SONA KOYO

STEERING SYSTEMS LIMITED

(SKSSL)
VENDOR MANAGEMENT

PRESENTED TO:
DR. PRAVEEN GUPTA

PRESENTED BY:
GROUP 2
 • ABOUT THE COMPANY
• FINANCIAL PERFORMANCE REVIEW
• BUSINESS OBJECTIVE & STRATEGY
• MANUFACTURING CAPAPCITY & CAPABILITIES
FLOW OF • ROLE OF TECHNOLOGY

PRESENTATION • ROLE OF SOURCING PRACTICES

• SOCIAL & ENVIRONMENTAL ASPECTS
• SWOT ANALYSIS
• STATUS OF MANUFACTURING FLEXIBILITY
• RELATIVE PERFORMANCE OF TECHNOLOGY & SOURCING PRACTICES
• SAP ANALYSIS
• KEY LEARNING ISSUES OF INTEREST
• ACTION SUGGESTED
 ABOUT THE COMPANY

• The Company is a subsidiary of JTEKT Corporation Japan and operates as part of

JTEKT Group India.
• The Company is India's largest manufacturer of steering systems for passenger cars,
utility vehicles, and light commercial vehicles.
• The Company has a technical and financial partnership
with JTEKT Corporation in Japan. JTEKT has a 69.36% share in the Company.
Another major shareholder is Maruti Suzuki India with 5.64%.
• To become part of JTEKT Group, the name of the Company was changed from Sona
Koyo Steering Systems Limited to JTEKT India Limited on April 7, 2018.
• Sona Koyo's product portfolio includes two types of products - steering systems and
driveline products. Driveline products include case differentials, rear axle assemblies
and propeller shafts.
• JTEKT India has seven plants located across Gurgaon, Bawal, Dharuhera, Sanand
and Sriperumbudur.
• SKSSL is the first steering systems company in the world to have bagged the
prestigious Deming award, the world's most coveted honour for excellence in Total
Quality Management.
FINANCIAL PERFORMANCE
REVIEW
(FY03 - FY08)

• Net sales : Net sales have been increasing over the years. The sales
growth has been supported by increasing exports to USA, Europe and
Japan through various strategic alliances. The company intends to
maintain its dominant position in the domestic market and has targeted
35% of its revenues to come from exports by 2010.

• Profit after tax (PAT) : PAT declined during the year 2005-06, due to the
steep hike in petroleum product prices, extraordinary cost of air freight
for overseas supplies to meet delivery deadlines and high tooling costs
for development of new products during the year. Also, During 2007-08
the profit after tax has registered a negative growth of - 9.1% because
of higher depreciation and interest costs due to capacity expansions.

• Earnings per share (EPS) : Following the trend of net profit or PAT, EPS
decreased by 2.4% to Rs. 3.70 for year 2005-06. The company decided
to give a bonus share @ 1:1 to its existing shareholders. So the net EPS
worked out to be Rs. 1.85 for the year 2005-06. Then in 2007-08, it
showed a fall of 9.1% to Rs. 2.60/- because of decreased profits in the
same year.

• EBIDTA and Return on Capital Employed (ROCE) are showing a

continuous growing trend over the last years. Although, ROCE reduced
to 22% during 2005-06, due to high investment in capacity expansion.
BUSINESS OBJECTIVE & STRATEGY

• The objective is to become a “full-fledged steering solutions provider” in addition to manufacturing, where company
provides a complete suite of services ranging from product designing to manufacturing to testing and validation.

• This should enable increased penetration to global OEM accounts.

• In order to build on these capabilities company has been focusing on:

➢ Creating global manufacturing capacities by investing in advance manufacturing technology in recent years to
expand its capacities and scale up for the greater global opportunities by exporting to partners in USA and Europe
and establishing alliances and partnerships.
➢ Investing in technology infrastructure (company expenditure on R&D increased has increased over years) to
create a complete back-office engineering support base so that Sona Koyo will continuously innovate and adjust to
the needs of the market. ONE OF THE KEY BENEFIT REALISED: because of increased dependence on virtual
prototyping and testing, the cost of making physical prototypes has reduced considerably.
➢ Ensuring sustained cost competitiveness by setting up new plants near other OEMs and by investing in
localization projects of both Hydraulic and Electronic Steering Systems.
➢ Improving operational efficiencies through continuous improvement i.e., ‘KAIZEN’, which creates a culture of
small improvements through experimentation in every process in the organization.
 • As the company is in the process of transforming itself to a “Full-Service
Supplier”, they have embarked upon an expansion plan and spent
Rs.370 million for capacity expansion and added Rs.360 million worth of

MANUFACTURING •
fixed assets.

The company undertook a cost management program which included

CAPACITY & improvements in operational efficiencies through activities like value
analysis and value engineering (VA/VE), vendor rationalization,
CAPABILITIES increasing localization and streamlining the existing production
processes.

• The company has also taken up Two Major Initiatives:

➢ High Volume Production Trial (HPVT) – the purpose is to judge
whether or not the mass production can be started. This will
enable a smoother launch of new product/product line. The
result would be reduction in rejection of new products.
➢ Quality Gate 20 – Every gate will indicate achievement in the
milestone of product development cycle and satisfaction in the
closure of activity before moving out to the next level.
 ADOPTION OF TECHNOLOGY BENEFITS GAINED

➢ The company has acquired the ➢ Localization of electric power steering

manufacturing technology for Column would enable company to be more cost
Type Electric Power Steering (C-EPS) competitive as well as it would open
from its Collaborator, JTEKT Corporation. opportunities for the company.

ROLE OF ➢ The company is in the final stages of

setting up core manufacturing facilities
➢ Localization of electric power steering
would enable company to be more cost

TECHNOLOGY to manufacture valve assemblies for

Hydraulic Power Steering locally using
the technology from its collaborator.
competitive in domestic market as well
as it would open opportunities for the
company to supply parts back to its
collaborator.

➢ The company is developing technology ➢ Localization of valve assembly for

for advanced featured Steering Columns hydraulic power steering gear would
for commercial vehicles. enable import substitute as well as
reduce the time to market for new
projects.
➢ Developed capabilities and virtual
simulation & testing of new products
before they are released for
manufacturing.
 ROLE OF SOURCING PRACTICES
• The company has adopted a Dual Supplier Policy for all bought-out items and is in the process of validating and rating new and
existing suppliers.

• The company has also carefully reassessed component prices to reflect “true cost” thereby shedding off additional costs. These
initiatives helped protect the company's operating profit margins in the current fiscal and will result in margin improvement in the
next few years.

• A cluster of 23 suppliers was formed to train and inculcate best practices in quality management. The company also identified a group
of suppliers to implement a common cost-effective ERP solution for them.

• The company also considers all its suppliers as partners. To strengthen this partnership and develop the capabilities across its supply
chain, the company has been advocating TPM and TQM practices with suppliers

• Due to these initiatives some of the awards received during the 2006-07 includes “Cost Reduction” and “Best Effort and Quick
Response” Award from Toyota Kirloskar Motors Limited and for “tier-2 vendor up gradation and implementation of Kaizen and Maruti
Production System” from Maruti Udyog Limited.
SOCIAL AND ENVIRONMENTAL ASPECTS

• The company takes their philanthropic responsibilities for the environment, community development and educational
areas.
• The CSR council was created by the company to specialize in order to attain fair process for holistic social and ecological
development.
• The company has achieved an improved work culture because they put great emphasis on training it’s workers and
create team building exercises for them so that they are motivated.
• Many schemes to link pay to performance, develop competency models, training programs to facilitate these
competencies to new workers are created.
• Worker absenteeism had reduced from 11.29 % in 1998 to 8.1% in 2005-06 due to such efforts of the company.
• Various energy saving initiatives have been carried out and the company has also enhanced its’ effluent treatment plant.
• The company wants to take initiatives for the betterment of the rural population in India through modes of education,
employment and other such areas.
 SWOT ANALYSIS
Strengths Weaknesses
• Global brand image • Too much dependent on Maruti Suzuki India Limited
• Technical and financial support from Koyo Seiko • The rules of the Indian government are too rigid
Company Ltd., Japan • Components of the power steering systems are being
• Collaborated with Maruti Suzuki India Limited imported at a very high price
• Committed workforce at every level
• Good implementation of the Toyota Production
Systems (TPS) using TQM and TPM techniques
• Good team spirit and group work culture
• Is considered a Tier-I vendor by many OEMs to supply
steering systems
Opportunities Threats
• More FDI from automobile manufacturers in India • New MNCs are producing steering systems and not
• Power steering systems have become the ultimate importing them
demand today • Prices of raw material rise day by day
• Growing export opportunities in the nearby countries • Profits are reducing day by day
• OEMs want to procure parts from Tier-I vendors only • Lot of non-genuine spare parts are being produced by
unauthorized organizations
STATUS OF MANUFACTURING FLEXIBILITY

• Introduced number of modified or new products and by Re-engineering its manufacturing facilities has helped in
increasing capacity and capabilities flexibility.
• Significant Investment in design and entire product range has helped the company to achieve flexibility in terms
of Volume, Modification and Delivery.
• Significant Investment in Technology Infrastructure has helped the company to achieve manufacturing flexibility.
• Increased Investment in Research and Design and Localization efforts for the imported technology has helped
the company to achieve manufacturing flexibility.
• Incorporation of ERP (Entity Resource Planning) system has helped the company to gain competitive advantage
which help in improving manufacturing flexibility.
• Incorporation of SCM (Supply Chain Management) System has helped the company to improve quality and
shorter production lead time which in turn help the company to achieve manufacturing flexibility.
• Volume Flexibility – There are lot of Projects they had invested in
and there are projects they want to invest in along with various
factors such as incorporation of ERP, Infrastructure technology
improvement helped the company to achieve Volume flexibility. Manufacturing
• Modification Flexibility - The company focuses on product Flexibility
design improvement, improve existing models and many variants
in each category and invest in R&D in order to achieve
Modification Flexibility. Volume Modification Delivery
• Delivery Flexibility – The company’s focus on supplier Flexibility Flexibility Flexibility
involvement in design and development stage, localization of
technology, R&D efforts along with various initiatives such as
HVPT helped the company to achieve Delivery flexibility.
RELATIVE PERFORMANCE OF TECHNOLOGY
AND SOURCING PRACTICES
• Adoption of different sourcing practices has
significantly increased the tactical level
flexibility and profit aspects of the company
along with moderately decrease in the
product cost.
• New technology has a significant positive
impact on various delivery, flexibility and
quality parameters.
• The company has invested in the localization of
technology adapted for modifying the existing
product range and delivering the new products.
• The collaborated effort of the company to train and
develop the design capabilities of tier-2 suppliers has
helped the company to modify its product range.
• Collaboration with the technology suppliers
worldwide and pursuing the R&D efforts locally
significantly influenced the achievement of delivery
flexibility.
 SAP ANALYSIS

Situation
• The company has obtained its technology for Koyo
Seiko Company Ltd. of Japan through technical
collaboration.
• Market share and profit margin of MUL has affected
the performance of this company because it is the
main supplier of steering systems to it.
• The company has diversified into allied products like
UJ assembly and Rack and Pinion assembly.
• SKSL has widened its customer base from MUL to
other OEMs also, e.g. Hyundai, Eicher, Telco etc
• ERP solutions have improved the systems of the
organization and changed the work-culture.
• Top officials of the company
• Tier-2, Tier-3 vendors and other suppliers to
SKSSL.
• Original Equipment Manufacturer (OEM’s)
for SKSSL.
• Flexible and innovative engineers and
supervisors to manage changing needs of
the customers quickly.
• Foreign collaborators to the company

ACTORS
Technological Aspects Sourcing Aspects
• Technical collaboration with • Creating and maintaining a seamless
world leaders has helped in supply chain with the suppliers.
manufacturing of world-class • Identified a group of suppliers for
products. implementing an ERP solution
• Optimal use of manufacturing enabling seamless sharing of
facilities for flexibility and information and managing flexibility.
• Participative
productivity increase.
• Suitable change in technology for
management,
suggestion schemes and cross PROCESS
Electronic Steering systems. functional teams with tier-2 and
• Automation in the production tier-3 Suppliers.
area. • Developing local vendors for timely
• Increase in the partnership of supply of parts and components.
Koyo Seiko Company Limited • Implementation of TPM, 5S, and
Japan for new technology accreditations to Toyota Production
alliance. System, ISO 9002 and QS 9000
KEY LEARNING ISSUES OF INTEREST
(LAP)
• TECHNOLOGICAL DEVELOPMENT
• SOURCING PRACTICES
• VENDOR CONSOLIDATION
• MANUFACTURING FLEXIBILITY
• STRATEGIC CHANGE
ACTION SUGGESTED

• The company must increase their focus on tier-1/tier-2 vendors and

enhance their capabilities for design and modification at micro level. For
further cost cutting, more systematic changes are required in the company.
END OF THE PRESENTATION