A Brief Study

of

Maruti Suzuki Supply Chain

Submitted to:

Dr. Srikanta Routroy

Instructor- Incharge
Supply Chain Management
MF F421
Submitted by:

Rohan Sanghvi 2013A4PS389P

Ayush Jain
2012B4A4739P
30 April, 2015

____________________________________________________
Birla Institute of Technology and Science, Pilani

Acknowledgement
In this report we attempt to analyze the Maruti Suzuki Supply Chain in
India.

In performing our assignment, we had to take the help and guideline of

some respected persons, who deserve our greatest gratitude. The
completion of this assignment gives us much pleasure. We would like to
show our gratitude Dr. Srikanta Routroy, Course Instructor, BITS Pilani
for giving us a good guideline for assignment throughout numerous
consultations. We would also like to expand our deepest gratitude to all
those who have directly and indirectly guided us in writing this
assignment.

Table of Contents
Topic

Page No.

Introduction

Supply Chain Configuration

Strategic Fit

Logistics Management

Strategies Undertaken for Coordination

10

SWOT Analysis

15

Recent Issues

16

Conclusions

19

Recommendations

19

References

20

Introduction

Maruti Suzuki India Limited (MSIL) was incorporated on February 24, 1981
in Gurgaon, Haryana., with the name Maruti Udyog Limited. The company
was formed as a government company, with Suzuki as a minor partner, to
make a people's car for middle class India. In October 2, 1982, the
company signed the license and joint venture agreement with Suzuki
Motor Corporation, Japan. As of May 2007, the government of India sold
its complete share to Indian financial institutions and no longer has any
stake in Maruti Udyog. (Wikipedia)

MSIL is India's largest car manufacturer, accounting for about 49 per cent
of the domestic car market. Today, it alone makes 1.5 million family cars
every year, that is one car every 12 seconds (Maruti). Emerging out
converting obstacles into opportunities it has become the epicentre of the
automobile revolution in India. The company is engaged in the business of
manufacturing, purchase and sale of motor vehicles and automobile
spare parts. MSIL have six plants, three located at Gurgaon, Haryana and
other three located at Manesar Industrial Town, Haryana.

Supply Chain Configuration

Suppliers:
Generally, Maruti Suzuki defines three categories of suppliers: fully
owned, global suppliers (such as Visteon and Delphi, as well as logistics
providers like NYK/Yusen); the second is large Indian companies that went
in for joint ventures with foreign companies (such as Sona Koyo, Krishna
Maruti, etc.); the third lot is small Indian suppliers, such as for sheet metal
or plastic components, that operate with no foreign equity or
technological collaboration. (AutomotiveLogisticsMagazine)

As on 31st March, 2014, it had a base of 326 suppliers, including 18 joint

venture companies where it has equity stake. Localisation of suppliers and
components has been an important part of Maruti Suzukis supply chain
2

development over the past decade or more, not least to avoid exposure
to currency shifts and higher logistics costs. Both the Gurgaon and
Manesar plants, have adjacent Suppliers' Parks where select suppliers
have established manufacturing units. Nearly 78% of the supplier base by
value is located within a 100 km radius of the company.
Localization has many benefits. It develops a reliable local source for all
future requirements, reduces exposure of the company to foreign
exchange movement and builds capability of local suppliers and boosts
local economy. (Maruti)

Suppliers who sell components directly to Maruti are classified as tier-1.

Maruti has 326 such suppliers. Tier-1 suppliers buy parts from five or six
smaller suppliers to build the components that go into Maruti
automobiles. These smaller suppliers, classified as tier-2, play an
important role in Marutis manufacturing eco-system since the subcomponents they manufacture are made to order for Maruti. The
automaker has about one thousand tier-2 suppliers.

Suppliers are grouped into clusters and taught pull and just-in-time
manufacturing in classrooms. Following this, projects at vendor locations
are taken up for identifying where there is maximum pain: high inventory,
low productivity and high manpower, for example. Maruti experts then
work with suppliers to help them improve further. This has not only
helped the suppliers but also the company as they are able to get
maximum out of their suppliers at best quality.
3

Sales and Service:

MSIL is largest among car manufacturers in India. The Company employs
over 13000 people (as on 31st Mar13). Its sales and service network is
the largest among car manufacturers in India with over 1300 sales outlets
(across 1097 towns and cities) and over 3060 service centers (covering
1454 towns and cities). Besides serving the Indian market, Maruti Suzuki
also exports cars to several countries in Europe, Asia, Latin America, Africa
and Oceania . (Maruti Udyog) (Maruti)

Yes, you can get lost in India, but chances are there will be a Maruti
Suzuki Service Station close at hand. Wherever you go, across the length
and breadth of this vast nation, our service network follows.
The company service 40,000 cars a day with an unmatched 'first-time
right' score. Maruti hopes to have a service centre within 25 km of every
Maruti car owner.

Service is a major revenue generator of the company. Most of the service

stations are managed on franchise basis, where Maruti Suzuki trains the
local staff. Other automobile companies have not been able to match this
benchmark set by Maruti Suzuki. It has 30 Express Service Stations on 30
National Highways across 1,436 cities in India. The Express Service
stations help many stranded vehicles on the highways by sending across
4

their repair man to the vehicle.

On any of the high density highways in India, one can expect to find a
Maruti Suzuki service workshop at a distance of 30 km or thereabouts.

Strategic Fit
India comes home in a Maruti Suzuki, and we're not surprised! It's been
our mission to provide a car for every individual, family, need, budget and
way of life

Going with this statement Maruti has made it very clear that it aims is to
provide a car in each and every Indian home and as good customer
service as possible.

They offer 14 brands and over 150 variants ranging from Alto 800 to the
latest Life Utility Vehicle, Ertiga. Their portfolio includes the Alto 800, Alto
K10, WagonR, Celerio, StingRay, Ritz, Swift, Swift DZire, SX4, Ciaz, Ertiga,
Omni, Eeco, Gypsy and Grand Vitara. (Maruti)
5

The overall car pricing range from Rs.2,83,541 to Rs.10,32,518. Maruti is

provides car for people having low income, not only one car but even
variety of cars ranging from Alto 800 and Alto K10, to WagonR, Celerio
and StingRay. Maruti has even worked hard on the looks of cars like Swift
to attract the youth. For the people who can afford luxury Maruti
provides sedans like SX4 and Ciaz and SUV like Grand Vitara. Other than
serving the civilian customers its has also been serving the Indian Defence
Force from a long time with its unbeatable and reliable car Gypsy.

Logistics Management
Inbound Logistics i.e. the receiving and warehousing of raw materials, and
their distribution to manufacturing.

Maruti Suzukis inputs primarily comprise raw materials and purchased

components. Raw material includes rubber, glass, steel, plastic,
aluminum. Tyre, windshields, and airbags are example of parts or
components. The company has implemented tierization of suppliers and
Just in Time supply logistics.

In order to improve quality and generate economies of scale, MUL has

reduced the number of vendors of components in India from 370 as of
March 31, 2000 to about 100 as in 2005. By lowering the time and cost
involved in dealing with more vendors, they have increased their supply
6

chain efficiencies In case of repair and replacements, costs of defective

components supplied are borne by the vendor.

Information systems: Vendors are linked through the Internet-based

information network, which maintains online information regarding order
status and delivery instructions. These have helped in reducing both
inventory levels and lead times required for the supply of various
components.
The Company worked hard along with its vendors on cost reduction
initiatives. The key initiative was a raw material yield improvement
program with a micro focus on each component on the lines of Suzuki
philosophy. Called One Component One Gram, this program calls for
weight reduction of one gram for every component. With this micro
focus, the raw material yield improvement savings increased by a factor
of three in 2009 as compared to 2008. The material cost to net sales
reduced from 90% in 2000-01 to 79% in 2008-09, partly due to external
factors but largely due to cost reduction efforts.
(AutomotiveLogisticsMagazine)
The company has instituted sustainable practices in its relationship with
vendors like communicating realistic volumes to avoid excess capacities
and inventories and making quick payments to facilitate healthy cash
flows and financial discipline.

To reduce supply bottle necks, transport related uncertainties, high intransit inventories (related to long distance transport) and ultimately its
total inventory levels, Maruti-Suzuki creates incentives for far away
suppliers to move near its plant. These incentives comprise: setting up a
supplier park with excellent on-site infrastructure; offering subsidized,
well located and industrially developed land; sales tax concessions; and
reliable power supply generated by Maruti-Suzuki itself.
Over 76% of the companys 326 suppliers are located within 100
kilometers of radius. This has facilitated cost reduction in supply chain.
The JIT system has evolved over the last 25 years in the company from
monthly scheduling to daily scheduling of parts order and finally in 2003
the release of schedules on hourly systems, a practice that aids in
maintaining less than two hours inventory of components within the
company.
Maruti-Suzuki gets involved in establishing suppliers, supplier JVs with
local suppliers and asks Japanese suppliers to do the same. For instance,
Maruti Suzuki formed a joint venture with 'Futaba Industrial Co., Ltd.'
(Futaba) for manufacture of Exhaust Systems Components (ESCs). Futaba
is the largest manufacturer of ESCs in Japan and has operations in many
countries. This joint venture will ensure supply of high quality ESCs to the
Company at lower cost.

Out-bound logistics are the activities required to get the finished product
to the customer, including collecting, storing, physically distributing,
material handling, delivery vehicle operation, order processing and
scheduling.

The Company has jointly developed with the Indian Railways, special Auto
Wagons, to support a high capacity, high speed and safe car
transportation system.

To support its export shipments, the Company commissioned a dedicated

Roll-on Roll-off car terminal at Mundra sea port in partnership with
MPSEZL (Mundra Port and Special Economic Zone Limited). Built with an
initial investment of Rs 1 billion, of which the Company's share is 40%, the
mega car terminal houses a state-of-the-art 'Washing and Waxing
Inspection' centre, a car stockyard and a parking area.

Land and Sea Transport Systems

Maruti Suzuki is said to possess the largest and most closely connected
auto dealer and Eye For Innovation R. Harikumar GM - Supply Chain
Division, Maruti Suzuki India aftermarket network in the country. The
company has 877 sales outlets in 619 cities, with 2,855 workshops in
1,363 cities. It also has 346 True Value Outlets (certified used car dealer
network) which cover 202 cities! Most of the company's cars are moved
9

to their destinations by trucks and trailers, with less than 10 percent

being transported by rail. Poor and snail-slow development has
hamstrung rail infrastructure, which thus offers few options to auto
manufacturers in the country.

"We are in discussions with the railways to increase transportation by

rail"

"We also expect auto wagons to be ready within a couple of years. But
even when auto wagons are ready, the poor state of railway
infrastructure - insufficient number of railway tracks and wagons - will
severely limit auto transportation by rail." (CII)
- Mr. R. Harikumar

Strategies Undertaken for

Coordination
Supply chain coordination as understood by Maruti is the key to
maintain responsiveness as well as remain efficient in terms of low
inventory and low transportation costs. Following were the measures
undertaken by Maruti in order to facilitate coordination and in turn
smooth logistics.
10

 Adopted the Japanese system: Just in Time (JIT) to achieve higher

operational efficiencies and reduce inventory carrying cost
MSIL adopted the E-Nagare system of electronic flow which has
completely transformed its supplier chain.
Localized the manufacturing of components, which reduced the
lead time and transportation barriers to a great extent
Fifty four of the top eighty component suppliers of MSIL India
compete against each other in what has been called 'Quality Circle
Competition'
Maruti adopted the 'Maruti Production System' based on lean
manufacturing program, wherein the vendors are called for
classroom training and several waste elimination methods are
identified and executed jointly
Another important innovation was implemented when MSIL
convinced Suzuki in Japan and its shipping lines to dock at Indian
ports once a week instead of monthly
A milk run system was also started in 2010-11 for 30 suppliers based
in Faridabad. This initiative helped in reducing the number of trips
per day to MSIL by 30 per cent from these suppliers and
improvement in the truck fill rate by over 25 per cent

11

Just-In-Time
The main aim of JIT is to achieve higher operational efficiencies and
reduce inventory carrying cost. JIT improves the return on investment of
a business by reducing in-process inventory and its associated carrying
costs.
To achieve JIT material supplies, the company gives preference to locally
based suppliers and encourages far distance suppliers to set up base close
to Maruti Suzuki`s facilities. Over 76% of the company's 326 suppliers are
located within 100 kms of radius. have strategically located the suppliers
of bulky components such as instrument panels, fuel tanks, bumpers,
seats, etc. adjacent to the company's manufacturing facilities in the
Suppliers' Park.
The JIT system has evolved over the last 25 years in the company from
monthly scheduling to daily scheduling of parts orders and finally, in
2003, to E-Nagare system i.e. the release of schedules on hourly systems,
a practice that aids in maintaining less than two hours inventory of
components within the company.
Maruti Suzuki is governed by the manufacturing excellence principles of
reducing wastages, inconvenience and inconsistency, which are imbibed
from its parent company SMC, Japan.
The company is efficiently interfaced with the dealers through Dealer
Management System (DMS), annual dealer interactions and reviews
which help the dealers in cost savings and customer convenience.
12

Optimum levels of inventory are maintained to reduce the burden of

inventory carrying cost. Higher inventory levels are corrected whenever
required to them financially viable. This results in multiplicity of efficiency
across the value chain.

Kaizen
Maruti had adopted the Japanese management concept of Kaizen, or
continuous improvement. The Kaizen activities had resulted in the
improvement of the in-house capabilities. For example, they had
manufactured 25 multi-axis robots and 16 multi-spot welders. Group
discussions among employees in different departments are conducted on
a monthly basis in order to discuss and resolve problems relating to their
areas of operation, an activity referred as quality circle activity. Based on
the belief that individuals contribute to improvement in growth, there has
been a suggestion scheme in which they promote participation of all
employees at all levels. The average number of suggestions made per
employee has improved by approximately 35% in fiscal 2004, when
suggestion received were more than 80,000, as compared to fiscal 2002.
Some of the other improvements as a result of the Kaizen process have
been increased automation through automated material transport
system.

13

E-Nagare
Much of the credit for this uber efficiency is due to Maruti's muchdiscussed 'E-Nagare' supply chain system. E-Nagare is a Japanese word
which defines continuity and flow. It was installed at the Gurgaon plant in
2003 after several experiments with various supply chain strategies. This
is a system which has been pioneered by Maruti for Just-In-Time
inventory, uninterrupted production and quick response to market
fluctuations. It is suitable for vendors who operate in the vicinity of the
plant and within a three-hour transit time from the factory. The stock
position is generated daily and sent to the vendor at a particular time
through this system. The vendor then plans the schedule accordingly for
the next day. Every corridor of Maruti's plants is lined with movable
storage cabins known as 'bins' which store auto components. As the stock
in the bins is used up, information is sent to the vendor through E-Nagare
and it is replenished.
"The system is so designed that it picks up the nearest supply time for
each block of production requirement. And as per our inventory norms, no
safety stocks are maintained. Only advance material for about two hours
production will be available at best."
" On the basis of the information that is supplied, the vendor ensures
supplies at pre-defined timings and frequencies. We are visibly proud of
the E-Nagare system "which enables us to roll off 4,600 cars a day. This
system is now our lifeline!" (CII)

- Mr. R. Harikumar
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SWOT Analysis
Strengths

Weaknesses

Largest Network

Government intervention

Strong Brand Value

Management and labour unions

Loyal Customer Base

bad relations

True-value Entity
Opportunities

Brand positioning
Threats

Export capacity

Other new foreign players

Entry into the higher segment

China giving a good competition

Economic growth of the country

Changing consumer preferences

Maruti Suzuki supply chain being the largest in India holds a major share
in the Indian passenger automobile market. Due to its large share it
enjoys a great influence over vendors and third party logistics providers.
This helps them tackle day to day logistical issues efficiently. Finding
success in the export market there still exists scope for expansion. Even
after introducing Kizashi, it hasn't been able to woo the customer base for
higher segment cars. Government's interventions and constrained
relation with its labour unions have proved to be major hindrances in
Maruti's growth. Fast growing competition from the foreign players has
threatened Maruti's presence in the market.
15

Recent Issues
Manesar violence
On 18 July 2012, Maruti's Manesar plant was hit by violence as workers at
one of its auto factories attacked supervisors and started a fire that killed
a company official and injured 100 managers, including two Japanese
expatriates. The violent mob also injured nine policemen. The company's
General Manager of Human Resources had both arms and legs broken by
his attackers, unable to leave the building that was set ablaze, and was
charred to death. The incident is the worst-ever for Suzuki since the
company began operations in India in 1983.
This disturbed the company's supply chain as the facility had to be shut
down. As Maruti has evolved fighting obstacles it managed to overcome
this and has grown a lot since. (Wikipedia)

Maruti helps vendors sort out HR issues

New Delhi, May 14, 2010
The countrys largest car maker Maruti Suzuki India Ltd, which had to
put up with at least seven supply disruptions last year, has started
working with vendors to help them improve their human resource (HR)
policies and prevent labour strife.

16

Car sales in India rose 25% to 1,526,787 units in 2009. This rapid and
sudden growth resulted in vendors having to ramp up quickly in order to
meet demand as companies struggled to meet back orders. Most of the
human resources problems cropping up were due to a lack of
communication, according to the company. As a first step, Maruti asked
all chief executives to communicate with workers directly and regularly.
(livemint)
The other major issues had been the recall of vehicles for replacement of
part which had manufacturing and designing defects. Those are as
follows:

Maruti Suzuki recalled 103,311 vehicles (Ertiga, Swift and DZire)

New Delhi, April 11, 2014
Maruti Suzuki India Limited today announced that it will proactively
replace fuel filler neck of 103,311 vehicles (42,481 units of DZire, 47,237
units of Swift and 13,593 units of Ertiga) manufactured between 12th
November 2013 and 4th February 2014. (Maruti)

Maruti Suzuki recalled 69,555 vehicles (Old Dzire, Old Swift and Ritz)
September 30, 2014
Maruti Suzuki India Limited today announced that it will proactively
inspect and repair the wiring harness fitment of 69,555 diesel vehicles
(55,938 units of Old Dzire, 12,486 units of Old Swift and 1,131 units of
17

Ritz) manufactured between 8th March 2010 and 11th August 2013.
(Maruti)

Maruti Suzuki recalled 33,098 vehicles (Alto 800 and Alto K-10)
March 10, 2015
Maruti Suzuki India Limited today announced that it will proactively
inspect and replace the `right hand door latch assembly of 33,098
vehicles (comprising 19,780 units of Alto 800 and 13,318 units of Alto
K10) manufactured between 8th December 2014 and 18th February
2015. (Maruti)

Method for the recall is as follows:

Users of Maruti Suzuki can either check the Companys website to
ascertain if their particular vehicle is among the above mentioned
vehicles. The customer just have to fill in the chassis number on the
computer screen. The chassis number is embossed on the vehicle ID plate
and is also in the vehicle invoice / registration documents.
Customers may also contact the nearest Maruti Suzuki dealer workshop
to ascertain if their vehicle is among the above vehicles.
The recall is inconvenient for the customers but Maruti has tried to make
it as comfortable as possible. After checking the if their vehicle is among
the above vehicles the customers just have to drop their car to the
nearest Maruti service centre.
18

Conclusions
Maruti has been very responsive to the changing market. The continuous
innovations in supply chain and logistics management have contribute
positively to the company and the partners.
As there are many foreign players in the market Maruti has to consistently
introduce innovations in order to further improve operational efficiency,
quality and cost effectiveness. This is necessary in order to maintain its
position in the market. The bench mark that Maruti has achieved in 3
decades is not an easy one but to stay there it cannot stop working hard,
as it has emerged so can the other players.

Recommendations
The study has been restricted to the overview of the Maruti Suzuki's
Supply Chain and it is recommended that further study may include the
information on the different facilities such as number of employees
working on floor per day, the inventory level management, utilization of
warehouses, manufacturing load distribution, transportation schedules,
etc.

19

References
I.

AutomotiveLogisticsMagazine.

II.

CII.

III.

livemint.

IV.

Maruti.

V.

Maruti Udyog.

VI.

Wikipedia.

20