Date:21/03/2007 URL: http://www.thehindubusinessline.com/2007/03/21/stories/2007032102690200.htm

Back Mahindra on vendor rationalisation drive

K Giriprakash

Cost-cutting
The rationalisation has led to reduction in the number of vendors to around 150
It has also started negotiating for better prices from the vendors

Bangalore March 20 Mahindra & Mahindra, which makes a variety of vehicles, has started rationalising its vendor base as it attempts to drive down costs and increase efficiency.

The rationalisation drive has in fact gathered pace recently, a top official with Mahindra & Mahindra told Business Line.

He said the rationalisation has led to reduction in the number of vendors to around 150 from around 220. "We plan to reduce the number of vendors further," the official said.

It has also started negotiating for better prices from the vendors on the basis of higher volume of work to them. In one case at least, better price negotiation has helped the company to reduce the price of its multi-utility vehicle Bolero by as much as Rs 40,000.

But there are other advantages too, the official said. The reduction in vendor base has helped the company to achieve better efficiencies apart from being able to monitor the production closely. "A smaller vendor base means we can manage the work better than before," the official said.

The official pointed out that their joint ventures with International Truck and Engine Corporation as well as with Renault and Nissan has helped the company to strike bargains with vendors.

"They are now assured of more business and on our part, we are able to strike bargains in terms of lower prices with them," he said. He said cost savings because of better vendor management has in fact allowed the vehicle manufacturer to not only pass on the benefit to the customers but also allowed it to use extra resources to make the vehicles more efficient.

20% revenues

In another development, the official said Mahindra & Mahindra expects 20 per cent of its revenues to come out of its three-way joint venture Renault and Nissan. "We expect 20 per cent of our turnover by 2009 to come from the joint venture," he said.

He said in another three months, there will be enough clarity on the type of products both in terms of passenger and commercial vehicles the joint venture will manufacture. In the first year of operations, the joint venture aims to manufacture nearly 5 lakh cars which will be expanded to around 8 lakh units after two more years.