ASSIGNMENT

Module Code
Module
Name
Course
Department
Faculty

EMM 505
SUPPLY CHAIN MANAGEMENT
EMM
MECHANICAL AND
MANUFACTURING DEPARTMENT
FET-FULL TIME

Name of the
Student

N.YASHWANTH

Reg. No

14ETME027002

Batch

2014

Module Leader

PROFESSOR P.S. SATISH

Declaration
Sheet
M. S. Ramaiah
University
of Applied
Student Sciences
University House,
N.YASHWANTH
Name
Gnanagangothri Campus, New BEL Road,
Reg. No M S R14ETME027002
Nagar, Bangalore, Karnataka, INDIA - 560 054
Batc
Course
EMM
Full-Time 2014.
h

Module Code

EMM 505

Module Title
Module Date
Module
Leader

SUPPLY CHAIN MANAGEMENT

to
5/01/15
07/02/15
PROFESSOR P.S. SATISH

Declaration
The

assignment

submitted

herewith

is

result

of

my

own

investigations and that I have conformed to the guidelines against

plagiarism as laid out in the Student Handbook. All sections of the
text and results, which have been obtained from other sources, are
fully referenced.

I understand that cheating and plagiarism

constitute a breach of University regulations and will be dealt with

accordingly.

Signature of the
student

Dat
e

Submission date
stamp
(by Examination &
Assessment Section)

Signature of the Module Leader and

date

<Supply Chain Management>

Signature of Reviewer and date

Abstract
____________________________________________________________________________
In a competitive world, organization are constantly looking for opportunities
to produce and deliver products as the most cheapest price with a sufficient
profit margin and in the process of dealing with these issues, the
organizations are required to master the good practices of the supply chain
management. Organizations are realizing that it is very important to follow
good supply chain management practices to achieve the companys goal
and to meet customer requirements. It is a successful supply chain which
will win the confidence of the stake holders and deliver efficiency and
effectiveness in all phases of the organizations process. So, SCM tools and
techniques are of great importance in the present manufacturing scenario.
The assignment consists of three parts in part A the stance is taking
whether the vertical integration is important or outsourcing practice is
important in business scenario with appropriate reference the case studies
of the vertical integration is important in business scenario is written.
Part B the illustration of supply chain flow of Bajaj Auto Ltd is written and
analysis of supply practices with respect to vertical integration and
outsourcing is briefed and remarks on the benefits of Bajaj Auto Ltd is
briefed.
Part C a manufacturing company called Devaki Engineering Enterprises is
visited and study of supplier selection process is done and identifying the
risk management practices in the company selected, the benchmarking of
the risk mitigations process with the good practice is briefed and action
plan of improvement in the process of the company with appropriate
reference and citation is done.

<Supply Chain Management>

Contents
____________________________________________________________________________
Declaration Sheet............................................................................................ ii
Abstract............................................................................................................ iii
Contents........................................................................................................... iv
List of Tables..................................................................................................... v
List of Figures.................................................................................................. vi
List of Symbols............................................................................................... vii
PART-A CHAPTER 110
VERTICAL INTEGRATION10
1.1 Introduction:10
1.2: Vertical integration and Outsourcing trends: 10
1.1 Debate with suitable examples/case studies:11
1.4 Conclusion:12
PART-B CHAPTER 213
Bajaj Auto Ltd13
2.0 Introduction:13
<Supply Chain Management>

2.1 Illustration of supply chain flow in BAL:13

2.2 Analysis of supply chain practices of Bajaj Auto Limited :18
2.3 Conclusion:25
PART-C CHAPTER 328
Devaki Engineering Entriprices28
3.0 Introduction:28
3.1 Supplier selection process:28
3.2 Supplier risk management practices: 29
3.3 benchmarking of risk mitigation practices:30
3.4 Action plan for improvement of process:32
3.5 Refference and citation of refference: 33
3.6 learning outcomes:34
Bibliography33

<Supply Chain Management>

List of Figures
____________________________________________________________________________
Figure
Title of the figure
No.
Figure
BAL supply chain flow
2.1.1
Figure
Manufacture flow
2.1.2
Figure
Supply chain practices
2.2.1
Figure
Monitoring
2.2.2
Figure 2.2.3
the use of SAP

Pg.N
o.
14
15
19
22

23

<Supply Chain Management>

<Supply Chain Management>

PART-A CHAPTER 1
VERTICAL
INTEGRATION AND OUTSOURCING
1.1 Introduction:
Vertical integration is a strategy that many companies use to gain control over their
industrys value chain. This strategy is one of the major considerations when
developing corporate level strategy. The important question in corporate strategy is,
whether the company should participate in one activity (one industry) or many
activities (many industries) along the industry value chain . It is a strategy used by a
company to gain control over its suppliers or distributors in order to increase the firms
power in the marketplace, reduce transaction costs and secure supplies or distribution
channels. It has two stages forward and backward integrations Forward integration is
a strategy where a firm gains ownership or increased control over its previous
customers (distributors or retailers). And Backward integration is a strategy where a
firm gains ownership or increased control over its previous suppliers.

(Jurevicius,

2013) The fixed asset technologies and frequency of transactions would dictate a
market structure of tightly bound pairs of buyers and sellers that would need to
negotiate an almost continuous stream of transactions. Transaction costs and the risk
of exploitation would be high. It is more effective, lower cost, and lower risk to
combine these two stages under common ownership. (White, 1993) Therefore
Vertical integration is needed in current business scenario

1.2 Vertical integration and Outsourcing trends:

Vertical integration trends:
Vertical integration trends in many ways the oil industry, reliance, media industry,
apple and agriculture industry have using the vertical integration strategy to improve
QCD, vertical integration internalizes the value chain, backward integration secures
the acquisition of raw materials and components, forward integration secures sales
and controls the profit of the later stages of the value chain. Vertical integration is not
only smart for company, but for community, local and regional economy, environment,
and, in turn, our customers. By centralizing manufacturing operations, not only
increasing efficiency, and being held accountable and responsible for actions, Vertical
integration of the broiler industry allows producers to combine different biosecurity
and sanitation practices, housing technologies and feeding regimens to improve food
safety. This structure allows greater governance over each aspect of food safety from
the breeder farm to the hatchery through the processing plant. (usda, 2012) Vertical
integration dictates that one company controls the end product as well as its
component parts. In technology, Apple for 35 years has championed a vertical model,
which features an integrated hardware and software approach. For instance, the
iPhone and iPad have hardware and software designed by Apple, which also designed
its own processors for the devices. This integration has allowed Apple to set the pace
for mobile computing. (hsu, 2014)

Outsourcing trends:
Today, with outsourcing being the top business trend, the growth of Indian outsourcing
industry has been phenomenal. As markets worldwide are becoming knowledgeintensive, India has evolved to become the most preferred destination for knowledge
services. Knowledge Process Outsourcing may soon be the biggest revenue grosser in
India. India has a large pool of skilled manpower Chartered Accountants, MBAs,
Doctors, Lawyers, Research Analysts, etc., which strengthens its position in the
knowledge service industry. (outsource2india, 2014) Outsourcing, in all its forms, is
rapidly reshaping work as we know it, and at the same time, the economies of both
developed and emerging nations. According to IAOP survey 80% of customers today
have been Outsourcing for more than 10 years, Entire economies have been built on
the outsourcing wave, and by all measures, the quality and efficiency of such services
have greatly improved. Efficiencies found in early applications of outsourcing have
also transferred to lower-volume, higher-touch functions. (Asta, 2013)

1.3 Debate with suitable examples/case studies with respect to QCD:

National chicken councils vertical integration:

The American chicken industry has undergone dramatic change in the early days of
the broiler business, the major production staging of producing broiler meat were all
separate businesses. There were independent feed mills, hatcheries, farms and
processors who each sold their product in a separate market In the 1940s, the
different stages of production were beginning to be combined by integrators. The
integrators reduced costs by coordinating the production capacity of each stage of
production. The chicken industry has grown to the magnitude that it is today by
combining production stages into large vertically integrated firms able to take
advantage of rapidly changing technology. Vertically integrated companies in a supply
chain are united through a common owner. Usually each member of the supply chain
produces a different product or service, and the products combine to satisfy a
common need in this case, the production of broiler chicken. The efficiency of this
system has helped foster lower real prices for chicken products. The broiler industry,
in particular, is often cited as a model of the organization which may characterize U.S.
agriculture in the future A reduction in the amount of feed required to produce a
pound of broiler meat, due to continual discoveries in genetics and nutrition; A
reduced growing period to produce a market broiler chicken, meaning reduced space,
labour, equipment and a much smaller environmental impact and Being able to go to
the market at any time of the year and buy tender, flavourful chicken products at a
price that is very kind to your budget. Vertical integration allows the industry to
maintain strict biosecurity measures, vaccination programs and testing for bacteria
such as Salmonella at breeder farms and hatcheries. In the feed mill, feed is
frequently heat-treated to prevent the spread of any bacteria between the feed and
the birds. At the grow out house, strict biosecurity measures, pest management
control and the all in all out concept controls the spread of disease between the
birds, houses and flocks. (usda, 2012)
American apparel:
In the past decades, it has become the norm amongst the majority of US apparel
companies to move the manufacturing operations abroad to third party vendors.
American Apparel has kept it local. The company is vertically integrated, and operate
the largest apparel manufacturing facility in North America, right in Downtown LA.
Though it's not the easy road to travel, this has always been their business model.
The shirt starts as spools of yarn that are knit into rolls of fabric in one of our three

knitting facilities in Southern California. These rolls are then dyed, either within the
same facility, or in another one of our dye houses, at most 30 miles away. These lots
of fabric are then cut, sewn and packed into a box under the same roof at one of our
three factories in Southern California. At the same time these garments are being
made, our creative department, including photographers, models, and graphic
designers, is creating the marketing campaign for our brand without the help of an
outside PR firm or celebrity spokespeople. Our shipping and retail departments handle
the distribution of these products that we sell ourselves in more than 280 stores Not
only is this an efficient method for our company, but also for the environment. Vertical
integration by definition shrinks a company's carbon footprint, as the materials are not
shipped back and forth internationally, across thousands of miles, in the production
process. When you buy a t-shirt from American Apparel, a smaller portion of the
margins goes towards fuel, trans-ocean container ships, middlemen, boxes, pallets
and entropy. Instead we're able to spend that money on paying living wages to our
workers, higher-quality materials for our garments, and investing in the future of our
company. (American apparel, 2012)
1.4 Conclusion:
Vertical integration practices increase advantages over competition and to block
competitors from gaining access to scarce resources or important markets, it gives
companies access to more production inputs, distribution resources and process and
retail channels, A retailer can more quickly adapt to changing customer needs if it
owns the manufacturing or production firm that makes its products. The manufacturer
could sell through an Internet website and use online advertising techniques to
improve the business. Ability to control costs throughout the distribution process. By
selling directly to end buyers, manufacturers can eliminate the middle man, the main
advantage that get into vertical integration is more control over the value chain.

PART-B CHAPTER 2
________________________________________________________________________________
BAJAJ AUTO LIMITED
2.0 Introduction:

The Bajaj Auto Group was founded in 1926 by Jamnalal Bajaj and now consists of 27
companies. In 1945, Jamnalal Bajaj had formed M/s Bachraj Trading Corporation
Private Limited, the flagship company, to sell imported two-wheelers and threewheelers. The company acquired a license from the government in 1959 to
manufacture these vehicles and went public the next year. By 1977, the company saw
its plant rolling out 100,000 vehicles in a single year. In another nine years, Bajaj Auto
could produce 500,000 vehicles in a year. The present Chairman of the Bajaj Auto
group, Rahul Bajaj, took charge of the business in 1965. He was the first licensee of
the Indian make of the Italian Vespa scooter.
The Bajaj Company has a network of 498 dealers and over 1,500 authorized service
centers and 162 exclusive three-wheeler dealers spread across the country. Around
1,400 rural outlets have been created in towns with populations of 25,000 and below.
The current dealer network of Baja is servicing all these outlets. Bajaj Auto is
convinced that the real impetus of future two-wheeler growth will come from
upcountry rural India. Bajaj Auto has defined specialist dealerships for rural markets,
called 'Rural Dealerships'. During the year 2008-09, twenty new rural dealers became
operational

2.1 Illustration of supply chain flow in BAL:

The supply chain flow in Bajaj Auto Limited:

Suppliers(raw material)
Inbound logistics
Manufacturing
Outbound logistics
Marketing and Distribution management
End customer

Bajaj Auto Limited does not manufacture all the parts required for its all models of
motorcycles. Major portion of the parts are outsourced from various suppliers
depending on which supplier produces the best of the component in the industry. Bajaj
Autos decision whether to Make or Buy is based on the Fine and Whitney Framework
for Make or Buy Decision.
Bajaj auto practices a systematic process in selecting suppliers and deal with them.
Production manager of the company study the application received by the suppliers
and select proper suppliers as per their requirement. The selected suppliers invited for
general meeting with the production manager and purchase manager of the company.

In this meeting they decided conditions and time period of supplying raw materials to
the company.
Once the contract signed by both the routine work continue. Whenever the company
required raw material they send e-mail or call the suppliers just before three days. And
within two days company gets raw materials. If the suppliers are unable to provide
raw materials than Bajaj immediately informs and search for alternative vendors.

Figure 2.1.1 BAL supply chain flow chart

Suppliers:
Bajaj auto has approximately 198 vendors for their raw materials and parts. Some of
the key vendors are:

JBM Frames. Company located at Faridabad, Noida and Nashik.

MRFTires. Company located at Goa, Medak, Arakonam, Tiruvottiyur, Pondicherry,

and Kottayam.

Minda Handle Bar Assembly & ignition system. Company located at Haryana,
Pune, Mumbai, Bangalore, Hyderabad, and Pantnagar.

Endurance Brakes and Suspension. Company located at Pantnagar, Pune, and

Chennai.

Varroc Plastic parts & Digital Meter. Company located at Aurangabad.

Max auto components ignition system and switches

Silco cable wires and cables

Makino industry Brake shoes. Brake lining, clutch center.

Bajaj Auto Limited manufacturing plants are situated in the states of Maharashtra,
Aurangabad and Uttarakhand. The vendor locations (mentioned above) also come in
and around these states and so procurement of parts and raw materials is not a time
taking process and also the cost of logistics is reduced thus providing an efficient
supply chain. Bajaj auto maintains seven (7) days inventory. All the Mediators are
connected with each other through IT linkage to know exact status of delivery of
goods. (RAO., 2012)

Manufacturing:
The industrial complex of Bajaj Auto Limited-Waluj is spread over an area of 906acres.
The manufacturing activity consists of manufacturing motorized 2-wheelers, 3wheelers & parts thereof and also machine tools required for captive consumption.
The scooter plant was started in 1985 and other plants were started subsequently. The
manufacturing process for 2-wheelers and 3-wheelers as well as machine building is
basically metal cutting and metal forming. The basic raw materials are steel and
aluminum.

Surface

treatment

processes

electroplating are carried out in the factory.

like

heat

treatment,

painting

and

Figure 2.1.2 manufacture flow

The Bajaj Auto have three state of the art Manufacturing Plants, These are
1. Waluj
2. Chakan
3. Pantnagar
During the first half of 2009-10, a number of improvement activities were initiated at
the shop floor level across all plants of the Company. Bajaj Auto could produce 32%
higher volume of output without any significant investments. Below Table gives the
plant-wise capacities and product (Models) produced in respective plants in the last
two years.
Inbound logistics:
The raw materials and required components and spares are sourced from selected
suppliers/vendors. The inbound logistics are managed by third party logistic (3PL)
operators as suppliers of Bajaj Auto spread across different states. Bajaj Auto
maintains seven days (7) inventories; this sourced raw material will be stored in raw
material ware houses in concerned plant.
In manufacturing process, the final assembly unit will get all the assembled
components from different assembly lines and assembles these components to body
chassis of the motor cycle.

The assembled motor cycle has to pass through two levels of quality inspection to
maintain Zero Defects in final product. After inspection process these motor cycles will
sent to Factory warehouse for distribution.
Outbound logistics:
The outbound logistic operations depend upon Bajaj Auto market segments. Bajaj Auto
market is segmented by geographical wise. The geographical segmentation of Bajaj
can be divided into two broad categories.
1. National Level Markets
2. Global Level Markets
The national and Global level segments are further divided into sub-segments for
smooth logistic and physical distribution operations.

Distribution management:
The physical flow of goods takes place from the factory warehouse to either the depot
or to the carrying and forwarding agent, depending upon the geographic distance and
the location of the Depot. The transport & logistics for this is outsourced to third party
vendors which are under Transport Corporation of India
(TCI).
Depending upon the demand these goods have, they flow from Depot or the C&F
agent to the dealer and their network. In case of high profile dealers, the dealer can
himself take the physical delivery of goods directly from the manufacturing plant. The
dealer, at the last juncture, caters Authorized Service Center
(ASO), Rural Service Outlet (RSO), Sub Dealer & its own branch .
Distribution Channel Design is dependent on the segmentation that Bajaj have done in
the geographic and product category segments. Various players involved in the
distribution channel network are:

Depots
Carrying & Forward Agent
Dealers
Sub Dealers.

DEPOT
For distribution Bajaj auto uses mix of depots and C&F agents. This is completely
dependent on the distance of manufacturing location from dealer point. Due to
extensive distance from manufacturing plant from west Bengal to north-east India,
there exists a depot in Kharagpur with capacity of housing 800 vehicles.

There are similar depots in Punjab, Rajasthan and southern India.

Setting up depots is a geographical strategy adopted by Bajaj Auto. But this does not
mean that the company has gone all out to open a large number of depots.
It has chosen strategic locations. The key role played by depots is that they are meant
to cater to any sudden rise in demand of vehicles, and to cover the existing
geographic span of India.
The reasons behind having a depot in different regions in India are as follows:

Catering to a sudden shooting up of demand

Reaching the states of the North-East and other remote and poor transport
facility areas.

CARRYING & FORWARDING (C&F) AGENTS

Though the agent has a separate set of roles and responsibilities, it is just a semantic
difference in the case of Bajaj Auto. In most cases, it is the Giant dealer of a
particular region who acts a carrying and forwarding agent for Bajaj Auto. A giant
dealer is one who secures an A+ rating from the company, or has strong financial
muscle in the region in comparison to the other dealers. Their key deliverables will be
dealt in detail when we talk about dealers. This generally happens in states or regions
which are near to the manufacturing unit. This is almost always the case for most
Indian States.
DEALERS
The Bajaj Auto Limited has an extensive network of 498 dealers and over 1,500
authorized service centers and 162 exclusive three-wheeler dealers spread across the
country. Around 1,400 rural outlets have been created in towns with population of
25,000 and below. The current dealer network is servicing these outlets.
Dealers can be classified under 3 heads. They are as follows:
1. COCO-These are Company Owned & Company Operated showrooms. These
concepts exist only for Pro-Biking showrooms. Here Bajaj Auto has tried showcasing
their muscle power in high end biking segment. The concept has evolved very fast and
now there are 52 Pro-Biking showrooms in the country. The company itself does not
take any order from the customer in these showrooms. The giant dealer of the region
who is acting as a logistics partner for the probiking concept takes the order on behalf
of the company and fulfils the customer requirement.
2. CODO-These are Company Owned & Dealer Operated showrooms. In case of this
concept, showrooms are owned by the company but the operations in the showroom
are managed by the dealer. This is generally the case where Bajaj wants to provide

the dealer financial benefits considering the high working capital requirement of the
company.
3. DODO-These are Dealer Owned & Dealer Operated. These dealers are fewer in
number because they are generally the giant dealers who are the financial muscle for
the company.
SUB DEALERS, AUTHORISED SERVICE CENTER (ASC) & RURAL SALES OUTLETS (RSO)
SUB DEALERS
Generally this are the small players in the market who helps breaking the bulk at the
dealers end and providing the dealer necessary rotation of working capital.
In turn they get flexible terms from the dealer and trade on smaller volumes. These
channel members exist in the design because of the companys objective of increasing
the reach to the end consumer. (RAO., 2012)
End customer:

Types of Customers:

Bajaj Auto ltd. produces goods by considering the different types of customers. They
distribute products in small towns of the country and all over the world. The bikes
lights produces as per the current trend of the customers.

After sales Service:

Bajaj Auto ltd. is one of the most accepted products by the customers. With best
quality products Bajaj Auto ltd. can survive customers after selling products.

Customer relation management:

Bajaj Auto ltd. believes in customer satisfaction. They try to earn consumers trust by
providing good quality products and after sales services. Every two months Bajaj Auto
ltd. researches the market and tries to implement the problems. They also believe in
innovation and produce different variety of products with minimum price. Day wise
Summary of Customer Satisfaction Feedback. This is a method to record customer
feedback
2.2 Analysis of supply chain practices of Bajaj Auto Limited:

Figure 2.2.1 supply chain practices

Research and Development:
R&D has been working on improving its operations in a number of areas as listed
below.

Manpower: R&D has been expanding its team size in areas of design, analysis
and validation in order to keep up with the rapidly expanding aspirations of the

Company.
Facilities: R&D continued to enhance its design, computing, proto-typing and
validation facilities. Such enhancement efforts have enabled R&D to develop
durable and refined products. A number of new test facilities were put in to
validate the durability and performance of the forthcoming 4 wheelers. The
prototyping facilities were also upgraded to enable building of the prototypes of

these vehicles.
Technology: This year, R&D launched the Triple Spark technology for the Pulsar
family. This technology takes the DTS-I performance to the next higher level. It
gives best in class fuel efficiency and performance on a sports bike. This
technology went on to win the Automotive technology of the year award
competing in the category of not just 2 wheelers, but in all categories of

automobiles.
Total Productive Maintenance (TPM): R&D continues to vigorously pursue the
TPM way of thinking and working. This has yielded excellent results in quality
management of design and validation process. The TPM approach has also been
effective in the lead time reduction on the various critical processes in R&D by
elimination of waste. (Bajaj Auto Limited, 2013)

INBOUND LOGISTICS

The raw materials and required components and spares are sourced from selected
suppliers/vendors. The inbound logistics are managed by third party logistic (3PL)
operators as suppliers of Bajaj Auto spread across different states. Bajaj Auto
maintains seven days (7) inventories; this sourced raw material will be stored in raw
material ware houses in concerned plant.
In manufacturing process, the final assembly unit will get all the assembled
components from different assembly lines and assembles these components to body
chassis of the motor cycle.
The assembled motor cycle has to pass through two levels of quality inspection to
maintain Zero Defects in final product. After inspection process these motor cycles will
sent to Factory warehouse for distribution.
OUTBOUND LOGISTICS
The outbound logistic operations depend upon Bajaj Auto market segments. Bajaj Auto
market is segmented by geographical wise. The geographical segmentation of Bajaj
can be divided into two broad categories.
1. National Level Markets
2. Global Level Markets
The national and Global level segments are further divided into sub-segments for
smooth logistic and physical distribution operations.
National level outbound logistics:
Transport & Logistics This function of distribution is not owned by the company in any
form. This function is outsourced completely to the third party vendors (3PL
Operators). The third party here is Transport Corporation of India (TCI) and a few other
private vendors. The fleet to be transported is custom-designed for Bajaj Auto by the
vendor. A Transit Insurance Compliance Letter (TICL) is signed between the two
parties.
There are twenty vendors (3PL Operators) across India to cater the logistic
requirements in vast geographical segments of Bajaj. Logistics of the vendor is
decided by the Bajaj Company. The major 3PL operators of Bajaj Auto are: Transport
Corporation of India (TCI)
OSL
Jamuna Transport
Sumit Transport
Last mile logistics is decided most of the time by sub-dealers. Bikes are driven from
the dealers warehouse to the showroom by employees of sub-dealer or have it
transported to him. Freight charge is built-in in the product price. (RAO., 2012)

Sourcing:
In 2007, BAL formed its vendor association Bajaj Auto Vendor Association (BAVA) with
an objective to facilitate prevention of interface losses between vendors and BAL. It is
the first-of-its-kind in the automobile manufacturing industry in India. The other
objective of forming the BAVA is enabling vendor improvement activities steered
through BAVA management and executive committees. As of 31 March 2013, 130 out
of total 211 vendor groups are part of BAVA.
To further BAVA initiatives, BAL adopted a Green Purchasing Policy endorsed by the
Head of Purchase. The policy declares BALs commitment to conservation of energy,
water and environment across its supply chain and states that the Company will
endeavor to source its parts from vendors that adopt environment friendly
technologies. Following the policy, BAL has worked with BAVA to develop a road map
for green procurement
BAL supports its vendors for continuous improvements on quality, cost and delivery
performance in the following ways:
1. Direct assistance by deploying BAL engineers at vendor plants to identify gaps,
carry out improvement and monitor the same till sustenance is achieved and
transferred to vendor.
2. Specific training programs on Total Productive Maintenance (TPM) implementation
for vendor plant managers at BAL plant and to vendor front line workers for skill and
knowledge improvement at BAL Technology Centre.
3. BAVA forums to provide guidance on preventing interface losses and promote
improvement culture among small cluster groups.
4. Extending services of BAL employed Industry/Process Experts for Non-Proprietary
category.
5. Assisting Automation Projects in Non-Proprietary category, which also has reduced
their dependency on skilled manpower. (Bajaj Auto Limited, 2013)

Governance:
Bajaj Groups commitment to good corporate governance practices predates SEBI and
clause

49 of the listing agreements. Transparency, fairness, disclosure and accountability are

the main thrust to the working of the Bajaj Group. Bajaj Auto Ltd. (BAL or the
Company or Bajaj Auto) maintains the same tradition and commitment.
As will be seen, Bajaj Autos corporate governance practices and disclosures have
gone well beyond complying with the statutory and regulatory requirements in
accordance with the provisions of clause 49 of the listing agreement.
In keeping with the commitment of the management for the principle of integrity and
transparency in business operations for good corporate governance, the Companys
policy is to have an appropriate blend of executive and independent directors to
maintain the independence of the Board, and to separate the Board functions of
governance and management.
As per the current directors remuneration policy, non-executive directors of the
Company are being paid, in addition to the sitting fee of ` 20,000 per meeting for
every meeting of the Board and its committees attended by them, commission at the
rate of ` 100,000 per meeting of the Board and its committees attended by them,
subject to the overall ceiling of one percent of net profits. In terms of the approvals
given by the Board of Directors and shareholders, Nanoo Pamnani will be paid `
1,500,000 as additional commission for the year 2012-13 in consideration of the extra
services rendered by him at the request of the management during the year 2012-13.
(Bajaj Auto Limited, 2013)

Organization:
Organization designed to produce goods and services, both required the coordinated
work of many people in order to be accomplished. The principles of division of labor
and specialization are fundamental to many of these organization.
Monitoring the progress of activities:

Figure 2.2.2 monitoring

(UK essays, 2013)

Technology:
Bajaj Auto restructured its products, channels, vendor management system and the
performance management system. Bajaj Auto successfully implemented
SAPs my SAP Enterprise Portal simultaneously with the current SAP R/3 ERP
implementation.
Bajaj has linked 165 out of a total of 200 suppliers through this system. The supplier
gets up-to-date information on purchase orders and contracts, material schedules, and
payment details. Bajaj Auto, in turn, gets invoicing information from suppliers for its
automated material receipt system. This helps in streamlining the supply chain,
optimizing inventories and reducing non-value-adding activities at both ends.
The my SAP ERP system enabled Bajaj auto to track the competence of its suppliers
who must comply with various performance standards on quality, delivery and cost for
different categories of the business. The company can track service levels from order
right through to delivery for both the domestic and export markets. The company can
also check inventory to ensure that it have the right stocking levels to support orders

and production. Bajaj Auto use analytics to create a composite index around the
figures and track it through the vendor portal.
With this information Bajaj Auto can incentivize vendors to reach higher levels of
competency by offering them more business and it can also encourage price
reductions through innovations, rewarding vendors with profit sharing.
In addition to operating information, provides access to unstructured information like
news items, new product releases, new product introduction, dealer discussion groups
and internal marketplace.

Figure 2.2.3 the use of SAP

(slideshare, 2013)
KEY SUPPLIERS
Bajaj auto has approximately 198 vendors for their raw materials and parts. Some of
the key vendors are:

JBM Frames. Company located at Faridabad, Noida and Nashik.

MRFTires. Company located at Goa, Medak, Arakonam, Tiruvottiyur, Pondicherry,

and Kottayam.

Minda Handle Bar Assembly & ignition system. Company located at Haryana,
Pune, Mumbai, Bangalore, Hyderabad, and Pantnagar.

Endurance Brakes and Suspension. Company located at Pantnagar, Pune, and

Chennai.

Varroc Plastic parts & Digital Meter. Company located at Aurangabad.

Max auto components ignition system and switches

Silco cable wires and cables

Makino industry Brake shoes. Brake lining, clutch center.

Bajaj Auto Limited manufacturing plants are situated in the states of Maharashtra,
Aurangabad and Uttarakhand. The vendor locations (mentioned above) also come in
and around these states and so procurement of parts and raw materials is not a time
taking process and also the cost of logistics is reduced thus providing an efficient
supply chain. Bajaj auto maintains seven (7) days inventory. All the Mediators are
connected with each other through IT linkage to know exact status of delivery of
goods. (RAO., 2012)
Environment policy:
Bajaj Auto Ltd., manufacturer of two and three wheeler vehicles is committed to
prevention of pollution, continual improvement of our environmental performance and
compliance with all applicable environment legislation and regulation. Towards this,
we shall strive to create a proactive environment management system that addresses
all environmentally significant aspect related to our products and processes, Minimise
the generation of waste and conserve resources through better technology and
practices, and Promote environmental awareness amongst our employees and
motivate them tofu fill our commitments. We, at Bajaj Auto, pledge ourselves towards
creating and preserving a cleaner environment (Bajaj Auto Limited, 2013)
Inventory management:
Bajaj auto maintains seven days inventory. Demand Estimations were based
on Panel Regression, which takes into account both time series and cross section
variation in data .All the Mediators are connected with each other through IT
linkage to know exact status of delivery of goods
With operations spanning to such vast geographies, managing a supply
chain globally becomes more and more complex. In countries where Bajaj
perceives a strong market potential, they establish a tie up with one major industrial
establishment eager to invest in the project. This investment may include
setting up strategic manufacturing units, apart from a well-established
nationwide network for marketing , distribution and after sales services. These
investors who form alliances with Bajaj Auto are termed as Business Partners. Bajaj
Auto offers a number of services to its business partners. They include:

Training in sales, service and spare parts management based on the Bajaj

distribution system
Active support for

including transfer of technical know-how

Assistance in setting up an assembly plant for assembly of vehicles

from complete knocked down (CKD) kits

Selecting of machinery and equipment and training of technical

setting

up

manufacturing

facilities

overseas

personnel, all in a phased manner as required by the regulations in the

recipient country
Active support in
identification

setting

nation-wide

and recommending

suitable

dealer

network,

partner

who

also

involving

would assist

the

distributor in Business growth

(channel bajaj, 2010)

Risk management:
The exports of the Company, presently constituting substantial portion of the turnover,
are at prices predetermined for each product in each region. These prices are fixed in
USD based on an assumed USD/INR rate. (Budgeted rate of realization).
Exports are then effected at such price and hence it is desirable for the Company to
shield itself from adverse movements in forex rates at a future date.
The Company also imports raw materials and components for its Motorcycles etc.
However, the value of such imports is not material as compared to the value of
exports. Nevertheless, the Company may wish to secure its procurement prices in
terms of
INR to be able to forecast its pricing and profitability. Consequently the Company may
wish to hedge such exposures, future and current, to achieve the aforesaid objective.
The exchange rate between the Indian rupee and foreign currencies has changed
substantially in recent periods and may continue to fluctuate substantially in the
future. Consequently, the Company uses derivative financial instruments, such as
foreign exchange forward and option contracts, to mitigate the risk of changes in
foreign currency exchange rates in respect of its forecasted cash flows and trade
receivables.
The details in respect of the outstanding foreign exchange forward contracts including
range forward and par forward contracts are given below. The forward exchange
contracts mature between one to twelve months. The table below summarizes the
notional amounts (amounts of contracts booked and outstanding) of foreign currency

forward contracts into relevant maturity groupings based on the remaining period as
at the 31 March 2013:

2.3 Conclusion:
The supply chain management in automobile industry is always challenging in vast
country like India, the two wheelers companies not exception to this. Bajaj Auto
Company are making innovative ways to reach rural India with their supply chains.
The company are practicing Lean manufacturing, vendors management, and JIT
system and out sourcing of logistic operations, which are prominent supply chain
practices in the world.
In todays competition is extremely high planning and manufacturing according plays
a crucial role in survival of the company, selection of suitable vendors also plays
crucial role, the closer vendor location, the better as the logistics cost reduces there
by reducing the overall costs. Bajaj Auto Ltd efficiently and effectively manages these
activities and that is the reason why Bajaj Auto Ltd remains competitive as one of the
best two wheeler brands in the country, still the company can innovate their supply
chains to reach all segments of Indian customers.

PART-C CHAPTER 3
________________________________________________________________________________
Devaki Engineering Enterprises
3.0 Introduction:
The company have been supplying quality Battery Making Equipment to Battery
industry for the last 3 decades. Its in-house cad-aided design facility, state of the art
manufacturing centre, dedicated & experienced engineers have attributed to our
leadership in Battery equipments for all these years. Continued innovations &
adapting modern technologies to improve the efficiency& reliability of the machines
have helped our customers to improve their operations& profitability.
Our focus has been always our customer satisfaction, offering value products with
operator friendly, easy to maintain, easy to operate features. Many of our Equipments
have also been exported to various countries.
The first to launch automatic grid casting machines, semi-automatic and pressure die
casting machines in India. Now, we have wide products range used in this industry.
Automatic grid casting machines, pressure die casting machines, semi-automatic grid
casting machines, pasting machines with flash drying ovens & cone feeders, assembly
lines including intercell welding & heat sealing machines, oxide mixers, tubular spine
filling vibrators.

3.1 Supplier selection process:

The company Devaki engineering enterprises supplier selection process as follows:

Identifies the supplier selection criteria. Supplier selection criteria are attributes
that a procurement department values in its arrangements with suppliers as
Cost & Value, Quality & Safety, and Agility.
It follows the determine supplier selection constraints like the decisions to do
business with only one supplier, requirements to select the low bidder, and a
specific maximum amount of time in which delivery must take place.
The hierarchy of constraints and criteria is done like list of supplier selection
constraints and criteria is done, which is that sorts them in order from most
important to least important. This helps the sourcing team recognize the
likelihood of tradeoffs between competing supplier options and determine what

negative characteristic of a supplier is worth overlooking in order to benefit

from a positive characteristic of that supplier.

Weights, expressed as percentages, quantify the relative importance of
constraints and criteria. These weights are an important component of weighted

average supplier scorecards.

Developing a scoring scheme. For each criterion, they need to determine a way
of awarding a supplier a raw score of 0 to 100 on the supplier scorecards, with
0 being the worst and 100 being the best, based on the suppliers proposal. The
methods of calculating raw scores will differ for each criterion.

Analyzing Proposals. First, they disqualify any suppliers who were not able to
comply with any constraint. Then, populate supplier scorecards for the
remaining suppliers with their raw scores that were determined in accordance
with scoring scheme.

Next, multiply those raw scores by weightings to

calculate weighted scores for each criterion. Finally, add all of those weighted
scores to calculate total scores for each of the suppliers.

Applying Common Sense. While the supplier with the highest total score should
be the most attractive supplier, they dont treat supplier selection solely as a
mathematical exercise. Use the professional judgment to determine if the
supplier scorecard truly led to the optimal supplier selection. If so, they award
the business to the best scoring supplier. If not, make the right supplier
selection as long as they override of the scorecard approach is done in strict
compliance with ethical and organizational standards.

3.2 Supplier risk management practices:

The Devaki engineering enterprises suppliers risk management practices:

They create a complete view of supplier information, including data on the

suppliers suppliers. A complete profile means that the buyer can compile

information from internal stakeholders

Identifying the risk measurements that are most important to the buyer, their
leading indicators and the internal business owner for each risk area. Keep a
watch on these risk measurements such as receivables, days of inventory stock

and revenues and expenses.

Developing an early warning system of supplier health and alert the right
business owners. Enable the collaboration on mitigation and business continuity
planning from alternate supplier sourcing to contract renegotiation.

The contract executive is member of senior management who would be

responsible for the executive oversight of the vendor contract and would be
ultimately responsible for the programs success, the contract executive would
interact with the vendor manager and vendors account executive periodically

to review contract status and issues.

A full time vendor manager under the direction of contract executive, works
closely with the vendor having day to day responsibility for quality and cost

effectiveness of the vendors services

Financial analyst provides financial analysis and audit work in support of one or
more service contract. The financial analyst would identify, catalogue and

monitor a contracts financial requirements and commitments.

Performance analyst monitors and analyzes vendor performances in order to
assure compliance with service level agreements and continuous improvement
of the service. The performance standards, reporting requirements and any

financial penalties for poor performance on the part of one or more vendors
Supplier certification Recognized international standard: ISO 2859, SA 8000, ISO
9000, BSCI, C-TPAT, and more

3.3 Benchmarking of risk mitigation practices:

Review the credit Management Procedures: Making sure of having a good Credit
Management Procedures' Manual in place and that it is being followed.

Know who you are dealing with: Revise the financial situation of the major
buyers, even if you have been dealing with them for many years. The cost of a
credit report will be significantly lower compared to the money which may
potentially lose if you make the wrong credit decision.

Protect the business: Insure payments through trade credit insurance to cover
the business from insolvency and payment default. The additional peace of
mind associated with knowing that up to 90 per cent of the insured debts will be
covered in case of insolvency or non-payment will far outweigh the costs and
anxiety associated with collecting bad debts. Some providers offer insured
clients the ability to hand the collection process over to the Underwriter for a
small fee. Will then pursue the debt on your behalf and cover all costs, including
legal. This is extremely beneficial if you don't have the resources to collect
debts or you are unfamiliar with the legislation and 'business culture' when
dealing with customers in foreign countries. (Muiz, 2011)

Making every employee a risk manager: Enterprising companies in the industry

are empowering their employees to proactively manage risk. Managers should
be conscious of sources of risk and how to detect it, and they should integrate
this knowledge into their daily practices. Overly bureaucratic and complex
processes tend to submerge risk management. Managers need the flexibility to
use techniques that make sense for them and their operation. Employees
should also view unexpected events as opportunities as well as risks. For
example, a larger-than-expected sales order demand will have an impact on
planned stocks and production, but if coordinated with warehousing and
logistics, this kind of event provides a great opportunity for increased revenues
and enhanced customer satisfaction.

Detect unplanned disruptions to the supply chain in real time: The use key
performance indicators (KPIs) at the corporate level as a way to identify supply
chain disruption and take appropriate action. However, similar to trying to drive
a car by looking in the rear view mirror, KPIs only provide insight into past
performance. By the time the KPIs are reported, the data are usually a month
old and no one can uncover the source of the original problem. Smart alerting
technologies constantly seek out and monitor unplanned events anywhere in
your supply chain (late deliveries, inconsistent or missing data, bigger than
expected orders, stock right-offs). Notifying immediately if something goes off
track

Providing a foundation for employees to collaborate and share knowledge to

resolve risks: Combined human knowledge always provides greater insight than
systems alone can provide. Individuals know about the big orders due next
week, the likelihood of market price increases, competitor promotions and their
impact, and the tanker that just went down with your shipments on board.
Collaborative technologies reach out to the internal employees and external
business partners, gathering information and improving transparency into and
across the supply chain.

Proactively measure performance and mitigate risk through continuous business

process optimization: Risk management is a dynamic business process.
Combining collaboration with alerting technologies allows companies to act
immediately and improve the chances of detecting the source of the problem
and eliminate the underlying source.

Scenario planning: What changes would like to make in supply chain network if
you had a crystal ball and knew the price of fuel in six months time? The level

of "green" taxation that might be applied to your products? The crop yield of
your key ingredient at the end of the season? The price of energy next year in
all your plants around the globe? Knowing this, how many would revisit the very
design of their supply chain network, source materials from different countries,
perhaps even reverse the conventional wisdom of outsourcing to the Far East,
saving on manufacturing costs but at much increased transportation expenses?
Obviously, by simulating the supply chain can evaluate the sensitivity to such
eventualities and help to establish contingency plans. Forewarned is forearmed
in supply chain strategic thinking.

(Kinder, 2008)

Some companies evaluate risk mitigation services solely on the basis of cost
rather than taking a more comprehensive view, one which evaluates those
services based on value as well. The elimination or reduction of risk increases
the organizations potential for financial success.

With every organization at risk of business-disrupting events, clear and tested

business continuity and disaster recovery plans are vital to preserving the wellbeing of the enterprise. The experts can guide the organization in identifying
key processes and assets, assessing current preparedness and mapping
continuity strategies directly to critical business activities.

(Yesko, 2013)

3.4 Action plan for improvement in practices:

The procurement organizations must pick the most important suppliers to focus
on, but too often this is done, Best-in-class companies take a more formal
approach,

dividing

suppliers

into

different

risk

categories

based

on

predetermined criteria such as financial health, supply of critical components,

supplier value-add, supplier power, time to switch and industry outlook, so

proper care should be taken.

The company need to assess both the probability of a supply disturbances and

the level of financial impact the disturbance that might cause.

The company need to add more strictness to the risk assessment process,
and do a better job collecting cross-functional data that might help identify an
emerging supplier problem earlier.

The Company must understand the risks of the entire supply chain, not just of
individual suppliers, yet few can single-handedly take on the substantial cost of
managing risk across the board.

The company must actively collaborate with suppliers to manage risk. Supplier
risk management is essential, but as seen the senior leaders and category
managers are not managing the risk quite well

The company failed to provide even one full day of risk management training,
and

expressed

dissatisfaction

with

current

programs

company

training

programs on the subject.

Technology support tools are equally lacking in the company, so the company
must have complex tools that can track the potential impact of a single event in
one location

Understanding

the company's model, based on the source of competitive

advantage and degree of supply chain complexity, reveals critical best

practices. can help your company stay ahead of potential supplier problems

SAP or ERP softwares are needed in the company to improve the quality, cost
and delivery of the company and tracking the material and improvement in the
inventory

Proper communication skills should be improved with the clients, suppliers and
manufactures to improve more in QCD of the company and expansion of the
company
The company should conduct weekly teleconferences with critical suppliers to
identify current issues that may disrupt daily operations, and tactics to reduce
them. Screening and monitoring of suppliers can provide input into the
teleconferences and a method to track effectiveness of tactics implementation.
Seek security enhancements that comply with new initiatives in Customs Trade
Partnership against Terrorism, Container Security Initiative, and others.
Test and implement technologies to track containers in distribution channels to
enhance global pipeline inventory visibility
Gather supply chain intelligence and monitor critical supply base locations to
allow real-time sense and response against material flow disruptions.

3.5 Reference and citation of reference:

Avraham Shtub. (2010) The dynamics of supply chain and process

management, 2nd Edition, Springer Publishers,
Sunil Sharma (2010) , Supply Chain Management- Concepts, Practices and
Implementation
4th Edition, the oxford university press.

Dr. Dawei Lu (2007) Fundamentals of Supply Chain Management, 5th Edition

http://bookboon.com/en/fundamentals-of-supply-chain-management-ebook 4th
February 2015 at 10.15am,.

American apparel. (2012). Retrieved from vertical integration:

http://www.americanapparel.net/aboutus/verticalint/
Asta, D. J. (2013). kelly OCG. Retrieved from six key trends in outsourcing:
http://www.kellyocg.com/Workforce_Trends/6_Key_Trends_in_Outsourcing/#.VNOWXjGUewE
Bajaj Auto Limited. (2013, 5). p. 51.
channel bajaj. (2010). Retrieved from https://www.google.co.in/webhp?sourceid=chromeinstant&ion=1&espv=2&ie=UTF-8#q=channelbajaj
dominick, c. (2013, july 8). open windows. Retrieved from procurement and supply:
http://www.procurementandsupply.com/html/seven-step_supplier_selection.cfm
hsu, d. (2014, march 14). wharton university of pennsylvania. Retrieved from knowledge@wharton:
http://knowledge.wharton.upenn.edu/article/vertical-integration-works-for-apple-but-it-wont-foreveryone/
Jurevicius, O. (2013, 04 13). strategic management insight. Retrieved from
http://www.strategicmanagementinsight.com/topics/vertical-integration.html
Kinder, A. (2008, may 30). supply demand chain. Retrieved from mitigation risks through best
practices: http://www.sdcexec.com/article/10289589/mitigating-risk-through-best-practices
Muiz, T. (2011). veda applied inteligence. Retrieved from risk mitigation practice:
http://www.veda.co.nz/insights/mid-market-newsletter/April_12/risk-mitigation-best-practice.dot
outsource2india. (2014). Retrieved from future of outsourcing:
http://www.outsource2india.com/trends/future_outsourcing.asp
RAO., R. (2012). SUPPLY CHAIN MANAGEMENT IN TWO WHEELER INDUSTRY.
INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE, IT & MANAGEMENT .
slideshare. (2013). Retrieved from value chain of bajaj auto:
http://www.slideshare.net/livelifefullest/value-chain-of-bajaj-auto-my-second-semester-project-onthe-mentioned-topic-assigned-as-the-semester-assignment-of-the-subject-management-accou
UK essays. (2013). Retrieved from bajaj auto ltd history:
http://www.ukessays.com/essays/india/bajaj-auto-limited.php
usda. (2012, 07 23). national chicken council. Retrieved from Vertical Integration:
http://www.nationalchickencouncil.org/industry-issues/vertical-integration/
White, J. S. (1993, August). When and when not to vertically integrate.
Yesko, S. (2013). RISK MITIGATION SERVICES. 8.

3.6 Learning outcomes:

Traditional manufacturing knowledge will never help to grow or permit him to take part
in the growth of the business. The one who practices the supply chain management
techniques will help in the growth and sustainability of the business, so engineer
students will not able to learn these practices so the MSRUAS are providing proper
knowledge of SCM which is useful for the future while joining a company. The course
module EMM 505 supply chain management helped us understanding the almost
major portion of the supply chain management techniques and methods to design an
efficient supply chain to help in the growth of a business understood and learnt.

In short the module Supply Chain Management and the assignment involved have
provided sufficient knowledge like

Run a successful supply chain

Importance of vertical integration and outsourcing
Supply chain flow of automobile industry
Risk management practises in a company