Amidst all the media-noise about the labor imbroglio in its factories, a silent revolution is unfolding at Maruti Suzuki, India’s top automobile manufacturer. Maruti has undertaken a large-scale project to deliver the benefits of enterprise resource planning (ERP) to its hundreds of tier-2 suppliers using cloud computing.
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Maruti’s supplier eco-system is made up of two tiers. Suppliers who sell components directly to Maruti are classified as tier-1. Maruti has 250 such suppliers. Tier-1 suppliers buy parts from five or six smaller suppliers to build the components that go into Maruti automobiles. These smaller suppliers, classified as tier-2, play an important role in Maruti’s manufacturing eco-system since the sub-components they manufacture are made to order for Maruti. The automaker has about one thousand tier-2 suppliers.
“Although small, the tier-2 suppliers are crucial to our business. They must adhere to high quality standards and tight deadlines. On a daily basis, we receive about 24,000 supplies and our permissible inventory limit is less than a day,” informs Rajesh Uppal, executive officer (IT) and CIO at Maruti Suzuki India.
Challenges and their solution
While cloud ERP projects appear exciting on paper, automating and standardizing the manufacturing processes of tier-2 suppliers on such a large scale is no easy task. Uppal says that since these are very small companies, they do not have the financial capability or IT expertise to implement ERP. “A bigger challenge is that many of them have even tested failures with their IT implementations in the past. Convincing them to invest in ERP again is not easy,” Uppal says.
Uppal and his team hope to overcome these hurdles by creating a low-cost cloud ERP delivery model for them. The team has roped in Zensar Technologies to build a public cloud platform for Microsoft Dynamics ERP. The cloud ERP will cover the suppliers' entire manufacturing operations and business processes.
Project objectives and targets
Maruti is playing the role of the mentor on the project and is helping the Zensar and Microsoft teams to adequately test and customize the cloud ERP as per industry benchmarks.
“We want to ensure that the cloud ERP comprehensively covers all business processes of our tier-2 suppliers and is also affordable. With cloud services and some price negotiations, the ERP’s annual cost per user for the supplier is being brought down to about Rs 4,000,” says Uppal.
As of now, Maruti is running a cloud ERP pilot project at eight of its tier-2 suppliers in India. Uppal's target is to bring more than a hundred tier-2 suppliers onto the ERP cloud within one year.