Keywords: buyer-supplier relations, subcontracting, vertical integration, supplier relations, Indian automotive industry, automobile industry, India
Changing buyer-supplier relationships: reflections of dynamism and innovation in the automotive industry in India
The opening up of the Indian economy that has occurred since the mid-1980s has forced Indian firms to face external competition. This paper looks at the spectrum of linkages between the two automobile manufacturers Maruti Udyog Limited (a passenger car manufacturer) and Eicher Tractors Limited (a tractor manufacturer) and their suppliers. A discernible shift in the assembler-supplier relationships has been seen in the case of these two automobile manufacturers and their respective suppliers. Reducing the supplier base is one of the most discernible features of restructuring, based on the just in time approach. This has paved the way for long-term contracts with suppliers, quality assurance and more assembling being carried out at the supplier's end leading to supply of subassemblies rather than mere components. The important lesson that one learns is that the supply chain, as a system, became institutionalised with the establishment of Maruti and Eicher. The autocomponents industry, which was marked by inefficiencies, such as low technological competence, poor quality and low productivity with virtually no access to the international market got the boost which it needed. The supplier firms operating in the open market in the controlled regime have now become a part of the network. Many small firms were established. Their technological development, quality awareness, and financial management were guided by the large firm. The transition can be attributed to the government's redefined role in adopting clear-cut policies and the efforts of the automobile manufacturers to innovate. The outcome of this process is dynamic long-term relationships, information exchange, skill enhancement leading to improved processes, changed raw materials, inventory reduction, product improvements, wastage reductions, quality improvements, energy conservation, continuous benchmarking, and so on, for the suppliers on one hand, and the Indian automotive industry in general.