At AL, Vendor Development and Strategic Sourcing were handled by Corporate Materials Department (CMD). CMD identified the vendors, rated the vendors based on feedback received from Supplier Quality Assurance Cell, send drawings/specifications, called for quotes with detailed breakup of operation-wise costs, and negotiated the price at which the parts would be supplied. In addition to CMD, there were Materials Management Departments (MMDs) for scheduling based on unit production plan.
AL's policy was to develop a vendor base committed to continuous improvement to meet quality, cost and delivery standards. AL considered its vendors as partners in progress and believed in establishing mutually beneficial relationships. It provided necessary technical assistance in the form of project and production engineering, to maintain quality levels. In addition, where required, it also helped vendors financially. AL's Vendors were expected to have a good quality system. Vendors' quality system had to encompass the following: cost effective process, assured process capability, continuous improvements based on customer feedback, compliance of all statutory/legal/commercial requirements of AL, a stage of development where the Vendor could come under AL's self-certification system, and, traceability - first-in first-out.
AL also placed emphasis on optimizing the inventory and vendors were required to progressively meet "Just-in-Time" requirements. Delivery mode as well as packaging were required to minimize the handling/loading and unloading time. AL preferred a manufacturing/assembly/ support base at close proximity to the production units.
Commenting on the relationship AL shared with its vendors, J.N. Amrolia, executive director, human resources, said, "The close working relationship with the vendors for vendor development program have benefitted us a lot in cost cutting and making the vendors understand the complexities of material handling." This resulted in low inventories all through the chain. He further added, "We stabilised both the inward material flows as well as the outbound material and that saved us a lot on the inventory." In the late 2000, AL's systems were closer to J-I-T with inventories averaging just seven days, down from three weeks in the late 1990s.
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