A Study in Supply Chain Management of

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Index:

1> Introduction to Automobile Industry

2> Introduction on the companies

3> Supply chain flow chart

4> Supply chain flowchart of Maruthi Suzuki Ltd

5> Supply chain process of Toyota

6> Comparison of supply chain and similarities of both the companies

The automotive industry is not only one of the world’s most important economic sectors by revenue; it
also takes up a leading role in terms of quality expectations, product variety and process complexity.
Driven by globalization and increasing customer requirements, car manufacturers are forced to offer a
large range of vehicle models and options. The enormous product variety-induced complexity and the
pressure of tough international competition make it hard to ensure efficient logistics. That is the reason
why industrial computing plays a major role throughout the entire automotive supply chain, from
allocation and storage of raw materials and components to production and delivery to timely spare
parts procurement.

Automotive supply chains are among the most complex in the world, with each vehicle
containing more than 20,000 parts originating from thousands of different suppliers. The
automotive supply chain includes multitude of Tier 1, 2 and Tier 3 suppliers or manufacturers with many
assembly operations and a number of dealerships. Customer demand for varied specific configurations
and features add to the high level of response needed from automobile supply chains. The order lead
time required by a customer is averaged at 4-6 weeks in the automobile industry.

The automotive industry is made up of supply management and physical distribution

management. The industry supply chain stretches from the producers of raw materials through to the
assembly of the most sophisticated electronic and computing technologies. The fierce competition,
fluctuating market demand and rising customer requirements is a key challenge in the automotive
industry. Lengthy demand planning cycles and lack of visibility to supplier, material, and production
constraints have caused scheduling delays and short term production changes. Customers are more
demanding and the sheer varieties of cars create an increasingly complex challenge, different
preferences and specific requirements for each car, which includes the range of body-styles, engine
sizes, colors, options etc. The automotive industry requires flexibility and responsiveness in their supply
chains.

The generic supply chain strategies are lean and agile supply chain. While leanness is most
appropriate to be used in a stable and predictable environment, agility can achieve more benefits in a
volatile and unanticipated environment. The leanness paradigm pays more attention to the low cost,
high quality and is more focused on technology and systems. On the contrary, the agility may put higher
emphasis on the flexibility and quick delivery to the customers. An agile manufacturer needs to maintain
a certain degree of buffer capacity to cope with the volatile demand and high variety of products and is
focused on people and information.
 Generic Supply Chain of Automobile Industry

Upstream Downstream

Tier
Domestic Tier N Suppliers 1Suppliers

Tier 2 Suppliers
OEM 3PLs Dealers Customer

Global Tier N Suppliers

Raw
Materials

The automotive supply chain includes multitude of Tier 1, 2 and Tier 3 suppliers or manufacturers with
many assembly operations and a number of dealerships. Customer demand for varied specific
configurations and features add to the high level of response needed from automobile supply chains.
The order lead time required by a customer is averaged at 4-6 weeks in the automobile industry. In the
Indian automotive industry, business environmental factors and Government policies effect supply chain
competitiveness to a large degree followed by cost advantage and buyer-supplier relationship. Increased
pressures on Tier-1 suppliers are related to performance expectations, lack of strategic collaboration
and lack of information. The major aspect of the OEM-auto component manufacturer’s linkage relates
to concerns regarding responsibility for design and quality besides location, cost and module design
capabilities. It is evident that on-site suppliers contribute substantially in achieving overall supply chain
efficiency through standardization of parts and cost effectiveness. Outsourcing by OEMs has also
resulted in suppliers assuming greater responsibilities in assembly and sub-assembly design and
development necessitating widespread technological advancement. Global suppliers, particularly, face
challenges of logistics, local content and quality, innovative ability of suppliers, reliability and cost.
 Maruti Suzuki Overview

Maruti Suzuki India Ltd (MSIL), commonly referred to as Maruti and formerly known as Maruti Udyog Ltd,
is an automobile manufacturer in India. The company is engaged in the business of manufacture,
purchase and sale of motor vehicles, automobile components and spare parts (automobiles)

At present, the company is sitting on a capacity to make almost 1.5 million cars a year and it is in the
process of adding capacity for another 250,000 cars. The company also pledged to invest in new, cost-
effective technologies that bring down greenhouse gas emissions of its facilities. The Company is actively
supporting the government, in laying down a robust policy framework to promote electric and hybrid
vehicles in the country. It is also part of government efforts to introduce corporate fleet emission norms for
2015 and 2020.

Maruti Suzuki

 Is India’s leading Automobile Company

 Market leader in car segment
 Maruti Suzuki India has produced and sold over 7.5 Million vehicles in India
 Company’s Revenue is over USD 243 Million

Maruti Suzuki: Continuing to remain market leader

1994 Production of one millionth car

2005 In the process of establishing Suzuki’s largest R&D facility outside Japan

2011 Roll-out of 10 millionth car

2012 Total sales crossed 1 million units in FY13

Third Tier Supply Chain of Maruthi Suzuki
Suppliers

Second Tier
Suppliers

First Tier
Suppliers

Automakers

Dealers Parts

Customers

Service Providers
 Supply Chain Description and Role Of Maruthi Suzuki

Third Tier Suppliers: Companies provide basic products like rubber, glass, steel, plastic and aluminum to
the second tier suppliers.

Second Tier Suppliers : These companies design vehicle systems or bodies for first tier Suppliers and
OEMs & Services which include welding, Fabrication, Shearing etc.

First Tier Suppliers: These companies provide major systems directly to assemblers. First tier suppliers
are responsible management of second –tier suppliers.

Last phase of supply chain:

Dealers: Vehicles after ready are shipped to the authorised dealers of the companies. The dealers then
sell the vehicles to the end customers.

Part and Accessory: These companies provide products like tires, windshields, and air bags etc. to
automakers and dealers or directly to customers.

Service Providers: Service to the customers includes servicing of vehicles, repairing parts, or financing of
vehicles. Many dealers provide these services but, customers can also choose to go to independent
service providers.
 Toyota Overview

 Toyota Motor Corporation, established in 1937, today is the premium vehicle manufacturer in
the world.
 Headquartered in Toyota city, Aichi, Japan
 It recorded unit sales of 7.7 million vehicles and net revenues of US $ 186 billion for the fiscal
year ended March 2006.
 Toyota has a total of 52 overseas manufacturing companies in 27 different locations.
 One of the largest automotive manufacturer
 Toyota Production system formed in 1950 based on just in time principle
 Toyota Kirloskar Motor Private Limited (TKM) was incorporated on October 6th 1997, as a joint
venture between Toyota Motor Corporation in India
 TKM plant is located in Bidadi Industrial Area, near Bangalore in Karnataka, where about 2400
people work together to manufacture the Innova and the Corolla.
 Toyota Supply Chain

Suppliers First-Tier customer Second- Tier customer

 Raw Materials  Dealers  End customer

 Component parts

Direct Supply

Information

Toyota supply chain consists of 4 processes.

1>Suppliers

2> Suppliers Provides parts and Components to Toyota

3> Toyota shifts their final components to the First tier customers known as dealers.

4> Second Tier customers are the End customers who goes to dealers for purchase of the car

Company Strategy

The Toyota Way: Toyotas management philosophy has evolved from the company’s origins and has
been reflected in the terms “LEAN MANUFACTURING” and JUST IN TIME PRODUCTION” which it was
instrumental in developing Toyotas managerial values and business methods are known collectively as
the Toyota way. Toyota adopted the Toyota Way in 2001, which is an expression of values an conduct
guidelines that all Toyota employees should embrace. Under the two headings of respect for people and
continuous Improvement. Toyota summarizes its values and conduct guidelines with the following five
principles.

 Challenge
 Kaizen (Improvement)
 Genchigenbutsu ( Go and See)
 Respect
 Team Work
 Comparison of Supply Chain of Maruthi and Toyota
 The entire process is IT driven and any
exception during production, Planning,
and factory dispatch can be traced and
corrective action can be taken with no
delay
 The new supply chain of Maruthi has
helped the company to achieve
substantial cost reduction, from
production to distribution
 Prime driver with the supply chain
project is to increase customer base in
the current economic breakdown
 Provides all stake holders complete
visibility of an order progress
 Updates distributors systems to
facilitate their dispatch planning
 Company has adopted the Japanese
system, just in time (JIT) to achieve
higher operational efficiencies and
reduce inventory carrying cost
 To achieve JIT material supplies, the
company has given preference to locally
based suppliers. Over 76% of the
company’s 246 suppliers are located
within 100 kms of radius
 Maruthi’s implementation of
environment friendly processes,
adoption of people friendly policies,
minimization of wastage and adherence
to quality systems ensures long term
sustainability and in-turn sustainability
 Suppliers are the Partners
 Suppliers are the integral elements of
Toyota
 They are located within 56 mile radius
 Train suppliers as per requirement.
 Kaizen and learning
 Information sharing
 Control system
 Long term partnership
 Strict cost target and timing
 Toyota production system gives best
quality, lowest cost, shortest lead time,
best safety and high morale through
shortening the production flow by
eliminating the waste.
 Continuous improvement through JIT,
People and Team work, Jidoka( Make
problem visible), waste reduction,
leveled production, stable and
standardize process, visual
management and Kanban process
(Correct flow of information)
 Toyota applies the Toyota Way to
manage dealers , based on three basic
principles: Dealers are free to
makeindependent decesions, and
Toyota can only help them to invest in
the right things to improve.
 Toyota works with one distributor in
each country
 References:

https://www.slideshare.net

https://www.ibef.org

https://www.scribd.com

http://www.marutisuzuki.com/

http://airccse.org/journal/