Executive Summary Automotive Axle Ltd. AAL is a is a Joint Venture Company, promoted by ARM, (35.

5% shareholding),the Kalyani Group, Pune (35.5% shareholding) and the rest(29%) public. They are one of the major Tier 1 suppliers to all the Medium and Heavy Commercial Vehicle OEMs. The schedule for components in Indian Medium and Heavy Commercial Vehicles industry is largely dependent on two factors 1. Off take of stock by dealers and 2. Rate of supply or schedule adherence by the Tier 1 suppliers The OEMs ask for quantities more than what they need to make sure that they get the required quantity even if the Tier 1 suppliers fall short by a bit. As soon as they realise that the supplies are smooth and meeting the schedule they will revise their schedule and cut their demand. This in addition with the off take of dealers makes the demand for Tier 1 suppliers very unstable. As a result of this Automotive Axles Ltd experience at least 4 to 5 schedule changes from the OEM customers. This variability in demand has created problems in the internal as well as external supply chain. Typically what Automotive Axles Ltd. does is taking the first revision received by 20th of the previous month as the basis for running the MRP system for the month. Based on the MRP, the supplier schedules to Automotive Axles Ltd. suppliers are sent and internal manufacturing orders are released. The root cause of the problem here is the variability in demand which is creating all the other problems. The only way out is to smoothen out the demand in one way or the other. The demand fluctuation due to the off take of dealers is something which is out of our control. So that variation is something we cannot address. But the variation due to the mistrust between the OEMs and Tier 1 suppliers is something we can work on. One of the suggestions we have is to integrate the production schedules of both the OEMs and Tier 1 suppliers. They can use electronic Kanban systems(move Kanban) to bring the OEM production and Tier 1 supplier production in sync. Along with that the relationship with the OEMs need to be improved to increase the level of trust OEMs have on Tier 1 suppliers. Both these measures will reduce the variability due to the communication gap between the OEMs and suppliers. On the Tier 1 suppliers end, we can mine historic data and find any trend in order revisions for each OEM. In addition to that we should also take into consideration the usual variation in the demand due to dealer off take and base our MRP system on the forecast instead of the first revision figure the OEMs sent which will still be subjected to many revisions. Once we have found some strong trends in that we can use that figure with the MRP system for the scheduling of the production. Keeping in mind the forecasted demand, we need to come up with weekly commitments that would take care of the future revisions.

Discount can be provided for giving less variation in their demand. If the variation between the starting demand and actual demand is within a permissible range, we can give a discount to OEMs. This will encourage them to give a better demand forecast, and help Automotive Axles Ltd schedule its production better. In order to increase their efficiency lead time some of the processes can be reduced. There is scope for improvement on external supplier/outsourced party end like Gear Steel Supplier, Pinion Steel Supplier and Bearings supplier. Because of the high lead time we end up holding large amounts of inventory which just pushes up the inventory cost. We have to analyse the different alternatives and find out the cost and benefit resulting from each of that and then make a decision on implementing it.