JIT and Inventory Management System of Maruti Suzuki 1

Acknowledgement

We would like to express our deepest appreciation to the dealers at Maruti Suzuki and Hyundai

showrooms, who, through interviews, provided valuable information that immensely aided our

research and helped us prepare this report. We are grateful to them for having spared some time

out from their hectic schedule to help us successfully complete this project report.
 JIT and Inventory Management System of Maruti Suzuki 2

Contents
Introduction ................................................................................................................................................... 3
Objective ....................................................................................................................................................... 3
Research Methodology ................................................................................................................................. 4
Evolution of JIT ............................................................................................................................................ 4
Automobile Industry in India ........................................................................................................................ 5
Maruti Suzuki India Limited (MSIL)............................................................................................................ 6
JIT in Maruti Suzuki India Limited .............................................................................................................. 8
Analysis of Maruti Suzuki .......................................................................................................................... 10
Conclusion .................................................................................................................................................. 14
References ................................................................................................................................................... 14
Exhibits ....................................................................................................................................................... 15
 JIT and Inventory Management System of Maruti Suzuki 3

Introduction
In the last three decades, various industries in the world have undergone massive changes. This

has resulted in drastic changes in management approach, techniques used in production and

process, attitudes of supplier, competitive behaviour and expectations of customer.

Inventories that are stored in large quantities result in space usage and waste. Survival of

companies in the fast changing global marketplace depends solely on being able to deliver good

quality products at a cheaper rate. Quality improvement and costs control are important for

fulfilling customers’ requirements and attaining the goal of work performance enhancement.

Economies of scale and internal specialisation are crucial for achieving competitive advantage.

Just-in-time (JIT) is a major programmatic operations improvement concept that has changed the

way manufacturing firms manage their operations. It emphasizes on eliminating waste and

increasing productivity. Its primary elements are to have only that inventory which is needed; to

reduce lead times by reducing lot sizes, setup times and queue lengths; to maximize the quality

by bringing down the defects to zero; and to minimize cost. Its goal is to optimize procedure and

processes by continuously pursuing waste reduction.

Objective
This report discusses in depth the implementation of JIT manufacturing in Maruti Suzuki. The

objectives are multi-fold:

 To study the JIT method of inventory management

 Analysis of operations of Maruti Suzuki post implementation of JIT

 Comparative analysis of inventory management between Maruti Suzuki and Hyundai

 JIT and Inventory Management System of Maruti Suzuki 4

Research Methodology
Primary research was done by conducting interviews of MSIL and Hyundai dealers. The

showrooms were located in Santacruz, Mumbai. The dealers provided information about their

respective inventory management systems. With the collected information we were able to

compare the inventory models of both the manufacturers.

We did the secondary research as well to understand the concept of JIT implementation at MSIL.

Evolution of JIT
JIT is a Japanese management philosophy which has been put to practice since the early 1970s in

many manufacturing organizations. By most accounts, it was first developed within the Toyota

manufacturing plants by Taiichi Ohno as a means of meeting consumer requirements with

minimum delays through systematic elimination of all kinds of waste in industrial operations.

This model of approachcame to be known as Toyota Production System. It received extended

support during the 1973 oil embargo and was later adopted by many other organizations.This

approach focused on people, plants and systems. Toyota realized that JIT would be a success

only if every individual within the organization contributed to it with full commitment, if the

plant and processes were arranged for maximum efficiency and output and if production

programs and quality were scheduled to meet the demands exactly.

JIT was started with the establishment of a flow process, wherein the right quantity of the right

parts reaches the assembly line only when they are required. Ohno then added the second

element in the technical core of JIT which was a system of production and transfer based on

demand pull. Other elements subsequently introduced by Ohno were Kanban and levelling of

production by mixing models in final assembly and freezing the schedule (within a certain

range). Kanban refers to the information system based on cards used for production and
 JIT and Inventory Management System of Maruti Suzuki 5

inventory control. There are various types of such cards, besides a formula for determining their

number. Toyota kept all these pioneering efforts in-house till the early 1960s because the system

was continuously growing and also for competitive reasons. By 1965, Toyota was able to

overtake the productivity levels in the American car industry. By 1972, JIT began to attract the

attention in Japan and in the mid-1970s other Japanese companies started adopting it. At this

stage it was known as “Toyota Manufacturing System”. By the end of the 1970s, this system

started getting attention in the West under the name “Kanban System”. This name was

misleading because kanban is a small part of the whole system. Since the early 1980s this

approach became widely known under different names like Stockless Production, Zero Inventory

Production, Small Batch Production and Continuous Flow Manufacturing. However the most

common term used to describe this philosophy is Just-in-Time. Nowadays, JIT concepts are

being adopted in many activities in industries of a number of countries like United States, Japan,

United Kingdom, Germany, India, Italy, Hong Kong and Korea.

Automobile Industry in India

The automobile industry in India is world’s fourth largest. Indiawasworld's 4th largest

manufacturer of cars and 7th largest manufacturer of commercial vehicles in 2017. Indian

automotive industry is expected to reach US$ 251.4-282.8 billion by 2026. Domestic

 JIT and Inventory Management System of Maruti Suzuki 6

automobiles sales increased at 7.01 per cent CAGR between FY13-18 with 24.97 million

vehicles getting sold in FY18 while Domestic automobile production increased at 7.08 per cent

CAGR between FY13-18 with 29.07 million vehicles manufactured in the country in FY18.

During April-September 2018, automobile production increased 13.32 per cent year-on-year to

reach 16.65 million units.

During April-September 2018, highest year-on-year growth in domestic sales among all the

categories was recorded in commercial vehicles at 37.82 percent.The passenger vehicle sales in

India crossed the 3.2 million units in FY18 and is further expected increase to 10 million units by

FY20.

Maruti Suzuki India Limited (MSIL)

Maruti Suzuki India Limited is India’s biggest car maker with more than 50 percent market share

in the passenger vehicles segment during 2017-18. The company recorded its highest ever sale in

FY18 of about 1,779,574 units. During 2017-18, the company recorded revenue of Rs 84,039.9

crore (US$13.04 billion).

It has 1820 sales outlets in 1471 cities and 3145 service network in 1506 cities. It recognized the

increasing competition from the global Original Equipment Manufacturers and rising
 JIT and Inventory Management System of Maruti Suzuki 7

expectations of the customers and to retain its market superiority, it dedicated its efforts towards

R&D (Research and Development). MSIL has been redefining and designing supply chain

strategies and operations to lower cost and maximize throughput. It has been innovating

consistently to reduce operating cost, achieve operational excellence and enhance customer

service through efficient supply chain management. Lean supply chain and logistics management

are crucial for success and JIT in supply chain is a powerful strategy.

2018 Planning to enter into electric vehicles segment. It has begun with the field testing
of the vehicles.

2016 Exported first ‘Made in India’ car to Japan.

2012 Ranked first in India in customer satisfaction for the 13th time in a row.

2008 Launched ‘A-Star’, world’s fifth strategic models. It also Launched National
Road Safety Programme in the same year.

2005 Ranked 91st in Forbs list of World’s top 200 Most reputed Companies. Ranked
7th in the automotive sector.

2003 Just in Time ( JIT) and E-Nagare inventory management systemsstarted.

2001 Entered into pre-owned cars segment. Opened True Value, its first pre-owned cars
outlet, in Bangalore.

2000 The first car company in India to start a customer care centre. The company was
awarded ‘Highest Exporter Award’

1996 Launched India’s first 24 hours on-road service.

1991 Received the 1991 Corporate Performance Award by the Economic Times -
Harvard Business School Association.
 JIT and Inventory Management System of Maruti Suzuki 8

1983 The company was incorporated with the launch of iconic Maruti 800. First batch
of Maruti Suzuki cars was assembled.

JIT in Maruti Suzuki India Limited

MSIL has 246 local and 20 global suppliers which function seamlessly. It receives its supplies

ordered the previous night in a two hour slot the next day. It had adopted JIT to reduce inventory

carrying cost and hence achieve higher operational efficiencies. MSIL adopted the E-Nagare

system of electronic flow which has completely transformed its supply chain.

MSIL’s local Tier I has undergone a massive change from previous 385 suppliers to present 246.

Smaller suppliers were absorbed in the automobile’s Tier II vendor list after bad performers had

been weeded out. MSIL started insisting on 'full systems supply' from its Tier I suppliers instead

of supplying each component separately. It has a total of 800 suppliers including Tier II and Tier

III suppliers.

The company gives preference to locally based suppliers to achieve JIT material supplies. Over

76 per cent of its 246 suppliers are located within 100 kilometres of radius. These are suppliers

of bulky components who supply 86 per cent of the components by value to Maruti. The

company provides support to its vendors in all possible ways which includes giving financial,

technical and management support; finding technology partners and bringing transparency in its

dealings.

At MSIL, E-Nagare or 'electronic flow' is a religion. It is the sequence of production plans from

the vendor to MSIL’s shop floor, which has reduced to a two hour cycle from thirty days in the

past. Across MSIL’s twin sprawling plants in Manesar and Gurgaon, multi-coloured bumpers
 JIT and Inventory Management System of Maruti Suzuki 9

arrive in mobile trolleys and components line up outside factory sheds directly feeding the

assembly lines. Within the factory premises, the inventory hold up is just two hours.

MSIL used to give one month schedule of their material requirement, which resulted in the

suppliers producing more and the inventory levels started to go up. In view to reduce inventory

levels, MSIL lowered its material quota from a month to 15 days and the inventory levels inside

the plant fell by a whopping 70 percent. MSIL initiated the same process with the Tier I suppliers

to implement a similar system with their own suppliers to make the supply chain lean at all

levels.

Today, the vendors at MSIL are reaping the benefits of efficiencies unleashed by the original

equipment manufacturer (OEM). The vendors have been supplying to MSIL on a JIT basis and

directly on line, which means the part is approved and the company does not have to inspect

them at all, making it a 100 per cent fool proof process.

E-Nagare has resulted in better capacity utilization at the vendor’s end. At MSIL, while

inventories have reduced drastically, any inefficiency in the system is now evident. As for the

suppliers, any reduction in cost by MSIL brings down their overheads substantially.

MSIL has been able to reduce the number of man hours spent on each car by half in just five

years through a number of initiatives that involve workers and up to Tier II vendors, along

withthe management. One such initiative is by debottlenecking its production lines year after

year. Mechanization and optimal utilization of manpower has raised service bay productivity of

its dealer service centres by 20 per cent, saving them a lot of money in setting up new service

bays.
 JIT and Inventory Management System of Maruti Suzuki 10

On the inventory front, MSIL assists the dealers in inventory management by reducing the

inventories, which means lesser financing cost on working capital for the dealers. MSIL analyzes

the market, and everyday inquiry,inventory, orders and sales, and the dealers are informed of

vintage stocks, which are 3 to 4 months old, which is hard currency stuck in old stock which

needs to be mobilized as soon as possible.

JIT and E-Nagare inventory management systems, started in 2003, have brought the inventory

levels down to less than a day. In 2010-11, the company started encouraging its suppliers to

supply material during the night shift, which helped in reducing pollution and traffic congestion

in and around its plant in Gurgaon city. A milk run system was also introduced in 2010-11 for

thirty suppliers based in Faridabad. The logistics for these companies is managed by one logistic

supplier. This initiative helped in bringing down the number of trips per day to MSIL by 30 per

cent from these suppliers and improvement in the truck fill rate by over 25 per cent.

Analysis
We conducted an interview at a Maruti Suzuki showroom where we got insights into how the

inventory is managed by the company. That showroom has many products including Alto, Swift,

Brezza, Wagon R, Celerio each having many sub-categories.

Distribution channel

As far as distribution channel is concerned, the products are received from the manufacturing

plant. For example, Swift has a production factory in Gujarat and one in Gurgaon. Every

dealership has a stockyard where the vehicle has to be landed. From stockyard, the product

comes to the dealers and allotted to a particular customer. They do not keep all vehicles in the

showroom because if there are more vehicles that would occupy a lot of space.
 JIT and Inventory Management System of Maruti Suzuki 11

Waiting period

The productsgenerally have a waiting period of 4-6 weeks which is given by the company itself.

Same product has the same waiting period throughout the country. Every product has a different

waiting period. For example, Brezza has a waiting period of 4-6 weeks whereas Swift has a

waiting period of 3-4 weeks. If some dealer has some product which others do not have, then that

dealer will deliver it before the waiting period. Waiting period is communicated to the customers

at the time of booking itself. If they do not have the product, it is communicated to the customer.

If they have the product, delivery is done provided payment has been made by the customer. If

there is no waiting period for the product and if payment is made by the customer within a day’s

time, then the delivery is made within 5-6 days. Loan takes additional 4-5 days for delivery.

The dealerships have price lists and charts showing waiting periods. These charts come from the

company itself. An agreement is signed with the customer which is called order booking form.

All details related to pricing, model of car, customer details and waiting period is mentioned on

that form.

Stock dumping

There is no stock dumping at the showrooms. HODs are aware of the highest selling product as

per the previous enquiries made by customers. More enquiries mean more bookings. Wholesale

target is given from the company accordingly. The product with more enquiries has a greater

target as compared to others.

 JIT and Inventory Management System of Maruti Suzuki 12

Peak season

We asked them about how they managed demand during the peak season. At MSIL, festive

season is the busiest time of the year. Booking is done one month prior so that customers can

take the delivery on the day of the festival.

During this time, every dealer gets some wholesale target from the company itself. These dealers

have to sell that much vehicles. Every product has a different target which has to be fulfilled.

When the target is fulfilled and if there are additional bookings from the customers, then that

product is ordered.

Spare parts

Every dealership has one workshop. This dealership where we conducted our interview has it at

Link Road. Spare parts are kept at these workshops. If they do not have spare parts, they

communicate to the customers that it would be delivered to them within a specified time.

Comparison with Hyundai

We also conducted an interview at a Hyundai showroom in order to compare their inventory

management system with that of MSIL.

Distribution channel

Hyundai factory is located in Chennai. All cars are distributed from Chennai directly to the

stockyards. Their stockyard is located in Bhiwandi. From stockyards, the cars are brought into

the different dealerships which are located in Wasai, Thane, Santacruz.

 JIT and Inventory Management System of Maruti Suzuki 13

Waiting period

A Hyundai showroom makes 125-140 deliveries per month on an average. Generally, the

company keeps inventories of cars. However, carslike Creta which have more demand than the

others or a newly launched product are not kept in stock. However, if the product is not in stock,

they deliver the product within maximum 2-3 weeks. Waiting period differs from car to car.

Creta is the highest selling car for Hyundai right now. Thus, waiting period is maximum for

Creta- 4 weeks for petrol variant and 8 weeks for diesel variant. If the cars are available and the

payment is made outright, then RTO process takes minimum 5 working days. If loan is availed,

additional 4-5 days are required for the delivery.

Stock dumping

Stock is dumped by the manufacturers on the dealers and they have to sell the entire stock. There

is no time frame within which the stock has to be sold. The stock is dumped irrespective of the

demand by the customers.

Peak season

Hyundai has peak season during the festive season that is during the months of October,

November and December. They take advance bookings from the customers who plan to take the

delivery on the auspicious day of Diwali. Orders are taken 1-1.5 months prior to the date of

delivery. If the customer places order closer to the day of festival, then the dealers do not make

any commitment to the customers regarding the delivery on Diwali because stocks and

manpower are limited. So they cannot go beyond their capacity.

 JIT and Inventory Management System of Maruti Suzuki 14

Spare parts

Hyundai has a good number of spare parts present in the workshops. Every dealer has a different

workshop just like MSIL. This dealer has workshops in Thane and Wasai.

Conclusion
JIT production system identifies the hidden problems in the value chain and emphasizes a search

of ways to make production flow all along it, subject to the pull of customer need at every stage.

It seeks to gradually accelerate the pace and flexibility of this flow by constantly simplifying

operations. This requires problem solving and innovation of the shopfloor to identify and

eliminate all wasteful sources of variability. Such shopfloor activities are triggered by the

Kanban system of information and control. Even though it does not seem to be complex, it

requires a lot of coordination with supply chain to minimize delays in the production schedule.

References

Bhargava, A. (2017, December 15). A Study on The Challenges And Solutions To Just In Time
Manufacturing. Retrieved from www.ijbmi.org: https://www.ijbmi.org/papers/Vol(6)12/Version-
3/F0612034754.pdf

Bon, A. T., & Garai, A. (n.d.). JUST IN TIME APPROACH IN INVENTORY MANAGEMENT .
Retrieved from eprints.uthm.edu.my:
http://eprints.uthm.edu.my/1624/1/Talib_Bon_FPTPK_(ICBER_2011).pdf

CASE STUDIES OF JIT IMPLEMENTATION. (n.d.). Retrieved from shodhganga.inflibnet.ac.in:

http://shodhganga.inflibnet.ac.in/bitstream/10603/173428/14/14.%20appendix%20i.pdf

EVOLVING JIT IMPLIMENTATION STRATEGIES. (n.d.). Retrieved from

shodhganga.inflibnet.ac.in:
http://shodhganga.inflibnet.ac.in/bitstream/10603/36769/16/16_chepter%206.pdf
 JIT and Inventory Management System of Maruti Suzuki 15

Julka, D. T., & Lamba, A. S. (2014, March). Supply Chain and Logistics Management
Innovations at. Retrieved from www.irjcjournals.org:
http://www.irjcjournals.org/ijmssr/Mar2014/8.pdf

Just-In-Time System and Its Impact on Operational Excellence: An Empirical Study on

Jordanian Industrial Companies. (2017, November). Retrieved from www.researchgate.net:
https://www.researchgate.net/publication/321232734_Just-In-
Time_System_and_Its_Impact_on_Operational_Excellence_An_Empirical_Study_on_Jordanian
_Industrial_Companies

Kootanaee, A. J., Babu, K. N., & Talari, H. (2013, April 18 ). Just-In-Time Manufacturing
System: From Introduction to Implement. Retrieved from papers.ssrn.com:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2253243

Reddy, V. K. (2010, December 09). Just in Time Manufacturing in the Indian Automobile
Industry. Retrieved from www.scribd.com: https://www.scribd.com/document/44997316/Just-in-
Time-Manufacturing-in-the-Indian-Automobile-Industry

Singh, D. S., & Garg, D. D. (2011, March). JIT System: Concepts, Benefits and Motivation in
Indian Industries. Retrieved from www.ijcst.com:
http://www.ijcst.com/ijmbs/research1/sultan.pdf

Sukarma, L. (1997). Applying the just-in-time production system in. Retrieved from
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Exhibits
Exhibit 1:

Maruti Suzuki Showroom

 JIT and Inventory Management System of Maruti Suzuki 16

Exhibit 2:

Hyundai Showroom

Exhibit 3:

Waiting period for different models of Hyundai

 JIT and Inventory Management System of Maruti Suzuki 17

Exhibit 4:

Visiting card of Maruti Suzuki Showroom

Exhibit 5:

Visiting card of Hyundai Showroom