This document discusses a supplier cluster program to holistically improve small and medium companies. It notes that OEMs source parts from tier 1 suppliers who source from smaller tier 2 suppliers. It is important to ensure quality at the tier 2 level to achieve quality in the end product. The program aims to build quality at tier 2 suppliers to ensure robust end products. It discusses aligning the challenges of OEMs, tier 1, and tier 2 suppliers and having a "win more - win more" approach through a common engagement platform. Key elements of the cluster deployment include common trainings, monthly review meetings, and hands-on support visits. Expected benefits include positive impacts on quality, delivery, and capabilities for all parties involved.

1. Cluster Programme
For holistic improvement of Small and medium
companies.
Suhas Gokhale,Nasik (India)
www.SuhasGokhale.com

2. • OEM’s buy parts, assmeblies ,aggregates and systems (like brake system,clutch
system,suspension parts,seats, body parts, rubber and plastic parts etc) from suppliers
(who are typically called as, Tier I companies.).
• Further, these Tier I companies offload child parts manufacturing to smaller companies
(who are typically known as Tier II companies). Usually, these Tier II companies (spread
Pan India and even abroad) are manufacturer of thousands of small parts, child parts
and sub assemblies..which goes to Tier I to get assembled on bigger assembly.
• Which then flows to OEM wherein they get assembled on vehicle. Usually 70 % parts of
vehicle are bought out parts. Typically a vehicle will have more than 60,000 such small
parts. There fore for perpetuity and consistency in material flow and qulity it is crucial and
essential to strengthen all elements across value chain (i.e. OE, Tier I and Tier II)
Value flow in
supply chain

3. A vehicle quality is sum total of the quality level of all these child parts +
quality of building vehicle. This means that , to ensure a Quality end
product, it is essential to inculcate “Quality” at child part level which is
actually produced at Tier II level (which are many a times..bottom of
pyramid companies).
• Hence it is extremely important to build a quality at these Tier II to
ensure robust end product. It is therefore very important to work with
suppliers to ensure required product quality level and throughput.
Build ‘Quality’ at root

4. Challenges in Current Context for OE and Suppliers
( P, Q, C, D, S, M, E )
PRODUCTIVITY :- Rising numbers, models ,variants .
QUALITY :- Changing Customer Expectations (both External and Internal)
COST / PRICE :-
Price – Old formula …… Cost +_Profit = Price. New Formula….. Price – Cost = Profilt.
Price is now market driven.. Decided by competition.
Cost – The one which is in our hand to monitor and control.
DELIVERY :- JIT (Just in time) days are gone it is now one step beyond as JIS (Just in sequence).
SAFETY :- Must since lives of human beings involved.
MORALE :- Days will be coming wherein the people will be considered as most precious resource.
To become competent and beat competition, motivated people will be key.
ENVIRONMENT :- Govt. norms, OE’s have to declare ‘Sustainability’ score.
Motivators like ‘Carbon Credit’
Pressures from Global market.Social awareness.

5. How do we align P,Q,C,D,S,M,E challenges
of OE and Suppliers together and have
WIN MORE –WIN MORE….

6. OEM
Tier I
Supplier
Tier II
SupplierGovt. of
India
Society
External
experts
Key Stake
holders

7. Benefits of common engagement platform :
• Learn directly from the behavior of its
customer
• Generate new ideas rapidly
• Experiment with new offerings quickly
• Get input from customers on their
running preferences
• Build deeper relationships and trust with
the community and generate “stickier”
brand collateral
Lean techniques to address Manufacturing
challenges deployed on common engagement
platform SUPPLIER CLUSTER

8. Objective: Supplier Improvement
8
Waste Elimination
• Productivity Improvement
• Capability & Competency enhancement
• OEE
• SMED
• VSM
Q
• Kaizen
• Cellular
Mfg
• VSM
• Poka yoke
• QC Story
• Kaizen
P C D S M
• JIT
• Kanban
• 5S
• Kaizen
• Training
• Competition
• Involvement
•Reduction in PPMeq & Internal Rejection

9. Business Performance Indicators
9
Product Quality : PPMeq, Internal Rejection
Labour productivity
Inventory Turn Ratio
Delivery Schedule Achievement
Overall Equipment Effectiveness (OEE)
Floor Space Utilization
Value Added per Personnel Cost (VAPCO)

10. Delivery Mechanism
for quality improvement & capability enhancement of Tier I
and II suppliers.
M&M
Tier I
Tier
II
10
Consultant

11. Identify Tier I
Identify Critical
Tier II
Cluster
Formation
Execution
Monitoring
Total
Employee
Involvement
11
Supplier Improvement Methodology
III
Deployment
though
Handholding
IV
Sharing &
Review
(MRM)
II
GEMBA
(Value Stream
Mapping)
I
Education &
Training
V
Horizontal
Deployment

12. Cluster Deployment
Key Elements (which gets deployed in every month cycle)
• Common Trainings.
• Hand Holding Visits.
• Monthly Review Meetings (MRM).

13. SR DESCRIPTION OF NVA LEAN TOOL DEPLOYED BEFORE AFTER BENEFITS (per month)
1 . Excess material handling for Cab Protector Line. Cellular Layout 117 mtr 81 mtr Rs.1.6 L
2 Cup welding from inside was cumbersome and manual Kaizen
Manual
welding JIDOKA Rs. 1.06 L
3 Excess handling –holding of fuel tank while welding + Kaizen 2 operator 1 operator 1 operator reduced
4 Set up time reduction on bolt heading hammer Set up time reduction 31.6 min 26.7 min. Productivity increase 2.5 %
5 Labours for excess material handling Cellular Layout - - Rs.1.54 L
6 Manual checking of battery rod length Kaizen - - Zero Defect
7 Change over of Dies on all Press Machines SMED 56 min 26 min 30 mins
4,00,000 strokes p.m., Rs.4.8 L
8 Waiting Time, Searching Time and Maintenance Time OEE 67% 78% 12%
9
Low output of Inj. Moulding on HVAC Assly for XUV
500 SPF, Cellular Layout 121 mtr 3 mtr Output increased by 240%
Rs.1.6 L
10 Waiting Time, Searching Time and Maintenance Time OEE 66% 85% 13%
11 Higher In Process Rejection Kaizen
30500
ppm 5500 ppm In Process Rej reduced by 82%
12 Higher In Process Rejection Kaizen
21000
ppm 2500 ppm In Process Rej reduced by 88%
13 Unutilized Space on the Shop Floor 5 S - - 189 Sq.M. space saved
14 Higher In Process Rejection Kaizen 2100 ppm 132 ppm In Process Rej reduced by 94%
15 Unutilized Space on the Shop Floor 5 S, Cellular Layout - - 156 Sq.M. space saved
16 Excess material on shearing m/cs Kanban 6 labours 2 labours Rs.3.2 L
17 Excess material handling of CRCA sheets 3 M 4 labours 2 labours Rs.1.6 L
18 Excess Inventory of RM, WIP, SFG & FG VSM ITR : 8 ITR : 42 Rs.3.5 L
NVA’s (some examples)

14. Expected benifits of Supplier Clusters
.
OEM:-
Positive impact on Quality and enhanced ability of supply chain.
Tier I :-
Positive impact on Quality, delivery.
Tier II :-
Enhance capability and perpetuity in delivering customer requirements.
Cultural change resulting long term positive impact.
Consultant :-
Active participation in ‘Driving positive change’ thereby perpetuity of profession.

15. RANKING CRITERIA OF Supplier Cluster companies
Top level lowest level
Sr.No
Area of
influence
Measurement Criteria Unit of measure Level IV Level III Level II Level I
No of days1 Quality (Q)
Number of Consecutive days without defect at
Customer end > 270 180 to 270 90 to180 < 90
2
Quality (Q)
First time right (i.e. PPMeq at PDI)
PPM eq
(The target is commoditywise)
Machining,mechanisms <25 26 to 250 250 to 500 >500
Sheetmetal & BIW 0 <100 100 to 200 200 to 2500
Casting & forging <500 500 to 1500 1500 to 5000 >5000
Rubbe,plastic and all other not considered above <25 26 to 250 250 to 500 >500
3 Quality (Q)
Cost of Poor Quality (Rupees as % of sales value in Rs)
% of sales < 0.05 0.05 to 0.1 0.1 to 1 > 1
kg/person-hour
4 Productivity (P) Production volume per employee -improvement over
base line in % basis
>30%
15% to 30% 0 to 15%
No
improvementor
Nos/person-hour
or
Sales in Rs/No of
employees
Absolute value as per
formula
5 Cost (C ) I Inventory Turn Ratio (ITR) -Improvement over base
value
>30 % 15% to 30% 0 to 15 % No
improvement
Delivery schedule adherence (as per daily trigger) as % > 99 95% to 99% 90% to 95% < 90%
6 Delivery (D)
7 Safety ( S ) Accident frequency rate (as per formula) Absolute value 0 0 to 0.05 0.05 to 1 > 1
Accident severity rate (as per formula) Absolute value 0 0 to 0.05 0.05 to 1 > 1
8 Morale ( M ) Number of Kaizens in per person per month Nos > 4 2 to 4 1 to 2 < 1
No change or
negative
9 Energy ( E ) Energy cost (as % of sales) - reduction over base value % reduction
> 10 % 2% to 10% 0% to 2%
10 Overall rating Rating as per Mahindra Supplier Sustenace audit % > 80% 60% to 80% 30% to60 % upto 30%

16. Finally…We
Win More – Win More
Through
Co-Creation
Thank You