Maruti Suzuki India Ltd Management Discussions.
The year 2018-19 flagged off with promising economic outlook supported by benign inflation, favourable interest rates, close to normal rainfall forecast and strong global economic growth. In Q1, the Indian economy registered a robust growth of 8% which gave an indication of economic activities returning to near normal post the GST roll-out. However, the momentum gained at the start didnt sustain during the rest of the year and the economy faced major challenges leading to a slowdown in domestic consumption in the later part of the year. The pace of global economy also slowed down and couldnt provide meaningful support to the Indian economy. The Government and the RBI undertook a slew of measures to provide the necessary stimulus to the economy.
Indias passenger vehicle market grew by 2.7% in 2018-19 against 7.9% in 2017-18. This is the lowest annual industry growth recorded in previous seven years. Among the three broad industry segments, the utility vehicles segment that accounts for about 28% of industry sales, grew by 2.1%. The other two segments, passenger cars and vans, grew by 2.0% and 13.1% respectively. The urban markets witnessed weak demand while the non-urban markets saw relatively better growth. The demand for diesel models continued its weakening trend, and its industry share declined from 40% to 36%.
The Company posted a volume growth of 5.3% in passenger vehicles in the domestic market (against the industry growth of 2.7%). Including the Light Commercial Vehicle (LCV) segment, the Companys domestic sales growth stood at 6.1%.
With the expectation of better economic growth, the Company planned for a double-digit growth for the financial year 2018-19. Initial few months progressed as per the Companys expectation. The Company was all set to enter the festive season by building a shade higher inventory based on the previous years experience of stock out of some models.
However, in the month of August, just before the start of the festival season in Kerala, a natural calamity struck. Kerala is a big market for the Company. Its share in all India sales goes higher during the festival season. The unprecedented floods caused an opportunity loss for the Company. The vehicles produced for this market had to be diverted to other areas leading to more than planned inventory in certain parts of India.
In the following month, various unfavourable factors struck simultaneously. Third party multi-year insurance policy cover for new vehicles, sharp INR depreciation, all-time high fuel prices in India affected the consumer sentiments. All this happened at the onset of main festivals which are celebrated across the country leading to a slump in demand during the festival season. Dealers were carrying high inventory as the month of December was approaching when low inventory levels are desirable. The Company had to curtail production to avoid further inventory build-up, while supporting its dealers to clear the high inventory through increased sales promotion. During the third quarter, retail sales were ~90,000 more than the wholesale.
The situation did not improve in the last quarter due to factors such as terrorist strike in Jammu & Kashmir, heavy snowfall in hilly states like Himachal Pradesh, etc.
Contrary to expectations, sales were also impacted in export markets due to country specific reasons.
The year also witnessed adverse commodity prices and foreign exchange movement. Due to weak market situation, the Company could not take adequate price increases to neutralise the increase in input costs.
Higher expenditure on marketing and sales promotions did not generate proportionate volume increase as demand remained low, impacting the profit margins.
However, the Company could partially off-set the impact of unfavourable factors by stepping up cost reduction measures.
During the year, the business partnership between Suzuki Motor Corporation and Toyota Motor Corporation (TMC), Japan started taking shape.
The Company is likely to benefit immensely from this partnership by gaining access to the new-age technologies and from the mutual supply of vehicles.
The Company has always endeavoured to provide clean technology in its products. India is at a nascent stage of using clean automotive technologies and the Company aims to be a front-runner in providing clean technology to the mass market. Using hybrid technology is the first step in this direction.
This partnership with TMC is helping the Company to gain access to the hybrid technology. If the Company were to develop this technology on its own, it would take considerable time and significant investments. Also, many emission and safety related regulations are coming in the near future requiring more resources.
Sourcing hybrid technology from Toyota could free-up the Company resources to devote them on other priorities.
Combining the global volume of Suzuki and Toyota will provide a significant scale and make technology more affordable specially for a price-sensitive market like India.
This partnership is also bringing opportunity to increase sales volume of the Companys models by selling through Toyota Kirloskar Motor India. The Company is offering Baleno, Vitara Brezza, Ciaz and Ertiga to Toyota. Automobile industry is highly capital intensive and requires lots of investments in products, technologies and facilities. For realising adequate return on investments, increasing volume per model and per platform is the key. This arrangement will bring in incremental volume for the Company and help maximise volume per model/platform.
Domestic Sales Passenger Vehicles
The Company strengthened its leadership position across all the three industry segments - passenger cars, utility vehicles and vans. The success of models launched in the past along with the positive response for all new model launches i.e. Ertiga and WagonR helped it enhance its sales performance.
For the second year in a row, five best-selling models in India came from the Company.
The shift in consumer demand towards petrol segment is now even more evident with this segments contribution to the passenger vehicle sales going up to 64% during the year. For the Company, the contribution of petrol segment in the domestic passenger vehicle sales, during the year, increased to 74.5%, an increase of 3.4%.
Amid weak market demand with fewer walk-in customers to the showrooms, the approach of reaching out to customers plays an important role. With an extensive know-how of varied geographies along with the support from all the stakeholders, the Company conducted relevant events across urban and non-urban markets. This significantly helped identify the potential customers.
Light Commercial Vehicle (LCV)
The Company entered the LCV segment in 2016-17 and in a very short span of time, its product Super Carry sold 23,874 units, registering a growth of 138% compared with that of the previous year. One of the fastest network expansion to 310 outlets spread across 230 cities is a testimony to the good market acceptance for the product.
New thrust on pre-owned car sales
To make pre-owned car buying experience more appealing, the Company re-launched True Value with a new brand identity. To enable the new customer drive the pre-owned car with confidence, special emphasis is laid on buying and selling of good quality cars that are refurbished and certified by authorised True Value dealers. The consumers can select from an array of available cars through a user-friendly mobile application and visit the nearest outlet to conclude the final purchase. There are now a total of 247 independent True Value outlets across 150 cities.
Spare Parts and Accessories
Since inception, the Company has laid special emphasis on the ease of availability of genuine parts and accessories to its valuable customers. With the ever-increasing product portfolio, the Company manages the distribution of over 70,000 unique parts across the country. Every year, the Company augments its forecasting capabilities to achieve optimum inventory levels. The commencement of Siliguri warehouse in the East India and the expansion of Bengaluru warehouse operations will help the Company better
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During the year, the Company extended round-the- clock support to customer vehicles affected by the unfortunate floods in Kerala. Meticulous planning along with all stakeholders helped us enhance our response time during crisis.
During the year, many export markets faced economic and political uncertainties leading to a 13.7% decline in exports of the Company. Particularly, an East Asian country, a large export market for the Company put a sudden embargo on the import of cars. Shipments to some Latin American markets suffered due to the prevailing political environment. Restrictions on retail financing and market skew towards used cars continued to pose pricing challenge in some of the African and SAARC countries. The Company arrested the decline to a certain extent by enhancing exports to other markets and improving its service processes in some key markets.
The Companys service network serves around 18.8 million customers annually. All efforts of the Company are focused around:
During the year, 211 dealer workshops were added to the network, the highest ever in a single year. The Companys service network now has 3,614 service workshops covering 1,784 cities. Additionally, 1,490 Maruti Mobile Support vehicles (MMS) are providing doorstep service to ~80,000 customers per month. Quick Response Team (QRT) aims at providing emergency road assistance sought by customers in the event of vehicle breakdown. With presence in 250 cities, it has provided assistance to over 135,000 customers till date.
Human capital development
Service quality depends on the skill level of workshop technicians. Relevant training is imparted to them through Suzuki Service Qualification System (SSQS) based on the global standards defined by Suzuki Group. During the year, the Company increased its training infrastructure ten-fold to 170 centers.
Digitalisation is helping enhance customer satisfaction. The introduction of Online Customer Approval System (OCAS) is one such initiative, wherein the customer is able to approve or reject the additional jobs recommended by the service advisor.
The Company firmly believes that sustainability of the business depends on manufacturing defect-free and safer products. To achieve this, deployment of advanced technology along with upskilling of man-power is essential specially at a time when the market demand is witnessing considerable fluctuations both in terms of overall volume and choice of models. To meet this challenge, the manufacturing operations need to be flexible so that the production can be adjusted according to the demand scenario.
The Company has increased the use of digital technologies in manufacturing processes, preventive maintenance of machines and installation of new manufacturing lines. This has led to significant improvements in eliminating defects and also in cost reduction. Simultaneously, skills of human capital are being upgraded to effectively manage the increased deployment of technology, sustain high operational efficiency and quality.
Recently, the Company introduced a system that checks the weld quality of almost all the welding spots in a vehicle. When it comes to ensuring uninterrupted operations, the Company implemented a self-diagnostics system. This system pre-empts a possible machine breakdown, thereby aiding preventive maintenance measures for improved life and reduced downtime of machines. During the commissioning of new manufacturing lines, the Company uses Digital Mock Up (DMU) checks in which the manufacturability is checked with respect to ergonomics for enhanced comfort of workmen.
Conservation of Natural Resources and Environment Protection
The principle of 3R (Reduce, Reuse and Recycle) is a way of life for the Company. Smaller, fewer, shorter, lighter and neater is the guiding principle based on which the Companys operating processes are built. Be it continuous enhancement of efficiency in the operations or development of highly fuel-efficient cars, the Companys commitment to preserve resources is persistently reinforced.
In a bid to conserve natural resources used in energy generation, the Company uses heat recovery steam generator. The Company is already using solar power for lighting its manufacturing plants and office areas. Now, the Company has also started using solar power in manufacturing of cars. During the year, the Company commissioned a 312 kWp solar power plant at its Manesar facility. With this addition, the total solar power used in manufacturing of cars now stands at 1.3 MW. This has further strengthened Companys power generation mix in favour of renewable energy.
Towards environment protection, the Company not only conforms to laws and regulations but also strives to stay ahead. During the year, the Company voluntarily put in place a globally recognised mechanism for controlling hazardous substances in its vehicles. With the launch of new WagonR, the Company has adopted the globally acclaimed International Material Data Systems (IMDS) tool in controlling the use of Substance of Concern (SoC). Since long, the Company has done away with usage of SoC, and now with IMDS, it will be able to quantify the recoverable and recyclable materials in its vehicles. The new WagonR is minimum 95% recoverable and 85% recyclable, ahead of regulations in India. Besides commitment to environment protection, this initiative reinforces the Companys firm belief in the 3R practices.
The Companys Sustainability Report elaborates on the initiatives undertaken in this area.
The Companys vision on Safety is Zero Incident - Zero Human Injury and Zero Fire. A 3-tier committee under direct supervision of the MD & CEO is making continual progress towards the improvement of safety systems and compliance to achieve the Companys safety vision. With every near-miss or incident occurrence, root-cause analysis is carried out and accordingly theme-based safety improvements are suggested.
With increasing use of technologies in the vehicle, scale of operations, product variants and customer expectation about product quality, the complexity of manufacturing components and vehicles is increasing. This makes Quality a continuous journey. In order to deliver defect free products, the Company not only focuses on excellence in its in-house production processes but also actively supports suppliers in manufacturing defect free components. Among the many thrust areas to achieve world class quality, following areas remain in sharp focus:
(a) Strengthening Quality Culture across Supply Chain
1. Reinforcement of zero-defect methodology
- going beyond six sigma
The Company believes that for the utmost customer satisfaction, not a single product should have any defect. To achieve this, the Company has taken an initiative to establish zero defect lines at suppliers works. During the year, a series of sensitisation workshops by the Company helped workmen at 518 supplier plants enhance their knowledge and implement best practices to achieve zero defect production lines.
2. Strengthening quality management systems
- adherence to rules
Adherence to defined systems and processes by the suppliers continues to be the key focus area and the Company has moved from monitoring its suppliers to now helping them enhance their system compliance capabilities.
3. Recurrence prevention - reinforcing the culture of identification of root cause
The Company carefully reviews and assesses market and dealer feedback. Prompt and corrective actions are undertaken to prevent
recurrence of all issues. The Company has established a defect-recurrence-prevention department to institutionalise the learning and take necessary countermeasures.
(b) Capability Development
1. The Company is promoting the development of relevant workmen skills and capabilities through the setting up of DOJO training centre at suppliers works. The workmen are required to mandatorily go through off-line training programs in the centre and they are introduced to the shop floor only after acquiring the required skills. The training is provided in simulated production conditions to equip workmen to do a high-quality job on the production lines.
2. Tool and Die maintenance capability development
The Company has been focusing on improving Tool and Die maintenance capabilities of plastics and sheet metal suppliers for the last three years. It has created standard maintenance manuals containing the best practices for upkeep of tools, dies and jigs with periodic assessment done to check their condition and ensure quality.
(c) Managing Scale and Complexity
1. Quality defects start getting evident when sudden production ramp-up of a new model component occurs at the time of mass production. To prevent the defects, the Company adopted a process called Peak Production Verification Trial (PPVT). In this process, on a trial basis, the production is carried out of a new model component at full scale to see the kind of quality issues that can surface when mass production starts. Since there is a sufficient time gap between the trial production and the mass production, the suppliers get time to take countermeasures. Earlier, PPVT was done for selected components. Now it has been extended to all the components.
2. Consolidation of Tier-II Suppliers
Adequate scale helps suppliers to invest in enablers which help produce consistent quality. Tier-II suppliers have limitation to raise their scale and hence fall short in meeting the desired quality levels. Tier-II supplier consolidation is one of the ways to provide sufficient scale and achieve consistency in quality.
Human Resource Our Philosophy
The Company always strives to promote a safe, healthy and happy workplace. It creates and instills a culture of partnership attitude among its employees.
The biggest strength of the Company lies in its healthy combination of top-down and bottom-up approach in decision making process towards empowering the employees. A major thrust is laid on the constant two-way communication, free flow of thoughts and mutual growth. Led by the MD & CEO, and enunciated across levels, communication has led to a marked change in the labour-management relations in recent years. A calendar for communication ensures two-way communication with employees across various levels.
The unique strength of Employee-Employer Connect
The Company is a beneficiary of the unique strength it enjoys with its human resources. During the year, various channels, both digital and non-digital were improvised to interact better with the employees. A lot of thrust was given on digitisation of HR processes which led to enhanced employee experience owing to improved and faster responsiveness. Employees in turn, raise queries, give feedback and participate in different policy and procedural decisions on these platforms.
Along with industry-leading benefits, the Company since 1989 has launched housing schemes to support workmen in their efforts to own a house. The Companys relentless efforts have benefitted a large part of workforce. In addition, under the Governments recent flagship housing scheme program Deen Dayal Awas Yojana and Pradhan Mantri Awas Yojana, the Company has facilitated the entire process right from selecting land, negotiating price and appointing real estate firm for ensuring quality and timely construction of houses and also providing housing loan subsidies.
In April 2018, the Companys Board also gave its in-principle approval for establishing an Employee Welfare Fund. Extensive stakeholder consultations were carried during the year to come up with suitable schemes to further promote well-being of employees including social security measures such as post-retirement medical benefits among others. Every year, the Company will contribute 1% of the Profit-after-Tax of the previous year to the fund.
During the year, the Company and its three workmen-unions concluded a three year wage agreement in a congenial manner, and to the mutual satisfaction of all.
The Company takes care of its employees health. Periodic medical checkups, regular health talks from the experts in the field of medicine are organised. To create the awareness on health and promote well-being of the employees the Company not only encourages participation in various sporting events held in the country but also organises marathons exclusively for its employees. This initiative greatly helps the Company to engage positively with its employees.
For larger connect and welfare of the families of employees, the Company has a calendar of events which includes expert career counselling for employees children, a gala family day, plant visits for family members and attractive rewards for innovators. In engaging the families of employees in communication, an in-house magazine and MD & CEOs messages on special occasions play an important role.
To address any grievance of its workmen including temporary workforce, the Company has a well-structured grievance redressal mechanism. Periodic grievance redressal camps are organised to hear the issues of workmen, if any, and take actions accordingly.
Talent Acquisition and People Development - Making the Workforce Future Ready
As the pace of business accelerates amidst an uncertain environment for the automobile industry led by technology and regulatory disruptions, the ability to react fast to changes and plan human capital needs well in advance is key to competitive advantage.
In talent acquisition, the objective is to improve quality and consistency of hiring while making the process efficient, robust and scalable at the same time. Major thrust has been laid on diversification of sourcing channels by enhancing usage of social networking platforms for recruitment. This helps in reaching out to a wider talent pool and also reduces hiring cost.
During the year, a new digital recruitment system has been implemented to make the entire process more efficient, transparent and metrics driven. Special emphasis was laid on improving the candidate experience through various initiatives such as chat-bots, video interviews and adopting intuitive and user-friendly processes.
The Company is an equal opportunity employer promoting gender diversity and equality at the workplace. During the year under review, the Company celebrated Gender Diversity and Inclusion week thereby emphasising its importance among the employees.
The Company has a structured training, skill development and higher education program for career enhancement and personal growth for each employee. For this, the Company has tied up with some reputed institutions. For workmen on the shop-floor, the Company provides opportunities to pursue a diploma engineering course at these institutions. Those with a diploma engineer qualification can pursue a degree in engineering. The Company encourages employees by providing funds, time and better career opportunities to those pursuing a higher qualification. During the year, 292 workmen and diploma engineer employees benefited from higher education programs.
An in-house educational and training infrastructure, Maruti Suzuki Training Academy (MSTA) plays a pivotal role in facilitating the identification of skill gaps and preparing people for future business needs and challenges. The scope of training is extended to all relevant business partners as well. The investments in capacity and capability building of dealers, suppliers and transporter personnel go a long way in enhancing the quality of overall business and customer experience.
During the year, a total of 70,914 people benefited from varied training initiatives of the Company.
Horizontal Implementation of Best HR Practices at Supplier Plants
The Company recognises the importance of sound human resource (HR) and industrial Labour relations (IR) practices to promote a safe and healthy work environment throughout the supply chain. The human
capital development of suppliers can only happen if the top management of the supplier feels the need to invest in the same. The Company conducted over 300 workshops to sensitise the top management on the need for human capital development and also shared the best practices. Subsequently, onsite assessments of their plants are conducted to evaluate and identify areas of improvements.
Engineering, Research and Development
Since inception, the Company has internalised a customer-centric approach both in its strategy and organisational culture. Indian customers are very demanding and desire features of higher price segment cars at lower price bracket cars. To succeed in such a market, there is a necessity to design cost engineered products that not only meet customer expectations but also create new product and customer segments that help in garnering larger share of the market and better profitability for the Company. In all this, the role of R&D becomes crucial.
In addition to rising customer expectations with regard to vehicle styling, features and technologies, regulations are changing rapidly. Both these factors are leading to significant increase in the intensity of R&D efforts. Moreover, as the Indian market is expected to expand in the near future, more number of products will be required at a faster pace further burdening the R&D. The Company has been able to remain ahead of the customer expectations and regulatory requirements and maintained its market leadership position in the Industry. This was made possible with strong support and commitment of R&D centre of Suzuki Motor Corporation Japan which has several decades of experience in designing products and technologies. The Companys in-house R&D function which is gaining design capability from SMC Japan, is complementing it in development efforts for some of the new models and also gaining capability to design vehicles on its own by obtaining core technologies and new age technologies from SMC. It is important to note that acquiring R&D capability to design a vehicle independently requires significant time and the Company continues to depend on SMC for a larger part of product design and development work.
Key highlights of R&D efforts during FY19 are discussed in detail in Annexure D of the Board Report.
The year was marked by adverse commodity price and foreign exchange rates impacting the profitability of the Company. In order to reduce the adverse impact of rise in input costs, several cost reduction programs continued throughout the year. These include localisation of direct and indirect imports, value engineering and value analysis, yield improvement and sharing of scale benefit with suppliers.
The Company is also working with Indian steel makers for the development of local high tensile and galvanised steel material to improve indigenisation.
The Company has foreign exchange exposure on account of import of components. In the last few years, a large portion of this exposure has been reduced with a focused approach by adopting various measures such as:
Project based approach for localisation of high technology parts
Launching a new model with maximum possible localisation to realise benefits over a longer timeframe.
Localisation of critical functional parts with support of SMC and vendors overseas collaborators
Enhanced procurement from the Japanese suppliers transplants in ASEAN region to reduce the dependence on Yen.
The Company continued its localisation drive during the year as well.
Foreign exchange fluctuation affects financial performance. The Company is preparing an ambitious plan to reduce the import content significantly and insulate the financial performance from such fluctuations.
During the year, prices of commodities such as flat steel, plastics, aluminum, precious metals, lead and copper firmed up. The Company tried to limit the adverse impact of commodity price increase through better negotiation and hedging.
Every year, the contribution of all employees in cost reduction drives and suggestion schemes result in significant cost savings. This participation process is a unique example to achieve organisational excellence. It demonstrates the oneness with which employees collectively work towards achieving organisational goals. During the year, with the help of suggestion scheme Sujhaav Sangrehika and cost reduction drive Sanchaika, the Company was able to achieve cost savings to the tune of 1,118 million.
The Company registered Net Sales of Rs 830,265 million and Profit after Tax of Rs 75,006 million, de-growth of 2.9% over the previous year.
The Company has efficiently managed its surplus funds through careful treasury operations. The guiding principle of the Companys treasury investments is safety and prudence. In view of this, the Company invested its surplus funds in debt schemes of mutual funds. This has enabled the Company to earn reasonable and stable returns.
Abridged Profit and Loss Account for 2018-19
(Rs in million)
|1 Volumes (Nos.)|
|2 Gross Sale of Products||830,265||
|Spare parts/ dies and moulds/ components||82,550||
|3 Excise duty||-||
|4 Net sales (2-3)||830,265||
|5 Other operating revenue||29,938||
|6 Other income||25,610||
|7 Total revenue (4+5+6)||885,813||818,082||8.3%|
|8 Consumption of raw materials, components and traded goods||601,321||
|9 Employee benefit expenses||32,549||
|10 Finance Costs||758||
|11 Depreciation and amortisation||30,189||
|12 Other expenses||116,340||
|13 Total expenses||781,157||708,048||10.3%|
|14 Profit before tax (7-13)||104,656||110,034||(4.9%)|
|15 Current tax||29,323||
|16 Deferred tax||327||
|17 Profit after tax (14-15-16)||75,006||77,218||(2.9%)|
Table 2: Financial Performance - Ratios
(% of Net Sales)
|Employee benefit expenses||3.9%||3.6%||0.3|
|Depreciation and amortisation||3.6%||3.5%||0.1|
|Profit before tax||12.6%||14.1%||(1.5)|
|Profit after tax||9.0%||9.9%||(0.9)|
|(i) Debtors Turnover (No. of Times)||52||64||-19%|
|(ii) Inventory Turnover (No. of Times)||19||17||9%|
|(iii) Interest Coverage Ratio||430||394||9%|
|(iv) Current Ratio||0.9||0.5||70%||Higher amount of investments with duration less than one year.|
|(v) Debt Equity Ratio||-||
|(vi) Operating Profit Margin (%)||9.5%||11.5%||-17%|
|(vii) Net Profit Margin (%)||9.0%||9.9%||-9%|
|Return on Net Worth||16%||18%||-12%||Return on Net worth is lower this year due to lower Net profit as compared to last year.|
Table 3 lists the investment of surplus funds while Table 4 lists the return on these surplus funds.
Table 3: Investment of Surplus Funds
(Rs in million)
|Debt Mutual Fund||354,810||340,820|
Table 4: Income from Investment of Surplus Fund
(Rs in million)
on fixed deposits
|Net Gain on sale of investment in debt mutual funds||1,601||964|
|Fair Value gain on investment in debt mutual funds||22,681||18,612|
Foreign Exchange Risk Management
The Company is exposed to the risks associated with fluctuations in foreign exchange rates mainly on import of components, raw materials, royalty payments and export of vehicles. The Company has a well-structured exchange risk management policy. The Company manages its exchange risk by using appropriate hedge instruments depending on market conditions and the view on currency.
Internal Controls and Adequacy
The Company has a proper and adequate system of internal control to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition, and that all transactions are authorised, recorded and reported correctly. The internal control system is designed to ensure that financial and other records are reliable for preparing financial information and other data, and for maintaining accountability of assets. The internal control system is supplemented by an extensive program of internal audits, reviews by management, and documented policies, guidelines and procedures.
To harness the full potential of ever-increasing digital adoption, the Company has embarked on a digital transformation journey. The objective is to rethink every aspect of the organisation and come up with tailor-made solutions to further improve customer experience and process efficiencies. It started with CRM system modernisation that will, once completed, set new benchmarks in customer experience. During the year, the Company digitised a host of internal processes for employees with an intent to further improve engagement, productivity and satisfaction. Institutionalising a framework to capture organisational learning was another important initiative taken during the year that will help the Company build on its experience in a much more efficient manner.
The Company is also actively pursuing the use of new age technologies. Deploying platform solutions based on Internet of Things (IoT) technology is one such example. The platform is capable of capturing real-time machine parameters and production data. It is helping the Company with increased overall equipment efficiency, improved predictive maintenance, and enhanced safety. By using advanced data analytics, the Company is empowering business leaders with quick and efficient decision making. At the same time predictive and artificial intelligence is making the Company find ways to improve business efficiencies.
Amidst increasing spread and volume of logistics operations, the Companys focus is on ensuring fleet movement to be safe, fast, cost-effective and environment friendly. Key initiatives, helping us meet the stated objective are:
Most of the car carriers have been integrated with GPS devices for real time tracking. In 2018-19, the Company saved 194.6 million on account of route optimisation which also resulted in faster delivery of vehicles. Each GPS device comes with a voice-box to give proactive and timely alerts to the driver before entering accident prone zones. It is also an extremely effective tool to give real-time feedback to the driver in the event of harsh manoeuvring or over-speeding, thereby, helping inculcate safe driving habits among the driver community.
Integrated Digital Platform
The Company closely tracks the Key Performance Indicators (KPIs) of all service providers. Some of the standardised KPIs include in-transit delay, en-route stoppages other than pit-stops, route deviation, daily running of trucks, loading and unloading time among others. On observing any deviation against the set KPIs, an exception ticket is generated and the team gets in touch with the relevant stakeholder to immediately resolve the issues.
During the year, the Company started operations at its third regional stockyard in Siliguri that now handles dispatches for North-Eastern states. The two other regional stockyards are in Bengaluru and Nagpur to timely serve the southern and central region respectively.
Enhancing Multi-modal Dispatches
Rail continues to be among the fastest and the mosl economical modes of transport along with benefit ol reduced carbon footprint and delivery time. During the year more rakes and destinations were added. The year witnessed a growth of 40.7% in vehicles dispatch using rail model. As a result, CO2 emissions reduced by 1,258 MT. The Company is actively pursuing opportunities tc come up with in-plant sidings at Manesar and Gujaral plant to further enhance volumes and operationa efficiency of despatches.
Over the past several years the Company has made conscious and concerted efforts to counter the threat of cyber security to its business. It has invested in Security Operations Center (SOC) to detect any IT security incident. Sandboxing technology has been put in place to ensure proactive malware detection and containment. As a measure against rapidly emerging cyber threats, the frequency of the Vulnerability Assessment/Penetration Testing (VA/PT) has been increased from once to twice a year. Periodic trainings are conducted for internal IT teams to equip them with knowledge and techniques to identify and respond against any cyber security incident. Regular user awareness programs are also organised to sensitise users on phishing attacks.
The Company continued efforts to identify and improve on potential sources of risk that could disrupt business continuity. Among the various potential sources ol disruptions identified, greater emphasis was given to address the issues pertaining to fire safety.
In the recent past, the Company has implemented various preventive measures including some of the best practices of SMC, Japan related to fire safety. The scope of fire safety has been extended to the suppliers operations also. The Company has started safety assessment of its suppliers with a special focus on fire safety assessment. Suppliers are re-audited to judge their preparedness and provided guidance on improvements to prevent fire accidents.
After disruption at a suppliers facility due to water logging, the Company has increased its focus on such issues and identified suppliers vulnerable to such problems. Adequate risk mitigation measures are being undertaken.
The Company also carries out a comprehensive supplier assessment to identify the weak areas with an objective to improve suppliers capability. Risks get identified during assessments and appropriate mitigation measures are then taken with a time bound action plan.
In order to tap the growth opportunity going ahead, it is imperative for the Company to groom its employees and create a talent pool. Accordingly, the Company has put a systematic succession planning process in place to create a talent pipeline.
Auto industry will witness several regulations in the year 2019-20. Introduction of Anti-lock-braking system (ABS) and implementation of second phase of safety regulations are among major ones. Though BS-VI regulation is coming into effect from 1st April 2020, it will be applicable on registration of vehicles and not on production. This means, BS-IV spec vehicles cannot be sold from 1st April 2020 and any unsold inventory beyond 1st April would be of no use. A careful volume planning needs to be done in such a scenario.
Further, all three major regulations will come into effective simultaneously in the financial year 2019-20. These regulations would lead to increase in prices may affect the demand specially of price sensitive entry level cars.
It is also interesting to see how the customers will respond to the change in regulations. There may be a chance that customers may advance the purchase of the vehicles in anticipation of a price increase. On the other side, customers might prefer technologically superior vehicles which may not alter the pace of buying. Overall, the year 2019-20 appears to be an unpredictable year.
On the economic growth for 2019-20, most of the credible national and international research agencies have revised down their growth forecast. Instead of any sharp recovery, the economy is expected to gather a gradual momentum from the current state. Concerns over a global economic slowdown are growing. On the positive side, however, easing of interest rate, public spending in rural areas and increase in disposable incomes of households due to tax benefits augur well for the economy.
Statements in this Management Discussions and Analysis describing the Companys objectives, projections, estimates and expectations are categorised as forward looking statements within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include trends in the domestic auto industry, competition, rise in input costs, exchange rate fluctuations, and significant changes in the political and economic environment in India, environmental standards, tax laws, litigation and labour relations.