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Supply Chain Management at Ashok Leyland limited, Chennai
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Supply Chain Management at Ashok Leyland limited, Chennai - August 19th, 2006

Based on the above Key areas of supplier development identified, an attempt has been made in this study to understand the supplier development program followed in a Professional Organisation in real times. It has been found that the Automobile Giant Ashok Leyland Ltd, Chennai, has got one of the very successful Supplier development Program as part of its World-Class Supply Chain Management.

Mission Statement of the Company: "Our Vendors are our valued partners in our business development and we shall work with them in a spirit of mutual co-operation to meet our business objectives."

* Vendor Development and Strategic Sourcing are handled by Corporate Materials Department (CMD).

- CMD identifies the vendors, rates the vendors based on feedback received from Supplier Quality Assurance Cell, sends drawings / specifications, calls for quotes with detailed break-up of operation-wise costs, and negotiates the price at which the parts will be supplied.

- In addition to CMD at Ennore, and the two Units at Hosur, there are Materials Management Departments (MMDs) for scheduling based on unit production plan.

* Vendor Development of Strategic Sources

- Strategic Sourcing is central to the integrated Materials Management function. Ashok Leyland's policy is to develop a vendor base committed to continuous improvement to meet quality, cost and delivery standards.

- Ashok Leyland considers its vendors as partners in progress and believes in establishing mutually beneficial relationships. Ashok Leyland provides necessary technical assistance in the form of Project and Production Engineering, to maintain quality levels. In addition, where required, Ashok Leyland also helps vendors financially.

* Becoming a Vendor to Ashok Leyland is easy, involving just four steps

- Fill the Questionnaire. As this provides the basic inputs required for preliminary study, applicants need to provide as much information as possible.

- If Ashok Leyland needs the item you would like to supply, CMD will inform Ashok Leyland's Supplier Quality Assurance Cell (SQA) for an on-site assessment. Otherwise, the Vendor information is stored for future reference.

- If SQA approves the vendor, then CMD will send the drawings for SQA cleared components to the Vendor for obtaining a quotation. If, instead of approving the vendor, SQA recommends improvements to facilities, the Vendor is given adequate feedback and a re-survey is undertaken at a mutually agreed future date.

- If the Vendor matches Ashok Leyland's expectations in terms of price, quality and delivery, then CMD places a trial order with the Vendor. Both on-line and off-line inspection may be carried out at the time of processing the trial order. Based on the outcome of the trial order, CMD may place the Vendor in the Approved Vendor List.

* Some of the relevant points to note

- Ashok Leyland's Purchasing Philosophy is to maximize bought-out parts. Over 90% of the parts are bought-out.

- Ashok Leyland believes in global sourcing. Consistent with its operational needs, AL would consider both domestic (Indian) as well as international vendors. Global sourcing is normally resorted to overcome local constraints - in the form of technology, quality, capacity or cost effectiveness.

- Ashok Leyland would consider new suppliers for required components, based on Vendors' ability to meet our specification, price and delivery schedules.

- Vendors are required to have a strong manufacturing base with adequate engineering support for their own product development activities, as needed by the category of product, viz Proprietary, Bought Out Finished (BOF), Bought Out Rough (BOR) and Sheet Metal items. Castings and forgings are to be received in fully finished/machined condition, progressively. Ashok Leyland could make available to the vendors necessary technical expertise, wherever possible and needed, particularly with regard to developing the manufacturing process.

- As QS 9000 certified company, Ashok Leyland's Vendors are expected to have a good quality system, meeting ISO 9000 requirements. Ashok Leyland would be willing to help Vendors in the preparation for ISO certification by offering necessary technical guidance.

- Vendors' quality system should encompass, at the minimum Cost effective process, Assured process capability, Continuous improvements based on customer feedback, Compliance of all statutory /legal/ commercial requirements of Ashok Leyland.

- A stage of development where the Vendor can come under Ashok Leyland's self-certification system tractability - first-in first-out basis and Ashok Leyland has established a transparent periodically audited Vendor Rating System. Ashok Leyland places emphasis on optimizing the inventory and Vendors are required to progressively meet "Just-in-Time" requirements. Delivery modes as well as packaging are required to minimize the handling/loading and unloading time.

- Though not a must, Ashok Leyland would prefer a manufacturing / assembly / support base at close proximity to the production units. Ashok Leyland encourages its vendors to participate in their e-servicing project starting fiscal year 2004-05.

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