Operation level strategy- Maruti Suzuki


Published on

operational level strategy of maruti suzuki enclose production techniques and philosophy

Published in: Business, Technology
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Operation level strategy- Maruti Suzuki

  1. 1. Manjot Chitvan Udhai Jatin Sampreet
  2. 2. AGENDA 1. General Environmental Analysis 2. Industry Environment Analysis 3. Indian Automobile Industry 4. Competitor Analysis 5. Value Chain Analysis 6. Operations 7. Conclusion
  3. 3. GENERAL ENVIRONMENTAL ANALYSIS PESTLE • Government promoting foreign investment (FDI‟s) • Stable political environment Political (Attractive) • Good access of funds due to availability of cheap loans • Persistent high growth rates for past few years Economic (Attractive) • Rise of middle class leading to improved purchasing power • Mass transportation due to increase environment consciousness Social (Moderate) • Capital intensive • Huge investment required to achieve economy of scales Technology (Unattractive) • Need to comply with ever evolving emissions standards • Need to comply various safety and technical standards Legal (Unattractive)
  4. 4. INDUSTRY ANALYSIS PORTER‟S FIVE FORCES • Not very high due to proprietary knowledge, patents and government policies • Huge investment required hence not easy to enter into automobile market Threat of New Entrants (Low) • Incentives to buyers in form of price discounts, accessories, after-sales services • Lot of options available because of lot of competition. Bargaining Power of Buyers (Moderate) • Presence of many substitute inputs • Cost of switching of suppliers high Bargaining Power of Suppliers (Moderate) • High risk as there are many competitors offering similar products • Rapid Development of new technologies and hence constant threat Threat of Substitute Product (High) • High Industry concentration & fixed costs so competition among existing players • Low switching cost from different kind of automobiles after initial investment by minor changes, facelift etc. Rivalry Among Competitors (High)
  6. 6. COMPETITOR ANALYSIS  Debut in 1998 with launch of Santro  By 2004 had 5 models, Santro, Accent, Sonata and Elantra and Getz  In 2007 launched i10  Wide range along with alternate fuel options  2nd largest car manufacturer in India  3rd Largest in Passenger Cars  Launched Indica in 1998  Acquired Jaguar and Land Rover brands ( 2008)  Launch of Nano in 2009  High Market share in diesel market  Labor Cost -9% of profit Through its subsidiaries, machine tools and metal producing plants Hyundai Tata
  7. 7. COMPETITOR ANALYSIS  Tagline- Das Auto meaning „The Car‟ but luxury models for the upper class in India  Entered with Skoda Brand in 2001 with current range of Fabia , Laura, Octavia etc.  VW in India in 2007 with Passat and Jetta  Launched Polo in 2009  120 dealerships across the country today  Focus on service and Customer satisfaction  Chevrolet :“For a Special Journey Called Life.” with Optra in 2003  Launched Aveo, Optra SRV and Aveo U-VA  Chevrolet Spark in 2007 and Beat in 2010  Innovative schemes like the „Chevrolet Promise‟ - Maintenance at a fixed cost for three year period  Affordability at every stage Volkswagen Chevrolet
  8. 8. COMPETITOR ANALYSIS Ford  Started in 1995 : JV with M&M  Launched Ikon in 1999  Entered the hatchback with Figo in 2010  Keen to take what they can from the positive market conditions
  10. 10. FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROCUREMENT INBOUND OPERATIONS OUTBOUND MARKETING SERVICES LOGISTICS LOGISTICS & SALES Production Management System MARGIN Team building activities Variable- pay e-learning Electronic Data Processing Data Management Software Product Life Cycle Management Solution Vendor quality system audits Maruti Center for Excellence Supplier Club MARGIN Partnership approach with all stakeholders JIT Effective Material Handling Presence in 500 cities with 1500+ distributors True Value model Maruti Finance Anytime Maruti Maruti on road Sales operating Standards Motor training Schools Cashless insurance Lean Manufact- uring Value Added Value Engg. (VAVE) Focus on Cost, Quality & Safety
  11. 11. INBOUND LOGISTICS • Just-In-Time (pioneered by Toyota) • Huge savings on inventory management costs • Sound demand management system • Implementation of Logistics improvement systems OPERATIONS • Eliminates unnecessary costs using Lean Manufacturing • Maintains constant prices by using Value Added Value Engineering • K-Engine (fuel efficient) Plant used in many models & well received by customers • Manufacturing supremacy rests on ideals of Cost – each employee works as Costs Manager Quality - „Do it right first time‟ Safety- „Home or Work place: Safety takes first place‟ OUTBOUND LOGISTICS • Presence in 500 cities • 300+ distributors • 1600+ service stations • 16 warehouses • True value dealership model • Decent margins to dealers
  12. 12. MARKETING & SALES • Anytime Maruti - 24*7 toll-free helpline to attend to customer grievances • Maruti On road- Maintenance & Repair services • Maruti Finance – Car finance in 166 cities in partnership with SBI • Free test drive to customers SERVICE • Sales Operation Standards (SOS) - Requirements in terms of infrastructure and workflow processes to be met at dealership • Excellent after-sales service- 1600+ centers with detailed information on website • Motor training schools • Cashless insurance- Inception of two subsidiaries- Maruti Insurance Distributors Services Pvt. Ltd. & Maruti Insurance Brokers Pvt. Ltd.
  13. 13. • IT network links vendors across the country & keeps track of order and delivery status. • Electronic Data Processing (EDP) Dep't. manages post-sales process & sales analysis. • Styling & Engineering functions done in UGS‟ NX solutions • Data Management Software maintains record of all enquiries & provides timely reports on demand. TECHNOLOGY DEVELOPMENT • Reduced no. of vendors from 370 (2000) to 100 (2005) • Quality maintained by periodic quality system audits • Maruti Centre for Excellence (MACE) to share best practices & increase competitiveness among suppliers • Guidance to suppliers on financial matters pertaining to fund management, Basel III norms etc. • Supplier Club used as platform to discuss operational & social issues between suppliers and top management PROCUREMENT
  14. 14. • Plants at Manesar & Gurgaon; 7600 employees • Partnership approach with all stakeholders • Annual General Meetings • IR Cell • Production Management System aimed at achieving manufacturing supremacy through Japanese principles of 5S, 3G & 3K FIRM INFRASTRUCTURE • Major component of variable pay ensures alignment of employees with organization • Innovation forms a core value & is highly encouraged • Company is treated as family with events like Parivar Milan & Family Day • Maruti Recruitment System (MARS) comprising technical aptitude test followed by technical & HR interview. • Classroom training is reinforced through e-learning modules • MSPIN issued to all employees HUMAN RESOURCE MANAGEMENT
  15. 15. CAPABILITIES OF MSIL  Manufacturing and production technology  Understanding customer‟s needs  Developing new designs and models of cars which are fuel- efficient  Quality focus  Prompt service and customer satisfaction
  16. 16. CORE COMPETENCIES • Pioneer in latest technology • Lean Mfg • PMS • Quality Control MANUFACTURIN G EXCELLENCE • Most extensive network in India • Greater customer satisfaction STRONG DISTRIBUTOR NETWORK • Alliances with suppliers • Alliances with dealers FORWARD AND BACKWARD INTEGRATION• True Value • Anytime Maruti • Authorized service centers • Insurance OTHER CRM INITIATIVES
  17. 17. GURGAON FACILITY  The Gurgaon facility spread over 300 acres is located around 25 kms south of Delhi. This facility houses three fully integrated plants. Together the three plants churn out around 9 lakh units annually.  K- series Plant The Gurgaon premises also houses the 'K Engine' Plant. Commissioned in 2008, the K-series engine plant has an installed capacity of over 7.7 lakh units per annum. Since the launch of the engine cumulatively, over 10 lakh K- series engines have been rolled out. K-series engines are available in 1 litre, 1.2 litre and 1.4 litre capacities. The highly fuel efficient, technologically advanced K-series engines have been very well appreciated by our customers for their performance. Several Maruti Suzuki cars such as the Alto K10, A-star, Estilo, WagonR, Swift, Swift Dzire, Ritz and Ertiga are powered by the K-series engines.
  18. 18. MANESAR FACILITY  The 600 acre Manesar facility located around 25 kms south of Gurgaon facility was inaugurated in February 2007. The Manesar facility houses two fully integrated plants with a capacity of 5.5 lakh units annually. The third assembly line is in advanced stage of completion and is expected to be completed in the year 2013.  Both manufacturing facilities are highly automated with advanced robotics, contemporary paint, weld and machining infrastructure. While the different models can be assembled on same lines, inter plant flexibility helps to increase productivity. On a single line diverse car models can be made conveniently. Automatic tool changers, centralized weld control systems and advance numerical control machines help for quick change over between models.
  19. 19. SAFETY:
  20. 20. SAFETY KPI(S):  Safety Index- Safety is of the paramount importance in a workshop. To meet the desired safety standards various training programs are started so as to give proper knowledge to workers regarding safety precautions. Safety Index represents the overall percentage of number of points received by an assembly shop to improve safety to number of points available for improving the safety of the department.
  21. 21. SAFETY AUDITS:  PMS audit: Each area is assigned with a safety area co- ordinator, who suggests measure for improving the safety of an area and each suggested measures carries some points. The safety area co-ordinator assigns points based on number of suggestions implemented in the area.  Sunday audit: under this an official conducts the audit of all the plants on a Sunday and award points.  External audit: under this an external agency visits the facility and suggests measures to improve the safety. Each measure is given some points. A facility is then given points based on the implementation of the suggestions.
  22. 22. QUALITY:
  23. 23. QUALITY AND COST: Quality is of utmost importance to the company. Quality lapses have a huge impact on the company’s image besides the financial loss. Therefore, the company tries its best to foolproof its processes against the operators’ faults. However, still some defects are passed on by the operators during the manufacturing processes. These defects, when found later during the process need to be removed which causes some cost to the company. Therefore, the company monitors the quality levels and the costs involved by defining KPI(s) listed in the next slide.
  24. 24. KPI(S) RELATED TO QUALITY AND COST:  GCA score  ABOK Line off Average per day  Direct Pass  Rejection Cost  Warranty cost  Cost of Repair  Cost Savings
  25. 25. PRODUCTIVITY: Productivity is a measure of output from a production process, per unit of input. Productivity may be conceived of as a metric of the technical or engineering efficiency of production. Assembly shop has numerous KPIs to monitor its productivity. Various KPIs related to productivity are:  Indexed CPV  HPV  Line Efficiency  HPV and Non-HPV manpower
  26. 26. LINE EFFICIENCY Line Efficiency = Total time available in a shift – Time duration of the stoppages Total working time available in a shift It can be observed that lesser stoppages in the assembly line means higher line efficiency and increased production capacity.
  27. 27. PACK ADHERENCE LOGIC The different models which are manufactured at Maruti- Suzuki can be broadly categorized into the following two types: 1. Heavy work-models: SX4, Swift Dzire. 2. Light work-models: Alto, Zen. Heavy work models need more work to be done on them as compared to the Light work models. Therefore, the operators at the station need more time to complete the heavy work models than the light work models.
  28. 28. It is desirable that no two heavy models come consecutively on the line so as to avoid operator overloading which might cause the line to stop. This means that Assembly line requires models in a specific sequence called ‘Pack’. A Pack consists of a certain number of vehicles arranged in a specific sequence. All the cars in a pack are arranged such that no two heavy work models come together and the pack remains balanced. This leads to maximization of efficiency of the Assembly line.
  29. 29. BENEFITS Ensuring adherence to the packs defined will lead to  Reduced Operator Overloading  Maximization of line efficiency  Increased production capacity of the assembly shop.
  30. 30. SCENARIO- WORK AREA Therefore, to reduce the data acquisition and report generation time, we have centralize and partially automate the monitoring the productivity related parameters, which help us in not only in saving time but also generate 100% accurate data to analyze and compare.
  32. 32. PRIME BENEFITS  Partial automation of Data Capturing.  Optimum Utilization of Resources.  Analytics  Forecasting and Pre-Planning of Resources. Initial Scope of implementation: Assembly shops
  33. 33. STANDARDIZATION Standardization of Control rules
  34. 34. STANDARDIZATION OF CONTROL RULES IN ASSEMBLY SHOP: Maruti Suzuki India Ltd (MSIL) has four assembly plants in India. Three of the assembly plants operate in Gurgaon area and one assembly plant is located in Gurgaon. Each of these assembly plants have certain set of processes which are carried out during the course of the production cycle. The Operators, Supervisors and Inspectors working on the assembly line have to follow certain set of standards called as ‘Maruti Operating Standards’. To aid the work of the employees certain systems have been implemented in each of these plants.
  35. 35. BENEFITS:  Availability of uniform control rules across each of the assembly plants of MSIL  Ease of Auditing process  Better control of the assembly operations
  36. 36. MARUTI‟S GREEN PHILOSOPHY STEMS FROM ITS USE OF “THREE R‟S Reduce Recycle Reuse policy
  37. 37. REDUCE  Reducing water usage in its air-conditioning plant: Water use is eliminated by introducing air-cooled air-conditioners and closed cycle cooling towers.  Reducing consumption of raw paints: Company has started using automation in paint shop, increasing efficiency and thus reducing raw paint consumption. This has also reduced paint-sludge (industrial waste) generated from the plant.  Rightsizing of equipments: In its new facility, Maruti has ensured to use right sizes of equipments, saving a lot on energy front.  Three-coat-one-bake painting system: This state of art system uses only one baking step as compared to conventional system of having two baking steps, thus reducing the consumption of energy levels and increase efficiency.  Use of solar energy in form of solar lamps and heaters helps in reducing power consumptions. Use of natural ventilators: These ventilators use wind energy as against electrical energy to keep the rooms cool, thereby saving on power consumption.  Reducing noise pollution: Company has installed many noise curtains in its facilities, creating enclosure for high noise generation equipments and hence providing a safer working condition to its employees.
  38. 38. REUSE  Waste Heat Recovery: Company is reusing the waste gases, generated during power generation, in its manufacturing process, resulting in a saving of almost 4225 MWH per year.  Sheet metal crap utilization: Parts of unused steel sheets during manufacturing process i.e. scrap, is reused within the value chain (like making smaller components). This results in lower industrial waste generation and better returns for the company.  Reuse of sewage treatment plant sludge: This waste is used in horticulture, resulting in a significant reduction in landfill wastes.  Reuse of packaging material: Maruti ensures almost 100 % of domestic components come in collapsible boxes, making them easy to reuse and in turn reducing wood and cardboard wastes.
  39. 39. RECYCLE  Recycling groundwater: Maruti uses techniques like soak pits, recharging shafts, rain-water harvesting and water lagoons that help in recharging ground water from the rainfalls.  Recycling Water, 100% recycling: Through technologies like “Reverse osmosis” and “tertiary treatment” used in its Effluent Treatment Plant, Maruti recycles almost 100 % of its waste water, bringing down the need for fresh water by almost 28%.
  40. 40. JIT AT MSIL  The Company has adopted the Japanese System, JIT to achieve higher operational efficiencies and reduce inventory carrying cost.  JIT improves the return on investment of a business by reducing in- process inventory and its associated carrying costs.  To achieve JIT material supplies, the company gives preference to locally based suppliers and encourages far distance suppliers to set up base close to Maruti Suzuki`s facilities.  Over 76% of the company's 246 suppliers are located within 100 kms of radius. Have strategically located the suppliers of bulky components such as instrument panels, fuel tanks, bumpers, seats, etc. adjacent to the company's manufacturing facilities in the Suppliers' Park.
  41. 41. CONT……..  The JIT system has evolved over the last 25 years in the company from monthly scheduling to daily scheduling of parts orders and finally, in 2003, to e- nagare system i.e. the release of schedules on hourly systems, a practice that aids in maintaining less than two hours inventory of components within the company.  The e-nagare system is successfully running today at the company and helps in maintaining the right material inventory, at the right time, at the right place and in the exact amount without the safety net of excess inventory, thus reducing high inventory carrying cost.
  42. 42. MARUTI – SUSTAINABLE OPERATIONS THROUGH INTERNAL EFFICIENCY  Maruti in recent years, owing to several innovative measures like investing in green equipments, its employee-driven campaigns  Kaizens (shop floor improvements), has drastically reduced the consumption of power and water and the waste generation in its facilities.  Company also credits this decrease in utility consumption to its adoption of “just-in-time” approach towards operations. Some of the facts and figures supporting Maruti‟s claims are (figures available for year 2007):
  43. 43. COST SAVINGS  Total energy consumption per vehicle is down by 26 % over the last six years.  Power Consumption has come down by 31 % over the last six years.  Water Consumption per vehicle has dropped by 63% over the last six years.  Landfill waste has come down by 67 % over the last six years.  Carbon Dioxide emissions per vehicle (produced during manufacturing) are down by over 39% in last five years.
  44. 44.  Maruti Suzuki is governed by the manufacturing excellence principles of reducing wastages, inconvenience and inconsistency, which are imbibed from its parentcompany SMC, Japan.  Maruti Suzuki using best practices such as Just in Time (JIT), Kaizen (continuous improvements), Pika Pika and Poka Yoke (mistake proof operations). The best practices are replicated in the business process of business partners to make their operations lean and error free.  The company is efficiently interfaced with the dealers through Dealer Management System (DMS), annual dealer interactions and reviews which help the dealers in cost savings and customer convenience.  Optimum levels of inventory are maintained to reduce the burden of inventory carrying cost. Higher inventory levels are corrected whenever required to them financially viable. This results in multiplicity of efficiency across the value chain
  45. 45. Environmental best practices Maruti is not only working towards implementing environmental best practices in its facilities, but also takes active part working in collaboration with its suppliers to implement best practices in their facilities through its Environment Management System (EMS) bringing benefit to the entire value chain.
  46. 46. CONCLUSION • MSIL, through its cost leadership approach – market leader for 3 decades , 50% market share. • Constant innovation to its processes, hence helping it achieve efficiency. • Cost advantage by maintaining long term contracts with its suppliers - reliable supply of materials • Moving towards Integrated cost leadership/differentiation strategy to cater to changing demands of customers and changing environment • Sustainability of this strategy in the long run