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Unit 14: Supply Chain Logistics Administration

securing higher performance through the linkages that would not be possible by firms operating Notes
individually.
This means aligning the operational processes of a large number of firms into a single integrated
supply chain system. It permits each of the firms to compensate for their individual weaknesses
and/or resource constraints. They can do this by linking with other firms that have offsetting
strengths. Collectively, this allows all firms to apply their resources toward areas that they see
as important and where they can contribute the most. These types of processes are fostered
through relationships management.

14.1 Relationship Development Management

Maruti Udyog, the leading manufacturer of cars in India, is a leader in supplier relationship
management. Their turnover was ` 12,481 crores and profit before tax was ` 1,750 crores in
2005–06. Maruti sold 561,822 vehicles in 2005–06 and captured a market share of over 55 percent.
Maruti deals with about 7,100 components for its eleven major models. 70 percent of its
suppliers by number are located within 100 km radius of their Gurgaon plant. They meet more
than 80 percent of Maruti’s requirements by value, which was at a level of ` 7,150 crores in
2005–06.
Maruti has 220 approved vendors who supply the major components. The top 80 vendors supply
86 percent by value of the purchases. The rest of the vendors supply only 14 percent. Maruti has
also signed joint ventures with a large number of its vendors. Of the 86 percent components
supplied by vendors, joint ventures supply only 34 percent; the rest of the 52 percent by value is
supplied by other vendors. These 80 vendors are considered strategic partners. Only 20 to 30 of
them are Maruti joint ventures.
With strategic partners, Maruti has a number of programmes. Their emphasis is on vendor
productivity and quality. Maruti takes on a major role in improving vendor productivity. They
organize Junkai VA or cost workshops with their vendors on an ongoing basis. Junkai is a
Japanese word which basically means ‘visiting’. It has three components called three G – Gemba,
Gembutsu, and Genjitsu.

Notes Gemba means taking a look to see what is happening at site. Gembutsu means
examining the affected piece to understand what exactly the defect is. Genjitsu is discussing
under what conditions this has happened – something like a brainstorming session.
Typically a team from Maruti, along with the supplier team, visits the supplier’s shop
floor, has a look around, noting down points. They then have a brainstorming session at
the Maruti office. At the end of brainstorming, they come out with various points relating
to improvements in productivity, quality and cost.

Maruti has also constituted a group called Maruti Centre for Excellence. This is a team which
continuously goes to suppliers to upgrade them. They audit the workings of their suppliers and
chalk out a spider chart. The spider chart has 22 points. Each vendor is evaluated on
these 22 points. They promise additional business on the next new model to vendors who score
over 60 percent on the spider chart. Every vendor really tries to make sure that he goes above this
mark.

They have also started the second tier improvement in a very big way. This is the latest initiative
they have taken up a year ago. The result has been that the second tier vendor’s quality has also
gone up. They have also started ‘green initiatives’. All packing has been converted into reusable
packing. Maruti has recently introduced a practice to check the pollution levels of each trucks

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