Indian Automobile Industry Accounting for approximately 4 % of GDP, Automobile Industry is the significant contributor to the growth of Indian economy. The last few years have seen greater integration of the Indian players with their global counterparts. What is interesting about this is its almost democratic nature, in that a large part of the industry has seen significant changes. While the changes have been more visible in the auto component part of the industry, with key players having a significant export contribution today, Original Equipment Manufacturers (OEMs) too have been undergoing their own set of changes.
The change process started with overseas OEMs wanting to enter the country. A natural fall-out of this was the large suppliers who entered the country as part of the ‘follow source’ doctrine. The last couple of years have seen significant interest from Indian players who are actively looking at exciting markets to enter as well as attractive targets to acquire. Going forward, OEMs as well as auto component players will evolve further as they become more and more ‘global’ in nature. For OEMs, this would mean rising competition in the domestic market, and hence the need to diversify out of India.
For auto component players, this would mean the need to achieve global manufacturing standards and emerge as supplier of choice for global companies. These changes would have a significant impact on the automotive supply chain. Clearly the need of the hour is for various players to identify key challenges facing the industry and develop strategies to help mitigate these. The objective of this report is to analyze the key advancements in automotive supply chain and the unique practices followed by major players in India. Finally balanced scorecard framework would be used to build the strategic map for Automobile players.
Global automobile manufacturers are consistently streamlining their business process by outsourcing their non-core activities to low-cost countries like India. Global automobile manufacturers are under tremendous pressures to innovate their manufacturing process and at the same time, to reduce costs. In view of the present global competitiveness, they must not only develop new features to strengthen their customer requirements but also follow the environmental and safety standards. In addition, the base price of a car is expected to remain same over the next decade.
As a result, companies are forced to source more components from low-cost countries like India. Domestic Sales Passenger Vehicles segment during April-January 2010 grew at 25. 21 percent over same period last year. Passenger Cars grew by 24. 75 percent, Utility Vehicles grew by 21. 95 percent and Multi Purpose Vehicles grew by 37. 05 percent in this period. The overall Commercial Vehicles segment registered positive growth at 30. 39 percent during April-January 2010 as compared to the same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) registered growth at 20. 8 percent; Light Commercial Vehicles grew at 39. 66 percent. Three Wheelers sales recorded a growth rate of 25. 77 percent in April-January 2010. While Passenger Carriers grew by 32. 54 percent during April-January 2010, Goods Carriers grew at 4. 20 percent. Two Wheelers registered a growth of 23. 74 percent during April-January 2010. Mopeds, Scooters and Motorcycles grew by 31. 73 percent, 20. 56 percent and 24. 32 percent respectively. Exports During April-January 2010, overall automobile exports registered a growth rate of 13. 24 percent. Passenger Vehicles segment, Three Wheelers and Two Wheelers segments grew by 33. 2 percent, 4. 60 percent and 8. 84 percent respectively in this period. Commercial Vehicles recorded growth of (-) 7. 52 percent. Auto Components Industry Surge in automobile industry since the nineties has led to robust growth of the auto component sector in the country. In tandem with the industry trends, the Indian component sector has shown great advances in recent years in terms of growth, spread, absorption of new technologies and flexibility. Indian auto component industry has seen major growth with the arrival of world vehicle manufacturers from Japan, Korea, US and Europe.
Today, India is emerging as one of the key auto components centre in Asia and is expected to play a significant role in the global automotive supply chain in the near future. The auto component industry is also expected to drive the growth of the engineering sector in view of its strong downstream and upstream linkages with many other segments of the engineering sector like raw materials, capital goods, intermediate products etc. Auto component industry supports industries like automobiles, machine tools, steel, aluminum, rubber, plastics, electrical, electronics, forgings and machining.
India has also emerged as an outsourcing hub for auto parts for international companies such as Ford, General Motors, Daimler Chrysler, Fiat, Volkswagen, and Toyota. During the year 2008-09, the turnover and export for auto component industry was recorded at US $ 15. 85 billion and US $ 3. 11 billion respectively. INTRODUCTION: Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system.
It was established with the objectives of - modernizing the Indian automobile industry, producing fuel efficient vehicles to conserve scarce resources and producing indigenous utility cars for the growing needs of the Indian population. A license and a Joint Venture agreement were signed with the Suzuki Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of the equity and agreed to provide the latest technology as well as Japanese management practices. Suzuki was preferred for the joint venture because of its track record in manufacturing and selling small cars all over the world.
There was an option in the agreement to raise Suzuki’s equity to 40%, which it exercised in 1987. Five years later, in 1992, Suzuki further increased its equity to 50% turning Maruti into a non-government organization managed on the lines of Japanese management practices. Maruti created history by going into production in a record 13 months. Maruti is the highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 5 million vehicles by May 2005. Maruti is one of the most successful automobile joint ventures, and has made profits every year since inception till 2000-01.
In 2000-01, although Maruti generated operating profits on an income of Rs 92. 5 billion, high depreciation on new model launches resulted in a book loss. COMPANY HISTORY AND BACKGROUND The Evolution Maruti’s history of evolution can be examined in four phases: two phases during pre-liberalization period (1983-86, 1986-1992) and two phases during post-liberalization period (1992-97, 1997-2002), followed by the full privatization of Maruti in June 2003 with the launch of an initial public offering (IPO). The first phase started when Maruti rolled out its first car in December 1983.
During the initial years Maruti had 883 employees, a capital of Rs. 607 mn and profit of Rs. 17 mn without any tax obligation. From such a modest start the company in just about a decade (beginning of second phase in 1992) had turned itself into an automobile giant capturing about 80% of the market share in India. Employees grew to 2000 (end of first phase 1986), 3900 (end of second phase 1992) and 5700 in 1999. The profit after tax increased from Rs 18. 67 mn in 1984 to Rs. 6854. 54 mn in 1998 but started declining during 1997-2001.
During the pre-liberalization period (1983-1992) a major source of Maruti’s strength was the wholehearted willingness of the Government of India to subscribe to Suzuki’s technology and the principles and practices of Japanese management. Large number of Indian managers, supervisors and workers were regularly sent to the Suzuki plants in Japan for training. Batches of Japanese personnel came over to Maruti to train, supervise and manage. Maruti’s style of management was essentially to follow Japanese management practices. The Path to Success for Maruti was as follows: a) Teamwork and recognition that each employee’s future growth and prosperity is totally dependent on the company’s growth and prosperity (b) Strict work discipline for individuals and the organization (c) Constant efforts to increase the productivity of labor and capital (d) Steady improvements in quality and reduction in costs (e) Customer orientation (f) Long-term objectives and policies with the confidence to realize the goals (g) Respect of law, ethics and human beings. The “path to success” translated into practices that Maruti’s culture approximated from the Japanese management practices.
Maruti adopted the norm of wearing a uniform of the same color and quality of the fabric for all its employees thus giving an identity. All the employees ate in the same canteen. They commuted in the same buses without any discrimination in seating arrangements. Employees reported early in shifts so that there were no time loss in-between shifts. Attendance approximated around 94-95%. The plant had an open office system and practiced on-the-job training, quality circles, kaizen activities, teamwork and job- rotation.
Near-total transparency was introduced in the decision making process. There were laid-down norms, principles and procedures for group decision making. These practices were unheard of in other Indian organizations but they worked well in Maruti. During the pre- liberalization period the focus was solely on production. Employees were handsomely rewarded with increasing bonus as Maruti produced more and sold more in a seller’s market commanding an almost monopoly situation. APPROACHES TO PROCESS IMPROVEMENT Kaizen
Japanese for "improvement" or "change for the better", refers to philosophy or practices that focus upon continuous improvement of processes in manufacturing, engineering, supporting business processes, and management. It has been applied in healthcare, psychotherapy, life-coaching, government, banking, and many other industries. When used in the business sense and applied to the workplace, kaizen refers to activities that continually improve all functions, and involves all employees from the CEO to the assembly line workers.
It also applies to processes, such as purchasing and logistics, that cross organizational boundaries into the supply chain. By improving standardized activities and processes, kaizen aims to eliminate waste (see lean manufacturing). Kaizen was first implemented in several Japanese businesses after the Second World War, influenced in part by American business and quality management teachers who visited the country. It has since spread throughout the world and is now being implemented in many other venues besides just business and productivity.
Total Quality Management (TQM): Total Quality Management is a process (or, perhaps, a mindset) rather than a thing. Total Quality Management (TQM) means consistently and predictably producing what the customer wants. TQM is not just an outcome, but a never ending process of continually improving the delivery of what the customer wants. Six Sigma and Statistical Process Control (SPC) are the part of TQM that focuses on creating a process that delivers quality components and products. A process that can deliver parts capable of meeting quality requirements 99. 999% of the time is a capable, six sigma process. Quality cannot be “inspected into” parts. Parts need to be inspected, for the purpose of qualifying the process producing the part. Inspection is for answering the question, “Is the process that produces this part capable of consistently producing parts that meet the quality standard 99. 9999% of the time? ” The Statistical Process Control System collects and analyzes the data to answer that question. Implementing TQM means that companies must make their suppliers part of their process.
If a company wants to meet the Six Sigma standard, its suppliers must implement TQM also. Vendors need to become part of the TQM process, so that all of the parts are working together to deliver a quality product. You just cannot build a quality product out of sub-standard parts. Business Process Reengineering is the analysis and design of workflows and processes within an organization. A business process is a set of logically related tasks performed to achieve a defined business outcome. Re-engineering is the basis for many recent developments in management.
The cross-functional team, for example, has become popular because of the desire to re-engineer separate functional tasks into complete cross-functional processes. Also, many recent management information systems developments aim to integrate a wide number of business functions. Enterprise resource planning, supply chain management, knowledge management systems, groupware and collaborative systems, Human Resource Management Systems and customer relationship management. Business Process Reengineering is also known as Business Process Redesign, Business Transformation, or Business Process Change Management.
MARUTI ADOPTS KAIZEN APPROACH TO PROCESS IMPROVEMENT In its bid to meet limited capacity challenges at its existing plants, Maruti Suzuki has said that it will be adopting 'Kaizen' methodologies in its production processes that would help it to rationalize its assembly lines. It is to be mentioned that the term kaizen (Japanese for "improvement") is a Japanese word adopted into English referring to a philosophy or practices focusing on continuous improvement in manufacturing activities, business activities in general, and even life in general, depending on interpretation and usage.
When used in the business sense and applied to the workplace, kaizen typically refers to activities that continually improve all functions of a business, from manufacturing to management and from the CEO to the assembly line workers. By improving standardized activities and processes, kaizen aims to eliminate waste (see lean manufacturing). Kaizen was first implemented in several Japanese businesses during the country's recovery after World War II and has since spread to businesses throughout the world. I. V.
Rao, managing executive officer, Engineering, Maruti Suzuki India Ltd (MSIL), said, "This will be a major milestone for the company and also brings new challenges as we could face some capacity constraints. By using the Japanese Kaizen production methodologies, we are working to bring about incremental gains in production at Gurgaon and Manesar plants. " He added, "The Manesar plant is faced with serious capacity constraint. Therefore, we are in the process of further streamlining operations. However, we have no plans to add a third shift. We are actively considering expansion and a decision is likely by next fiscal.
The company accounts for 54 per cent market share and we will continue to bring in new products to retain our hare," he said. Meanwhile, the country's largest passenger car manufacturer is also planning to roll out brand centres across key metros in the country that will enable it to enahnce its brand salience. The company is looking to set up these centres (which are expected to occupy at least 44,000-45,000 square feet space) over the next 18-24 months. Financial Chronicle says that the company is on course to buying nearly 44,000 square feet space in Rajarhat, one of India's latest and fastest-growing planned new cities near Kolkata. This concept is in an early stage and lot of changes may eventually happen. The brand centres are likely to showcase the best products from Maruti and Suzuki's stables. For instance, you could hope to see Hayabusa bikes in the brand centre besides the Maruti Eeco," a senior official was quoted as saying to FC, without disclosing any investment outlay for such centres. In a separate media report, Maruti Suzuki has also revealed that it is looking to enhance its export base by entering into markets in the Middle East, South America, West Asia and Australia. We are currently exporting our cars to the European countries but now we will start exploring new markets such as Africa, South America, the Middle East and Australia to boost our exports," a senior official told reporters in Chandigarh recently. The company has targeted to export 1. 30 lakh cars by this fiscal end against 70,000 cars exported in 2008-09. Talking about sales in the northern region, Maruti Suzuki said the company recorded 30 per cent growth in cars sales in Punjab, Himachal Pradesh, Haryana (excluding NCR), Jammu and Kashmir, Chandigarh during the first nine months till December 2009 against the national growth of 22. per cent. The company has sold 72,000 cars in the region [comprising Haryana (excluding NCR region), Punjab, Chandigarh, Himachal Pradesh and Jammu & Kashmir] during the period April-December 2009 as compared with 55,000 units it sold during the corresponding period of the previous year. "We are on an average selling 8,000 cars per month in these markets, which have grown by 30 per cent in April till December 2009," a senior Maruti official was quoted as saying to reporters. PROBLEMS IN MARUTI | | | Maruti Udyog, India's largest carmaker has been making key investments in several human resource initiatives.
The company is currently working on a five-year people-oriented strategy, apart from initiatives that are being taken to make young recruits understand the philosophy, culture and best practices within the company. Special emphasis has also been placed on training. The company believes it is worthwhile being in a position, where people are in fact, envious of the corporate world outside and its employees in high demand, For Maruti, there are two to three key areas. One of the biggest is to bring about a change, where we are acceptable to a dynamic global business scenario.
The second big challenge is to bring in the best HR practices, policies and systems from the global perspectives, while being attuned to local requirements. At Maruti, are very clear that we need to have a proper balance of global and local bestpractices. The third big challenge is about the young people, on whom our future is going to depend. They are very strong in terms of career aspirations. Understanding their aspirations and blending that with the company's aspirations, where talent management and retention comes in, constitutes this challenge. | DATABASE MANAGEMENT SYTEM (DBMS)
A Database Management System (DBMS) is a set of computer programs that controls the creation, maintenance, and the use of a database. It allows organizations to place control of database development in the hands of database administrators (DBAs) and other specialists. A DBMS is a system software package that helps the use of integrated collection of data records and files known as databases. It allows different user application programs to easily access the same database. DBMSs may use any of a variety of database models, such as the network model or relational model.
In large systems, a DBMS allows users and other software to store and retrieve data in a structured way. Instead of having to write computer programs to extract information, user can ask simple questions in a query language. Thus, many DBMS packages provide Fourth-generation programming language (4GLs) and other application development features. It helps to specify the logical organization for a database and access and use the information within a database. It provides facilities for controlling data access, enforcing data integrity, managing concurrency, and restoring the database from backups.
A DBMS also provides the ability to logically present database information to users. For example:- Features and capabilities The DBMS of today roll together frequently needed services or features of attribute management. By externalizing such functionality to the DBMS, applications effectively share code with each other and are relieved of much internal complexity. Features commonly offered by database management systems include: Query ability: Querying is the process of requesting attribute information from various perspectives and combinations of factors.
Example: "How many 2-door cars in Texas are green? " A database query language and report writer allow users to interactively interrogate the database, analyze its data and update it according to the users privileges on data. Backup and replication: Copies of attributes need to be made regularly in case primary disks or other equipment fails. A periodic copy of attributes may also be created for a distant organization that cannot readily access the original. DBMS usually provide utilities to facilitate the process of extracting and disseminating attribute sets.
When data is replicated between database servers, so that the information remains consistent throughout the database system and users cannot tell or even know which server in the DBMS they are using, the system is said to exhibit replication transparency. Rule enforcement: Often one wants to apply rules to attributes so that the attributes are clean and reliable. For example, we may have a rule that says each car can have only one engine associated with it (identified by Engine Number). If somebody tries to associate a second engine with a given car, we want the DBMS to deny such a request and display an error message.
However, with changes in the model specification such as, in this example, hybrid gas-electric cars, rules may need to change. Ideally such rules should be able to be added and removed as needed without significant data layout redesign. Security: For security reasons, it is desirable to limit who can see or change specific attributes or groups of attributes. This may be managed directly on an individual basis, or by the assignment of individuals and privileges to groups, or (in the most elaborate models) through the assignment of individuals and groups to roles which are then granted entitlements.
Computation: Common computations requested on attributes are counting, summing, averaging, sorting, grouping, cross-referencing, and so on. Rather than have each computer application implement these from scratch, they can rely on the DBMS to supply such calculations. Change and access logging: This describes who accessed which attributes, what was changed, and when it was changed. Logging services allow this by keeping a record of access occurrences and changes. Automated optimization: For frequently occurring usage patterns or requests, some DBMS can adjust themselves to improve the speed of those interactions.
In some cases the DBMS will merely provide tools to monitor performance, allowing a human expert to make the necessary adjustments after reviewing the statistics collected. Database Management in Maruti Suzuki When leading Indian automaker Maruti Suzuki says, “Count on Us,” it’s more than a marketing slogan to customers. It’s also the message that the company’s IT department is sending loud and clear to its internal customers, a team that is manufacturing and selling a highly engineered and customizable consumer product accompanied by an array of related products and services.
When the company added leasing, finance, insurance, and preowned car sales to existing lines of business in 2002, it used the expansion as the impetus to replace a collection of mismatched IT applications with a series of high-speed Oracle applications. The result is a single, standardized environment that retrofits the complex, multichannel company for rapid acceleration. Powering Goals with Real-Time Data Currently commanding more than 54 percent of India’s huge automobile market, with 2008 sales of US$3. billion and four relatively new business lines, the company plans to double annual production from 500,000 vehicles today to 1 million by the end of 2010. Add a huge network of dealerships, and you get revved-up demand throughout the organization for access to consistent real-time data. When Rajesh Uppal, Maruti Suzuki’s chief general manager of IT, set Maruti Suzuki on a course of standardization in 2002, the company already had Oracle Database, Oracle Application Server, and some of the enterprise resource planning modules of Oracle E-Business Suite in place. But IT sprawl became a growing challenge.
Various lines of business were using homegrown systems, and integration between them was poor. Staff had to enter data multiple times and couldn’t generate useful management reports without manually consolidating information. The addition of four new business lines only added to the complexity, requiring even more human intervention and creating additional integration issues. Plus, plans to build on its expanded footprint and increase vehicle production made it critical for Maruti Suzuki to create an IT environment that could scale easily to accommodate more products and services, more customers, and a lot more data.
Uppal’s goals were to avoid a future filled with integration challenges and other forms of IT catch-up as well as to provide real-time, end-to-end visibility throughout the company. With Oracle technology now underlying every aspect of Maruti Suzuki’s business, from the back office to online sales to its dealer network, the IT operation is able to deliver greater efficiency and flexibility in a scalable solution with lower IT costs, streamlined support, and a tightly integrated environment that yields consistent data and simplifies the addition of new technologies. Our long-term perspective has been that a single-vendor stack and road map makes good business sense,” Uppal says, adding that upgrades have been significantly simplified because each generation of Oracle products ties neatly into the existing Oracle stack. The single-vendor model enables the company to complete upgrades without getting stalled in time-consuming integration projects. It’s a model that other companies would be well advised to follow, says Howard Rubin, a leader in IT benchmarking and senior advisor at Gartner. “[Maruti Suzuki is] in the business of making cars, not the business of handling software disharmony,” he notes. In an industry where margin is being squeezed, you want to get the best leverage you can, and a single-source solution is an obvious and brilliant thing to do. ” Market Demands For Maruti Suzuki, standardizing on Oracle answered a need for continual technology improvement. “In this country, technology is one area where you have to constantly innovate. You can’t sit still,” says Uppal. “You know that you’ll be ahead of the curve only for a short time and that your competitors will catch up shortly, so the lifecycle of innovation isn’t very long. In that spirit, Uppal complemented Oracle Database and Oracle Application Server with a growing array of Oracle E-Business Suite modules that run its financial, purchasing, and human resources systems, among others. The open architecture of these components has simplified integration with Maruti Suzuki’s legacy procurement, dispatch, time card, production planning, and business intelligence systems, which was accomplished without any interruption to the business. That’s critical to a company generating more than 2,000 invoices each day.
One of the key operational benefits that Maruti Suzuki has achieved has been a level of integration that enables the company to work more effectively with its nationwide network of 850 dealers. The company’s proprietary dealer management system was built using Oracle Forms and has run on a centralized Oracle Database since prior to Maruti Suzuki’s decision to standardize. But because of the disparate nature of the company’s legacy applications, an inquiry through the dealer management system couldn’t reveal updates entered manually by back-office staff.
This meant that one dealership might not be able to see that another had ordered the last of a certain part, resulting in erroneous information being passed on to the dealership and its customers. Today, however, the system links to various modules of the company’s Oracle E-Business Suite deployment, ensuring that the entire dealer network is being fed the same data. Such integration also means that dealership input arrives on the production floor in real time, enabling faster response to requests for parts or rush delivery of vehicles. Improved end-to-end visibility has also allowed Maruti Suzuki to take online sales to a new level.
The company’s evolving e-commerce capabilities now allow customers to do everything from choosing a vehicle to obtaining financing and insurance, all with the click of a mouse. When a customer who has decided on, a particular vehicle logs on to Maruti Suzuki’s Web site to contact a dealer, options for financing and insurance are presented. If the customer expresses interest, the system collects the pertinent information and automatically routes it to the nearest dealership, which can arrange financing options with a local bank or work with the company’s in-house financing unit before contacting the customer directly to continue the process.
End-to-End Support Underlying these IT improvements is a fundamental comfort with Oracle technology, and that would not have been achieved without assistance from Oracle Consulting during Maruti Suzuki’s 2002 Oracle E-Business Suite deployment, says Uppal. Oracle consultants brought with them a combination of deep knowledge of the technology and best practices to draw upon in mapping each module to the company’s business processes. They not only assisted Maruti Suzuki’s IT team with the installation but also helped them develop user manuals, designed a program for training trainers, and provided additional training for superusers.
In fact, Uppal credits Oracle’s team with helping to overcome resistance among employees who weren’t sure they wanted to embrace new technologies. As users have grown increasingly comfortable with Oracle software, Uppal reports that there are fewer errors, translating to more-reliable data throughout the company’s wide-ranging application portfolio. “Standardization with one vendor and one partner has driven knowledge skill sets,” says Subhomoy Sengupta, senior director of applications for Oracle India Pvt Ltd.
What’s more, as an end-to-end Oracle stack customer, Maruti Suzuki is availing itself of Oracle’s wide-ranging resources, working closely with Oracle Support to resolve issues. It has also been teaming up with Oracle’s development organization, not only to help identify requirements for planned applications—including a recently released demand forecasting application—but also to make sure that Maruti Suzuki is identifying the right applications to add to its stack. “Oracle’s technology team helps us to define the parameters, and then we say, ‘OK, if we put in a technology over there, what kind of improvement does that yield? ” says Uppal. “We keep finding opportunities for process improvement, and thankfully, Oracle has a huge application and technology stack that supports it. ” Gartner’s Rubin says that maintaining ties to an established partner for technology upgrades should pay huge dividends for Maruti Suzuki, whereas using niche solutions for specific processes would only lead to headaches. “The cross-vendor approach is deadly,” he says. “By working with Oracle, Maruti Suzuki is working with one of the true powers in the industry.
If they follow the rules and match the Oracle blueprint to their processes, they will have a lot of power and a lot of leverage. ” Oracle executives consider Maruti Suzuki to be a bellwether customer in its use of Oracle’s standards-based and custom technologies. “Other customers should look at the way Maruti Suzuki has balanced the two aspects—the unique parts of the solutions and the standard parts of the solutions,” says Sengupta. “Reliance on the entire Oracle stack has had a huge impact on the company’s operations and customers and has enabled it to cut down on IT costs and increase operating efficiencies. For his part, Uppal intends to keep Maruti Suzuki tuned up by adopting Oracle applications wherever they match the needs of his business. He knows that doing so will enable the company to scale its IT operations to match its market growth, seamlessly absorb technology upgrades without breaking the bank, and keep its place in the fast lane ahead of the competition. SUPPLY CHAIN MANAGEMENT (SCM) SCM is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996).
Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain). Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally. Role of SCM in Automotive Industry According to the Council of Logistics Management Supply Chain Management, “the process of planning, implementing and controlling efficient and cost effective flow of materials, in-process inventory, finished goods and related information from point-of-order to point-of-consumption, for the purpose of conforming to customer requirements as efficiently as possible”. The automobile industry has undergone significant structural and other changes in the last decade or so.
In view of the present globalisation, implementation of lean production and the development of modularisation have changed the relationships between automobile assemblers (OEMs) and their suppliers, especially those in the first tier. Stiff competition among manufacturers will result in more mergers or acquisitions. The challenges automobile manufacturers and suppliers face include improving quality, meeting cost reduction targets and developing time to market.
All this is driving the organizations towards greater product differentiation using cutting edge R&D, innovative sales and marketing approaches, and increasing focus on boosting efficiencies in manufacturing and supply chain. Hence, in the age of e-business and global outsourcing, supply chain management (SCM) plays a crucial role in many of these areas. SCM is a best-in-class, high-performance solution which can be utilized by the world's leading automobile manufacturer, logistics and distribution companies, and retailers to blend the demand chain with the supply chain.
SCM helps in demand forecasting; taking an order; giving an accurate promise date; sourcing and manufacturing the right goods; position inventory properly; pick, pack, and efficient transhipment; most importantly, SCM makes a world of difference to the manufacturers by maintaining a minimal finished goods inventory. Supply chain management flow is divided into: a) Product flow b) Information flow c) Finance flow The product flow is nothing but movement of goods from supplier to customers and also in case of any customer returns or service requirements.
The information flow covers updating the status of the delivery as well as sharing information between suppliers and manufacturers. The finance flow encompasses credit terms, payment schedules and consignment and title ownership arrangements. Supply chain management has two types of software—planning application and execution applications. While planning application is utilised to determine the best way to fill the order, execution software determines the physical status of goods, the management of materials and financial information of all parties involved.
Rapid surge in global sourcing of auto components has also become a challenge for manufacturers and suppliers although sourcing has reduced the cost of production substantially. Auto component manufacturers and all tiers of the supply chain have immense opportunities to enhance their entire supply chain process with the successful implementation of SCM solution. Benefits of IT in SCM * Quicker response – improved professional service * Timely product supplies * Accurate pricing/discounts * Reduction in billing errors – cleaner SOA Simplified and faster payments process * Reduction in administration costs for customers/vendors * Online information (purchases, sales, inventory, financials) * Elimination of reconciliation of accounts/error processing * Reduction in accounting cycle times * Less duplication of job – utilisation of human-power in value adding roles * Reduction in paper flow, data processing, printing, mailing * Better warehousing and transportation management * Timely and correct asset capitalisation Credit management (customers) * Better plant maintenance * Easy access to data /information Key issues / challenges Indian automotive players today face several key challenges in managing their supply chains. While addressing these is critical for success, players were asked to rank the challenges in order of priority. Based on a survey conducted by KPMG: The most significant challenge identified by automotive players in India is ‘integrating the entire supply chain’ and managing it as a single integrated entity.
While past efforts of OEMs have been focused on streamlining and improving different areas of the supply chain independently, through efforts in dealer management, operations planning, vendor rationalization, IT package implementation etc, it is expected that the linking up of these activities is expected to provide significant benefits to players, as this would involve aligning the entire chain to meet market requirements in the most efficient way.
The key challenge in achieving this would be two-fold – to align the different stakeholders along the chain – vendors, transporters, distributors and dealers – along common goals and processes, and also to integrate and link disparate IT systems used by different stakeholders. ‘Managing inbound logistics’ remains a key concern for OEMs as well as auto component players, driven more by challenges related to reliability of data, lead time and absence of quality logistics players on the upstream side. However, all respondents felt that this was a key area of focus, given the riticality of supply for future growth. ‘Managing product and part proliferation’ is one of the second significant challenges players face. Increasing competition in the Indian automotive industry has led to significant shrinkage in product lifecycles and the need for regular and frequent product up gradation and new product introductions. While this has led to issues of managing a wide product portfolio, a related key issue is the proliferation of parts/components, driven by the need for providing spare parts for current as well as discontinued models.
Respondents across both OEMs as well as auto-components indicated that increasingly the need for common platforms, and hence common parts becoming critical pre-requisite. A key role played by product development teams today is the identification and adoption of common parts and components across models. However all respondents agreed that there was significant scope for improvement in that area. Costs, quality and timely delivery continue to be key concerns for players, driven by increasing competition and pressure on margins. Many OEMs have implemented ‘Just in Time (JIT) supplies in their inbound logistics’.
However, in cases where this is not accompanied by increased visibility across the supply chain and improved planning, it has only resulted in the burden of inventory getting shifted from OEMs to their Tier-I vendors. Balanced Scorecard in Automotive SCM The balance scorecard allows managers to look at the business from four important perspectives (see above). While giving senior managers information from these four different perspectives, the balance scorecard minimises information overload by limiting the number of measures used. It forces managers to focus on the handful of measures that are most critical. . Financial: How do we look to our Shareholders? 2. Customer: How do our Customers See Us? 3. Internal Business Process: What must we excel at? 4. Employee and Organization Innovation and Learning: Can we continue to Improve and Add Value? Category| Measure| Weightage| | EVA| 25%| Financial (50%)| Unit Profit| 15%| | Market Growth| 10%| Customer (20%)| Customer satisfaction with automobile performance (TNS Automotives total customer satisfaction survey, JD Power Automotive performance survey)| 10%| | Satisfaction with after sales service| 5%| | Lead Time| 5%|
Internal Processes (20%)| Above average rank on industry quality survey| 10%| | Decrease in dealer delivery cycle time| 10%| Innovation and Learning (10%)| Suggestions per employee| 5%| | Emp. satisfaction survey| 5%| SCM in Maruti Suzuki India Limited The company works jointly with its suppliers to develop new products, achieve high localization levels, and reduce cost. It has a strong base of 246 suppliers (as on 31st March, 2009) including 16 JV companies where the company has strategic equity stake. 76% of the company's suppliers are located in the 100 kms of radius from its manufacturing facilities.
Most of the JVs are situated in the Suppliers' Park adjacent to the company facilities. With a large number of variants under the 14 running models, the supply chain management is especially challenging. Company’s A-Star model alone has around 750 variations, some of them would be cosmetic and a few others deep rooted so as to conform to different emission norms in different countries. The supply chain solution enables the concerned product reach in time, be it the type of fabric used, the audio system, the tyres or the specific engine and transmission systems.
The entire inventory management has also been fully automated and integrated with its vendors. Key Challenges When it comes to its operation and supply chain, Maruti Suzuki’s key challenges include: * Achieving a lean supply chain * Managing effectively the variations in the components for various models * Managing continuous supply-demand matching and optimization * Achieving efficient use of materials and other resources * Managing demand and customer expectations * Enabling MSIL, suppliers and dealers to constantly adapt their strategies, processes and systems to meet dynamic market needs.
Key SCM Initiatives Due to stiff competition and cost leadership of Maruti, lean manufacturing and zero inventory are its goals. Maruti’s Supply Chain management represents one of the best examples of lean manufacturing in the country. The manufacturing plants have been almost fully linked to IT systems and all inventory and processes are networked. Every component-set has a bar coded tag which helps to monitor the movement of materials right from suppliers to the Trim line. This helps to know exactly how much inventory is present on the assembly lines (using the P-BOM (Production Bill of Materials)).
CUSTOMER RELATIONSHIP MANAGEMENT (CRM) In these competitive times the challenge is to keep inventing newer ways of doing things to keep the customers in your fold. Over the last few years, the company strengthened the existing practices and experimented with many new initiatives by way of kaizens (continuous improvements) to delight its customers. These initiatives ranged from product design and quality to network expansion, and included new service programs to meet unsaid needs of customers. The company has retained its competitive edge by offering high quality products.
In the field, the products are supported by rapidly expanding networks. The company has diverse networks for new cars, spares, service, pre owned cars and so on, and all of them were in expansion mode last year to enable the company get closer to the customer. Servicing customers 24X7..... 365 days.... The company takes great pride in sharing that customers have rated Maruti Suzuki first once again in Customer Satisfaction Survey conducted by independent body, J. D. Power Asia Pacific. It is 9th time in a row. The company was first Car Company in India to launch a Call Centre in the year 2000.
The award mirrors the company's commitment towards "Customer Obsession”. Key Initiatives * Car pickup & delivery facility for women car owners. * Quote Unquote: "The study finds that vehicle pickup and delivery before and after service has a strong impact on customer satisfaction. In particular, customers who say that their vehicle was picked up from their doorstep before service and delivered to the same point after service are notably more delighted with their after-sales service experience, compared with customers who do not receive this service.... * Maruti also launched mission to promote safe driving habits jointly with Institute of Driving Training and Research. * It also launched ‘Dil Se’- a special program for Indians living abroad or NRIs, to facilitate them to gift Maruti cars online to friends and relatives at home. * Online club ‘Swift Life’ is made for all Swift owners. Setting up "Express Service Bays" & "2 - Technician Bays" As the name suggests the company set out to delight its customers by offering them faster car service by introducing new concepts such as Express Service Bays & 2- Technicians Bays. These are done for customers who are hard pressed for time.
Both the initiatives undertaken in this direction have helped improve customer interface and also helped increase the productivity and capacity of existing workshops. Mega Camps The company aggressively conducts 'Mega Camps' throughout the country round the year. Activities undertaken during a mega camp include complimentary car wash, AC & Pollution check up, oil and fuel top ups, wheel alignments etc. Apart from mega camps workshop camps like A/C checkup camps, PUC and general check-up camps, Locality camps , Pre monsoon camps etc are also regularly conducted as part of customer connect initiatives.
Service at Door Step through Maruti Mobile Support Another unique initiative is the door step service facility through Maruti Mobile Support. Maruti Mobile Support is a first of its kind initiative and is expected not only to help the company reach out customers in metro cities but also as a mean to reach semi urban /rural areas where setting up of new workshop may not be viable Car Safety device: Immobilizer The company used technology to meet customer needs and even delight them. Following feedback that the company's cars were more prone to theft owing to heir resale value, the company worked on an anti-theft immobilizer or "I-Cats;" system for all its new cars. Complete car needs The company's effort of providing all car-related needs -- from learning to drive a car at Maruti Driving Schools to car insurance, extended warranty and eventually exchanging the existing car for a new one -- under one roof at dealerships also enhances customer satisfaction. The organization needed greater visibility into customer preference, their economical strata, behavior, and needs. Our marketing managers wanted to target potential buyers and sell them products that customers perceived as a 'best value' proposition and sell it at the right time," says Rajesh Uppal, Executive Officer IT & CIO, Maruti Suzuki India Limited. In order to achieve a 'single view of customers' and a platform for 'marketing for one', Maruti Suzuki embarked on an analytical CRM (aCRM) project. The aCRM project has improved customer segmentation and targeting. Today, it helps marketers assess which prospects are most likely to transact and also identifies those who are bogged down in a sales process and need assistance.
Empowered by aCRM, the car-maker can find and acquire potential customers, nurture and retain those the company already has, entice former customers back into the fold, and trim marketing and client servicing costs. CUSTOMER RELATIONSHIP MANAGEMENT (CRM) • Includes the methodologies, technology and capabilities that help an enterprise manage customer relationships. The general purpose of CRM is to enable organizations to better manage their customers through the introduction of reliable systems, processes and procedures. Customer Relationship Management is a corporate level strategy which focuses on creating and maintaining lasting relationships with its customers. Although there are several commercial CRM software packages on the market which support CRM strategy, it is not a technology itself. Rather, a holistic change in an organization’s philosophy which places emphasis on the customer. • Management at MARUTI believes that a successful CRM strategy cannot be implemented by simply installing and integrating a software package and will not happen overnight.
Changes must occur at all levels including policies and processes, front of house customer service, employee training, marketing, systems and information management; all aspects of the business must be reshaped to be customer driven. To be effective, the CRM process has been integrated with end-to-end across marketing, sales, and customer service. The objectives of CRM at MARUTI:- • To Identify customer success factors • To Create a customer-based culture • To Adopt customer-based measures • To Develop an end-to-end process to serve customers To Recommend what questions to ask to help a customer solve a problem • To Recommend what to tell a customer with a complaint about a purchase • To Track all aspects of selling to customers and prospects as well as customer support. Before implementing the CRM segment the management at MARUTI did a survey to identify what profile aspects it feels are relevant to its business, such as what information it needs to serve its customers, the customer's past financial history, the effects of the CRM segment and what information is not useful.
Being able to eliminate unwanted information is a large aspect of implementing CRM systems. ARCHITECTURE OF CRM AT MARUTI There are three parts of application architecture of CRM at Maruti: • Operational CRM- automation to the basic business processes (marketing, sales, service) • Analytical CRM - support to analyze customer behavior, implements business intelligence alike technology • Collaborative CRM- ensures the contact with customers (phone, email, fax, web, sms, and post) OPERATIONAL CRM
Operational CRM at Maruti includes customer contact (sales, marketing and service). Tasks resulting from these processes are forwarded to employees responsible for them, as well as the information necessary for carrying out the tasks and interfaces to back-end applications are being provided and activities with customers are being documented for further reference. Operational CRM provides the following benefits: • Delivers ersonalized and efficient marketing, sales, and service through multi-channel collaboration • Enables a 360-degree view of the customer while you are interacting with them • Sales people and service engineers can access complete history of all customer interaction with the company, regardless of the touch point . The operational part of CRM typically involves three general areas of business at Maruti: Sales force automation (SFA) * SFA automates the critical sales and sales force management functions of Maruti, i. . , lead/account management, contact management, quote management, forecasting, sales administration, keeping track of customer preferences, buying habits, and demographics, as well as performance management. SFA tools are designed to improve field sales productivity. Key infrastructure requirements of SFA are mobile synchronization and integrated product configuration. Customer service and support (CSS) * CSS at Maruti automates the service requests, complaints, product returns, and information requests.
The internal help desk and inbound call-center support for customer inquiries have been evolved into the "customer interaction center" (CIC), using multiple channels (Web, phone/fax, face-to-face, kiosk, etc). Key infrastructure requirements of CSS include computer telephony integration (CTI) which provides high volume processing capability, and reliability. Enterprise marketing automation (EMA) * EMA of the company provides information about the business environment, including competitors of Maruti, industry trends, and macro environmental variables.
It is the execution side of campaign and lead management. The intent of EMA applications is to improve marketing campaign efficiencies. Functions include demographic analysis, variable segmentation, and predictive modeling occur on the analytical (Business Intelligence) side. Integrated CRM software is often also known as "front office solutions. " Of Maruti, This is because they deal directly with the customer of the company. Maruti uses CRM software to store all of their customer's details. When a customer calls at Maruti, the system is used to retrieve and store information relevant to the customer.
By serving the customer quickly and efficiently, and also keeping all information on a customer in one place, the management at Maruti aims to make cost savings, and also encourage new customers. ANALYTICAL CRM In analytical CRM, data gathered within operational CRM and/or other sources are analyzed to segment customers or to identify potential to enhance client relationship. Customer analysis typically leads to targeted campaigns to increase share of customer's wallet. Examples of Campaigns directed towards customers are: • Acquisition: Cross-sell, up-sell Retention: Retaining customers who leave due to maturity or attrition. • Information: Providing timely and regular information to customers about Maruti. • Modification: Altering details of the transactional nature of the customers' relationship. Analysis typically covers but is not limited to: • Decision support: Dashboards, reporting, metrics, performance etc. • Predictive modeling of customer attributes • Strategy and research. Analysis of Customer data relates to the following analysis: • Campaign management and analysis • Contact channel optimization Contact Optimization • Customer Acquisition / Reactivation / Retention • Customer Segmentation • Customer Satisfaction Measurement / Increase • Sales Coverage Optimization • Fraud Detection and analysis • Financial Forecasts • Pricing Optimization • Product Development • Program Evaluation • Risk Assessment and Management COLLABORATIVE CRM Collaborative CRM facilitates interactions with customers through all channels (personal, letter, fax, phone, web, e-mail) and supports co- ordination of employee teams and channels.
It is a solution that brings people, processes and data together so company can better serve and retain their customers. Collaborative CRM provides the following benefits: • Enables efficient productive customer interactions across all communications channels • Enables web collaboration to reduce customer service costs • Integrates call centers enabling multi-channel personal customer interaction • Integrates view of the customer while interaction at the transaction level CRM PROCESS: Future Plans: Provide product information, product use information, and technical assistance on web sites that are accessible 24 hours a day, 7 days a week. • Identify how each individual customer defines quality, and then design a service strategy for each customer based on these individual requirements and expectations. • Provide a fast mechanism for managing and scheduling follow-up sales calls to assess post-purchase cognitive dissonance, repurchase probabilities, repurchase times, and repurchase frequencies. Provide a mechanism to track all points of contact between customer and the company, and do it in an integrated way so that all sources and types of contact are included, and all users of the system see the same view of the customer (reduces confusion). • Help to identify potential problems quickly, before they occur. • Provide a user-friendly mechanism for registering customer complaints (complaints that are not registered with the company cannot be resolved, and are a major source of customer dissatisfaction). Provide a fast mechanism for handling problems and complaints (complaints that are resolved quickly can increase customer satisfaction). • Use internet cookies to track customer interests and personalize product offerings accordingly. • Use the Internet to engage in collaborative customization or real-time customization. • Provide a fast mechanism for managing and scheduling maintenance, repair, and on-going support (improve efficiency and effectiveness). • The CRM can be integrated into other cross-functional systems and thereby provide accounting and production information to customers when they want it.
ENTERPRISE RESOURCE PLANNING (ERP) ERP is an enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing. The system supports most of the business system that maintains in a single database the data needed for a variety of business functions such as Manufacturing, Supply Chain Management, Financials, Projects, Human Resources and Customer Relationship Management.
Maruti Supports Business Growth with Scalable, High-Performing ERP System: “The open interfaces of Oracle E-Business Suite offered the best integration with our legacy systems. Standardizing on Oracle technology and applications would also lower support costs and ensure easy upgrades in the future. ” – Rajesh Uppal, Chief General Manager, Information Technology, Maruti Suzuki India Limited Maruti Suzuki India Limited has led India’s car market for more than a quarter of a century. First established in 1981, the company is now a fully-fledged subsidiary of the Suzuki Motor Corporation.
Its principal activities include the manufacture and sale of motor vehicles and spare parts via a 300-strong dealer network scattered across India. The year 2002 saw Maruti add finance, leasing, insurance, and pre-owned car businesses to its portfolio, increasing the scale of its operations and prompting a review of its processes and systems. Oracle Consulting was engaged to install a number of Oracle E-Business Suite modules and integrate them with Maruti’s existing systems. The eight-month project involved managing up to 50 people, including Maruti staff, Oracle consultants, and employees of third-party organizations.
Oracle also assisted Maruti with change management, a critical part of the process to ensure quick user acceptance. Thorough project management by Oracle Consulting enabled Maruti to go live on the Oracle applications without any interruptions to its business. By standardizing on a single Oracle platform, the company achieved better control of its finance, procurement, and human resources functions. It also gained a more manageable and scalable platform to support its rapidly expanding business.
The Need to Strengthen Management Control Prior to employing Oracle, Maruti used a number of home-grown systems to manage its various lines of business. Many of these disparate systems could not talk to each other, requiring staff to enter data multiple times and consolidate information to generate management reports. The addition of four new business sectors in 2002 created further pressures, requiring constant monitoring and human intervention to keep the system operating across the hundreds of locations Maruti serves within India.
To support this growth and improve efficiency, the company decided to revamp its information technology systems to provide end-to-end visibility into the organization. “We were looking for a flexible, expandable system that was easy to manage,” said Rajesh Uppal, chief general manager, information technology, Maruti Suzuki India. “This would reduce the complexity of the IT environment and our reliance on certain people to maintain the systems. And because our business is undergoing a period of rapid expansion, it was important to have a system that could scale easily. To minimize the impact of the system change on its business, Maruti decided on a phased migration to Oracle E-Business Suite. As a first step, the company decided to replace its financial, purchasing, and human resources systems with Oracle Financials, Oracle Procurement, and a range of Oracle Human Resources applications. Oracle Consulting was selected to supervise the implementation, including determining Maruti’s requirements and developing a project plan, designing the system, deploying the software, managing the various parties involved, and providing post-implementation support.
Standardization Improves Financial Insight The problem with using multiple systems to manage finances was the lack of control over processes and information quality. Each office followed different workflows, which often meant one division lagged behind another in delivering information. Differing data formats required tedious consolidation, preventing real-time access to critical statistics. With Oracle Financials, Maruti was able to standardize on a single financial management platform.
According to Uppal, the company achieved tight control over accounts payable and accounts receivable, and gained a comprehensive general ledger that assists in the management of all financial information. “The Oracle application can be used by accounting and finance staff, as well as senior managers,” he said. “We established standardized data formats and processes for staff, resulting in greater efficiency and less confusion. Financial management is more disciplined as a result. ” Month-end closing is completed within two days, without the fuss that usually accompanies the task.
Uppal added that auditing is also in better shape. “We completed our year-end close on time in March this year, which was fantastic as we had initially been worried that the system would not be able to handle the load,” he said. “With Oracle Consulting on site to provide support, the whole procedure was completed without a hitch. “As our business continues to expand, it is also reassuring to know that the Oracle system can scale to meet our needs, and can be easily integrated with other applications in the suite. ” Drilling Down to Details with Hyperion
Maruti has used Hyperion business performance management software for the past two years to analyze budgets, consolidate accounts across nine subsidiaries, and conduct financial reporting in compliance with generally accepted accounting principles (GAAP) in India. The system is integrated with Oracle Financials and is currently used by around 10 budgeting staff in Maruti’s finance department. “We use Hyperion to complete scenario- and project-based analytics,” said Uppal. “The system supports all types of reporting and analysis, giving staff and senior management deeper insight into our performance as and when they need it.
It alerts us to possible problems before they impact our operations and has helped improve the accuracy of our forecasts. We are able to respond faster to changing market conditions, which boosts our competitiveness. ” Oracle’s acquisition of Hyperion in April 2007 is good news for Maruti. “When we implemented Oracle Financials, we found that the application integrated easily with the Hyperion system, so there were no interruptions to the business when we cut over to Oracle from our legacy financial system,” Uppal said. Now that Hyperion is an Oracle company, we are further assured of a seamless upgrade path in the future. ” Streamlined Procurement Lowers Costs Maruti implemented Oracle Purchasing to manage procurement of capital goods, services, and indirect consumables. Prior to implementing Oracle Purchasing, some subsidiari