Ramesh Kumar talks to those involved with India’s complex logistics operations at Hyundai and Fiat about issues such as supplier challenges, seasonal changes, crossdocking aspirations, packaging priorities and controlling supply.
Complexity is the name of the game for the supply chain at Hyundai Motors India’s (HMIL) factory in Irungattukottai, 40km from Chennai. Sidhapatru Venkata Naga Prasad, general manager for production planning and control, faces the task of managing 20,000 components to produce eight models and innumerable variants from the same assembly line.
Prasad’s role encompasses a wide range of functions, including departments such as production planning, process control, material management and knockdown support. The supply chain and production are monitored simultaneously from South Korea as part of Hyundai’s global watch tower strategy.
Of the 120 vendors in India supporting the country’s second largest passenger car producer, 80% operate in and around Chennai where the manufacturing plant is located, thus leaving 20% of suppliers from further afield (mainly in the regions of New Delhi, Indore, Hosur and Pune). More than 50% of Hyundai’s vendors are joint ventures between South Korean companies and local Indian partners.
“It is the most comfortable arrangement because all of these South Korean companies have been doing business with our parent company back home and therefore their frequency matches ours. They know what we are doing,” says Prasad, who has been with Hyundai India right from its inception in 1996.
Critical components such as the engine shaft, crank shaft, cam shaft, cylinder head and others are produced in-house. The ratio of imported versus domestic components varies from model to model, which poses a big challenge for logistics, admits Raja Ramamoorthy, senior manager production planning, and a trusted lieutenant of Prasad. For example, Hyundai’s Santa Fe and Sonata models use 95% imported parts while the Eon boasts 97% local. Plus, with almost 50% of Hyundai’s annual production earmarked for exports, there are further complexities as the plant must manage at least 1,000 different specifications. “Everything looks the same [coming to the line],” interjects deputy manager Govardanan J, part of Prasad’s team. “If we do not have a robust system, we will be doomed. It’s a big challenge.”
Almost 200 containers reach the container freight station adjacent to the factory every week, bringing CKD components from across globe. At any time, this stations hosts at least 600 containers. However, whenever volume shoots up, Hyundai is compelled to find space beyond the factory.
For most automotive production, components are sourced from single suppliers, which means the smooth running of the assembly line hinges on each of them sticking to their commitment. But life in the supply chain is not always smooth. A Fiat India Automobiles warehouse manager was recently frustrated at the Tata-Fiat joint venture manufacturing plant at Rajangaon, near Pune (see boxout on p54) after he lost visibility of a supplier.
Hyundai’s Raja points to similar issues, particularly for imported material. “A few months ago, we had a tough time. Container handling at Chennai port became unmanageable. Not only were roads bad, but it took a minimum of 48 hours for trucks to enter and exit the port,” says Raja.
Another hiccup tends to come late in the year as the country readies for the Diwali festival of lights, when there is often wrangling over Diwali bonuses, which can lead to strikes at vendors. As this also happens to be the peak season for car buying, the disruption of even one part can be a serious issue.
Some years ago, each plant used to have a warehouse where stock for up to a month would be kept. Today, operational methods have changed drastically. Not only do assembly lines produce multiple models, but the supply at plants is kept to a strict minimum.
At Hyundai, bulk feeding of bolts and nuts happens once every two days, while many other items are fed on an hourly basis. Sequence feeding has also increased in importance, with some sequencing at plants in India also done by vendors, which is common in more mature markets.
This operation requires an orchestrated and transparent approach where tier one vendors are involved at the monthly production planning meeting, held in the third week of the month for Hyundai, for example. Besides the forthcoming month’s plan (called m-month plan), a tentative, four month plan is also finalised. Based on the monthly plan, a daily plan is chalked out, which is subsequently fitted into sequencing. The multiplicity of models demands a higher level of coordination right from the body shop level. Through the vendor portal, everyone is fully aware of what is to be produced unit by unit.
If Hyundai production planners are to be believed, sequence plans of at least three days are created. As the vehicle moves from body shop, to paint shop, to storage and finally the assembly line, the barcoding of each item eases the challenge to a certain extent, as it notes vehicle specification, diesel or petrol engine type, components, and if the vehicle is for the domestic market or for export. The production planning team ensures the right components for the right models are sequenced and then pushes them to the assembly line.
Mistakes do happen during stock picking at times, in part because of a dependence on unskilled labour and high turnover among workers on the assembly line. Mistakes are also inevitability for highvolume factories to a certain degree. “It is human tendency to err,” adds a divisional manager for corporate supply chain management (SCM) at Fiat India Automobiles. He believes that automation is an important key to overcoming these errors.
An example at Fiat is the monitoring of inbound material through gate receipt notes (GRN). On any working day, 250 vehicles enter the Ranjangaon facility of Fiat India Automobiles, and a data capture system is used to track stock, issuing around 1,700 GRNs daily. Without a GRN, no receipt is taken note of or allowed and therefore payment is blocked, giving vendors a good reason to control their deliveries.
Another way to keep ahead of potential errors and supply chain glitches is to increase material monitoring and inbound control. There was a time when plant heads used to abhor supply chain representatives near the assembly line. But today, at the Ranjangaon plant for example, there is a supply chain representative for every 100 components to ensure stock is readily available.
Of course, buffer stock is also an important part of contingency plans against supply failures. Although Hyundai did not originally plan for a warehouse on its premises, past experience has convinced it to build one in small measure. Inventories include one shift’s worth of local parts and around 20 days supply of knockdown parts, owing to their long inbound delivery time. But plant heads need to be flexible about the inventory they keep, says Prasad.
Packaging and its waste is yet another challenge. Local vendors supply in returnable pallets, while imported components come in steel boxes and cartons. Disposal items are sent to scrap yards where they are sold on a daily basis. Steel frames are recycled in the plant’s storage depots. Packaging is a major issue, warns Fiat’s SCM manager. Supply chain design is his core job, under which he develops vendor packing. “It is not just looking at the size of the product and [saying], ‘let us do [it] this way’. We need to look at the frequency of the requirement at the line feeding level [and] the kind of infrastructure available, including warehousing, height of transport bay, etc,” he adds. Returnable packaging, particularly from service providers using a pooling concept, is a favourite with Fiat in India. So far, the company has managed to convince 15 long-distance vendors to go for a pooling format.
Warehouse-to-line feeding is another important area of supply chain management, including issues such as where to store bulky items, what kind of trolleys to use and what height the tall storage facilities should be kept. The manager maintains that responses to these “mundane” questions have important cost complications. Automation is the ultimate goal and Fiat India is moving in this direction.
It is no secret that the production planning team is buffeted between sales and marketing on one side and manufacturing on the other. “Our job is to ensure production lines are running smoothly and sales and marketing do not make noise,” concedes Hyundai’s Prasad. Seasonal and unusual changes dictated by the sales department compel the planning team to tinker their daily schedule. But all these need to be done in the open so that vendors are also on the same page. Not to be forgotten is the regular flow of engineering orders that have to be incorporated for better product delivery. At times, problems at the vendors’ end can also force alterations in the OEMs’ production schedule.
Fiat’s assistant vice president for corporate SCM, Kalpesh Pathak, sums up the issue: “In-plant logistics is the vital element in the entire production process in almost all mass volume products. And in this age of outsourcing and almost zero inventory or just-in-time planning, supply chain managers have come to play a big role.
“And in the days to come, as business zooms [ahead], the challenges will multiply and, as such, [the responsibilities] of supply chain professionals will also move up. It is challenging, but exciting.”