Supplier Relationships

Contractual Transfer efforts focused on three crucial aspects Structural Process

Contractual Terms Maruti Udyog Limited tries to establish close ties with its suppliers. Structural Terms Maruti Udyog limited tried to implement itemization of MULs supplier relations. Supply Flow/Process Terms Maruti Udyog Limited goes for Just in Time.

Supplier

Steel coils Raw Material Suppliers From manufacturers in Japan, Korea and, to some extent, India Tender system purchase (Accept the lowest price offered) Quotation system Paint from Indian Suppliers

(Flexibility to renegotiate prices)

One Year Contract Insurance of order on Requirement

Standard Purchase Order Six months for foreign suppliers One Year Contract For Indian Suppliers

Issue of purchase order happens in line with requirement

Components
Vendor Development Program MUL plays a collaborative role with our vendors by assisting them in periodically improving their processes and through training and interaction, regular audits and follow-ups in order to reduce line rejections and warranty cost. Vendors work in close coordination with us to meet our long-term goals in terms of : 1. Component Development 2. Quality 3. Delivery and 4. Cost Control Role of Vendor Tactical strategic

Fact: - top ten local vendors accounted for approximately 34% of MULs aggregate purchases of components from vendors in India

Agreement With Vendor

Vendors are given supply schedules periodically 1. Agreement includes vendors to provide designs, drawings and specifications provided by MUL, exclusively to MUL 2. quality control procedures :- periodic inspections of components and audits of its premises by MUL 3. Bearing of repair and replacements costs of defective components by vendors

Termination of Agreement
It may occur when:1. a change in the ownership of the vendor 2. merger or amalgamation of the vendor with a third party 3. Insolvency of the vendor 4. Transfer of a material portion of the assets of a vendor to a third party so that components cannot be supplied to Maruti without the assistance of the third party.

Delivery By Vendors

Vendor

Vendor

MULs delivery instruction system

Vendor

Vendor

Vendor provide details of MULS component requirements for every 15 days. Advantage: It has reduced both inventory levels and lead times for supply of components and sub assemblies. Internet-based information network maintains online records for order status and delivery instructions.

Reduction of Vendor Cost

Implementation of MPS (Master Production Scheduling) which causes elimination of wasteful activities in their manufacturing processes, which help in :Improve vendor productivity. Reducing Number of rejections. Their yield from material Reducing Inventories. Reducing the warranty cost of vendor per vehicle. Set target with vendor for cost reduction. Sharing benefits of cost reduction with vendor from initial periods (incentives). Implementing worldwide purchasing system. Value analysis and value engineering. Vendor Quality Control They follow Quality Management System such as ISO 9000/ QS 9000, specially Cluster Approach which includes:Vendors are grouped together. Providing training to them in quality management. Assisting them in obtaining ISO 9000 certificate.