%

22 Implementation of inspection 2 6 33%

Total Score 168 209 80%

WEAK AREAS

MACE-SPIDER CHART

Road Transport: 90% of dispatches

Rail Transport: A-Star

Sea Transport:• Via Mundra Port for

domestic supplies• Via JNPT for import

•Hub & Spoke model for distribution of vehicle & spare parts

•Focus: Inventory Management & Delivery to dealer

•The Visual Cargo tracking solution provided better visibility into the transport

logistics to streamline business operations

•The Visual Cargo dashboard allows the logistics manager to easily monitor,

track & manage operations of GPS enabled devices

•It is a single, common platform used by all supply chain stakeholders

•Enabled efficient fleet management as the volumes went up

Logistics & Visual Cargo tracking

“Competition in modern business is not between organizations but rather within their supply chain”

Maruti – India’s most loved passenger car takes the lead in this regard

Despite initial skepticism (Maruti was formed as PSU in 1981 when all major PSU’s were bleeding) it has formed one of the most efficient supply chain

As per Mr. R.C Bharagava , Maruti was the first PSU to have categorically stated that the PSU would work towards profit earning and not just for people welfare

Insights from “The Maruti Story”

One example stated by Mr. R.C Bharagava in his book “ the Maruti Story”

So high was the focus on customers that once due to sweltering summer in Delhi cars started facing the issue of vapour locks on fuel tank which made them come to halt due to overheating.

To rectify the issue , Maruti got 30000 pumps from Japan and replaced them free of cost. This was first case of recall in India.

Notable thing was that all pumps were flown which threw the foreign exchange budget out of gear due to airfare paid in foreign currency but priority was customer focus

Maruti has always given high priority

to customer service

It has the largest dealer network in

India

Its service station network is also largest in India

High focus on adherence to

schedules (when there was waiting for car booking)

Insights from “The Maruti Story”: Customer Focus

Several big names like Renault were

overruled and finally Suzuki was selected as their

goals were aligned

Even before Maruti

Suzuki was formed , Maruti

management spent

tremendous effort in

finalizing it JV partner

• Similarly vendors have been selected whose goals align with Maruti.

• Focus on punctuality, quality and optimization

Insights from “The Maruti Story” Vendor Selection