supply chin management of automobiles

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Supply Chain Management as a strategic tool

for Indian Automobile Industry with special

reference to Car Segment

DIPANKAR

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Supply Chain Management as a strategic tool

for Indian Automobile Industry with special

reference to Car Segment

DIPANKAR

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EXECUTIVE SUMMARY

SCM is a powerful strategic function capable of radically improving customer value

propositions by the reengineering of intranet and internet-enabled collaborative

channel partnerships. Latest developments in information technology have propelled

the e-Supply Chain Management (e-SCM) concept to newer dimensions. In the past,

neither markets nor products changed much over time, enterprises that gained

initial superiority could leverage on, considerable resources and process knowledge,

mature distribution channels, advertising and marketing clout, and the newest

technologies, to maintain that lead. Today, it is evident that there is no such thing as

sustainable competitive advantage and also that all advantages are temporary.

The importance of supply chain management is attracting the attention of

academicians and business managers globally. As companies experience globalisation

and cut throat competition, companies are forced to adopt measures to contain risk

due to their supply chain design characteristics.

The research was conducted among car manufactures in Delhi & NCR region and

main analysis has been done with respect to supply chain at Maruti Suzuki. The data

for the research was collected from executive of car companies, OEM suppliers and

logistics service providers. All the respondents form a key part of supply chain of car

manufacturers.

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ACKNOWLEDGEMENT

We owe the deep depth of gratitude to our esteemed teacher Miss. Nidhi Khurana

for supporting us a lot to during the span of project and to help us when we faced

several problems. We are thankful to our Honble Director who allowed us to

perform several tasks like weekly meetings and discussions in the institute itself.

We are thankful to the lab faculties for providing necessary help whenever it was

required like in case when it was system problem in print outs and other information.

Library staff helped us in providing necessary books of different authors for project

development and several other platform oriented books on which we had worked

upon like entrepreneurs.

At last but not the least we cannot forget to thank our friends for their important

suggestions help in editing our work and let us know about our errors and mistakes

throughout the project.

DIPANKAR

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TABLE OF CONTENT

INTRODUCTIONOVERVIEW OF AUTOMOBILE SECTOR (CAR SEGMENT)

GROWTH DRIVERS OF INDIAN AUTOMOBILE MARKET

INDIA'S POSITION IN WORLD'S PRODUCTION

AIMS AND OBJECTIVE OF RESEARCH

STRUCTURE OF THE PROJECT:

SIGNIFICANCE OF THE STUDY

REVIEW OF LITERATURE

RESEARCH METHODOLOGY

TYPE OF RESEARCH

SAMPLING

TYPE OF SAMPLING METHOD USED IN THE STUDY

JUDEGEMENTAL SAMPLING

SAMPLING UNIVERSE

SAMPLE SIZE

METHOD OF DATA COLLECTION

EMPIRICAL STUDY contentRESEARCH FINDINGS

LIMITATIONS

CONCLUSION & RECOMMENDATION

REFERENCES

ANNEXURE

QUESTIONNAIRE

LIST OF RESPONDENTS

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INTRODUCTION

Automobile is one of the largest industries in global market. Being the leader inproduct and process technologies in the manufacturing sector, it has been recognized

as one of the drivers of economic growth. During the last decade, well directed efforts

have been made to provide a new look to the automobile policy for realizing the

sector's full potential for the economy. Steps like abolition of licensing, removal of

quantitative restrictions and initiatives to bring the policy framework in consonance

with WTO requirements have set the industry in a progressive track. Removal of the

restrictive environment has helped restructuring, and enabled industry to absorb new

technologies, aligning itself with the global development and also to realize its

potential in the country.

Indian Automotive Industry is one of the fastest growing globally, manufacturing 11

million vehicles annually. India is world's 2nd largest manufacturer of motorcycles

and 4th biggest commercial vehicle manufacturer. India is expected to be 7th largest

automobile market by 2016. In this age of e-business and global outsourcing, SCM

plays a crucial role in the Automotive Industry. (Auto Supply Chain Forum, 2012)

Efficient and Stream-lined processes are required to remain competitive in today's

marketplace. Material flow, distribution, logistics, purchasing and planning are all

important factors for success and competitiveness. Inventory Solutions can help you

by optimizing your material flow.

Planning is one the most important issues of SCM for the Indian automotive industry.

Hence, determination of production requirements and inventory levels at the vendor'sfacility for each product and development of transportation flows between these

facilities to the warehouse in a best possible way to reduce total production, inventory

and transportation costs with fulfilment of service level requirements. The emphasis

given on improving supply chains in organizations both by companies and academia

in the past two decades shows the growing importance of integrating manufacturing

and marketing processes of organizations. In recent years, supply networks are being

recognised as strategic tools that enable companies to fight global competitive battles.

The automotive industry is a key contributor to the Indian economy accounting for

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about 4 percent of the Indian economy. The last few year have seen greater

Integration of the Indian industry with its global counterparts. The interesting part

about this is that large part of the industry has seen significant changes while the

changes have been more visible in the car segment.

The Indian automobile industry is currently experiencing an unprecedented boom in

demand for all types of vehicles. This boom has been triggered primarily by two

factors: a) increase in disposable incomes and standards of living of middle class

Indian families estimated to be as many as four million in number; and b) the Indian

government's liberalization measures such as relaxation of the foreign exchange and

equity regulations, reduction of tariffs on imports, and banking liberalization that has

fueled financing-driven purchases. (IMS, 2012)

In car segment, 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. KPMG in India has been fortunate enough to

see this transformation take place while participating in a small way through its work

with key parts of the automotive supply chain. The wave of change 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 sourced 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. 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 car segment 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

moderate these. Today's rapidly changing business environment places ever greater

demands on business such as to provide products and services quicker, with greater

added value, to the correct location, with no relevant inventory position

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Overview of Automobile sector (Car Segment)

On the canvas of the Indian economy, automotive industry occupies a prominent

place. Due to its deep forward and backward linkages with several key segments of

the economy, automotive industry has a strong multiplier effect and is capable of

being the driver of economic growth. A sound transportation system plays a pivotal

role in the country's rapid economic and industrial development. The well-developed

Indian automotive industry ably fulfils this catalytic role by producing a wide variety

of vehicles passenger cars, light, medium and heavy commercial vehicles, multi-

utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors

etc.

Automotive Industry comprises of automobile and auto component sectors and is one

of the key drivers of the national economy as it provides large-scale employment,

having a strong multiplier effect. Being one of the largest industries in India, this

industry has been witnessing impressive growth during the last two decades. It has

been able to restructure itself, absorb newer technology, align itself to the globaldevelopments and realize its potential. This has significantly increased automotive

industry's contribution to overall industrial growth in the country.

Growth Drivers of Indian Automobile Market

Rising industrial and agricultural output

Rising per capita income

Favourable demographic distribution with rising working population andmiddle class Urbanisation

Increasing disposable incomes in rural agri-sector

Availability of a variety of vehicle models meeting diverse needs and

preferences

Greater affordability of vehicles

Easy finance schemes

Favourable government policies Robust production

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India's Position in World's Production

Well-developed, globally competitive auto industry Established automobile testing and R&D centres

Among one of the lowest cost producers of steel in the world

Worlds second largest manufacturer of two wheelers

Fifth largest manufacturer of commercial vehicles

Manufactures largest number of tractors in the world

Ninth largest car manufacturer in world

One of the major industrial sectors in India is the automobile sector. Subsequent to the

liberalization, the automobile sector has been aptly described as the sunrise sector of

the Indian economy as this sector has witnessed tremendous growth.

Automobile Industry was deli censed in July 1991 with the announcement of the New

Industrial Policy. The passenger car industry was, however, deli censed in 1993. No

industrial licence is required for setting up of any unit for manufacture of automobiles

except in some special cases. The norms for Foreign Investment and import oftechnology have also been progressively liberalized over the years for manufacture of

vehicles including passenger cars in order to make this sector globally competitive.

At present 100% Foreign Direct Investment (FDI) is permissible under automatic

route in this sector including passenger car segment. The import of

technology/technological up gradation on the royalty payment of 5% without any

duration limit and lump sum payment of US$ 2 million is also allowed under

automatic route in this sector. With the gradual liberalization of the automobile sector

since 1991, the number of manufacturing facilities in India has grown progressively.

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AIMS AND OBJECTIVE OF RESEARCH

The aim is to study and evaluate how supply chain can act as a strategic tool for

improving the performance of Indian Automobile industry. The main objective is to

analyse the key SCM practices at selected automobile industry players with specific

reference to Maruti Suzuki in car segment for improving its performance. The other

specific objectives are

1) To access the supply chain metrics and its performance.

2) To examine and evaluate key aspect of SCM for selected automobile industry

players in India with reference to car segments with specific reference to Maruti

Suzuki.

3) To evaluate the effectiveness of Supply Chain practices at selected automobile

industry for reducing the cost and increasing efficiency at inventory management,

logistics, transportation, warehouses and distribution and recommending solutions

for improving performance.

Structure of the project:

The format of this study is outlined below; each is in line directly to the overall

research objective of this study. The chapter and listed below with a concise

description to give a clear profile of the structure of the study.

Chapter- 1 Introduction:

This section is an introduction into what the dissertation entails and the rationale for

the topic selection.

Chapter 2 Literature review:

This section gives the detail about the concept of supply chain management and its

relevance in automobile industry.

Chapter 3- Research Methodology:

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The section critically evaluates the method for data collection. The researcher

compares the method of the data analysis and justifies the primary research that is

being carried out data was collected using the mixed method approach.

Quantitative method:

Interviewer administered questionnaire

Qualitative method:

Focus group and telephone interview

Chapter 4 Research finding and discussion:

The section focuses on interpretation and discussion of the data obtained from

primary research. This is linked with the literature review and the research objective.

Chapter 5 Conclusion and Recommendation:

This section concludes the aim and objective introduced in the chapter one. The

conclusion was drawn based on each research objective and recommendation ware

made

Chapter 6 Reflection on Learning:

This highlights personal reflection from the author about the learning process

involved in carrying out study.

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SIGNIFICANCE OF THE STUDY

Supply chain management (SCM) is working its own way onto the strategic agendas

of CEOs in an expanding list of industries, from automobiles to personal computers to

fashion retailing. There is very little research in this area particularly in the

automobile industry. The current study aims to compare the supply chain management

practices of automobile companies in Delhi & NCR.

Analysis was done in the area of each companys procurement and outsourcing

strategies, relationship with alliances, and the use of information technology to obtain

competitive advantage. The findings of the study can be useful for the automobile

industry in other parts of India.

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REVIEW OF LITERATURE

Relevant literatures pertaining to the present study on four wheeler automobileindustry are included in this chapter. The literatures are helpful for proper

understanding the four wheeler automobile industry and its various related aspects.

Review of literature is also helpful in effectively fulfilling the objectives for which the

research project has been undertaken.

Ketchen Jr., G., & Hult, T.M. (2006 pp: 573-574) studies that in the past ten years

many significant changes has been takes place in the Indian automobile industry. His

studies further states that there was a healthy change in the relationships between

Indian automobile assemblers and their suppliers due to globalization, implementation

of lean production and the development of modularization. There were stiff

competition among many manufacturers and it helps to improve their quality, cost

reduction targets and on-time delivery to market. And also it creates more mergers or

acquisitions.

Larson, P.D. and Halldorsson, A. (2004 pp: 17-20), in his studies, aimed at analyzingthe role of SCM in Indian automotive industry confirms that SCM is a best-in-class,

high performance solution which is been utilized by Indian automobile manufacturer,

logistics and distribution companies, and auto component retailers to blend the

demand chain with the supply chain. The author further confirms his statement by

saying that 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 transshipment; most importantly, SCM makes a

world of difference to the manufacturers by maintaining a minimal finished goods

inventory.

Further,McCubbrey, D., Pinsonneault, A., & Donovan, R. (2006 pp: 722-727) studies

SCM flow in Indian automotive industry is based on its products, information and

finance. His studies reveal that 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

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as sharing information between suppliers and manufacturers. The finance flow

encompasses credit terms, payment schedules and consignment and title ownership

arrangements.

Based on above facts, Kaushik K.D., & Cooper, M. (2000 pp: 65-67) studies that in

order to execute supply flow in Indian automotive industry, Supply chain

management has two types of softwareplanning application and execution

applications. Planning application is utilized 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.

According to a survey by Handfield and Bechtel (2001 pp: 284-286), SCM benefits

Indian automotive industry in several ways which include on-time delivery to the

suppliers, proper pricing and discounts. The billing error has been reduced and the

payments were made simple and faster.

Administration costs were reduced for customers/vendors; better warehousing and

transportation management, timely and correct asset capitalization, creditmanagement (customers), better plant maintenance, and easy access to data

/information.

Studies related to structure of supply chain flow in Indian automotive industry

Lavassani, M. K., Movahedi B., Kumar V. (2008pp: 543 and 622) examined that the

structure of the Indian automotive industry can be divided into tiers like first tier,

second tier and third tier. The supply chain starts with third and fourth tier supplierswho supply the raw materials to the second tier suppliers who manufacture some

simpler individual components. The second tier companies supply the simpler

components to auto components manufacturers, who form the first tier. The first tier

suppliers provide the components to the OEMs, who in turn provide the automobiles

to the customers. But today there are new direct suppliers, who design systems and

co-ordinate the supply chain required for the manufacturing and assembly. ''The

larger first tier suppliers go a step further of supplying the components, by semi-assembling the modules like steering systems and rear axle systems, which can be

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directly fixed on the final assembly of the cars.'' (Hemila, 2002 pp: 72)By this the

costs incurred by the car manufacturers in finding the individual component

manufacturers, material handling and processing are reduced. This even transfers the

risks and problems associated with each component to the suppliers. According to

(Francisco Veloso and Rajiv Kumar, 2002 pp72) the latest development in supply

chain of the automotive industry is the emergence of tier 0.5. The auto ancillary

companies, which cater to the research and design requirements of automobile

manufacturers, are called the tier 0.5 vendors. The following is the flow-chart

representation by the researcher to demonstrate the supply chain flow in Indian

automobile industry

Lower-Tier Sub-Suppliers

3rd Tier Suppliers

2nd Tier Suppliers

1st Tier Suppliers

0.5 Tier Suppliers

OEMs / Assemblers

Dealer Networks

Consumers

Studies related to various supply chain decisions taken by Indian automotive industry

According to Garver M S and Mentzer J T (2000 pp.12-22) in the Indian automobile

industry there are three levels in the supply chain management decisions. They are

strategic, tacticaland operationallevel. Strategic level decisions are related to

production, location transportation and inventory. Production decisions are used to

decide which products to produce, where to produce, which suppliers to use and so

on. Location decisions deals with the numbers size and geographic locations like

distribution centers and plants. Transport decisions are used to decide the mode of

transport. Inventory decisions will manage inventories throughout supply chain.

Based on the studies by (Haag, S., Cummings, M2006 pp: 124-132) strategic leveldecisions are interrelated. For instance mode of transport will change according to the

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geographic locations of plant and warehouses. Inventory policies may change

according to the supplier's choice. Tactical level decisions are responsible for medium

term decisions. For instance some of the tactical level decisions are weekly

distribution, production, and transportation planning. The operational level of supply

chain management is concerned with the very short term decisions made from day to

day. The border between the tactical and operational levels is vague and often no

distinction is made. The researcher concludes that these decisions form the

appropriate selection for SCM.

Studies relating to process techniques adapted by Indian automotive industry to fulfill

its decisions

According to Lewis and Talalayevsky, (2004 pp: 90) Indian automotive industry

adapts different techniques in its supply chain such as Quick Response (QR),

Continuous Replenishment Programs (CRP) and Efficient Consumer Response (ECR)

Quick Response (QR) is both a management paradigm and a methodology that is

adapted by Indian automotive companies since it allows auto components supplysystems to react quickly to changes while improving their performance. (Wagner,B

2000 pp1003).

Mills et al., (2004 pp: 12) studies that Continuous Replenishment Programme (CRP)

has been managed by Indian automotive industry in two different ways. The first way

of managing is by considering which party has the responsibility for the inventory

management and the other way is by considering to what extent the partners are

sharing information. Due to these above reasons the automotive industry has been

improved in the speed of supply, product availability, cost reduction target and it

helps to give better service.

Efficient Consumer Response (ECR) as a strategic initiative working to overcome

traditional barriers between trading partners, thus eliminating internal barriers that

result in costs and time that add little or no value to consumers (Skjoett-Larsen, T

2007 pp284).

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According toKumar V. (2008) nowadays, these companies have started to adopt the

emerging Internet technologies to have constant contact with their suppliers. The

Internet is very useful to do online B2B transactions. Ashok Leyland has reduced their

inventory cost by using an end-to-end supply chain management system. Mahindra &

Mahindra has employed a single network to connect all its plants, corporate office and

all offices.

Studies relating to recent trends in supply chain management related to Indian

automotive industry in improving its process techniques

In the bookComplementary theories to supply chain management Halldorsson, A.,

Kotzab, H., Mikkola, J. H., Skjoett-Larsen, T. (2007 pp:90-94) studies that the Indian

auto manufacturers have started to take upon new concepts in supply chain

management like distribution manufacturing, back hauling, vendor managed

inventory, containerization and logistics out-sourcing. Indian auto suppliers has

adapted a new concept called Supplier Relationship Management (SRM) and is said

as the consolidation and classification of procurement data to provide an

understanding of supplier relationships in order to develop procurement strategies that

reduce costs, make procurement predictable and repeatable, enlighten supplier

partnership decisions and provide leverage over suppliers in negotiations. It's also

called: Sourcing, Strategic Sourcing, SRM, and e-Sourcing. (Bob lowson, Russell

King, et al, 1999 pp523) sees that it helps to improve the efficiency of the auto

components supply process, through collaboration with the suppliers.

Baziotopoulos, (2004 pp:42) worked hard to study supplier relationship management's

(SRM) goal and came to the conclusion that customer relationship

management(CRM) is the best tool to streamline and make effective supply chain

processes between an enterprise and their customers. SRM practices helps to maintain

the effective communication between an enterprise and its suppliers. As a result SRM

increases the supply chain processes, inventory and good service of goods. Author

further explains that if the enterprise uses SRM in an appropriate way then it would

definitely decrease the production costs and improves the quality and service.

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According to the studies by Yusuf et al., (2003 p: 122) many automation technologies

are also adapted by Indian auto suppliers in the recent time. Some of them are

Automatic Guided Vehicles (AGV's), Automated Storage and Retrieval Systems

(AS/RS), Stores and Conveyor System, Radio frequency terminals and radio

frequency data communications. As Gallegos, J (2002 pp: 213) says automated

Storage and Retrieval Systems is a very good technology that can be considered to cut

auto component inventory cost and to improve its productivity.

Studies relating to measurement of supply chain management performance in relation

to its trends and techniques adapted

Measuring the performance of a supply chain isn't easy. For one thing, supply chains

are subject to conflicting requirements, creating confusion about which aspects of

performance ought to be monitored and improved. For another, there are dozens of

metrics to choose from, and it's far from obvious how to select among them (DavidA.

Taylor, 2004 pp: 223).

AsMarshall Fisherexplained in his classicHarvard Business Review article (1997 p:4) Efficiency and flexibility are the basic trade-off in the supply chain process. If the

supply chain processes are said to be more efficient process then it is capable of

minimizing the inventory at each location and it can definitely achieve economies of

scale at every link. On the other way around if the supply chain processes are flexible

then reserve capacity inventory must be maintained. As a result it will help to produce

and deliver products in a very short time even if there is a fluctuation in the quantities.

The methods Ramakrishnan R V (2006 pp: 167-231), suggest for measuring the

supply chain performance are:

Balanced Scorecard

Supply chain council's SCOR model

Logistics scoreboard

Activity-Based Costing

Economic Value Analysis

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According to Hedberg and Olhager,(2002 pp:72-74 ) , Supply Chain Balanced

Scorecard tracks a limited number of key metrics . These metrics should be closely

aligned to the automobile companies' strategic objectives. The measurements usually

cover 4 areas:

1. Financial - ex: The cost of manufacturing, warehousing, transportation etc

2. Customer - ex: Order Fill Rate, Backorder Levels, On Time Delivery 3

3. Internal Business - ex: Adherence -To-Plan, Forecast Error

4. Training: ex: In house Training Hours, APICS Membership/Certification

While the Balanced Scorecard approach was not specifically designed for the

automobile and auto-component supply chain, it does give a good guidance for its

core measures of this research objective. The central idea is to focus on key metrics

that have real meaning to automobile company. The Balance Scorecard approach

helps the manufacturers to keep their measures aligned with their specific objectives.

These measures should be tracked over time (usually monthly) with specific targets

for each supply.

Ketchen Jr., G., & Hult, T.M. (2006 pp: 19). studied the Supply Chain Operations

Reference -model (SCOR) and found that it isolates key supply-chain management

processes of auto component companies and matches their process elements against

industry -specific best practices , benchmarking performance data , and appropriate

software applications , providing its users with a framework for understanding where

they need to make improvements . SCOR builds on the concepts of automobile

business process reengineering, benchmarking, and process measurement by

integrating their techniques into a cross-functional framework that addresses

management issues at the enterprise rather than at functional level. The main factor of

adapting this model in this research project is because SCOR is recognized by the 800

member companies of the Indian Automotive industry Supply -Chain Council as an

effective toolkit for companies wanting to upgrade their supply chains for strategic

advantage. While using the SCOR model is not a substitute for developing a

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comprehensive operations strategy, it is a tool for ensuring that the operations strategy

has the desired outcome. Cross - industry studies show that integrated supply chain

management in Indian automobile industry typically yields the following results:

25 -50% reduction in total supply chain costs

25-60% reduction in inventory holding

25-80% increase in forecast accuracy

30-50% improvement in order -fulfillment cycle time.

When it comes to measuring performance of Indian auto industry, it is a prescriptive

and recommended set of logistics metrics that covers: logistics financial performance;

logistics productivity; logistics quality; and logistics cycle time can be used to map

the supply chain performance measurement processes. This method is adapted in this

research project since it's prescriptive and recommends the use of a specific set of

supply chain performance measures.

As recommended byMentzer, J.T. et al (2001 pp:124) Activity based costing is been

adapted by Indian auto suppliers since its a measurement method that ties financial

measures of these companies to operational performance since it involves breaking

down activities into individual tasks or cost drivers. ABC is one of the most accurate

cost management methodologies by Indian companies since it focuses on indirect

costs. It traces rather than allocates each expense category to the particular cost object

.It makes indirect expenses direct. ABC is used when overhead is high, products are

diverse: complexity, volume, amount of direct labor. It is used when cost of errors are

high, also when competition is stiff.

Bennett stewart 111, (2000 pp: 92) The most successful measurement of performance

is Economic value analysis (EVA). It is mainly used as a guide to take decisions in

the new company. In the Indian automobile supply chain metrics, it has been given

equally high importance and it is used for managing both intangible and tangible

assets. Economic value analysis (EVA) is been adapted in this research because EVA

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metrics vary from other metrics. The characteristic features of EVA metrics are

complete, practical and avoid confusion in the business.

To summarize on the basis of literature survey we can say that the automobile

industry has undergonesignificant structural and other changes in thelast decade or

so. In view of the presentglobalisation, implementation of leanproduction and the

development of modularisation have changed the relationshipsbetween 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 developingtime to market. Over the last few years,

automobile companies have increasingly realised the importance of logistics as a tool

for competitive advantage. For long, the Indian logistics sector remained at a nascent

stage due to inadequacies in infrastructure, lack of regulation, unfavourable taxation

regime and so on.

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RESEARCH METHODOLOGY

Research methodology is a description explanation and justification of various

methods of conducting research. In order to accomplish the objectives of the study, it

is essential to articulate the manner in which it is to be conducted, i.e., the research

process is to be carried-out in a certain framework. The Research Methodology,

which follows, is the backbone of the study.

Type of research: Descriptive

The data for the research was collected using both primary and secondary data.

Sampling:

The sampling plan for the study decides the work area that is the population, which

has to be surveyed. A Brief idea about the sampling for this research consisting of its

different parameters is given below:

Type Of Sampling Method Used In The Study

Judegemental Sampling

In this type of the sampling the researcher uses his judgment to select population

members who are good source for accurate information

Sampling Universe

The sample universe is taken Delhi & NCR and nearby areas.

Sample Size

In this study sample size is of 40 Automobile Industry that included Executives from

Maruti Suzuki and other car manufacturers, OEM suppliers and Logistic service

providers. Due to the shortage of time and un-availability of expert team the research

size is taken short so that the research can be done easily.Method Of Data Collection

Primary Data: The data was collected in regards to Supply Chain of Maruti Suzuki

and other car manufacturers and their suppliers in regards to the existing supply chain

network.

The research was carried out through survey method with the help of a Questionnaire

consisting of closed ended question due to flexibility, questionnaire method is ideally

suited for collection of primary data.

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Secondary data: The secondary research was undertaken through collection of above

mentioned secondary data which has been presented in the report as the literature

review. The literature review covers the views of different authors and writers on the

selected dissertation topic. The information relevant to the topic has only been

included in the report. The author has tried to give the reader a birds eye view about

the strategic marketing and related topics. The information obtained from these

secondary sources provided a good foundation of knowledge to carry out primary

research.

Method of Analysis

The data has been analysed using MS Excel and presented using pie-charts and bar

graphs. For the purpose of survey, I have tried to get quality data and also tried

to quantify the collected information in terms of values and percentages, as

and where applicable. The research has tried to get the most relevant

information for the analysis. In most of questions, results have been averaged

to the nearest value for the purpose of better interpretations.

Justification of the methods

The survey method is considered to be reliable because the respondents were

associated with the automobile industry car manufacturers for quite a reasonable

length of time; therefore they had knowledge of supply chain policies and operations.

They gave sufficient time for filling the questionnaire in the right way.

The advantage of using the above method is that it gives the user an option to vary the

selected sample size without much of a problem to get more information if it is

observed that the collected information was not sufficient or revealing.

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LIMITATIONS OF THE STUDY

Good results depend upon Automobile Industry willingness to give good and fair

response then we can say concretely the result is good.

Results of this study and findings are applicable only for Delhi & NCR city and

near by areas. The results may be different of this study in another place.

One of the limitation of this study is that of time limitation due to which it is not

possible to do the detailed study.

The sample size was taken only 40; it is difficult to say anything concretely.

Absence of professional researcher and team was another limitation of the study.

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EMPIRICAL STUDY

India is emerging as one of the worlds fastest growing passenger car markets and

second largest two wheeler manufacturer. According to the International Yearbook of

Industrial Statistics 2008 released by United Nations Industrial Development

Organisation (UNIDO), India ranks 12th in the list of the worlds top 15 automakers.

It is home to the largest two wheeler manufacturer and fifth largest commercial

vehicle manufacturer in the world. The industry is producing about 19 lakh passenger

vehicles, 4.5 lakh commercial vehicles, 90 lakh two wheelers and 5 lakh three

wheelers per annum.In order to make India a power to reckon with in the automotive

sector the government launched the Automotive Mission Plan (AMP) 2006-2016. As

per the AMP, it is estimated that the total turnover of the automotive industry in India

would be in the order of USD 122 billion - USD 159 billion in 2016. It is expected

that in real terms, India would continue to enjoy its eminent position of being the

largest tractor and three-wheeler manufacturers in the world and the world's second

largest two-wheeler manufacturer. By 2016, India will emerge as the world's seventh

largest car producer (as compared to the eleventh largest currently) and retain the

fourth largest position in world truck manufacturing sector. Further, by 2016, the

automotive sector would double its contribution to the country's GDP from current

levels of five per cent to 10 per cent.

The automotive industry in India has thus undergone a transition, from comprising a

few auto manufacturers, virtually no auto components makers and only low-quality

auto ancillary producers to the league of global auto manufacturers, competitive

component manufacturers and emerging ancillary producers. Several studies have

revealed thatpreviously the Indian automotive industry was not competitive enough

for the global marketdue to inferior quality, lower labour productivity and high cost

of raw materials in India (e.g., Pradosh and others, 2006). However, as in other

markets, globalization has made theautomotive market very competitive and brought

profit margins to a very low level. Component suppliers are the strength of the

emerging automobile industry. TheIndian automobile component sector is relatively

labour-intensive by global standards and is in the transition stage as a low-cost base

for exporting labour intensive products (Saripalle,2005). It is transforming itself from

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a low volume, fragmented market into an internationallycompetitive industry, having

the advantage of skill-oriented, labour-intensive components. Indian component

suppliers have displayed a growing capability to cater to the engineering and

production needs of some of the worlds biggest auto companies, and many of the

automobile majors are now outsourcing several components from India. The

manufacturingcosts in India are 25 per cent to 30 per cent lower than in its Western

counterparts. Despite its growth, the share of Indian exports in the global auto

component market is very small. The dynamics of the industry are undergoing a

tremendous restructuring and tiering. Various technological and non-technological

innovations have been brought in by the industry to capitalize on the opportunities.The India automotive sector has a presence across all vehicle segments and key

components. In terms of volume, two-wheelers dominate the sector, followed by

passengervehicles. Until the 1990s, the industry had few players and was protected

from global competition. After the Government removed the requirement for

licensing in 1993, the arrival of global players has resulted in the sector becoming

highly competitive. Automobile manufacturing units are located all over India.

However, as noted by theAutomotive Component Manufacturers Association of India

(ACMA), they are concentrated in some pockets such as Chennai and Bangalore in

the south, Pune in the west, theNational Capital Region (NCR), which includes New

Delhi and its suburban districts) in thenorth, Jamshedpur and Kolkata in the east and

Pithampur in the central region. Following global trends, most auto suppliers are

located close to the manufacturing locations ofOEMs, forming regional automotive

clusters.

Indias automobile industry has undergone significant changes in the context of

globalization, implementation of lean production and the development of

modularization have changed the relationships between automobile assemblers

(OEM) and their suppliers. Stiff competition among manufacturers has resulted in

more mergers and acquisitions. Thechallenges facing automobile manufacturers and

suppliers include improving quality,meeting cost-reduction targets and improving the

time taken for products to reach themarket (time-to-market). Thus, the organizations

today are driven more towards greaterproduct differentiation, using cutting-edgeR&D, innovative sales and marketing approaches, and increasing their focus on

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boosting efficiencies in the manufacturing and supply chain. Hence, in this age of

global outsourcing, supply chain management (SCM) plays a crucialrole.

SCM helps in demand forecasting, taking orders, giving an accurate promised

delivery date, sourcing and manufacturing the right goods, positioning inventory

properly,and pick, pack and efficient trans-shipment; most importantly, SCM makes

a world ofdifference to the manufacturers by maintaining a minimal finished goods

inventory.

SCMconstitutes:

(a) Product flow;

(b) Information flow;

(c) Finance flow.

Product flow is the movement of goods from supplier to OEMs as well as customer

returns or service requirements. Information flow covers updating the status of

deliveries as well as sharing information between suppliers and manufacturers.

Finance flowencompasses credit terms, payment schedules, and consignment and title

ownershiparrangements.

Indias automobile industry has achieved a global footprint. While most global OEMs

and component majors are well-established in India, local OEMs, such as Tata

Motors,Mahindra and Mahindra and TVS Motors, suppliers such as Bharat Forge and

Sundaram Fasteners, have a significant global presence. Apart from the large and

growing domestic market, many OEMs are looking at India as a significant globalsourcing hub for auto components as well as specific products such as small cars. The

manufacturing companies have adopted e-sourcing, which has helped them to

reorganize the purchasing process and provided support for aggregated buyingacross

business units compared to the traditional strategic sourcing process. The process

reduces time spent on negotiating, accelerates information gathering, and speeds up

communication channels among buyers and sellers. The 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. Exports are

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playing an increasingrole in Indias automobile industry with manufacturers such as

Hyundai (which has alreadymade India the world source for the i10), Renault-Nissan

(which is using India as a supply hub for small cars) and Ford, Chevrolet, Honda,

Toyota and VW, which are investing in new capacity for supplying local and overseas

markets.

Figure:Inventory and SCM model for Maruti-Suzuki and Tata Motors

Hence, the essence of the SCM solution lies in coordinating the flow of information

and goods between the customers and the network of suppliers, manufacturers and

distributors. A comparative framework of the SCM model for Maruti-Suzuki and Tata

Motorsis presented in figure above.

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Both Maruti and Tata keep a close watch on the protection of their technicalknow-

how. Although it is easy to monitor joint-venture suppliers, this is not the case with

independent suppliers. However, joint-venture suppliers are now allowed to supply

otherOEMs and export independently. Some joint-venture suppliers have been able to

rise upthe value chain and reach a position where they can supply similar products to

differentcompanies. This has allowed these suppliers to scale up their operations and

expand theirproduct lines.

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RESEARCH FINDINGS

1. Awareness Level towards Supply chain Management Fundamental

50%

30%

20%

0%

10%

20%

30%

40%

50%

Good Average Poor

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2. Options for a better Supply chain Solutions

38.00%

28.00%

34%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Maximum Moderate Minimum

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3. Willingness level to accept the Supply chain Management

High Average Low

42.00%

25%

33.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

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4. Level the cost deficiency hinders to implement Supply chain solution.

High Average Low

30%22.00%

48.00%

0%

20%

40%

60%

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5. Problems in implementation of Supply chain solution

High Average Low

40% 43.00%

17.00%

0%

20%

40%

60%

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6. Level the unavailability hinder to implement Supply chain solutions.

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7. Level of satisfaction with Supply chain solutions.

HighAverage

Low

50%

30%

20%

0%

20%

40%

60%

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8. Observation level of the Supply chain solution is advantages for the scope of

business.

56%

27.00%

17.00%

0%

10%

20%

30%

40%

50%

60%

Good Average Bad

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9. Option preferred as advantages in implement Supply chain solutions.

42.00%

20%

38.00%

Better timedelivery

Better Inventorymanagement

Better costEffectiveness

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10. Level new emerging technologies are beneficial in providing better

Supply chain solutions.

45%

35%

20%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

High Moderate Low

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11. Role SCM play in the total performance.

55%

28.00%

17.00%

0%

10%

20%

30%

40%

50%

60%

Good Average Poor

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12. Level of desire to ask for supplier for much better Supply chain solution

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13. Which option is most important for much better Supply chain solution.

53.00

27.00

20

Better InventM anagemen

TransportatiDecision

Location Dec

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14. Level of willingness to go for outsourcing Supply chain services

25%

20%

55%

0%

10%

20%

30%

40%

50%

60%

High Moderate Low

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15. Level of requirement for Automobile sector in comparison with other commodity

for a supply chain solution

55%25%

20%

High

ModerateLow

Interpretation

To sum up,

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MAJOR FINDINGS

1. People are not well aware about SCM scope because still 20% firms are having poorawareness level.

2. Still in days globalized scenario cost play a major hindrance agent in the better SCM

options by a firm.

3. The approach is now future looking but still 40% firms are conservative.

4. Better SCM providers are not available in the Delhi & NCR region.

5. Satisfaction level is quite balances with still 20% people are not well satisfied.

6. Firms feel SCM may provide advantage to them and there prospects in business.

7. Timely delivery of product is most important advantage factor.

8. Firm is technology focus and they feel that emerging technologies are beneficial to

them.

9. Role of SCM as a strategy is high.

10. Level of desire is good but still 20% are not having better mindset.

11. Inventory management is most important component felt by the firms of the SCM.

12. Willingness for the outsourcing is not quite satisfactory.

13. Automobile companies feel that there need urgency is quite higher in comparative to

other factor.

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CONCLUSION & RECOMMENDATION

Worldwide, organizations are striving to increase their productivity in order to staycompetitive in the global market. The process of supply chain has become

complicated and there are uncertainties at every stage in the chain. They are in the

form of poor demand forecasts, stock-outs or late deliveries. Now days, effective

supply chain has become an imperative in order to increase customer satisfaction,

reduce costs and handling of demand supply scenario. Information is now treated as

strategic asset and solution for driving the inefficiencies out of supply chain.

Leveraging of IT tools helps in synchronizing the activities along the supply chain to

reduce costs and increases the focus on reducing response time to fluctuations in

demand.

According to the Council of LogisticsManagement Supply Chain Management, the

process of planning, implementing andcontrolling efficient and cost effective flow of

materials, in-process inventory, finished goodsand related information from point-of-

order to point-of-consumption, for the purpose of conforming to customer

requirements asefficiently as possible.

The Indian automobile manufacturers face stiff international competition in the wake

of all major US and European car manufacturers entering the Indian market. In the

contemporary scenario, supply chain management practices can be adopted to

improve operational efficiency and profits. All this is driving the organisations

towards greater product differentiation using cutting edgeR&D, innovative sales and

marketingapproaches, and increasing focus on boostingefficiencies 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 utilised by the

world's leading automobile manufacturer, logistics and distribution companies, and

retailers toblend 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

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transhipment; most importantly, SCM makes a world of difference to the

manufacturers by maintaining a minimalfinished goods inventory.

The researcher finds that the in-bound and out-bound transportation cost and

inventory carrying cost forms the major part of the supply chain cost. So, to reduce

the total supply chain cost, the companies must focus in reducing the in-bound

transportation cost to the minimum.

Rapid surge in global sourcing of autocomponents has also become a challenge for

manufacturers and suppliers although sourcing has reduced the cost of production

substantially. Auto component manufacturersand all tiers of the supply chain haveimmense opportunities to enhance their entire supply chain process with the

successful implementation of SCM solution.

Finally, companies that are able to create values for their customers by satisfying their

needs and wants generally increase their market share and their profitability. Thus an

important part of any business, certainly for any supply chain, is making it easy for

customers to do business with, the report concluded.

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REFLECTION ON LEARNING

In the current competitive scenario Supply Chain Management assumes a significantimportance and calls for serious research attention, as companies are challenged with

finding ways to meet ever-rising customer expectations at amanageable cost. To do

so, businesses must identify which parts of their supply-chain process are not

competitive, understand which customer needs are not being met, establish

improvement goals, and rapidly implement necessaryimprovements.

SCM has been interpreted by various researchers. Based on the relatively recent

development of the supply chain literature, it is not surprising that there has been

much debate as to a specific SCM definition. Automotive Industry comprises of

automobile and autocomponent sectors and is one of the key drivers of the national

economy as it provides large-scale employment, having a strong multiplier effect.

Being one of the largest industries in India, this industry has been witnessing

impressivegrowth during the last two decades. It has been able to restructure itself,

absorb newer technology, align itself to theglobal developments and realize its potx

x ential. This has significantly increased automotive industryscontribution tooverall industrial growth in the country.

Thesupply chain as a concept and a reality is moving far beyond the confines of the

individual organization. It has become a dynamic process that involves simultaneous

acquisition and continuous re-evaluation of partners, technologies and organizational

structure. The building blocks of successful supply chains are numerous and their

interactions are complex and one of the block is knowledge management. The supply

chain has evolved from corporate necessity to enhancing competitive advantage for

savvy industry leaders.

In 1980s and early 1990s, the companies focused their supply chain initiative on

reengineering supply chain cost structures, But today the customers are coming to

expect greater customization of products and services to their individual needs. The

customers are beginning to demand the same level of quality, not just in product itself

but in the delivery of the product and the services packaged with it.

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Supply Chain design and operation is a driver of corporate strategy and shareholder

value. Companies need to expand beyond the boundaries of their own organization.

Companies need to synchronize their planning and operational activities. This is

where the knowledge management plays its part.

However, over the last few years, there has been a sea change in the approach. The

logistics sector has evolved from basic transportation to include total supply chain

management. This change has played an important role in ensuring the success of the

automobile industry in India. This end-to-end approach involves providing assistance

for purchasing, production planning, order processing and fulfilment, inventory

management, transportation, distribution and customer service etc.

With increasing competition, more and more companies have started outsourcing

supply-chain management to specialists to cut down costs. In today's competitive

business environment, automobile companies worldwide are shifting focus to

understanding and implementing extended supply chain management systems that

integrates product, process and information flows within and across organisational

boundaries.

Leading automobile companies now rigorously follow the concepts of pull against

push, and just-in-time to improve the efficiency of supply chain. Recognising this

need, some of the leading supply chain solution providers specialise in offering state-

of-the-art warehousing and inventory management services based on JIT and FIFO.

These include inventory management, C&F/distribution, hub management, order

processing, material handling and cross docking, web enabled warehouse and

inventory management software.

Besides the basic movement of raw materials, parts and finished goods, it is also

imperative for auto companies to customise services to their diverse needs. It is this

service function that differentiates one supply chain provider from another.

Time-bound delivery and safety are the two most critical aspects of managing supply

chains of automobile companies that would also reduce logistics costs considerably.

With the inclusion of functions such as OEM solutions, line feeding, spares

distribution, CBU (completely built unit) distribution, reverse logistics, customised

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fleet, warehousing and inventory management by supply chain solution providers,

automobile companies have been able to improve the overall efficiency.

This has not only led to significant reduction in working capital requirements and

maintaining an inventory of dealers but also helped in building brand image and

goodwill for the companies. It is also important to function in a hi-tech environment

so as to improve information flow, both internal and external.

Several automobilemanufacturers in India have taken proactivemeasures to control

their logistics cost and improve customer services. Several measures were

undertaken by Indian companies toimprove their supply chain.In India, some of the

automobilemanufacturing companies have adopted e-sourcing,which helped them to

reorganise the purchasing process and supported the aggregated buying across

business units with the help of Internet-based tools or B2CInternet portals. With the

use of Internet, more global suppliers have participatedcompared to the traditional

strategic sourcingprocess. The process reduces time spent onnegotiating, accelerates

information gathering and speeds up communication channels among buyers and

sellers. The companies have implemented this e-sourcing forprocurement of high-

value commodities. Hence, the essence of SCM solution lies incoordinating the flow

of information and goods between the customers and the network of suppliers,

manufacturers and distributors. Interestingly, there has been a growing trend of

realisation of supply chainoptimisation in India; there is no dearth ofSCM solutions

in the country. Currently, manufacturing andautomotive sectors have been the leaders

inimplementing SCM solutions in the country.

Indian automobile and auto components industry is on a roll and there is an immense

scope for management for enhancing the supply chain of the sector. India has become

a favourable destination for foreign companies to establish their facilities and form

alliances with domestic companies. Low cost of manufacturing and conducive

governmentsupport have been the major drivers for foreign companies investing in

India.

Indiaslarge young population, higher GDP growth,and most importantly per capita

passenger carpenetration is low at 8.5 car per thousandpopulation, which creates

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great opportunityfor industry players to offer an affordablefour-wheeler alternative

to the two-wheelercustomers.

According to PlanningCommission of India, Indian automobileindustry is expected

to grow at CAGR of 15% over the next five years. The Indian economy is now

gaining momentum in the world of free trade and liberal movements of goods and

services between countries. Therefore,efficiency in supply will be critical for Indias

automobile success.

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ANNEXURE

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QUESTIONNAIRE

Your opinion and suggestion shall be kept confidential and will be used for academicpurpose.

Name of Firm

Occupation Designation

Q1.What is your awareness Level Towards Supply chain Management Fundamental

as a Strategy to take the advantage in supply of Automobile products?

Good

Average

Poor

Q2.How many option do you have for a better Supply chain Solution?

Many

Moderate

Minimum

Q3. What is your willingness level to accept the Supply chain Management advantage

for better profitability achievement?

Highest

Higher

Average

Lower

Lowest

Q4. Up to what level the cost deficiency hinder you to implement Supply chain

solution?

Highest

Higher

Average

Lower

Lowest

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Q5. Did you face problems in implementation of Supply chain solution?

Highest

Higher

Average

Lower

Lowest

Q6. Up to what level the unavailability hinder you to implement Supply chain

solution?

Highest

Higher

Average

Lower

Lowest

Q7. Up to what level you satisfied with Supply chain solution?

Good

Average

Poor

Q8.what is the your observation level of the Supply chain solution is advantages for

the scope

of business?

Good

Average

Poor

Q9.Which option do you prefer as advantages in implement Supply chain solution?

Better time delivery

Better Inventory Management

Better Cost Effectiveness

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Q10. Up to what level new emerging technologies are beneficial in providing better

Supply chain solution?

Highest

Higher

Average

Lower

Lowest

Q11.In your business strategy what role SCM play in the total performance?

Good

Average

Poor

Q12. What is the impact of poor supply chain on the overall systems?

Highest

Higher

Average

Lower

Lowest

Q13.Which component do you feel is most important for much better Supply chain

solution?

Better Inventory management

Better location Decision

Better transportation Decision

Distribution management

E-logistics management

Warehouse management

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Q14. Level of your willingness to go for outsourcing Supply chain services?

Highest

Higher

Average

Lower

Lowest

Q. 15.What is level of requirement for Automobile sector in comparison with other

commodity for a supply chain solution?

Highest

Higher

Average

Lower

Lowest

Signature

Documents

supply chin management of automobiles