Internat ional Journal of Applied R es ea rch 2015; 1(1 0): 40-54

ISSN Print: 2394-7500

ISSN Online: 2394-5869
Impact Factor: 5.2
Lean practices and supply chain trends in Indian auto
IJAR 2015; 1(10): 40-54
www.allresearchjournal.com
industry
Received: 27-07-2015
Accepted: 27-08-2015
Mrunalini D Dodkey, Quazi Khabeer
Mrunalini D Dodkey
Faculty, Symbiosis Institute of
Abstract
Operations Management, Nashik,
India Purpose: This paper focuses on studying existing supply chain management trends in SME’s of Indian
Auto Industry and its preparedness to adopt lean supply chain management practices.
Dr. Quazi Khabeer Design/Methodology/Approach: The study is based on capturing the qualitative data through
Associate Professor, Mellinuim interviews during company visits and quantitative data collected by means of questionnaire response
Institute of Management, building. A case study approach is used to understand the lean practices that are adopted in the auto
Aurangabad, India Industry.
Findings: The trends of supply chain practices in Auto Industry considering various stakeholders and
business practices used across entire value chain are more or less uniform. The SME’s by their capacity
and constraints are more or less governed by OEM’s and Tier I suppliers. The Tier 1 suppliers play
major role in binding the SME’s due to the fact that OEM’s are interested in buying the complete
assembly from Tier 1 suppliers barring few cases. While the culture of lean supply chain management
is need of the hour, the industry maturity is reached only up to lean manufacturing or operational
excellence at own premises as far as SME’s are concerned.
Research Limitations / implications: The focus of study is limited to Teir 1 & Tier 2 suppliers of 4
big OEM players viz. Mahindra & Mahindra, Bajaj, Tata Motors and Maruti Udyog limited. The scope
is to identify existence of lean practices across the entire value chain of supply chain.
Practical implications: Although supply chain management is getting prime importance in today’s
business world, penetration of best SCM practices is far away from reality. While the intent of SME’s
is always to adopt good practices, they are so much bogged down by their day to day activities and
confined by limited resources that SCM participants at the far end of the value chain do not add much
value thereby losing its rigour.

Keywords: OEM, Auto Industry, SME’s, SCM

1. Introduction
Over past few years the Indian Auto Industry has seen the boom in the market and similar
trend will continue for few more years to come. While the industry is becoming more
competitive and demanding, the players are finding new ways to earn their pie. No wonder,
global scenario is also experiencing the same pressure and hence low cost manufacturing
base is the destination for OEM. That is where developing countries like India and China are
getting the advantage of the situation. With digitization of technology on the forefront and
expectations of customer for more sophisticated features like increased fuel efficiency,
longer vehicle life, better performance, the OEM’s are always finding challenge to fulfill the
customer’s demand of having power packed features in the vehicle at most competitive price.
Since operational excellence at organizational level is considered as a hygiene factor these
days, the industry is now looking for optimizing& enabling the processes, consolidating
business entities, leveraging on expertise of partners and make the entire value chain lean
and agile. Essentially this means looking at the process that cut across the various
organizations that are the backbone of the industry. Supply Chain Management is one of the
areas that play a vital role in the entire dynamics of the industry. Supply Chain Management
is evolved over the years and is looked at as a strategic business function rather than looking
Correspondence
Mrunalini D Dodkey
to it as a logistics and distribution function. No wonder these days lean manufacturing has
Faculty, Symbiosis Institute of become necessity and is practiced by each and every organization, big or small that
Operations Management, Nashik, constitutes the part of value chain.
India
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Different industries have different peculiarities and issues by Especially Maruti Suzuki India Ltd has taken a benefit of this
nature of its operations, customer needs, global reach and and has helped many suppliers to establish their facilities in
industry maturity (Niranjan Mudholkar, Editor& Chief DELHI NCR region. Considering these facts, the paper
community officer, www.machinist.in). Thus supply chain discusses the lean supply chain management practices
management although a common business function amongst the SME’s that are contributing to 4 big OEM’s
applicable to each industry the practices and processes that that are established under this scheme. The research is not
are followed within the industry do vary across each domain. only limited to the operational excellence that is practiced
inside the organization but it tries to study lean practices that
The Government of India is obliged to strengthen the SME’s are established across the supply chain.
that are the backbone of countries economy. National
Productivity Council is apex organization oriented to 2. Literature Review
promote productivity in all sectors of Indian economy The automobile industry has matured over a period of time
(http://www.npcindia.gov.in/). This is an autonomous non- and has established its working model by creating an
profit body established under Ministry of Industry, Govt of ecosystem that is complimentary to both suppliers as well as
India 1958. The council offers various services in the area of customers. However Kehoe and Boughton (2001) have
consultancy, training, research, productivity and promotion observed that the power within the auto sector lies very much
and other International services. The idea is to enhance within the brand owners rather than with the dealers or the
productivity for improved triple bottom line. Under this first or second tier suppliers. That is why OEMs dictate their
council, Lean Manufacturing Competitiveness Scheme terms on smaller partners. It is well known fact that most of
(LMCS), for Micro, Small and Medium Enterprises is the SME’s are governed by the big players and to certain
practiced. Several sectors are selected where this scheme can extent exploited by them because of their inability to develop
be promoted by OEM (in case of auto), primary the business model with big giants (Arend and Wisner,
manufacturer (in case of pharmaceutical) etc. A financial 2005).
support by Govt. of India upto a maximum of 80% of Pertaining to Indian auto industry, literature review reveals
consultant fees for each Mini Cluster is provided. The that SME’s play a secondary role when it comes to tying up
remaining 20% to be borne by beneficiaries of MSMEs. with the value chain even though it is a well-known fact that
Major OEM’s are found to be the beneficiary of these they are very important part of entire supply chain. Some of
initiatives. In addition, Ministry of Heavy Industries and the issues gathered from literature review about Indian
Public Enterprises has come up with the Automotive Mission SME’s are:
Plan (2006-2016) to boost the Automobile industry.

Sr # Problems Reference
Customers are demanding more of modular products but this has not yet been
1. started because of inadequate infrastructure and preparedness on the side of local Jitesh Thakker et al, 2013
suppliers
It is observed that the Indian industry, on an average, maintains an inventory
2. turnover of 10.9 turns for raw materials and 22.7 turns for finished goods in the Sahay et al. 2003
supply chain, which is very high as compared to global standards
The downstream constituents of the supply chain namely carrying and forwarding
3. agents (CFAs), distributors, and retailers are major carriers of inventories. There is Sahay et al. 2003
no strict control on these inventories
Some of the peculiarities of Indian automobile sector are: large number of auto
assemblers, low-technological capability, poor quality, lack of reliability in terms
4. of delivery, large number of players in automobile component sectors, small Sahay et al. 2003
capacity of auto-ancillary firms leading to shortages and lack of availability of
components, and lack of partnership among partners in the SC.
Missing Balance Score Card View of SCM for SME's : Finance, Customer,
5. Brewer and Speh (2000)
Learning & Growth, Internal Processes
The missing clarity on SCM is bottleneck in SME industry. Purchase department
6. JiteshThakker et al, 2013
was renamed as supply chain department.
Automation of SCM partners is a still not a reality. (Small players can think of e- ParikshitCharan
7.
Nagare is an electronic version of Kanban) system Summary
SME's Lack of familiarity with the technology and its benefits, and barriers related
8. (Tiessen et al., 2001).
to high costs and security concerns were found to be significant
The E-commerce has created new opportunities and challenges in the sales and
9. procurement of the product and its components. Trust is necessary for information RanjanTayal, 2013
sharing among the various partners of a supply chain
Most ERP solution providers extended their suites to include basic reporting and
10. RanjanTayal, 2013
analytics rather than having dedicated BI solutions for SMEs.
11. Missing holistic view of SCM and Performance Measurement (Saad and Patel, 2006).
ParikshitCharan
12. Disparity in trading partner’s capabilities
Summary
SME's do not have enough resources to employ at various stages of the chain and
13. hence often concentrate on individual components for optimising their internal NiranjanMudholkar
operations
14. Each industry vertical has a unique set of issues NiranjanMudholkar
15. SMEs in general are not able to implement SCM to its full extent, mainly because (Arend and Wisner, 2005

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they are managed at arm’s length by larger customers and have to follow the norms
stipulated by the buyer
Significant gap between SMEs and LEs with respect to implementation of state-of-
16. Arend and Wisner, 2004
the-art tools and systems supporting effective and competitive supply chains.
Missing Organisation culture: To create a sustainable supply chain and sourcing
process means having a clear business code of conduct - a standard set of rules that
17. is geared towards improving a company’s triple-bottom-line: PEOPLE, PLANET firstcarbonsolutions.com
AND PROFIT. Every effort or initiative should contribute to protecting the people
and preserving natural resources while ensuring revenues remain intact.
Missing Communication: Communication seems to be a key tool for ensuring the HieuguyenTrung
18.
efficiency of supply chain of cooperation as perceived by SME MekdesBelihu
SME perceives that the usual difficulties they confront are less bargaining power,
HieuguyenTrung
19. barriers to satisfy new demands from customers and the change in customers’
MekdesBelihu
decisions.
The management structure in SMEs is often lacking specific departments and
employees have multifunctional roles, working in many different situations and
less clear assigned responsibility (Bodin, 2000). There is low degree of job
20. Bodin, 2000).
specialization with more generalists. The coporation of different functions is not
clearly seen in SMEs, because functions are less specialized and less likely to be
separated by physical and organizational distance
A majority of respondents, around 45%, put Inventory Reduction in the top slot in
their list of supply chain issues. This was also corroborated by the fact that around
70% of respondents were carrying more than 30 days of inventory. Supplier
cgn-Business Performance
21. management came second at 40%, while working capital reduction came third at
Consulting, 2009
17%. Indian industries are in need of optimization tools and better process
modeling in order to exploit available resources and sustain lean
operations
Demand planning was found to be another area offering scope for improvement, as
around Demand planning applications that are presently available are not designed
to respond to the real-time needs of today's fast-paced market. They are neither
precise nor responsive enough to drive programs such as "the perfect order," "just- cgn-Business Performance
22.
in-time" or "lean."40% of respondents said that mismatch between forecast and Consulting, 2009
actual production is in the range of 20% to 40%. This area has good potential for
improvement through the introduction of demand planning using statistical
methods.
The primary differences between large firms and SMEs are in the scope of
information and product flows. Large firms have a much larger scope for these (Lambert and
23. flows, through the complex relationship requirements within their supply chains. Cooper, 2000; Powell, 1995; Tsang
Large enterprises may formalize their documentation system practices and tend to and Antony, 2001
be more timely in exploiting available technologies, in contrast to SMEs.
Superior features and quality, as well as superior customer service, are ways that
24. SMEs often use to differentiate their products and services from those of the more (Porter, 1985).
commoditized
Supply chain inefficiency is one of the most prevalent issues facing the small-to-
25. (Lewis, 2005).
mid-size enterprise
Supply and process costs represent 30 per cent of an average manufacturing SME’s
budget and logistics cost incurs about 40 per cent of total supply spending. On the
other side, SMEs are now more and more taking part in the global business
network participating in many interlinked supply chains (Hvolby and Trienekens,
26. ( Jonh and Riley, 1985)
2002). But sustainability and ability to meet changing needs for SMEs are
questionable when they do not have much flexibility in setting prices being a
supplier to large organizations and for this, streamlining of their supply chain
activities becomes equally important.
SMEs do not have the means to conduct detailed analysis nor do they have
27. Wagner et al., 2003
the time or resources to take away from day-to-day business
Management of risk across the supply chain is key to business sustenance and cgn-Business Performance
28.
continued profitability. Consulting, 2009

The above facts initiate the need to go into the deep of the 3. Research Methodology
issues and identify the health of SME’s in auto industry. This paper will use exploratory research method to
Couple of papers are available in the Indian context as far as understand the core issues of SME’s and their contribution to
Supply chain issues are concerned. However literature the entire supply chain of Auto Industry. The exploratory
review does not mention about the trends of different OEM’s research will help to analyze the practices that are adopted in
and their supply chain practices with respect to their a particular region, by a particular OEM. The exploratory
suppliers. research will also help to formalize the theory and identify
the constraints that will formulate the hypothesis for further
research. Once the analysis of these practices is done, the
instrument in form of questionnaire can be floated to do the
quantitative analysis of the problem to understand the detail
working model of these OEM’s and study the various trends
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with respect to SME’s customer sensitivity, SME’s Working Model of OEM1 Ltd and Tier 1 supplier,
operational excellence issues, and SME’s preparedness to Aurangabad
move towards lean and agile framework. Tier 1 supplier Group located at Waluj, Aurangabad is a
A case study base approach is the most advisable since it supplier to this OEM. This group diversifies into making of
involves discussing with the real practitioners in a most automotive components, sub-assemblies for two, three
natural manner and identify the real and unnoticed facts and wheelers and four wheelers and caters to domestic as well as
experiences (Eisenhardt, 1989; Meredith, 1998). Multiple global market. The group has two main business units named
case studies are discussed in the paper to ensure that the facts as Polymers and Engineering. Till recently, the main focus of
and analysis are validated with sufficient data (Voss et al business was on capturing two and three wheeler market in
2002). The selection of case study for the purpose of this India and abroad narrated the senior manager. With
paper ensures the spread of Auto manufacturers mostly in increasing market potential in four wheelers industry, tier 1
Maharashtra region. However Maruti Udyog Limited is supplier is now concentrating on becoming a preferred
added to the scope since it is a leading passenger car supplier for 4 wheeler components as well.
manufacturer with proven industry bench mark practices. Tier 1 supplier has realized the market competitiveness and
The trends of other OEM’s can hence be better compared. pressures in terms of cost, quality and speed to market.
The researcher has selected following Auto industry players Hence TPM, lean manufacturing, and automated
1. OEM Manufacturer (1), Aurangabad manufacturing has now become the DNA of organization
2. OEM Manufacturer (2), Nashik says quality manager. Other lean concepts like JIT, Pull
3. OEM Manufacturer (3), Pune system, MSMED, VSM are practiced as a part of culture.
4. Maruti Udyog Limited, Gurgaon
Tier 1 supplier: Way of handling its Suppliers
No major thrust is given on studying the practices of OEM During last decade, this Tier1 supplier was dealing with
since the scope is limited to SME’s of Auto Industry. Hence almost 300 to 500 suppliers to manufacture its product range.
the starting point is Tier I suppliers and upstream thereon. Most of the suppliers were small and medium scale
The initial meetings happened with the senior management industries located nearby tier 1 supplier and were thriving on
of tier I company who are decision makers and can influence it. With the market pressures and need to deliver the best
the tier II and tier III companies. The first visit consisted of quality products at most competitive rates, tier 1 supplier
introduction of Tier I organization, followed by plant visit to realized the need to rationalize its suppliers and rely on only
understand the linkages between OEM, tier I and tier II those who can withstand the quality requirements of ISO
(SME’s) companies. This was followed by visiting the tier II, 14001, TS 16949 certification. The company focused on
tier III companies to know the ground realities and optimizing manufacturing operations to the extent that one of
operational practices that are followed in the different their plants has secured “Gold” rating for manufacturing
regions of auto industry. excellence from Frost & Sullivan adhering to global quality
standards.
CASE 1 Tier 1 supplier, executives are proud in mentioning that
OEM1 group is diversified into many areas that include KANBAN principle which is nervous system of “Lean
automobiles, home appliances, lighting, iron and steel, Manufacturing” is applied to supply chain for internal
insurance, travel and finance. OEM 1’s one of the flagship material movement as well as shipment to customers
group is into the business of manufacturing two wheelers and ensuring maximum efficiency. JIT is followed with all major
three wheelers and is well known across various countries OEM’s eliminating the inventories of components and sub-
like Latin America, Africa, Middle East & South East Asia. assemblies. For overseas customers, warehouse facilities
This group has three plants viz Waluj, Chakan and Pant located at their manufacturing locations ensures that supply
Nagar. is done on JIT basis. The executive further mentioned that in
order to control the internal material flow, a system of two
The plantwise production for the year 2013-14 is as below bin Kanban (PULL) is uniformly implemented across all the
plants ensuring maximum efficiency, minimum cost and
Plant-wise capacities (in numbers) and product range shortest possible lead times.
Plant FY2014 Product Range An interview with Group Associate Vice President
Boxer, Platina, (Corporate Materials) revealed that advanced supplier quality
Discover, management system with real time visibility in suppliers
Motorcycles 2,100,000
Pulsar and Three processes and product quality is where 1 tier supplier is
Waluj wheelers gaining the competitive position in the market. Tear down
Three-wheelers 600,000 exercises to find out the root cause of quality issues going
RE 60 60,000 deep down to the supplier delivery and understanding the
Waluj subtotal 2,760,000 supplier issues, helps to benchmark the practices to ensure
Pulsar, Avenger that supplier understands the quality expectations and thus
Chakan 1,200,000
, Ninja and KTM
owes the responsibility in making the final product. Further
Pantnagar 1,800,000 Platina and Discover
talks revealed that Supplier system assessments are carried
Source : Annual report 13-14
out through audits to verify the supplier’s quality
The facility at Waluj located in Aurangabad is mainly into
management systems, manufacturing processes, material
manufacturing of Boxer, Platina, Discover, Pulsar and Three
handling and compliance to overall specifications. Tier 1
wheelers.
supplier believes that supplier is a part of extended family
and hence equally equips them with all the best practices.

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. In this case, there exists a separate focus group on supplier CASE 2

upgradation that ensures use of best practices like TPM, lean OEM 2, headquartered in Mumbai has its plant in Nasik,
manufacturing etc. so that supply chain partners inculcate the manufacturing Xylo, Quanto, Bolero, Scorpio, Verito, XUV
values of tier 1 supplier and add value to the final product. 500 etc. The average number of parts that goes in complete
During interview it was noted that “Excellence Award assembly of passenger car is in the range of 3000 to 5000.
Scheme” to appreciate supplier’s efforts in achieving The major components are in form of assembly e.g Engines,
remarkable success in quality and adopting perfection is a brake system, transmission system, wheel assembly,
motivation to all its suppliers. electrical system & seat system and metal body etc. The seat
The rationalization of suppliers was one of the exercises assembly for OEM 2 passenger cars is provided by Tier 1
carried out to identify and support the suppliers that form the supplier who is the leading global supplier of automotive
backbone of upstream Value Chain. seating and electrical power management systems. This Tier
One such supplier who won the quality award at the hands of 1 supplier has its plant situated in Nasik and nearby place
Managing Director of tier 1 supplier is Sanjay Techno Gonde and supplies the seat assembly to OEM 2 on Just in
Product. Located in the Waluj MDIC at Aurangabad, Sanjay Time basis.
Group manufactures motor cycle parts, mirror components,
suspension parts. Certified with ISO/TS 16949 certification Working Model of OEM 2 & TIER 1 supplier 1, Nasik
and having extremely efficient facility, the group processes The initial discussion with Top management of Tier 1
40 different types of engineering plastics. With recognition supplier reveled that, OEM2 2 is situated in the vicinity of
from government of Maharashtra in 2008: “Best Industry in around 50kms. Over the years, the upstream operations
District”, Appreciation from tier 1 supplier Group, and First between this OEM2 and tier 1 supplier are so evolved that
Price for work in 5s by Quality Circle forum of India, Sanjay production at supplier happens on the tunes of OEM. OEM
Group has already created a benchmark in adopting quality shares the Production plan with supplier on the monthly basis
processes amongst SME’s. This talks about the ownership depending on the market demand. This high level plan is
that small and medium scale industry is having towards the then broken down into daily plan which is confirmed to
industry. supplier by automatic updates. This then decides batch size
of that day which ensures that supply of seat assembly to
There is no dearth of problems in achieving the end results, OEM is on JUST IN TIME basis. Supplier has dedicated
says one of SME’s chief. He stated that being SME, they vehicle lined up for OEM so that as soon as seat assembly is
are sandwiched between their suppliers as well as customer. ready it directly picks up them from line and loads them onto
While there customer, is in near vicinity and demands auto ever ready hungry assembly line of OEM thereby eliminating
component on JIT basis, they are at the mercy of their the inventory.
supplier who is not in the vicinity and is the big player. This
SME being quality conscious and driven by tier 1 supplier, TIER 1 supplier Cluster: A Vehicle for integrating the
cannot compromise on quality. Hence they source main raw SME’s
material i.e. plastic from Reliance Industries, Hajira. Hajira Upon visiting Tier 1 supplier plant and few SME’s nearby
plant being located far off from Aurangabad, many a times following information was gathered.
goods in transit are not locatable and hence create problem Tier 1 supplier in Nasik is heading the supplier cluster under
while fulfilling the orders on JIT basis. In order to avoid such the scheme of National Productivity Council since last few
situations, this SME has to keep a raw material inventory in years. This cluster comprises of 25 to 30 small SME’s. A
anticipation of these issues. typical framework required to formulate the cluster includes
The representative list of OEM1’s supplier is as under. following steps.
 Sanjay Group
 Sanjeev Auto Parts
 Aurangabad Auto Ancillary P Ltd
 Automobile Products Of India Ltd
 Marathwada Auto Compo P Ltd.
 Bombay Industrial Enterprises

After discussions with few SME’s in this region, it is evident

that some of the typical problems that are bothering SME’s
are
1. Purchasing issues like on time delivery by supplier’s
supplier
2. Right quantity of material from supplier’s supplier
3. Pilferage of inventory items
4. Lack of integrated process and systems view
5. Lack of IT systems
6. Lack of visibility on goods tracking during transit

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Fig 1: Steps to formulate Cluster

The initial cluster activities during year 2009-2010 were Some of the facts gathered from Wave II MRM Cluster
carried out under WAVE I that formulated the working meetings and discussions with senior management are
model of cluster. The thrust of cluster was on training, detailed below.
awareness and sustained quality improvement across all the 1. Lean Activity Calendar is prepared for the month. Some
SME’s. This assisted tier II & tier III companies to of the activities planned are
understand the quality practices and adopt same in their a. Training on TPM
organization. In addition to this, the SME’s were assured of: b. Red Tagging campaign
1. Sharing of Technology c. Training on SMED
2. Long term relationship d. Workshop on SPC
3. Training & Education on best practices from industry e. 5 S audit
4. Inclusion in a long value chain f. Training on Inventory Turns Ratio
5. Financial aid if needed and found to be promising g. Training on Kaizen
By now cluster had taken a very good shape and started h. Training on 3 M
showing the results in form of added value to the products 2. Safety Audits are conducted on regular basis
and individual benefits to SME’s in terms of waste 3. 5 S Audits are conducted on regular basis
minimization, increased productivity etc says senior manager 4. Training in the area VSM, SMED, 5s, SPC, TPM,
of Tier 1 supplier. To continue the momentum and accelerate Kaizen, Lean manufacturing are conducted on regular
the growth of SME’s. WAVE II of cluster was formed during basis. The new employees are trained on this as a part of
the year 2014-2015. This supplier cluster is more mature and induction.
emphasizes on lean culture across all the partners. 5. Red Tagging campaign is carried out on regular basis
As a part of cluster activities, Tier 1 supplier holds Monthly and action is taken accordingly
Management Review Meeting (MRM) with all their 6. The data with respect to defects, process capability
suppliers. The representative list of suppliers (cluster indices, customer complaints, cost of poor quality, labor
members) is given below. productivity, on time delivery %, floor space utilization,
kaizen, Overall Equipment Efficiency, VSM are
S. No
Name of the
Nature of Business
Locatio captured and shared in the MRM meeting.
Cluster Members n 7. The monthly meetings are hosted by each company on
Soham Autotech Seat frames, sheet metal rotation basis that gives a chance to every organization
1 Nashik
Pvt Ltd parts, tubular parts to show case their best practices.
2 Jhanvi Auto Mech Press Component Nashik The above facts indicate that tier II suppliers under cluster
3 SI Inter- Pack Foam Seat Covers Nashik
are now geared up to operate within the framework laid
Mfg. of Auto
4 ARS Auto Pvt Ltd
Accessories.
Nashik down by Supplier cluster. It is apparent that Lean is practiced
Rainbow within organization and focus is operational excellence.
5 Surface Finish Nashik
Decoplas Pvt Ltd
6 Sterling Industries Machining components Nashik Tier 1 supplier has plants at Halol and Chennai. While Halol
Sheet metal parts and plant supplies seats to General Motors, the plant at Chennai
7 Pratik Industries Nashik supplies seats to Nissan & Ford. However there is no concept
Engineering Job work
Automobile components, of supplier cluster at these 2 locations.
Precision Auto
8 Sheet metal parts, Nashik
Industries
Automobile tubular parts Note: As in case of OEM 2 & its tier 1 supplier i.e. Case
Study 2 mentioned above, where the existence of supplier

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cluster is prominent and ensures that suppliers are geared up vehicles, to trucks, to autorickshawas to earthmovers, to
for taking various challenges in the industry, in case of forklifts, to Tractors, to trailers, to Cars and to Motor cycle
OEM1 and its tier 1 supplier the formal supplier cluster is not tier 1 supplier is the preferred name when it comes to
seen. TYRES, says Senior Manager Production. Having plants at
Mumbai, Nashik, Halol catering to global needs around 110
CASE 3 countries in the world, RPG is creating additional capacity
OEM3 established in Pune during 1966 at Pimpri and by setting up a new plant at Nagpur with investment of 400
Chinchwad manufactures Tata Indica and Tata Indigo in the crores. With daily production of 95000+ tyres, the company
category of passenger vehicles. The facility at these locations is first to get TUV certification in Tyre Industry. R & D
also design and manufacture sophisticated press tools, jigs, specialist mentions that the company’s focus on building best
fixtures, gauges, metal pattern as well as models for in class products through a culture of continuous innovation
development of new range of automobile products. makes it more accountable when it comes to material
The passenger car division housed at this facility has five development that is required for ensuring grip, safety and life
shops i.e. engine, transmission, press and body, paint shop, of tyre. The company works closely with OEM to understand
trim and final assembly shop. Latest technology the needs of passenger vehicles that are at par with global
implemented in all the shops ensures minimum error in the standard. There exists a Automotive Tyre Manufacturing
manufacturing processes. With every passing year, the OEM Association (ATMA) that collaborates all branded tyre
is offering world class products to every class of people companies and works continuously on innovation of product.
across the globe. Latest launch being GenX Nano cars with A typical raw material that goes in making tyre consists of
Electrical Power Assisted Steering, latest design, Easy shift Natural rubber, Nylon Tyre Cord fabric, Carbon black,
automated manual transmission, connectivity features etc is Rubber Chemicals, Butyl Rubber, PBR, SBR and some
an example of value to the customer. One of the latest press others.
release dated April 2015, tells Global wholesale of all
passenger vehicles including Jaguar and Land Rover were at Tier 1 supplier- Way of handling the Suppliers
51,021 nos higher by 6% compared to April 2014. In case of Tyre Industry the raw material is sourced from
different locations. In fact 60 % of the raw materials are
Working Model of OEM3 and Tier 1 supplier supplying imported and remaining is purchased from different locations
Tyres of India. The main constituent of Tyre, i.e. rubber comes
Tier 1 supplier, the flagship company of RPG group is one of from Thailand & Sri Lanka and others like Cord Fabric,
the leading tyre manufacturing company in India having Carbon Black comes from coutries like China, Indonesia.
presence in global market. Right from light commercial

The representative list of Raw material suppliers to Tier 1 supplier

Sl no Company Name Location Raw Material
TUFNYL brand of Polyamide 6 & Polyamide 66 engineering resins
1 SRF Limited Manali Gurgaon TUFBET brand of Polybutylene Terephthalate (PBT) engineering resins
TUFPC brand of Polycarbonate (PC) engineering resins
2 RajashreePolYfill Gujarat Chord Fabric
PMC Rubber rubber chemicals covering Accelerators, Antioxidants, Antiozonants, Retarders
3 Kolkata
Chemicals &Peptisers
4 English Indian Clay New Delhi EICL has two key divisions, viz., "clay" and "starch".
5 Chetan Trading Gujarat Metal cutting & grinding tools
All types of chemicals like organic & inorganic chemicals, Mg0, Pigments And
6 Modi Chemical Gujarat
Recovered Solvents.....
Specialty Chemicals for Rubber which although used in small dosages but are
7 Acmechem Thane
critical inputs and where sources of such chemicals being very limited.
8 FlexilisPvt Ltd Goregaon East Natural Rubber, Synthetic Rubber, Chemicals, and Adhesives.
9 Philips Carbon Black AndheriEst Carbon black manufacturer
10 Dujodwala Resins Mumbai Gum Rosin, Oil of Turpentine and their derivatives.

After talking to SCM Manager of tier 1 supplier, it seems ending up in holding large inventory and at times selling it
that the ecosystem of Tyre Industry which is a main product off to retail market at very low prices. Holding inventory
in Automobile is different than that of other tier I suppliers always becomes an issue when OEM’s production plans
mentioned in case study 1 & 2. He mentioned, apart from changes says the SCM Manager. Rationalization of suppliers,
main raw material i.e. natural Rubber coming from Sri Lanka long term contract, and Economic Order Quantity purchase
and China, the domestic suppliers are even not in the close are the practices that are prevalent in this industry.
vicinity. Most of the raw material suppliers are in Gujarat, The typical problems faced by tier 1 supplier are:
Mumbai, and Kerala. This does not allow tier 1 supplier to 1. Huge raw material & finished goods inventory
work on JIT principles that are applicable to tier 1 suppliers 2. Logistics and transportation issues
of case study 1 &2 which operates on per day production 3. Locational issues
orders from OEM1 and OEM 2 respectively. In this case 4. Dependence on very few suppliers
study, the tier 1 supplier operates in a conventional manner
of producing the tyres based on economies of scale thus
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Case 4 Maruti Centre of Excellence: A way to practice Quality

Maruti & Its Ecosystem Maruti Centre of Excellence, MACE plays a vital role in
Maruti Suzuki India Ltd (MSIL), is one of the leading car evangelizing the culture of Lean practices across the entire
manufacturer’s in India with sale of more than 3.46 lacs of supplier network. The initiatives like “Quality Circle
vehicle recorded in quarter 4, 2015 (From annual report Competition”, “Kaizen”, 5s ensure competitive culture
MSIL). On 12th May 2015, the Company has rolled out its amongst the suppliers.
15th million car on road (Press release 12th May). The
company is proud to share its success that is dedicated to the
journey of “Continuous Improvement”.

The representative list of MSIL supplier is as under

Sr No Name of the company Type of Supplier Product Line

Seat Frames, Four wheeler seating system, Two wheeler Seating System,
1 Bharat Seats Tier I Moulded Carpets, Two wheeler frames and sheet metal components,
Muffler, Independent front suspension
Supplier of a large variety of automotive seat covers to Bharat Seats Ltd
2 Sharada Motors Tier II
(MarutiUdyog Ltd.).
3 SI Interpack Tier II Foam Seat Covers
Products Manufactured: Engine: Oil Pump Assembly, Fuel System Parts,
Exhaust Manifolds, Turbo Charger Parts, Flywheel Assembly, Main Bearing
Caps, Balancs Shaft Assembly, Watter and Air Connections, Cylender Head
Covers, Intake Manifolds Covers, Oil Pans, Cylender Block & Heads,
Timing Case, Housing and Brackets; Transmission: Clutch Assembly, Case
Rico Auto Industries Differencials, Transmission Support Assembly, Gear Shift Forks; Chassis,
4 Tier I
Ltd., Suspension and Braking Systems: Wheel Hub and Brake Panel Assembly,
Drum and Roters, Steering Knuckles, Brackets etc.; Manufacturing and
Engineering Capabilities-Machining & Assembly: Over 1000 CNC &
Special Purpose Machines; Aluminium High Pressure Die Casting: Over 76
HPDC Machines(135 to 1800 tn Locking Force); Ferrous Casting: 4 Fully
Automated Casting
Products Manufactured: Electrical: Automotive Lighting Solutions (Head
Lamps, Rear Combination Lamps, Side Indicator Lamps and Other Sundry
Lumax Industries
5 Tier I Lamps), Suspensions: Two Wheeler Chassis & Sheet Metal Parts,
Limited,
Interior/Exterior: Plastic Trim Parts, Gear Shifter, Parking brake, Exhaust &
Air Intake System, LED- Infrastructure light
Anand NVH Products Products Manufactured: Anti Vibration Rubber & Rubber to Metal/Plastic
6 Tier I
Pvt. Ltd., Bonded Parts.
Products Manufactured: Machined High Pressure Die Cast Components &
Assemblies, Engine Components, Rocker Valve Cover, Front Cover,
Transmission Components, Steering Rack & Pinion Housings, Worm
7 KiranUdyog Tier I
Housings, Auto Electrical Components, Engine Brackets, Compressor &
Alternator Mounting Brackets, L Covers, Cylinder Block, Cylinder Heads,
Complete Wheel Assembly for Motorcycles & Scooters
Products Manufactured: Mechanical Contol Cables, Transmission Shifting
8 Madhusudan Auto Ltd., Tier I
Systems and Alternate Fuel Systems
Products Manufactured: Catalytic Convertors for Euro 3, 4 & 5, Exhaust
Mark Exhaust Systems
9 Tier I Systems for Passenger Cars, Mufflers for 2 Wheelers, Door Sash and Rolled
Ltd., is
Section for Passenger Cars, EGR Pipes, Sheet Metal Parts and Assemblies
Products Manufactured: Rubber & plastic molded components, Rubber &
10 Roop Polymers Ltd., Tier I
plastic extruded components, Rubber to metal bonded parts

The culture of Maruti is to encourage owning and grooming principles is followed by all of them, making them tuned to
of the suppliers as per their requirements. The concept of the MSIL needs of lean supply chain and logistics
“Full System Supply” ensures that all Tier I supplier weaves management. Some of the best practices that suppliers have
Tier II suppliers as well in the network instead of supplying adopted are
each component separately. This also brings lot of  E-Nagare : An electronic flow of production plans from
accountability from Tier II suppliers. the vendors to Maruti’s Shop floor
MACE Quality Circle programs conduct extensive facility  Working with MSIL on the basis of 15 days of
audits of tier I as well as tier II supplier. This ensures that production plan
quality is right at the source. This also reduces inspections at  Supplying the material during the night shift to reduce
MSIL factory premises. the traffic congestion
After talking with few of these suppliers, it is observed that  Adopting milk run system to accommodate nearly 30
“Maruti Production System” based on lean manufacturing
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suppliers under one logistics company The questionnaire had 4 parts

 Understand world best practices in automobile industry a. Brief Description of the SME’s
through training and workshops b. Current challenges faced by the SME’s
c. SME’s and their customer sensitivity
d. Quality Practices adopted by SME’s
e. Awareness of SME’s in lean manufacturing
4.0 Data Analysis and Trends
The following tables and graph shows the trends of
A Questionnaire was floated to understand the overall above data captured through questionnaire
business processes of SME’s with respect to supply chain
management and manufacturing processes. Emphasis was
given to understand the maturity of quality processes and
supply chain practices that are followed within the
organization and across all the business entities across the
value chain. Out of 34 suppliers who were contacted, only 12
suppliers returned with their answers.

Table 1: Brief description of SME’s

How many number of
SR Name of the What is the turnover of your How many varieties of products
Tier I Supplier Tier II supplier customers do you have
No OEM company (Tier II)? do you have?
for your product?
1 OEM 1 OEM1 – Tier 1 supplier Supplier 1 > 40 Crores to <=100 Crores >50 1 to 50

2 OEM 1 OEM1 - Tier 1 supplier Supplier 2 > 60 Crores to <=100 Crores 1to 20 1 to 50

3 OEM 1 OEM1- Tier 1 supplier Supplier 3 >100 crores 21 to 50 1 to 50

4 OEM 2 OEM2 - Tier 1 supplier Supplier 1 > 1 Crore to <=5 Crores 1 to 50 1 to 50

5 OEM 2 OEM2 - Tier 1 supplier Supplier 2 < 10 Crores to <=15 Crores 1 to 10 1

6 OEM 2 OEM2 - Tier 1 supplier Supplier 3 < 10 Crores to <=15 Crores 1 to 10 1 to 50

7 OEM 2 OEM2 - Tier 1 supplier Supplier 4 > 15 Crores to <= 40 Crores 1 2

8 OEM 3 OEM 3- Tier 1 supplier Supplier 1 >100 crores > 50 >150

9 OEM 3 OEM 3- Tier 1 supplier Supplier 2 > 40 Crores to <=100 Crores 1 to 50 1 to 50

10 OEM 4 OEM 4- Tier 1 supplier Supplier 1 > 15 Crores to <= 40 Crores 1 to 10 1 to 50

11 OEM 4 OEM 4- Tier 1 supplier Supplier 2 > 15 Crores to <= 40 Crores 1 to 10 1 to 50

12 OEM 4 OEM 4- Tier 1 supplier Supplier 3 > 15 Crores to <= 40 Crores 1 to 10 1 to 50

Table 2: Current Challenges faced by SME’s

1 2 3 4 5 6 7 8

Is location of
Is High
the supplier an
Do you hold Production lead Do you have issues Does the supply Does the lead Is reliability on
issue to commit
Large WIP? times (Cycle in Making reliable of raw material time from supplier supplier a concern
deliveries to the
Codes: 1- times) a concern delivery quality a issue to a concern to your to your
supplier
strongly to you commitments your orgnisatopn organisation organisation
Tier II Codes: 1-
disagree, 2- Codes: 1- Codes: 1-strongly Codes: 1-strongly Codes: 1-strongly Codes: 1-strongly
company strongly
disagree, 3- strongly disagree, 2- disagree, 2- disagree, 2- disagree, 2-
disagree, 2-
neutral, 4- disagree, 2- disagree, 3- neutral, disagree, 3- disagree, 3- disagree, 3-
disagree, 3-
agree, 5- disagree, 3- 4-agree, 5- strongly neutral, 4-agree, neutral, 4-agree, neutral, 4-agree,
neutral, 4-
strongly agree neutral, 4-agree, agree 5- strongly agree 5- strongly agree 5- strongly agree
agree, 5-
5- strongly agree
strongly agree

OEM1 –
2 2 1 2 3 2 2
Supplier 1

OEM1 –
2 2 1 2 3 2 2
Supplier 2

OEM1 –
2 3 1 4 4 2 4
Supplier 3

OEM 2 –
2 4 2 4 3 3 2
Supplier 1

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OEM 2 –
3 3 2 2 4 2 4
Supplier 2

OEM 2 –
5 4 4 2 5 2 5
Supplier 3

OEM 2 –
4 5 2 2 2 2 4
Supplier 4

OEM 3-
4 4 1 4 5 2 4
Supplier 1

OEM 3-
4 4 1 4 4 4 4
Supplier 2

OEM 4 –
2 5 2 4 2 2 1
Supplier 1

OEM 4 –
2 5 2 2 2 2 1
Supplier 2

OEM 4 –
2 5 2 2 2 2 1
Supplier 3

Fig. 2: The Graphical interpretation of current challenges faced by Organization

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4.1 Analysis & Inference Table 3: SME’s and their Customer Sensitivity
A. The SME’s residing in same region
(nashik/Aurangabad/pune) & supplying raw materials to Following Questions were asked to understand the SME’s
same OEM show similar trends sensitivity towards customer needs
 All the SME’s of tier 1 supplier in Aurangabad do not
hold high inventory. This can be related with the fact a. Name of Tier II company
that customers of these SME’s are in the same location b. From your customer's point of view, how would a
(barring few), allowing SME’s to operate on Pull based "Predictability in Delivery Date" help them? In other
system. words, if you could predict accurate delivery date at the
 All the SME’s residing in Nasik Zone do hold time of accepting orders and your manufacturing
considerable inventory as far as seat assembly is facilities consistently kept these promises, will it benefit
concerned. This may be related with the location of the your customers? Codes: 1-strongly disagree, 2- disagree,
supplier’s feeding these SME’s. Another reason why 3- neutral, 4-agree, 5- strongly agree
these SME’s are holding considerable inventory is that c. From your customer's point of view, would a "Improved
they do supply the components to other tier I supplier Quality" help them? Codes: 1-strongly disagree, 2-
situated out of Nashik e.g. SME’s supplying to Tata disagree, 3- neutral, 4-agree, 5- strongly agree
Motors in Pune etc. d. If your plant significantly cut down on the delivery
 In case of SME’s of OEM3, where these SME’s holds required, would that be helpful to your customers?
substantial inventory, the reason is clear that location of Codes: 1-strongly disagree, 2- disagree, 3- neutral, 4-
their suppliers is a constraint. agree, 5- strongly agree
 SME’s of MSIL shows they do not hold much of the e. Would it reduce instances of stock outs and the needs for
inventory because their suppliers are located in nearby customers to wait occasionally? Codes: 1-strongly
vicinity. disagree, 2- disagree, 3- neutral, 4-agree, 5- strongly
B. As far as delivery commitments to Tier I supplier is agree
concerned, most of the SME’s are consistently making f. Would the less instances of stock outs help your
delivery. This shows that SME’s are sensitive to the company reduce lost sales and retain more customers?
customer requirements. Codes: 1-strongly disagree, 2- disagree, 3- neutral, 4-
C. As far as quality of raw material is concerned, the trends agree, 5- strongly agree
show that it is a concern to the SME’s of OEM3Tyres. g. Would it demand more needs to expedite the
This may be specific to the industry. In case of OEM1, manufacturing set up? Codes: 1-strongly disagree, 2-
OEM2 and Maruti, the raw material quality seems to be disagree, 3- neutral, 4-agree, 5- strongly agree
under control.
D. Lead time from the suppliers seems to be the issue The response to the above questions is collated as under
except in case of Maruti. Supplier lead time and location Table 3: Current Challenges faced by SME’s
of the customer seems to be related. The trends show
that where-ever suppliers are away, lead time is a a b c d e f g
constraint and this is directly related with inventory OEM1 – Supplier 1 5 5 2 4 2 4
holding. In case of Maruti, all factors are additive and OEM1 – Supplier 2 5 5 4 4 4 4
hence shows healthy supply chain. These includes OEM1 – Supplier 3 5 5 4 4 4 4
1. Suppliers are in the vicinity of OEM OEM 2 – Supplier 1 5 5 2 3 4 3
2. Even Suppliers supplier are nearby OEM 2 – Supplier 2 4 4 4 2 2 3
3. Suppliers supplier are governed by MACE OEM 2 – Supplier 3 5 5 5 5 5 2
E. High production lead times seem to be a concern to all
OEM 2 – Supplier 4 4 5 4 4 4 2
SME’s. This can be related to the fact that while supply
to OEM’s is on JIT basis, production is batch specific OEM 3- Supplier 1 5 5 4 4 4 4
adding to the inventory. It should be noted that OEM’s OEM 3- Supplier 2 5 5 4 4 4 4
are demanding complete assemblies rather than OEM 4 – Supplier 1 4 5 4 4 4 4
components. This can be one of the reasons that building OEM 4 – Supplier 2 4 5 4 4 4 4
of assembly takes a longer time and hence the high OEM 4 – Supplier 3 4 5 4 4 4 4
production lead times. Howeverall the efforts are made
to adhere to customer demand.
F. Of all supply chains, Maruti Suzuki supply chain seems
to be more reliable and mature. This is shown by the
trends such as
a. Low inventory holding
b. Reliable delivery commitments
c. Less issues with Raw material quality
d. No constraints as far as lead time from supplier is
concerned
e. No locational constrains as far as suppliers are
concerned.

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Fig. 3: Graphical representation of SME’s and their Customer Sensitivity

4.2 Analysis & Inference The less instance of stock out is never a scenario with SME’s
The above trends shows that as far as sensitivity to customer since they store enough to deliver the customer order. This
needs are concerned, the SME’s are highly aware of the same again is contradictory to lean principles and hence needs
and want to fulfill customer needs on highest priority. The change in SME’s working.
areas of concern as voiced by SME’s are: Taking a deep dive approach in understanding the quality
 Predictability in delivery date practices that are followed in Auto industry the following is
 Need for improved quality the scene.

Predicting accurate delivery date to customer is related with Table 4: Quality Practices
external factors like location of supplier’s supplier, non- Following Questions were asked to understand the quality
availability of information on Goods in Transit, supplier’s practices adopted by SME’s
capability to supply right quantity. This may need a
intelligent GPS system to track the goods in transit which A. Tier II company
will provide most updated information to the SME’s thereby B. Has your company been certified by one or more of the
making their production schedule on real time. following standards? Please tick more than one box if
Need for improved quality is operational excellence issue appropriate
that can be perfected through continuous improvement 1. ISO/TS 16949 2. ISO 9001:2000 3. ISO 14001:1996 4.
programs in the companies. However right quality at source Any other, please mention
can also improve the overall product quality. The models C. What major challenges (e.g. competition) is your
adopted by Maruti is the best examples to have tier II and tier company facing at present?
III suppliers tightly integrated in overall value chain. 1. Process Challenges 2. Quality Challenges 3. Challenges on
Supplier side 4. Challenges on Customer side
Cutting down of production lead times in order to fasten the D. Purchasing issues like
delivery takes a back seat. The spirit of Lean principle to 1. Reliability 2. On time 3. Right Qty 4. Right Quality
produce right quantity at right time and at right place is thus E. E What best practices you follow from the Industry for
compromised at the cost of having huge inventory in order to your Supply Chain Management
satisfy the customer.
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Table 4: Quality Practices adopted by SME’s

A B C D E
OEM1 – 1. Process Challenges Right Inventory Management Releasing Schedule time to time,
ISO/TS 16949
Supplier 1 2. Quality Challenges quantity Continous Interaction With Suppler
OEM1 – ISO/TS 16949 Right Inventory Management Releasing Schedule time to time,
1. Quality Challenges
Supplier 2 ISO 9001/2000 quantity Continous Interaction With Suppler, PokaYoka
OEM1 – 1. Process Challenges Right
ISO 9001/2000 TPM, 5 S
Supplier 3 2. Quality Challenges quantity
OEM 2 – 3. Challenges on
1. ISO/TS 16949 On time JIT - FIFO
Supplier 1 Supplier side
OEM 2 –
1. ISO/TS 16949 -------- On time We following all guideline as per process manual of SCM.
Supplier 2
OEM 2 – challenges on customer maintaining minimum inventry level and successfully using
ISO 9001:2000 On time
Supplier 3 side the KANBAN system
OEM 2 –
ISO 9001:2008 1. Process Challenges Reliability
Supplier 4
OEM 3- ISO 14000, ISO 1. Process Challenges Right
TQM
Supplier 1 18000 2. Quality Challenges quantity
OEM 3- 1. Process Challenges Right
ISO 9001:2008 Kaizen, 5 s
Supplier 2 2. Quality Challenges quantity
OEM 4 –
ISO 9001:2008 1. Process Challenges Reliability Maruti Production System, Quality Circle
Supplier 1
OEM 4 – 1. Process Challenges
TS 16949 Reliability Maruti Production System, Quality Circle
Supplier 2 2. Quality Challenges
OEM 4 – 1. Process Challenges
TS 16949 Reliability Maruti Production System, Quality Circle
Supplier 3 2. Quality Challenges

4.3 Analysis and Inferences Codes: 1- To a Great Extent, 2- Somewhat, 3-

 The above data states that even though SME’s are Little, 4- Very Little, 5 -Not at All
following ISO 9000 and TS16949 quality standards, F. Do you practice cycle time reduction
they still face process challenges and quality challenges. Codes: 1- To a Great Extent, 2- Somewhat, 3-
Both these are related with each other and to certain Little, 4- Very Little, 5 -Not at All
extent are internal issues, barring controlling the quality G. Do you practice "reducing inventory to expose
right at the source. manufacturing distribution and scheduling problem"
 The SEM’s always operate with constrained resources Codes: 1- To a Great Extent, 2- Somewhat, 3-
may it be human resources or otherwise. The great tools Little, 4- Very Little, 5 -Not at All
like Six Sigma improvements, lean practices although H. Do you practice using new process equipment or
introduced in SME’s, always takes back seat when it technologies
comes to delivery commitments. With the introduction Codes:1- To a Great Extent, 2- Somewhat, 3- Little,
of cluster and making supplier’s supplier as their 4- Very Little, 5 -Not at All
extended partmers, the SME’s have started adopting to I. do you practice quick changeover techniques
processes that are laid down by big players. Codes: 1- To a Great Extent, 2- Somewhat, 3-
Little, 4- Very Little, 5 -Not at All
Table 5: Awareness to Lean Manufacturing

Following questions were asked to understand the awareness

and adoption of lean manufacturing in SME’s

A. Tier II company
B. Do you practice reducing production lot size
Codes: 1- To a Great Extent, 2- Somewhat, 3-
Little, 4- Very Little, 5 -Not at All
C. Do you believe in reducing set up time
Codes: 1- To a Great Extent, 2- Somewhat, 3-
Little, 4- Very Little, 5 -Not at All
D. Do you practice sourcing from single supplier?
Codes: 1- To a Great Extent, 2- Somewhat, 3-
Little, 4- Very Little, 5 -Not at All
E. Do you practice implementing preventive
maintenance

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Table 5: Awareness to Lean Manufacturing

A B C D E F G H I
OEM1 – To a great To a great To a great To a great To a great To a great To a great
Somewhat
Supplier 1 extent extent extent extent extent extent extent
OEM1 – To a great To a great To a great To a great To a great To a great To a great
little
Supplier 2 extent extent extent extent extent extent extent
OEM1 – To a great To a great To a great To a great To a great To a great To a great
little
Supplier 3 extent extent extent extent extent extent extent
1- To a 1- To a 1- To a
OEM 2 – 2- 1- To a Great 1- To a Great 1- To a Great
Great Great Great 2- Somewhat
Supplier 1 Somewhat Extent Extent Extent
Extent Extent Extent
1-To a
OEM 2 – 4-Very 2-Some 4-Very
great 2-Somewhat 2-Somewhat 2-somewhat 2-somewhat
Supplier 2 Little what Little
extent
OEM 2 – To a great To a great To a great To a great
2-Somewhat 3-Little 3-Little 4-Very Little
Supplier 3 extent extent extent extent
1.To a
OEM 2 – 4.Very
3.Little 3.Little Great 2.Somewhat 4.Very Little 4.Very Little 2.Somewhat
Supplier 4 Little
Extent
OEM 3- To a great To a great To a great To a great To a great To a great To a great
very little
Supplier 1 extent extent extent extent extent extent extent
OEM 3- To a great To a great To a great To a great
very little very little little little
Supplier 2 extent extent extent extent
1.To a
OEM 4 – To a great To a great 4.Very To a great To a great To a great To a great
Great
Supplier 1 Extent Extent Little Extent Extent Extent Extent
Extent
1.To a
OEM 4 – To a great To a great 4.Very To a great To a great To a great To a great
Great
Supplier 2 Extent Extent Little Extent Extent Extent Extent
Extent
1.To a
OEM 4 – To a great To a great 4.Very To a great To a great To a great To a great
Great
Supplier 3 Extent Extent Little Extent Extent Extent Extent
Extent

4.4 Analysis & Inferences OEM also tries to share the best practices that are
 Both tables 4 & 5 explain that SME’s are not only aware followed in their organizations with suppliers to ensure
of lean manufacturing but are practicing these principles that entire value chain is dependable and optimized to
barring few examples. What is interesting to note is that eliminate the waste.
even if they are practicing these principles, the maturity  Tier 1 suppliers in automotive value chain have grown
level and professionalism in practicing them needs more along with the OEM and are capable of adapting to the
rigor and sustenance. demands of the markets. They have become flexible and
 The above tables indicate that as far as manufacturing can sustain the VUCA world by consistently providing
process of SME’s Is concerned, following is practiced the required quality at most competitive cost. They have
religiously adopted the culture and best practices of OEM viz six
o 5s sigma, lean manufacturing, TQM, TPM. However, the
o Kanban benefits of the cluster activities and professionalism in
o SMED Tier I suppliers is not seen uniformly across SME’s. A
o Pull based system comprehensive, holistic growth & improvement of Tier
o PokaYoka II& Tier III suppliers in terms of Productivity, Quality,
o Rank Order Clustering Cost, Delivery and Safety becomes the necessity to
 While these practices are helping the SME’s in make the entire value chain competitive and sustainable.
operational excellence, the Lean SCM on the entire  While SME’s are practicing lean manufacturing on their
value chain is missing. The most weakest link on the shop floors, the practice of lean supply chain
supply chain is integration of suppliers for tracking the management should become the culture of industry as a
information and material flow across the value chain. whole.
 SME’s are not only aware of lean manufacturing but are
5.0 Conclusions practicing these principles barring few examples in the
 The concept of supplier cluster is established and case study. What is interesting to note is that even if they
practiced in Auto industry since last few years by are practicing these principles, the maturity level and
players like Mahindra, Maruti etc. Under this concept, professionalism in practicing them needs more rigor and
the OEM tries to strengthen the partnership with the sustenance.
suppliers by way of outsourcing the operations that are  Automation of processes, Integration of processes and
not core to them. This allows OEM to enter into long use of IT enabled services in SME’s world is far from
purchase contract with suppliers for assured quality and reality.
delivery at most competitive prices. In addition, the

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