Any profitable business model is bound to attract competition. The lessons you pick up from dealing with this new enemy often gives you a head start when it is time to battle new challenges, opines Mohan Joshi, Independent Management Consultant
Ford once offered his car in any colour as long as it was black. When it came to indigenous cars, Indians had double the choice some years ago—Ambassadors and Premiers.
Suppliers hiked costs every year, which inflated car prices. Given the monopoly, the customers had no say. Then came the great leveler in business: competition!
Instead of passing the hikes, purchase managers started prescribing costs and demanding quality. “Procurement” at the lowest available cost was turned on its head to “target costing”. Suppliers balked. Suddenly, it was time to stop wrestling and join hands.
Links in a chain
As Sudam Maitra of Maruti Suzuki, credited with starting the automotive supply revolution once put it, the concept of “supply chain” was born and “vendors” became important links in that chain.
What hastened the revolution was the simultaneous global launches of Suzuki (Maruti in India) cars. If the Indian vendors’ inputs were to feature in the global scheme of things, they had to be helped to catch up in a hurry. “Concurrent engineering” led to collaborative models. Maruti engineers paired smaller local suppliers with foreign technology firms and pushed them into tool design. The rising numbers of capable vendors almost eliminated the threat of supply bottlenecks.
Raise to rise
The Maruti Centre for Excellence focussed on supplier quality, conducted periodic audits and helped with project implementation. It was no longer about squeezing the vendors on pricing and delivery. It was about helping them in various ways so that they could help you to beat global competition—together.
Any profitable model of business is bound to attract competition. The lessons you pick up from dealing with this new enemy often gives you a head start when it is time to battle new challenges.
When the status quo changes, you have several choices. Give up. Scream for a government bailout. Or forge a chain and focus on strengthening the weaker links. Take the lead in redefining existing new connections and build new ones. And whip up a revolution.
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