Operations Management @ Maruti Suzuki India Ltd.

Fact Sheet 2010

Market share : 47%

Sales network : 802 centres in 555 towns and cities

Service network : 2740 workshops in over 1355 towns and cities Manufacturing centres : 2, Manesar and Gurgaon Manufacturing Capacity : 1.2 million 14 brands and over 150 variants Employee Strength : 7600

Fact Sheet 2010

Indias most trusted brand 2010 by Economic Times

2001-2010 JD Power Customer Service Index Award

Hatchback of the year 2010 Ritz (Autocar) Best car of the year 2010- Ritz (Business Motoring) First automobile company in the world to be honored with an ISO 9000:2000 certificate

Segment

Models 2010

In December 2009 2574 52236 7843 62653 259 8088 71000 13804 84804

Till December

April'09 March'10

% 2010-11 2009-10 % Change Change -30% 24% 19% 21% 4% 68% 26% -29% 17% 18982 585523 92418 696923 4698 118729 820350 107315 927665 24594 459507 69613 553714 2835 68859 625408 105535 730943 -23% 27% 33% 26% 66% 72% 31% 2% 27% 33028 633190 99315 765533 3932 101325 870790 147575 1018365

A1 A2 A3 A: Total Passenger Cars B: MUV

M800 Alto, WagonR, Estilo, Swift, A-Star, Ritz SX4, D'zire

1798 64492 9362 75652

Gypsy, Grand 270 Vitara Omni, Versa, C: Van Type 13547 Eeco Domestic 89469 Export 9756 Total Sales 99225 * Eeco was launched in January 2010.

Source: MSIL Website

Source: MSIL Website

Source: MSIL Website

Source: MSIL Website

February 24, 1981 - Maruti Suzuki India Ltd incorporated

October 2, 1982 - joint venture agreement with Suzuki Motor Corporation, Japan.
1983 - launched Maruti 800. 1984 - introduced Maruti Omni 1985 - launched Maruti Gypsy 1987 - Entered foreign market by exporting first lot of 500 cars to Hungary. 1990 - launched India's first three-box car, Sedan 1992 - Suzuki Motor Corporation, Japan increased their stake in the company to 50%. 1993 - introduced the Maruti Zen 1994 - launched Maruti Esteem

1997 - started Maruti Service Master.

1999 - the third plant with new press, paint and assembly shops became operational.
2000 - launched Maruti Alto 2002 - Suzuki Motor Corporation increased their stake in the company to 54.2%. 2002 - Maruti True Value launched. 2005 - the company launched the first world strategic model from Suzuki Motor Corporation 'the SWIFT' in India. 2006 - launched WaganR Duo with LPG and also the New Zen Estillo.

2006-07 - commenced operations in the new car plant and the diesel engine facility at Manesar, Haryana.

2006 - inaugurated a new institute of Driving Training and Research (IDTR), set up as a collaborative project with Delhi Government at Sarai Kale Khan in South Delhi. 2007 - launched Swift Diesel and SX4- Luxury Sedan with Tag line 'MEN ARE BACK' during the year. 2007 - launched the new Grand Vitara September 17, 2007 - changed their name from Maruti Udyog Ltd to Maruti Suzuki India Ltd 2007 - joint venture agreement with Magneti Marelli Powertrain SpA for manufacturing Electric Control Units.

 2007 - joint venture agreement with Futaba Industrial Co Ltd for manufacturing Exhaust Systems Components. 2007 - pact with Shriram City Union Finance Ltd 2008-09 - launched A-star in India and in Europe as the new Alto. 2008-09 - raised their production capacity to a landmark 1 million cars. In June 2008 - the company launched Maruti 800 Duo, which is a dual fuel (LPG-cum- petrol) model car. In March 2009 - the company launched A-star or Suzuki Alto at Geneva Motor Show, sales begin at EU In April 2009 - revealed new Ritz K12M engine at Gurgaon plant.

Manufacturing Process
Blanking and Forming

Welding
Painting Assembly Machine and Engine Shops

Product Layout

Installed Capacity

2009 2006

10,00,000
1999

7,50,000
3,50,000

1995

2,00,000
1984

20,000
* Units per annum

Improving Operational Efficiency

Improvement in Quality and Productivity, both in-house and at the vendors end. Challenge 50 Initiative started in 2002 to improve productivity by 50% and reduce costs by 30% by 2004-05 Replication of several best practices from Suzukis production system
Participative Management Team Work Communication and Information Sharing Open Office System Kaizen (Continuous Improvement) Multi Skilling of Operators, Flat structure 5S Concept of Quality Circles

Implementation of Kaizen
Emphasis on making incremental improvements in the process and products Suggestion Schemes launched among employees to contribute ideas for improvement and cutting costs Annual savings of ` 1920 million in 2002 An 81% increase in Employee productivity (730 cars per day/4800 employees in 1995 to 1700 cars per day in 2003) Per Capita Output of over 100 cars in 2003 as compared to 140 of Suzuki despite using far fewer robots and automation in various processes As of 2010, Per capita output had reached 131 cars

PDCA
PLAN DO CHECK ACT

Planning by setting a target and time line and Dividing into Action plan with value to each factor/element Doing the standardized operation as decided Checking through gap analysis whether the operation was yielding the desired results Acting to Freeze if effective or Correct

Improving Operations-contd..
Target to avoid 3Ms
Muri for inconvenience
Muda for wastage Mura for inconsistency

Strategy of low cost automation to improve productivity and reduce operator fatigue Examples include multispot automatic welding design and automated trolleys Resulted in a 30% fall in HPV* in 2001-02

* Hours Per Vehicle

Reducing Costs
Reduce Reuse Recycle

Major focus areas were Energy, Water and Lighting Use of Skylights to improve natural light in shops Diesel driven forklifts converted to CNG Reduction in Steam consumption by shortening of pipeline and by pressure and temperature optimization

Reduction in consumption of water by 66% through recycling of wastewater

Improving Quality
Measuring Quality through a Quality Index Audit

Quality Gates at various stages in order to raise alarms for correction and immediate action on defects
Fool-Proofing to prevent defects arising from human errors during the manufacturing process

Real time feedback system, cross linked with overall targets

Drastic reduction in Defects per vehicle from 1999 through 2001-02 Helping Suppliers to improve quality by deputing its engineers

Vendors were grouped together, trained in quality management and assisted in obtaining ISO 9000 certification (cluster approach)

Implementation of TPM
TPM or Total Productivity Management

5S system as a prerequisite for achieving TPM

Seistri (Sorting) Seiton (Systemizing)

Sharing of ideas between cluster companies for continuous improvement The point of TPM is not to reduce breakdowns for the sake of it. Instead the focus
at all times should be on how by reducing breakdowns, you can reduce cost and increase productivity --- Yamaguchi

Production Management System

Strategy to achieve Manufacturing Excellence through participative approach People driven and ensures involvement of all levels (Managers, Executives, and Supervisors) Derived from the basic Japanese principles of 5S, 3G and 3K

Results :
Clarity of content Better understanding

Openness towards feedback

Non-duplication of work, ownership, commitment and Standardization in all our process and systems across the production division.

Vendor Management
Vendor Management forms the fundamental of ensuring operational efficiency.

Yearly procurement worth Rs 5000 Cr

Top Vendor accounted for about 34% of its aggregate purchases of components from India

Maruti was working on a 3.5% per annum reduction in vendor prices

Delivery Instruction System

Delivery instruction System

One of the Suzukis best practices

Provided details of Marutis component requirements for every 15 days across all its variants to its vendor
Web Initiatives helped Maruti to bring down procurement time and cost Maruti connected to its vendor through an Internet based information network

Inventory Timings before JIT

Maruti average inventory was 1.5 days for domestically sourced components. For imported components the 1 months inventory was followed

Steps to implement JIT

Frequency of supply was increased from nearby vendors

Far away vendors were encouraged to set up assembly plants near Maruti.
Encourage far off vendors to setup warehouses in Gurgoan.

Vendors received details instructions from Maruti two weeks in advance

Implementation of online system for replenishment of inventory. Vendor only produce only what is indented and made supplies only after receipt of indent card. Extension of electronic card system to 26 vendors from 10 vendors.

JIT Implementation- Contd

Reduction of number of Vendor to 100(earlier they had 299)

Buy from one big tier 1 supplier who assembled parts supplied by smaller vendors
Join hands with vendors for common sourcing

Materials were pooled from different vendors so that a trucks carrying capacity was fully utilized
Ensure exclusive agreements with vendors Integrate vendors to World Wide purchase (WPP) program Ensure payment to vendors within 10 days

Results of implementation of JIT

Leveraging Information Technology

In early 1990s there was no ERP vendor support available in the country. So company itself came out with the ERP solution. Variety of applications were made covering areas like

Inventory Management Receipt Excise Consumption Production Sales

Invoicing Exports Payroll Auditing Bank Reconciliation

Leveraging IT Contd
The Home made system was expanded to its sales and dealer network through an email based ordering system with about 250 outlets Later on implemented an in-house supply chain application that extended ERP on the extranet and linked both dealers and vendors To increase the flexibility vehicle tracking system were put in place along with technology enabled vehicle build sequence system Warehousing reengineering using bar coding

Results

Source: MSIL Website

Source: MSIL Website

Source: MSIL Website

Source: MSIL Website

Future Plans
Maruti has set itself a target of getting 60 % of market share. Launch new car models catering to all the sections of society.

Plans to export to Middle East and Far-East Asian.

Expand Capacity beyond 1.2 million vehicles/annum Setting up R&D facility in Rohtak, Haryana which will be a hub for Suzukis Asias operations Plans to launch Kizashi, a premium segment sedan in India

Operational Strategy of MSIL

Challenge 50 initiative

Value analysis and Value Reengineering initiatives

Reduced Cost development by localised sourcing and flexible Welding lines.

Use of best practices like Kaizen, Plan Do Check and Action(PDCA)

Use of production management systems(5-S, 3G, 3K)

Use strategy to implement low cost automation.

Key Learnings from the Case

Establish long term partnerships and strategic alliances with vendors to improve quality levels and supply chain efficiency. Focus on enhancing labor productivity to reduce ratio of aggregate costs to total income. Emphasis on reducing the productivity cost by assimilating the advantages of Information technology. This includes electronic vendor managed inventory system.

Thank you !! The Black Swan

Abhinav Varshney (03)

Kishan Kunal (25)

Mohit Jhurani (28) Dr. Prashast Jain (36)