Bajaj Auto to revamp supply chain [1]

Nandini Sen Gupta & Rajiv Nagpal, TNN Sep 30, 2002, 07.00am IST

In an attempt to make its supply chain both cost efficient and more flexible, two-wheeler major Bajaj
Auto chalked out a detailed vendor management strategy that included rationalising the network
existent at that time, consolidated component volumes and enabled technology acquisition from
overseas.
The company has already reduced its supplier base from 1000-strong four years ago to
"approximately 250" and is working towards further reduction in a year's time.
"(The supply network) will, we anticipate, finally consist of about 150 suppliers whose supplies will
represent 80% of the manufacturing cost associated with our products," says Rajiv Bajaj, president,
Bajaj Auto. "Such supplies will be increasingly delivered 'on-line, in-time' given at-source quality
assurance and the absence of physical in-Plant Stores."
The rationalisation, though, is only part of the company's larger supply chain management strategy.
Bajaj Auto is also working on rationalising its "supply chain into homogenous categories reflecting
similar product and process skills," says Mr Bajaj.
Additionally, the company is trying to simplify "the make-buy relationship by accounting ownership for
assemblies as opposed to individual components." Both initiatives are intended to consolidate
volumes with fewer suppliers thereby ensuring scale which in turn enables the supplier to invest in
quality and reduce costs. Indeed the company has defined a multi-tier "sourcing structure with no
more than two suppliers for a given family of assemblies," says Bajaj.
With fewer vendors and consequently larger volumes of component business to deal with, the
company will also help its vendors source technology from abroad. Indeed as part its supply chain
management strategy, Bajaj Auto intends to enhance "the supply chain's product development
capabilities by facilitating technology acquisition from Japan and Europe," says Bajaj.

References
[1] N. S. G. &. R. Nagpal, Bajaj Auto to revamp supply chain, The Economic Times, p. 1, 30
September 2002.