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.
SV Prasad, head of production planning cell, Hyundai Motors India
Sidhapatru Venkata Naga Prasad has never had time to read daily newspapers at dawn. It’s always a post-sunset chore.
Waking up at half past four in the morning, followed by a 30-minute walk with his wife at the spacious public park near his home in the upmarket Anna Nagar, the energetic, 50-plus-year-old executive leaves home soon after six to make the 45-minute drive to Hyundai’s plant.
He arrives this early so that he can interact with the night shift crew before they exit the factory at 7.00. “It is my first job on any day. This gives me a window to see first hand what were the previous night’s happenings on the shopfloor,” says Prasad.
Next, a quick meeting with his production planning team to get a view of what happened inside the plant and at vendors’ factories over the past 24 hours. “We deal with questions such as why the number of a particular model that marketing demanded as priority could not be met in full; how to tackle infrastructural problems on the power front due to severe power outage at vendors’ locations in Tamilnadu; should [we] go for overtime on the shopfloor to mitigate ballooning demand etc,” he says. “These issues are aired and amicable solutions found.”
Prasad then moves on to a crucial 30-minute meeting with Saranga Rajan, vice president of production.
Later, he meets two department heads who report to him each day. In a week, he usually discusses their respective Key Performance Indicator (KPI) matrices twice, which include improvement initiatives, logistic service payment, truck movements and container handling.
On any working day, Prasad walks 5-6 km within the plant—further if there are high-profile visitors from abroad with whom he might walk the length of the factory.
One pleasure Prasad does not miss is lunch in the spacious common food hall. “I have not missed a single lunch,” he says over his South Indian thali.
The working atmosphere is so dynamic, nobody notices the passage of time. He packs up around 7pm when the third shift has already taken charge at the plant. It is a long ride back home thanks to severe traffic congestion. He admits that it is a rarity for him to see the sunset from home, even if he rises before the sun nearly every morning.
“First thing, when I reach home, I read my morning dailies in English and Telugu, my mother tongue. Then I watch a few TV serials,” elaborates Prasad. With his daughter studying away from home, he chats with his spouse and by 10pm, he has gone to bed, post-dinner. Sundays, he escorts his wife for shopping.
What about an annual holiday? He raises his eyebrows. “Until recently, it was not compulsory for us to take these holidays. Now the management has made it mandatory for us to stay away from the plant for at least five consecutive days,” he adds with a tinge of apology in his voice.
Prasad admits that he has yet to master the art of how to spend the extra alternating Saturdays off, which are also now compulsory at Hyundai. Colleagues complain with big smiles, pointing out that Prasad has been spotted inside the plant even on those off days.
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.
Kalpesh Pathak, assistant vice president, corporate supply chain management at Fiat India, does not mince his words. When he was asked about the possibility of using milkruns at Fiat’s Ranjangaon plant, he shakes his head. “Milkrun? No.”
But wasn’t Pathak one of the pioneers to adopt milkruns in his previous post as General Motors’ logistics and supply chain maestro? If so, why not at Ranjangaon, 70km from Pune?
Pathak points out that successful milkrun operations depend on various factors. A smooth flow of auto components from tier one vendors is critical to adopt a just-in-time (JIT) practice. Vendors to Fiat are situated mainly in Talegaon, Chakan and Pune, approximately 70-100km away from the plant. State Highway 60, which connects Pune with Ahmednagar, and which all vendors have to access (Ranjangaon is situated on this highway), is dotted with villages which hold weekly market days that crowd the highway with the vehicles of buyers and sellers. The fact that each village has a different market day adds to the complexity and drivers are left with no alternative but to wait for long stretches of time. Naturally, JIT gets jolted.
Another challenge is that there are entry and exit restrictions on highways connecting Talegaon and Ranjangaon, resulting in delays of several hours that again impede the smooth flow of component movement. During peak hours, even on non-market days on this stretch, vehicles move at a snail’s pace because there are no traffic signals. “Under these circumstances, how do you expect us to adopt JIT and milkrun with dedicated window timings for vendors to drop their wares inside our plant?” demands one of Pathak’s colleagues, a senior corporate supply chain manager.
An example unfolds to illustrate his reasoning. Just a few hundred feet away, another divisional manager for warehousing and supply chain management is worried over the whereabouts of a vendor’s truck that is headed for the Fiat plant. For whatever reason, the driver has switched off his phone and is unreachable. Another colleague is equally tense because production may have to be halted in the absence of this critical component for one of the models. “You’re talking about a milkrun? Look at this,” complains the warehouse manager.
With no sign of the driver, the Fiat managers eventually find a substitute but they cannot deliver the component to the line-feeding operation without a written approval from the R&D department. They made such a submission earlier but are still awaiting the verdict. What if their replacement plan is vetoed? “We don’t want to think on those lines,” says the warehouse manager. Either way, under such circumstances, moving to JIT and milkruns is a risky proposition.
All said and done, Fiat’s passenger car plant is small— owned jointly by the house of Tata and the Italian giant— compared to Maruti Suzuki, Hyundai and several others, so stocking components for a week or fortnight should pose fewer problems. Even Maruti Suzuki is still only in the experimental stages of adopting milkruns as a practice, along with Ceva Logistics as a 3PL.
What about using milkruns at Hyundai Motors India, the country’s second largest passenger car manufacturer?
“We have not gone in for a milkrun routine and expect vendors to deliver directly. Nor have we appointed a 3PL to handle this,” explains SV Prasad. He never felt the need for it because a large segment of the manufacturer’s components come from vendors who are situated in and around its Irungattukottai facility. Moreover, Hyundai Motors—like Fiat India—faces a transport bottleneck. Several components for various models are imported from South Korea, China, Japan and Europe and ferrying them in containers from the port of Chennai is a major hassle because of the port’s frequent strikerelated stoppages and port-to-plant connectivity issues.
In the absence of milkruns, Hyundai is forced to create unplanned warehouses within the manufacturing premises to ensure smooth production. Also, Hyundai has advised vendors supplying from far off locations within India to have their own warehouses in the vicinity of the plant for quicker supplies.
“The milkrun success rate goes up when you are operating in a logistics or supplier park and there are no other external challenges such as having to move components through state roads or national highways,” reasons Pathak.
However, TCI Supply Chain Solutions’ CEO Jasjit Sethi begs to differ with Pathak and Prasad about only using milkruns in supplier parks. “In vendors’ parks, the frequency is very high and therefore poses a different challenge,” he says.
Sethi is talking from experience. TCI manages milkruns at 19 plants including General Motors’ Talegon and Halol plants, as well as for Volkswagen, Toyota Kirloskar, Hero Moto Corp and Bajaj Auto. In some cases, TCI offers local milkruns and in almost all cases it manages pick-ups.
Sethi reiterates that Hyundai chooses not to use milkruns because it decided to go for direct supply from vendors; and as far as Fiat is concerned, it produces a smaller volume that might warrant milkruns.
Neither Prasad nor Pathak debunks the use of milkruns and, given a choice, they would love to implement the concept. Fiat has trialled them in the past and could take a fresh look at them again soon, Pathak indicates. For now, delivery at the manufacturing plant is at the supplier’s cost, with the transport element factored into the component price. But when supplier contracts come up for renewal, Pathak and company might possibly revisit a different model, segregating the transport cost and bringing in a 3PL to carry out milkruns. After all, Pathak’s penchant for milkruns is no secret.
Hyundai has resorted to the services of a 3PL for its outbound logistics—Glovis India, a fully owned subsidiary— and it could eventually switch over to a 3PL for inbound logistics, too. The increase in volumes and model-types, coupled with the complexities involved therein, suggest a dalliance with milkruns could also be on the horizon.
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.
The devil and the deep blue sea
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.”
