Mumbai: Multinational conglomerate General Electric (GE) is planning to halve the number of its suppliers in India from the existing 3,000 within three years as part of an ongoing exercise, a top company executive said.
“Having begun a supplier consolidation last year, we will aggressively continue it over the next three years to scale up with our strategic (supplier) partners and drive more volumes to get the best outcomes," Amit Kumar, vice-president, global supply chain, GE South Asia and Asean said.
“In the past five years, we acquired many industrial businesses in India, so their suppliers just came in. Now, we want to ensure that we don’t have, say 10 suppliers, for the same product because none of them is operating at a large scale and gaining significant volume growth from GE," Kumar said on the sidelines of GE’s seventh suppliers’ conference in Pune.
Of course, suppliers who do not meet the industrial manufacturing giant’s expectations of cost-quality integrity and fulfilment excellence will also be dropped.
“We are a project-based business; so, we don’t always need the same kind of components. A significant portion of the solutions we provide is driven by customer designs, which are redesigned often. Therefore, we need suppliers who can quickly adapt at the lowest cost," Kumar added.
“Vendor consolidation has been a part of most heavy engineering companies’ strategies for a while because most mature companies have always pushed for as few vendors as possible since they would like them to co-invest in the firm for the long term. Therefore, such a move is not bucking the trend, so to speak," said Kumar Kandaswamy, senior director, Deloitte Touche Tohmatsu India Pvt. Ltd.
GE’s supply chain footprint in India is worth close to $4.2 billion in raw materials and finished products, Kumar said. Sixty percent of this output feeds GE’s 20 Indian factories, catering to industrial projects in the sectors of transportation, oil and gas, power, aviation and healthcare, while the rest goes to its American and European facilities.
Of the $4.2 billion, raw materials account for nearly $2.5 billion. The supplier consolidation will help increase this figure to reach a target of $4 billion in the next three years, Kumar said.
The overall supply chain footprint in the country is expected to reach close to $7 billion during the same time frame, he added.
This ambitious leap is expected on the back of robust demand for infrastructure in India. “Capacity utilization at most of our facilities is through the roof," said Kumar.
Accordingly, investments worth $400 million were made to enhance supply chain capabilities between 2015 and 2018, with close to $250 million invested in the company’s “lean and digital" multi-modal facility at Chakan near Pune, which serves all of GE’s India business. Operated by over 800 employees who can cater to multiple sectors and products, this is GE’s first mutli-modal facility in the world.
The company also built a diesel locomotive manufacturing facility in Marhowra district, Bihar, as well as maintenance sheds at Roza in Uttar Pradesh and Gandhidham in Gujarat, to cater to a $2.6 billion Indian Railways order won at the end of 2015.
GE is preparing to manufacture CFM International LEAP engine components worth $300-500 million at a greenfield facility in Hyderabad to be built by Tata Advanced Systems Ltd.
The facility, in addition to a Centre of Excellence, will be up and running early next year, according to Kumar.
The company is also making “significant investments" to participate in the government’s $6-10 billion programme to source military aircraft and engines locally and increase overall localisation, according to Kumar.