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Supply Chain Management as a strategic tool for Indian Automobile Industry with special reference to Car Segment

DIPANKAR

Supply Chain Management as a strategic tool for Indian Automobile Industry with special reference to Car Segment

DIPANKAR

EXECUTIVE SUMMARY
SCM is a powerful strategic function capable of radically improving customer value propositions by the reengineering of intranet and internet-enabled collaborative channel partnerships. Latest developments in information technology have propelled the e-Supply Chain Management (e-SCM) concept to newer dimensions. In the past, neither markets nor products changed much over time, enterprises that gained initial superiority could leverage on, considerable resources and process knowledge, mature distribution channels, advertising and marketing clout, and the newest technologies, to maintain that lead. Today, it is evident that there is no such thing as sustainable competitive advantage and also that all advantages are temporary. The importance of supply chain management is attracting the attention of academicians and business managers globally. As companies experience globalisation and cut throat competition, companies are forced to adopt measures to contain risk due to their supply chain design characteristics. The research was conducted among car manufactures in Delhi & NCR region and main analysis has been done with respect to supply chain at Maruti Suzuki. The data for the research was collected from executive of car companies, OEM suppliers and logistics service providers. All the respondents form a key part of supply chain of car manufacturers.

ACKNOWLEDGEMENT
We owe the deep depth of gratitude to our esteemed teacher Miss. Nidhi Khurana for supporting us a lot to during the span of project and to help us when we faced several problems. We are thankful to our Honble Director who allowed us to perform several tasks like weekly meetings and discussions in the institute itself. We are thankful to the lab faculties for providing necessary help whenever it was required like in case when it was system problem in print outs and other information. Library staff helped us in providing necessary books of different authors for project development and several other platform oriented books on which we had worked upon like entrepreneurs. At last but not the least we cannot forget to thank our friends for their important suggestions help in editing our work and let us know about our errors and mistakes throughout the project.

DIPANKAR

TABLE OF CONTENT
INTRODUCTION OVERVIEW OF AUTOMOBILE SECTOR (CAR SEGMENT) GROWTH DRIVERS OF INDIAN AUTOMOBILE MARKET INDIA'S POSITION IN WORLD'S PRODUCTION AIMS AND OBJECTIVE OF RESEARCH STRUCTURE OF THE PROJECT: SIGNIFICANCE OF THE STUDY REVIEW OF LITERATURE RESEARCH METHODOLOGY TYPE OF RESEARCH SAMPLING TYPE OF SAMPLING METHOD USED IN THE STUDY JUDEGEMENTAL SAMPLING SAMPLING UNIVERSE SAMPLE SIZE METHOD OF DATA COLLECTION EMPIRICAL STUDY content RESEARCH FINDINGS LIMITATIONS CONCLUSION & RECOMMENDATION REFERENCES ANNEXURE QUESTIONNAIRE LIST OF RESPONDENTS

INTRODUCTION
Automobile is one of the largest industries in global market. Being the leader in product and process technologies in the manufacturing sector, it has been recognized as one of the drivers of economic growth. During the last decade, well directed efforts have been made to provide a new look to the automobile policy for realizing the sector's full potential for the economy. Steps like abolition of licensing, removal of quantitative restrictions and initiatives to bring the policy framework in consonance with WTO requirements have set the industry in a progressive track. Removal of the restrictive environment has helped restructuring, and enabled industry to absorb new technologies, aligning itself with the global development and also to realize its potential in the country. Indian Automotive Industry is one of the fastest growing globally, manufacturing 11 million vehicles annually. India is world's 2nd largest manufacturer of motorcycles and 4th biggest commercial vehicle manufacturer. India is expected to be 7th largest automobile market by 2016. In this age of e-business and global outsourcing, SCM plays a crucial role in the Automotive Industry. (Auto Supply Chain Forum, 2012) Efficient and Stream-lined processes are required to remain competitive in today's marketplace. Material flow, distribution, logistics, purchasing and planning are all important factors for success and competitiveness. Inventory Solutions can help you by optimizing your material flow. Planning is one the most important issues of SCM for the Indian automotive industry. Hence, determination of production requirements and inventory levels at the vendor's facility for each product and development of transportation flows between these facilities to the warehouse in a best possible way to reduce total production, inventory and transportation costs with fulfilment of service level requirements. The emphasis given on improving supply chains in organizations both by companies and academia in the past two decades shows the growing importance of integrating manufacturing and marketing processes of organizations. In recent years, supply networks are being recognised as strategic tools that enable companies to fight global competitive battles. The automotive industry is a key contributor to the Indian economy accounting for

about 4 percent of the Indian economy. The last few year have seen greater Integration of the Indian industry with its global counterparts. The interesting part about this is that large part of the industry has seen significant changes while the changes have been more visible in the car segment. The Indian automobile industry is currently experiencing an unprecedented boom in demand for all types of vehicles. This boom has been triggered primarily by two factors: a) increase in disposable incomes and standards of living of middle class Indian families estimated to be as many as four million in number; and b) the Indian government's liberalization measures such as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and banking liberalization that has fueled financing-driven purchases. (IMS, 2012) In car segment, component part of the industry with key players having a significant export contribution today. Original Equipment Manufacturers (OEMs) too have been Undergoing their own set of changes. KPMG in India has been fortunate enough to see this transformation take place while participating in a small way through its work with key parts of the automotive supply chain. The wave of change started with overseas OEMs wanting to enter the country. A natural fall-out of this was the large suppliers who Entered the country as part of the follow sourced The last couple of years have seen significant interest from Indian players who are actively looking at exciting markets to enter as well as attractive targets to acquire. They become more and more global in nature .For OEMs this would mean Rising competition in the domestic market and hence the need to diversify out of India. For car segment players this would mean the need to achieve global manufacturing standards and emerge as supplier of choice for global companies. These changes would have a significant impact on the automotive supply chain. Clearly the need of the hour is for various players to identify key challenges facing the industry and develop strategies to help moderate these. Today's rapidly changing business environment places ever greater demands on business such as to provide products and services quicker, with greater added value, to the correct location, with no relevant inventory position

Overview of Automobile sector (Car Segment) On the canvas of the Indian economy, automotive industry occupies a prominent place. Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and is capable of being the driver of economic growth. A sound transportation system plays a pivotal role in the country's rapid economic and industrial development. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles passenger cars, light, medium and heavy commercial vehicles, multiutility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc. Automotive Industry comprises of automobile and auto component sectors and is one of the key drivers of the national economy as it provides large-scale employment, having a strong multiplier effect. Being one of the largest industries in India, this industry has been witnessing impressive growth during the last two decades. It has been able to restructure itself, absorb newer technology, align itself to the global developments and realize its potential. This has significantly increased automotive industry's contribution to overall industrial growth in the country. Growth Drivers of Indian Automobile Market

Rising industrial and agricultural output Rising per capita income Favourable demographic distribution with rising working population and middle class Urbanisation Increasing disposable incomes in rural agri-sector Availability of a variety of vehicle models meeting diverse needs and preferences Greater affordability of vehicles Easy finance schemes Favourable government policies Robust production
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India's Position in World's Production


Well-developed, globally competitive auto industry Established automobile testing and R&D centres Among one of the lowest cost producers of steel in the world Worlds second largest manufacturer of two wheelers Fifth largest manufacturer of commercial vehicles Manufactures largest number of tractors in the world Ninth largest car manufacturer in world

One of the major industrial sectors in India is the automobile sector. Subsequent to the liberalization, the automobile sector has been aptly described as the sunrise sector of the Indian economy as this sector has witnessed tremendous growth. Automobile Industry was deli censed in July 1991 with the announcement of the New Industrial Policy. The passenger car industry was, however, deli censed in 1993. No industrial licence is required for setting up of any unit for manufacture of automobiles except in some special cases. The norms for Foreign Investment and import of technology have also been progressively liberalized over the years for manufacture of vehicles including passenger cars in order to make this sector globally competitive. At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger car segment. The import of technology/technological up gradation on the royalty payment of 5% without any duration limit and lump sum payment of US$ 2 million is also allowed under automatic route in this sector. With the gradual liberalization of the automobile sector since 1991, the number of manufacturing facilities in India has grown progressively.

AIMS AND OBJECTIVE OF RESEARCH


The aim is to study and evaluate how supply chain can act as a strategic tool for improving the performance of Indian Automobile industry. The main objective is to analyse the key SCM practices at selected automobile industry players with specific reference to Maruti Suzuki in car segment for improving its performance. The other specific objectives are 1) To access the supply chain metrics and its performance.
2) To examine and evaluate key aspect of SCM for selected automobile industry

players in India with reference to car segments with specific reference to Maruti Suzuki. 3) To evaluate the effectiveness of Supply Chain practices at selected automobile industry for reducing the cost and increasing efficiency at inventory management, logistics, transportation, warehouses and distribution and recommending solutions for improving performance. Structure of the project: The format of this study is outlined below; each is in line directly to the overall research objective of this study. The chapter and listed below with a concise description to give a clear profile of the structure of the study. Chapter- 1 Introduction: This section is an introduction into what the dissertation entails and the rationale for the topic selection. Chapter 2 Literature review: This section gives the detail about the concept of supply chain management and its relevance in automobile industry. Chapter 3- Research Methodology:

The section critically evaluates the method for data collection. The researcher compares the method of the data analysis and justifies the primary research that is being carried out data was collected using the mixed method approach. Quantitative method:

Interviewer administered questionnaire

Qualitative method:

Focus group and telephone interview

Chapter 4 Research finding and discussion: The section focuses on interpretation and discussion of the data obtained from primary research. This is linked with the literature review and the research objective. Chapter 5 Conclusion and Recommendation: This section concludes the aim and objective introduced in the chapter one. The conclusion was drawn based on each research objective and recommendation ware made Chapter 6 Reflection on Learning: This highlights personal reflection from the author about the learning process involved in carrying out study.

SIGNIFICANCE OF THE STUDY


Supply chain management (SCM) is working its own way onto the strategic agendas of CEOs in an expanding list of industries, from automobiles to personal computers to fashion retailing. There is very little research in this area particularly in the automobile industry. The current study aims to compare the supply chain management practices of automobile companies in Delhi & NCR. Analysis was done in the area of each companys procurement and outsourcing strategies, relationship with alliances, and the use of information technology to obtain competitive advantage. The findings of the study can be useful for the automobile industry in other parts of India.

REVIEW OF LITERATURE
Relevant literatures pertaining to the present study on four wheeler automobile industry are included in this chapter. The literatures are helpful for proper understanding the four wheeler automobile industry and its various related aspects. Review of literature is also helpful in effectively fulfilling the objectives for which the research project has been undertaken. Ketchen Jr., G., & Hult, T.M. (2006 pp: 573-574) studies that in the past ten years many significant changes has been takes place in the Indian automobile industry. His studies further states that there was a healthy change in the relationships between Indian automobile assemblers and their suppliers due to globalization, implementation of lean production and the development of modularization. There were stiff competition among many manufacturers and it helps to improve their quality, cost reduction targets and on-time delivery to market. And also it creates more mergers or acquisitions. Larson, P.D. and Halldorsson, A. (2004 pp: 17-20), in his studies, aimed at analyzing the role of SCM in Indian automotive industry confirms that SCM is a best-in-class, high performance solution which is been utilized by Indian automobile manufacturer, logistics and distribution companies, and auto component retailers to blend the demand chain with the supply chain. The author further confirms his statement by saying that SCM helps in demand forecasting; taking an order; giving an accurate promise date; sourcing and manufacturing the right goods; position inventory properly; pick, pack, and efficient transshipment; most importantly, SCM makes a world of difference to the manufacturers by maintaining a minimal finished goods inventory. Further, McCubbrey, D., Pinsonneault, A., & Donovan, R. (2006 pp: 722-727) studies SCM flow in Indian automotive industry is based on its products, information and finance. His studies reveal that the product flow is nothing but movement of goods from supplier to customers and also in case of any customer returns or service requirements. The information flow covers updating the status of the delivery as well

as sharing information between suppliers and manufacturers. The finance flow encompasses credit terms, payment schedules and consignment and title ownership arrangements. Based on above facts, Kaushik K.D., & Cooper, M. (2000 pp: 65-67) studies that in order to execute supply flow in Indian automotive industry, Supply chain management has two types of softwareplanning application and execution applications. Planning application is utilized to determine the best way to fill the order; execution software determines the physical status of goods, the management of materials and financial information of all parties involved. According to a survey by Handfield and Bechtel (2001 pp: 284-286), SCM benefits Indian automotive industry in several ways which include on-time delivery to the suppliers, proper pricing and discounts. The billing error has been reduced and the payments were made simple and faster. Administration costs were reduced for customers/vendors; better warehousing and transportation /information. Studies related to structure of supply chain flow in Indian automotive industry Lavassani, M. K., Movahedi B., Kumar V. (2008pp: 543 and 622) examined that the structure of the Indian automotive industry can be divided into tiers like first tier, second tier and third tier. The supply chain starts with third and fourth tier suppliers who supply the raw materials to the second tier suppliers who manufacture some simpler individual components. The second tier companies supply the simpler components to auto components manufacturers, who form the first tier. The first tier suppliers provide the components to the OEMs, who in turn provide the automobiles to the customers. But today there are new direct suppliers, who design systems and co-ordinate the supply chain required for the manufacturing and assembly. ''The larger first tier suppliers go a step further of supplying the components, by semiassembling the modules like steering systems and rear axle systems, which can be
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management,

timely

and

correct

asset

capitalization,

credit

management (customers), better plant maintenance, and easy access to data

directly fixed on the final assembly of the cars.'' (Hemila, 2002 pp: 72)By this the costs incurred by the car manufacturers in finding the individual component manufacturers, material handling and processing are reduced. This even transfers the risks and problems associated with each component to the suppliers. According to (Francisco Veloso and Rajiv Kumar, 2002 pp72) the latest development in supply chain of the automotive industry is the emergence of tier 0.5. The auto ancillary companies, which cater to the research and design requirements of automobile manufacturers, are called the tier 0.5 vendors. The following is the flow-chart representation by the researcher to demonstrate the supply chain flow in Indian automobile industry Lower-Tier Sub-Suppliers 3rd Tier Suppliers 2nd Tier Suppliers 1st Tier Suppliers 0.5 Tier Suppliers OEMs / Assemblers Dealer Networks Consumers

Studies related to various supply chain decisions taken by Indian automotive industry According to Garver M S and Mentzer J T (2000 pp.12-22) in the Indian automobile industry there are three levels in the supply chain management decisions. They are strategic, tacticaland operationallevel. Strategic level decisions are related to production, location transportation and inventory. Production decisions are used to decide which products to produce, where to produce, which suppliers to use and so on. Location decisions deals with the numbers size and geographic locations like distribution centers and plants. Transport decisions are used to decide the mode of transport. Inventory decisions will manage inventories throughout supply chain. Based on the studies by (Haag, S., Cummings, M 2006 pp: 124-132) strategic level decisions are interrelated. For instance mode of transport will change according to the

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geographic locations of plant and warehouses. Inventory policies may change according to the supplier's choice. Tactical level decisions are responsible for medium term decisions. For instance some of the tactical level decisions are weekly distribution, production, and transportation planning. The operational level of supply chain management is concerned with the very short term decisions made from day to day. The border between the tactical and operational levels is vague and often no distinction is made. The researcher concludes that these decisions form the appropriate selection for SCM. Studies relating to process techniques adapted by Indian automotive industry to fulfill its decisions According to Lewis and Talalayevsky, (2004 pp: 90) Indian automotive industry adapts different techniques in its supply chain such as Quick Response (QR), Continuous Replenishment Programs (CRP) and Efficient Consumer Response (ECR) Quick Response (QR) is both a management paradigm and a methodology that is adapted by Indian automotive companies since it allows auto components supply systems to react quickly to changes while improving their performance. (Wagner,B 2000 pp1003). Mills et al., (2004 pp: 12) studies that Continuous Replenishment Programme (CRP) has been managed by Indian automotive industry in two different ways. The first way of managing is by considering which party has the responsibility for the inventory management and the other way is by considering to what extent the partners are sharing information. Due to these above reasons the automotive industry has been improved in the speed of supply, product availability, cost reduction target and it helps to give better service. Efficient Consumer Response (ECR) as a strategic initiative working to overcome traditional barriers between trading partners, thus eliminating internal barriers that result in costs and time that add little or no value to consumers (Skjoett-Larsen, T 2007 pp284).

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According to Kumar V. (2008) nowadays, these companies have started to adopt the emerging Internet technologies to have constant contact with their suppliers. The Internet is very useful to do online B2B transactions. Ashok Leyland has reduced their inventory cost by using an end-to-end supply chain management system. Mahindra & Mahindra has employed a single network to connect all its plants, corporate office and all offices. Studies relating to recent trends in supply chain management related to Indian automotive industry in improving its process techniques In the book Complementary theories to supply chain management Halldorsson, A., Kotzab, H., Mikkola, J. H., Skjoett-Larsen, T. (2007 pp:90-94) studies that the Indian auto manufacturers have started to take upon new concepts in supply chain management like distribution manufacturing, back hauling, vendor managed inventory, containerization and logistics out-sourcing. Indian auto suppliers has adapted a new concept called Supplier Relationship Management (SRM) and is said as the consolidation and classification of procurement data to provide an understanding of supplier relationships in order to develop procurement strategies that reduce costs, make procurement predictable and repeatable, enlighten supplier partnership decisions and provide leverage over suppliers in negotiations. It's also called: Sourcing, Strategic Sourcing, SRM, and e-Sourcing. (Bob lowson, Russell King, et al, 1999 pp523) sees that it helps to improve the efficiency of the auto components supply process, through collaboration with the suppliers. Baziotopoulos, (2004 pp:42) worked hard to study supplier relationship management's (SRM) goal and came to the conclusion that customer relationship management(CRM) is the best tool to streamline and make effective supply chain processes between an enterprise and their customers. SRM practices helps to maintain the effective communication between an enterprise and its suppliers. As a result SRM increases the supply chain processes, inventory and good service of goods. Author further explains that if the enterprise uses SRM in an appropriate way then it would definitely decrease the production costs and improves the quality and service.

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According to the studies by Yusuf et al., (2003 p: 122) many automation technologies are also adapted by Indian auto suppliers in the recent time. Some of them are Automatic Guided Vehicles (AGV's), Automated Storage and Retrieval Systems (AS/RS), Stores and Conveyor System, Radio frequency terminals and radio frequency data communications. As Gallegos, J (2002 pp: 213) says automated Storage and Retrieval Systems is a very good technology that can be considered to cut auto component inventory cost and to improve its productivity. Studies relating to measurement of supply chain management performance in relation to its trends and techniques adapted Measuring the performance of a supply chain isn't easy. For one thing, supply chains are subject to conflicting requirements, creating confusion about which aspects of performance ought to be monitored and improved. For another, there are dozens of metrics to choose from, and it's far from obvious how to select among them (David A. Taylor, 2004 pp: 223). As Marshall Fisher explained in his classic Harvard Business Review article (1997 p: 4) Efficiency and flexibility are the basic trade-off in the supply chain process. If the supply chain processes are said to be more efficient process then it is capable of minimizing the inventory at each location and it can definitely achieve economies of scale at every link. On the other way around if the supply chain processes are flexible then reserve capacity inventory must be maintained. As a result it will help to produce and deliver products in a very short time even if there is a fluctuation in the quantities. The methods Ramakrishnan R V (2006 pp: 167-231), suggest for measuring the supply chain performance are: Balanced Scorecard Supply chain council's SCOR model Logistics scoreboard Activity-Based Costing Economic Value Analysis

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According to Hedberg and Olhager,(2002 pp:72-74 ) , Supply Chain Balanced Scorecard tracks a limited number of key metrics . These metrics should be closely aligned to the automobile companies' strategic objectives. The measurements usually cover 4 areas: 1. Financial - ex: The cost of manufacturing, warehousing, transportation etc 2. Customer - ex: Order Fill Rate, Backorder Levels, On Time Delivery 3 3. Internal Business - ex: Adherence -To-Plan, Forecast Error 4. Training: ex: In house Training Hours, APICS Membership/Certification While the Balanced Scorecard approach was not specifically designed for the automobile and auto-component supply chain, it does give a good guidance for its core measures of this research objective. The central idea is to focus on key metrics that have real meaning to automobile company. The Balance Scorecard approach helps the manufacturers to keep their measures aligned with their specific objectives. These measures should be tracked over time (usually monthly) with specific targets for each supply. Ketchen Jr., G., & Hult, T.M. (2006 pp: 19). studied the Supply Chain Operations Reference -model (SCOR) and found that it isolates key supply-chain management processes of auto component companies and matches their process elements against industry -specific best practices , benchmarking performance data , and appropriate software applications , providing its users with a framework for understanding where they need to make improvements . SCOR builds on the concepts of automobile business process reengineering, benchmarking, and process measurement by integrating their techniques into a cross-functional framework that addresses management issues at the enterprise rather than at functional level. The main factor of adapting this model in this research project is because SCOR is recognized by the 800 member companies of the Indian Automotive industry Supply -Chain Council as an effective toolkit for companies wanting to upgrade their supply chains for strategic advantage. While using the SCOR model is not a substitute for developing a

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comprehensive operations strategy, it is a tool for ensuring that the operations strategy has the desired outcome. Cross - industry studies show that integrated supply chain management in Indian automobile industry typically yields the following results: 25 -50% reduction in total supply chain costs 25-60% reduction in inventory holding 25-80% increase in forecast accuracy 30-50% improvement in order -fulfillment cycle time. When it comes to measuring performance of Indian auto industry, it is a prescriptive and recommended set of logistics metrics that covers: logistics financial performance; logistics productivity; logistics quality; and logistics cycle time can be used to map the supply chain performance measurement processes. This method is adapted in this research project since it's prescriptive and recommends the use of a specific set of supply chain performance measures. As recommended by Mentzer, J.T. et al (2001 pp:124) Activity based costing is been adapted by Indian auto suppliers since its a measurement method that ties financial measures of these companies to operational performance since it involves breaking down activities into individual tasks or cost drivers. ABC is one of the most accurate cost management methodologies by Indian companies since it focuses on indirect costs. It traces rather than allocates each expense category to the particular cost object .It makes indirect expenses direct. ABC is used when overhead is high, products are diverse: complexity, volume, amount of direct labor. It is used when cost of errors are high, also when competition is stiff. Bennett stewart 111, (2000 pp: 92) The most successful measurement of performance is Economic value analysis (EVA). It is mainly used as a guide to take decisions in the new company. In the Indian automobile supply chain metrics, it has been given equally high importance and it is used for managing both intangible and tangible assets. Economic value analysis (EVA) is been adapted in this research because EVA

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metrics vary from other metrics. The characteristic features of EVA metrics are complete, practical and avoid confusion in the business. To summarize on the basis of literature survey we can say that the automobile industry has undergone significant structural and other changes in the last decade or so. In view of the present globalisation, implementation of lean production and the development of modularisation have changed the relationships between automobile assemblers (OEMs) and their suppliers, especially those in the first tier. Stiff competition among manufacturers will result in more mergers or acquisitions. The challenges automobile manufacturers and suppliers face include improving quality, meeting cost reduction targets and developing time to market. Over the last few years, automobile companies have increasingly realised the importance of logistics as a tool for competitive advantage. For long, the Indian logistics sector remained at a nascent stage due to inadequacies in infrastructure, lack of regulation, unfavourable taxation regime and so on.

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RESEARCH METHODOLOGY
Research methodology is a description explanation and justification of various methods of conducting research. In order to accomplish the objectives of the study, it is essential to articulate the manner in which it is to be conducted, i.e., the research process is to be carried-out in a certain framework. The Research Methodology, which follows, is the backbone of the study. Type of research: Descriptive The data for the research was collected using both primary and secondary data. Sampling: The sampling plan for the study decides the work area that is the population, which has to be surveyed. A Brief idea about the sampling for this research consisting of its different parameters is given below: Type Of Sampling Method Used In The Study Judegemental Sampling In this type of the sampling the researcher uses his judgment to select population members who are good source for accurate information Sampling Universe The sample universe is taken Delhi & NCR and nearby areas. Sample Size In this study sample size is of 40 Automobile Industry that included Executives from Maruti Suzuki and other car manufacturers, OEM suppliers and Logistic service providers. Due to the shortage of time and un-availability of expert team the research size is taken short so that the research can be done easily. Method Of Data Collection Primary Data: The data was collected in regards to Supply Chain of Maruti Suzuki and other car manufacturers and their suppliers in regards to the existing supply chain network. The research was carried out through survey method with the help of a Questionnaire consisting of closed ended question due to flexibility, questionnaire method is ideally suited for collection of primary data.

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Secondary data: The secondary research was undertaken through collection of above mentioned secondary data which has been presented in the report as the literature review. The literature review covers the views of different authors and writers on the selected dissertation topic. The information relevant to the topic has only been included in the report. The author has tried to give the reader a birds eye view about the strategic marketing and related topics. The information obtained from these secondary sources provided a good foundation of knowledge to carry out primary research. Method of Analysis The data has been analysed using MS Excel and presented using pie-charts and bar graphs. For the purpose of survey, I have tried to get quality data and also tried to quantify the collected information in terms of values and percentages, as and where applicable. The research has tried to get the most relevant information for the analysis. In most of questions, results have been averaged to the nearest value for the purpose of better interpretations. Justification of the methods The survey method is considered to be reliable because the respondents were associated with the automobile industry car manufacturers for quite a reasonable length of time; therefore they had knowledge of supply chain policies and operations. They gave sufficient time for filling the questionnaire in the right way. The advantage of using the above method is that it gives the user an option to vary the selected sample size without much of a problem to get more information if it is observed that the collected information was not sufficient or revealing.

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LIMITATIONS OF THE STUDY


Good results depend upon Automobile Industry willingness to give good and fair response then we can say concretely the result is good. Results of this study and findings are applicable only for Delhi & NCR city and near by areas. The results may be different of this study in another place. One of the limitation of this study is that of time limitation due to which it is not possible to do the detailed study. The sample size was taken only 40; it is difficult to say anything concretely. Absence of professional researcher and team was another limitation of the study.

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EMPIRICAL STUDY
India is emerging as one of the worlds fastest growing passenger car markets and second largest two wheeler manufacturer. According to the International Yearbook of Industrial Statistics 2008 released by United Nations Industrial Development Organisation (UNIDO), India ranks 12th in the list of the worlds top 15 automakers. It is home to the largest two wheeler manufacturer and fifth largest commercial vehicle manufacturer in the world. The industry is producing about 19 lakh passenger vehicles, 4.5 lakh commercial vehicles, 90 lakh two wheelers and 5 lakh three wheelers per annum.In order to make India a power to reckon with in the automotive sector the government launched the Automotive Mission Plan (AMP) 2006-2016. As per the AMP, it is estimated that the total turnover of the automotive industry in India would be in the order of USD 122 billion - USD 159 billion in 2016. It is expected that in real terms, India would continue to enjoy its eminent position of being the largest tractor and three-wheeler manufacturers in the world and the world's second largest two-wheeler manufacturer. By 2016, India will emerge as the world's seventh largest car producer (as compared to the eleventh largest currently) and retain the fourth largest position in world truck manufacturing sector. Further, by 2016, the automotive sector would double its contribution to the country's GDP from current levels of five per cent to 10 per cent. The automotive industry in India has thus undergone a transition, from comprising a few auto manufacturers, virtually no auto components makers and only low-quality auto ancillary producers to the league of global auto manufacturers, competitive component manufacturers and emerging ancillary producers. Several studies have revealed that previously the Indian automotive industry was not competitive enough for the global market due to inferior quality, lower labour productivity and high cost of raw materials in India (e.g., Pradosh and others, 2006). However, as in other markets, globalization has made the automotive market very competitive and brought profit margins to a very low level. Component suppliers are the strength of the emerging automobile industry. The Indian automobile component sector is relatively labour-intensive by global standards and is in the transition stage as a low-cost base for exporting labour intensive products (Saripalle, 2005). It is transforming itself from

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a low volume, fragmented market into an internationally competitive industry, having the advantage of skill-oriented, labour-intensive components. Indian component suppliers have displayed a growing capability to cater to the engineering and production needs of some of the worlds biggest auto companies, and many of the automobile majors are now outsourcing several components from India. The manufacturing costs in India are 25 per cent to 30 per cent lower than in its Western counterparts. Despite its growth, the share of Indian exports in the global auto component market is very small. The dynamics of the industry are undergoing a tremendous restructuring and tiering. Various technological and non-technological innovations have been brought in by the industry to capitalize on the opportunities. The India automotive sector has a presence across all vehicle segments and key components. In terms of volume, two-wheelers dominate the sector, followed by passenger vehicles. Until the 1990s, the industry had few players and was protected from global competition. After the Government removed the requirement for licensing in 1993, the arrival of global players has resulted in the sector becoming highly competitive. Automobile manufacturing units are located all over India. However, as noted by the Automotive Component Manufacturers Association of India (ACMA), they are concentrated in some pockets such as Chennai and Bangalore in the south, Pune in the west, the National Capital Region (NCR), which includes New Delhi and its suburban districts) in the north, Jamshedpur and Kolkata in the east and Pithampur in the central region. Following global trends, most auto suppliers are located close to the manufacturing locations of OEMs, forming regional automotive clusters. Indias automobile industry has undergone significant changes in the context of globalization, implementation of lean production and the development of modularization have changed the relationships between automobile assemblers (OEM) and their suppliers. Stiff competition among manufacturers has resulted in more mergers and acquisitions. The challenges facing automobile manufacturers and suppliers include improving quality, meeting cost-reduction targets and improving the time taken for products to reach the market (time-to-market). Thus, the organizations today are driven more towards greater product differentiation, using cutting-edge R&D, innovative sales and marketing approaches, and increasing their focus on
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boosting efficiencies in the manufacturing and supply chain. Hence, in this age of global outsourcing, supply chain management (SCM) plays a crucial role. SCM helps in demand forecasting, taking orders, giving an accurate promised delivery date, sourcing and manufacturing the right goods, positioning inventory properly, and pick, pack and efficient trans-shipment; most importantly, SCM makes a world of difference to the manufacturers by maintaining a minimal finished goods inventory. SCM constitutes: (a) Product flow; (b) Information flow; (c) Finance flow. Product flow is the movement of goods from supplier to OEMs as well as customer returns or service requirements. Information flow covers updating the status of deliveries as well as sharing information between suppliers and manufacturers. Finance flow encompasses credit terms, payment schedules, and consignment and title ownership arrangements. Indias automobile industry has achieved a global footprint. While most global OEMs and component majors are well-established in India, local OEMs, such as Tata Motors, Mahindra and Mahindra and TVS Motors, suppliers such as Bharat Forge and Sundaram Fasteners, have a significant global presence. Apart from the large and growing domestic market, many OEMs are looking at India as a significant global sourcing hub for auto components as well as specific products such as small cars. The manufacturing companies have adopted e-sourcing, which has helped them to reorganize the purchasing process and provided support for aggregated buying across business units compared to the traditional strategic sourcing process. The process reduces time spent on negotiating, accelerates information gathering, and speeds up communication channels among buyers and sellers. The rapid surge in global sourcing of auto components has also become a challenge for manufacturers and suppliers, although sourcing has reduced the cost of production substantially. Exports are
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playing an increasing role in Indias automobile industry with manufacturers such as Hyundai (which has already made India the world source for the i10), Renault-Nissan (which is using India as a supply hub for small cars) and Ford, Chevrolet, Honda, Toyota and VW, which are investing in new capacity for supplying local and overseas markets. Figure: Inventory and SCM model for Maruti-Suzuki and Tata Motors

Hence, the essence of the SCM solution lies in coordinating the flow of information and goods between the customers and the network of suppliers, manufacturers and distributors. A comparative framework of the SCM model for Maruti-Suzuki and Tata Motors is presented in figure above.

23

Both Maruti and Tata keep a close watch on the protection of their technical knowhow. Although it is easy to monitor joint-venture suppliers, this is not the case with independent suppliers. However, joint-venture suppliers are now allowed to supply other OEMs and export independently. Some joint-venture suppliers have been able to rise up the value chain and reach a position where they can supply similar products to different companies. This has allowed these suppliers to scale up their operations and expand their product lines.

24

RESEARCH FINDINGS
1. Awareness Level towards Supply chain Management Fundamental

5% 0 5% 0 4% 0 3% 0 2% 0 1% 0 0 % 3% 0 2% 0

G ood

Averag e

Poor

25

2. Options for a better Supply chain Solutions

38.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Max um im Moderate Minim um 28.00% 34%

26

3. Willingness level to accept the Supply chain Management

45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Hig h Averag e Low 42.00% 33.00% 25%

27

4. Level the cost deficiency hinders to implement Supply chain solution.

60% 40% 20% 0% Hig h Averag e 48.00% 30% 22.00%

Low

28

5. Problems in implementation of Supply chain solution

60% 40% 20% 0% Hig h 40% 17.00% Averag e Low 43.00%

29

6. Level the unavailability hinder to implement Supply chain solutions.

30

7. Level of satisfaction with Supply chain solutions.

60% 40% 20% 0%

50% 30% 20% Hig h

Averag e

Low

31

8. Observation level of the Supply chain solution is advantages for the scope of business.

56% 60% 50% 40% 30% 20% 10% 0% G ood Averag e Bad 27.00% 17.00%

32

9. Option preferred as advantages in implement Supply chain solutions.

42.00% 38.00% Better tim e delivery Better Inventory m anag ent em Better cost Effectiveness 20%

33

10. Level new emerging technologies are beneficial in providing better Supply chain solutions.

5% 0 4% 5 4% 0 3% 5 3% 0 2% 5 2% 0 1% 5 1% 0 5 % 0 %

4% 5 3% 5

2% 0

H h ig

Mode te ra

L ow

34

11. Role SCM play in the total performance.

60% 50% 40% 30% 20% 10% 0%

55%

28.00%

17.00%

Good

Averag e

Poor

35

12. Level of desire to ask for supplier for much better Supply chain solution

36

13. Which option is most important for much better Supply chain solution.

20% 53.00% Better Invento ry M anagement Transpo rtation Decisio n 27.00%

Lo catio n Decisio n

37

14. Level of willingness to go for outsourcing Supply chain services

5% 5 6% 0 5% 0 4% 0 3% 0 2% 0 1% 0 0 % H h ig Mode te ra L ow 2% 5 2% 0

38

15. Level of requirement for Automobile sector in comparison with other commodity for a supply chain solution

20%

Hig h Moderate Low 25% 55%

Interpretation To sum up,

39

MAJOR FINDINGS
1. People are not well aware about SCM scope because still 20% firms are having poor awareness level. 2. Still in days globalized scenario cost play a major hindrance agent in the better SCM options by a firm. 3. The approach is now future looking but still 40% firms are conservative. 4. Better SCM providers are not available in the Delhi & NCR region. 5. Satisfaction level is quite balances with still 20% people are not well satisfied. 6. Firms feel SCM may provide advantage to them and there prospects in business. 7. Timely delivery of product is most important advantage factor. 8. Firm is technology focus and they feel that emerging technologies are beneficial to them. 9. Role of SCM as a strategy is high. 10. Level of desire is good but still 20% are not having better mindset. 11. Inventory management is most important component felt by the firms of the SCM. 12. Willingness for the outsourcing is not quite satisfactory. 13. Automobile companies feel that there need urgency is quite higher in comparative to other factor.

40

CONCLUSION & RECOMMENDATION


Worldwide, organizations are striving to increase their productivity in order to stay competitive in the global market. The process of supply chain has become complicated and there are uncertainties at every stage in the chain. They are in the form of poor demand forecasts, stock-outs or late deliveries. Now days, effective supply chain has become an imperative in order to increase customer satisfaction, reduce costs and handling of demand supply scenario. Information is now treated as strategic asset and solution for driving the inefficiencies out of supply chain. Leveraging of IT tools helps in synchronizing the activities along the supply chain to reduce costs and increases the focus on reducing response time to fluctuations in demand. According to the Council of Logistics Management Supply Chain Management, the process of planning, implementing and controlling efficient and cost effective flow of materials, in-process inventory, finished goods and related information from point-oforder to point-of-consumption, for the purpose of conforming to customer requirements as efficiently as possible. The Indian automobile manufacturers face stiff international competition in the wake of all major US and European car manufacturers entering the Indian market. In the contemporary scenario, supply chain management practices can be adopted to improve operational efficiency and profits. All this is driving the organisations towards greater product differentiation using cutting edge R&D, innovative sales and marketing approaches, and increasing focus on boosting efficiencies in manufacturing and supply chain. Hence, in the age of e-business and global outsourcing, supply chain management (SCM) plays a crucial role in many of these areas. SCM is a best-in-class, high-performance solution which can be utilised by the world's leading automobile manufacturer, logistics and distribution companies, and retailers to blend the demand chain with the supply chain. SCM helps in demand forecasting; taking an order; giving an accurate promise date; sourcing and manufacturing the right goods; position inventory properly; pick, pack, and efficient

41

transhipment; most importantly, SCM makes a world of difference to the manufacturers by maintaining a minimal finished goods inventory. The researcher finds that the in-bound and out-bound transportation cost and inventory carrying cost forms the major part of the supply chain cost. So, to reduce the total supply chain cost, the companies must focus in reducing the in-bound transportation cost to the minimum. Rapid surge in global sourcing of auto components has also become a challenge for manufacturers and suppliers although sourcing has reduced the cost of production substantially. Auto component manufacturers and all tiers of the supply chain have immense opportunities to enhance their entire supply chain process with the successful implementation of SCM solution. Finally, companies that are able to create values for their customers by satisfying their needs and wants generally increase their market share and their profitability. Thus an important part of any business, certainly for any supply chain, is making it easy for customers to do business with, the report concluded.

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REFLECTION ON LEARNING
In the current competitive scenario Supply Chain Management assumes a significant importance and calls for serious research attention, as companies are challenged with finding ways to meet ever-rising customer expectations at a manageable cost. To do so, businesses must identify which parts of their supply-chain process are not competitive, understand which customer needs are not being met, establish improvement goals, and rapidly implement necessary improvements. SCM has been interpreted by various researchers. Based on the relatively recent development of the supply chain literature, it is not surprising that there has been much debate as to a specific SCM definition. Automotive Industry comprises of automobile and auto component sectors and is one of the key drivers of the national economy as it provides large-scale employment, having a strong multiplier effect. Being one of the largest industries in India, this industry has been witnessing impressive growth during the last two decades. It has been able to restructure itself, absorb newer technology, align itself to the global developments and realize its potx x ential. This has significantly increased automotive industrys contribution to overall industrial growth in the country. The supply chain as a concept and a reality is moving far beyond the confines of the individual organization. It has become a dynamic process that involves simultaneous acquisition and continuous re-evaluation of partners, technologies and organizational structure. The building blocks of successful supply chains are numerous and their interactions are complex and one of the block is knowledge management. The supply chain has evolved from corporate necessity to enhancing competitive advantage for savvy industry leaders. In 1980s and early 1990s, the companies focused their supply chain initiative on reengineering supply chain cost structures, But today the customers are coming to expect greater customization of products and services to their individual needs. The customers are beginning to demand the same level of quality, not just in product itself but in the delivery of the product and the services packaged with it.

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Supply Chain design and operation is a driver of corporate strategy and shareholder value. Companies need to expand beyond the boundaries of their own organization. Companies need to synchronize their planning and operational activities. This is where the knowledge management plays its part. However, over the last few years, there has been a sea change in the approach. The logistics sector has evolved from basic transportation to include total supply chain management. This change has played an important role in ensuring the success of the automobile industry in India. This end-to-end approach involves providing assistance for purchasing, production planning, order processing and fulfilment, inventory management, transportation, distribution and customer service etc. With increasing competition, more and more companies have started outsourcing supply-chain management to specialists to cut down costs. In today's competitive business environment, automobile companies worldwide are shifting focus to understanding and implementing extended supply chain management systems that integrates product, process and information flows within and across organisational boundaries. Leading automobile companies now rigorously follow the concepts of pull against push, and just-in-time to improve the efficiency of supply chain. Recognising this need, some of the leading supply chain solution providers specialise in offering stateof-the-art warehousing and inventory management services based on JIT and FIFO. These include inventory management, C&F/distribution, hub management, order processing, material handling and cross docking, web enabled warehouse and inventory management software. Besides the basic movement of raw materials, parts and finished goods, it is also imperative for auto companies to customise services to their diverse needs. It is this service function that differentiates one supply chain provider from another. Time-bound delivery and safety are the two most critical aspects of managing supply chains of automobile companies that would also reduce logistics costs considerably. With the inclusion of functions such as OEM solutions, line feeding, spares distribution, CBU (completely built unit) distribution, reverse logistics, customised

44

fleet, warehousing and inventory management by supply chain solution providers, automobile companies have been able to improve the overall efficiency. This has not only led to significant reduction in working capital requirements and maintaining an inventory of dealers but also helped in building brand image and goodwill for the companies. It is also important to function in a hi-tech environment so as to improve information flow, both internal and external. Several automobile manufacturers in India have taken proactive measures to control
their logistics cost and improve customer services. Several measures were

undertaken by Indian companies to improve their supply chain. In India, some of the automobile manufacturing companies have adopted e-sourcing, which helped them to reorganise the purchasing process and supported the aggregated buying across business units with the help of Internet-based tools or B2C Internet portals. With the use of Internet, more global suppliers have participated compared to the traditional strategic sourcing process. The process reduces time spent on negotiating, accelerates information gathering and speeds up communication channels among buyers and sellers. The companies have implemented this e-sourcing for procurement of highvalue commodities. Hence, the essence of SCM solution lies in coordinating the flow of information and goods between the customers and the network of suppliers, manufacturers and distributors. Interestingly, there has been a growing trend of realisation of supply chain optimisation in India; there is no dearth of SCM solutions in the country. Currently, manufacturing and automotive sectors have been the leaders in implementing SCM solutions in the country. Indian automobile and auto components industry is on a roll and there is an immense scope for management for enhancing the supply chain of the sector. India has become a favourable destination for foreign companies to establish their facilities and form alliances with domestic companies. Low cost of manufacturing and conducive government support have been the major drivers for foreign companies investing in India. Indias large young population, higher GDP growth, and most importantly per capita passenger car penetration is low at 8.5 car per thousand population, which creates

45

great opportunity for industry players to offer an affordable four-wheeler alternative to the two-wheeler customers. According to Planning Commission of India, Indian automobile industry is expected to grow at CAGR of 15% over the next five years. The Indian economy is now gaining momentum in the world of free trade and liberal movements of goods and services between countries. Therefore, efficiency in supply will be critical for Indias automobile success.

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Tinbergen, trend

J.

Zur

Theorie

der

Langfristigen

Wirtschaftsentwicklung.

Weltwirtsschaftliches Archiv. 1942; 55(1): 511-549 (translated as On the theory of

49

ANNEXURE

50

QUESTIONNAIRE
Your opinion and suggestion shall be kept confidential and will be used for academic purpose. Name of Firm Occupation Designation

Q1.What is your awareness Level Towards Supply chain Management Fundamental as a Strategy to take the advantage in supply of Automobile products? Good Average Poor

Q2.How many option do you have for a better Supply chain Solution? Many Moderate Minimum

Q3. What is your willingness level to accept the Supply chain Management advantage for better profitability achievement? Highest Higher Average Lower Lowest

Q4. Up to what level the cost deficiency hinder you to implement Supply chain solution? Highest Higher Average Lower Lowest
51

Q5. Did you face problems in implementation of Supply chain solution? Highest Higher Average Lower Lowest

Q6. Up to what level the unavailability hinder you to implement Supply chain solution? Highest Higher Average Lower Lowest

Q7. Up to what level you satisfied with Supply chain solution? Good Average Poor

Q8.what is the your observation level of the Supply chain solution is advantages for the scope of business? Good Average Poor

Q9.Which option do you prefer as advantages in implement Supply chain solution? Better time delivery Better Inventory Management Better Cost Effectiveness

52

Q10. Up to what level new emerging technologies are beneficial in providing better Supply chain solution? Highest Higher Average Lower Lowest

Q11.In your business strategy what role SCM play in the total performance? Good Average Poor

Q12. What is the impact of poor supply chain on the overall systems? Highest Higher Average Lower Lowest

Q13.Which component do you feel is most important for much better Supply chain solution? Better Inventory management Better location Decision Better transportation Decision Distribution management E-logistics management Warehouse management

53

Q14. Level of your willingness to go for outsourcing Supply chain services? Highest Higher Average Lower Lowest

Q. 15.What is level of requirement for Automobile sector in comparison with other commodity for a supply chain solution? Highest Higher Average Lower Lowest

Signature

54

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