Subject:-

Logistics
Topic:-
Logistic & Supply Chain Management
Of Maruti Suzuki
Submitted by:- Akshay Kumbhar 67
Std/div: - TYBMS/B
College:- Sheth N.K.T.T
Subbmitted To:- Prof.Mrs Kanchana Sattur

Date:- 7th August 2012

Logistics of maruti Suzuki:-
Considerable investment, partnership and patience are all needed for logistics to
keep up with market demand which is expected to see car sales double to 6m per
annum in the next three years.

Almost 300 delegates at the annual Automotive Logistics India conference heard
about the need for more sophisticated services and long-term partnerships from the
country’s largest carmakers and tier one suppliers. Senior logistics executives were
present from Maruti Suzuki, Hyundai, Mahindra & Mahindra, Tata Motors, Ford,
Fiat and others, and from Delphi, Visteon, Continental and others.

Delegates also heard some surprises, with a representative of the Ministry of Railways
saying that the idea of private sector operation of autohubs for finished vehicles is “on
hold”.

Government representatives from both the Planning Commission and the Ministry of
Railways set out the critical next steps for investing and modernising infrastructure and
transport policy. And while there are some encouraging plans – from large investment in
roads to more interest in automotive by the railways – there are also signs that
development and regulatory reform will be slower than hoped.

In striving for modern logistics, the ‘Indian way’ always applies, delegates heard.
That can mean surprising efficiencies, as well as delay and frustration. The
conference discussed the many infrastructural, regulatory, operational and capacity
issues which the country faces – and they are substantial. But it also saw users and
service providers inching towards collaboration, as well as actions to address the
appalling conditions of car-carrier drivers in India.

Once again, delegates agreed that India’s fast growth in the automotive sector will
depend critically on the country’s ability to improve its infrastructure and advance
its logistics. Overall there is optimism, which is also the ‘Indian way’. And once
again the conference
Mubaruti Suzuki to invest 200 crore on
logistics h in Bengal:-
Kolkata: Maruti Suzuki is planning to set up an integrated logistics hub near
Kolkata at an estimated investment of over Rs 100 crore. The country's leading
automakeris eyeing some 60 acres near Panagarh for the project.

The proposal is at a preliminary stage and is yet to be submitted to the West

Bengal government. This will be Maruti's second such facility in the state since the
auto major has already outlined plans to set up a Rs 80 crore hub at Siliguri to cater
to its customers in across North Bengal and the North east.

The proposed unit will have warehousing facility for 10,000-15,000 cars, a
servicing unit and a store house for automobile spares. It will also have a training
facility. It will service Maruti's existing and future client base across the entire
eastern region in states like West Bengal, Jharkhand, Orissa and Chhatisgarh.

This part of a long term strategy drawn up by the country's leading automaker to
locate close to its customers and consolidate its market share across regions.

In recent months, Maruti has been facing intense competition from its rivals. The
company also suffered a major jolt in production due to prolonged strike at its
Manesar factory.

On Friday, officials from Maruti Suzuki meet state industries minister Mr Partha
Chatterjee, industry secretary Basudeb Banerjee, and WBIIDC executives to
discuss their plans in the state.

"Our plans for a facility near Kolkata are at a nascent stage. We want to set up a
warehousing facility for 10,000-15,000 cars, which will also include a servicing
unit, a store house for automobile spares and a training facility," R Dayal,
executive officer (production engineering) Maruti Suzuki said after the meeting.

Maruti has a 65% share of the market in the East. "We will inspect the land near
Panagarh which is inside an industrial park being constructed by the state
government. Alternatively, we are interested in land on the national highway,
preferably close to a railway link," Dayal added.
"We were initially keen to set up the hub at Jharkhand. However, the Bengal
government's investor friendly moves has prompted us to locate it near Kolkata," a
Maruti official added.

Based on a hub and spoke model, Maruti has already unveiled such a warehousing
and servicing facility at Bangalore on 120 acres to meet the needs of its customers
in south. While Maruti caters to its customers in the northern region though its
facilities at Gurgaon, construction has already started on a similar facility at
Nagpur for the western region. Earlier Maruti has already applied to the
government for 35 acres in an upcoming industrial park at Siliguri.

The state government already owns the land in the industrial park being set up at
an investment of Rs 500 crore by WBIIDC, Kanchenjunga Integrated
Infrastructure Development and Bengal Shristi. "We are waiting for the necessary
government approvals but we hope to operationalise the Siliguri facility within 2
years.

Maruti Suzuki to set up logistics hub in Siliguri:-

India's leading automaker Maruti Suzuki plans to invest about Rs 80 crore in West
Bengal in a logistics hub at upcoming industrial park near Siliguri.

Senior officials from Maruti Suzuki met West Bengal industry minister Partha
Chatterjee on Friday, the fifth day of the ongoing 'Bengal Leads', a business
summit organised by the state government. The automajor has asked for 35 acres
of land for the same in the upcoming industrial park near Siliguri in northern part
of the state.

According to company officials, Maruti Suzuki plans to invest about Rs 65-80

crore in the proposed logistics hub which is likely to employ about 300 people. The
state government is understood to have asked the company to submit a formal
proposal for the same. About 120 companies and 12 government departments are
participating in the six-day business summit.
Organizing Freight Movement:-
In a demand-supply situation, when demand exceeds a certain limit, market forces
find it difficult to keep up with supply. But Maruti has done the improbable. It has
exceeded market expectations and continues to keep up with increasing volumes in
spite of the high demand from the market. Maruti is also a pioneer of the milk run
supply chain within the automotive industry.

The idea of the milk run was spawned when Maruti noted that the steep volumes of
components flowing into the factory were causing a logjam within the premises.
The company hit on the idea of the milk run in the National Capital Region (NCR)
and began organizing their trucks to go to suppliers’ locations at a designated time,
pick up the components and deliver it. Consequently, factories carried lower
inventories and also ensured timely supply of components.

The reduction in congestion of components also reduced the cost of logistics for
the company. Earlier, 40-45 percent trucks would be partially full at the factory.
With the milk run supply chain, significantly all the trucks come in filled. “We
began saving about 25-30 percent in our overall cost of logistics,” discloses Mr
Maitra.

Back On Track:-
Maruti constantly aims at cost improvement. Mr. Maitra proceeds to share his
company’s plans of port-to-plant freight corridors. Maruti is planning to convert to
rail mode to gain lower freight per ton. Adani Logistics offers end-to-end services
to Maruti, exporting 60 percent of Maruti cars and providing end-to-end solutions
for cold rolled (CR) coils. This includes handling at port, transportation to the
NCR, storage at built-to-suit warehouses and JIT delivery to the plant for a volume
of 100,000 metric tons per annum (MTPA).

In the near future, the company is depending heavily on the completion of the
western dedicated freight corridor (DFC), expected to be ready by 2015, so that it
can start transporting coils from the port directly to the plant. The DFC planned by
the government will reach Manesar, but to ensure continuity, Maruti plans to lay
railway tracks till the Manesar plant. At present, Maruti is content with its part-
road-part-rail movement. But the last mile connectivity by road does cause
congestion. “The DFC is a better option than transporting all the way from Kandla
port to Gurgaon or Manesar by road,” opines Mr. Maitra.

Tracing The Coils:-

Maruti has made arrangements for ‘coiltainers’ (trailers specially carrying coils)
for the purpose of transporting coils by roads. These coils are used for
manufacturing various panels in the car. When the company decided to convert to
part-road-part-rail, it also made specific arrangements for coils to be transported by
rail. While the system of tracking trucks is well-known, Maruti also formulated an
in-house coil tracking system, its very own USP. From the time the coils arrive at
the port till they reach the factory, Maruti tracks the movement of coils at every
stage.

The ever-increasing volumes have also compelled the company to ship

components from overseas suppliers once a week, up from bringing in shipments
once a month. The inventory for domestic supplies is kept at 2 hours now (a radical
shift from inventory kept for three weeks earlier) and for overseas supplies is one
week.

Inventory Check:-
Maruti has been able to keep its inventory under check and this can be attributed
largely to the Just-In-Time (JIT) and Kanban system. Kanban is Japanese for
‘signboard’ or ‘visual card’; it is a means to achieve JIT. The purpose of Kanban is
to divide work into different segments and mark each process with posts, to assign
explicit limits to how many items may be in progress at each workflow state and to
optimize lead times.

Mr. Maitra flashbacks to a time when orders would be placed with suppliers a
month in advance and full payment would be made. The suppliers would deposit
the entire load of components at the factory within the first ten days of the month.
The company faced the dilemma of carrying a heavy load of a month’s inventory
at the factory. “Seeing no trucks at the factory’s materials section towards the latter
half of the month would create unnecessary panic. We would wonder if the
inventory had depleted or if there was a shortage on the line,” recounts Mr. Maitra.
“Hence, we decided to come up with a 15-day schedule where we placed orders for
15 days’ inventory. Now with the e-nagare (electronic-nagare) system in place, the
inventory time has come down to two hours.”

Maruti went into overdrive and sketched out intricate plans to save additional costs
of carrying inventory. The company pioneered the e-nagare system, built
exclusively for MSIL, which is the backbone of the corporate’s supply chain.

Applying the Kanban principle, the schedules are released through the e-nagare
system with only one delivery time per day for the suppliers. There are three sets
of trolleys in the system; one trolley is at MSIL for production, the other at the
storage location in the production shop, and the last trolley is ready for dispatch at
the suppliers’. Once the trolley at the production line is emptied and further
material is required, then the trolley at the storage location is brought in and the
empty trolley returned to the vendor. On receipt of the empty trolley at the vendor
location, the loaded trolley at their facility gets dispatched. Now, the next set of
trolleys is prepared for dispatch. This system is currently being followed with the
vendors in the supplier park.

The vendors are constantly informed from time-to-time if the movable storage bins
(that store components moving into production) must be replenished. “We inform
our suppliers the next day about the number of deliveries and the time slot. Hence
we ensure uninterrupted production and quick response to market fluctuation,”
remarks Mr. Maitra.

Maruti today holds inventory for a maximum of two hours, a stark contrast from
the bleak times when inventory was held for 12-14 days. This improvement can be
attributed to the Kanban or JIT method. “As far as the system is concerned, it is
indeed, a giant exponential leap, wherein supply scheduling is done through the e-
nagare system, ensuring supplies in two-hour fixed slots, with one-day prior notice
to vendors through the extranet system, clearly stating the date, time of supply, part
number, quantity and delivery location,” emphasises Mr. Maitra proudly.
Direct On-Line:-
To slim down its supply chain, Maruti Suzuki eliminated its receipt and holding
stores. This was a pragmatic choice as an abundance of transit warehousing points
resulted in delays, excess inventory management and affected quality issues due to
unwarranted additional handling and storage. Maruti has now switched to the
Direct-Online-System in order to make manufacturing leaner.

Formerly, the internal workforce collaborated with the truckers at the receipt stores
and inspected each lot before sending them to the holding stores and to the line.
But with the elimination of the receipt and the holding stores, the company
required human intervention to carry the material from the trucks to the line. “Then
somebody from our team suggested making holes in the wall of the shop floor
tantamount to the height of the truck and now a roller track carries the
consignments right up to our assembly line,” says Mr. Maitra expansively.

These newly-minted methods also depicted Maruti’s faith in the ability of its
suppliers to deliver quality components. Capt. Sandeep Mehta, COO, Adani
Logistics Ltd, speaks warmly of Maruti as a pathfinder which guides its suppliers
at every step. “Maruti has a history of cultivating vendors. This creates a
relationship that is based on understanding, trust and is long-lasting, rather than
being just transactional,” he says. Suppliers, on their part, have to follow stringent
parameters, conduct regular inspections and send daily reports to Maruti about
quality and efficiency.

Every filter has its own limitations. The key lies in producing quality
parts/components the very first time. “It is important that the components are
produced right,” stresses Mr. Maitra. “A filter’s efficiency is 95-96 percent so even
if you are filtering everything, some defect will pass unnoticed. Hence, the
suppliers are expected to produce quality auto parts.”
Indigenizing Models:-
Over the years, the debut of new models and their variants in the Indian market
often led to higher import of components. Gradually, the company began searching
for indigenous components. But that depends on a number of factors viz. suppliers’
capability, availability of required technology, collaborations with foreign
suppliers for necessary ToT (Transfer of Technology) and further joint ventures for
production in India and the lead time in respect to the launch of the model.

By localization one can achieve better economies of scale as the input cost is
always competitive in the country. Further, the supply chain becomes notably
shorter and leaner with less inventory carrying cost. Also, Indian consumers are
shielded from external international environmental factors, viz. forex fluctuations
and other factors prevailing in the country of import, which may have direct or
indirect affect on supplies.

Step-By-Step Kaizen:-
Maruti is tirelessly endeavouring to improve processes which will not only assist
cost reduction, but also contribute to the environment. The company has absorbed
invaluable lessons from its parent company, Suzuki, on ‘kaizen’ (improvement)
and has promptly translated these teachings into actions that have enabled them to
trim flab and scorch the market with its effortless supply chain.

After immense thought, the latest development in inbound logistics is the use of
collapsible racks and bins to carry overseas shipments. Earlier, the racks were sold
as scrap as they could not be reused. “If we did not recycle, the amount of wastage
would have been too large. Then it dawned upon us that probably if we got the
components on collapsible racks, we could take the components off, collapse the
racks and send them back to Japan,” explains Mr. Maitra.

The idea of using collapsible racks was derived from the parent company, Suzuki,
as this idea was put into practice in domestic logistics in Japan. Mr. Maitra and his
team have received special permission from the customs to send the empty racks
back on the same ship to Japan.
In the automotive industry, it is imperative that loading-unloading processes follow
the FIFO norm. But rear-opening trucks make it impossible for items loaded first
to be taken out first. The model of side-opening trucks is unique to Maruti in India,
another invention inspired by Suzuki. “These trucks expedite the process of
loading-unloading, because the amount of space that is open makes it easy for the
forklifts to lift the auto components or finished items and take it out. So, the
efficiency of loading-unloading goes up and in the meantime, we follow FIFO,”
explains Mr. Maitra energetically.

Another innovation in the assembly units is the implementation of the principle of

‘Pokayoke’,it literally means ‘fool proofing’. It is crucial for all manufacturers to
create a fail-proof system that systemically checks errors time and again and aids
in creation of high quality products. Maruti has automated the assembly line to the
extent that the line comes to a standstill and an alarm goes off to notify any human
error. Leaning back in his chair, Mr. Maitra cites the example of the engine filling
section in the assembly unit. “A worker fills every engine with oil manually.
During the course of time, it is only sometimes a worker may miss an isolated
engine. When that happens, the entire line stops. The conveyor belts have points
where the engines are weighed before and after being filled with oil and if it
notices that there isn’t much difference in the weight before and after, the line
comes to a halt.”

Value Creation:-
As the country’s largest automaker, Maruti Suzuki has tirelessly and successfully
experimented with diverse ideas in different models of its cars. The company’s
value addition and value engineering (VA/VE) is based on specific changes in the
existing or new models. Mr Maitra and his team follow an exercise where
disassembled auto parts are placed before a select few team members. They
evaluate and come up with new ideas, note it on a yellow slip and post it on the
wall. The exercise ends with 400-600 slips on the wall, out of which 35-40 ideas
are deliberated upon. “Now there are around 7000 components in the car, if we
reduce 350 components we get a good cost reduction without compromising on the
quality of the models,” says Mr. Maitra animatedly.
Over the years, small accessories like lighters and ashtrays have disappeared from
Maruti’s low-end range. “This also contributes to our efforts to acknowledge the
anti-smoking campaign that was so prominent a few years ago,” notes Mr. Maitra.
The basis of VA/VE is to analyze and add value at a lower cost either in-house or
otherwise. It could be by changing the process, design, source, etc., or putting new
cutting edge technologies in place or even by learning and imbibing / adopting
significant innovations from its competitors by benchmarking.

In today’s intensely fierce market where each competitor would like to cut the
ground from under the other, there is sustained focus on various cost reduction
activities which encompass Value Analysis Value Engineering, MSIL imports and
vendor part localization, Master Production Schedule (MPS) Activity( a weekly
scheduled activity with one vendor each week) annual negotiations with local
vendors, Focused Model Cost Reduction, Commodity Price Management, Periodic
Cost Down, Forex management, etc.

Improving output/input ratio is a continuous activity that is being carried out at

Maruti through yield improvement. It effectively results in cost reduction with a
focus on optimal material utilization. Here the cost reduction is achieved by better
input material utilization, reducing wastage, scrap utilization, recycling etc. Mr.
Maitra underscores an example where ‘nesting’ of metal sheets obtains more
components and reduces wastage of end pieces.

Tying Indo-Pak Shipments

Earlier, components, parts, consumables and other miscellaneous items were
shipped from Japan to India and Pakistan on two different respective country-
bound ships. “The Japanese believed there was a conflict between the two
countries, hence they sent the shipments separately.” This resulted in
transshipment at Singapore where individual supplies to India and Pakistan were
held for three-four days. “Seven years ago, over deliberations on kaizen to reduce
logistics costs, we wondered what measures could be taken to save time and
money. Then, we resolved to consolidate shipments to India and Pakistan. We had
to convince our Japanese counterparts and finally when they saw reason, they
agreed,” smiled Mr Maitra. Today supplies for India and Pakistan are combined
and sent on a mother ship that calls at JNPT before proceeding towards Karachi.
By eliminating the need for transshipment at Singapore, the transit time has been
reduced by four days.
Guarding The Rupee:-
Maruti faces difficulty in purchasing certain parts or accessories from local
vendors in India. “For example, take seat belts. The belts are sourced from Japan
and external additions like buckles are appended in India. Of late, we have been
promising local suppliers lucrative incentives on manufacturing spares and other
body parts in India,” Mr. Maitra elucidates. “The cost saved is shared with the
suppliers thus, encouraging them to continue manufacturing.” Maruti has been
lobbying Suzuki intensely to set up a manufacturing plant in the country for such
parts/components.

Due to constant imports/exports, Maruti is subjected to enervating foreign

exchange fluctuations. Maruti has also introduced the concept of hedging in the
Indian automotive industry. In the past two years, only two-three suppliers of
Maruti have taken up hedging. “The convoluted trading name and lack of clear
understanding deters suppliers from taking up hedging,” adds Mr. Maitra. With
special permission in hand from RBI, Maruti has taken up hedging on behalf of
their suppliers to guard their best interests against constantly fluctuating foreign
exchange (FE) rates.

The Forex risk is invalidated; also the company does not have to pay extra to the
suppliers in case of varying FE rates. “This is something like the share market,
where your shares keep falling or rising. At the start of every fiscal, we create
budgets taking into account the in-house valuation and the present FE rates. The
main motive behind hedging is to protect our budget, not make profits,” he insists.

Maruti has survived a turbulent phase in the past couple of months. Industrial
relations which had gone awry affected sales of the models in the market, thus
bringing production at Manesar and Gurgaon to a grinding halt. The overall
market has been sluggish, he shrugs. “The overall growth in the automotive market
will be around four-five percent, this year; hence we won’t be able to meet the five
million mark of production as claimed earlier. Maybe not five, but we will touch
the two million mark, re-gaining our 50 percent domestic market share,” says Mr.
Maitra with cool confidence.
Maruti Suzuki’s market share may have come down from 50 percent to 40-44
percent, but Mr. Maitra firmly states that “this was a temporary aberration due to a
particular cause.” Before the long drawn-out strike hamstrung the company’s
operations, the production rate was 4,500 vehicles per day; however, the company
is strenuously trying to cut back its losses for the five-month strike period by
pushing its current production rate to 5,200 vehicles per day. “It will not be long
before we get our 50 percent market share back,” he promises.

Growth Drivers:-
Earlier, Maruti stored its supplies in a single main warehouse in Gurgaon. But the
corporate has now taken the pragmatic and radical path of decentralization. Maruti
has opened its first stock depot facility at Bangalore. The story behind this venture
is that when Suzuki Chairman, Osamu Suzuki, asked Mr. Maitra’s team how
many days it takes to deliver a car (that is not on the waiting list) to a customer in
Guwahati, they replied that it was 15 days. The answer expected of them was two
days (if not on the waiting list)! That unvarnished truth has triggered off the
current decentralization, with Maruti contemplating setting up stock depot facilities
across India at four strategic locations: Nagpur, Bangalore, Siliguri and
Chandigarh (tentative). These depots will be able to stock about five to six days
worth of production and promise to reduce the delivery time period and measure
up to world-class standards.

Maruti is also in talks with the Gujarat government to establish another plant,
close to the Mundra port. Proximity to the port will ensure faster procurement of
components and it will eventually reduce logistics and manpower.

Maruti Suzuki has constantly striven to maintain its hegemony in the market. But
despite some fluctuations of fortune, the company appears to have surmounted its
problems and is apparently cresting the wave of popularity again. With its tireless
work, the company has struggled to preserve its position on the pedestal
indefatigably and in the hearts of millions of its loyal customers.