New Delhi: Maruti Suzuki India Ltd has hired a crisis management firm to audit its vendors after unusually heavy rain in August stalled production at a key parts supplier in Gurugram, disrupting production at India’s biggest carmaker. Momentum Global, the crisis and emergency management company, will implement water safety standards at the manufacturing plants of its vendors to ensure Maruti Suzuki’s production schedule doesn’t get disrupted in the future.
Maruti had to stop production for two days in August as supply from the vendor, Krishna Maruti Ltd, stopped due to water-logging. Although Maruti didn’t face much pressure as retail demand was subdued, a buoyant market would have led to much longer delays in car deliveries to purchasers and revenue losses, two people aware of the development said on condition of anonymity.
A factory shutdown for a company as big as Maruti Suzuki can cost its dealerships sales of almost a week, said Anil Sharma, associate director, MarketsandMarkets, a market research firm. “So, these kinds of initiatives are not unknown in the automobile or other manufacturing sectors since companies would also want to get rid of redundancies from their systems to improve efficiency."
Momentum Global outlined best practices that suppliers should incorporate to avoid such situations in the future at a vendor conference in August.
Preventing such disruptions is critical as Maruti Suzuki follows a one-component, one-vendor policy, which means that any trouble at a supplier can potentially stall production at Maruti Suzuki factories.
Maruti Suzuki did not respond to an email seeking comment on Monday.
Momentum Global already conducts a fire safety audit of vendors’ capacities, according to one of the two people cited earlier.
“Loss of production days for any vehicle maker is a big thing, especially before the festive months," the person said.
In May 2016, Maruti Suzuki had to halt production for several days after a fire broke out at the plant of its vendor, Subros Ltd.
On 1 October, Mint reported that Maruti Suzuki has started its maiden performance audit of vendors and also introduced a so-called “purple band" for its most efficient suppliers as it seeks to retain the leadership position in India.
According to the second person cited before, Maruti Suzuki’s decision to hire Momentum Global will help its suppliers, as many of them don’t have the means to implement such an initiative.
“This time the incident happened in August when demand for vehicles was down. Otherwise it would have resulted in bigger losses for the company and also other suppliers," the person said.