Value-addition at vendor sites set to rise

Chennai: With automobile manufacturers getting out of non core activities, the value addition at the component manufacturers'' sites is set to rise.

According to M N Varadarajan, vice president, materials, TVS Motor Company Limited, the value-addition at the original equipment manufacturers'' end is 35 per cent and at the 65 per cent at the vendors''.

"The value-addition at the component manufacturers place is set to touch 74 per cent," he said at the Auto SCM India 2004 — The Indian Automotive Supply Chain Conference organised by the Confederation of Indian Industry (CII) and CII Institute of Logistics in the city.

Explaining TVS Motors'' approach, he said the company is consolidating its vendor base and uses the component manufacturers'' as systems suppliers. From a vendor base of 490, TVS Motor reduced it to 175 at the end of FY 2004.

"The global standard is to have vendor base between 100-120 giving economies of scale. We consider the vendors as partners and innovators and involve them at the design stage itself."

According to him TVS Motor practices several supplier developmental activities and has dedicated supplier development teams. The two-wheeler manufacturer also sees that the vendors also practice good manufacturing practices like it does.

On the cost cutting side, TVS Motor embraced e-procurement, global sourcing and value engineering. The company has connected all its vendors through the web and delivery scheduling is done via the internet.

"We also practice e-Kanban and hold reverse auctions on the web," remarked Varadarajan.

According to him, the company follows the hub and spokes model in delivery of components whereby components sourced from different vendors are consolidated at one place and supplied to the factory.

"87 per cent of our supplies are containerised. The movement of trucks carrying components are tracked more or less on a real time basis," he said.

All these have brought the inventory holding at the factory to 2.2 days from 15.8 days earlier.

The company minimises the impact of rising steel prices by resorting to group buying. "While the order is placed in bulk, deliveries are made to different factories as per their required schedules," Varadarajan said.