Term paper of production and operation Management

NAME-Tarun KUMARROLL NO-08CLASS- BBA-MBA(Dual int)6th semREG NO-11484879

Submitted To Mr TajinderSingh

TOPIC-: Examination of Assembly line operations in Manufacturing concern

Introduction of assembly line -:

An assembly line is a line of factory workers and equipment that produce a product as it moves consecutively from station to station on the line until completed. Assembly line methods have

become considerably more sophisticated since the first moving assembly lines were introduced in the automobile industry in the early part of the 20th century. Assembly line methods were originally introduced to increase productivity and efficiency by reducing the amount of manufacturing time required to produce a finished product. Advances in assembly line methods have the same objective—to increase throughput, or the number of products produced in a given period.

Maruti’s entry into the Indian Passenger Car Market:

MUL was the result of the joint venture created in February 1981 between Japan's Suzuki Motor Company and the Indian Government when the latter decided to produce small, economical cars for the masses. The intention of the venture was to produce a 'people's car'. To get the project off the ground MUL took over the assets of the erstwhile Maruti Ltd., which was set up in 1971 and closed in 1978.

It was on December 14, 1983 that MUL launched the first Maruti vehicle - the Maruti 800. The first model was the SS80, a 796cc hatchback car priced at Rs. 47,500.Subsequently, in spite of price hikes, the car has remained within the reach of the Indian middle class and has been a

runaway success. Available in vibrant colures when India's passenger car population comprised mainly Ambassadors and Fiats in black and white, M800 gave Indians the first taste of global quality and reliability.

In late1980s, Suzuki increased its equity stake in MUL from 26% to 40% and further to 50% in 1992, converting Maruti into a non-government company .In the years that followed, MUL consolidated its position with a line of Indian classics, such as the eight-seat

Omni, the rough-terrain Gypsy and, in October 1990, a 3-box Maruti 1000. MUL took the lead in the green drive by launching its CNG-run Omni and Maruti 800 in 1999.MUL redefined the premium compact segment with the launch of the Zen in October 1993. It was the company’s first 'world car selling across multiple markets. A year later, the Zen had won several awards, including 'No. 1car in Europe' (Auto Week, 1994), 'No.1 import in Europe' (1997) and 'most fuel-efficient car' (ADAC).

In 1999, MUL launched Baleno and Wagoner. Baleno targeted the premium mid-segment while Wagoner was positioned as a multi-activity vehicle.In1999, to improve customer satisfaction; it even established a chain of model workshops and soon after, set up customer call centers in the metros.

In 2000, Maruti Suzuki introduced Alto - a premium small car targeting the export market - and in October 2001, Versa, a multipurpose vehicle. In May 2002, Suzuki took management control of Maruti.

Components, parts and accessories and all machinery,implements, utensils, appliances, apparatus, lubricants, cements, solutions enamels and all things capable of beingused for, in, or in connection with manufacture, maintenance, and working of motors and other things or in the construction of any track or surface adapted for the use thereof. To carry on the business of garage keepers and suppliers of and dealers in petrol, electricity and other motive power for motors and other things.

Dynamics of Market:Initially Maruti was operating in the market which was the part of a closed economy but with the opening of economyMarket scenario has changed dramatically and is at an interesting juncture where both challenges and opportunities areimmense. According to the statistics available

Indian car market is one of Asia's largest and most competitive markets. Over1,030,068

passenger cars, multi and sports utility vehicles were sold during 2003/04 resulting in the market growth of about 32% With such immense growth opportunity the Indian automobile market has finally caught the fancy of big players which are eager to capture the India automobile market at any cost. And as such Maruti is having a tough competition from the new players, including Hyundai, GM and Honda of Japan. In the last quarter of 1998 these new entrants in the market had launched an unprecedented assault on the B segment of the market.

• Daewoo launched the Matiz• Hyundai launched the Santro. Santro Xing specially created a fresh excitement in the B segment.• Telco launched the Indica• Around the same time, Fiat slashed the prices of its Undo and launched a Diesel variant. Hyundai has also launched Getz

• General Motors is also planning to launch new variants.• Fiat has reworked the engine of the Palio and is planning to launch another B segment product.• And then, there are Honda and Toyota.• It is also predicted that Honda Motors India will be also launching its small car, Life, in India.

Maruti Suzuki to adopt 'Kaizen' to improve production processes:

In its bid to meet limited capacity challenges at its existing plants, Maruti Suzuki has said that it will be

adopting 'Kaizen' methodologies in its production processes that would help it to rationalize its assembly lines.It is to be mentioned that the term term kaizen (Japanese for "improvement") is a Japanese word adopted into English referring to a philosophy or practices focusing on continuous improvement in manufacturing activities, business activities in general, and even life in general, depending on interpretation and usage. When used in the business sense and applied to the workplace, kaizen typically refers to activities that continually improve all functions of a business, from manufacturing to management and from the CEO to the assembly line workers. By improving standardised activities and processes, kaizen aims to eliminate waste (see lean manufacturing). Kaizen was first implemented in several Japanese businesses during the country's recovery after World War II and has since spread to businesses throughout the world.I. V. Rao, managing executive officer, Engineering, Maruti Suzuki India Ltd (MSIL), said, "This will be a major milestone for the company and also brings new challenges as we could face some capacity constraints. By using the Japanese Kaizen production methodologies, we are working to bring about incremental gains in production at Gurgaon and Manesar plants." He added, "The Manesar plant is faced with serious capacity constraint. Therefore, we are in the process of further streamlining operations. However, we have no plans to add a third shift. We are actively considering expansion and a decision is likely by next fiscal. The company accounts for 54 per cent market share and we will continue to bring in new products to retain our hare," he said.

Meanwhile, the country's largest passenger car manufacturer is also planning to roll out brand centres across key metros in the country that will enable it to enahnce its brand salience. The company is looking to set up these centres (which are expected to occupy at least 44,000-45,000 square feet space) over the next 18-

24 months. Financial Chronicle says that the company is on course to buying nearly 44,000 square feet space in Rajarhat, one of India's latest and fastest-growing planned new cities near Kolkata. "This concept is in an early stage and lot of changes may eventually happen. The brand centres are likely to showcase the best products from Maruti and Suzuki's stables. For instance, you could hope to see Hayabusa bikes in the brand centre besides the Maruti Eeco," a senior official was quoted as saying to FC, without disclosing any investment outlay for such centres.

In a separate media report, Maruti Suzuki has also revealed that it is looking to enhance its export base by entering into markets in the Middle East, South America, West Asia and Australia. "We are currently exporting our cars to the European countries but now we will start exploring new markets such as Africa, South America, the Middle East and Australia to boost our exports," a senior official told reporters in Chandigarh recently. The company has targeted to export 1.30 lakh cars by this fiscal end against 70,000 cars exported in 2008-09.

Groundwork needed:-

The challenges are immense. For one, a contract manufacturer must demonstrate world-class production practices in assembly lines across multiple platforms. Second, such a player must be able to win large deals from OEMs, giving them a value proposition across volumes for passenger cars and commercial vehicles. A contract manufacturer's task will be helped by Indian auto's reputation of being a low-cost manufacturing and labour base. Lastly, the workforce must be versatile in its operations

The testament of a robust contract-manufacturing model in India will lie in demonstrating to foreign OEMs why they need not invest on assembly plants, and deal with the scale-related pressures

thereof. OEMs, of course, regard car manufacturing as a core strategic activity. "It is not something they will readily outsource," argues Kapil Arora, Partner at Ernst & Young (E&Y). Still, a sub-contracting system can, at the very least, facilitate a quick market entry for any foreign OEM in India—without having to set up a plant until it is well entrenched. These are the initial savings a sub-contracting assembler can point to.

Sub-contracting also fuels a novel idea in global auto—that of a 'vehicle brand owner.' This vision challenges OEMs to focus only on designing auto products, and on managing and marketing a stable of auto brands. To achieve this, they can pass on the responsibility—and costs—for vehicle assembly to competent suppliers

In India has been oblivious to the possibilities of providing vehicle-assembly production. Magna Steyr set up an engineering centre in Pune in 1999, and plans to open a second one in Delhi. The Austrian company's business drivers are different; it is in talks with Indian OEMs that wish to go global, including Tata Motors and Mahindra & Mahindra. "We can help them with smaller volumes so that they don't have to establish plants in Western Europe or North America," says Guenther Apfalter, President of Magna Steyr

For now, the biggest potential player in assembly sub-contracting is Argentum Motors. The company, founded by former Hyundai India President BVR Subbu, Ajay Singh of SpiceJet, and Ashish Deora of India Online Network, made its intentions clear in February 2007 with a Rs 850 crore buyout of Daewoo's Surajpur plant. It has since committed another Rs 500 crore towards developing a paint shop, a weld shop and an assembly line capable of handling multiple car and light commercial vehicle projects

In India, this can take eight years. "If a player sets up a truck manufacturing and assembly facility today, it would take at least six years to break even," feels Subbu. But with a contract manufacturer, an OEM can start making money by the time it sells 100,000 units in just above two years, he adds. More importantly, such an arrangement enables an auto player to focus on the local market—and sell cars.

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Industry & MUL passenger car volumes in India:-

The above graphs clearly show the blood bathed condition of MUL. They are clearly showing that if MUL has to continue with its position of being market leader it has to take some of the big steps

Car Market Classification:

Before going further it is necessary to understand the Indian car market classification and the segments in whichMUL operates.There are two principal systems of classification in the Indian passenger car industry

Price Based ClassificationPrice based classification is the widely accepted classification basis in the Indian passenger car industry.The different price segments used by Maruti were as follows:1. Segment A – cars priced lower than Rs. 300,0002. Segment B – cars priced between Rs. 300,000 and Rs. 500,0003. Segment C – cars priced between Rs. 500,000 and Rs. 1,000,000

4. Segment D – cars priced between Rs. 1,000,000 and Rs. 2,500,0005. Segment E – cars priced above Rs. 2,500,000

MUL’s Competitive Strengths:-

• Expertise in small car technology. As a subsidiary of Suzuki, they have access to globally respected technology in the small car segment. They have the advantage of Suzuki’s expertise in all aspects of small car technology and design, with respect to their products, manufacturing processes and business practices, the development of their supply chain and the training of personnel.

• Extensive product portfolio. Their diverse product range includes cars in segments A, B and C, andutility vehicles.. They are the major manufacturer of cars in segment A (priced below Rs.300,000). TheMaruti 800 has been the largest selling car in India for several years, and still continues to have the very high sales volumes. They also manufacturer three distinct models, the Zen, the Alto and the WagonR, in segment B (priced between Rs. 300,000 and Rs.500, 000). Their dominance in segment A andextensiveproduct range in segment B enables them to offer the customer a wider choice in the small car segment than any of their competitors. In addition, the absence of any major manufacturers in segment A givestheir dealer’s greater flexibility in promoting models in segment B.

• Quality products. In November 2001, MUL was one of the first automobile manufacturers in the world to receive the ISO 9001:2000 certification. They benchmark their products against international quality standards. They export heir products to approximately 70 countries,

which are manufactured using the same assembly line as that for the domestic market.

• Extensive sales and service network MUL has the largest network of dealers and service centers amongst car manufacturers in India In addition to the distribution of cars, their dealership network is aCritical resource in their efforts to provide customers with a “one-stop shop” for automobiles and automobile related products and services such as automobile finance, automobile insurance, MaruticertifiedPre-owned cars available for purchase, and leasing and fleet management, in order to promote customer loyalty.• Brand strength: MUL is present in the Indian market for almost 24 years and have built the brand on the basis of the values of trust and reliability In 2000, 2001 and 2002, J.D.Power Asia Pacific, Inc. with product quality and dealer service. NFO Automotive’s 2002 Total Customer Satisfaction Survey ranked Maruti products as No. 1 in the “Economy”, “Premium Compact” and “Entry Midsize” segments Respectively, for 2002.

• Integrated manufacturing facility. Their manufacturing facility consists of fully integrated plants with flexible assembly lines located at Gorgon. The facilities have advanced engineering capability and each plant is upgraded on an ongoing basis to improve productivity and quality. They are one of the most efficient among the vehicle manufacturing facilities of Suzuki’s subsidiaries outside Japan in terms of productivity measured as the ratio of number of vehicles produced to number of employees

• Strong vendor base and higher rates of localization: In order to improve quality and generate economies of scale, MUL has reduced the number of vendors of components in India from 370 as of March 31, 2000 to about 100 as in 2005. As of the same date, they had strategic equity interests through joint venture agreements in their vendors, who together supply a substantial portion of the purchases of components. A number of their vendors are their dedicated suppliers in that they account for a majorityof their turnover. Vendors located within a radius of 100 kilometers from the facilities supply the majority of the components. The production systems of their vendors are generally aligned to their needs for a reliable and timely supply of components that meet the required quality standards. This has enabled MUL to increase the proportion of locally sourced, lower cost components in their models, a concept refer to as localization.

MUL’s Business Strategy:

MUL intend to continue to focus on the small car segment, while offering products in most segments of the Indian passenger car market. The business strategies of MUL are:

Maintain and enhance the product range. MUL utilize Suzuki’s expertise in small car technology to produce new variants of the existing models and to upgrade the existing one with contemporary technology and features. They intend to increase the number of variants of existing models in the A and B segments

Increase reach and penetration. MUL has one of the extensive sales and service network in terms of geographical spread, and penetration, in terms of sales volumes across India. They continuously assist theirdealers in enhancing their performance and profitability by suggesting improvements, such as increasing the number of sales executives employed at dealerships. Currently, wide network of Mass’s primarily provides after sales service. They can even use the Mass’s that are located in some of the more remote areas of India as sales outlets to increase the reach and penetration in those areas.

Increase availability of automobile finance. MUL being the market leader should seek opportunities to expand the size of the Indian passenger car market, especially in the small car segment. They have made available,Through the dealers, finance products of eight select finance companies under the brand “Maruti Finance”. Thisincreases the availability and transparency of the financing transactions, which can contribute greatly to the customer satisfaction and confidence. Their agreement with the State Bank of India, or SBI, to provide the finance to their customers has enabled it to leverage the strength of the extensive network of SBI, more than 9,000

Branches across India. This all will enable it to promote the demand of its offering among SBI’s vast customer base and expand the size of the passenger car market in India.

Continuous benchmarking of manufacturing capabilities: MUL continuously benchmark, with that of Suzuki’s premier one, its facility to improve its operating efficiencies. As part of Suzuki’s plans to make Marutiits research and development center for cars in Asia (outside Japan), it is expected that MUL will ultimately behaving the capability to have full model change capability.

Continue to reduce costs to offer more competitive products. Cost competitiveness has been, and continues to be, central to MUL’s strategy, as the leading manufacturer in the small car segment, to expand the size of the market by offering competitively priced, high quality products

Higher levels of localizationMUL has increased the level of localization over time by working closely with the vendors in India to up grade their capabilities, which has enabled them to reduce costs and has increased the flexibility in pricing. A look at the new models tells that MUL, with any new model, tries to have a minimum of 75% localization level and then tries to increase the same to at least 90%.

Vendor participation in cost reductionIn some of the major vendors MUL has implemented the “Maruti Production System” which focuses on the eliminating the wasteful activities in their manufacturing processes such as improving their productivity, reducing the number of their components that are rejected, reducing materials handling, improving their yield from materials, and reducing their inventories. This helps in reducing the costs of production, which also reduces the costs of the components being required by MUL.

Cost reduction on warrantiesThe warranty costs of the vendors are the cost of components incurred by them to service warranty claims arising from defects in components supplied by them. MUL works in association with the vendors to reduce theirWarranty cost.

Mul’s Supply Chain:-MUL’s inputs primarily comprise raw materials and purchased components. Only a small amount of raw material and components consumed are imported and a much larger portion is purchased from the sources within India.

Raw Material SuppliersThe raw materials used in the manufacturing process primarily comprise steel coils and paints. In recent years, MUL is increasingly trying to localize the purchases of steel coils with a view to reduce cost. Earlier MUL used toFollow the tender system for the purchase of steel. Under this system, specifications were advertised and accept the lowest price offered by a supplier who could meet the specifications. In 2001 MUL moved to the quotation system which gives them the flexibility to renegotiate the prices once an offer is submitted. Standard purchase orders are issued covering a period of six months for purchase of steel from foreign suppliers for Indian supplier the period extends up to one year. .At MUL the role of the vendors has gradually evolved from tactical to strategically where the vendors work in

Close coordination with MUL to meet our long-term goals in terms of:• Component development;• Quality;• Delivery; and• Cost control.In order to improve quality and generate economies of scale, MUL has reduced the number of vendors of

components in India from 370 as of March 31, 2000 to about 100 as in 2005. In case of repair and replacements, costs of defective components supplied are borne by the vendor

Dealer Management System (DMS):-

Very recently Maruti Udyog Limited has joined hands with Wipro InfoTech, the Asia Pacific and Middle East information technology arm of Wipro Limited, for a nationwide Dealer Management System (DMS), which is the first of its kind information network system implementation in India.The system will enable the 450 dealerships of Maruti across India to access updated information from the car manufacturer and a real time view of their operational processes for better efficiencies. The system will assist dealerships in customer retention and help build lasting relationships. As far as the customers are concerned, they will benefit from the ‘single face of Maruti’ irrespective of the dealership. It will help raise customer service levels and enhance the quality of management at dealerships, a company release said. The system, apart from dealer integration with a central database, will also serve as knowledge repository from where dealerships can access information on customer schemes, product features and price lists. Wipro, as the core IT partner with Maruti, would be responsible for implementation, networking, training and sustenance of the dealer management system. The system aims at issuing alerts to dealerships whenever they are falling short of performance norms in various areas like level of customer complaints, handling and sales.

Manufacturing:-The core focus areas of Maruti’s manufacturing division are:

• Benchmarking against global standards so as to efficiently manufacture quality products.• Building a strong and motivated work force by emphasizing safety, education and continuous improvement of the manufacturing capabilities and those of the vendors

Maruti Manufacturing Facility and Process:

FacilityMaruti’s manufacturing facility comprises three integrated plants with flexible assembly lines located at Gurgaon in the northern state of Haryana. The first plant was set up in fiscal 1984 with an initial installed capacity to produce 20,000 vehicles per annum, which was augmented to 130,000 by fiscal 1991. Installed capacity was further increased with the second plant becoming operational in fiscal 29 1995 to 200,000 vehicles per year. In fiscal 1996, with capacity increases in each plant, installed capacity increased to 250,000. With the third plant becoming operational in March 1999, installed capacity increased to 350,000 vehicles per year, which is the highest among passenger car manufacturers in India and among the passenger car manufacturing facilities of Suzuki’s subsidiaries outside Japan. 24 September 2004, Suzuki Motors and Maruti decided to invest 32.7 billion rupees over the next five years to set up a new car assembly unit, a diesel engine manufacturing unit and for increasing automation and efficiencies in Maruti's current facilities. Maruti Udyog would hold a 70 percent stake in the new joint venture, under which a car assembly unit is being set up; Suzuki would have a capacity to produce 250,000 units a year. This plant will receive an investment of 15.2billion rupees, which is expected to begin its production by the end of 2006. The proposed diesel engine unit would be set up under Suzuki Metals India, an existing 49:51 joint venture between Maruti and Suzuki, respectively. The engine plant will have a capacity of 300,000 diesel engines and 20,000 petrol engines. It will also make up to 140,000 transmission assemblies. The plant will supply diesel engines to Maruti as well as export engines to Suzuki subsidiaries in Europe and Asia. This plant, which will beset up at a cost of 17.5 billion rupees, will begin production by the end of 2006. Suzuki would

undertake a feasibility study to set up a gearbox production unit in India. This unit would be set up under Suzuki Metals India, which is would be renamed as Suzuki Engineering India. Maruti’s facility hasadvanced engineering capability and is upgraded on an ongoing basis to improve productivity and quality. Maruti have 17 manufacturing shops and are capable of producing more than 50 variants of the nine basic models manufactured, with different specifications, within the same day

UtilitiesMaruti do not have to rely on outside sources of power as they have a 60-megawatt gas turbine captive power plant, which has multi-fuel capability. They also have our own reverse osmosis water treatment plant and effluentand sewage treatment plant.

Maruti’s Manufacturing ParadigmMaruti has adopted a target control and PDCA approach as the underlying theme of all its processes.PDCA Constitutes:• Planning by setting a target and time-line, dividing into action plan with value to each factor/element.• Doing the standardized operation as decided.• Hecking through gap analysis to check whether the operation is really giving the desired results• Acting to freeze if effective or correct

Manufacturing Process:-The manufacturing process at Maruti facility is depicted below:

The production of a car at Maruti facility occurs in the following stages:

Press Shop: Press shop has five transfer presses and two blanking lines. In the press shop, steel coils are cut to the required size and panels are prepared by pressing them between various die sets such as doors, roofs and bonnet.An anti-rust coat is applied at this stage.

Weld Shop: There are three welding shops with 122 six-axis robots and 25 in-house manufactured two-to-four axis robots. In this shop, various press metal components manufactured in the previous stage are spot-weldedtogether to form the body shell. Various parts such as the floor panel, side panel, doors and bonnet are sub assembled in this shop. Subsequently, the assembled parts undergo final welding. The welded body is sent to thepaint shop through a conveyor. Paint Shop: There are three paint shops, within one of which the final outer body is fully painted by robots. In thepaint shop, the body undergoes various pre-treatment and electro deposition painting processes to provide a high corrosion resistance to the body. The car body is given an intermediate or primer coat before topcoat paint. The

intermediate and the final coat are applied by using automatic electrostatic spray-painting machines (micro bells) and robots, followed by a baking process.Assembly Shop: Maruti has highly flexible assembly lines, which can simultaneously handle a large number of variants as well as adapt to sequence changes. The painted bodies proceed for final assembly in three stages. The first stage is the trim line wherein various components such as roof head lining, windshield glass and interior trim components are fitted. Thereafter, the car is transferred to an overhead conveyor, the chassis line, wherein components such as the engine, gearbox and front and rear axles are assembled on the underbody. The vehicle is then lowered to the final line on its own wheels and here components and parts such as seats, the steering wheel and the battery are fitted. The completely assembled vehicle finally rolls out of the assembly lines to the final inspection stages.Machine and engine shops: Assembling and testing of engines takes place at engine shops and carry out precision machining of engine components in our machine shops .applying the storing