1.

EXECUTIVE SUMMARY

The dynamic business environment today requires organizations to effectively

use all available resources to remain competitive. The quality and cost of a product or
service offered in the market is a function, not only of the capabilities of the firm, but
also the supplier network providing inputs to the enterprise. To remain competitive,
organizations are increasingly implementing supplier development programs to
maintain capable and high-performance supply bases.

This report mainly focuses on the Vendor Development process of Godrej

Consoveyo Logistics Automation Ltd. Vendors considered for this process are from
India only. This report contains information regarding the Industry i.e. automation
industry, information about the company, and the standard vendor development
processes. Here steps involved in Vendor Development are explained.

Also, recommendations based on study includes various ways for improving the
process and various observations are drawn. Key learning includes various new things
learned from project. The conclusions are Supplier development is one of the most
powerful approaches that a firm can engage in / on the path to World-Class Supply
Chain Management. The focus should be on developing suppliers to become self-
sufficient at Developing, Implementing and maintaining World-Class performance.
Also supply management becomes the key to supply chain management ONLY through
development efforts, that go beyond the first tier of suppliers.

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 2. INTRODUCTION TO THE TOPIC

Vendor development is one of the popular techniques of strategic sourcing,

which improves the value we receive from suppliers. Vendor Development can be
defined as any activity that a Buying Firm undertakes to improve a Supplier's
performance and capabilities to meet the Buying Firms' supply needs.

Selecting the right vendor is always a difficult task for buyers and purchasing
managers. Suppliers have varied strengths and weaknesses which require careful
assessment by the purchasers before orders could be given to them. The vendor
development system is for supporting the good quality of material, delivery on time,
good service and cooperation, reasonable price, strong and close relationship to
continuously improve, etc.

The vendor selection process would be simple if only one criterion were used
in the decision-making process. However, in many situations, purchasers have to take
account of a range of criteria in making their decisions. If several criteria are used then
it is necessary to determine how far each criterion influences the decision-making
process, whether all are to be equally weighted or whether the influence varies
accordingly to the type of criteria.

Suppliers represent a critical resource to a firm providing both direct and

indirect materials and services, which are inputs to the organization’s product offerings.
The quality and cost of a product or service offered in the market is a function, not only
of the capabilities of the firm, but also of the network of suppliers who provide inputs
to the enterprise. When an organization finds its suppliers lacking in performance it can
help suppliers to develop their capabilities. There is strong evidence that organizations
today are increasingly implementing supplier development programs to improve
supplier performance and remain competitive. For example, Otis Elevator’s
(Bloomington, Indiana) supplier development program is considered a core activity for
supply management. Executives at Eaton Corporation believe that their supplier
development initiatives help drive continuous improvement through their supply base
and achieve reduced supply base costs, improved quality and delivery, increased
capacity, reduced lead times, and improved productivity. Similarly, John Deere’s
Enterprise Supply Management (ESM) group has implemented a program, ‘‘Achieving
Excellence,’’ which is geared towards fostering supplier performance improvements.

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 As the growing popularity of just in time and supply chain management, the
supplier seems to be more significant role for manufacturing to achieve their customer
satisfaction in terms of quality, delivery and business point of view. The smooth
running of production line could be interrupted by the poor quality of material. The
schedule to delivery will be affected by both poor quality of material and poor delivery
performance. Also, the manufacturing will get less profit if they select the non-
reasonable price of material, as of the material is the cost of manufacturers. In order to
achieve the Quality Manufacturing Excellence (QME), the Vendor Management
System (VMS) is the one most important factor of success. The vendor/ supplier is the
partnership that concerned to manufacturer not only the quality but also other business
issues. As Vendor Partnership Relation (VPR), it is necessary to work closely between
manufacturer and supplier as a team working such as training a supplier’s staff about
quality techniques, including a design review meeting to gain ideas on how supplier
parts can best be used, providing sale projections/ forecasts with supplier to support
their production scheduling, sharing information of accept/ reject criteria for
manufacturer and supplier, etc. Such this Vendor Partnership Relation (VPR), it leads
to establish the Vendor Management Team (VMT) at Manufacturer to assess, work,
and coordinate with the vendor partnership at a first stage of production. The supplier
development is a vehicle that can be the important factor to increase the competitiveness
of the entire supply chains. The supplier development had been studied since the
supplier selection phase, the quality of materials; good delivery performance and cost
are some of major criteria in selection suppliers.

Vendor development is an evolution in supply chain management. There is a

growing interest in generating approaches for meaningful development of suppliers so
that business could snatch long-term strategic initiatives by developing effective
partnerships with suppliers. Vendor development places priority on vendor
improvement through training, co-developing product, innovation, improving capacity,
delivery lead-time and quality of product of their counterparts (D’Lima, 2001). Vendor
rating and rationalisation based on technique, product conception, geographical
proximity, commercial capability, contractual relationship, image and technical service,
are important criteria for evaluation and selection for supplier alliances (Dzever et al.,
2001). A crucial characteristic of vendor development is the tiered and networked
relationships with the demand chain.

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 Figure 1 – Evolution of Supplier
Development Strategies
A series of evolutionary strategies STRATEGIC
SUPPLIER
Higher DEVELOPMENT

❑ Longer-term
REACTIVE orientation
SUPPLIER ❑ Supply base/
DEVELOPMENT commodity
family focus
Relative ❑ Short-term problem
Supply Base resolution
SUPPLY BASE ❑ Supplier focus
Performance/ REDUCTION
Capability
Level
❑ Drop poor
SUPPLY BASE performers
ASSESSMENT ❑ Eliminate
unnecessary
redundancy
TOTAL ❑ Supplier performance ❑ Add best-in-class
QUALITY monitoring suppliers
MANAGEMENT ❑ Supplier assessment ❑ Fix higher potential
suppliers

Lower
Time

Fig. 1 Evolution of supplier development strategies

As shown in Fig. 1, firms often begin the process of continuous

improvement through extensive internal training programs to educate company and
purchasing personnel in basic Total Quality Management principles. Training is often
carried out by quality department managers, using two to three-day seminars on
continuous improvement, customer satisfaction, basic statistics and process capability.
These initiatives later mature into a focus on the goal of assessing supplier performance.
Organizations at this level realized that in order to improve material quality and
performance, a history of supplier performance is necessary for future effective
decision-making and sourcing strategy formulation. Key measures of quality include
percent acceptable vs. rejected lots, parts per million defective, warranty percentages,
reliability, process capability ratios, percent parts rejected, and internal/external
customer satisfaction. Practices also included developing a cooperative approach to
setting specifications, listing of "problem" suppliers, definition of target quality levels,
employing common measurement systems across strategic business units, and pre-
qualifying suppliers.

Once assessed, companies often focused on consolidation of volumes with

fewer suppliers, in order to eliminate those supplier’s incapable of meeting

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expectations. Supplier databases often pinpointed those suppliers consistently unable
to perform, resulting in fewer suppliers getting more of the business. This “first cut”
of reducing the supply base is often fairly easy to implement, as non-performance is
easy to identify once an assessment system is in place. Almost all of the companies
who responded have already gone through several rounds of supply base reduction, and
are closing in on optimizing their supply base to an appropriate number of suppliers.
Many of these practices were implemented during the 1980s and early 1990s.

2.1 Standard process of Vendor-Development:

Step # 1. Identify critical commodities for development:

This is a portfolio analysis which states that not all organization required to go
for vendor development which are already using sourcing facilities from word-class
vendors or the outsourcing ratio is very small to total cost or total sales so that
investment in vendor is neither strategically nor financially justifiable. So, a corporate
level executive committee should develop an assessment of the relative importance of
all goods and services purchased by the company to identify where to focus any
development efforts. This is called critical analysis of commodities related to vendor-
development.

Step # 2. Identify vendors for critical commodity development:

After identifying commodities for development next step is to identify group of

vendors of that particular critical commodity needed to be developed. A very well-
known approach is parcto-analysis of existing Vendor performance. Vendors who are
failing to meet minimum performance objectives related to the quality-areas, delivery,
cycle time, late-delivery time, total cost, service, safety or the climate and environment
are targeted for analysis and appropriate development.

Step # 3. Formation of internal team:

Before approaching vendors and asking for improvements, it is important to

develop internal cross-functional team for the initiative. Team members come from
different departments like design, engineering, quality control.

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 Step # 4. Meeting with top-management of vendor:

After identify the suitable vendor for development and establishing a team, a
team should approach the top management of vendor and establish key area decision
related to strategic alignment, measurement and professionalism. Strategic alignment
not only means an internal business and technology alignment, but it should also focus
on customer requirement. Vendor measurement includes a total cost focus, credibility
and technical function. Professionalism involves setting a positive relationship, faster
communication, trust development, provide expertise whenever required.

Step # 5. Identify opportunities for development:

At meetings with top management of vendor executive should identify area for
improvement. Such areas are formed on the basis of customer’s expectations needs.

Step # 6. Define feasibility and viability:

After identifying the key areas for development opportunities should be

evaluated in terms of feasibility and viability and it should include resources and time-
requirements for carrying out the project and potential outcomes of this investment.

Step # 7. Joint agreement of project:

Once a potential improvement project is selected, both buyer and vendor must
reach an agreement related to the specific measures that will indicate success. These
measures may include percentage of quality improvement, percentage of cost saving
shared, percentage of delivery or cycle time improvement, technology availability and
system implementation stage. Once an agreement is reached, the project is rolled out
hopefully according to schedule.

Step # 8. Monitoring progress of project:

Once a vendor development project has been initiated, progress must be

monitored and tracked over time. This can be achieved by creating different monitoring
means, process and standards for objectives, updating progress and in turn creating new
or revised objectives based on progress till date.

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 Step # 9. Follow-up and modification:

By continuing the step (viii) we have required continuous follow-up and

accordingly it may require modification in the original plan, additional resources,
information or priorities depending upon the current situation at that time.

2.2 Barriers in effective supplier development:

1. Poor communication and feedback

2. Complacency
3. Misguided improvement objectives
4. Credibility of customers
5. Misconception regarding purchasing power
6. Lack of clarity and commitment
7. Lack of a unified approach
8. Misaligned sourcing and performance metrics
9. Concealment problems
10. Initiative fatigue
11. Resource limitations
12. "Blame the supplier" culture
13. Lack of trust
14. Confidential issues
15. Legal issues and
16. Imbalance of power in the relationship.

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 3. LITERATURE REVIEW

One of the most significant paradigms shifts of modern business management

is that companies no longer compete as autonomous enterprises but rather within supply
chains (Lambert, 2008). Related to that, the roles of suppliers have changed
significantly from simple suppliers to strategic partners (Kwon et al., 2010), and buyer-
supplier relationships have evolved from competitive to cooperative relationships
(Sanchez Loppacher et al., 2011). Consequently, supplier relationship management has
become a relevant management activity (Lintukangas, 2011), and supplier
improvement is a top priority for leading organisations (Carr et al., 2008). Suppliers
play a pivotal role in almost all companies’ operations, but what if a buying firm
encounters shortcomings in the performance and/or capabilities of its supplier? In such
cases, the buying firm can (Krause et al., 2000):

1. switch to another supplier, i.e., seek alternative sources of supply and purchase
from a supplier that is more capable and/or performs better

2. develop the supplier, i.e., invest human and/or financial resources to increase
the performance and/or capabilities of the supplier

3. integrate vertically, i.e., manufacture the component in-house

4. choose a combination of the above three options.

Companies now know that suppliers of critical goods and services can provide
major competitive benefits, in the form of lower costs, improved quality, on-time
delivery, technological innovation, and customer service. As firms seek to globalize
their businesses, they must also bring with them a capable supply base that can likewise
support these global initiatives into new markets and businesses, as well as drive costs
out of the supply chain. In our studies, we employed the following definition:

“Supplier development is a bilateral effort by both the buying and supplying

organizations to jointly improve the supplier’s performance and/or capabilities in one
or more of the following areas: cost, quality, delivery, time-to-market, technology,
managerial capability, financial viability and environmental.”

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 Supplier development can broadly be defined as “any effort of a buying firm
with its supplier(s) to increase the performance and/or capabilities of the supplier and
meet the buying firm’s short-term and/or long-term supply needs” (Krause and Ellram,
1997a). In practice, supplier development is gaining importance. A survey of 200 Chief
Procurement Officers shows that improving supplier development is a top priority for
the best-performing organisations [Carr et al. (2008), citing Checketts and Bartolini
(2006)]. In addition, the recent economic crisis has underlined the need for strong
supply chain partners and stable relationships as opposed to strategies that squeeze
suppliers, risk their bankruptcy and thus potentially harm the entire supply network.

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 4. INDUSTRY OVERVIEW

Today’s highly increasing competitiveness over the industry demands high

quality and most consistent products with a competitive price. To address this challenge
number of industries considering various new product designs and integrated
manufacturing techniques in parallel with the use of automated devices.

One of the remarkable and influential moves for getting the solutions of above-
mentioned challenge is the industrial automation. Industrial automation facilitates to
increase the product quality, reliability and production rate while reducing production
and design cost by adopting new, innovative and integrated technologies and services.

Industrial automation is the use of control systems, such as computers or robots,

and information technologies for handling different processes and machineries in an
industry to replace a human being. It is the second step beyond mechanization in the
scope of industrialization.

Earlier the purpose of automation was to increase productivity (since automated

systems can work 24 hours a day), and to reduce the cost associated with human
operators (i.e. wages & benefits). However, today, the focus of automation has shifted
to increasing quality and flexibility in a manufacturing process. In the automobile
industry, the installation of pistons into the engine used to be performed manually with
an error rate of 1-1.5%. Presently, this task is performed using automated machinery
with an error rate of 0.00001%.

Automation takes a step further mechanization that uses a particular machinery

mechanism aided human operators for performing a task. Mechanization is the manual
operation of a task using powered machinery that depends on human decision making.
On the other hand, automation replaces the human involvement with the use of logical
programming commands and powerful machineries.

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 Fig. 2 Typical Automation System

Industrial Automation is the replacement with computers and machines to that

of human thinking. The word Automation gives the meaning ‘self-dictating’ or
‘a mechanism moves by itself’ that derived from the Greek
words Auto and Matos where auto means self while Matos means moving.

In a brief, industrial automation can be defined as the use of

set technologies and automatic control devices that results the automatic operation and
control of industrial processes without significant human intervention and achieving
superior performance than manual control. These automation devices include PLCs,
PCs, PACs, etc. and technologies include various industrial communication systems.

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 Fig. 3 Power plant automation by Siemens

The above figure shows the power plant automation provided by Siemens for
achieving sustainable, safe and economic operations. It provides the total integrated
automation (TIA) by automating every section of power plant with efficient control
devices, field sensors and actuating devices. In this automation, SIMATIC modules
(PLCs) are used as control devices while WinCC provides an effective graphical
interface.

3.1 Advantages of Automation System

1. To increase productivity

Automation of factory or manufacturing or process plant improves production

rate through a better control of production. It helps to produce mass production by
drastically reducing assembly time per product with a greater production quality.
Therefore, for a given labour input it produces a large amount of output.

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 2. To provide optimum cost of operation

Integration of various processes in industry with automated machineries,

minimizes cycle times and effort and hence the need of human labour gets reduced.
Thus, the investment on employees has been saved with automation.

3. To improve product quality

Since the automation reduces the human involvement, the possibility of human
errors also gets eliminated. Uniformity and product quality with a greater conformity
can be maintained with automation by adaptively controlling and monitoring the
industrial processes in all stages right from inception of a product to an end product.

4. To reduce routine checks

Automation completely reduces the need for manual checking of various

process parameters. By taking advantage of automation technologies, industrial
processes automatically adjust process variables to set or desired values using closed
loop control techniques.

5. To raise the level of safety

Industrial automation increases the level of safety to personnel by substituting

them with automated machines in hazardous working conditions. Traditionally,
industrial robots and robotic devices are implemented in such risky and hazardous
places.

3.2 Disadvantages of Industrial Automation

1. High Initial cost

The initial investment associated with the making the switch from a human
production line to an automatic production line is very high. Also, substantial costs are
involved in training employees to handle this new sophisticated equipment.

3.3 Industrial Automation Market

Industrial automation involves using computer aided control devices to operate

different industrial processes by replacing human involvement. Global industrial

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automation market is expected to grow at USD 149 Billion by 2022, at 6% of CAGR
between 2016 and 2022.

3.4 Key Players

Siemens AG (Germany), ABB Ltd. (Switzerland), Emerson Electric Company

(U.S.), General Electric Company (U.S.), Schneider Electric SE (France), Honeywell
International, Inc. (U.S.), Mitsubishi Electric Corporation (Japan), Yokogawa Electric
(Japan), Ametek, Inc. (U.S.), Rockwell Automation, Inc. (U.S.) and Fanuc (Japan)
among others are some of the prominent players profiled in MRFR Analysis and are at
the forefront of competition in the global Industrial Automation Market. Industrial
Automation have wide range of application in several industries including oil & gas,
aerospace & defense, electrical & electronics, automotive & transportation, chemical,
pharmaceuticals, mining & metals, food & beverages and electric power generation
among others.

3.5 Regional Analysis of Factory Automation Market

Geographically, Asia pacific, North America, Europe and Rest of the World
constitute the regions of study for the global factory automation market. Among all the
regions, Asia Pacific is anticipated to dominate the global market owing to the growing
application areas on a yearly basis. Advancement in technologies along with integration
with current manufacturing environment is predicted to stimulate the market growth.
Moreover, the presence of manufacturing companies and developing economy of the
Asian countries is likely to contribute to the growth of the market during the assessment
period. The Asian pacific market is expected to generate the fastest growth led by
Japan, China and India.

North America holds the second position owing to the high demand for
semiconductor products and manufacturing. Technological advancements in this region
is also another major factor stimulating the market growth during the assessment period.
The increase in the number of industrial robots into the U.S. is expected to drive the
U.S. market for factory automation.

Meanwhile, Europe is anticipated to showcase a positive growth rate during the

forecast period due to the increasing automotive and power generation industries in this
region. The European market is expected to be led by Germany on account of its large

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automotive industry and presence of world class large players such as Volkswagen,
Mercedes Benz, Audi, and others. The high cost of manpower in these regions coupled
with the research ecology is expected to drive the market. The Middle East and Africa
market is expected to be dominated by Saudi Arabia, UAE while Africa is expected to
result in moderate growth because of small industrial base.

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 5. COMPANY OVERVIEW

Godrej Consoveyo Logistics Automation Ltd. (GCLA) is a Joint Venture

between Godrej & Boyce Mfg. Co. Ltd. and Consoveyo S.A. (Acquired by Körber AG,
Germany). GCLA is pioneer and leader in offering automated solutions for storage,
movement and handling in Manufacturing and Distribution domain in India. GCLA
offers technologically advanced customized solutions by integrating best-in-class
technologies with global partners. The company offers end-to-end automation solutions
for various industry segments such as Pharmaceuticals, Chemicals, Agro-Chemicals,
Food & Beverages, Textile, Paper, Paints, Automotive, Railways and Defense. GCLA
also exports its products and services to South East Asia, Europe and Middle East
countries.

Godrej and Boyce Mfg. Co. Ltd. (G&B) established in 1897 is one of the largest
privately held diversified industrial corporations in India with approx. 12000+
employees around the world. G&B have 15 diverse business divisions offering
consumer, office, and industrial products and services of the highest quality to every
corner of India and across the globe. The Godrej Group touches the lives of 750 million
Indians who use at least one Godrej product every single day. G&B’s commitment to
quality, attention to detail and customer centricity has helped earn the trust of
generations of Indians.

Consoveyo, S.A. is a system integrator and leading provider of automated

conveyor technology and storage systems headquartered in Porto, Portugal. The wide
range of services and integrated solutions for handling applications includes automated
storage and retrieval systems, automated distribution centres, order fulfilment systems
and internal handling systems. Consoveyo is part of the Körber Group’s Business Area
Logistics Systems.

Körber Logistics Systems GmbH, based in Bad Nauheim, Germany, is a leading

provider of fully integrated applications for the optimization of complex internal and
external logistics processes. Under the umbrella brand Körber Logistics, the Business
Area provides digital solutions for the smart factory (production logistics), the
warehouse, distribution centre, e-commerce, and management of the entire supply
chain. In three Business Units, the umbrella brand unites the companies Aberle GmbH

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and Consoveyo S.A. (System Integration), Langhammer GmbH and Riantics A/S
(Product Solutions), Aberle Software GmbH, Cirrus Logistics, DMLogic, HighJump,
Inconso AG and Voiteq (Software). They offer an extensive range of products and
services, from system integration to technologies for storage, palletizing, de-palletizing
and conveyor systems, through to software.

Körber AG is the holding company of an international technology group with

around 10,000 employees worldwide. The Group unites technologically leading
companies with more than 100 production, service and sales locations. Körber
combines the advantages of a globally represented organization with the strengths of
highly specialized and flexible medium-sized companies that offer their customers
solutions, products and services in the Business Areas Körber Digital, Logistics
Systems, Pharma Systems, Tissue and Tobacco.

Godrej Consoveyo is part of 2 strong industrial conglomerates

Godrej & Boyce Mfg. Co. Ltd.: Market leaders in India & No. 1 in storage and material
handling industry

Körber AG: Market leaders in their respective industry sectors

Godrej Consoveyo is the only Joint Venture company in India offering

intralogistics automation solutions with European technology and manufacturing set-
up in India. Godrej Consoveyo are Market Leaders with largest installed base of
Automated Storage and Retrieval Systems (ASRS) in India. Godrej Consoveyo partner
with customers across the product life cycle by offering solutions such as system
design, equipment supply, installation, testing & commissioning, system handholding,
annual maintenance contract, operation & maintenance, retrofits and upgrades. Godrej
Consoveyo has strong domain expertise in various industry segments such as
Pharmaceuticals, Food & Beverages, Chemicals, Agro-Chemical, Textiles,
Automobile, Paper, FMCG, Railways, among others. Godrej Consoveyo adheres to
high quality standards, robust software processes and efficient after-sales services
resulting in repeat orders from clients.

The total staff strength of company is about 150 employees in which about 120
employees are permanent and remaining about 30 employees are on third party payroll.

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5.1 Products:

All products are built in accordance with safety standards and guidelines, and
to provide easy handling and access to parts for maintenance, as well as optimized
energy consumption and low noise level. As a product supplier, there vast experience
has enabled them to enhance our portfolio by successfully designing equipment using
cutting-edge technology: stacker cranes, mini-loads, shuttles, automated guided
vehicles, rail guided vehicles, conveyors, among others. All these products are entirely
designed and assembled within their company, giving them an unsurpassed
understanding of the core technologies. By constantly investing in specialized product
design, they can assure flexibility, modularity and customization. No matter the load to
be carried, container type, size or weight, they have the appropriate product to meet
every customer´s specific requirements.

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 a. Stacker Cranes-

Stacker Cranes are automated machines that perform the storage and retrieval
of goods while working within the racking system. They design their Stacker Cranes to
allow full control of your warehouse activities ensuring error-free, smooth, fast and safe
storage and retrieval operations. Their own portfolio is developed to meet the market´s
latest requirements for flexibility, energy efficiency, reliability and performance.

By specifically selecting design characteristics, they ensure that their extensive

range of Stacker Cranes can operate with diverse loads up to 6,000kg in ASRS or Mini-
load systems, arranged in single or multiple deep storage configurations. They may
reach up to 45m high storage locations and achieve desired throughputs.

This equipment can also be designed to operate in special working conditions,

such as freezing, high humidity and clean or harsh environments.

There products cover a wide range of loads divided in three main categories:
Light Loads, Unit Loads and Heavy/ Oversized Loads.

Fig. 4 Stacker Cranes

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 b. Conveyors-

Conveyors are the key to ensuring a fast, efficient and accurate transportation
of goods between all operational areas. Depending on what you are conveying, be it
light loads or unit loads, they have the appropriate technology to offer. Moreover, they
are not only delivering the standardized load handling products but also able to
customize their equipment according to your specific needs. There engineers evaluate
the characteristics of the goods; the material flow diagrams and the required
performance. After this analysis, they will determine which of solutions best suits your
requirements.

Fig. 5 Conveyors

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 c. RGV (Rail Guided Vehicle)-

The Rail Guided Vehicle System is based on intelligent, high-speed and floored
rail guided vehicles fitted for a wide range of load handling applications. This
technology is an efficient, cost-effective and fast option for complex sorting
applications or connecting very distant points. It is also an interesting alternative to long
conveyor lines when the load handling units are not standardized. Their system is
formed by the Rail Guided Vehicles (RGVs) and their floor-fixed track rail (including
running rails, rail switching devices, lifts and maintenance areas, among others). In
addition, they may provide specific elements (i.e. fences, access controls or light
barriers) that are required to ensure a completely safe working environment for
operators.

No matter how complex the transport route, thanks to their modular and flexible
design, smooth and constant transportation is always guaranteed. Redundancy is also a
key factor of this handling solution, as all RGVs within the system are interchangeable.

Fig. 6 RGV (Rail Guided Vehicle)

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5.2 Company’s address:

Godrej Consoveyo Logistics Automation Ltd.

701, A Wing, Reliable Tech Park,

Off Thane-Belapur Road,

Airoli, Navi Mumbai - 400708

Tel: +91-22 6139 3800

Email: info@godrejconsoveyo.com

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 6. PROJECT DETAILS

6.1 OBJECTIVES AND LIMITATIONS OF THE PROJECT:

• To understand the process of vendor development of Godrej Consoveyo

Logistics Automation Ltd.

• To understand the criteria based on which the vendors are shortlisted.

• To understand how make or to outsource to a vendor decision are made.

• To understand how a particular vendor is selected for a particular

project.

• To give recommendations based on study.

Limitations:

• Time constraints

• Sharing of Confidential information

6.2 METHODOLOGY TO BE USED: Descriptive Research

6.3 SOURCE/S OF DATA:

Sources of Primary Data: Observations, Company’s Data

Sources of Secondary Data: Internet

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 7. DATA ANALYSIS AND INTERPRETATION

7.1 Vendor Development Process In Godrej Consoveyo Logistics And Automation

Ltd.

The vendor development process which is followed in Godrej Consoveyo

Logistics and Automation Ltd. Has a 5 major stages. In Vendor development process
mainly Procurement and technical departments are involved. Here the main focus is on
the vendors form the India. Each of this stage has significant importance in the process.
Here we have to keep in mind that vendor development process is basically building a
pool of vendors for future.

The 5 stages in the process is as follows.

Fig. 7 Vendor Development process

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 1. Collecting information about vendors
As a name suggest this stage consists of collecting the information of vendors
from various sources. These sources are Internet, vendors expos, previous experience,
information from customer about different vendors who has already worked with them.
This stage forms the base for the further process. Significant amount of time is spent in
this process. Basically, in this process we are collecting as much information we can
for further research. For example, if we have to find the vendors for palletizer then we
will look in all the sources like, we will look on internet, pamphlets received in various
vendors expos etc.

2. Analysis of vendors

After building the base i.e. collection of information the next stage is of analysis
of that information. In this stage the vendors are analysed on different parameter like
vendors experience, cost quoted by vendors, product specification, after sales service,
installation time, product flexibility, location of vendor, reputation of vendor in
industry, feedback from the existing customers of vendors, whether the vendor is a
dealer of a foreign company and many more. This is also an important stage where the
vendors bifurcation takes place. In this stage the vendors are ranked on the basis of all
the parameters mentioned above. It depends upon the company to give how much
weightage to which parameter. For some company vendors experience is very
important so that company might give 60% weightage to experience and so on. Vendors
with very poor weightage in every parameter are rejected. The top 10 vendors from the
list are considered first for further process. This data is maintained for further reference.
For example, continuing the above example of palletizer after collecting information
about different vendors of palletizer the information is analysed. Vendors experience
in the palletizer product, vendors existing customers, feedback from them, after sales
service are some of the parameters based on which company analysis the vendors. It
totally depends upon the company which parameters to evaluate.

3. Establishing the contact

After analysis of vendors next step is to establish the contact. In this stage top
10 vendors from the data base which are considered for contacting are contacted. The
communication takes place first through E-mails then through phone calls this process
depends upon how the vendor responds. In few cases vendors doesn’t responds then

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after some time period that vendor is removed from the list of top 10 after giving the
remarks and the immediate next vendor i.e. the vendor who is ranked 11th is considered.
This cycle repeats until company has at least minimum number of vendors who can be
subjected to further process.

4. Physical Visits

After establishing the contact, the next step is actually visiting the vendors
factory or manufacturing unit. For these visits technical team is send which checks the
product, verity, products specification, decision with the vendors technical team and
checking other parameters. For example, if a particular vendor has passed the previous
2 stages the technical team of a company visits the vendor company and checks for
actual products, process, product specification and so on.

5. Finalizing the vendors

After the physical visit to the vendors the technical team submits the report of
each vendor to the procurement department. On the basis of that report and other
parameters like experience, after sales service, location of vendor etc. the final decision
is taken for a particular vendor. For example, if a technical team has submitted the
report in favour of vendor than that vendor is almost finalized.

6. Vendor Registration

This is the ultimate stage in this process. After finalizing vendors each vendor
for a particular product is invited for registration separately. The terms and conditions,
policies are explained to vendors. After their approval the registration form is given to
each vendor and after submission of completely filled registration form and other
necessary documents the vendor is registered with the company.

7.2 Make or to outsource decisions

After this process also if a company doesn’t find a capable vendor for a
particular product then company can think of making that product. Also, if a product is
closely related or which is to be used with/on company’s core product line than
company can decide to make that product rather than outsourcing. Also, if a particular
product has a high cost and if that same product can be made in company with little

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modification in some process than company decides to make that product in company
only.

7.3 Selection of a vendor for a particular project.

Now the case arises of how the particular vendor is selected from a pool of a
vendors for a particular project or requirement. The choice of vendor is mostly
depending on customers preference i.e. whether customers wants a cost-effective
product or quality conscious product. Mostly customers demand a product with both
i.e. high quality and low cost than the vendor is assigned on the basis of cost and quality
i.e. which vendor which has a cheapest product but at a same time good quality. The
combination of both is mostly considered while assigning the vendor. Sometime
company chooses the vendor on the basis of flexibility of a product i.e. vendor with a
product having high flexibility is chosen. Also, delivery, location, after sales services
are some of the factors based on which vendors are assigned. Like which vendor can
provide the desired product quickly that vendor is chosen is products are required
quickly. Also, Project location is considered from both delivery and after sales services
point of view.

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 8. RECOMMENDATIONS/FINDINGS

8.1 Findings:

After studying the process of Vendor development following

observations can be made:

1. In today’s Competitive world companies are not dependent on a single supplier

or vendor.

2. Different organisations can have different vendor development process.

3. Vendors are finalised on the basis of various factors like cost, quality of product,
experience, after sales services also technical report form a technical team is
most important while finalising the vendors.

4. If a company doesn’t find a capable vendor for a particular product or if a

product has a high and same product can be made with little modification in
some existing process of the company then company thinks of making that
product.

5. Choice of vendor for a particular product depends mostly upon the customer
preference i.e. whether customers wants a cost-effective product or quality
conscious product. Also, other factors like cost, after sales service are
considered.

8.2 Recommendations:

After studying the process of Vendor development following

recommendations can be given:

1. Company have to not only focus on Vendor development but also on the
Managing Buyer-Supplier Relationship.

2. Vendor Development is a continuous process so company should review the

vendors periodically like after 1 year and so. Because market demand is
continuously changing also new products are inventing and launching market
so to be competitive company should review vendors periodically.

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3. Company should encourage vendor for continuous improvement by free flow
of information like timely feedback etc.

4. Company should focus on building the feeling of trust among the vendors by
not following the practices such as blame the vendor for any failure.

5. Also, there should proper communication between the vendors and company.

6. Company should provide necessary technical assistance in the form of Project

and Production Engineering, to maintain quality levels of product. In addition,
where required, company should help vendors financially.

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 9. KEY LEARNINGS

After studying the process of Vendor development following observations can

be made:

1. In today’s Competitive world companies are not dependent on a single supplier

or vendor.

2. This helps the companies in offering best quality product in minimum possible
time.

3. Today by doing a vendor development process companies are keeping no

inventories at all thereby reducing the inventory carrying cost substantially.

4. Due to increasing importance of vendors the companies are concentrating on

Buyer Supplier Relationships for this purpose companies are also helping
suppliers to improve.

5. Also, some suppliers feel the lack of trust due to the power imbalance i.e. mostly
the power is concentrated with company only.

6. Also, if a particular product fails at the customer end companies blame the
suppliers and do not take any responsibility. Due to this lack of trust builds in
vendors.

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 10.CONCLUSION

The traditional control-through-ownership strategies in purchasing function are

being replaced by control through relationship management strategies in supply-
demand chain management that emphasise more on the overall performance of local
and extended supply-demand chains. Vendor development put forth a more intense
effort by organisation to create a competitive edge over its rivals in the market place.
The supplier-marketer alliance requires greater emphasis on vendor rating and
selection, communication and information exchange, higher levels of involvement in
vendor improvement activities, and establishment of networked relationships for a
significantly longer time period. The vendor development process is one of the most
important process that every organization should follow to remain competent in market.
Also, vendor development process should be followed with strict adherence to policies
of company and without any personal bias.

For an effective vendor development approach, a conceptual synthesis

framework that links vendor structures to demand chain management should be
introduced. These strategies recommend different emphasis on the critical elements of
vendor development such as structure, strategy, technology, relationships, and tasks.
Strong management commitment to develop closer relationships with suppliers through
strategic purchasing effort is found to contribute significantly to higher customer
satisfaction. The results revealed that both entities in the integration experienced
excellent increase in performance and quality of the value chain. Supply-demand chain
activities affect the income statement, balance sheet and cost of capital. The supplier-
marketer integration approach has significant financial implications on cost
management, reduction of expenses, generation of better returns on capital, increase
customer satisfaction and improvement in cash flows. These benefits are achievable
through cycle time compression, system-wide cost reduction, and improved value for
end customers in the implementation of supply-demand chain integration through a
well-organised and well-developed value chain logistics.

Therefore, Supplier development is one of the most powerful approaches that a

firm can engage in / on the path to World-Class Supply Chain Management. The focus
should be on developing suppliers to become self-sufficient at Developing,
Implementing and maintaining World-Class performance. Also supply management

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becomes the key to supply chain management ONLY through development efforts, that
go beyond the first tier of suppliers.

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 11. BIBLIOGRAPHY

1. A. Seetharaman, A. Ali Khatibi and Wu Swee Ting, “Vendor development and

control: its linkage with demand chain”

2. Wan H., Wan M., Nurulain Mat Tahar, Mohd Nizam Ab Rahman and Baba Md
Deros (2010) “Supply chain enhancement through product and vendor
development programme”

3. Garrett and Karen (2003), “Four steps to successful vendor management”

4. Jose Benedicto and B. Duhaylongsod (2013), “Vendor Financing and Its Impact
on Vendor’s Optimal Policies”

5. White, Sarah K. CIO (2019), “What is vendor management? The key to

productive vendor partnerships”

6. Eric Sucky and Sebastian M. Durst (2013), “Supplier development: Current

status of empirical research”

7. Subrata Chakraborty and Tiny Philip, “Vendor development strategies”

8. Sachin B. Modi and Vincent A. Mabert, “Supplier development: Improving

supplier performance through knowledge transfer”

9. S. Yahya and B. Kingsman (1999), “Vendor Rating for an Entrepreneur

Development Programme: A Case Study Using the Analytic Hierarchy Process
Method”

10. Robert Handfield, “Executive Report of Key Results of Recent Research on

Supplier Development Strategies and Outcomes”

11. Mandar Chaudhary (2016), “AN EFFECTIVE VENDOR MANAGEMENT

SYSTEM”

12. http://www.indianmba.com/Faculty_Column/FC136/fc136.html

13. http://www.engineeringenotes.com/supply-chain-management/process-of-
vendor-development-9-steps-management/15180

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14. https://www.electricaltechnology.org/2015/09/what-is-industrial-
automation.html

15. https://en.wikipedia.org/wiki/Automation

16. www.godrejconsoveyo.com

17. www.plantautomation-technology.com

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 12. PROJECT PROGRESS REPORT
Name of the Student: Tushar Nikam Class & Roll No.: MMS-29

Project Guide: Prof. Sagaljit Kaur

Project Title: To study the vendor development process in Godrej Consoveyo

Logistics Automation Ltd.

Sr. Next Meeting Student Project Guide

Date Topic Discussed
No. Date Signature Signature

29-03- Introduction to
1 ---
2019 Project format

16-05-
2 Project Synopsis ---
2019

13-06- Visit of Guide in

3 ---
2017 company

Methodology, Report
21-06-
4 to be submitted in ---
2017
industry

17-07-
5 Literature review ---
2019

22-07- Checking of Report,

6 ---
2019 Executive Summary

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 13. SUMMER INTERNSHIP PROJECT SYNOPSIS

Student Name: Tushar P. Nikam Class & Roll No.: A-29

Specialization: Operations

1. PROJECT TITLE:

To study the vendor development process in Godrej Consoveyo Logistics

Automation Ltd.

2. OBJECTIVES AND LIMITATIONS OF THE PROJECT:

• To understand the process of vendor development of Godrej

Consoveyo Logistics Automation Ltd.

• To understand the criteria based on which the vendors are

shortlisted.

• To understand how make or to outsource to a vendor decision are

made.

• To understand how a particular vendor is selected for a particular

project.

• To give recommendations based on study.

Limitations:

• Time constraints

• Sharing of Confidential information

3. METHODOLOGY TO BE USED: Descriptive Research

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 4. SOURCE/S OF DATA:

Sources of Primary Data: Observations, Company’s Data

Sources of Secondary Data: Internet

5. DATA COLLECTION INSTRUMENT: -

(Approved/Not Approved) Date: ____________

Project Guide: Name & Signature: Prof. Sagaljit Kaur

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