Maruti - 3: Vendors, Customers and Employees

Maruti faced a chicken and egg problem. To create a mass market car, it needed an ecosystem of vendors and suppliers. But without a mass market, there weren’t too many vendors or suppliers. To add to that, Suzuki didn’t trust Indian vendors to supply good quality parts, and feared it would dilute their brand. Government regulations for PSU’s, like changing vendors every couple of years, acted as a disincentive to vendors to invest into any company. So Maruti tried partnerships with vendors. It started the concept of testing parts for wear and tear, a new concept back then! Vendors didn’t understand the term “quality”. They thought better specs meant better quality. Maruti had to educate them that quality meant exact matching of specs for almost every piece. Root cause analysis was taught to vendors, at Suzuki’s insistence. Eventually, vendors jumped onboard sensing that they were on the cusp of something big. Maruti introduced vendor rating systems, a norm these days. It informally acted as a broker between Indian vendors and Japanese companies to get into collaboration, acting as a sort of reference. Maruti even used its clout to pressurize banks to sanction loans faster to their approved vendors, thereby enabling them to respond faster to demand. In some cases, Maruti entered into Joint Ventures with key suppliers.

As sales grew, it was time to focus on dealerships. Should Maruti own the dealerships? The idea was dropped for the very sensible reason that govt employees were not exactly known for customer service! But Maruti did insist on a “No sale without service” mantra, not an easy ask from dealers those days. At the time of servicing, dealers were told to drop the customers back; to provide quotes for expected costs; and to get a phone confirmation in case the cost was going to exceed the quote. All standard practices today, but new at that time. Initially, customers were reluctant to leave the car at the service center fearing that parts might be replaced. So Maruti set up glass partitions from where they could view the mechanics. Over time, as confidence built, customers rarely hung around the workshop. Maruti also worked hard to educate customers on the importance of genuine spare parts for the life of their car; and dealers were told to keep spares so customers would know where to get genuine parts. It also got into the business of financing car purchases via tieups.

Maruti tried to instill a strong work culture, and instill the importance of punctuality. They tried to overcome the traditional labor vs management antagonism, to varying degrees of success. Maruti partnered for housing schemes for workers; and helped start a DPS school nearby with priority in admission for employees. Lower managers were encouraged to make decisions, something alien to them. Managerial rotation was attempted to familiarize them with different aspects of the company, with limited success. Bonus systems for all workers were instituted.

All in all, a remarkable story. Who’d have thought a PSU could do so much?