Maruti Suzuki

Chaudhari Akash Ajay (1902054)

History
Affiliation with Suzuki
In 1982, a license and joint venture agreement (JVA) was signed between Maruti Udyog Ltd,
and Suzuki of Japan. At first, Maruti Suzuki was mainly an importer of cars. In India's closed market,
Maruti received the right to import 40,000 fully built-up Suzuki in the first two years, and even after
that the early goal was to use only 33% indigenous parts. This upset the local manufacturers
considerably. There were also some concerns that the Indian market was too small to absorb the
comparatively large production planned by Maruti Suzuki, with the government even considering
adjusting the petrol tax and lowering the excise duty in order to boost sales. Local production
commenced in December 1983. In 1984, the Maruti Van with the same three-cylinder engine as the
800 was released and the installed capacity of the plant in Gurgaon reached 40,000 units.
In 1985, the Suzuki SJ410-based Gypsy, a 970 cc 4WD off-road vehicle, was launched. In 1986, the
original 800 was replaced by an all-new model of the 796 cc hatchback Suzuki Alto and the
100,000th vehicle was produced by the company. In 1987, the company started exporting to the
West, when a lot of 500 cars were sent to Hungary. By 1988, the capacity of the Gurgaon plant was
increased to 100,000 units per annum.
Market liberalisation
In 1989, the Maruti 1000 was introduced and the 970 cc, three-box was India's first
contemporary sedan. By 1991, 65 per cent of the components, for all vehicles produced, were
indigenized. After liberalization of the Indian economy in 1991, Suzuki increased its stake in Maruti
to 50 per cent, making the company a 50-50 Joint Venture with the Government of India the other
stake holder.
In 1993, the Zen, a 993 cc, hatchback was launched and in 1994 the 1298 cc Esteem was
introduced. Maruti produced its 1 millionth vehicle since the commencement of production in 1994.
Maruti's second plant was opened with annual capacity reaching 200,000 units. Maruti launched a
24-hour emergency on-road vehicle service. In 1998, the new Maruti 800 was released, the first
change in design since 1986. Zen D, a 1527 cc diesel hatchback, and Maruti's first diesel vehicle,
and a redesigned Omni were introduced. In 1999, the 1.6 litre Maruti Baleno three-box saloon
and Wagon R were also launched.
In 2000, Maruti became the first car company in India to launch a Call Center for internal and
customer services. The new Alto model was released. In 2001, Maruti True Value, selling and
buying used cars was launched. In October of the same year the Maruti Versa was launched. In
2002, Esteem Diesel was introduced. Two new subsidiaries were also started: Maruti Insurance
Distributor Services and Maruti Insurance Brokers Limited. Suzuki Motor Corporation increased its
stake in Maruti to 54.2 per cent.
In 2003, the new Suzuki Grand Vitara XL-7 was introduced while the Zen and the Wagon R were
upgraded and redesigned. The four millionth Maruti vehicle was built and they entered into a
partnership with the State Bank of India. Maruti Udyog Ltd was Listed on BSE and NSE after a
public issue, which was oversubscribed tenfold. In 2004, the Alto became India's best selling car
overtaking the Maruti 800 after nearly two decades. The five-seater Versa 5-seater, a new variant,
was created while the Esteem was re-launched. Maruti Udyog closed the financial year 2003-04 with
an annual sale of 472,122 units, the highest ever since the company began operations and the
fiftieth lakh (5 millionth) car rolled out in April 2005. The 1.3 litre Suzuki Swift five-door hatchback
was introduced in 2005.
In 2006 Suzuki and Maruti set up another joint venture, "Maruti Suzuki Automobiles India", to build
two new manufacturing plants, one for vehicles and one for engines. Cleaner cars were also
introduced, with several new models meeting the new "Bharat Stage III" standards. In February
2012, Maruti Suzuki sold its ten millionth vehicle in India. In July 2014 it had a market share of more
45%.
Maruti Suzuki is now looking to shift its current manufacturing facility located in the downtown
Gurgaon as apparently it is short of space and logistics. It is hunting for a huge 700 acres of plot of
land.
On 25 April 2019, Maruti Suzuki announced that it would phase out production of diesel cars by 1
April 2020, when the Bharat Stage VI emission standards come into effect. The new standards
would require a significant investment from the company to upgrade its existing diesel engines to
comply with the more stringent emission standards. Chairman R.C. Bhargava stated, "We have
taken this decision so that in 2022 we are able to meet the Corporate Average Fuel Efficiency norms
and higher share of CNG vehicles will help us comply with the norms. I hope the union government's
policies will help grow the market for CNG vehicles." Diesel cars accounted for about 23% of Maruti
Suzuki's annual sales.

Major Milestones:
Products and Services:
Sales and service network
Maruti Suzuki has 3598 sales outlets across 1,861 cities in India. The company aims to double its
sales network to 4,000 outlets by 2020. It has 3,792 service stations across 1,861 cities throughout
India. Maruti's dealership network is larger than that of enough known companies combined. 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. Also, The Express Service stations exist, sending
across their repair man to the vehicle if it is away from a normal service center.
NEXA
In 2015 Maruti Suzuki launched NEXA, a new dealership format for its premium cars
Maruti currently sells the Baleno, Baleno RS, S-Cross, XL-6, Ciaz and Ignis through NEXA outlets.
S-Cross was the first car to be sold through NEXA outlets. Several new models will be added to both
channels as part of the Company's medium term goal of 2 million annual sales by 2020.
Maruti Insurance
Launched in 2002 Maruti Suzuki provides vehicle insurance to its customers with the help of the
National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram. The service
was set up the company with the inception of two subsidiaries Maruti Insurance Distributors Services
Pvt. Ltd and Maruti Insurance Brokers Pvt. Limited
This service started as a benefit or value addition to customers and was able to ramp up easily. By
December 2005 they were able to sell more than two million insurance policies since its inception.
Maruti Finance
To promote its bottom line growth, Maruti Suzuki launched Maruti Finance in January 2002. Prior to
the start of this service Maruti Suzuki had started two joint ventures Citicorp Maruti and Maruti
Countrywide with Citi Group and GE Countrywide respectively to assist its client in securing
loan. Maruti Suzuki tied up with ABN Amro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra,
Standard Chartered Bank, and Sundaram to start this venture including its strategic partners in car
finance. Again the company entered into a strategic partnership with SBI in March 2003. Since
March 2003, Maruti has sold over 12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance
is currently available in 166 cities across India.
Citicorp Maruti Finance Limited is a joint venture between Citicorp Finance India and Maruti Udyog
Limited its primary business stated by the company is "hire-purchase financing of Maruti Suzuki
vehicles". Citi Finance India Limited is a wholly owned subsidiary of Citibank Overseas Investment
Corporation, Delaware, which in turn is a 100% wholly owned subsidiary of Citibank N.A. Citi
Finance India Limited holds 74% of the stake and Maruti Suzuki holds the remaining 26%. GE
Capital, HDFC and Maruti Suzuki came together in 1995 to form Maruti Countrywide. Maruti claims
that its finance program offers most competitive interest rates to its customers, which are lower by
0.25% to 0.5% from the market rates.
Maruti TrueValue
Maruti True service offered by Maruti Suzuki to its customers. It is a market place for used Maruti
Suzuki Vehicles. One can buy, sell or exchange used Maruti or non-Maruti vehicles with the help of
this service in India. As of 10 August 2017 there are 1,190 outlets across 936 cities.
N2N Fleet Management
N2N is the short form of End to End Fleet Management and provides lease and fleet management to
corporates. Clients who have signed up of this service include Gas Authority of India
Ltd, DuPont, Reckitt Benckiser, Doordarshan, Singer India, National Stock Exchange of India and
Transworld. This fleet management service include Leasing, Maintenance, Convenience services
and Remarketing.
Maruti Accessories
Many of the auto component companies except than Maruti Suzuki started to offer compatible
components and accessories. This caused a serious threat and loss of revenue to Maruti Suzuki.
Maruti Suzuki started a new initiative under the brand name Maruti Genuine Accessories to offer
accessories like alloy wheels, body cover, carpets, door visors, fog lamps, stereo systems, seat
covers and other car care products. These products are sold through dealer outlets and authorized
service stations throughout India.
Maruti Driving School
As part of its corporate social responsibility Maruti Suzuki launched the Maruti Driving School in
Delhi. Later the services were extended to other cities of India as well. These schools are modelled
on international standards, where learners go through classroom and practical sessions. Many
international practices like road behaviour and attitudes are also taught in these schools. Before
driving actual vehicles participants are trained on simulators.
At the launch ceremony for the school Jagdish Khattar stated "We are very concerned about
mounting deaths on Indian roads. These can be brought down if government, industry and the
voluntary sector work together in an integrated manner. But we felt that Maruti should first do
something in this regard and hence this initiative of Maruti Driving Schools."

Plants and Offices:

Installed Capacity:
The Company has two state-of-the-art manufacturing facilities located in Gurugram and Manesar in
Haryana, with a combined annual production capacity of ~1.58 million units per annum. Highly
efficient lean manufacturing processes together with a skilled and motivated workforce leads to the
manufacture of reliable and quality products. Suzuki Motor Gujarat Private Limited (SMG), a
subsidiary of SMC, was set up in Hansalpur, Gujarat to cater to the increasing market demand for
the Company's products and has been operational since 2017. Through this new facility, an
additional annual production capacity of 0.5 million units has been made available, thereby taking
the combined production capacity to a little over two million units. The SMG facility is in the process
of expanding production capacity to 0.75 million units by the year 2020. The Company is responsible
for the sales and distribution of units produced at the SMG facility in Gujarat.

Production for Last 5 years:

Manpower Strength:
15892 regular employees

Financials for last 5 years:

Current Supply Chain Practices:

Company has 246 local Tier-1 suppliers and 20 global ones. Its has 1204 dealers across India and
16 ware houses. It also has service network of 3013 service stations.
Vendor Management:

 Sources 70-80% of its component requirements from locally developed vendors.

 Primary raw material- Steel coils and paint
 Yield improvement program
 Strategized logistics
 Lead time reduced from 57 days in 1992 to 19 days in 2003
 Automated Material Receipt System and Wi-Fi enabled handheld devices

Milk Run System:

Suggestions for improvement in SCM practices:

1. Automatic Purchasing

Continually monitoring inventory levels takes up too much time. Newer ERP systems with Supply
Chain Management (SCM) functionality feature automated purchasing. This means that the ERP
software can be programmed to automatically place orders with vendors when inventory levels drop
below a certain level. A critical part of any supply chain strategy is being able to preemptively
maintain inventory levels. Automatic purchasing will free up employees to concentrate on other
important duties.

2. Standardize

Process standardization is central to the success of any supply chain strategy. Having a
standardized ERP system will increase efficiency while saving time and money. Another benefit is
that employees will share a standardized system of tools, which will increase accuracy, encourage
teamwork and reduce miscommunication.
3. Increase Transparency

Waste, mistakes and even fraud are permanent supply chain strategy problems that can be fixed
with the right ERP system. One of the biggest problems of inventory management is reconciling the
software numbers with a physical inventory count. There are always products or units that are
forgotten about or simply disappear. Increasing internal SCM transparency is critical to reducing
unexplained inventory and financial losses.

4. Gain Data Insight

Decision making for your supply chain strategy depends on accurate and timely data and
information. Having real-time reports available at all times will provide valuable insight into the
supply chain health of your manufacturing business. ERP software allows both users and
management to be able to instantly access inventory, purchasing and production data for critical
decision-making purposes.

5. Real-Time Inventory Management

Traditional inventory management involves the overuse of spreadsheets and hand checked lists.
However, modern ERP software offers inventory features that provide real-time visibility of exact
inventory levels. In addition to this, traditional inventory management software has limited scalability,
while modern ERP software has unlimited flexibility that will match your businesses’ growth and
unique needs.

6. Monitor Vendor Performance

A smoothly running supply chain system depends on outstanding vendor performance. Therefore,
vendor performance needs to be monitored and rated through robust metrics available through ERP
systems. With a few clicks of a mouse, management can review vendor cycle times and error rates.
This data is invaluable during vendor re-negotiations.

7. Raise Cost Awareness

There are many uncontrollable factors and variables with supply chain management. As a result,
different managers along the supply chain often are unaware of each other’s expenses. Having
centralized financial data pinpoints exactly when and where the organization spends money. This
will encourage cost related communication and strategies for consolidating expenses and
streamlining processes.

8. Improve Returns Management

Every solid supply chain strategy needs an efficient returns management

system. Manufacturers must be able to effectively handle returns so they can quickly re-process or
re-manufacture returned products or units. Many manufactures understandably focus on continually
moving new products out the door and therefore, returns often fail to get the attention they deserve.
Being able to better manage returns will reduce waste and identify consistent product problem
factors.

9. Just-in-time (JIT)

ERP systems naturally work well with both just-in-time manufacturing and JIT Inventory
Management to decrease inventory costs and increase inventory turn around. As a result, there will
be less overhead costs and order fulfillment communication mistakes. Operate at the optimal
inventory levels and reduce warehouse costs.

10. Streamline Accounting

ERP systems are often integrated with different business areas, such as HR, management and
finances. An ERP system will reduce excessive paperwork and invoice mix-ups. In addition to this,
ERP systems are integrated with Electronic Data Interchange (EDI) and Electronic Funds Transfers
(EFT), which will drastically reduce payment processing administration and associated wait times

Applications of new technologies in SCM practices:

Artificial intelligence

AI carries great potential to revolutionize supply chain processes. The ability to apply AI to enhance,

and even automate, decision making, reinvent business models and ecosystems, and remake the

customer experience could make many other emerging technology trends redundant. However,
although current AI solutions can find patterns and predict future scenarios, they still lack decision-

making abilities. Combining pattern capabilities with more advanced prescriptive capabilities will

therefore be critical to widespread supply chain uptake, enabling users to dedicate their skills to

higher-order use cases such as strategic network design or capacity planning.

Advanced analytics

Advanced analytics enable companies to proactively take advantage of future opportunities and

mitigate future adverse events. Prescriptive analytics can improve decision making in functional

areas like supply chain planning, sourcing, and logistics and transportation, and can be deployed to

improve end-to-end supply chain performance. Processes that previously relied on human judgment

can be powered with predictive and prescriptive analytics that could have a significant impact on

future demands for supply chain talent.

Internet of Things (IoT)

Adoption of the IoT is growing in select supply chain domains, but rarely as part of a complete end-

to-end supply chain process. One exception is the air and defense industry, where airplanes have

thousands of sensors and data is leveraged in the extended supply chain. Other potentially impactful

supply chain use cases are in preventative maintenance, sourcing, manufacturing, logistics, demand

management and services. These include improved asset utilization, higher uptime through remote

monitoring and maintenance, improved customer service by better understanding customer behavior

and needs, and proactively responding to and shaping customer demand.

Intelligent things

Current supply chain use cases for intelligent things — such as autonomous mobile robots

and autonomous vehicles — are mainly targeted at defined scenarios and controlled environments,

such as in warehouses. Intelligent things will make their initial business impact across a wide

spectrum of asset-centric, product-centric and service-centric industries. As a result, the ability for

organizations to assist, replace or redeploy their human workers in more value-adding activities will

potentially create high, even transformational, business benefits.

Conversational systems

Conversational systems — most recognizably implemented today in virtual personal assistants

(VPAs) and chatbots — are taking interaction to the next level with the addition of conversational

commerce. Not only can they handle discovery questions and offer solutions without any human

agent involvement, conversational systems can enable transactions, handle payments, ensure

delivery and provide customer service.Read more: Gartner Predictions for the Future of Supply

Chain Operations in 2018

Robotic process automation

Robotic process automation (RPA) allows supply chain leaders to cut costs, eliminate keying errors,

speed up processes and link applications. For example, an organization may want to work with

structured data to automate an existing manual task or process with minimal process re-engineering

or to avoid major system integration projects or specific new major application deployments.

Immersive technologies

Immersive technologies such as virtual reality (VR) and augmented reality (AR) allow supply chain

businesses to enhance employee and customer digital experiences. Gartner estimates VR will reach

mainstream adoption in the next two to five years, with AR going mainstream in the next five to 10

years, but these technologies are already in use in a variety of industries. These include enhanced

repair and maintenance capabilities in manufacturing, logistics and warehousing and better

purchasing choices for customers leveraging product visualization or store layout and planning.

Blockchain

Certain highly decentralized supply chain management functions such as smart contracts or

traceability and authentication are prime candidates for blockchain. Multiple business use cases are

yet to be proven, but some early pilot projects have emerged that are experimenting with the

potential of blockchain for supply chain. For example, blockchain is being used to track the

movement of diamonds from mining to retail stores by developing a digital record that includes the
unique attributes, including color, carat and certificate number that can be inscribed by laser into the

stone

Future Plans:

Comments on the Performance of the Company:

The year 2018-19 flagged off with promising economic outlook supported by benign inflation,

favourable interest rates, close to normal rainfall forecast and strong global economic growth. In Q1,

the Indian economy registered a robust growth of 8% which gave an indication of economic activities

returning to near normal post the GST roll-out. However, the momentum gained at the start didn’t

sustain during the rest of the year and the economy faced major challenges leading to a slowdown in

domestic consumption in the later part of the year. The pace of global economy also slowed down

and couldn’t provide meaningful support to the Indian economy. The Government and the RBI

undertook a slew of measures to provide the necessary stimulus to the economy.

India’s passenger vehicle market grew by 2.7% in 2018-19 against 7.9% in 2017-18. This is the

lowest annual industry growth recorded in previous seven years. Among the three broad industry

segments, the utility vehicles segment that accounts for about 28% of industry sales, grew by 2.1%.

The other two segments, passenger cars and vans, grew by 2.0% and 13.1% respectively. The

urban markets witnessed weak demand while the non-urban markets saw relatively better growth.

The demand for diesel models continued its weakening trend, and its industry share declined from

40% to 36%. The Company posted a volume growth of 5.3% in passenger vehicles in the domestic

market (against the industry growth of 2.7%). Including the Light Commercial Vehicle (LCV)

segment, the Company’s domestic sales growth stood at 6.1%.

With the expectation of better economic growth, the Company planned for a double-digit growth for

the financial year 2018-19. Initial few months progressed as per the Company’s expectation. The

Company was all set to enter the festive season by building a shade higher inventory based on the

previous years’ experience of stock out of some models. However, in the month of August, just

before the start of the festival season in Kerala, a natural calamity struck. Kerala is a big market for

the Company. Its share in all India sales goes higher during the festival season. The unprecedented

floods caused an opportunity loss for the Company. The vehicles produced for this market had to be

diverted to other areas leading to more than planned inventory in certain parts of India. In the

following month, various unfavourable factors struck simultaneously. Third party multi-year insurance

policy cover for new vehicles, sharp INR depreciation, all-time high fuel prices in India affected the
consumer sentiments. All this happened at the onset of main festivals which are celebrated across

the country leading to a slump in demand during the festival season. Dealers were carrying high

inventory as the month of December was approaching when low inventory levels are desirable. The

Company had to curtail production to avoid further inventory build-up, while supporting its dealers to

clear the high inventory through increased sales promotion. During the third quarter, retail sales

were ~90,000 more than the wholesale. The situation did not improve in the last quarter due to

factors such as terrorist strike in Jammu & Kashmir, heavy snowfall in hilly states like Himachal

Pradesh, etc.

Contrary to expectations, sales were also impacted in export markets due to country specific

reasons. The year also witnessed adverse commodity prices and foreign exchange movement. Due

to weak market situation, the Company could not take adequate price increases to neutralise the

increase in input costs. Higher expenditure on marketing and sales promotions did not generate

proportionate volume increase as demand remained low, impacting the profit margins. However, the

Company could partially off-set the impact of unfavourable factors by stepping up cost reduction

measures.

Comments on Future Plans of the Company:

During the year, the business partnership between Suzuki Motor Corporation and Toyota Motor

Corporation (TMC), Japan started taking shape. The Company is likely to benefit immensely from

this partnership by gaining access to the new-age technologies and from the mutual supply of

vehicles. The Company has always endeavoured to provide clean technology in its products. India is

at a nascent stage of using clean automotive technologies and the Company aims to be a front-

runner in providing clean technology to the mass market. Using hybrid technology is the first step in

this direction. This partnership with TMC is helping the Company to gain access to the hybrid

technology. If the Company were to develop this technology on its own, it would take considerable

time and significant investments. Also, many emission and safety related regulations are coming in

the near future requiring more resources.

Sourcing hybrid technology from Toyota could free-up the Company resources to devote them on

other priorities. Combining the global volume of Suzuki and Toyota will provide a significant scale

and make technology more affordable specially for a price-sensitive market like India. This

partnership is also bringing opportunity to increase sales volume of the Company’s models by selling

through Toyota Kirloskar Motor India. The Company is offering Baleno, Vitara Brezza, Ciaz and

Ertiga to Toyota. Automobile industry is highly capital intensive and requires lots of investments in

products, technologies and facilities. For realising adequate return on investments, increasing

volume per model and per platform is the key. This arrangement will bring in incremental volume for

the Company and help maximise volume per model/platform.