Indian Automobile Industry

Accounting for approximately 4 % of GDP, Automobile Industry is the significant

contributor to the growth of Indian economy. The last few years have seen greater
integration of the Indian players with their global counterparts. What is interesting
about this is its almost democratic nature, in that a large part of the industry has
seen significant changes. While the changes have been more visible in the auto
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.

The change process 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 source’ doctrine. 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.

Going forward, OEMs as well as auto component players will evolve further as
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 auto component 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 mitigate these.

The objective of this report is to analyze the key advancements in automotive

supply chain and the unique practices followed by major players in India. Finally
balanced scorecard framework would be used to build the strategic map for
Automobile players.

Global automobile manufacturers are consistently streamlining their business

process by outsourcing their non-core activities to low-cost countries like India.
Global automobile manufacturers are under tremendous pressures to innovate their
manufacturing process and at the same time, to reduce costs. In view of the present

1
global competitiveness, they must not only develop new features to strengthen
their customer requirements but also follow the environmental and safety
standards. In addition, the base price of a car is expected to remain same over the
next decade. As a result, companies are forced to source more components from
low-cost countries like India.

Domestic Sales

Passenger Vehicles segment during April-January 2010 grew at 25.21 percent over
same period last year. Passenger Cars grew by 24.75 percent, Utility Vehicles grew
by 21.95 percent and Multi Purpose Vehicles grew by 37.05 percent in this period.

The overall Commercial Vehicles segment registered positive growth at 30.39

percent during April-January 2010 as compared to the same period last year.
Medium & Heavy Commercial Vehicles (M&HCVs) registered growth at 20.58
percent; Light Commercial Vehicles grew at 39.66 percent.

Three Wheelers sales recorded a growth rate of 25.77 percent in April-January

2010. While Passenger Carriers grew by 32.54 percent during April-January 2010,
Goods Carriers grew at 4.20 percent.

Two Wheelers registered a growth of 23.74 percent during April-January 2010.

Mopeds, Scooters and Motorcycles grew by 31.73 percent, 20.56 percent and
24.32 percent respectively.

Exports

During April-January 2010, overall automobile exports registered a growth rate of

13.24 percent.

Passenger Vehicles segment, Three Wheelers and Two Wheelers segments grew
by 33.92 percent, 4.60 percent and 8.84 percent respectively in this period.
Commercial Vehicles recorded growth of (-) 7.52 percent.

Auto Components Industry

Surge in automobile industry since the nineties has led to robust growth of the auto
component sector in the country. In tandem with the industry trends, the Indian

2
component sector has shown great advances in recent years in terms of growth,
spread, absorption of new technologies and flexibility. Indian auto component
industry has seen major growth with the arrival of world vehicle manufacturers
from Japan, Korea, US and Europe. Today, India is emerging as one of the key
auto components centre in Asia and is expected to play a significant role in the
global automotive supply chain in the near future. The auto component industry is
also expected to drive the growth of the engineering sector in view of its strong
downstream and upstream linkages with many other segments of the engineering
sector like raw materials, capital goods, intermediate products etc. Auto component
industry supports industries like automobiles, machine tools, steel, aluminum,
rubber, plastics, electrical, electronics, forgings and machining. India has also
emerged as an outsourcing hub for auto parts for international companies such as
Ford, General Motors, Daimler Chrysler, Fiat, Volkswagen, and Toyota.

During the year 2008-09, the turnover and export for auto component industry was
recorded at US $ 15.85 billion and US $ 3.11 billion respectively.

INTRODUCTION:

Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act

of Parliament, to meet the growing demand of a personal mode of transport caused
by the lack of an efficient public transport system. It was established with the
objectives of - modernizing the Indian automobile industry, producing fuel
efficient vehicles to conserve scarce resources and producing indigenous utility
cars for the growing needs of the Indian population. A license and a Joint Venture
agreement were signed with the Suzuki Motor Company of Japan in Oct 1983, by
which Suzuki acquired 26% of the equity and agreed to provide the latest
technology as well as Japanese management practices. Suzuki was preferred for
the joint venture because of its track record in manufacturing and selling small cars
all over the world. There was an option in the agreement to raise Suzuki’s equity to
40%, which it exercised in 1987. Five years later, in 1992, Suzuki further increased
its equity to 50% turning Maruti into a non-government organization managed on
the lines of Japanese management practices.

3
Maruti created history by going into production in a record 13 months. Maruti is
the highest volume car manufacturer in Asia, outside Japan and Korea, having
produced over 5 million vehicles by May 2005. Maruti is one of the most
successful automobile joint ventures, and has made profits every year since
inception till 2000-01. In 2000-01, although Maruti generated operating profits on
an income of Rs 92.5 billion, high depreciation on new model launches resulted in
a book loss.

COMPANY HISTORY AND BACKGROUND

The Evolution
Maruti’s history of evolution can be examined in four phases: two phases during
pre-liberalization period (1983-86, 1986-1992) and two phases during post-
liberalization period (1992-97, 1997-2002), followed by the full privatization of
Maruti in June 2003 with the launch of an initial public offering (IPO).The first
phase started when Maruti rolled out its first car in December 1983. During the
initial years Maruti had 883 employees, a capital of Rs. 607 mn and profit of Rs.
17 mn without any tax obligation. From such a modest start the company in just
about a decade (beginning of second phase in 1992) had turned itself into an
automobile giant capturing about 80% of the market share in India. Employees
grew to 2000 (end of first phase 1986), 3900 (end of second phase 1992) and 5700
in 1999. The profit after tax increased from Rs 18.67 mn in 1984 to Rs. 6854.54
mn in 1998 but started declining during 1997-2001.
During the pre-liberalization period (1983-1992) a major source of Maruti’s
strength was the wholehearted willingness of the Government of India to subscribe
to Suzuki’s technology and the principles and practices of Japanese management.
Large number of Indian managers, supervisors and workers were regularly sent to
the Suzuki plants in Japan for training. Batches of Japanese personnel came over
to Maruti to train, supervise and manage. Maruti’s style of management was
essentially to follow Japanese management practices.

The Path to Success for Maruti was as follows:

(a) Teamwork and recognition that each employee’s future growth and prosperity
is totally dependent on the company’s growth and prosperity
(b) Strict work discipline for individuals and the organization

4
(c) Constant efforts to increase the productivity of labor and capital
(d) Steady improvements in quality and reduction in costs
(e) Customer orientation
(f) Long-term objectives and policies with the confidence to realize the goals
(g) Respect of law, ethics and human beings.
The “path to success” translated into practices that Maruti’s culture
approximated from the Japanese management practices.

Maruti adopted the norm of wearing a uniform of the same color and quality of
the fabric for all its employees thus giving an identity. All the employees ate in the
same canteen. They commuted in the same buses without any discrimination in
seating arrangements. Employees reported early in shifts so that there were no time
loss in-between shifts. Attendance approximated around 94-95%. The plant had an
open office system and practiced on-the-job training, quality circles, kaizen
activities, teamwork and job- rotation. Near-total transparency was introduced in
the decision making process. There were laid-down norms, principles and
procedures for group decision making. These practices were unheard of in other
Indian organizations but they worked well in Maruti. During the pre-
liberalization period the focus was solely on production. Employees were
handsomely rewarded with increasing bonus as Maruti produced more and sold
more in a seller’s market commanding an almost monopoly situation.

APPROACHES TO PROCESS IMPROVEMENT

Kaizen 

Japanese for "improvement" or "change for the better", refers to philosophy or

practices that focus upon continuous improvement of processes in manufacturing,
engineering, supporting business processes, and management. It has been applied
in healthcare, psychotherapy, life-coaching, government, banking, and many other
industries. When used in the business sense and applied to the workplace, kaizen
refers to activities that continually improve all functions, and involves all
employees from the CEO to the assembly line workers. It also applies to processes,
such as purchasing and logistics, that cross organizational boundaries into the
supply chain. By improving standardized activities and processes, kaizen aims to
eliminate waste (see lean manufacturing). Kaizen was first implemented in several
Japanese businesses after the Second World War, influenced in part by American

5
business and quality management teachers who visited the country. It has since
spread throughout the world and is now being implemented in many other venues
besides just business and productivity.

Total Quality Management (TQM):

Total Quality Management is a process (or, perhaps, a mindset) rather than a

thing.  Total Quality Management (TQM) means consistently and predictably
producing what the customer wants.  TQM is not just an outcome, but a never
ending process of continually improving the delivery of what the customer wants.

Six Sigma and Statistical Process Control (SPC) are the part of TQM that
focuses on creating a process that delivers quality components and products. A
process that can deliver parts capable of meeting quality requirements 99.9999% of
the time is a capable, six sigma process.  Quality cannot be “inspected into” parts. 
Parts need to be inspected, for the purpose of qualifying the process producing the
part.  Inspection is for answering the question, “Is the process that produces this
part capable of consistently producing parts that meet the quality standard
99.9999% of the time?”   The Statistical Process Control System collects and
analyzes the data to answer that question.

Implementing TQM means that companies must make their suppliers part of their
process.  If a company wants to meet the Six Sigma standard, its suppliers must
implement TQM also.  Vendors need to become part of the TQM process, so that
all of the parts are working together to deliver a quality product. You just cannot
build a quality product out of sub-standard parts.

Business Process Reengineering is the analysis and design of workflows and

processes within an organization. A business process is a set of logically related
tasks performed to achieve a defined business outcome. Re-engineering is the basis
for many recent developments in management. The cross-functional team, for
example, has become popular because of the desire to re-engineer separate
functional tasks into complete cross-functional processes. Also, many
recent management information systems developments aim to integrate a wide
number of business functions. Enterprise resource planning, supply chain
management, knowledge management systems, groupware and collaborative
systems, Human Resource Management Systems and customer relationship
management.

6
Business Process Reengineering is also known as Business Process Redesign,
Business Transformation, or Business Process Change Management.

MARUTI ADOPTS KAIZEN APPROACH TO PROCESS

IMPROVEMENT
In its bid to meet limited capacity challenges at its existing plants, Maruti Suzuki
has said that it will be adopting 'Kaizen' methodologies in its production processes
that would help it to rationalize its assembly lines.
It is to be mentioned that the term kaizen (Japanese for "improvement") is a
Japanese word adopted into English referring to a philosophy or practices focusing
on continuous improvement in manufacturing activities, business activities in
general, and even life in general, depending on interpretation and usage. When
used in the business sense and applied to the workplace, kaizen typically refers to
activities that continually improve all functions of a business, from manufacturing
to management and from the CEO to the assembly line workers. By improving
standardized activities and processes, kaizen aims to eliminate waste (see lean
manufacturing). Kaizen was first implemented in several Japanese businesses
during the country's recovery after World War II and has since spread to businesses
throughout the world.
I. V. Rao, managing executive officer, Engineering, Maruti Suzuki India Ltd
(MSIL), said, "This will be a major milestone for the company and also brings new
challenges as we could face some capacity constraints. By using the Japanese

7
Kaizen production methodologies, we are working to bring about incremental
gains in production at Gurgaon and Manesar plants." He added, "The Manesar
plant is faced with serious capacity constraint. Therefore, we are in the process of
further streamlining operations. However, we have no plans to add a third shift.
We are actively considering expansion and a decision is likely by next fiscal. The
company accounts for 54 per cent market share and we will continue to bring in
new products to retain our hare," he said.

Meanwhile, the country's largest passenger car manufacturer is also planning to

roll out brand centres across key metros in the country that will enable it to
enahnce its brand salience. The company is looking to set up these centres (which
are expected to occupy at least 44,000-45,000 square feet space) over the next 18-
24 months. Financial Chronicle says that the company is on course to buying
nearly 44,000 square feet space in Rajarhat, one of India's latest and fastest-
growing planned new cities near Kolkata. "This concept is in an early stage and lot
of changes may eventually happen. The brand centres are likely to showcase the
best products from Maruti and Suzuki's stables. For instance, you could hope to see
Hayabusa bikes in the brand centre besides the Maruti Eeco," a senior official was
quoted as saying to FC, without disclosing any investment outlay for such centres.

In a separate media report, Maruti Suzuki has also revealed that it is looking to
enhance its export base by entering into markets in the Middle East, South
America, West Asia and Australia. "We are currently exporting our cars to the
European countries but now we will start exploring new markets such as Africa,
South America, the Middle East and Australia to boost our exports," a senior
official told reporters in Chandigarh recently. The company has targeted to export
1.30 lakh cars by this fiscal end against 70,000 cars exported in 2008-09.

Talking about sales in the northern region, Maruti Suzuki said the company
recorded 30 per cent growth in cars sales in Punjab, Himachal Pradesh, Haryana
(excluding NCR), Jammu and Kashmir, Chandigarh during the first nine months
till December 2009 against the national growth of 22.5 per cent. The company has
sold 72,000 cars in the region [comprising Haryana (excluding NCR region),
Punjab, Chandigarh, Himachal Pradesh and Jammu & Kashmir] during the period
April-December 2009 as compared with 55,000 units it sold during the

8
corresponding period of the previous year. "We are on an average selling 8,000
cars per month in these markets, which have grown by 30 per cent in April till
December 2009," a senior Maruti official was quoted as saying to reporters.

PROBLEMS IN MARUTI

Maruti Udyog, India's largest carmaker has been making key investments in
several human resource initiatives. The company is currently working on a five-
year people-oriented strategy, apart from initiatives that are being taken to make
young recruits understand the philosophy, culture and best practices within the
company. Special emphasis has also been placed on training. The company
believes it is worthwhile being in a position, where people are in fact, envious of
the corporate world outside and its employees in high demand, 

For Maruti, there are two to three key areas. One of the biggest is to bring about a
change, where we are acceptable to a dynamic global business scenario. The
second big challenge is to bring in the best HR practices, policies and systems
from the global perspectives, while being attuned to local requirements. At
Maruti, are very clear that we need to have a proper balance of global and local
bestpractices. 

The third big challenge is about the young people, on whom our future is going to
depend.
They are very strong in terms of career aspirations. Understanding their
aspirations and blending that with the company's aspirations, where talent
management and retention comes in, constitutes this challenge. 

9
 DATABASE MANAGEMENT SYTEM (DBMS)

A Database Management System (DBMS) is a set of computer programs that

controls the creation, maintenance, and the use of a database. It allows
organizations to place control of database development in the hands of database
administrators (DBAs) and other specialists. A DBMS is a system software
package that helps the use of integrated collection of data records and files known
as databases. It allows different user application programs to easily access the same
database. DBMSs may use any of a variety of database models, such as
the network model or relational model. In large systems, a DBMS allows users and
other software to store and retrieve data in a structured way. Instead of having to
write computer programs to extract information, user can ask simple questions in
a query language. Thus, many DBMS packages provide Fourth-generation
programming language (4GLs) and other application development features. It
helps to specify the logical organization for a database and access and use the
information within a database. It provides facilities for controlling data access,
enforcing data integrity, managing concurrency, and restoring the database from
backups. A DBMS also provides the ability to logically present database
information to users.

For example:-

10
Features and capabilities

The DBMS of today roll together frequently needed services or features of

attribute management. By externalizing such functionality to the DBMS,
applications effectively share code with each other and are relieved of much
internal complexity. Features commonly offered by database management systems
include:

Query ability: Querying is the process of requesting attribute information from

various perspectives and combinations of factors. Example: "How many 2-door
cars in Texas are green?" A database query language and report writer allow users
to interactively interrogate the database, analyze its data and update it according to
the users privileges on data.
Backup and replication: Copies of attributes need to be made regularly in case
primary disks or other equipment fails. A periodic copy of attributes may also be
created for a distant organization that cannot readily access the original. DBMS
usually provide utilities to facilitate the process of extracting and disseminating
attribute sets. When data is replicated between database servers, so that the
information remains consistent throughout the database system and users cannot
tell or even know which server in the DBMS they are using, the system is said to
exhibit replication transparency.
Rule enforcement: Often one wants to apply rules to attributes so that the
attributes are clean and reliable. For example, we may have a rule that says each
car can have only one engine associated with it (identified by Engine Number). If
somebody tries to associate a second engine with a given car, we want the DBMS
to deny such a request and display an error message. However, with changes in the
model specification such as, in this example, hybrid gas-electric cars, rules may

11
need to change. Ideally such rules should be able to be added and removed as
needed without significant data layout redesign.
Security: For security reasons, it is desirable to limit who can see or change
specific attributes or groups of attributes. This may be managed directly on an
individual basis, or by the assignment of individuals and privileges to groups, or
(in the most elaborate models) through the assignment of individuals and groups to
roles which are then granted entitlements.
Computation: Common computations requested on attributes are counting,
summing, averaging, sorting, grouping, cross-referencing, and so on. Rather than
have each computer application implement these from scratch, they can rely on the
DBMS to supply such calculations.
Change and access logging: This describes who accessed which attributes, what
was changed, and when it was changed. Logging services allow this by keeping a
record of access occurrences and changes.
Automated optimization: For frequently occurring usage patterns or requests,
some DBMS can adjust themselves to improve the speed of those interactions. In
some cases the DBMS will merely provide tools to monitor performance, allowing
a human expert to make the necessary adjustments after reviewing the statistics
collected.

Database Management in Maruti Suzuki

When leading Indian automaker Maruti Suzuki says, “Count on Us,” it’s more than
a marketing slogan to customers. It’s also the message that the company’s IT
department is sending loud and clear to its internal customers, a team that is
manufacturing and selling a highly engineered and customizable consumer product
accompanied by an array of related products and services. When the company

12
added leasing, finance, insurance, and preowned car sales to existing lines of
business in 2002, it used the expansion as the impetus to replace a collection of
mismatched IT applications with a series of high-speed Oracle applications. The
result is a single, standardized environment that retrofits the complex, multichannel
company for rapid acceleration.

Powering Goals with Real-Time Data

Currently commanding more than 54 percent of India’s huge automobile market,
with 2008 sales of US$3.5 billion and four relatively new business lines, the
company plans to double annual production from 500,000 vehicles today to 1
million by the end of 2010. Add a huge network of dealerships, and you get
revved-up demand throughout the organization for access to consistent real-time
data.
When Rajesh Uppal, Maruti Suzuki’s chief general manager of IT, set Maruti
Suzuki on a course of standardization in 2002, the company already had Oracle
Database, Oracle Application Server, and some of the enterprise resource planning
modules of Oracle E-Business Suite in place. But IT sprawl became a growing
challenge. Various lines of business were using homegrown systems, and
integration between them was poor. Staff had to enter data multiple times and
couldn’t generate useful management reports without manually consolidating
information.
The addition of four new business lines only added to the complexity, requiring
even more human intervention and creating additional integration issues. Plus,
plans to build on its expanded footprint and increase vehicle production made it
critical for Maruti Suzuki to create an IT environment that could scale easily to
accommodate more products and services, more customers, and a lot more data.

13
Uppal’s goals were to avoid a future filled with integration challenges and other
forms of IT catch-up as well as to provide real-time, end-to-end visibility
throughout the company. With Oracle technology now underlying every aspect of
Maruti Suzuki’s business, from the back office to online sales to its dealer network,
the IT operation is able to deliver greater efficiency and flexibility in a scalable
solution with lower IT costs, streamlined support, and a tightly integrated
environment that yields consistent data and simplifies the addition of new
technologies.

“Our long-term perspective has been that a single-vendor stack and road map
makes good business sense,” Uppal says, adding that upgrades have been
significantly simplified because each generation of Oracle products ties neatly into
the existing Oracle stack. The single-vendor model enables the company to
complete upgrades without getting stalled in time-consuming integration projects.
It’s a model that other companies would be well advised to follow, says Howard
Rubin, a leader in IT benchmarking and senior advisor at Gartner. “[Maruti Suzuki
is] in the business of making cars, not the business of handling software
disharmony,” he notes. “In an industry where margin is being squeezed, you want
to get the best leverage you can, and a single-source solution is an obvious and
brilliant thing to do.”

Market Demands
For Maruti Suzuki, standardizing on Oracle answered a need for continual
technology improvement. “In this country, technology is one area where you have
to constantly innovate. You can’t sit still,” says Uppal. “You know that you’ll be

14
ahead of the curve only for a short time and that your competitors will catch up
shortly, so the lifecycle of innovation isn’t very long.”
In that spirit, Uppal complemented Oracle Database and Oracle Application Server
with a growing array of Oracle E-Business Suite modules that run its financial,
purchasing, and human resources systems, among others. The open architecture of
these components has simplified integration with Maruti Suzuki’s legacy
procurement, dispatch, time card, production planning, and business intelligence
systems, which was accomplished without any interruption to the business. That’s
critical to a company generating more than 2,000 invoices each day.

One of the key operational benefits that Maruti Suzuki has achieved has been a
level of integration that enables the company to work more effectively with its
nationwide network of 850 dealers. The company’s proprietary dealer management
system was built using Oracle Forms and has run on a centralized Oracle Database
since prior to Maruti Suzuki’s decision to standardize. But because of the disparate
nature of the company’s legacy applications, an inquiry through the dealer
management system couldn’t reveal updates entered manually by back-office staff.
This meant that one dealership might not be able to see that another had ordered
the last of a certain part, resulting in erroneous information being passed on to the
dealership and its customers.

Today, however, the system links to various modules of the company’s Oracle E-
Business Suite deployment, ensuring that the entire dealer network is being fed the
same data. Such integration also means that dealership input arrives on the
production floor in real time, enabling faster response to requests for parts or rush
delivery of vehicles.

Improved end-to-end visibility has also allowed Maruti Suzuki to take online sales
to a new level. The company’s evolving e-commerce capabilities now allow

15
customers to do everything from choosing a vehicle to obtaining financing and
insurance, all with the click of a mouse. When a customer who has decided on, a
particular vehicle logs on to Maruti Suzuki’s Web site to contact a dealer, options
for financing and insurance are presented. If the customer expresses interest, the
system collects the pertinent information and automatically routes it to the nearest
dealership, which can arrange financing options with a local bank or work with the
company’s in-house financing unit before contacting the customer directly to
continue the process.

End-to-End Support
Underlying these IT improvements is a fundamental comfort with Oracle
technology, and that would not have been achieved without assistance from Oracle
Consulting during Maruti Suzuki’s 2002 Oracle E-Business Suite deployment, says
Uppal. Oracle consultants brought with them a combination of deep knowledge of
the technology and best practices to draw upon in mapping each module to the
company’s business processes. They not only assisted Maruti Suzuki’s IT team
with the installation but also helped them develop user manuals, designed a
program for training trainers, and provided additional training for superusers. In
fact, Uppal credits Oracle’s team with helping to overcome resistance among
employees who weren’t sure they wanted to embrace new technologies.
As users have grown increasingly comfortable with Oracle software, Uppal reports
that there are fewer errors, translating to more-reliable data throughout the
company’s wide-ranging application portfolio. “Standardization with one vendor
and one partner has driven knowledge skill sets,” says Subhomoy Sengupta, senior
director of applications for Oracle India Pvt Ltd.

What’s more, as an end-to-end Oracle stack customer, Maruti Suzuki is availing

itself of Oracle’s wide-ranging resources, working closely with Oracle Support to

16
resolve issues. It has also been teaming up with Oracle’s development
organization, not only to help identify requirements for planned applications—
including a recently released demand forecasting application—but also to make
sure that Maruti Suzuki is identifying the right applications to add to its stack.

“Oracle’s technology team helps us to define the parameters, and then we say,
‘OK, if we put in a technology over there, what kind of improvement does that
yield?’” says Uppal. “We keep finding opportunities for process improvement, and
thankfully, Oracle has a huge application and technology stack that supports it.”

Gartner’s Rubin says that maintaining ties to an established partner for technology
upgrades should pay huge dividends for Maruti Suzuki, whereas using niche
solutions for specific processes would only lead to headaches. “The cross-vendor
approach is deadly,” he says. “By working with Oracle, Maruti Suzuki is working
with one of the true powers in the industry. If they follow the rules and match the
Oracle blueprint to their processes, they will have a lot of power and a lot of
leverage.”

Oracle executives consider Maruti Suzuki to be a bellwether customer in its use of

Oracle’s standards-based and custom technologies. “Other customers should look
at the way Maruti Suzuki has balanced the two aspects—the unique parts of the
solutions and the standard parts of the solutions,” says Sengupta. “Reliance on the
entire Oracle stack has had a huge impact on the company’s operations and
customers and has enabled it to cut down on IT costs and increase operating
efficiencies.”

For his part, Uppal intends to keep Maruti Suzuki tuned up by adopting Oracle
applications wherever they match the needs of his business. He knows that doing
so will enable the company to scale its IT operations to match its market growth,

17
seamlessly absorb technology upgrades without breaking the bank, and keep its
place in the fast lane ahead of the competition.

SUPPLY CHAIN MANAGEMENT (SCM)

SCM is the management of a network of interconnected businesses involved in the
ultimate provision of product and service packages required by end customers
(Harland, 1996). Supply chain management spans all movement and storage of raw
materials, work-in-process inventory, and finished goods from point of origin to
point of consumption (supply chain).

Another definition is provided by the APICS Dictionary when it defines SCM as

the "design, planning, execution, control, and monitoring of supply chain activities
with the objective of creating net value, building a competitive infrastructure,
leveraging worldwide logistics, synchronizing supply with demand and measuring
performance globally."

Role of SCM in Automotive Industry

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-of-order to point-of-consumption, for the purpose of conforming to
customer requirements as efficiently as possible”.

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

18
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.

All this is driving the organizations 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 utilized 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 transhipment; most importantly, SCM makes a world of difference to the
manufacturers by maintaining a minimal finished goods inventory.

19
Supply chain management flow is divided into:

a) Product flow
b) Information flow
c) Finance flow

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.

Supply chain management has two types of software—planning application and

execution applications. While planning application is utilised 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.
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.

Benefits of IT in SCM

 Quicker response – improved professional service

 Timely product supplies
 Accurate pricing/discounts
 Reduction in billing errors – cleaner SOA
 Simplified and faster payments process

20
  Reduction in administration costs for customers/vendors
 Online information (purchases, sales, inventory, financials)
 Elimination of reconciliation of accounts/error processing
 Reduction in accounting cycle times
 Less duplication of job – utilisation of human-power in value adding roles
 Reduction in paper flow, data processing, printing, mailing
 Better warehousing and transportation management
 Timely and correct asset capitalisation
 Credit management (customers)
 Better plant maintenance
 Easy access to data /information

Key issues / challenges

Indian automotive players today face several key challenges in managing their
supply chains. While addressing these is critical for success, players were asked to
rank the challenges in order of priority.

Based on a survey conducted by KPMG:

21
The most significant challenge identified by automotive players in India is
‘integrating the entire supply chain’ and managing it as a single integrated entity.
While past efforts of OEMs have been focused on streamlining and improving
different areas of the supply chain independently, through efforts in dealer
management, operations planning, vendor rationalization, IT package
implementation etc, it is expected that the linking up of these activities is expected
to provide significant benefits to players, as this would involve aligning the entire
chain to meet market requirements in the most efficient way.

The key challenge in achieving this would be two-fold – to align the different
stakeholders along the chain – vendors, transporters, distributors and dealers –
along common goals and processes, and also to integrate and link disparate IT
systems used by different stakeholders.

‘Managing inbound logistics’ remains a key concern for OEMs as well as auto
component players, driven more by challenges related to reliability of data, lead
time and absence of quality logistics players on the upstream side. However, all

22
respondents felt that this was a key area of focus, given the criticality of supply for
future growth.

‘Managing product and part proliferation’ is one of the second significant

challenges players face. Increasing competition in the Indian automotive industry
has led to significant shrinkage in product lifecycles and the need for regular and
frequent product up gradation and new product introductions. While this has led to
issues of managing a wide product portfolio, a related key issue is the proliferation
of parts/components, driven by the need for providing spare parts for current as
well as discontinued models. Respondents across both OEMs as well as auto-
components indicated that increasingly the need for common platforms, and hence
common parts becoming critical pre-requisite. A key role played by product
development teams today is the identification and adoption of common parts and
components across models. However all respondents agreed that there was
significant scope for improvement in that area.

Costs, quality and timely delivery continue to be key concerns for players, driven
by increasing competition and pressure on margins. Many OEMs have
implemented ‘Just in Time (JIT) supplies in their inbound logistics’. However, in
cases where this is not accompanied by increased visibility across the supply chain
and improved planning, it has only resulted in the burden of inventory getting
shifted from OEMs to their Tier-I vendors.

Balanced Scorecard in Automotive SCM

The balance scorecard allows managers to look at the business from four important
perspectives (see above). While giving senior managers information from these
four different perspectives, the balance scorecard minimises information overload

23
by limiting the number of measures used. It forces managers to focus on the
handful of measures that are most critical.

1. Financial: How do we look to our Shareholders?

2. Customer: How do our Customers See Us?
3. Internal Business Process: What must we excel at?
4. Employee and Organization Innovation and Learning: Can we continue
to Improve and Add Value?

Category Measure Weightag

e
EVA 25%
Financial Unit Profit 15%
(50%)
Market Growth 10%
Customer Customer satisfaction with automobile performance 10%
(20%) (TNS Automotives total customer satisfaction survey,
JD Power Automotive performance survey)
Satisfaction with after sales service 5%
Lead Time 5%
Internal Above average rank on industry quality survey 10%
Processes
(20%)
Decrease in dealer delivery cycle time 10%
Innovation and Suggestions per employee 5%
Learning
(10%)
Emp. satisfaction survey 5%

SCM in Maruti Suzuki India Limited

The company works jointly with its suppliers to develop new products, achieve
high localization levels, and reduce cost. It has a strong base of 246 suppliers (as
on 31st March, 2009) including 16 JV companies where the company has strategic

24
equity stake. 76% of the company's suppliers are located in the 100 kms of radius
from its manufacturing facilities. Most of the JVs are situated in the Suppliers' Park
adjacent to the company facilities.

With a large number of variants under the 14 running models, the supply chain
management is especially challenging. Company’s A-Star model alone has around
750 variations, some of them would be cosmetic and a few others deep rooted so as
to conform to different emission norms in different countries. The supply chain
solution enables the concerned product reach in time, be it the type of fabric used,
the audio system, the tyres or the specific engine and transmission systems. The
entire inventory management has also been fully automated and integrated with its
vendors.

Key Challenges
When it comes to its operation and supply chain, Maruti Suzuki’s key challenges
include:

 Achieving a lean supply chain

 Managing effectively the variations in the components for various models
 Managing continuous supply-demand matching and optimization
 Achieving efficient use of materials and other resources
 Managing demand and customer expectations
 Enabling MSIL, suppliers and dealers to constantly adapt their strategies,
processes and systems to meet dynamic market needs.

Key SCM Initiatives

Due to stiff competition and cost leadership of Maruti, lean manufacturing and
zero inventory are its goals. Maruti’s Supply Chain management represents one of
the best examples of lean manufacturing in the country. The manufacturing plants

25
have been almost fully linked to IT systems and all inventory and processes are
networked. Every component-set has a bar coded tag which helps to monitor the
movement of materials right from suppliers to the Trim line. This helps to know
exactly how much inventory is present on the assembly lines (using the P-BOM
(Production Bill of Materials)).

26
 CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
In these competitive times the challenge is to keep inventing newer ways of doing
things to keep the customers in your fold.

Over the last few years, the company strengthened the existing practices and
experimented with many new initiatives by way of kaizens (continuous
improvements) to delight its customers.

These initiatives ranged from product design and quality to network expansion,
and included new service programs to meet unsaid needs of customers.

The company has retained its competitive edge by offering high quality products.

In the field, the products are supported by rapidly expanding networks. The
company has diverse networks for new cars, spares, service, pre owned cars and so
on, and all of them were in expansion mode last year to enable the company get
closer to the customer.

Servicing customers 24X7..... 365 days....

The company takes great pride in sharing that customers have rated Maruti Suzuki
first once again in Customer Satisfaction Survey conducted by independent body,
J.D.Power Asia Pacific. It is 9th time in a row.

The company was first Car Company in India to launch a Call Centre in the year
2000.

The award mirrors the company's commitment towards "Customer Obsession”.

27
Key Initiatives

 Car pickup & delivery facility for women car owners.

 Quote Unquote: "The study finds that vehicle pickup and delivery before and
after service has a strong impact on customer satisfaction. In particular,
customers who say that their vehicle was picked up from their doorstep before
service and delivered to the same point after service are notably more delighted
with their after-sales service experience, compared with customers who do not
receive this service...."
 Maruti also launched mission to promote safe driving habits jointly with
Institute of Driving Training and Research.
 It also launched ‘Dil Se’- a special program for Indians living abroad or NRIs,
to facilitate them to gift Maruti cars online to friends and relatives at home.
 Online club ‘Swift Life’ is made for all Swift owners.

Setting up "Express Service Bays" & "2 - Technician Bays"

As the name suggests the company set out to delight its

customers by offering them faster car service by introducing
new concepts such as Express Service Bays & 2-
Technicians Bays.

These are done for customers who are hard pressed for time.

28
Both the initiatives undertaken in this direction have helped improve customer
interface and also helped increase the productivity and capacity of existing
workshops.

Mega Camps

The company aggressively conducts 'Mega Camps' throughout

the country round the year.

Activities undertaken during a mega camp include

complimentary car wash, AC & Pollution check up, oil and fuel
top ups, wheel alignments etc.

Apart from mega camps workshop camps like A/C checkup camps, PUC and
general check-up camps, Locality camps , Pre monsoon camps etc are also
regularly conducted as part of customer connect initiatives.

Service at Door Step through Maruti Mobile Support

Another unique initiative is the door step service facility through

Maruti Mobile Support.

Maruti Mobile Support is a first of its kind initiative and is expected

not only to help the company reach out customers in metro cities but
also as a mean to reach semi urban /rural areas where setting up of
new workshop may not be viable

Car Safety device: Immobilizer

The company used technology to meet customer needs

and even delight them. Following feedback that the company's
cars were more prone to theft owing to their resale value, the
company worked on an anti-theft immobilizer or "I-Cats;"
system for all its new cars.

Complete car needs

29
 The company's effort of providing all car-related needs -- from learning to
drive a car at Maruti Driving Schools to car insurance, extended warranty and
eventually exchanging the existing car for a new one -- under one roof at
dealerships also enhances customer satisfaction.

The organization needed greater visibility into customer preference, their

economical strata, behavior, and needs. "Our marketing managers wanted to
target potential buyers and sell them products that customers perceived as a
'best value' proposition and sell it at the right time," says Rajesh Uppal,
Executive Officer IT & CIO, Maruti Suzuki India Limited.

In order to achieve a 'single view of customers' and a platform for 'marketing for
one', Maruti Suzuki embarked on an analytical CRM (aCRM) project. The aCRM
project has improved customer segmentation and targeting. Today, it helps
marketers assess which prospects are most likely to transact and also identifies
those who are bogged down in a sales process and need assistance. Empowered by
aCRM, the car-maker can find and acquire potential customers, nurture and retain
those the company already has, entice former customers back into the fold, and
trim marketing and client servicing costs.

CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

• Includes the methodologies, technology and capabilities that help an enterprise

manage customer relationships. The general purpose of CRM is to enable
organizations to better manage their customers through the introduction of
reliable systems, processes and procedures.

• Customer Relationship Management is a corporate level strategy which focuses

on creating and maintaining lasting relationships with its customers. Although
there are several commercial CRM software packages on the market which support
CRM strategy, it is not a technology itself. Rather, a holistic change in an
organization’s philosophy which places emphasis on the customer.

• Management at MARUTI believes that a successful CRM strategy cannot

be implemented by simply installing and integrating a software package and will

30
not happen overnight. Changes must occur at all levels including policies and
processes, front of house customer service, employee training, marketing,
systems and information management; all aspects of the business must be
reshaped to be customer driven. To be effective, the CRM process has been
integrated with end-to-end across marketing, sales, and customer service. The
objectives of CRM at MARUTI:-

• To Identify customer success factors

• To Create a customer-based culture

• To Adopt customer-based measures

• To Develop an end-to-end process to serve customers

• To Recommend what questions to ask to help a customer solve a problem

• To Recommend what to tell a customer with a complaint about a purchase

• To Track all aspects of selling to customers and prospects as well as

customer support.

Before implementing the CRM segment the management at MARUTI did a

survey to identify what profile aspects it feels are relevant to its business,
such as what information it needs to serve its customers, the customer's past
financial history, the effects of the CRM segment and what information is
not useful. Being able to eliminate unwanted information is a large aspect of
implementing CRM systems.

ARCHITECTURE OF CRM AT MARUTI

31
There are three parts of application architecture of CRM at Maruti:

• Operational CRM- automation to the basic business processes (marketing, sales,

service)

• Analytical CRM - support to analyze customer behavior, implements business

intelligence alike technology

• Collaborative CRM- ensures the contact with customers (phone, email, fax, web,
sms, and post)

OPERATIONAL CRM

Operational CRM at Maruti includes customer contact (sales, marketing and

service). Tasks resulting from these processes are forwarded to employees
responsible for them, as well as the information necessary for carrying out the
tasks and interfaces to back-end applications are being provided and activities with
customers are being documented for further reference. Operational CRM provides
the following benefits:
• Delivers personalized and efficient marketing, sales, and service through multi-
channel collaboration

• Enables a 360-degree view of the customer while you are interacting with them

• Sales people and service engineers can access complete history of all customer
interaction with the company, regardless of the touch point . The operational
part of CRM typically involves three general areas of business at Maruti:

Sales force automation (SFA)

 SFA automates the critical sales and sales force management functions of
Maruti, i.e., lead/account management, contact management, quote
management, forecasting, sales administration, keeping track of customer
preferences, buying habits, and demographics, as well as performance
management. SFA tools are designed to improve field sales productivity.

32
 Key infrastructure requirements of SFA are mobile synchronization and
integrated product configuration.

Customer service and support (CSS)

 CSS at Maruti automates the service requests, complaints, product returns, and
information requests. The internal help desk and inbound call-center support
for customer inquiries have been evolved into the "customer interaction
center" (CIC), using multiple channels (Web, phone/fax, face-to-face, kiosk,
etc). Key infrastructure requirements of CSS include computer telephony
integration (CTI) which provides high volume processing capability, and
reliability.

Enterprise marketing automation (EMA)

 EMA of the company provides information about the business

environment, including competitors of Maruti, industry trends, and macro
environmental variables. It is the execution side of campaign and lead
management. The intent of EMA applications is to improve marketing
campaign efficiencies. Functions include demographic analysis, variable
segmentation, and predictive modeling occur on the analytical (Business
Intelligence) side.

Integrated CRM software is often also known as "front office solutions." Of

Maruti, This is because they deal directly with the customer of the company.
Maruti uses CRM software to store all of their customer's details. When a
customer calls at Maruti, the system is used to retrieve and store information
relevant to the customer. By serving the customer quickly and efficiently, and
also keeping all information on a customer in one place, the management at Maruti
aims to make cost savings, and also encourage new customers.

ANALYTICAL CRM

33
In analytical CRM, data gathered within operational CRM and/or other sources are
analyzed to segment customers or to identify potential to enhance client
relationship. Customer analysis typically leads to targeted campaigns to increase
share of customer's wallet. Examples of Campaigns directed towards customers
are:
• Acquisition: Cross-sell, up-sell

• Retention: Retaining customers who leave due to maturity or attrition.

• Information: Providing timely and regular information to customers about

Maruti.

• Modification: Altering details of the transactional nature of the customers'

relationship. Analysis typically covers but is not limited to:

• Decision support: Dashboards, reporting, metrics, performance etc.

• Predictive modeling of customer attributes

• Strategy and research.

Analysis of Customer data relates to the following analysis:

• Campaign management and analysis

• Contact channel optimization

• Contact Optimization

• Customer Acquisition / Reactivation / Retention

• Customer Segmentation

• Customer Satisfaction Measurement / Increase

• Sales Coverage Optimization

• Fraud Detection and analysis

• Financial Forecasts

34
• Pricing Optimization

• Product Development

• Program Evaluation

• Risk Assessment and Management

COLLABORATIVE CRM

Collaborative CRM facilitates interactions with customers through all channels

(personal, letter, fax, phone, web, e-mail) and supports co- ordination of
employee teams and channels. It is a solution that brings people, processes and
data together so company can better serve and retain their customers. Collaborative
CRM provides the following benefits:

• Enables efficient productive customer interactions across all communications

channels

• Enables web collaboration to reduce customer service costs

• Integrates call centers enabling multi-channel personal customer interaction

• Integrates view of the customer while interaction at the transaction level

CRM PROCESS:

35
Future Plans:

• Provide product information, product use information, and technical

assistance on web sites that are accessible 24 hours a day, 7 days a week.

• Identify how each individual customer defines quality, and then design a service
strategy for each customer based on these individual requirements and
expectations.

• Provide a fast mechanism for managing and scheduling follow-up sales calls to
assess post-purchase cognitive dissonance, repurchase probabilities, repurchase
times, and repurchase frequencies.

• Provide a mechanism to track all points of contact between customer and

the company, and do it in an integrated way so that all sources and types of
contact are included, and all users of the system see the same view of the
customer (reduces confusion).

• Help to identify potential problems quickly, before they occur.

• Provide a user-friendly mechanism for registering customer complaints

(complaints that are not registered with the company cannot be resolved, and are
a major source of customer dissatisfaction).

36
• Provide a fast mechanism for handling problems and complaints (complaints that
are resolved quickly can increase customer satisfaction).

• Use internet cookies to track customer interests and personalize product offerings
accordingly.

• Use the Internet to engage in collaborative customization or real-time

customization.

• Provide a fast mechanism for managing and scheduling maintenance, repair,

and on-going support (improve efficiency and effectiveness).

• The CRM can be integrated into other cross-functional systems and thereby
provide accounting and production information to customers when they want it.

ENTERPRISE RESOURCE PLANNING (ERP)

ERP is an enterprise-wide information system designed to coordinate all the
resources, information, and activities needed to complete business processes such
as order fulfillment or billing. The system supports most of the business system
that maintains in a single database the data needed for a variety of business
functions such as Manufacturing, Supply Chain Management, Financials, Projects,
Human Resources and Customer Relationship Management.

Maruti Supports Business Growth with Scalable, High-Performing ERP

System:

“The open interfaces of Oracle E-Business Suite offered the best integration with
our legacy systems. Standardizing on Oracle technology and applications would
also lower support costs and ensure easy upgrades in the future.” – Rajesh Uppal,
Chief General Manager, Information Technology, Maruti Suzuki India Limited

Maruti Suzuki India Limited has led India’s car market for more than a quarter of a
century. First established in 1981, the company is now a fully-fledged subsidiary

37
of the Suzuki Motor Corporation. Its principal activities include the manufacture
and sale of motor vehicles and spare parts via a 300-strong dealer network
scattered across India.

The year 2002 saw Maruti add finance, leasing, insurance, and pre-owned car
businesses to its portfolio, increasing the scale of its operations and prompting a
review of its processes and systems.

Oracle Consulting was engaged to install a number of Oracle E-Business Suite

modules and integrate them with Maruti’s existing systems. The eight-month
project involved managing up to 50 people, including Maruti staff, Oracle
consultants, and employees of third-party organizations. Oracle also assisted
Maruti with change management, a critical part of the process to ensure quick user
acceptance.

Thorough project management by Oracle Consulting enabled Maruti to go live on

the Oracle applications without any interruptions to its business. By standardizing
on a single Oracle platform, the company achieved better control of its finance,
procurement, and human resources functions. It also gained a more manageable
and scalable platform to support its rapidly expanding business.

The Need to Strengthen Management Control

Prior to employing Oracle, Maruti used a number of home-grown systems to

manage its various lines of business. Many of these disparate systems could not
talk to each other, requiring staff to enter data multiple times and consolidate
information to generate management reports.

The addition of four new business sectors in 2002 created further pressures,
requiring constant monitoring and human intervention to keep the system operating

38
across the hundreds of locations Maruti serves within India. To support this growth
and improve efficiency, the company decided to revamp its information technology
systems to provide end-to-end visibility into the organization.

“We were looking for a flexible, expandable system that was easy to manage,” said
Rajesh Uppal, chief general manager, information technology, Maruti Suzuki
India. “This would reduce the complexity of the IT environment and our reliance
on certain people to maintain the systems. And because our business is undergoing
a period of rapid expansion, it was important to have a system that could scale
easily.”

To minimize the impact of the system change on its business, Maruti decided on a
phased migration to Oracle E-Business Suite. As a first step, the company decided
to replace its financial, purchasing, and human resources systems with Oracle
Financials, Oracle Procurement, and a range of Oracle Human Resources
applications.

Oracle Consulting was selected to supervise the implementation, including

determining Maruti’s requirements and developing a project plan, designing the
system, deploying the software, managing the various parties involved, and
providing post-implementation support.

Standardization Improves Financial Insight

The problem with using multiple systems to manage finances was the lack of
control over processes and information quality. Each office followed different

39
workflows, which often meant one division lagged behind another in delivering
information. Differing data formats required tedious consolidation, preventing real-
time access to critical statistics.
With Oracle Financials, Maruti was able to standardize on a single financial
management platform. According to Uppal, the company achieved tight control
over accounts payable and accounts receivable, and gained a comprehensive
general ledger that assists in the management of all financial information.

“The Oracle application can be used by accounting and finance staff, as well as
senior managers,” he said. “We established standardized data formats and
processes for staff, resulting in greater efficiency and less confusion. Financial
management is more disciplined as a result.”

Month-end closing is completed within two days, without the fuss that usually
accompanies the task. Uppal added that auditing is also in better shape.
“We completed our year-end close on time in March this year, which was fantastic
as we had initially been worried that the system would not be able to handle the
load,” he said. “With Oracle Consulting on site to provide support, the whole
procedure was completed without a hitch.

“As our business continues to expand, it is also reassuring to know that the Oracle
system can scale to meet our needs, and can be easily integrated with other
applications in the suite.”

Drilling Down to Details with Hyperion

Maruti has used Hyperion business performance management software for the past
two years to analyze budgets, consolidate accounts across nine subsidiaries, and
conduct financial reporting in compliance with generally accepted accounting

40
principles (GAAP) in India. The system is integrated with Oracle Financials and is
currently used by around 10 budgeting staff in Maruti’s finance department.
“We use Hyperion to complete scenario- and project-based analytics,” said Uppal.
“The system supports all types of reporting and analysis, giving staff and senior
management deeper insight into our performance as and when they need it. It alerts
us to possible problems before they impact our operations and has helped improve
the accuracy of our forecasts. We are able to respond faster to changing market
conditions, which boosts our competitiveness.”
Oracle’s acquisition of Hyperion in April 2007 is good news for Maruti.
“When we implemented Oracle Financials, we found that the application integrated
easily with the Hyperion system, so there were no interruptions to the business
when we cut over to Oracle from our legacy financial system,” Uppal said. “Now
that Hyperion is an Oracle company, we are further assured of a seamless upgrade
path in the future.”

Streamlined Procurement Lowers Costs

Maruti implemented Oracle Purchasing to manage procurement of capital goods,
services, and indirect consumables. Prior to implementing Oracle Purchasing,
some subsidiaries had a rudimentary system, while others relied on basic
spreadsheets to manage the process. This made it difficult for the organization as a
whole to have control over capital and services purchasing, leading to escalating
costs and excess inventory.
With Oracle, Maruti now has a standardized platform to oversee procurement. The
company has set up a list of preferred suppliers to cut down on the number of
vendors it deals with and ensure it has control over costs. An automated workflow
sends purchase orders along the approvals chain and keeps staff in the accounts
payable department aware of all procurement activity.

41
Tight Project Management Ensures Swift Deployment
As with all Oracle Consulting-led deployments, consultants sat down with Maruti
managers and key business users to scope out their requirements. A steering
committee was set up to guide the implementation and ensure consultants had
recourse to senior executives for advice.

The project plan delineated the responsibilities of each party and incorporated
monthly milestones and testing deadlines. Oracle Consulting ensured a fast,
problem-free installation by employing Oracle’s Business Flow Accelerators—an
implementation approach that leverages predefined business flow templates to
reduce the time and cost associated with application deployments.

A key project challenge was interfacing the Oracle modules with Maruti’s legacy
systems, including direct item procurement, dispatch systems, the time card system
for attendance, and the Hyperion business intelligence platform. The integration
had to be completed without any impact on the company’s business, which
frequently deals in large volumes. For example, Maruti generates more than 2,000
invoices each day and any lengthy interruptions could have disastrous impacts on
cash flow further down the line.

The open, modular structure of Oracle E-Business Suite ensured the technical side
of the integration was relatively painless. Process-wise, Oracle Consulting helped
ensure tight integration for real-time performance, enabling budget and credit
checks to be completed online in the legacy system.

Ensuring a Smooth Transition

42
While Oracle Consulting was not actively involved in change management, the
team contributed indirectly to Maruti’s efforts to transition users to the new
modules. The Oracle team advised Maruti on process changes and contributed to
training programs.

Key Benefits:

 Strengthened management by consolidating on a single financial platform

 Gained deep insight into financial performance by using Hyperion to analyze
budgets and consolidated accounts
 Lowered procurement costs by streamlining purchasing process
 Provided HR staff with greater control over recruitment, payroll, compensation
management, leave management, competency assessments, and staff
development
 Ensured a smooth rollout by engaging Oracle Consulting to supervise the
design and deployment of the solution, and manage the implementation team
 Achieved seamless integration with legacy systems, ensuring senior managers
have visibility into business performance
 Promoted user acceptance by developing extensive training programs to help
staff transition to the new system

Future Plans

After the success of the financials, procurement, and human resources deployment,
Maruti is considering expanding its Oracle footprint. The company is evaluating
Oracle Advanced Supply Chain Management and Oracle Enterprise Asset
Management.

43
“We would like to further automate supply chain management and integrate more
processes with the Oracle ERP system,” said Uppal. “We are also looking at
integrating more systems with Oracle, so we can access real-time information
across all our businesses. I expect Oracle Consulting to play a role in future
projects.”

SUPPLY CHAIN MANAGEMENT (SCM)

SCM is the management of a network of interconnected businesses involved in the

ultimate provision of product and service packages required by end customers
(Harland, 1996). Supply chain management spans all movement and storage of raw
materials, work-in-process inventory, and finished goods from point of origin to
point of consumption (supply chain).

Another definition is provided by the APICS Dictionary when it defines SCM as

the "design, planning, execution, control, and monitoring of supply chain activities
with the objective of creating net value, building a competitive infrastructure,
leveraging worldwide logistics, synchronizing supply with demand and measuring
performance globally."

Role of SCM in Automotive Industry

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-of-order to point-of-consumption, for the purpose of conforming to
customer requirements as efficiently as possible”.

44
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.

All this is driving the organizations 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 utilized 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

45
forecasting; taking an order; giving an accurate promise date; sourcing and
manufacturing the right goods; position inventory properly; pick, pack, and
efficient transhipment; most importantly, SCM makes a world of difference to the
manufacturers by maintaining a minimal finished goods inventory.

Supply chain management flow is divided into:

d) Product flow
e) Information flow
f) Finance flow

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.

Supply chain management has two types of software—planning application and

execution applications. While planning application is utilised 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.
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.

46
Benefits of IT in SCM

 Quicker response – improved professional service

 Timely product supplies
 Accurate pricing/discounts
 Reduction in billing errors – cleaner SOA
 Simplified and faster payments process
 Reduction in administration costs for customers/vendors
 Online information (purchases, sales, inventory, financials)
 Elimination of reconciliation of accounts/error processing
 Reduction in accounting cycle times
 Less duplication of job – utilisation of human-power in value adding roles
 Reduction in paper flow, data processing, printing, mailing
 Better warehousing and transportation management
 Timely and correct asset capitalisation
 Credit management (customers)
 Better plant maintenance
 Easy access to data /information

Key issues / challenges

Indian automotive players today face several key challenges in managing their
supply chains. While addressing these is critical for success, players were asked to
rank the challenges in order of priority.

Based on a survey conducted by KPMG:

47
The most significant challenge identified by automotive players in India is
‘integrating the entire supply chain’ and managing it as a single integrated entity.
While past efforts of OEMs have been focused on streamlining and improving
different areas of the supply chain independently, through efforts in dealer
management, operations planning, vendor rationalization, IT package
implementation etc, it is expected that the linking up of these activities is expected
to provide significant benefits to players, as this would involve aligning the entire
chain to meet market requirements in the most efficient way.

The key challenge in achieving this would be two-fold – to align the different
stakeholders along the chain – vendors, transporters, distributors and dealers –
along common goals and processes, and also to integrate and link disparate IT
systems used by different stakeholders.

‘Managing inbound logistics’ remains a key concern for OEMs as well as auto
component players, driven more by challenges related to reliability of data, lead
time and absence of quality logistics players on the upstream side. However, all

48
respondents felt that this was a key area of focus, given the criticality of supply for
future growth.

‘Managing product and part proliferation’ is one of the second significant

challenges players face. Increasing competition in the Indian automotive industry
has led to significant shrinkage in product lifecycles and the need for regular and
frequent product up gradation and new product introductions. While this has led to
issues of managing a wide product portfolio, a related key issue is the proliferation
of parts/components, driven by the need for providing spare parts for current as
well as discontinued models. Respondents across both OEMs as well as auto-
components indicated that increasingly the need for common platforms, and hence
common parts becoming critical pre-requisite. A key role played by product
development teams today is the identification and adoption of common parts and
components across models. However all respondents agreed that there was
significant scope for improvement in that area.

Costs, quality and timely delivery continue to be key concerns for players, driven
by increasing competition and pressure on margins. Many OEMs have
implemented ‘Just in Time (JIT) supplies in their inbound logistics’. However, in
cases where this is not accompanied by increased visibility across the supply chain
and improved planning, it has only resulted in the burden of inventory getting
shifted from OEMs to their Tier-I vendors.

Balanced Scorecard in Automotive SCM

The balance scorecard allows managers to look at the business from four important
perspectives (see above). While giving senior managers information from these
four different perspectives, the balance scorecard minimises information overload

49
by limiting the number of measures used. It forces managers to focus on the
handful of measures that are most critical.

5. Financial: How do we look to our Shareholders?

6. Customer: How do our Customers See Us?
7. Internal Business Process: What must we excel at?
8. Employee and Organization Innovation and Learning: Can we continue
to Improve and Add Value?

Category Measure Weightag

e
EVA 25%
Financial Unit Profit 15%
(50%)
Market Growth 10%
Customer Customer satisfaction with automobile performance 10%
(20%) (TNS Automotives total customer satisfaction survey,
JD Power Automotive performance survey)
Satisfaction with after sales service 5%
Lead Time 5%
Internal Above average rank on industry quality survey 10%
Processes
(20%)
Decrease in dealer delivery cycle time 10%
Innovation and Suggestions per employee 5%
Learning
(10%)
Emp. satisfaction survey 5%

50
SCM in Maruti Suzuki India Limited

The company works jointly with its suppliers to develop new products, achieve
high localization levels, and reduce cost. It has a strong base of 246 suppliers (as
on 31st March, 2009) including 16 JV companies where the company has strategic
equity stake. 76% of the company's suppliers are located in the 100 kms of radius
from its manufacturing facilities. Most of the JVs are situated in the Suppliers' Park
adjacent to the company facilities.

With a large number of variants under the 14 running models, the supply chain
management is especially challenging. Company’s A-Star model alone has around
750 variations, some of them would be cosmetic and a few others deep rooted so as
to conform to different emission norms in different countries. The supply chain
solution enables the concerned product reach in time, be it the type of fabric used,
the audio system, the tyres or the specific engine and transmission systems. The
entire inventory management has also been fully automated and integrated with its
vendors.

Key Challenges
When it comes to its operation and supply chain, Maruti Suzuki’s key challenges
include:

 Achieving a lean supply chain

 Managing effectively the variations in the components for various models
 Managing continuous supply-demand matching and optimization
 Achieving efficient use of materials and other resources
 Managing demand and customer expectations
 Enabling MSIL, suppliers and dealers to constantly adapt their strategies,
processes and systems to meet dynamic market needs.

51
Key SCM Initiatives
Due to stiff competition and cost leadership of Maruti, lean manufacturing and
zero inventory are its goals. Maruti’s Supply Chain management represents one of
the best examples of lean manufacturing in the country. The manufacturing plants
have been almost fully linked to IT systems and all inventory and processes are
networked. Every component-set has a bar coded tag which helps to monitor the
movement of materials right from suppliers to the Trim line. This helps to know
exactly how much inventory is present on the assembly lines (using the P-BOM
(Production Bill of Materials))

Supply Chain Schematic – IT-empowerment

InP -proSFi lacniVe nturessh Pemedadoan roeGndd cenoDs&T st,iodSra Finstruck agInibpin Ancveutilig de,nor RHtons &Rry D

e- Oracle Product
Nagare
Dealer based Lifecycle
System
Mgmt. ERP Mgmt.
System

Vendor Management – e-Nagare system

Vendor management became an important area as Maruti attempted to improve
operational efficiency. The company's top 10 vendors account for about 34 % of its
aggregate purchases of components from vendors in India. In-process inventory
reduction is most important to reduce carrying costs. Over 76% of the company’s

52
246 suppliers are located within 100 kms of radius. Suppliers of bulky components
such as instrument panels, fuel tanks, bumpers, seats, etc. are adjacent to the
company’s manufacturing facilities so as to save on the logistics cost.

The company’s JIT system has evolved over the last 25 years from monthly
scheduling to daily scheduling of parts orders and finally to hourly schedule
releases. The company today boasts of less than two hours of inventory of
components within the plant for several key components.

With a view for IT-empowerment in Supply chain Management the company

implemented the e-Nagare system in 2003. Nagare is Japanese for "flow"

This is how it works –

 Every trim body is bar coded, its stage of completion is known as it passes
the assembly line
 Thus it is exactly possible to say how much inventory may be left on the line
(because of the integration of P-BOM with the system)
 A screen in the Supply Chain office is always updated automatically with
the depletion or receipt of inventory
 As soon as the inventory goes below a point for a particular component,
reordering is triggered
 In case inventory goes down dangerously low, manual intervention to
facilitate quick procurement from vendors may be required

With this model MSIL has been able to maintain lean inventory and safety stock is
not required or maintained especially for bulky items thus inventory carrying costs
are reduced. Also, Cross docking is made possible thus tremendously reducing
storage space requirement. This has helped Maruti increase capacity at the plant at

53
Gurgaon from installed capacity of 3.5 lakh to 7 lakhs without substantial capital
investments.

In-House Management – Oracle based ERP

When Maruti decided to automate its operations in the early 1990s, there was no
ERP vendor support available in the country. A team of 45 engineers, using a
combination of software from Oracle and Computer Associates, developed an in-
house ERP system. A variety of applications including inventory management,
receipts, excise, production, sales, invoicing, exports, financial accounting,
payrolls etc. were developed. The applications have been developed and upgraded
on a regular basis.

The company’s Oracle based system helps sort out all employee related issues like
payrolls, leave application, approval systems for tours and expenses etc. Also,
Finance, excise and taxation are also done through this system. The attendance
system on the plant is fully automated biometric scanning system, linked to the
ERP. Every Finished Car is monitored viz. its location in the parking lot till it
remains in the plant. This helps in implementing FIFO and managing the Bill Of
Materials.

Outbound Management – Dealer Management System

MSIL has 750 retail sites through 227 cities. Maruti’s Sales and Service network is
its major competitive advantage. Through its DMS, the company aims at providing
a world class standardized and streamlined process at dealerships in order to
provide a uniform and enriching experience to end customers. Though e-CRM is
not a very important concept for the automobile industry in India, yet DMS acts as
a proxy e-CRM maintaining a data base of customers. Customer follow-ups are
done at the dealer’s end, though MSIL gets a report on it through the DMS system.

54
DMS implementation was started in Sept 2004. The application supports all the
dealer processes including presales, planning, sales, inventory management and
financial management. The dealers’ invoices are shared with MSIL in real time
through the extranet. The requirements of dealers are met on FIFO basis and Proof
of Delivery (POD) is sent to MUL via DMS. Value added services like Maruti
Finance; Maruti Insurance etc. are also integrated to the DMS.

55