The case study of Maruti Suzuki Limited shows how they built their supply chain

network from the ground up. They used a variety of tools and management techniques to get
a competitive advantage over their competitors, which is detailed in this report.

When Suzuki first arrived in India, the low quality of the industry's sub-suppliers was
a major obstacle to better performance. As a result, Suzuki assisted Indian auto component
manufacturers in upgrading their technologies. IT set out to build a supplier network that
would be capable of supporting an operation that bought a large proportion of the value of its
automobiles from its suppliers, despite the fact that it was located on a greenfield location
away from conventional auto production zones.

Vendors were promised substantially bigger volumes by Maruti, with a production

capacity of 100,000 units per year. Because of Suzuki's engagement with Maruti and the
adoption of Japanese quality standards, there was a demand for high-quality products, and no
vendor's component could be accepted unless it fulfilled a certain standard.

With Suzuki's entry into India, Maruti helped suppliers recognise that consistency in
following the approved manufacturing technique was the key to quality. When Maruti began
production, just a few suppliers believed Maruti could reach a production level of 100,000
units in five years.

Maruti Suzuki was effective in boosting the Indian vehicle sector, setting a
benchmark for other local companies to follow, and fostering small-scale businesses by
establishing supplier relationships with them (Okada 1998).

Furthermore, because the maximum foreign investment authorised at the time was up
to 40%, the topic of Japanese component manufacturers establishing their own company in
India did not arise. Maruti management considered vendors as significant partners with
whom they collaborated and adopted an interdependence policy.

Maruti had a lot of troubles with suppliers in the beginning. One of them was a
supplier's inability to deliver the specified quantity of component on time. As Maruti boosted
its output, most component manufacturers were unable to supply the demand in a timely
manner. Maruti subsequently opted to get even more involved with its suppliers, founding
joint ventures to produce components that were important to the vehicle's quality, were
cumbersome to transport, or required high technology and a huge investment.

India's reduced salary and manufacturing costs provides additional justification for
growing component indigenization and development. In a short amount of time, forty joint
venture and technical agreements between Indian and Japanese component producers were
struck. Maruti Suzuki has placed a strong emphasis on local suppliers and local procurement
of parts since its inception. When Maruti Suzuki adopted the JIT (Just in Time) system in
India, it gave preference to locally based suppliers in order to achieve JIT in material supply
totally. It also helped vendors relocate within a 100-kilometer radius of its operations. Both
the Gurgaon and Manesar facilities feature neighbouring Suppliers' Parks where bulky
components such as instrument panels, fuel tanks, bumpers, and seats have been constructed
by selected suppliers. By value, over 78 percent of the supplier base is within a 100-kilometer
radius of the organisation.

(1) Reduced price through economies of scale

Maruti Suzuki was tasked with creating a "people's automobile" that was both less
expensive and of higher quality. Maruti Suzuki concluded that producing a cheaper car would
be impossible if it couldn't secure quality components from local suppliers.

(2) Quality Improvement

Maruti assisted its suppliers in improving their quality by ensuring that they followed
the required method consistently and taught them how to embed quality into the
manufacturing process. Maruti later implemented a vendor rating system to assess
organisations based on quality, number of rejections, delivery timeliness, and general
attitude. They were also evaluated on a regular basis for the efforts they were taking to boost
productivity, upgrade technology, and lower production costs.

(3) Others

Maruti Suzuki also assists its supplier in other areas. For example, in 2012, Maruti
purchased Rs 5000 crore in forex insurance from the Reserve Bank of India on behalf of its
suppliers, who accounted for the majority of the Japanese imports used in its vehicles (Ghosh,
2012).

 8 reasons for supplier development

Maruti Suzuki's large investment in its supplier development programme might be
attributed to a number of causes. Maruti Suzuki has worked hard to establish solid and tight
relationships with its first-tier suppliers, holds equity in important suppliers, and encourages
technological collaboration between its suppliers and Suzuki's suppliers in Japan. The
following variables are the primary drivers of supplier growth and agglomeration in the NCR
region.

１. Phased Manufacturing Program

２. Poor Quality of Auto Component

３. Foreign Exchange Rate

４. Just in Time (JIT) System

５. Government Policy of Protection

６. Location

７. Tax System.
 Conclusion

The Indian automobile industry has always been very competitive, and it will
continue to be so. Continuous supply chain and logistics management improvements will
improve the overall efficiency of the entire supply chain and provide numerous benefits to
all. MSIL has been adapting to the changing market and modernising its supply chain. In
terms of lean operations, supplier integration in the value chain, cost reduction, inventory
reduction, and shorter transit times for produced vehicles, the modifications introduced have
benefited all suppliers. MSIL will be required to be flexible and sensitive in its approach to
supplier development in the future, as it will face new obstacles. More over it will be critical
to introduce innovations on a regular basis in order to improve operational efficiency, quality,
and cost effectiveness.