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DECLARATION
IPadmini.Yof M P Birla Institute of Management, Bangalore,
hereby declare that the Project report titled SUPPLIER
APPRAISAL for EB Purchases Department in MICO,
Naganathapura has been submitted in partial fulfillment of
the requirements for the Master of Business Administration
Degree of Bangalore University during 2003-2005 is an
original work and this has not formed the basis for an award
of a Degree/Diploma by any other University or Institute.
DATE:
PLACE:Bangalore (PADMINI Y)
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ACKNOWLEDGEMENT
Project report is in partial fulfillment of the requirements for
MBA Degree course of the Bangalore University.
I acknowledge deep sense of my gratitude to Mr.B.V.Sudarshan, Purchases Head,EB Purchases MICO, Naganathapura for the opportunity offered to me to undertakethis study. I also thankMr. T.Karthikeyan for his unrelenting support and guidance,without which this endeavor would not have been possible.
I express my grateful thanks to Dr. Nagesh Malavalli, the
Principal, MPBIM and my guide Prof.B.K.Ramaswamy for
their invaluable guidance in preparing this report.
I also thank all the staff of the MICO for their help and
administrative support during the tenure of the study.
I take this opportunity to thank my parents and friendsfor
their constant and consistent encouragement.
PADMINI.Y
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CONTENTS
CHAPTER
NO
PARTICULARS PAGE
NO
I DECLARATION
II CERTIFICATES
Guide
Principal Company
III ACKNOWLEDGEMENT
A. EXECUTIVE SUMMARY
1. INTRODUCTION 1 to 2
2. COMPANY PROFILE 3 to 25
3. BACKGROUND OF THE STUDY
Problem Statement
Objective of the Study
Significance
Theoretical Framework 26 to 31
4. METHODOLOGY
Research design
Study population
Sample size
Data Gathering Procedure
Study Type
Data Analysis 32 to 39
5. FINDINGS
40 to 59
6. RECOMMENDATIONS AND CONCLUSIONS 60 to 63
7. BIBLIOGRAPHY 64
8. APPENDICES 64 to 73
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LIST OF TABLES
Serial Number Particulars Page number
Table no. 1 Cost/Price Rating Factors 36
Table no. 2 Quality Rating Factors 37Table no. 3 Logistics Rating Factors 37Table no. 4 Supplier Grading 39Table no. 5 Supplier Assessment PUR 49 to 51Table no. 6 Supplier Assessment QSG 52 to 54
Table no. 7 Supplier Assessment PPR 55 to 57Table no. 8 LEB - 2005 58 to 59
LIST OF GRAPHS AND CHARTS
Serial Number Particulars Page number1 Organisation Structure of MICO 10
2 M & SS Manpower 123 Classification of Suppliers Bar Graph 42
4 Classification of Suppliers Pie Chart 42
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A. EXECUTIVE SUMMARY
As a part of the course curriculum of degree of Master of Business
Administration at Bangalore University, I am required to undertake a projectwork in an organisation in forth semester. The purpose of this is to createthe manager with greater adaptability and who can provide creative solutionto the organisation they work with, so it help the student to becomecomplete manager and efficient in the industry. This project report is aneffort of mine for the fulfillment of the same.
MICO is one of the reputed companies in India. It is one of the oldest
and fastest growing company. It has a leading presence in India.
MICO, Bosch Group has over the years, acquired a strong reputation
in the field of sparkplugs, pumps, and other competitive products.
I undertook this project to evaluate the suppliers of the EB Purchases
Department, MICO, Naganathapura Branch. This project report focus on
the classification of the suppliers in to key suppliers, Technology
Specialist, Essential Suppliers, New Suppliers, Suppliers to be eliminated,
Customer Specified, suppliers not feasible to eliminate and reviews the
importance of supplier performance.
For this purpose, weighted point technique of vendor rating is used as
a tool to determine the supplier performance under the following
criteria- Price/cost, Quality, and Logistics.
The objective of this report is to get a clear picture with regard to the
Supplier Base Reduction (SBR) activity and identifying the key
suppliers to Energy Body (EB) Purchases, MICO Bosch Group,
Naganathapura Plant.
This helps in providing feedback to suppliers with average rating to
encourage improvement in their performance, black listing the
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vendor with low rating from the list, selecting of preferred supplier
and giving supplier awards.
By the data analysis done, the 52% of the total suppliers are essential
suppliers with average performance, 21% are key suppliers and 11%
of the suppliers are to be considered for elimination, 6% are new
suppliers to MICO, 2% are suppliers not feasible to eliminate,
customer specified suppliers to MICO, Naganathapura - EB Purchases
are 1%, and 7% of the total suppliers are technology specialists.
MICO has accepted my findings and has started implementing my
suggestion by considering the suppliers with grade C for elimination.
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CHAPTER 1
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INTRODUCTION
Today we are in Competitive World & lot of Advancements are taking place
around us & we are suppose to improve continuously every minute in order to
cope with these advancements. In this competitive world every activity of the
company has become very critical. Purchasing is one among those critical
activities.
Materials, supplies and equipment are the pivotal function concerned to
industry, governmental agency or commercial operations. The efficiency of
any business is contingent upon having them available in the right quantity, in
right quality at right place with right price. Failure in any of these fronts adds to
the cost and has the adverse impact on the companys profits and will speak
on ineffective buying techniques. Thus the purchasing is the main factor in the
timely execution of industrial projects.
A true measurement of an effective purchasing department is obtained by the
quality of reliable vendors selected for supplying goods and services. Poor
supplier performance accounts for billions of currencies in product recalls.
Such problems, combined with today' s dynamic, global business environment,
require buyers to evaluate and manage supply partners' efficiencies.
Suppliers those who fail to meet performance standards can cost
manufacturers a bundle in actual expenditure, customer dissatisfaction, and
loose the business ultimately. So every Organisation is looking for having
dedicated limited Quality suppliers on whom one can rely upon & constantlyhave focus on them.
Hence as a specimen MOTOR INDUSTRIES COMPANY LTD,
Naganathapura has been chosen & Project has been carried out to assess
and rate their suppliers performance.
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CHAPTER 2
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COMPANY PROFILE
MICO.. AN INSIGHT
MICO is the largest manufacturer of diesel fuel injection equipment in India
and one of the worlds largest company. In addition, it manufactures industrial
equipments, auto electrical equipments, hydraulic gear pumps for industrial
and tractor applications, electric power tools and packing machines. In the
automotive industry , MICO is synonymous with high precision. Be it spark
plugs, fuel injection equipment, auto electricals or hydraulics, the one constant
is precision.
MICO (Motor Industries Co. Ltd.), a member of the Bosch Group, Germany,
has contributed to India' s status as an industrial force within the automotive
industry for over fifty years. It has been part of India' s transition from a newly
independent nation to an international capital of technology.
Today, MICO products play a vital role in varied sectors of the economy. You
will find them performing with precision in pump-sets, tractors and power
tillers, in most vehicles on Indian roads, in diesel locomotives and defense
applications. World-class quality, inspired innovation, entrepreneurial
leadership and high professionalism have made MICO a company to be
reckoned with anywhere in the world. And a force that will continue to drive
the Indian automotive industry through the new millennium.
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BOSCH, GERMANY AN INSIGHT
World over the name Bosch stands for competence and product diversity in
automotive equipment, power tools and accessories, thermo technology,
household appliances, communication, automation and packaging machines.
The workshops for precision engineering and electrical engineering that
Robert Bosch founded in 1886 have grown in the course of more than 100
years to become a global player. Employing 221,000 at 227 manufacturing,
Bosch has 250 subsidiaries and associate companies spread across 50
countries. There are 18500 scientist, engineers and technicians engaged in
R&D activities resulting in 2000 patent activities per years. All this place the
company at the top in the entire automotive industry.
Bosch India develops software solution for Bosch units across the globe and
brings the renowned BOSCH technology in gasoline engine management
systems to its customers. The software division of BOSCH India is 9001-2000
certified and assessed at CMM level 4.
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COMPANY PROFILE
MOTOR INDUSTRIES COMPANY LTD. ( MICO )-BOSCH GROUP
LEADERSHIP THROUGH INNOVATION AND TECHNOLOGY
MISSION STATEMENT OF MICO BOSCH
To delight customers through world class products as well as a nationwide
network of dedicated sales and service outlets. Its All-India network is well
equipped to provide quick solutions, backed by mobile service workshops,
excellent training in maintenance and availability of genuine spares.
VISION STATEMENT OF MICO-BOSCH
We, the employees of MICO, are motivated, informed, creative and open
minded.
Our aim is to delight our customers through world-class products, services
and solutions.
Continuous improvement is our way of life and we will work professionally to
succeed.
ROBERT BOSCH saysI have always acted on the principle: Rather lose money than the confidence
of the customer, the integrity of my goods and my given work always meant
more to me than temporary gain.
It all started off when Bhailal C.Patel visualised a greater partnership between
India and Germany and urged Bosch to setup a base in India. Later, an
Indian entrepreneur, Raghunandhan Saran approached Bosch to setup a new
venture in India. Established in 1951 in Chennai with a capital of Rs.2.8
million and employee strength of just two persons.
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Founded in 1951, Motor Industries Company Ltd. (MICO), a group member
of the BOSCH GROUP, is a pioneer and acknowledged leader in DIESEL
FUEL INJECTION EQUIPMENT & SPARK PLUGS. Access to state-of-the-
art technologies from Bosch and a zealous commitment to quality, have
made MICO the countrys largest manufacturer of Diesel Fuel Injection
Equipment and one among the largest in the world. In addition, MICO
manufactures industrial equipment, auto electricals, hydraulics for industrial
& tractor applications, electric power tools, packaging machines and
Blaupunkt car multimedia systems. MICO enjoys monopoly in many of its
products, as it is in automobile ancillary industry. Its main clients are Telco,
Ashok Leyland, MarutiUdyog Ltd. and Mahindra & Mahindra.
With its head office in Bangalore and hi tech manufacturing facilities in its
branches at Naganathapura (near Bangalore), Nashik and Jaipur, MICO
manufactures products as diverse as industrial equipment, auto-electricals,
hydraulics for industrial and tractor applications, electric power tools,
packaging machines, and Blaupunkt car audio systems.
MICO has 800 outlets both in service and sales and have a firm and well
established network. Today MICO is the THIRD LARGEST Manufacturing
Center outside Germany of the BOSCH GROUP.Bosch is one of the leading
automotive companies in the world. MICO is the Bosch in India
(representative of Bosch products) . MICO has 85% market share and its only
competitors are LUCAS & TVS. All around the world, the Bosch name stands
for competence and product diversity in the following sectors:
automotive equipment
power tools and accessories
thermos technology
household appliances
communication
automation and packaging machines.
MILESTONES:
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1951 Establishment of the Company
1953 Construction of the first factory building at Bangalore
1954 Manufacture of spark plugs, single- cylinder diesel fuel injection
pumps and nozzle holders
1955 Manufacture of elements and delivery valves
1956 Manufacture of multi-cylinder diesel fuel injection pumps
1972 Manufacture of nozzles and nozzle- holders at Nashik Pilot Plant
1974 Production begins at Nashik Plant
1981 Manufacture of special purpose machines and tools
1986 Manufacture of VE Distributor pump
1989 Manufacture of Hydraulic products
Manufacture of auto-electricals
1990 Naganathapura Plant inaugurated
1991 MICO becomes the Bosch Global Development Center for
single- cylinder diesel fuel injection pumps
MICO represents Bosch for imported automotive after market
products, Automotive workshop test equipment and
hydraulics and pneumatics
1992 Marketing of automotive accessories
ISO 9001 Certification for all three plants
1993 Manufacture of Bosch electric power tools
1994 Manufacture of packaging machines
1995 MICO becomes the Bosch global development center for a range of
Multi cylinder diesel fuel injection pumps
1996 Blaupunkt car audio systems launched
1997 QS 9000 Certification for Bangalore, Nashik and Naganathapura
Plants
1998 20 millionth single- cylinder pump produced
1999 Jaipur Plant inaugurated
Manufacture of Blaupunkt car audio systems in India
2000 MICO Application Center (MAC) inaugurated
MICO, Bangalore has been adjudged as All India Best
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Establishment for the 25thtime
Naganathapura Plant manufactured one millionth auto- electrical
unit 50000 VE pumps produced at Jaipur Plant
QS 9000 Certification for Jaipur Plant
2001 Launch of Terra 25 packaging machine
2002 25 millionth single cylinder pump produced.
Launch of indigenously developed marble and granite cutter.
Launch of first Bosch Car Service outlet.
MICO enters into Communication, Security and Imaging business.
ISO 9001:2000 certification for industrial equipment, packing
technology and power tools divisions.
ISO 14001 (Environmental Management Systems) certification for
Bangalore Plant.
2003 10 Millionth inline A pump produced.
Bosch Security Systems launched.
TS 16949 certification for all MICO plants.
ORGANISATION STRUCTURE
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CODE DESCRIPTION OF THE ORGANISATION STRUCTURE
LF - Joint Managing Director ( Manufacturing and Quality).
L - Director.
LK - Joint Managing Director (Commercial Administration).SRD - Automotive Equipment and Hydraulics.
SAA - Sales Automotive After-market.
EW/PL - Power Tools.
VT/PL - Packaging.
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SXE - Exports.
EB/PL - Energy System.
SP/PL - Spark Plug and Glow Equipment.
COM - Corporate Communication.
ST/PL - Security /Technology.
CEP - Corporate Engineering and Building Projects.
QAL - Corporate Quality.
BanW/QSG - Quality Assurance.
NaW/QSG - Plant Assurance(Nashik).
NhW/QSG - Plant Assurance(Naganathapura).
JaW/QAE - Plant Assurance (Jaipur).
RMB/QSG - Special Purpose Machines And Tool Room.
BanW/TL -Technical Plant Management, Manufacturing (Bangalore)
NaW/TL -Technical Plant Management, Manufacturing (Nashik).
JaW/TL -Technical Plant Management, Manufacturing (Jaipur).
NaW/KL - Commercial Plant (Nashik).
JaW/KL - Commercial Plant(Jaipur).
CDT - Corporate Direct Taxation.
CEC - Central Excise, Import Licensing And Customs.
CFN - Corporate Finance.
CPR - Corporate Personnel and HR.
CTG - Corporate Accounting/MIS/Controlling.
ICA - Internal Commercial Audit.
ISY - Information Systems.
SEC - Legal Council and Company Secretary.
PJ-SAP - Project SAP.
DSO - Data Security Officer.
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MANAGERIAL & SUPERINTENDENT STAFF MANPOWER
LEVELS IN MICO :
GM - General Manager
DGM - Deputy General Manager
DM - Divisional Manager
Gr.1 - Senior Manager
Gr.2 - Manager
Gr.3 - Deputy Manager
Gr.4 - Assistant Manager
Gr.5 - Senior Engineer / Senior Officer / Senior
Superintendent
Gr.6 - Engineer / Officer / Superintendent
Gr.7 - Assistant Engineer / Assistant Officer / Foreman
MICO PRODUCT RANGE:
HRM11 08.04
This is the exclusive property of Mo tor Industries Co.Ltd.. Without their consent, it may no t be reproduced or given to third parties.
M&SS MANPO WER AS ON 01.08.04(VA included)
GM
DG M
DM
Gr.1
Gr.2
Gr.3
Gr.4
Gr.5
Gr.6
Gr.7
Total* 2434 2443 Total 753 764 -11 2432 41
1
-4
5
8
40
25
22
32
-62
-78
15
29
39
82
13 5
22 9
38 1
58 6
43 1
50 5
51
52
48
49
45
42
40
37
36
42
2
2
10
23
65
98
134
199
157
63
1
6
5
15
25
73
112
167
219
141
(Strength as on 01.08.04 - 2432) A dd it io ns D el eti on sNet
Change
Average
Age
Present Strength
(as on 01.06.04)Strength
(01.06.03)Level Strength
(01.01.04)
14
33
34
74
95
204
359
554
493
583
14
34
33
74
95
204
359
562
495
564
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Diesel Fuel Injection equipment
Fuel Injection Pumps Single Cylinder, Multi cylinder, Distributor type
(VE)
Common Rail Systems
Electronically Controlled Distributor Pumps (VP37)
Governors , Injection Times and Feed Pumps
Nozzles and Nozzle-holders
Elements
Delivery Valves
Monoblock Pumps
SPARK PLUGS
Bosch Safety Systems
Antilock Braking Systems (Hydraulics)
AUTO-ELECTRICALS
Starter Motors
Alternators
AUTOMOTIVE ACCESSORIES
Halogen Bulbs
Fog Lamps
Stop and Tail Bulbs
Miniature Bulbs
Festoon Bulbs
Two-wheeler Head Lamp Assembly
Ignition Coils
Voltage Regulators
Horns
Diesel Filter / Filter Inserts, (Spin on / bowl), Lub Oil Filters, Air Filters,
Petrol Filters, Petrol Injection Filters
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Wrapped V-Belts, Clogged V-Belts, Poly V-Belts
Clutch Auto Belts
Clutch Plates / Cover Assemblies
Glow Plugs, Glow Duration Unit, Glow Indicators & Glow Resistors
ARAL Lubricants & Coolants
Shock Absorbers
Batteries
Blaupunkt Car Audio Systems
Diesel Fuel Injection Pipes
Automotive Relays
Wiper Blades
Gear Pumps
INDUSTRIAL EQUIPMENT
Special Purpose Machines
Lapping Machine
Deburring Machines
Electro Chemical Machining (ECM), Thermal Energy Method (TEM)
Measuring & Inspection Automats
Assembly/ Cleaning Equipment
Fully Automated Transfer Line
Super Finishing Machines
Special Purpose Grinding Machines
Test Benches for Service
PACKAGING MACHINES
Vertical form fill and seal machines
Dosing Systems Cup Filler, Auger Filler, Weigher & Pump
Pharmaceutical packing machines
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Confectionery processing machines
ELECTRIC POWER TOOLS
Construction Tools
Wood Working Tools
Specialty Tools
Cordless Tools
Metal Working Tools
Bench Top Tools
Pneumatic Tools
Bosch Accessories for all the Tools
High Frequency Tools
Bolting Technology
Fischer Fixing Systems
BOSCH AUTOMOTIVE PRODUCTS:
BLAUPUNKT CAR MULTIMEDIA
Car radios
Speakers
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Amplifiers
Subwoofers
CD changers
Accessories Digital Signal Processors(DSPs)
Antennas
Remote Controls
Coach Audio/Video
In Car Multimedia Players DVD/VCD/In Car Multimedia screens
MP3 players
DVD/VCD/In Car Multimedia screens & Public Address Systems
Trunk Systems
SECURITY SYSTEMS
Communication: Public address system, Conference system, Sound
management system, Industrial PA system
CCTV : Cameras and lenses, CCTV monitors, Digital Vide Recorder,
Observation Systems
Fire Alarm
Access Control & Building Integration System
Intrusion Alarm
MAJOR MICO CUSTOMERS
Ashok Leyland
Bajaj Tempo
Eicher Tractors
Escorts
Hindustan Motors
HMT
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FACTORY : SALES OFFICE :
BANGALORE NEW DELHI INDORE
NASHIK MUMBAI CALICUT
NAGANATHAPURA KOLKATA SECUNDERABAD
JAIPUR BANGALORE
SPECIAL FEATURES OF MICO
CIP-CONTINUOUS IMPROVEMENT PROCESS
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CIP is thought and action process that always questions the present systems,
processes and behavioural systems in all fields at all levels and improve
them. Main objective of CIP is to maintain competitiveness through
continuous improvement by involving all employees. They have this CIP
because of increased competition and increased quality requirement.
The CONTINUOUS IMPROVEMENT PROCESS (CIP) is participation of
employees at all levels has also been introduced at MICO. This is a thorough
action process which always questions the present system, processes and
behavioural systems in all fields, at all levels and improves them. It is a time
bound action plan that ensures effective implementation. This helps in
identifying flaws in working methods, and helps to bridge the gap between
ideal work methods and present methods. Customer orientation and
satisfaction stays at the core of CIP. This is achieved through improvements
in Quality, Cost and Delivery. CIP has no end.
The goal of CIP is to
initiate small improvements in daily activities.
involve all employees .
improve continuously Quality, Cost and Delivery
LERNSTATT
LERNSTATT is formed out of the German words Lernen and
Werkstatt
it was devised by an institute in mid 70s for BMW in Germany
its first task was an on-the-job language course for foreign workers
soon other companies adopted the idea, Bosch initiated Lernstatt
activities in 1980 and MICO initiated in 1992.
LERNSTATTactivities are organized by the moderators to make the group
aware of the requirements. The activities are not limited to one level in the
hierarchy. It is planned to be propagated to all levels in the organization. This
is to tie up communication and improve teamwork at all levels.
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Continuous training through Regular workshops and Seminars helps
employees at MICO to upgrade their skills and widen their professional
outlook.
MICO VOCATIONAL CENTRE (MVC)
MICO Vocational Centre (MVC) was established in 1960. It was conceived
and set up as a full-fledged training centre to develop a reservoir of skilled
personnel required to produce quality products on sophisticated machines.
Since then, MVC has been the centre to cater to all training needs of the
company.
One of our major activities is to train trade apprentices. They undergo basic
training common to all trades in the first year. Job-oriented training starts in
the second year, at the end of which they acquire advanced skills. In job-
oriented training, the demand for accuracy is on par with what is required in
the Tool Room. The output has to pass the normal modes of inspection. At
the end of the second year, they are ready to be posted to different shops for
in-plant training. Trainees in Tool & Die making undergo special training in the
third and fourth years, respectively.
FACILITIES OFFERED TO EMPLOYEES
MICO Library
MICO General Library
MICO Technical Library
Membership is opened to all employees at minimum fees of Rs.5
MICO Sports Club started in 1956
Provides recreation to employees and their family members
Promote and encourage sportsman spirit
PRED-Performance Review Employee Development
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It is an annual feature of MICO where in employees performance is evaluated.
CANTEEN
Technical Director, Mr. E. Lang, started MICO canteen in 1959. The canteen
in Bangalore is a show piece of the factory and one of the best equipped in
the country and it can accommodate 1200 person at a time. The working of
the canteen is guided by an advisory committee on which the employees have
an equal representation with the nominee from the management.
MEDICAL
Medical Center works round the clock and also provides a 24 hours
ambulance service. Most of the medicines are dispensed here. The medical
also liaisons with important hospitals, labs and senior medical consultants in
the city.
MICOs ENDEAVOUR & CONTRIBUTION TOWARDS
SOCIAL SERVICE
During the year 1996, MICO employees donated a days salary/wages
amounting to Rs. 13,68,271 towards the Andhra Pradesh Chief Ministers
cyclone Relief fund. The company made a matching contribution taking the
sum to Rs. 27,36,543. MICO has provided MSSI, a social service
organisation, with office space and other facilities. Machines are made to
serve people. Technologies are developed to lighten their load. MICO is
dedicated to satisfy the needs of the coming generations. Producing better,
safer, cleaner and more economical products for the realisation of a futurethat offers a better quality of life. MICO has also adopted a village near
Bangalore, for the development of that village. MICO ensures about the better
educational infrastructure, hygienic facilities etc.
ENVIRONMENTAL PROTECTION
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One of the foremost principles and desires of MICO has been
Environmental Protection. Within and around the factories trees and plants
are planted to take care of nature. MICO continuously improves its product
lines to ensure environmental protection through the following activities:
Elimination and reduction in the use of hazardous substances in
processes.
Through the process of reclamation like recycling of treated Canteen
waste water , sewage and process rinse water.
Through the process of treatment and safe disposal of effluents generated
in heat treatment and surface treatment processes in line with standards
laid out by environmental protection statutory bodies.
MICO has an Automated Treatment plant for process effluent at all sites. The
type of effluent treated in these plants are cyanide rinse, chrome rinse, nitrite
rinse, acid / alkali rinse, nitrite salts and used emulsion.
Also there is a Biological Treatment plant for Sewage & Sullage. The canteen
waste water is treated in this plant and the recycled water is used for
gardening purpose. Sewage is let into the underground drainage system for
final treatment by Govt. agency at Bangalore.
ENVIRONMENTAL POLICY
Environmental Protection is one of the MICO' s basic corporate principles.
Product quality, economic efficiency and environmental protection are given
equal importance. MICO' s Environmental Policy envisages continuous
improvement to control and minimize the potential impacts of the over all
company activities on the environment.
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The Environmental Management Systems is in place in which integrated
measures are being implemented in the processes instead of the end of the
pipe measures. It includes the following-
1. ENVIRONMENTAL PROTECTION AS A CORPORATE PRINCIPLE
Regard for environmental protection is one of our basic corporate
principles. We consider product quality, economic efficiency and
environmental protection as equal objectives.
2. REDUCTION OF ENVIRONMENTAL IMPACTS
Environmental protection concerns all process and modes of
behaviour in the corporation.
3. SENSE OF RESPONSIBILITY OF EMPLOYEES
Environmental protection is the concern of every employee. Creating
and promoting a sense of responsibility for the environment among all
employees is a part of the managing task
4. CONTINUOUS IMPROVEMENT
By way of a continuous improvement process, we are attempting to
control and minimise the potential impacts of our overall company
activities on the environment.
5. LEGALITY
Laws and regulations on environmental protection must be strictly
observed.
6. ENVIRONMENTAL TECHNOLOGY
We are applying the best possible technology to protect the
environment, taking into account economic aspects.
7. ENVIRONMENTAL MANAGEMENT
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We have an environmental management system in place with we are
subjecting to continuous development. It includes an organisation
with clearly assigned responsibility and defined delegation of tasks.
8. CONTRACTORS
We involve contractors and suppliers in our environmental protection
measures.
9. PUBLIC RELATIONS
We cultivate a co-operative relationship with authorities and an open
dialogue with employees and the public.
10. ENVIRONMENTAL CONTROLLING
We regularly review the compliance of these principles to ensure the
effectiveness of our environmental management system.
SERVICE
The customer pays for a promised product performance. MICO backs this
performance with a nation wide network of over 300 service points including a
service point at Ladakh (Kashmir).
Well-equipped and manned by MICO trained personnel, these service centers
render the expert servicing required for the high precision MICO products.
The customer has access to genuine spare parts through sales dealer outlets
numbering over 330.
VENDOR DEVELOPMENT
Indigenisation, which triggered the growth of MICO, is a continuing priority in
MICO. This covers product and process technology, besides import
substitution achieved through a concerted vendor development programme.
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Among its suppliers are over 600 small-scale industries. By sharing know-
how, by providing tools and gauges and by training their personnel, MICO
helps them become reliable suppliers not only to MICO but to others as well.
The suppliers Meet is organized to appraise the suppliers of factors such as
rising material cost, high material content in our products and the expected
rapid growth in both the local and international market. The meet is broadly
structured into technical and management session. The technical sessions
covers usage and merits of quality, cost control, continuous improvement
process, do it right, statistical process control, process plan and control,
metrology and gauges,
ISO 9000 and QS 9000 and also Preventive Maintenance and inspection.
Topics such as WORKING CAPITAL MANAGEMENT , LABOUR
MANAGEMENT, VALUE ENGINEERING and BENCHMARKING are covered
during the Management Session.
CHAPTER 3
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BACKGROUND OF THE STUDY
PROBLEM STATEMENT
The basic function of purchasing is to ensure continuity of supply of raw
materials, sub contracted items and spare parts and at the same time
reduce the ultimate cost of the finished goods.
But the poor supplier performance accounts for billions of currencies in
product recalls and also having control over no of suppliers is difficult. It is not
always easy to identify good vendors. In many cases purchasing department
is unjustly criticized because of poor performance. Generally, if the supplier
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base is too large it is very difficult to concentrate on all the suppliers in terms
of Quality, Cost & Delivery. The ability to select reliable vendors is a mark of
successful purchasing action. In this context, there is no substitute for an
objective means of SUPPLIER APPRAISAL.
OBJECTIVE OF THE STUDY
The objective of this project is to classify the suppliers based on their
performance, to get a clear picture with regard to the Supplier Base
Reduction (SBR) activity and identifying the key suppliers to Energy Body
(EB) Purchases in MICO Bosch Group, Naganathapura Plant so that only dedicated limited Quality suppliers on whom one can rely upon exists.
SIGNIFICANCE
Supplier assessment has become an asset and a valuable tool in the hands
of a buyer in making his purchase decisions and also providing feedback to
suppliers with low rating to encourage improvement in their performance or
black listing the vendor from the list.
THEORETICAL FRAMEWORK
With manufacturers increasingly relying on external suppliers, it is hardly
surprising that some 70% of the companies responding to an Aberdeen
survey view supplier performance as critical to their operations. Many
manufacturers have established strict supplier performance measurement
processes and procedures to ensure external suppliers meet stringent
operational requirements. As companies move beyond trying to squeeze
costs out of their supply chains, the performances of their suppliers become
critical.
Manufacturers can attain multiple benefits by appraising supplier
performance. Companies that fail to assess most of their suppliers, risk large-
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scale quality mishaps, service deficiencies, and cost overruns that can eat
into bottom-line profits and damage competitive positioning in the market.
On the other hand, companies that subscribe to such practices can reduce
buffer inventory, cut cycle times, and lower the total cost of Management of
their supply chains.
The ability to select reliable vendors is a mark of successful purchasing
action. An objective and accurate vendor rating can become an asset and a
valuable tool in the hands of a buyer in making his purchase decisions as to
eliminate the low rated supplier from the list or provide feedback to them to
improve their performance.
VENDOR RATING
In plain terms, the Vendor Rating system checks to what extent a supplier
does what he agreed to do like quality, delivery reliability, flexibility and the
price. The Vendor Rating System is the continuous observatory over Supplier
and Product / Performance / Service Quality
It is very much essential to evaluate vendors with common parameters by
giving weights for various evaluation criteria. It is required for creating a solid
& consistent vendor base to take challenges in business. The evaluation is
based on Indexes / Indicators, tailored to the different activities to be
monitored, that measure strategic components of the purchased goods
Vendor analysis and performance improvement is always part of quality
standards. The modern purchasing organizations evaluated the suppliers
based on the following parameters-
The desired quality defined as the suitability of product or service of use as
intended.
The total number of products required, including the schedule by which the
product or service is required.
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Price, which is a measure of value along with discount received, credit
terms provided, freight and delivery charges.
Tangible and intangible service that are benefits over and above the
quality and price.
The past performance of a particular vendor if he is an existing supplier.
The quality and safety measures followed by them so as to attain
international standards, which has become a need of the age and their
quality certification.
The sheer size of the supplier, which is an important parameter to know
about the growth potentials of the firm. It also helps to identify the
companies which are having economies of scale.
Their flexibility to sudden changes in delivery schedules and their delivery
commitments.
The technology used.
The infrastructure and R&D facilities.
Major customers of these vendors.
Maintenance of specifications and compliance with other specifications.
Promptness of delivery.
Co-operation and co-ordination of the supplier with his customers.
Financial position of the supplier.
No of rejections.
Cost reduction projects.
Final evaluations will be applied to:
o Qualified Supplier List management
o Contractual clauses
o Improvement trend measurement
o the redefinition of supply strategic objectives
o the identification of new alternative proposals
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ADVANTAGES OF VENDOR RATING & SUPPLIER APPRAISAL
More effective assessment of suppliers can ensure that the right supplier
is selected for a project and realise many benefits for customer
organisation throughout the procurement lifecycle in its widest sense,
Is a good strategic approach to assessing markets and suppliers
Helps the suppliers to assess their own suitability for individual projects,
principally by defining requirements in a clear, accurate and meaningful
way.
Helps in achieving supply chain transparency: a full understanding of
prime/subcontractor and consortium arrangements.
Helps in managing working relationships for maximum benefit.
It concretely adds new value to the procurement process as a spring of
competitive advantage.
High focus can be achieved as one can have focus on all the issues of
Quality, Cost & Delivery supplier wise in depth.
As low rated suppliers are eliminated and better suppliers are identified, it
leads to reduction of follow up/ documentation, reduction of inspection
time, logistics and hence reduce the cost and time.
More accountability on supplier.
As the purchases from key suppliers increases, cost advantage can be
obtained based on increased turnover.
DRAWBACKS OF VENDOR RATING & SUPPLIER APPRAISAL
Despite of considerable efforts to set up a good system, the end results
have too often been viewed as a group of antagonized suppliers and an
impractical, and meaningless mass of data.
With large number of non standard items and exclusive items it is very
difficult to find competitive vendors.
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The complete exercise will be farce if the number of persons responding to
it is few i.e., it cannot work well unless the people involved understand it
and are convinced that its is worthwhile.
CHAPTER 4
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RESEARCH METHODOLOGY
RESEARCH DESIGN
The type of research undertaken is descriptive in nature.
When a study is designed primarily to describe what is going on & what has
already taken place it is called a Descriptive Research. As this research
interprets facts as they are, Descriptive Research has been selected.
STUDY POPULATION
Population for this study is all the suppliers of MICO.
SAMPLE SIZE
The sample size is all the existing suppliers, new suppliers and the suppliers
already under the Supplier Base Reduction of Energy Body Purchases of
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direct materials in MICO, Naganathapura Plant. The total number of suppliers
are 93.
DATA GATHERING PROCEDURE
Date type Primary data
Data source data is obtained from employees in the EB Purchases
Department, EB Procurement Department EB QSG Department with
the help of Questionnaire, through which the ratings for each supplier
under various factors are obtained.
Data ratings of the suppliers on various criteria.
STUDY TYPE
To analyse the supplier performance, vendor rating tool weighted point plan
is used.
DATA ANALYSIS
METHODOLOGY FOR CLASSIFICATION OF SUPPLIERS-
The suppliers are classified strategically using the pyramid given below
E NT
K Key SuppliersT Technology SpecialistE Essential SuppliersN New SuppliersX Suppliers to be eliminated
D Customer SpecifiedW Not feasible to eliminate
K
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New Suppliers
The suppliers supplying to MICO for less than a year are classified under this
group. These suppliers have further business potential and can be developed
to replace the suppliers under deletion.
Technology Specialists
The suppliers having special technology or process and owning patents for
particular products are classified under this category.
Customer Specified Suppliers
These are the suppliers who are determined by MICO or the suppliers who
are recommended by customers.
After placing the suppliers in above categories, for all other suppliers the
following methodology must be used to classify the suppliers.
First, the Suppliers are rated by 3 different departments on different
parameters and the overall rating by each department is calculated by taking
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the average of the ratings corresponding to the factors. This is called as
Supplier Assessment, 2005 for MICO
NOTE: minimum of the ratings given by various employees for each supplier
are considered for each department.
For EB Purchases Department following are the factors considered
Purchase Volume, Technical dependency on MICO, Financial Strength of the
supplier, SOB with MICO (Dedication to MICO), Cost Competence, Sample
submission lead time, Organization strength, Capacity (TEK), Flexibility,
Responsiveness and Attitude of the suppliers.
For EB Procurement Department following are the factors considered-
Proximity, Adherence to schedule, Willing towards KANBAN, Organization
strength, Flexibility, Responsiveness and Attitude of the suppliers.
For EB Quality Assurance (QSG) Department following are the factorsconsidered-
Series Production Quality, Quality System, Rejection at Initial Sample
Inspection Report (ISIR) stage, Process Transparency, Ability & Response to
solve problem, Knowledge on quality tools.
Second, the above factors are consolidated into certain criteria according to
MICOs guidelines for 3 fields i.e., Price, Quality and Logistics. Each criteria is
given certain weights, these weights are specified by the MICOs judgment
about the relative importance of the respective factors. Consolidated factors
ratings are based on the ratings of certain factors of Supplier Assessment
2005 multiplied by 10.
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EB Purchases departments ratings are consolidated as COST/PRICEfactors.
Following factors along with weights are considered under cost/price
COST/PRICE RATING FACTORS
Factor Based on weights
1. Price (Price ratings) x 10 0.4
2. Price discipline (Financial Strength
ratings) x 10
0.2
3. Cost reduction projects (Flexibility ratings) x 10 0.3
4. Communication and co-operation
towards buyers when asked for price
reduction.
(Response ratings) x 10 0.1
QSG Departments ratings are consolidated as QUALITY factors. Following
factors along with weights are considered under quality
QUALITY RATING FACTORS
Factor Based on weighs
1. Communication of the supplier with
the employees of QSG Department.
(Response ratings) x 10 0.1
2. Co-operation of the supplier towards
the employees of QSG Department
(Attitude ratings) x 10 0.1
3. Series production quality (Series production quality
ratings) x 10
0.5
4. Quality system (Quality system ratings) x
10
0.1
5. Initial sample quality (Rejection at ISIR stage
ratings) x 10
0.2
EB Procurement departments ratings are consolidated as LOGISTICS
factors. Following factors along with weights are considered under logistics
LOGISTICS RATING FACTORS
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Factor Based on weights
1. Proximity (Proximity ratings) x 10 0.2
2 Adherence to schedule (Adherence to schedule
ratings) x 10
0.5
3 Flexibility (Flexibility ratings) x 10 0.2
4 Communication and co-operation
towards the Procurement Department
employees
(Response ratings) x 10 0.1
Each fields (i.e., Price, Quality and Logistics) overall rating is calculated by
multiplying rates with its corresponding weights for each supplier and then are
added to get the overall rating for each criteria.
Overall ratings = (W1*Ra1) + (W2*Ra2) + (W3*Ra3) + .
Where, W1 is the weight of 1stfactor
W2 is the weight of 2ndfactor
W3 is the weight of 3rdfactor
Ra1 is rating corresponding to a supplier and 1stfactor
Ra2 is rating corresponding to a supplier and 2ndfactor
Ra3 is rating corresponding to a supplier and 3rdfactor
Third, equal weights are given to overall ratings of each Field (Price-P,
Quality-Q, Logistics-L) and to get the final ranking which is called by MICO as
LEB ratings (supplier performance assessment of existing suppliers) the
rates are multiplied by corresponding overall ratings of each criteria and
added up.
LEB ratings = (Wp*Rap) + (Wq*Raq) + (Wl*Ral) / 10
Where, Wp is the weight given to Price/cost = .33
Wq is the weight given to Quality = .33
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Wlis the weight given to Logistics = .33
Rap is the overall rating corresponding to a supplier and
Price/cost.
Raq is the overall rating corresponding to a supplier and
Quality.
Ral is the overall rating corresponding to a supplier and
Logistics factor.
NOTE: if only two fields are rated, the weight for both the field is 0.5
Fourth, vendors are graded according to their ranking. Following table shows
the grading given to the suppliers and their classification.
SUPPLIER GRADINGS-
LEB - SCORE GRADE Supplier classification
8 and Above A Key supplier fully compliance6 to 8 B Essential suppliers conditionally compliantBelow 6 C Supplier for elimination - Not compliant
Note:
Below mentioned 10 suppliers have not been rated on the Quality parameter
hence their totals are calculated on 1:1 ratio for price and logistics.
1. BEICO INDUSTRIES LTD
2. CLASSIC WIRE INSULATION
3. HARINAM WIRES4. IMPEX INSULATIONS
5. INTEC POLYMERS LTD
6. PRECISIONS WIRES INDIA LTD
7. SUMI MOTHERSON INTEGRATED
8. SIMMONDS MARSHALL LTD
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9. SOUTHFIELD PAINTS & CHEMICALS
10. DOW CORNINGS INDIA LTD
CHAPTER 5
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FINDINGS
Classification of Suppliers Supplier Pyramid
E
47
D
1
N
5
T6
W
2
X
10
K Key SuppliersT Technology SpecialistE Essential SuppliersN New SuppliersX Suppliers to be eliminated
D Customer SpecifiedW Not feasible to eliminate Total = 91
K19
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GRAPH NO. 3
19
6
47
5
10
1 2
0
5
10
15
20
25
30
35
40
45
50
no of
suppliers
K T E N X D W
classification of suppliers
GRAPH NO. 4
CLASSIFICATION OF SUPPLIERS
21%
7%
52%
6%
11%
1%
2%
K T E N X D W
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Note:
Below mentioned 4 suppliers have been rated as X Elimination as they are
already under Supplier Base Reduction (SBR).
1. N D TESTING SERVICES
2. P E P CHARLES LIMPENS
3. SARA PRESSTECH
4. SUDHIR ENTERPRISES
Below mentioned 3 suppliers are not applicable for vendor rating as they
come under either under imports or TIRE-2 i.e., supplier of the supplier.
1. HINDUSTAN COPPER LTD
2. HENKEL TERSON INDIA LTD
3. SHIMO RESINS PVT LTD
Key Suppliers
- Supplier exceeds specific demand.
- Performance is above average.
- Scope of enhanced business.
- Total LEB score > 8 i.e., A grade suppliers
K
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1 ABILITY IN DISABILITY
2 CTR MANUFACTURING INDUSTRIES
3 CHAITHANYA HI-TECH ENGINEERING COMPANY PVT LTD
4 EMCEE PRESSINGS
5 ELECTROMAGS
6 GOZTZE (INDIA) LTD
7 INCHINOTEK PRECISION TOOLS
8 IMPEX INSULATIONS
9 METLOK COMPANY
10 POOJA PRECISION SCREWS PVT LTD
11 RESISTORS MANUFACTURING COMPANY
12 RAJAMANE INDUSTRIES
13 S K F BEARINGS INDIA LTD.
14 SABB ENGINEERING
15 SHASHWATI PLASTICS
16 STANDARD ELASTOMERS
17 SUJA RUBBER INDUSTRIES
18 S N AUTOMATS
19 DOW CORNING INDIA LTD
Technology Specialists
The suppliers having special technology or process and owning patents for
particular products as specified under this category.
1. ASSAM CARBON PRODUCTS LTD
2. CARBONE LORRAINE MADRAS
3. FAIRFIELD MANUFACTURING
4. GKN SINTER METALS LTD(FOR
5. S.J.S ENTERPRISE
T
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6. SAHNEY COMMUTATORS P LTD
Essential Suppliers
- Supplier meets general requirements.
- Scope to be a key supplier.
- Total LEB score 6 to 8 i.e., B grade suppliers
1 ADVANCED COMPONENTS & INSTRUMENTS
2 ANKIT FORGINGS
3 ADITHYA COMPONENTS
4 AVANTI COMPONENTS
5 AZ ENGINEERING
6 BESOTO STARTING SYSTEMS
7 BEICO INDUSTRIES LTD
8 CLASSIC WIRE INSULATIONS
9 DEVILOG SYSTEMS
10 ENGINEERING PLASTICS
11 HARINAM WIRES
12 INTEC POLYMERS LTD
13 J.L ENGINEERING INDSTRIES
14 KLAS ENGINEERING PVT LTD
15 KUDUMA FASTENERS PVT LTD
16 LAKSHMI PRECISIONS SCREWS PVT LTD
17 MACUREX SENSORS PVT LTD
18 MEHRA METALS COMPONENTS (P) LTD
19 METAL NITRIDERS
20 NATIONAL ENGINEERING INDUSTRIES
21 NIVITA TOOLS & ACCESSORIES
22 PRETECH PLAST
E
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23 PRECISION COMPAID
24 PRECISION PRODUCTS
25 PRECISION WIRES INDIA LTD
26 PAVITHRA TOOLINGS
27 PRAGATI PRECISIONS
28 PRESSMATIC ELECTRO STAMPI LTD
29 PROMPTEKK METALS & ALLOYS
30 RAMIND COLD FORGE
31 STUMPP SCHULE & SOMAPPA
32 SHASTRY TOOLINGS
33 SUMI MOTHERSON INTEGRATED
34 SWATHANTHRA INDUSTRIES
35 S J P INDUSTRY
36 SHRI RAM ENGINEERING
37 SIMMONDS MARSHALL LTD
38 SOUTHFIELD PAINTS & CHEMICALS
39 SRIMUKHA PRECISION PRODUCTS
40 SUNDRAM FASTENERS LIMITED
41 SUVESWARU ENTERPRISES PVT
42 UBE PLASTIC AND CHEMICALS
43 ESWAR ENGINEERING WORKS
44 VENKATESHWARA AUTO PRODUCTS
45 VSM ENGINEERING PVT LTD
46 WELL PRODUCTS INDUSTRIES
47 WELL KNOWN TOOLS AND EQUIPMENTS
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New Suppliers
The suppliers supplying to MICO for less than a year are classified under this
group.
- Potential for new products
- Inducted by LPB assessment.
- Competitive to replace sources under deletion.
1 ESSAE DIGITRONICS PVT LTD
2 PRICOL LTD
3 RAJAS ENGINEERINGS
4 SHARATH TECHNOLOGIES PVT LTD
5 WESTCOTT ELECTRICALS PVR LTD
Suppliers for Elimination
- Poor performance.
- No indication for Improvement.
- Total LEB score
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Customer Specified Suppliers
These suppliers are determined by MICO or RB customers. Hence they are
placed under this group.
1. LEO FASTENERS
Suppliers Without New Business
- Same as (X)
- Elimination economically/ technically not feasible.
- Total LEB score < 6. i.e., C grade suppliers
1 INDUSTRIAL TECHNICAL SERVICES
2 R.K.POLYMER INDUSTRIES
NOTE: Ratings obtained are between 1.5.10, where 1 is poor, 5 is
average and 10 is best.
The back up of the findings are shown in the following excel sheets-
RESULTS:
The null hypothesis, Ho has been proved wrong as from the analysis, the
classification of suppliers with the help of Vendor rating tools will help to
identify reliable suppliers to EB Purchases in MICO, Naganathapura.
D
W
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CHAPTER 5
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RECOMMENDATIONS & CONCLUSIONS
Limitations of the study
Some respondents may give biased replies.
Locating the criteria for supplier assessment is difficult.
The study is limited to EB Purchases of direct materials for MICO,
Naganathapura Plant.
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Direction for further research
Methodology used to conduct vendor rating is simple technique i.e.,
Weighted Point technique, so this can be used for classification of
suppliers in any organisation.
Rating of New Suppliers are not been taken into consideration, this can
also be taken.
If time permits, one can also consider his own ratings obtained by
observing the suppliers himself.
Recommendations
Periodic evaluation and grouping of the vendors has to be made accordingto the vendor pyramid guidelines.
The results indicate a large savings.
Suppliers classified under X i.e., Suppliers for elimination must be strictly
deleted from the list.
All the suppliers must have the knowledge of the elimination, so those
suppliers with B grade will be conscious, and perform well.
B grade suppliers must be guide for improving their performance.
Best supplier must be recognized and awarded, so others are motivated to
perform well to get the award next time.
Conclusions
A true measurement of an effective purchasing department is obtained by the
quality of reliable vendors selected for supplying goods and services.
The ultimate aim of this project is to show some direction for MICO,
Naganathapura Plant to identify its key suppliers and poor suppliers so that it
can decide on elimination of the poor supplier, find alternative suppliers,
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provide guidance to the average suppliers to improve and ultimately decrease
its costs indirectly. Leaner the Supplier Base more mutual Benefits to supplier
& the Organisation.
By this exercise, MICO, Naganathapura suppliers for EB Purchases
department are classified into-
Key Suppliers 19
Technology Specialist 6
Essential Suppliers 47
New Suppliers 5
Suppliers to be eliminated 10
Customer Specified 1
Not feasible to eliminate 2
Even though the savings, which are going to be resulted because of this
activity can not be quantified directly but definitely Organisation can feel the
impact of the same.
The over all effeciency of all the realted depatments will increase to the
proportion of number of suppliers being reduced.
To conclude, the 52% of the total suppliers are essential suppliers with
average performance, 21% are key suppliers and 11% of the suppliers are to
be considered for elimination. And also this project has emphasized the need
for Lean supplier base, its advantages, method of segregation of suppliers &
strategies to achieve it.
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MICO has accepted my findings and has started implementing my suggestion
by considering the suppliers with grade C for elimination.
BIBLIOGRAPHY
MICO Journals http://micoweb.in.bopprosch.com http://www.indiainfoline.com
Research Methodology & Techniques - Kothari C.R
Production and Operations Management
K Aswathappa & K Shridhara Bhat
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APPENDICES
Questionnaire