A Project report on

Seeding strategy for new commercial passenger vehicle-Tata Venture in Call centers/ ITs/BPOs
By

Astha Chawla (MM 10-12405)

Under the guidance of Mr. Parag Gohel (Area Manager,CVBU, Tata Motors Ltd.) & Mr. Pratik Mehta (Territory Sales Manager,, Tata Motors Ltd.) Submitted to Balaji Institute of Modern Management, Pune In partial fulfillment of the requirement for the award of Post graduate diploma in management (2010-2012)

PREFACE
The MBA programme is well structured and integrated course of business studies. In every professional course training is an important factor. The main objective of practical training is to develop skill in student by supplement to the theoretical study of business management in general. Industrial training helps to gain real life knowledge about the industrial environment and business practices. Professors give us theoretical knowledge of various subjects in the college but we practically exposed of such subjects when we get the training in the organisation. During the whole training we got a lot of experience and came to know about the management practices in real that how it differs from those of theoretical knowledge and the practically in the real life. In todays globalize world, where cutthroat competition is prevailing in the market, theoretical knowledge is not sufficient. Beside this one need to have practical knowledge, which would help an individual in carrier activities and it is true that, Experience is the Best Teacher

ACKNOWLEDGEMENT
With immense pleasure, I would like to present the project report for Tata Motors Limited (TML). It has been an enriching experience for me to undergo my summer training at TML which would not have possible without the goodwill and support of the people around. As students of Balaji Institute of Modern Management, Pune, I would like to express my sincere thanks to all those who helped me during my practical training programme. I sincerely feel that the credit of this project cannot narrow down to one individual. This work is an integrated effort of all those concerned, through whose cooperation and guidance I could achieve its completion. I greatly indebted to express profound gratitude to Mr. Milind Jadhav (Regional Sales Manager-West, SCV-Passenger, TML), Mr. Parag Gohel, (Area Manager, Pune, TML), and Mr. Pratik Mehta (Territory Sales Manager, , TML) for giving me the opportunity and reposing confidence in my abilities by giving me the freedom to work on the project independently at TML and helped me at every step whenever needed.. At last but not the least my grateful thanks to Prof, Col A. Balasubramanian, President, Sri Balaji Society and Directress Dr. Seema Singh Zokarkar, BIMM, who allowed me to do my project at TML. and to all our faculty members for the proper guidance and assistance extended by them. I also grateful to my parents and friends to encourage & giving me moral support. However, I accept the sole responsibility for any possible error of omission and would be extremely grateful to the readers of this project report if they bring such mistakes to my notices.

DECLARATION

I hereby declare that the project work entitled Seeding strategy for new commercial passenger vehicle- Tata Venture in Call Centres/ ITs/ BPO submitted to Balaji Institute of Modern Management, is a record of an original work done by me under the guidance of Mr. Parag Gohel (Area Manager, Pune, Tata Motors Ltd.) & Mr. Pratik Mehta (Territory Sales Manager, , TML), and this project work has not performed the basis for the award of any other degree or diploma/associate ship/fellowship and similar projects if any.

Executive Summary
The automobile sector is one of the sectors that are experiencing an exponential growth. With intense competition the profit margins are under pressure. This has lead to strategic changes in functioning of automobile companies. TML has been in a pioneer in this field by formulating & efficiently managing highly efficient strategies. The project that we got has the objective to formulate strategy for Tata venture and analyse their ability to provide transport solution to the companies for their staff transportation. The basic methodology of our project includes collecting data of Transport Vendors from Call centres/ITs/BPOs through internet, telecalling and personal visits, arranging this data in specific format and analysing on various aspects like location, employee strength, transport choices, outsourcing. Call centres/ITs/BPOs are generally medium and large scale companies and considered as strongest link in the transport decision making. Our project provides detailed view of these companies and also helps to identify their vendors which can be area of concern for TML in its seeding process. Through this project we also provided the input for Tata Business Enterprise Model (TBEM) audit and Dealer Retail Closing date (DRCD) meeting, which can help TML in capturing Data of Transport vendors and analyse it over long run, which can be critical tool for TML in fine tuning of Tata Venture. Also arranged a Promotional meet for Travel admins of various companies so that they may get detailed information about the product , first hand
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from the company people. The meet was organised in Taj Vivanta in Pune on 9th July 2011 . Company and product presentation, open discussion followed by dinner. The positive responses received made the event a great success.

CONTENT
Company profile
Introduction to Tata Motors Ltd. (TML) A Brief History of TML Background Of CVBU
PAGE NO

7 9 11

MSILs Pantnagar Plant Organizational Structure Performance and Company Milestones TML Financials TML Culture Divisions in MSIL

13 14 15 18 21 22 23 24 25 28 28 28 29 41 52 53

The Commercial Vehicle Business Unit in TML

TMLs Commercial vehicle business distribution Brief of the Commercial passenger vehicle Division New product Strategies

Project
Title Objective Importance Methodology Results & Findings

Conclusion Biblography

COMPANY PROFILE
INTRODUCTION TO TML

My aim for Tata Motors is that we should have the capability of developing good
automobiles in terms of reliability, finish and technology, so we have to keep on developing components ourselves, which is very time consuming and is not our core business. We want to bring in world-class products and have been working hard to improve the build quality and reliability of our vehicles- Tata Group chief Ratan Tata, in an interview to

market research firm JD Power's report on Indian automobile industry

The Automotive industry in India is one of the largest in the world and one of the fastest growing globally. India manufactures over 17.5 million vehicles (including 2 wheeled and 4 wheeled) and exports about 2.33 million every year. It is the world's second largest manufacturer of motorcycles, with annual sales exceeding 8.5 million in 2009. India's passenger car and commercial vehicle manufacturing industry is the seventh largest in the world, with an annual production of more than 3.7 million units in 2010. According to recent reports, India is set to overtake Brazil to become the sixth largest passenger vehicle producer in the world, growing 16-18 per cent to sell around three million units in the course of 2011-12. In 2009, India emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand. As of 2010, India is home to 40 million passenger vehicles and more than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second fastest growing automobile market in the world. According to the Society of Indian Automobile Manufacturers, annual car sales are projected to increase up to 5 million vehicles by 2015 and more than 9 million by 2020. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads. A chunk of India's car manufacturing industry is based in and around Chennai, also known as the "Detroit of India" with the India operations of Ford, Hyundai, Renault and Nissan headquartered in the city and BMW having an assembly plant on the outskirts. Chennai accounts for 60 per cent of the country's automotive exports. Gurgaon and Manesar in Haryana are hubs where all of the Maruti Suzuki in India are manufactured. The Chakan corridor near Pune, Maharashtra is another vehicular production hub with companies like General Motors, Volkswagen, Skoda ,Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Fiat and Force Motors having assembly plants in the

area. Ahmedabad with the Tata Nano plant, Halol again with General Motors, Aurangabad with Audi, Skoda and Volkswagen, Kolkatta with Hindustan Motors, Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country.

A BRIEF HISTORY OF

TML

Tata Motors is a part of the Tata Group manages its share-holding through Tata Sons. The company was established in 1950 as a locomotive manufacturing unit and later expanded its operations to commercial vehicle sector in 1954 after forming a joint venture with Daimler-Benz AG of Germany. Despite the success of its commercial vehicles, Tata realized his company had to diversify and he began to look at other products. Based on consumer demand, he decided that building a small car would be the most practical new venture. So in 1998 it launched Tata Indica, India's first fully
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indigenous passenger car. Designed to be inexpensive and simple to build and maintain, the Indica became a hit in the Indian market. It was also exported to Europe, especially the UK and Italy. The oldest Indian state transport under taking is "North Bengal State Transport Corporation" founded by the Raj Durbar regime in the year 1945, the 1 April. With three buses and three trucks .Is still vibrant and running providing service to hundreds of commuters of North Bengal region of West Bengal. link nbstc.co.

INNOVATION ON WHEELS

Technology and imagination come together at Tata Motors to create vehicles that drive the dream for millions of Indians Tata Motors is widely considered a pioneer in the Indian automobile sector. And rightly so. The company has, over the last decade, consistently created vehicles that not just fulfil the aspirations of millions of Indians, but done so while making quality and cost the two touchstones of its research and development activities. And what has led the company to achieving remarkable results within these parameters is its spirit of constant innovation. The story of Tata Motors is dotted with examples of innovative ideas, ideas that came to fruition thanks to the determined efforts of the companys research and development team. Established in 1966, the Engineering Research Centre of Tata Motors has played a crucial role in the creation and development of the companys products. Today, with over 2,000 engineers and scientists and an ever-growing focus on the next big idea, Tata Motors has spread its R&D efforts to Pune, Jamshedpur, Lucknow, South Korea, Spain and the UK where it has centres. It is the teams at these research centres that

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have earned for the company, and the Indian auto industry, a number of firsts: Indias first indigenously manufactured car the Indica, its first sports utility vehicle the Sumo, Indias first indigenously manufactured mini-truck the Ace, the worlds cheapest car the Nano, and its latest effort the Indica EV an electric version of the best-selling small car for European markets. The ones that best exemplify the companys innovative streak are the Indica, the Ace and the Nano. Three vehicles that broke the mould and are landmarks in the Indian auto industry. Three vehicles that, through quality, utility and price, allow customers to achieve their varied aspirations. More car per car: Indica Indias first indigenously designed car that was what the Indica set out to be back in 1998, the year of its launch. Now, a decade since it first hit Indian roads, the Indica embodies much more a vehicle that is not only affordable, but also one that can compete with international players in terms of mileage, drive quality, safety features and (notably) status. Over the years, the company has built on the Indica platform with the Indica V2, Indica Xeta and the latest Indica Vista (launched in 2008). Each model sports enhancements in style, performance and features providing customers with an increasingly world-class driving experience. The latest innovation is the Indica EV, the electric version of the best seller and Tata Motors answer to the global energy crisis. Developed by Tata Motors European Technical Centre, a subsidiary of Tata Motors, the EV is expected to hit European roads this year. The car will carry four people and have adequate luggage space, with a predicted range of up to

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200km and acceleration of 0-60kmph in under 10 seconds. The big small package: Ace Indias first indigenously developed mini-truck the Ace took the countrys light commercial vehicle industry by storm when it was launched in May 2005. The small carrier revolutionised the transportation industry with its high-performance, low-maintenance design. Up until that point, Indias commercial transport offerings comprised three-wheelers and trucks both segments that left a lot to be desired when it came to addressing the small trader and farmer, and their business needs. Also, with the countrys improved road connectivity and infrastructure, a vehicle that combined strength and utility with optimal loading capacity was the need of the hour. So when the Tata Motors team set to work on the Ace, much-needed safety and comfort features were built into the design along with high-ground clearance (a must for Indian roads), a fuel-efficient engine, and high loading capacity. The sturdy four-wheeler offered the small trader/farmer a cost-efficient, fuel-efficient transport solution that served his business needs and did so comfortably. Expectedly, the Ace was a runaway success. Tata Motors rolled out its 100,000th Ace within just 20 months of its launch. In September, the company added on to the Ace platform with the unveiling of the Tata Super Ace and Tata Ace EX. The variants have improved fuel efficiency, loading capacities and style, and the capability of a higher number of trips in a day thus providing better earnings and faster growth.

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The peoples car: Nano One thing we were clear about: this was never going to be a half-car, said Chairman Ratan Tata speaking about the Nano. The idea was to create a low-cost car without compromising on safety or comfort or quality. And to make that idea a reality is where Tata Motors needed to innovate. Innovation in technology, materials and design came together over six years to create a low-emission, low-cost car that offered more internal space that its closest competitor in the small car market and international safety features. Unveiled in January 2008, the Nano was the cynosure of not just the global media but the global auto industry. Everyone wanted a glimpse of the Rs 1lakh car. Amid speculation about materials being used, safety features, emissions and fittings, the Nano exceeded expectations on all parameters. It was a car complete in every way, just with a substantially smaller price tag. It was this unveiling that prompted the whopping 2.03 lakh fully paid bookings following its commercial launch in March 2009. Available in three variants the Nano Standard, Nano CX and Nano LX each offers customers add-ons such as air-conditioning, power windows, central locking and other aesthetic and comfort features. The next big idea While the company spends considerable effort in identifying the next avenue for growth in the automotive space and making it a reality, it has also made sure that its business model moves with the times. The assembly and distribution model of the Nano is one such example. The

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company employed a modular design to not just keep costs down but allow the car to be tailored to the needs of customers. This way the car can be shipped in kits to assembly sites, put together according to customer specifications (with quality assurance by Tata Motors' staff) and sold. On the product side of things, the company is now looking at green products. R&D activities have already begun on low-carbon vehicle technologies including pure electric vehicles (the Indica EV expected later this year), hybrid drive trains and advanced fuels. The innovation challenge is one that the Tata Motors team has taken head on. The company has, over the years, set near insurmountable challenges for itself and has achieved them with enviable success. What is the next innovative leap Tata Motors has planned? We can only wait and watch.

TRANSFER OF TECHNOLOGY
Every minute two vehicles roll out of the Maruti Plant. It is therefore imperative that the transfer of contemporary technology from our partner Suzuki is a smooth process. Great stress is laid on training and motivating the people who man and maintain the equipment, since the best equipment alone cannot guarantee high quality and productivity. From the beginning it was a conscious decision to send people to Suzuki Motor Corporation for onthe-job training for line technicians, supervisors and engineers. This helps them to imbibe the culture in a way that merely transferring technology through documents can never replicate.At present 20% of our workforce have been trained under this program.

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BACKGROUND OF SMC
Suzuki was founded in 1909 as Suzuki Loom Manufacturing Company. It started manufacturing motorcycles in 1952 and has since become a world leader in the manufacture of two wheelers. SUZUKI started producing cars in 1955. One year later the companys name was changed to SUZUKI MOTOR COMPANY LIMITED. Today it is Japans largest manufacturer of small, fuel-efficient cars. At present the companys name is SUZUKI MOTOR CORPORATION.

Company Vision
To become an internationally competitive company in terms of production volume, quality, cost and profits. We must not only maintain leadership in India but should aspire to be amongst the global players. The culture, thinking and actions have all to be consistent with the vision. The vision is a realistic, credible and attractive future that the company visualizes for its organization and all its employees. It is an articulation of a destination towards which the organization is moving. A future that is substantially better than the current state. The vision helps the company in moving consciously, continuously and in a focused manner towards the desired state. If the vision is the destination, the mission is the means by which the company is moving towards it. If the vision is a goal, the mission is the tool for achieving the vision. A mission defines what the organization has been established to accomplish. It determines the purpose of its operations.

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Maruti Code Of Conduct

A code has been developed to assist all the employees in their dealings with those with whom the company does business i.e., customers, dealers, and suppliers and with each other. The code is not a substitute for the judgment and discretion of individual employee in day-to-day work. Neither is it a replacement for company policies, which will continue to apply. The code contains advice for making decisions in situations where there are no precedents, so that a common set of norms of business behaviour can grow throughout the company.

Following are the important points:

Integrity Trust Image Consumer Orientation Ethics Positive Attitude

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MSILS GURGAON PLANT

The manufacturing plant, located about 25-km south of New Delhi in Gurgaon, has an installed capacity of 5,00,000 units per annum. The total area of the plant is 12,02,256 m2 with a total covered area of 2,95,293 m2. The average daily production is around 2500 vehicles a day. The whole production facility has been divided into 3 plants: 1. Plant I (M800, Omni, Esteem, Gypsy, Versa) 2. Plant II ( Alto, Zen ESTILO) 3. Plant III ( Wagon R MINOR/LPG MODEL, Baleno) The other activities include research & development and utilities (captive power plant, water and effluent treatment plant, compressor house, boiler house, air washers and incinerator facilities)

17

An aerial view of the Gurgaon Facility

ORGANIZATIONAL STRUCTURE:The following chart represents the organizational structure in MSIL:

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Managing Director

MEO/EO

Divisional Manager (DVM) Deputy Divisional Manager (DDVM) Departmental Manager (DPM) Manager

Dy. Manager

Asst. Manager

Executive

Supervisor

PERFORMANCE AND COMPANY MILESTONES

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MSIL is the largest manufacturer of cars in India with a production of over 10,00,000 vehicles per year. The company is proposing a major expansion program to augment the capacity to over 20 lakh vehicles per year. The company has expanded its wings in the recent past. Here is some data showing its Performance.

MILESTONES REACHED BY MSIL

1981 1982 1983 1984 1985 1986 1987

Incorporation of MUL Agreements signed with SMC First Maruti Car rolled out. 40,000 vehicles rolled out Launch of new model car and gypsy 1,00,000 vehicles rolled out First lot of 500 cars shipped to Hungary Achieved 60% indigenisation &1,00,000th Maruti 800 Produced Launch of 1000 cc car, 5,00,000th vehicle rolled out

1993 1994 1995

5,00,000th Maruti 800 produced & Maruti Zen launched 10,00,000th vehicle rolled out, Plant 2 starts operation. Esteem automatic launched, MSIL exported 100,000 Vehicles 10,00,000th Maruti 800 produced

1996

New models of Zen (Vx, Ax, D), Omni (Omni & Omni-E) launched

1999

25,00,000th vehicle produced in March 99 & other versions of Zen were launched. Baleno launched in Nov99.

2000 2000 2000

MSIL sold more than 4 lakhs vehicles during year 1999-2000 Wagon R and Baleno-Altura launched in Sep00. Maruti Alto launched in 2000
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2003 2004 2005 2006 2007

Grand Vitara launched Versa launched Maruti swift Zen estilo launched. Maruti Suzuki SX4 launched in May 2007.

MARUTI HAS INTRODUCED THE FOLLOWING MODELS IN THE LAST 22 YEARS

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1. Maruti 800(796cc, hatchback car) 2. Omni (796cc, MUV) 3. Gypsy (970cc, 4wd off road drive) 4. Maruti 800(new model-796cc, hatchback ca 5. Maruti 1000(970cc, three box car) 6. Zen (993cc, hatchback car) 7. Esteem 1.3L (1298cc, 3 box car) 8. Esteem 1.3L (1298cc, 3ar) VX 9. Esteem 1.3L (129 box car) AX 10. Zen automati3cc, hatchback car) 11. Gypsy 1298cc, 4 WD off road vehicle) 12. Omni (E) (796cc, MUV, 8 seater) 13. Gypsy (E)(796cc, 4 WD, off road vehicle) 14. New Maruti 800(796cc, hatchback car) (std. & DX) 15. The 1998 Esteem (1298cc, 3 box car) (LX, VX, AX) 16. New (Omni & Omni (E) (796cc, MUV)

Dec'83 Nov.'84 Dec'85 Jun'86 Oct'90 Oct'93 Nov'94 Nov'95 Jun'96 Oct'96 Nov'96 Dec'96 Sep'97 Sep'97 Oct'97 Feb'98

17. Zen VX & Zen AT Jul'98 18. Zen-D (1527cc diesel, hatchback car) Aug'98 19. Maruti 800 EX (796cc, hatchback car) Jan'99 20. Zen LX (993cc, hatchback car ) Jan'99 21. Zen classic (993cc, hatchback car) Oct'99 22. Zen Vxi (993cc, hatchback car with power steering) Oct'99 23. Omni XL (796cc, MUV, High roof) Oct'99 24. Baleno (1590cc, 3 box car) Nov'99 25. Wagon R MAV-1061cc, Multi activity vehicle (LX, VX, AX) Dec'99 26. Wagon R MAV-1061cc, Multi activity vehicle (Lxi, Vxi) Sep'00 27. Baleno Altura (1590cc, 3 Box car) Sep'00 28. Alto LX (796cc, hatchback car) Sep'01 29. Alto Vxi (1061cc, hatchback car) Sep'00 30. Versa Mar'01 31. Grand Vitara (4wd SUV) Apr'03 32. Swift May05 33. WagonR MINOR/LPG MODEL July06 34. ZEN ESTILO DEC06 35. Swift (diesel) Jan07 36.Maruti Suzuki SX4 May 2007

MSIL FINANCIALS:-

AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31st March, 2010

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Rs In Lacs

Particulars

Consolidated Year Ended

31st March 2010 Audited 31st March 2009 Audited 2, 330,760 287 ,770 2,930 ,281 28 ,871 53 ,099 3,012 ,251 (19, 408) 2,198 ,832 91 ,242 56 ,053 84 ,138 281 ,205 2,692 ,062 320 ,189 50 ,240 7 ,966 378 ,395 3 ,742 5,450 175,561 (426) 60,890 115,097 002,123 240,681 2, 71,649 48,128 73,231 540,333 28,101 1, 117,220 50,997 2, 10,429 055,794 274,966 2,

1 a.

Income from Operations Gross Sales Less: Excise Duty on Sales Net Sales 3,218 ,051

b c

Income from Services (net) Other Operating Income Total Income from Operations (a+b+c)

Expenditure : [a] Decrease/(Increase) in stock in trade and work in progress [b] Consumption of Raw Materials and Components [c] Purchase of Traded Goods [d] Employees Cost [e] Depreciation [f] Other Expenditure [g.]Total Expenditure (a+b+c+d+e+f)

3 4

Profit from Operations before Other Income, Interest and Exceptional Items (1-2) (a) Other Income (b) Share of Profit in respect of Investment in Associates

5 6

Profit before Interest and Exceptional Items (3+4) Interest

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7 8 9 10 11 12 13

Profit after Interest but before Exceptional Items (5-6) Exceptional Items Net Profit before Tax from Ordinary Activities (78) Tax Expense Net Profit from Ordinary Activities after Tax for the period (9-10) Extraordinary Item Net Profit for the Period (11-12)

374 ,653 374 ,653 112 ,189 262 ,464 262 ,464 122,745 122,745 47,366 170,111 170,111

The Company registered Net Sales of Rs. 289.5 billion, growing at 42.2% over the year 2009-10. Net Profit after Tax stood at Rs. 24.97 billion, a growth of 105% over FY'09. Since the previous year was exceptional on account of the global economic crisis, it may be relevant to look at the financial performance over two years. In the two year period ending 31 March 2010, the Net Sales grew 62%, implying a CAGR of 27% and the Net Profit grew 44% implying a CAGR of 20%. Capex for the year stood at Rs. 14.7 billion.

EVENTFUL

YEAR

In 2009-10, Maruti Suzuki could make and sell over a million vehicles. This was a first for any automobile company in India. After the slowdown of 2008-09, demand recovered faster than anticipated. The Company, its suppliers and business associates worked on a

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stretch to meet demand and keep the promise of a million vehicles. During the year, the Company expanded its network as planned, launched a new model, refreshed two existing models, achieved highest ever exports overall and in Europe, took the first steps in setting up a world class R&D centre, worked on cost down initiatives, emphasized sustainability and people development and strengthened its focus on customer satisfaction and new markets. While the Company duly celebrated the one million landmark, the focus was quickly back to the challenge at hand. The challenge is to provide the Indian customer best value over the period of vehicle ownership. Better than she receives today. The challenge is also to offer products that are more stylish, more comfortable and endowed with more features than today. Deliver technology that provides more driving pleasure and better fuel efficiency. Supported by a network that is proximate, more caring and more efficient than now. A market leader does not have the benefit of known paths, clearly laid out ahead. The challenge for us is to better Maruti Suzuki, many times over.

MARUTI CULTURE
To work towards sustaining the Distinctive Organization Culture which have been build over the years based on the Path to Success, i.e. Marutis culture. All the actions and behavioral patterns of all the members in the organization should be guided by its organizational culture

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Maruti Suzuki India Limited, a socially conscious and a responsible corporate citizen, is the market leader in the domestic car market and does India proud by exporting cars to over 100 countries around the world, including most advanced Western European markets. MSIL has revolutionized the Indian Automobile and Component Industry and has set standards in quality of products and service.

PRODUCT RANGE

OF

MSIL:-

DIVISION IN MSIL
The Various divisions in Maruti Suzuki India Limited are
Marketing & Sales Spares

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Engineering Quality Assurance Services Supply chain Production Production Engineering Materials Information Services Finance Personnel and Administration

THE SUPPLY CHAIN DIVISION IN MARUTI

THE SUPPLY CHAIN DIVISION IN MARUTI
The Battle ground for the next decade would be SUPPLY CHAIN Vs SUPPLY CHAIN Warren Haussman, Mgt Science Department, Stanford University.

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Marutis Vendor distribution:

It was Marutis entry into the automobile industry of India that setup a trend of joint ventures for auto components. It was one of the first companies to setup 12 joint venturer for sourcing some of the most critical components. Being the largest player in the Indian automobile market would mean that the Supply chain division at Maruti holds that bit more importance. One of the distinct advantages that Maruti has over its competitors is that upto 75 % of its vendors are from the Northern region, while about 15 % are from the south and upto 10 % from the west.

Schedules of delivery:
In case of vendors located in and around the Maruti complex, It has a regular 2 hourly delivery schedule. For the other items which come from NOIDA, Delhi and other nearby areas the schedules are given every 6 hours or every 12 hours. In case of items coming from down south, the schedules are sent on a daily basis with a 4 day lead time. The vendor companies have tie ups with 3PL (Third Party Logistics provider) who sources

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the components and stores them in his warehouse. This is then sent to MSIL as per MSILs requirements through a secondary transportation.

A BRIEF OF THE SC DIVISION: Supply Chain 1 Division:

Material 1 Department: Deals with the procurement of Engine & Air conditioning parts. Material 2 Department: Deals with the procurement of Electrical & Transmission Parts. Material 3 Department: Deals with the procurement of Plastics & Rubber Parts. Material 4 Department: Deals with the procurement of suspension, steering and brakes. Material 5 Department: Deals with the procurement of Body & Sheet Metal parts. Material 6 Department: Deals with the procurement of Interior Accessories & Glass.

Supply Chain 2 Division:

Shipping and Transport Department: Deals in Custom Clearance and inland transportation of CKD and import orders as well as insurance. Imports Department: Deals in ordering of imports, liaison between SMC &Government Agencies and Steel procurement. Consumables Department: Deals in procurement of consumable and ARC for general items. The supply chain division is responsible for sending the schedules of delivery to the vendors through the extranet through the e nagare system. Though Maruti has an in house developed IT system, it is however still not yet on a completely lean manufacturing system. Even today upto 20 % of the items coming onto the line need the approval of the PI (Parts Inspection) division. The main functions of the supply chain division can be said to get materials at the: Right quantity at the
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 Right time at the Right quality and at the Right Price. Apart from procuring items the other functions that the supply chain division at MSIL performs include. Vendor Development. Financial Conditions Operational efficiencies. Procurement Efficiencies.

Tierisation:The SC division has a collaborative approach and a problem solving attitude. It works with the vendors in identifying items where the vendor experiences difficulties in cutting costs. It negotiates for prices and pushes for the implementations of best practices at the vendor ends. It looks into areas where prices may be reduced by streamlining the vendor processes & improving their operational efficiencies. Some of the strategies that MSIL use to implement supplier cost reductions are:

Supplier Cost Reduction Strategies :

VALUE ENGINEERING: MSIL engages in value engineering of components with their suppliers which involves brainstorming sessions on ways to cut costs of individual components. The benefits of the cost reductions are generally shared with the vendor, sometimes in a staggerred fashion with MSIL appropriating a larger share. BULK PURCHSE OF RAW MATERIAL: This is accomplished with MSIL aggregating the raw material requirements of its suppliers and placing a bulk order with the raw material vendor. MSIL has been using this strategy where instead of its individual vendors purchasing aluminium in the open market, MSIL sources the entire aluminum requirements from NALCO and INDAL. A similar project is currently underway to purchase steel in bulk and source it to the different vendors through MSIL by building a steel center. SHARING INFORMATION WITH SUPPLIERS: The production plan is prepared normally from the expected sales. Since MSIL has the maximum variants even the best of the sales forecast for each model would give errors, it is therefore necessary that the whole chain be flexible enough to accommodate the change in their production plan. Therefore the

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difference in the actual product mix and the forecast product mix has to be communicated as early as possible to the suppliers. Apart from this Maruti has been carrying out a vendor consolidation and tierisation exercise wherein it has brought down its huge vendor base of approximately 400 vendors at the tier 1 to a supplier base of approximately 220 suppliers in the tier 1 category. It has gone in for the tierisation of suppliers where the smaller sub assembly manufacturer supplies the same to a larger sub assembly manufacturer. This would thereby lead to lesser traffic requirement at MSILs end. The manufacturer assembles all the child parts and supplies the larger sub assemblies to Maruti.

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PROJECT

PROJECT TITLE:
Understand and Analyse Tier-2 suppliers of Maruti Suzuki India Limited.

OBJECTIVES:-

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Objective is to understand who are Tier-2 suppliers of MSIL and analyse them on the various aspects like quality systems, financial robustness, capacity and delivery management etc. to sustain the kind of growth Indian automotive industry is witnessing in current market scenario.

IMPORTANCE:Indian economy is one of the fastest growing economies in the world. Automobile sector of India is growing at the rate of approx 30%. per year. In this rapidly growing market Maruti is experiencing leadership position over last few decades and captured more than 50% share. To serve this rapidly increasing market, to remain competitive and to sustain its leadership position, MSIL is expanding its capacities and also training its supplier(Tier-1) to grow with the speed of MSIL. But the problem lies with suppliers of MSIL. ut . Tier-2 Suppliers are generally small suppliers and MSIL dont have data of who are its Tier-2 suppliers. Hence it is difficult to say that whether Tier-2 suppliers are moving in same speed ahead or not, and will these Tier-2 suppliers become bottleneck in the growth of MSIL. To answer this question this project has been undertaken, which can ensure that its supplier partners are able to identify the potential risk in all the areas like capacity, finance, quality, delivery etc. and take suitable measures to tackle the challenge and also to work collaboratively with suppliers in various areas to ensure a strong supply chain.

METHODOLOGY:Whole project can be divided into following stages-

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1. Data collection 2. Development of framework of database 3. Data analysis

1. DATA COLLECTIONS:-

Before our joining project was already initiated by our guide Mr. Srivastava and he developed the sheet which includes all the field, require for analysis and sent to the Tier-1 Suppliers, so that they can get filled data from their suppliers (Tier-2). The format of this excel sheet is as follows:-

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Tier 2 data entry sheet

Name of Supplier Supplier Code ( if any) Type of Company ( Tick) Relation with Tier 1(Supplier of MSIL)

Limited company / Pvt. Ltd. / Proprietorship / Partnership

Group Company / Sister concern / Independent

General Information
Year of Establishment Start of supply to Tier 1(Supplier of MSIL) Product Portfolio Major Customers Details: Customer Turnover % of Turnover

% Dependency on Tier 1 ( MSIL Supplier) Top Management Contact Details Details of Person dealing with Tier 1 ( Supplier of MSIL) Certifications ( Tick) ISO 9001 / 14001 / ISO 14000 / TS 16949

Product & Capacity Utilization *

What are the capacity utilization of various product? Major Processes Capacity
eg :-Pressing eg:- Welding eg:- Machining

Unit

% Capacity utilization

Major Expansion *
Major Expansion in last one year Future expansion planned in Year 1 Future expansion planned in Year 2

Area

Capacity ( Amt.- Rs lacs) Capacity Increase %

Major M/c or Equipments *

Installation dt.

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1/2

Plant Details:
Address Phone Website State City Pin Fax

Employee Information
Employees Staff category ( How many) Average annual salary ( in thousand) Union exist Affiliated to Wage settlement duration Labour Unrest Reported: From : Reason:

Contractual

Regular

Yes / No

Yes / No to:

Financial details
Net Sales: Other Income Total expenses Operating Profit Depreciation Interest Profit Before Tax Profit After Tax Dividend

( in lacs)

FY09-10

FY08-09

FY07-08

Net Worth ( Total Equity + R & S) Short term debt raised Long term debt raised Gross Fixed Asset

Collaboration Details ( If applicable)

Collaborators's Name Country Technical/ Financial Tech (Design/ Drawing) Valid Upto (Date) Products Covered U / collab.

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Name of Supplier Supplier Code ( if any)

Quality
Rejections Details ( kindly Tick- wherever applicable) Availability of Operating Standard Rejections are being monitored in What is the current rejection level in a) In-house b) At customer ( Tier 1) Rework % Process Rejection is being monitored or not If yes, what is the current level? Set-up Rejection is being monitored or not If yes, what is the current level? Handling/ Packaging rejection is being monitored or not If yes, what is the current level? Yes / No Yes / No Percentage / PPM

Yes / No

Yes / No

Details on Process control

Details of Red Bin Analysis Availability of process defect data capturing Analysis of same to set priorities for improvement Investigate root cause(s) and implement effective countermeasure Reduction of process defects in % Yes / No Yes / No Yes / No

QC Circle & Kaizen

Is Suggestion scheme available? Is it applicable to all level of employee ? What was the total no of suggestion last yr. Is there any reward & recognition scheme ? Are Kaizen activity being captured ? If yes, Is there any Kaizen board available ? Is Kaizen board being monitored and controlled? Yes / No Yes / No Yes Yes Yes Yes / / / / No No No No

Details of Tier 2 upgradation Cluster and System Audit

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Whether included in Tier 2 cluster If yes, when did the last audit done What kind of upgradation activity being carried out by Tier 1supplier Progress summary- annexure Delivery and inventory status at Tier 1 from Tier 2 Delivery Status is being monitored Yes / No What is the ordering frequency? How many defaults in a month? Delivery failure analysis, methodology (Help of 7 QC tools) Records of Failed parts & Dates, No. of Times Corrective & Preventive action and analysis report to customer ( annexure) What is the average inventory days at Tier 1 What is the average inventory days at Tier 2 Cost Reduction Participation in cost reduction Cost Reduction Amount Cost Reduction % VA/VE Participation in VA/VE activities VA/VE nos. VA/VE Amount Design & Development Design and Development Capability ( What Type) Total buying Reduction in last two yrs.

No. of VA/VE proposals Implement.

Other Improvement areas

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Data of Tier-2 collected by Tier-1 supplier, then entered on the extranet. For that ITD made provisions based on sheet of information as shown above. The snapshots of extranet are as follows:-

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Even if every Tier-1 vendor have access to extranet, because of technical error or lack of knowledge, some vendors were sending information of tier-2 vendors via e-mail. So it was our responsibility to collect direct data from concern buyer and use it for analysis purpose.

2. DEVELOPMENT OF FRAMEWORK OF DATABASE:It was difficult to analyse data received directly from ITD or from suppliers. So we have developed formats of three sheets.

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These sheets area. General information sheet b. One page sheet

a. General information sheet:There was no previous data of Tier-2 suppliers was available, i.e. MSIL even did not have list of its Tier-2 suppliers. Hence to capture basic information of Tier-2 suppliers we developed this format. This format includes information like Name if Tier-1 supplier, Code of Tier-1 suppliers, Name of suppliers of Tier-1 suppliers i.e. Tier-2 suppliers and other information like address, Percentage dependency, major customers etc. Format of this sheet is as follows-

Tier-1 Supplier

Tier-2 Suppliers Percenta ge Dependa ncy on T1 supplier

Supplier Name

Supplier Code

Tier 2 Supplier Name

Type of Company

Address

Contact No.

Website

Relationshi p with Tier 1

Product Portfolio

Major Customers

b. One page sheet:One page sheet is developed to capture various data required for analysis. Basically the reason behind development of this sheet is capturing data of various Tier-2 suppliers of single Tier-1 supplier in one A3 size page, so that understanding of tier-2 suppliers with respect tier-1 supplier will become easier. Hence this sheet is named as one page sheet. This sheet has framework as follows:-

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Page for sheet-3

3. Data analysis:-

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Depending on data received we have done analysis of Tier-2 vendors on various aspects. These I. General analysis II. Financial analysis III. Quality analysis IV. Delivery analysis V. Capacity analysis VI. Personnel analysis

I. General analysis:General analysis is done to understand Tier-2 suppliers on broad general aspects, which includes information like Type of company i.e. Pvt. Ltd, limited, partnership, proprietorship company

Location wise spread of Tier-2 suppliers Relationship with tier-1 suppliers i.e. Group company or independent company

Part of Tier-2 cluster

II. Financial analysis:To understand financial health of Tier-2 suppliers we have done financial analysis on the following parameters. Net sales Total debt to equity ratio

Long term debt to equity ratio

Internal accrual Gross margin Net margin

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III.

Quality analysis:Quality of MSIL is directly or indirectly depends on quality of Tier-1 suppliers and quality of Tier-1 suppliers depends on quality of supplies from Tier-2. Hence understanding of quality of Tier-2 suppliers is one of the most crucial factors. This includes factors like Quality certifications Inhouse rejections in ppm Rejections at customer end in ppm Total rejections in ppm

IV.

Delivery analysis:-

Delivery analysis deals with total delivery defaults by Tier-2 per month and inventory of material available between Tier-1 and Tier-2 i.e. at both ends, in days.

V. Capacity analysis:In capacity analysis we analysed various processes carried out at Tier-2. on the basis of capacity utilization of each process we identified bottleneck processes ( i.e. capacity utilization more than 90%), which can become headache in future expansion of MSIL.

VI. Personnel analysis:The primary motto behind this analysis is to understand dependency of Tier-2 suppliers on contractual workforce and understanding availability of skilled workers at Tier-2.

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RESULTS & FINDINGS:1. GENERAL

ANALYSIS :-

Type of company:-

TYPE OF COMPANY
LIMITED COMPANY 17%

PROPRIETORSHIP 21%

PARTNERSHIP 9%

PVT. LTD. 53%

70% of Tier-2 suppliers belong to Private limited and Limited company. Pvt. Limited and Limited companies are registered under companies act and also audit is mandatory whereas companies belongs to other categories are unstructured. Hence we can say that majority of Tier-2 suppliers are well structured.

Region wise spread:-

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R EGION ISE CLA W SSIFICA TION

NR C 69%

O H RN R H TE O T 9% W ST E 4% E T AS 1%

SO T UH 17%

Majority of Tier2 suppliers ( 78% ) are located near to Northern region and out of this 69% of total base are situated inside NCR region. This implies majority of tier-2 suppliers are situated nearby to the MSIL and Tier-1 suppliers. This implies that overall inbound logistics cost of MSIL is at lower side.

Relationship with Tier-1 Suppliers:R L T N H W HT R S P L R E A IO S IP IT IE -1 U P IE (T R S P L R ) IE -2 U P IE S

IN E E D N , DP NE T 16 8% 1, 7

GOP R U C MA Y 1, O P N, 7 1% 3

As per the graph above, only 13% of companies belongs to Group Company, Rest others are independent from the influence from the Tier 1 companies.

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2. FINANCIAL ANALYSIS: Turnover:N SA ET LES FO Y R EAR 2 0 -1 09 0 ( TIER-2SUPPLIERS)

OF SUPPLIERS 40 % 30 % 20 % 10 % 0 % 0-50 0 50 0 0 -10 0 1 00 00 0 -50 > 00 5 0 N SA ET LES ( R LA IN S. CS) 15 % 1% 8 PERCENTAGE 3% 4 3 3%

Above graph shows that majority of tier-2 suppliers are having turnover less than 50 crores i.e. 82% tier-2 suppliers. If we compare this trend with turnover of tier-1 suppliers where more than 80% having turnover above 50 crores, then we say that tier-2 suppliers are belongs to small and medium scale industries.

Debt to equity Ratio:L T D/E RATIO FOR YEAR 2009-10 (TIER-2 SUPPLIERS)
PERCENTAGE OF SUPPLIERS 80% 60% 40% 20% 0% 0-1 1--2 D/E RATIO >2 16% 11% 73%

Graph of Debt to Equity indicates that nearly 70% of sample Tier-2 suppliers lie in the category of 0-1, that implies that majority of Tier-2 suppliers follow conservative approach and only 11% are in the high risk category ( more than 2 DE ratio).
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TOTAL DEBT/EQUITY RATIO FOR YEAR 2009-10 (TIER-2 SUPPLIERS)

60% PERCENTAGE OF SUPPLIERS 40% 22.22% 20% 0% 0-1 1--2 D/E RATIO >2 22.22% 56%

If we compare total debt to equity ratio with long term debt to equity ratio, a rapid shift of graph towards right side is seen. This implies that dependency of Tier-2 suppliers on short term loan is more.

Internal accrual:(PAT + Depreciation Dividend Dividend Tax)

INTERNAL ACCRUALS FOR YEAR 2009-10 (TIER-2 SUPPLIERS)
PERCENTAGE OF SUPPLIERS 60% 45% 30% 15% 0% < 0 0-100 100-500 500-1000 > 1000 1% 3% 8% 56% 32%

INTERNAL ACCRUAL IN RS.LACS

From above we can say that out of total sample Tier-2 suppliers nearly 60% are having internal accrual below 1 Cr. i.e. not very much capable of doing sudden large capacity expansion which can be area of concern

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 Profitability Ratio:Gross margin:GROSS MARGIN FOR YEAR 2009-10 (TIER-2 SUPPLIERS)

PERCENTAGE OF SUPPLIERS 50% 40% 30% 20% 10% 0% < 0 0--5% 5-10% > 10% EBDIT/NET SALES RATIO 1% 16% 44% 39%

Graph shows that nearly 17% tier-2 suppliers of sample populations are earning less than 5% gross margin i.e. these 17% tier-2 suppliers are struggling to earn enough gross margins. To make them competitive tier-1 suppliers should provide some support to these suppliers.

Net Margin:-

N M RG FO Y R 2 0 -1 ET A IN R EA 0 9 0 (I T ER-2SU P P LIERS)
OF SUPPLIERS PERCENTAGE 8% 0 6% 0 4% 0 2% 0 0 % < 0 0 % -5 P T E SA S ( ) A /N T LE % 5 0 -1 % >0 1% 3 % 1% 4 6 % 7% 7

In general net margin of tier-2 suppliers is good but still some suppliers (3%) needs special attention, which are having net margin ratio below zero.

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3. QUALITY ANALYSIS: Quality Certifications:CERTIFICATIONS

ISO 9001 40% NO CERIFICATES 2% ISO 14000 1% ISO 14000 & TS 16949, 6, 8%

TS 16949 44%

98% of Tier-2 suppliers of given sample are having at least one quality certification, which implies nearly all Tier-2 suppliers are following international quality standards.

Member of Tier-2 cluster:MEMBER OF TIER-2 CLUSTER

NOS.OF TIER-2 SUPPLIER PART OF TIER-2 CLUSTER 39% NOS.OF TIER-2 SUPPLIER NOT PART OF TIER-2 CLUSTER 61%

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It is found that approximately 40% Tier-2 suppliers are belong to MACE cluster and having total average rejection 13307 ppm and 60% suppliers who are not part of MACE cluster are having average total rejections 13666. That means tier-2 suppliers which are part of MACE cluster are not implementing their learning from MACE in effective manner.

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Rejections:-

REJECTIONS CUSTOMER END

PERCENTAGE OF SUPPLIERS 50% 40% 30% 20% 10% 0% 0--100 100-500 500-5000 >5000 REJECTIONS IN PPM 19% 18% 17% 46%

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REJECTIONS INHOUSE
PERCENTAGE OF SUPPLIERS 60% 50% 40% 30% 20% 10% 0% 0--100 100-500 500-5000 >5000 REJECTIONS IN PPM 9% 9% 28% 54%

The above graphs shows that inhouse rejections for Tier-2 suppliers are more than rejections at customer end which indicates the various defect filtration process which is being used vigorously at T2 Suppliers for arresting of defects to pass on to the customers.
TOTAL REJECTION IN PPM (INHOUSE+TIER-1 END) ( TIER-2 SUPPLIERS)
48% 42% PERCENTAGE OF TIER-2 SUPPLIERS 36% 34%

24% 12% 12%

12%

0% 0-200 200-1000 1000-10000 >10000 REJECTION IN PPM

There are as many as 75% of T2 suppliers where total cumulative rejections are more than 1000 PPM , which can be area of concern.

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4. DELIVERY ANALYSIS: Delivery Defaults:DELIVARY DEFAULTS FOR YEAR 2009-10 (TIER-2 SUPPLIERS)
PERCENTAGE OF SUPPLIERS 80% 60% 40% 20% 0% NIL 1--5 5--10 >10 DELIVARY DEFAULTS PER MONTH 24% 8% 3% 64%

As per the data received for T2 Suppliers from Tier1 ( MSIL suppliers) , there is no much delivery related issue from Tier2 to Tier1, but MSIL receive delivery related problems from Tier-1 suppliers, which can be area of concern.

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 Inventory:INVENTORY IN DAYS FOR YEAR 2009-10 (TIER-2 SUPPLIERS)

PERCENTAGE OF SUPPLIERS 50% 40% 30% 20% 10% 0% 0-5 5--10 10--20 >20 7% 41% 31% 21%

AVERAGE INVENTORY IN DAYS

As per the data received for T2 Suppliers from Tier1 ( MSIL suppliers) , total inventory days ( including both at T1 and T2) for any T2 supplier . The trend shows the no. of suppliers with higher inventory days goes on decreasing , indicating the increasing awareness of cost of inventory among the T2 suppliers .

5. PERSONNEL ANALYSIS:-

PERSONNEL (TIER-2 SUPPLIERS)

45% PERCENTAGE OF SUPPLIERS 30% 15% 0% NIL UPTO 1:1 1:1 TO 3:1 MORE THAN 3:1 38% 20% 24% 18%

CONTRACTUAL/REGULAR EMPLOYEE

Analyzed data of Tier 2 companies shows that these suppliers are dependent more on the contractual work force. This also indicates that these companies dont require high skill people either for manufacturing or any other developmental activities.
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6. CAPACITY ANALYSIS:-

TIER-2 SUPPLIERS WITH BOTTLENECK

80%

T-2 SUPPLIERS HAVING ATLEAST ONE BOTTLENECK PROCESS:T-2 SUPPLIERS WITHOUT ANY BOTTLENECK PROCESS:-

20%

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PERCENTAGE OF T-2 SUPPLIERS

CAPACITY UTILIZATION (TIER-2 SUPPLIERS)

100%

91%

89%

80%

80%

80%

80% 58% 42% 67%

80%

79%

75%

50%

33% 20% 21%

25%

9%
PRESSING

11%
WELDING

20%

20%

20%

20%

0% MOULDING MACHINING CHEMICAL TREATMENT CASTING SURFACE TREATMENT BLENDING FORGING OTHERS

PROCESSES
ONE VENDOR MAY HAVE SEVERAL PROCESSES BOTTLENECK PROCESSES NON BOTTLENECK PROCESSES

There are many processes where number of vendors having bottleneck is lower than no bottleneck. But alarming fact is that there are some processes where number of vendors with bottleneck processes are more than those where no bottleneck. These processes are - Chemical Treatment - Surface treatment - Blending and mixing These processes can become headache for MSIL expansion

CONCLUSION:The strength of any chain is always decided by its weakest link. In the Supply chain of MSIL it is observed that Tier-2 suppliers are the weakest link. From our project we conclude that, Tier-2 suppliers are small and medium scale suppliers and are less conscious about quality. Majority of Tier-2 suppliers are utilizing less than 90% capacity, which can serve increasing needs of Tier-1 suppliers but still some suppliers needs to be more focus.

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Operating margin and net margin of Tier-2 suppliers seems reasonably good but due to small turnover actual realised amount is considerably low. There is on an average 7.7 days inventory between Tier-2 and Tier-1 end, which is good for on-time delivery but not in line with Just In Time concept and tier-2, tier-1 and ultimately MSIL bearing this inventory carrying cost. It is observed that Tier-2 suppliers are largely depends on Contractual labours, which is good for cost saving but less skilled worker may affect quality of product. Majority of tier-2 suppliers are delivering materials to Tier-1 on time ( very less or no delivery default) and also there is quite good inventory available between tier-1 and tier-2 suppliers, still some tier-1 is making delivery defaults in sending materials to the MSIL, this need to be focused. It is seen that tier-2 suppliers are using good amount short term loan and ultimately paying higher interest which is affecting their overall net profit.

BIBLIOGRAPHY:Websites
12345-

www.google.com www.msil.co.in www.wikipedia.com www.scribd.com www.utvmoney.mangopeople.com (Bloomberg India)

Books
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123-

Supply chain Management by Peter Mendle The Maruti Story by R.C.Bhargava The Machine that change the world

Secondary sources
1.

MSIL Annual Report-2009-10

2. MSIL Files

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