Acknowledgement

We express our heartfelt gratitude towards our Course Director, Shri. Rakesh Rajpurohit

(PIM) and Shri Rajnish Kumar, (PIT)for his valuable guidance, support and inspiration

throughout this endeavour. It was due to his supervision that the work on the project was

enjoyable, rewarding and above all successful.

We are also thankful to all the officers from IOFS specially Sri Shashi Pal (AWM IOFS) and

MSIL and specially Sri Tarun Dheer (MSIL Engineer )who gave us data and information

related to their organisations and helped us in understanding their systems.

We also express our heartfelt gratitude towards Sri P S Shammi (RDSO) , Sri Kanaujiya

(Sr.DMM LKO), Sri Agrawal (Dy CMM NCR), Sri Santosh Kumar (Dy CMM COER) for

their valuable guidance..

We also extend our gratitude towards National Academy of Indian Railways,

Vadodara and its faculty members without whom this project would have been a distant

reality.

National Academy of Indian Railways,

Vadodara, Gujarat June, 2016

1

Abstract

Supplier relationship management is a comprehensive approach to managing an enterprise's

interactions with the organizations that supply the goods and services it uses. The goal of supplier

relationship management (SRM) is to streamline and make more effective the processes between an

enterprise and its suppliers.

In this project we have studied the SRM activities of IOFS and MSIL and implemented them

for the working environment of railways .Our work plan was divided into following activities

1. Collection of graphical, tabulated material from theory

2. Collection of data from different organisations

3. Visits of IOFS, RDSO, MSIL and different divisions and HQ

4. Study of existing system in following areas

Vendor registration

Vendor rating

Vendor relations

Vendor development

Indigenization

Localization

SRM

Handling Rejection Cases

5. Modify/ design new model suitable for the Indian Railways

2

Chapter 1

Literature Review

Introduction

Indian Railways procure about 12,500 stock and 8,000 non-stock items worth

Rs.30,000 Crores every year for smooth running of Railways which is a substantial amount.

Besides, there involves substantial in-house cost in various activities involved in processing

for procurement of materials through tenders and making them available at consumer’s point.

There are lot many number of vendors involved in the procurements. The Indian Railways is

is one of the most important customer groups for many suppliers and service providers. This

is due to the size of the organisation and the volume of public expenditure. It is of great

importance for the Indian Railways to maintain a healthy relationship with its vendors to

ensure supply of good quality material within the prescribed timeframe.

Maintaining positive relationships with suppliers is increasingly being recognised as

a critical factor in sustaining a competitive advantage (Stevenson 2009:525). Most businesses

view their suppliers as partners; in other words, they seek a stable relationship with

comparatively few suppliers that are able to provide high-quality supplies, sustain delivery

schedules and remain flexible in relation to changes in specifications and delivery

schedules.According to Monczka et al. (2010:109), most buyers and sellers recognise the

need for teamwork between buyers and suppliers as the best way to reduce costs and ensure

3

quality, delivery, time and other measures of performance. The relationship is two-sided, as

both parties have the power to shape their nature and future direction. Mutual commitment

and balanced power are key features. Commitment enables both parties to keep the

relationship working overtime and balance ensures mutual benefits. This teamwork is often

described as SRM.

However, the public sector has an inherent problem with SRM, as it often sees a

negative correlation between building relationships with suppliers and maintaining ethics.

This is based on a perception that in order for public procurement officials to form

relationships with suppliers, a compromise must be made in relation to their ethics. However,

the importance of sound supplier relationships is vital and relationships with suppliers should

be viewed as a key strategic activity in the public procurement sector.

An alliance between two parties is much like a relationship, & if only one party is

happy, then the marriage is not likely to last .Same scenario is in case of Vendors and

Organization. The Supplier Relation Management process aligns, provides structures, and

manages the supplier relationships. It is important to achieving win-win competitive

performance for the buyer and supplier. It involves “a mutual commitment over an extended

time to work together to the mutual benefit of both parties, sharing relevant information and

the risks and rewards of the relationship. It helps in planning resources and directs, confirms

and adjusts the relationship between company and key suppliers. It Develops the network

bonds of trust, commitment, cooperation & dependence.

The main goal of SRM is to maintain a good relationship with vendors. As per

purchaser's perspective the goal is to maximize the profit as well as reduce the risks involved.

If we are having good relationship with suppliers this will reduce the difference between

capability and performance. This will help in creating a reliable and long term source of

4

supply. There is sharing of Information between organisation and supplier thus Organisation

can inform the supplier about their needs and Supplier works in close coordination with the

organization. This helps in reducing overhead costs as well as lead time is also reduced. We

have to maintain a less stock as buffer stock.

If we see from the perspective of a supplier if he has a good relation with organisation

It will be a source of revenue for him. He will have a long term relationship with the

organisation. Also in SRM process as the organisation and supplier works together for the

organisation thus gives them clear idea about the trends of organisation and they can plan

their activities accordingly and supplier grows in line with the organisation

But the process of SRM is not as simple as it looks. The organisation has to face many

challenge. Selection of supplier is one of the challenge. Organisation has to choose one

supplier which will be helpful in highest value addition to the them with least effort i.e.

supplier stratification. Organisation will have to fix of needs and will have to identify the key

values of organisation. Also they will have to fix the performance levels and tolerance. The

SRM process involves System and process integration. Capability assessment is the very

important process in SRM. A careful and accurate assessment of the vendor capability is

must. The organisation and vendor invest jointly in new capabilities to improve the

organisation. Organisation should organise the training of its own staff as well as staff of

vendor. Collaboration with different organisations are made.

There are some agreements between the organisation and vendor which are structured

for srm.They agree upon various Incentive schemes for good performance and penalty for

poor performance. Well defined expected performance level and tolerance ranges are

communicated to the supplier well in advance. Also policies are formed for dealing the cases

of underperformance, its consequence and remedial process

5

Maruti & Toyota are famed for its tightly knit group of suppliers and its long-term,

collaborative approach to supplier relation.  It operates a system of shared values and work

philosophy across a tightly knit supplier network, an approach that has been adopted by many

other organisations, with varying degrees of success.

6

Chapter 2

Current practices in Indian Railway

Bulk of the procurement, spares and capital goods is being done by Indian

Railways from approved suppliers which are either approved by RDSO, DLW, CLW,

ICF or RCF etc. The list is prepared by these nodal agencies are used for making

purchases by stores department of various Railways and Production Units. But it is

surprise to note that during vendor approval, purchase officers have not been made a

part of the process. This is being done solely by technical officers who are not in true

sense the Supply Chain Managers. Also there have not been so many things related to

suppliers relation management in the past in Indian Railways. At present Indian

Railways is not using any proper vendor rating method to select the supplier. Also

there are not so many activities like vendor audit. At present there is a need of looking

into this area so that profit can be maximized as well as the risk is minimum. Thus

increasing the efficiency of stores department as well as relationship with supplier is

better.

1. V endor Registration Process

7

Registration Process was made online since 1st Dec 2010. RDSO website has a

vendor Interface on its website which can be accessed very easily by vendors.

Following are the steps of the process of registration.

1. Register online

2. Submit fee

3.Uploading all relevant documents

4.Legar Scrutiny by Legal Cell

5.Technical Screening

6. Acceptance/Rejection

7. Visit to firm's premise for STR(Schedule of Technical Requirements)

verification

8.Capability Assessment Report

9.Sample testing

10. Approval by Directorate head

Flowchart Showing Vendor Registration Process in IR.

8

First part-II registration should be given normally, but in some cases developmental

order are also placed first. After assuring adherence to QAP, and satisfactory

performance of the product in field and after supplying the minimum specified

quantity part II status is given. Then after capacity/ capability/ quality audit, firm is

given Part I status. For the quality audit, compliance to STR, QAP etc is verified.

Exhibitions are made once in two years . Last exhibition was made in December

2014. RDSO also participates in National and International exhibition programs for

interaction with vendors.

2. Inspection and Handling Rejection Case: At present items are inspected by

RDSO or RITES or Railway Advisor (for imported items) or by consignee. In case

the quality of material is not as per the desired specifications, the material is rejected

and a rejection memo is prepared. The firm is asked to lift the material. In case of

warranty rejection or rejection of pre-inspected item, board has issued a guideline

vide circular no. 2000/RS(G)/379/2 dt 07-08-2015.

3. Indigenization: Major items of import are rolling stock involving new technology

not available in India and their spares, machines/equipments not available

indigenously and items of regular consumption where indigenous sources are not able

to meet the requirement of Railway either in quantity or quality.  Import is resorted to

in inescapable circumstances only. At present, railways is doing so many efforts

towards indigenizing various items.

4. IT Implementation: Implementation of information technology is going on in

Indian Railways. All the information about materials can be seen online Vendor

Registration Process is Online. DLW is doing online prototype inspection. Vendor

Interface is there on RDSO website where vendors can get information regarding

registration and status. There is no centralized Vendor Portal and Vendor Directory.

9

Chapter 2

Study of current practices in various organisations in field

1. Indian Ordinance Factory

Vendor Registration and Vendor Rating:

Before the year 2005, since, all the quality control was centralized in the DGQA, therefore,

Vendor registration was also done by the DGQA. However, post-2005, registration activity

was delegated to respective factories.

Registration Procedure:

(i). Vendor Enrolment: Those vendors that are interested in participating in an open tender

have to purchase a Format application and enrolment digital key (INR 2000/-), which is

essential for enrolment.

Subsequent to this enrolment, an Initial Approval Requisition will appear on the screen of

concerned MMG officer (JAG level) which has to be approved online.

10

(ii). Capacity Verification: Once the initial online approval is granted by the MMG officer,

enrolled vendor is required to online update the relevant documents like Vendor Registration

Certificate (if registered in any other Ordnance Factory for the same or equivalent item), Past

5 IT Returns, Service & Sales Tax Certificate, Central Excise Certificate, ISO Certificate,

Industrial License, Turnover and Balance sheets for 5 years, etc. along with the submission of

Vendor Registration Request (VRR) fee in the form of Demand Draft (INR 1000/-)

A vendor can participate and bid in an Open Tender as soon as it gets enrolled in the

online system

However, the vendor will be eligible for commercial bid only after final registration

and success in technical bidding

A vendor already registered in another factory for the same or equivalent item need

not to be verified physically again, and is eligible for commercial bidding directly

after submission of essential documents as mentioned above.

Vendor registration/Technical bidding is valid only in case of mode of Open

Tendering and No vendor that is already registered with the factory can participate by

this mode.

(iii) Vendor Rating:

There is a system established in the factory available with all the concerned parties

like Store Section, MMG section, Quality Section etc. that can feed the data in

respective heads

A vendor is rated based on various parameters like delivery schedule is as per the

contract, quality of material & no./lot of item rejected from the delivered lot, failure

of delivery cases, etc.

11

This data is fed into the centralized system, which compiles the data entered by

different parties and make calculations as per the set formula

Based on this data vendor rating is generated in terms of %age

Vendor Rating %age is also a criteria to select vendors during Limited Tender Mode

of purchase.

Following are the defined parameters for Vendor Rating

(a). Quality Rating:

VRQ = (Q1 + 0.7 X Q2 + 0.3 X Q3 + Q4) / Q

Where, Q1 = Qty. accepted conforming to specs,

Q2 = Qty. accepted with deviation,

Q3 = Qty. accepted after rectification,

Q4 = Qty. rejected and

Q = Total Qty offered for inspection (Q1 + Q2 + Q3 + Q4)

(b). Delivery Rating:

VRD = (Qa/Qc) + (Qb/Qc) X (Tc/Ta) X 0.5

Where, Qa = Qty supplied on time

Qb = Qty supplied late beyond delivery period

Qc = Qty ordered

Ta = Total time taken to complete the supplies, including late deliveries in number of days

Tc = Delivery Period as per supply order in days

(c). Price Rating:

VRP = PL / PQ

12

Where, PL = Lowest price quoted by any supplier against the tender

PQ = Price quoted by the supplier

(d). Service Rating:

Break-up as per IS12040:2001

Parameter

Maximum Score

Cooperativeness and readiness to help

in emergencies

30

Readiness to replace rejected material 20

Providing support documents in time 10

Promptness in reply 10

Cooperation in delivering and

implementing measures or avoiding

recurrence of defects/complaints

30

TOTAL 100

(iv) Delay/Failure of Delivery:

If any delivery schedule is tempered with by the vendor due to its incapability or any

other reason that does not include Act of God, then firstly the rating of respective

vendor is affected

Before 2005, in most of the cases of failure in delivery were countered by performing

Risk Purchase, however, Risk Purchase method has been now minimized to avoid the

loss of time and money caused due to delayed response from defaulter vendor

13

At present scenario, Security Deposit at 10% the value of Tender is mandatory for

purchase of all items and has to be submitted as soon as contract is finalized. Same is

deemed to be forfeited in case of any failure of delivery

In case of any delay of delivery, Liquidated Damage has to be imposed on the vendor

at the rate of 0.5% per week and upto a maximum rate of 10%

(v) Special Points of Counter Measure followed for Delay/failure of delivery in OF:

Old methods like Risk Purchase has been abolished and Security Deposit is imposed

mandatorily on all items irrespective of category

Vendor Rating is highly affected in cases of delay in delivery, thus, increasing

difficulties for the vendor to grab future contracts

Quality Control and Inspection:

There are three categories defined in Ordnance Factories for the purpose of Quality

control and inspection viz.:

1. ‘Self-Certification’ category inspection status is awarded to firms securing more

than 95% vendor rating apart from other requirements mentioned in Schedule Of

Procedure for input material inspection. This categorization is valid for 1 year and has

to be reviewed on expiry of period.

2. For ‘Inspection at Firm Premises’ category inspection status, firm has to secure

more than 85% marks in vendor rating apart from other requirements mentioned in

Schedule Of Procedure for input material inspection.

3. ‘Inspection on Receipt’ category inspection is applicable to the firms securing

70% to 85% marks in vendor rating apart from other requirements mentioned in SOP

for input material inspection.

14

Procedure of Quality Check:

Though it is mandatory for all the suppliers to attach all relevant test certificates

issued by labs accredited to NABL, with the delivered material, yet inspection for all

Category 2 & 3 material is done in factory premises

After the generation of MIS, material is handed over to Quality Control department

for sampling and testing of the material

For testing purpose Factory owns Laboratory that is equipped with most of the

facilities required to test majority of items, however, if necessary some of the items

are also sent to Laboratory of adjacent Factories

Parameters subjected to test includes material properties, dimensions and other

features

Based on the test results, decision is mentioned on the MIS sheet for further action

Parameter Sample Size Counter-ActionMaterial Property 1 Unit Whole Lot will be rejected

without any further checkCriticalDimension

1 Unit Whole Lot will be rejected without any further check

Other Dimension Based on Indian Standard of Sample size

Every Unit of Lot will be checked for further use

2. MSIL:

Maruti Suzuki makes 1.5 million Maruti Suzuki family cars every year. That’s

one car every 12 seconds; reason behind the success is its JIT supply chain

management which is one of the best in the country. The backbone of a strong supply

chain is Supplier Relation management.MSIL has a vast vendor base, unlike other

OEMs, that allows to achieve 12 sec cycle time. Maruti suzuki India Ltd. does many

activities for maintaining a better supplier relation management.

15

• Vendor Registration : Vendor can register in MSIL as a Tier-2 supplier by sharing

their detail and interest in component development with the company. New vendor

may also call R&D team for an exhibition of their Part production plan with capacity.

R&D team is responsible for calling a Tech. Review before source selection with

Vendor in presence of Supply Chain personnel to discuss MSIL production plan =>

Vendor may discuss respective capacity.If found satisfactory the Vendor may be

registered as Tier-2 source after submission of all necessary legal documents.Only

then the Drawings are issued by MSIL to new Vendor.

• Vendor Rating : Vendor rating of MSIL is incorporated in the SAP based system

available.Parameters of rating are Quality, Cost, Delivery, Development.Based on

16

these Q, C, D, D parameters, system will be rating the vendors and compare on a 10

point scale

17

• System Process: Negotiation is a major part of source selection in MSIL from initial

stage of registration to source selection. MSIL enters in a long term contract, whose

life is evaluated on the basis of quality of material supplied by vendor. Financial

Support is made available for Investment in Dedicated Toolings as per the MSIL

Tooling Support Policy. And this support is also available directly to Tier2’s through

MSIL.The First Mover gets the advantage of higher volume share in order to get

faster return over the investments. Dedicated Department in Supply Chain Vertical

called as Vendor Development cell that discusses future projects with vendors and

provide support in modification of existing vendors and discovery of new vendors

• Quality : MSIL has a dedicated vertical of Quality Assurance that holds

responsibility of not only the final product but also owns the inhouse labs to test new

components. Supplier Quality Assurance is responsible for all the part quality being

supplied whether by new vendor or existing vendor

• Audits: MSIL does Frequent Quality checks on the vendor premises. Source selection

audits are done. It evaluates technical and financial capabilities of vendor. 3rd party

18

safety audits of vendor premises are also performed.Supply chain managers are also

involved in these processes. HR Audits of vendors are also performed and MSIL

share the good practices with the HR Teams of the vendors. Also they do the audit of

vendors of their Tier 1 vendor to ensure better quality.

They organise vendor conference frequently in which they discuss the

future projects. Also they have system of awarding the vendors for good performance.

Thus the vendors remain motivated and aware of future developments.

A Vendor's Perspective

Whenever some vendor does business with some organisation, his main aim is

to maximize his profit. He wants simplified process of vendor registration payments

etc. Also if some dispute arises there should be a simplified process for the redressal.

In the present scenario, railway is not giving much attention towards its vendors from

the aspect of maintaining a good relationship. Which is highly discouraging for the

emerging sources.

New entrepreneurs are not willing to do business with the railways. The

processes are a bit complicated and lengthy. Also most of the items are railways

specific and they cannot be used anywhere else. So if a supplier doesn't get the offer

again, his whole setup is idle which can lead to closure of firm.

There have been no initiatives towards joint investment which is one of the

basic pillar of the supplier relation management. Also suppliers have no information

about the future trends and planning of Indian Railways thus they are not able to plan

their activities accordingly.

Negotiations meetings for scrap and purchase need to be there as a regular practice.

19

Chapter 4

Analysis

Based on overall observations of the Indian Railways and other organisations like

IOFS and MSIL, we have tabulated our observations in the following areas in all the

three organisations.

IR IOFS MSIL

Vendor Registration Online, Complex Process

Lengthy & Complex Process

Open Online System

Vendor Rating Grey Area Software Based System

SAP Based System

System & Processes Variation among zones Partially Defined Vendor Friendly

IT In Progress In Progress Fully Implemented

Quality RITES/RDSO Inhouse Labs for each factory

Dedicated Department

Where are we lagging?

• Railway is not giving much attention towards its vendors from the aspect of

maintaining a good relationship

• The processes are a bit complicated and lengthy.

• New entrepreneurs are not willing to do business with the railways

20

• No initiatives towards joint investment which is one of the basic pillar of the supplier

relation management.

• Suppliers don’t have much information about the future trends and planning of Indian

Railways thus they are not able to plan their activities accordingly.

21

Chapter 5

Conclusions

1. Improved Vendor Rating System: A proper vendor rating system should be used

for rating all the vendors of IR. This rating system must cover all the criteria related to

Quality of Product, Delivery Performance, Price of Item, Service of supplier and

System.

Suppliers can be rated by keeping following criteria for evaluation:

The standard lays down the comparative weightage of various factors based on

criticality of component on quality and delivery consideration. For majority of items

for which vendor list is maintained, the Quality shall be treated as Critical and

delivery as Sub Critical Path . For this classification, the standard lays down

following weight ages:

Quality: 35%

Delivery: 20%

Price: 25%

Service: 20%

Following guidelines can be followed regarding vendor rating

•Vendor evaluation shall not be applicable to purchase orders valued below Rs

10,00,000 but if item is Safety item, this limit can be reduced upto Rs. 5,00,000

22

•Firms with rating less than 50 per cent should be taken as unreliable and generally

ignored for placement of purchase order .

•Exception :Administrative interest owing to reasons like inadequate sources, limited

capacity, lower price etc .

•Vendors with less than 30per cent vendor rating can be considered for deletion from

the list of approved suppliers .Also there should be a team of professionals which will

visit the vendors with lower rating and identify their problems and give them

recommendations for improving the performance. If the improvement is seen in next

orders, their ratings should be increased accordingly.

•Overall vendor rating can be decided based on orders placed during the last three

years (not less than 3 )

Reference can be taken from the studies done by Abhay Kumar Singh et.al. IRSS

2012 Batch for the major project Vendor Evaluation and Rating.

2. Long Term Contacts: Untill unless we maintain a long term relationship with

vendors just like the private automobile companies have, we will not be able to assure

the continuous supply and minimize the defaults from the vendors part. Vendors will

be able to manufacture the items more economically and quality will be ensured. Also

the traders will be reduced as OEMs will be interested to participate as a first hand

vendor. Recently the Railway Board has issued a circular regarding the LTCs. But it

is not yet adopted by most of the railways. There is a need to implement this concept

all over the railways. There is also need of selecting the items for which the LTCs will

be beneficial. The contract conditions must be so framed that there is a benefit to the

railways as compared to the normal contracts. Also while entering into LTC, we

should take care that orders are placed on multiple suppliers. Sources on which orders

are not placed are diminished with time. Also some big supplier can quote lower price

23

initially so that its competitors are not able to survive the market and at later stage he

can enjoy the monopoly. Thus if sources are less and item is of critical nature, we can

enter into LTC with more than one supplier and quantity can be divided on the basis

of capability and rates.

3. Negotiations: There should be provision of negotiations as a regular process in the

tendering process so that the rates are competitive. Thus we will be able to ensure the

economy. At present we are doing negotiations with L1 only which itself limits the

basic logic of negotiation. There should be some discretion as per the scale of the

officer dealing with case so that economy can be ensured and competition can be

increased among vendors. This will help in breaking the cartels also. Also reverse

auctioning must be encouraged and used more frequently with some modifications.

4.Financial incentives to New Vendors: If we give financial incentives to the new

and emerging vendors after proper scrutiny, more number of interested parties will

come and participate . There will be contract between railways and supplier and there

can be so that the vendor will be assured a minimum quantity in future if he

successfully develops the product and maintains the quality standards.

5. Vendor Development For this purpose, railways must organise vendor meets at

all the levels i.e. at Headquarters, workshops divisions etc. There should be some

agenda of each vendor meet and technical persons must be assigned the task of

clearing the doubts of new vendors. Also vendors must be familiarized with various

items of railways by showing them the drawings and explaining the manufacturing

process to them. It will reduce the risk of rejection. Under Prime minister's Make In

India campaign, an special investigation wing must be formed comprising supply

chain managers, user departments and designer of RDSO that will look after all

24

import items across all the zonal railways and PUs and will work for search and

development of new vendors for the main aim of indigenization of these items

6. Vendor Interface- The process of vendor registration should be made simple. It

should be made fully online so that vendors can do it by themselves. The status of

their registration should be shown online. All the details of vendor, his performance

related data, vendor rating etc vendor must be made online on his account. Also there

should be a system in which notifications should sent to vendor so that when the

registration is going to expire, they are notified about it. As well as the bill passing

activities must be made online and this should be connected to the vendor account so

that he is able to track the status of his bills. Also we can have option in the same

interface where a vendor can upload the dispatch details and particulars of the

material online and the consignee is notified about the same.

7.Inspection and Handling of Rejection Cases-

Self-Certification status should be awarded to firms with good vendor rating for input

material inspection and should be reviewed on expiry of period. Also there should be

provisions made for inspection at firm's premises.

8. Decentralization cum divisionalisation of Vendor Development: At present ,

some PUs and RDSO is involved in vendor development. This process must be

decentralized . Divisions and zonal headquarters and major depots must be delegated

with the powers for vendor development. There should be a committee at all the

levels which will search for new vendors and familiarize them with the practices of

the Indian Railways and encourage them to do business with Indian Railways by

manufacturing various items.

9. Make in India - Under Prime minister's Make In India campaign, an special

investigation wing must be formed comprising supply chain managers, user

25

departments and designer of RDSO that will look after all import items across all the

zonal railways and PUs and will work for search and development of new vendors for

the main aim of indigenization of these items

The size of India’s public procurement market offers a unique opportunity for its

leveraging for kick-starting the Make in India mantra of the new Government: an idea

most developed countries have been rigorously following for decades

IDDM

Under the new DPP, the government has introduced a newly incorporated

procurement class called “Buy (Indian-IDDM)”, where IDDM stands for Indigenous

Designed Developed and Manufactured.

 The category refers to the purchase from an Indian vendor of either products that

have been indigenously designed, developed and manufactured with a minimum of 40

per cent indigenous content or products having 60 per cent of it on a cost basis but not

designed and developed indigenously.

In future, vendors offering equipment designed and built in India(IDDM) products -

will be preferred to vendors offering equipment designed abroad.

Besides being designed and developed in India, at least 40 per cent of a product must

be manufactured in India for it to qualify for the IDDM category.

Under the new DPP,there will be three main categories:-

Make I-the government will fund 90 per cent of the development cost, instead of just

80 per cent. Further, if after successfully developing a prototype, the vendor does not

get an order within 24 months, his 10 per cent expenditure would be refunded.

26

Make II-it involves industry funding, rather than government funding, for prototype

development. If a tender is not issued within two years of the successful prototype,the

entire development cost to the duly selected vendor would be refunded.

Make III-it seeks to galvanise innovation in micro, small and medium enterprises

(MSMEs). While procedurally similar to Make II (industry-funded Make), this is

reserved for projects with a development cost of less than Rs 3 crore, which will be

exclusively reserved for MSMEs.

27

Chapter 6

Future Scope of Studies

• Identification of ITEMs for which LTC will prove to be beneficial

• Developing a Vendor Interface Module ideal for Railways

• Vendor Development Cell at divisional Level

28

References

1. McCue, C. P. and Johnson, B. R. (2010). Strategic Procurement Planning in the

Public Sector. Herndon, VA: NIGP, and the Scottish Public Procurement Toolkit - A

step by step guide to producing a strategic sourcing strategy, August 17, 2010.

2.Effective Supplier Relation Management , Josheph C. Black

3. IS 12040 , 2001 Guidelines for development of supplier rating system

4. Major Project Report " Vendor Rating" by Abhay Kr Singh and group IRSS 2012

batch

5. Supplier relationship management – anathema for theSouth African public

procurement sector by Micheline J. Naud and others.

6. DPP guidelines

29