Mid Year Meeting.

Learnings as GET

By: Harish karthik R

Graduate Engineer Trainee
Part sourcing- Purchase department
Brakes
 Introduction about the company

The Mando Corporation is a tier 1 automotive company which engages in manufacturing and sales of
automotive parts . The headquarters of the company is currently located in Seoul(Korea).

Major Customers of Mando in India is Maruti Suzuki , Mahindra and Mahindra , Tata , Nexon ,
Hyundai .

Its major Business includes manufacturing of Brakes , Suspension and Steering ..

• Plant 1 located in Pillaipakkam manufactures Steering and ABS related products.

• Plant 2 located in Sriperumbudur manufactures brakes and suspension related products

• Plant 3 located in Mahindra world city manufactures casting related components.

 Brakes
A mechanical device which arrests the motion of vehicle by the help of friction. The intensity of brake applied
depends on pressure applied by foot.
Different Types of brakes:

1. Drum brake

2. Master booster

3. Front calliper

4. EBS
 About the Purchasing department and organisation structure

In any company all department has functions aligned with production department. Their primary
function is to facilitate the production. This is the reason production department is called heart of a
company.
Parts purchasing or parts sourcing is a part of organization which deals with commercial settlement
with the supplier.
Functions of Purchasing Department:
• The primary function of the department includes cost settlement with the supplier after negotiation.
The department is responsible for regular supply of Raw materials for production line.

 Identifying potential suppliers to provide regular supply of part items required for the assembly.

 Registering the supplier details in the G-Tops after verification.

 Providing support in Audit(Potential supplier Audit)

 Roles and responsibilities-Contd.
Roles and responsibilities

 Negotiating with the supplier as much as possible and doing price finalization.

 Acting along with TCI(Total cost innovation) in cost savings .

 Procuring the required items with minimum cost to bring profit to our company.

 Acting as a connecting link between supplier and MAIL.

 In case of any proposal from R&D for design modification or material/process/VAVE change, then
proper communication to be done with the supplier for the required modification.

 In case of any new project, procuring modified items from regular supplier or procuring new items
from regular/new supplier.
 Risks and failures
• The payment to the suppliers has to be done without any delay of any kind.
• In case of business closure with a supplier then it is our duty to look for alternate supplier or
contingency plan in case of emergency.
• Localization is done for 2 reasons.
a) To ensure cost reduction in parts.
b) To ensured supply of goods.
• Budget allocation
 Limitations
The parts sourcing department has lot of responsibilities and duties in hand. But there are also equal
limitations from our side where we can’t interfere.
• Project selection decided by CI team
• Parts sourcing team has financial information (Non – technical information)
 Goal and possible achievements

The company is finally credited every year based on the profit. . The company has a TCI (Total cost
innovation) target to achieve every year. There are many teams working side by side to achieve this
target. The same applies for our team. Here comes our goal to minimize the part cost as much as
possible to bring possible profit to the company. Some of the possible goals within our scope are as
follows

 VA/VE

 RM decrease

 Material change

 Process cost change

 Drawing change
 Goal and possible achievements - Contd

• So our team is working very hard to find possibly ways to do the same. This target is usually
reviewed regularly by conducting various workshops with inter departments and inter divisions as
a chance of knowledge sharing.
• This workshop helps us to get a glimpse of new innovations used / about to be implemented in
other department ( PD or Central Pur.) or other business divisions( Steering / suspension).
• There is immense scope to learn from this workshop for all employees.
 Project

Project 1:- FTA

This project is regarding import of brake components for SU2id model in Indonesia. For custom
clearance we required the source of raw material of our supplier. Thus we collected Foreign trade
agreement document from every supplier mentioning the import percentage (if any) with origin in
company letter head with authorized signature and seal of plant head.

• The communication was initiated over mail and tracked continuously for 3 days over and phone
calls.

• This project was successfully completed gathering all required information under supervision of
HOT.
Project 2:Input Weight Details

The management required the weight of input and finished part from the supplier within a short
period of notice. But these details are very confidential and supplier refused to share the
details .Basically these details were collected due to following reasons

• To assess RM consumption

• VA/VE

• Process cost
We had to explain the importance of these details with suppliers and were required to extract the
information as soon as possible
Project 3: TATA X451

This project was raised from a compliant. There is a part called actuator plug in brake system which
converts electrical energy into mechanical energy.

• Customer complained that there is water leakage. So 5 design proposals were made from R&D
MAIL and sent to Korea. Out of which Korea asked us to collect quotation for 5 th proposal.

• So we received quotation from supplier after negotiation. This quotation was received by CI team.
Now the supplier was asked to develop .
GTOPS SUPPLIER UPDATE

G – Tops is our portal which contains all the necessary details of our supplier.
During Covid times the many suppliers failed to update the information.
The portal contains many important information such as
• Plant address • Current CEO details
• Active Contact persons • Annual turnover
• Email IDs • Major customers
• Company website • Types of goods produced
• No of employees • Major customers
• Size of the plant • Machineries available
IPCS DRAWINGS

IPCS portal contains all details regarding the parts procured. Some of
the important information present in website are as follows
• Drawing
• Revision change
• EO implementations
• BOM
There was a request to collect all the information for some parts to
study the revision history. So details regarding each part number is
gathered and presented to our HOT.
ADHOC CLOSING

Whenever a new supplier or new project is selected ,the parts are procured in sample price
category .
• After finishing all types of inspections the category is changed to confirmed price upon
management approval.
• Approval has to be raised mentioning the part numbers and respective suppliers with the reason
for the change. This approval has to get authorization up to Korea.
• After approval completion all the part numbers are finalized in MEPS website .
• There were over 60 parts from various suppliers to be amended.
• The project was completely successfully under the guidance of our HOT
EO change

Our company R&D team continuously works on bringing any engineering change in the part to
reduce cost. The team studies the possible ways to do the same by considering following factors
• 4M change
• Material change
• Process change
• VA/VE engineering
So we gathered all the details available for various part numbers under current revision in IPCS
portal
Tool movement

As mentioned earlier, payment is done to supplier under various terms depending upon the
requirement. But the final payment is done only after tool movement. I conducted various tool
movements under supervision of team members.

interdepartmental interaction
We were supposed to interact with various other departments to finish our works completely.
During the past 5 months we had lot of opportunities to interact with other departments.
• Part development
• Cost innovation
• Finance team
• R&D
• Production
Tools used.

The purchasing activity is not a single activity.it is combination of many

activities. Thus single tool may not be enough to handle multiple tasks.
Some of the important tools used in our sector is mentioned
• G-ERP (Global Enterprise Resource Planning) soon to become SAP
• MECS
• MEPS
• G-TOPS
• I-PCS
 RFQ
This is the first procedure from our side for any kind of business. After getting request from other
departments we sent Request for Quotation to the supplier furnishing all necessary details regarding the
requirement.
• In return we ask for quotation for our requirement from supplier. The received quotation reviewed
carefully. There is always a target cost before negotiation. So the difference between target and
supplier cost is analysed.
• After final negotiation the final quotation which is a highly confidential document and is directly sent to
Cost Innovation team for decision.CI team reviews gives feedback if to proceed or not.
Cost
There are different types of cost for same commodity. This difference arises based on the time of
consideration .Some of the common examples are as follows
• Target cost
• Business cost
• Sample cost
• Finalized cost
• Supplier cost
 RETRO PAYMENT

This concept is very usual in purchase. The part price increase / decrease regularly based on
many reasons.
• Raw material cost
• Process cost ( Labour, power)
• Freight cost
• Land cost
• Overhead cost (administrative, employee salary…)
• Other cost (profit etc.)
• Inventory cost
So there is always a gap between price change date and PO revision date. This is because PO
revision has to get approval from management including finance and CI team .During this gap
the part is procured with old price.
Finally the accumulated cost difference is compensated either by supplier or by us.
 Budget
The fund of the company is allocated to different projects based on the customer demand .Thus fund
is supposed to be utilized for the respective projects on time without any delay.
This budget changes every year considering many factors.
Competition study
There are many automotive companies in our country manufacturing brakes, steering and suspension.
These companies are active competitors as we both share same customers.
Then it becomes prime duty to study the competitors in locality to stay ahead in market. There are
many factors we may lag or may be far behind. These factors need to be improved as soon as possible.
Tools used:
The purchasing activity is not a single activity.it is combination of many activities. Thus single tool may not be
enough to handle multiple tasks. Some of the important tools used in our sector is mentioned

 G-ERP (Global Enterprise Resource Planning) soon to become SAP

 MECS

 MEPS

 G-TOPS

 I-PCS
Terms related to Part sourcing:-
RFQ:- This is the first procedure from our side for any kind of business. After getting request from other
departments we sent Request for Quotation to the supplier furnishing all necessary details regarding the
requirement.
Terms related to Part sourcing:-

• In return we ask for quotation for our requirement from supplier. The received quotation reviewed carefully.
There is always a target cost before negotiation. So the difference between target and supplier cost is
analysed.
• After final negotiation the final quotation which is a highly confidential document and is directly sent to Cost
Innovation team for decision.CI team reviews gives feedback if to proceed or not.
Cost:

There are different types of cost for same commodity. This difference arises based on the time of
consideration .Some of the common examples are as follows

 Target cost

 Business cost

 Sample cost

 Finalized cost

 Supplier cost
Retro payment:

This concept is very usual in purchase. The part price increase / decrease regularly based on many reasons.

 Raw material cost

 Process cost ( Labour, power)

 Freight cost

 Land cost

 Overhead cost ( administrative , employee)

 Other cost ( profit etc)

So there is always a gap between price change date and PO revision date. This is because PO revision has to get
approval from management including finance and CI team During this gap the part is procured with old price.
Finally the accumulated cost difference is compensated either by supplier or by us.
Budget:-
• The fund of the company is allocated to different projects based on the customer demand .Thus fund is
supposed to be utilized for the respective projects on time without any delay. This budget changes every
year considering many factors
Competition study:-
• There are many automotive companies in our country manufacturing brakes, steering and suspension. These
companies are active competitors as we both share same customers. Then it becomes prime duty to study the
competitors in locality to stay ahead in market. There are many factors we may lag or may be far behind.
These factors need to be improved as soon as possible.
New supplier selection:-
New supplier selection is a very complicated process as it takes lots of time and effort of the organization to find
a potential supplier. There are many categories based on which the supplier is selected

 Identify any potential suppliers list

 Checking if IATF 16949 road map is available

 Checking if Customer approved or new source

 Conduct PSA (Potential supplier assessment) without any favour.

 Categorizing into 2 groups Pass or Fail based on the assessment

 If more than 80% add to approved supplier list upon HOM approval

 If not then give suggestions to supplier to improve and achieve the required score.

Documents related to Supplier :-

Before selecting any supplier there are some standard audits required to assess the capacity. Then advance is
given to consumer to proceed with tool production .The rest of the payment is done after sample inspection.The
documents related to supplier is listed below.

• PPAP Production part approval process

• PSW Parts submission warrant

• ISIR initial sample inspection report

Approval:-
• Whenever there is requirement for new amendments. It is our duty to get permission from management side
regarding the amendment. We need to raise a e-approval in Mando website which allows specified set of
employees to view our approval .Based on the impact of amendment approval line is finalized. All
amendments should be implemented only after approval completion. Only in case of emergency the
amendment is implemented after HOM authorization. The employees can approve , reject , modify and
comment any approval as per condition.
Agreement copy:
This is a very important document created after final negotiation between Supplier and our team Agreement
copy contains many important information's regarding the business .More importantly it is a mutually signed
document with high degree of confidentiality and importance. Necessary information’s are as follows

 Part name and number with finalized Price

 Effective date

 Notes discussed during negotiation

 Reflection of mutual agreement wih signature from both sides

PO:
Any kind of procurement activity is supported by a set of legal documents. The most legal document in our
department is called Purchase Order. PO is called the bible of purchase department. The importance given to this
PO is because it is a signed copy which has sign up to HOM. This is called like the above as it contains all kind
of necessary information regarding the activity.

• Vendor name

• Vendor ID

• Parts procured.

• Price

• Tax details

• HSN code

• Payment terms

• Incoterms

• Note
AP invoice :-
This is the final document regarding payment. Here the document is made either after sample part approval or given
in advance depending upon the situation. The document is higly confidential . It can be shared only with the finance
team . The finance team after getting AP invoice from our side are allowed to proceed with payments.
Price :-

The goods are procured from supplier based upon varios factors kept in mind.

 Cost

 Urgency of requirement

 Impact in business

 Period of requirement

 SOP date

 Fund allocated

So based on above factors the price of the product is classified into 2 types:

• Development or interim price and Confirmed price

Confirmed Price:-

• This type of price is usually considered when the part is procured regularly after the supplier completing all
inspections on time. This price is usually lower than sample price .Organization prefers this type of price and
always works in finalizing sample price into confirmed price.

Payment terms: Usually supplier receives the payment once we start to receive approved parts regularly. The
payment can be either lumpsum or within regular intervals of time. This payment term is usually mentioned in all
POs and approvals. Some of the common terms in payment are as follows –

 50%advance + 30 %PPAP + 20 % Sample

 50 % advance + 50 %PPAP

 100 % PPAP

 100% Advance

 15 , 30 and 45 net
Payment type:-
This is a very important category regarding payments. The type of payment can vary depending upon the urgency
of the issue. The type of payment is usually decided by finance team. Common payment types are as follows
Expense
This type of payment is usually a liability cost to the company. There is no possible revenue generation due to the
payment. This payment is considered as a loss to the company. The company always tries to minimize this type of
cost.
Capex
This type of payment is done when the project is completely under control. After considering the future revenues
and profit values this payment is done. This payment brings asset to the company.

Customer

This type of payment is done when customers agrees for complete compensation of costs. Here the payment is
usually done by us in first hand. Then the customer pays back the amortized as required.
Tax details

Every product procured from supplier is associated with tax amount,This tax amount can vary depending upon
following factors

 Location of supplier

 RM import or local

 Type of part

 Process involved

Considering the above factors Tax is quoted by the supplier. Our finance team audits the tax quotation and gives the
authorization for payment. Some common tax categories are as follows

 SGST

 CGST

 IGST

 BCD and SWS

HSN code:-
HSN stands for Harmonized System of Nomenclature. This code is allotted by our government to simplify taxation This
systematic categorization of products was initiated by the World Customs Organization to bring uniformity among
manufacturing sectors, Every product is associated with a unique HSN code depending on the type of product.
BPA:-
Blanket purchase agreement is a open document which contains all the details regarding the procured goods. BPA is usually
mentioned as PO dump as it contains all necessary details regarding payment done. It gets updated each and every time
procurement is done and is available ERP portal. Some important details available in BPA is as follows

 Part name & Part number

 Vendor name and ID

 Price

 HSN and tax details

 Type of price

 Master code

 Reason for purchase

Master code:-
• Any supplier once who is fitting into our category of requirement completely or partially is called eligible
supplier. After getting final approval from team the registration of supplier in our portal (G-tops) is initiated.
There is a unique code allocated to each supplier from Mando Korea based on PSA Potential supplier audit .This
code generated in called master code. This code contains all the necessary information regarding the supplier.
• The management can get products in finalized price only after generating master code to the supplier .
Documentation:-
This is very important stage in purchasing where all the necessary data is stored properly. Mail confirmations and
all scanned documents are archived monthly once to prevent data loss. All documents in hardcopy are filled within
their respective categories and checked regularly. This is because at any time surprise audit from Anand group or
HL group may arise and team is supposed to showcase required documents on time. Thus 5S concept is properly
utilized in documnetariton floor to get easy access to any document any time.
Tax details:-
Agreement copy
Documentation
Concept of negotiation
Types of document open end document cloes end document
FTA
MS Excel training Importance
Cost reduction (CR):-
During negotiation with the customer initially the finalized price is decided considering many factors as mentioned
above. Then to continue the supplier company business the supplier agrees to reduce the cost up to to a certain
percentage (For example 1.5% per year).This is clearly mentioned in agreement copy. The supplier accepts CR
considering the open market and vast opportunities for procurement.
Discount:-

• Usually when a supplier is in business with the company for a long period of time, they agree to offer some
discount as a gratitude. This discount is usually mentioned in price agreement.

• RM study

• The cost of part is mainly decided by weight of Raw material. The RM cost changes is not fixed but changes
based on worldwide market. So there is a requirement to have regular update regarding RM cost by referrinfg
Indian times. Or business times.
Localization:-
In case of new proposal from customer or emergency requirement, then the production is initiated with foreign
imports. But there the cost of high import and high freight charges, So, localization for parts has to be done as
soon as possible to ensure profitable business. Localization is done for 2 reasons. One is to ensure cost reduction
in parts and other one is to get ensured supply of goods.
Purchase = parts sourcing + parts development + central purchasing.

• Functions

• Key responsibilities

• Parts development means what? Ask Naveen today….

• Central purchasing what? Ask Kishore today ….

• Own interest

• Customer complient Tata X451 protective plug leakage my project….

• Input weight details