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SUPPLY CHAIN MANGEMENT

         A PROJECT REPORT

        Under the guidance Of
              Mr. Shekhar

              Submitted by
             Pawan Kumar
               511029081
 In partial fulfillment o f the requirement
       For the award of the degree

                    Of

                  MBA
                    In
       Operations Management




   11/5B Pusa Road, Param Tower
           New Delhi 110005




           December & 2011
                                                                                                    2




                                      DECLARATION


I hereby declare that the project report entitled Operations Management, Submitted in partial fulfillment of
the requirements for the degree of Masters of business Administration to Sikkim Manipal University, India,
is my original work and not submitted for the award of any other degree, diploma, fellowship, or any other
similar title or prizes.




Place: KarolBagh                                                                (Pawan Kumar)
Date:                                                                        Reg. No.: 511029081
                                                                                                 3




                      EXAMINAR’S CERTIFICATION



The project report of Operations Management Is approved and is acceptable in quality and form.




Internal Examiner                                            External Examiner
Name                                                         Name
Qualification                                                Qualification
Designation                                                  Designation
                                                                                                       4




              UNIVERSITY STUDY CENTER CERTIFICATE



This is to certify that the project report entitled Operations Management Submitted in partial fulfillment of
the requirements for the degree of Masters of Business Administration of Sikkim – Manipal University of
Health, Medical and Technological Sciences.


Pawan Kumar has worked under my supervision and guidance and that no part of this report has been
submitted for the award of any other degree, diploma, Fellowship or other similar titles or prizes and that the
work has not been published in any journal or Magazine.




(511029081)                                                               Certified
                                                                                             5

                               ACKNOLEDGEMENT




All students learn theoretical subjects in their classroom, but as we are the management students,
apart from theoretical studies we need to get a deeper insight into the practical aspects of those
theories by working as a part of organization during our working experience in Industries. Industrial
Experience is a period in which a student can apply his theoretical knowledge in practical field.
Basically, practical knowledge and theoretical knowledge have a very broad difference. So this
Industrial Experience has high importance as to know how both the aspects are applied together.
The study of management acquires most crucial position in the business administration. In order to
be successful, it is necessary to give priority to the management in an organization. But it can’t be
denied that the study of management would be more educational, materialistic and even more
interesting, if it is to be paired with the work in organization as an employee. The Industrial
Experience session helps to get details about the working process in the organization. It has
helped me to know about the organizational management and discipline, which has its own
importance. The Industrial Experience is going to be a lifelong experience. Management in India is
heading towards a better profession as compared to other professions.             The demand for
professional managers is increasing day by day. To achieve profession competence, manager
ought to be fully occupied with theory and practical exposure of management.
                                A comprehensive understanding of the principle will increases their
decision-making ability and sharpens their tools for this purpose.        During the curriculum of
management programmers a student has to attain a practical exposure of an organization on live
project in addition to theory he/she studies.
This Project Report has been completed in Partial fulfillment of my management Program, MBA in
the company Videocon Telecommunications Limited, Videocon Telecommunications Limited;
which is a leading Consumer Electronics Goods Organization. The objective of my project was to
meet with the retailers and to supply them the CONSUMER ELECTRONICS GOODS products of
VTL (Videocon Telecommunications Limited). VTL are a name which has its name in organized
CONSUMER ELECTRONICS GOODS products in the numerous countries.
                                                                                    6




                                   Bonafide Certificate:




                           BONAFIDE CERTIFICATE

Certified that this project report titled “SUPPLY CHAIN MANAGEMENT” is the
bonafide work of “Pawan Kumar” who carried out the project work           under my
supervision.

 SIGNATURE                                                 SIGNATURE

HEAD OF THE DEPARTMENT                                 FACULTY IN CHARGE
                                                       <Academic Designation>
<Department>                                               <Department>

<<Full address of the Dept & College >>              <Full address of the Dept & College >
                                                                  7




Sr. No.                     Content                      Page

  1       Cover page And Title page                        1

  2       Student Declaration                              2

  3       Examiner’s Certificate                           3

  4       University Study Center Certificate              4

  5       Acknowledgement                                  5

  6       Bonafide Letter                                  6

  7       Contents                                         7

  8       Executive Summary                                8

  9       Basics of Supply Chain Management              9-78

  10      Company Profile                                79-83
          Brief Introduction    &     History   of   a
  11      company                                        84-90

  12      Supply Chain management in Videocon            91-117

  13      References/Bibliography                         118

  14      Words of Thanks                                 119
                                                                                    8



                               EXECUTIVE SUMMARY
The Indian consumer electronics industry has been growing at a double-digit growth
rate since past few years. Higher disposable income, increased product awareness,
affordable pricing, and shift in lifestyles have together been instrumental in changing
the amount and pattern of consumer spending; thereby, resulting in strong growth in
the consumer electronics industry. But still, the consumer electronics goods, like
refrigerators, televisions and air conditioners, have low penetration in the country,
leaving vast room for future growth.According to new research report, “Booming
Consumer Electronics Market in India”, the Indian consumer electronics industry will
grow at a CAGR of around 18% during 2011–2014. During this time period, we
expect that LCD TV will capture majority of the television market share as it will
replace Color televisions market to a large extent.

Moreover, we observed that the air-conditioner (AC) segment is one of the most
important product segments driving the overall growth of the Indian home appliances
market. Introduction of innovative features and technology coupled with the
expansion of distribution network is helping the market to grow at a faster rate.

Further, our report reveals that, the market will witness a dramatic change in the
competitive landscape over the next few years. A large number of companies will
foray into the lucrative Indian consumer electronics market with their diversified
product portfolio. This will lead the incumbent players to invest heavily in
establishing their stores across different states of the country.

This analytical research, “Booming Consumer Electronics Market in India”
thoroughly evaluates the Indian consumer electronics industry. It briefly discusses
about the current and emerging trends in the industry, underlining the future potential
areas and key issues crucial for the development of the industry. The research also
evaluates the behavioral aspect of the Indian consumers, their price sensitivity,
distribution channel analysis, and future prospects of the consumer electronics market
in rural India. Besides, our report also offers rational analysis on the key consumer
electronics companies operating in the country, which includes their strength and
weakness analysis.
                                    9




BASICS OF SUPPLY CHAIN MANAGEMENT
10
11
12
13
                                                                                                  14




The Importance of Supply Chain Management


                                                          Dealing with uncertain environments –
     matching supply and demand
        o                                                  Boeing announced a $2.6 billion write-off in
              1997 due to “raw materials shortages, internal and supplier parts shortages and
              productivity inefficiencies”
        o                                                  U.S Surgical Corporation announced a $22
              million loss in 1993 due to “larger than anticipated inventories on the shelves of
              hospitals”
        o                                                  IBM sold out its supply of its new Aptiva PC
              in 1994 costing it millions in potential revenue
        o                                                  Hewlett-Packard and Dell found it difficult
              to obtain important components for its PC’s from Taiwanese suppliers in 1999 due to a
              massive earthquake
                                                          U.S. firms spent $898 billion (10% of GDP)
     on supply-chain related activities in 1998



                                                          Shorter product life cycles of high-
     technology products
        o                                                  Less opportunity to accumulate historical
              data on customer demand
        o                                                  Wide choice of competing products makes
              it difficult to predict demand
                                                          The growth of technologies such as the
     Internet enable greater collaboration between supply chain trading partners
        o                                                  If you don’t do it, your competitor will
        o                                                  Major buyers such as Wal-Mart demand a
              level of “supply chain maturity” of its suppliers
                                                          Availability of SCM technologies on the
     market
                                                                                   15

o                                              Firms have access to multiple products
    (e.g., SAP, Baan, Oracle, JD Edwards) with which to integrate internal processes
16
17
                                                      18




Overcoming functional silos with conflicting goals-
                                                                        19




          ISSUE     CONSIDERATIONS

Network Planning    •       Warehouse locations and capacities
                    •       Plant locations and production levels
                    •       Transportation flows between facilities to
                    minimize cost and time

Inventory Control   •       How should inventory be managed?
                    •       Why does inventory fluctuate and what
                    strategies minimize this?

Supply Contracts    •       Impact of volume discount and revenue sharing
                    •       Pricing strategies to reduce order-shipment
                    variability
                                                                                            20

Distribution Strategies           •      Selection of distribution strategies (e.g., direct
                                  ship vs. cross-docking)
                                  •      How many cross-dock points are needed?
                                  •      Cost/Benefits of different strategies

Integration    and    Strategic   •      How       can   integration     with   partners   be
Partnering                        achieved?
                                  •      What level of integration is best?
                                  •      What information and processes can be
                                  shared?
                                  •      What partnerships should be implemented and
                                  in which situations?

Outsourcing & Procurement         •      What are our core supply chain capabilities and
Strategies                        which are not?
                                  •      Does our product design mandate different
                                  outsourcing approaches?
                                  •      Risk management

Product Design                    •      How are inventory holding and transportation
                                  costs affected by product design?
                                  •      How    does     product       design   enable   mass
                                  customization?




   Supply Chain Management Operations Strategies
                                                                       21




Supply Chain Management – Benefits

•   A 1997 PRTM Integrated Supply Chain Benchmarking Survey of 331 firms found
significant benefits to integrating the supply chain



Delivery Performance                             16%-28% Improvement


Inventory Reduction                              25%-60% Improvement


Fulfillment Cycle Time                           30%-50% Improvement


Forecast Accuracy                                25%-80% Improvement


Overall Productivity                             10%-16% Improvement


Lower Supply-Chain Costs                         25%-50% Improvement


Fill Rates                                       20%-30% Improvement

Improved Capacity Realization                    10%-20% Improvement




Supply Chain Imperatives for Success –
22
                               23

Value of Information and SCM
                      24



Taming the Bullwhip
                                  25




Methods for Improving Forecasts
                                             26




The Evolving Supply Chain


Supply Chain Integration – Push Strategies
27
                                       28

Supply Chain Integration – Push/Pull
Strategies
                                        29




Choosing Between Push/Pull Strategies
                                                                   30




Characteristics of Push, Pull and Push/Pull Strategies


                  PUSH                    PULL


Objective         Minimize Cost           Maximize Service Level

Complexity        High                    Low


Focus             Resource Allocation     Responsiveness


Lead Time         Long                    Short

Processes         Supply Chain Planning   Order Fulfillment
                                                                                                31




Supply Chain Collaboration –


         Many different definitions depending on perspective
         The means by which companies within the supply chain work together towards mutual goals
   by sharing
         Ideas
         Information
         Processes
         Knowledge
         Information
         Risks
         Rewards
         Why collaborate?
         Accelerate entry into new markets
         Changes the relationship between cost/value/profit equation
         Cornerstone of effective SCM
         The focus of many of today’s SCM initiatives
         The only method that has the potential to eliminate or minimize the Bullwhip effect
                                                                                            32




                                                               SERVICE
CUSTOMERS                       MATERIAL SUPPLIERS
                                                               SUPPLIERS

•        Reduced inventory      •      Reduced                 •      Lower freight costs
•        Increased revenue      inventory                      •      Faster and more reliable
•        Lower         order    •      Lower                   delivery
management costs                warehousing costs              •      Lower capital costs
•        Higher        Gross    •      Lower        material   •      Reduced depreciation
Margin                          acquisition costs              •      Lower fixed costs
•        Better      forecast   •      Fewer stock out
accuracy                        conditions
•        Better allocation of
promotional budgets

•        Improved customer service
•        More efficient use of human resources
                                      33




Supply Chain Collaboration Spectrum
                                                                                      34




Successful Supply Chain Collaboration

•     Try to collaborate internally before you try external collaboration
•     Help your partners to work with you
•     Share the savings
•     Start small (a limited number of selected partners) and stay focused on what you want
to achieve in the collaboration
•     Advance your IT capabilities only to the level that you expect your partners to manage
•     Put a comprehensive metrics program in place that allows you to monitor your
partners’ performance
•     Make sure people are kept part of the equation
–            Systems do not replace people
Make sure your organization is populated with competent professionals who’ve done this
before
                                                                                        35




Emerging Best Practices in SCM Strategy




The SCOR Model


                                                           Collaboration and the SCOR Model



                                                           The Supply-Chain Council (SCC) is
       a global, not-for-profit trade association open to all types of organizations
          o                                                 800 world-wide members
          o                                                 Multi-industry
                                                           SCC     sponsors     and   supports
       educational programs including conferences, retreats, benchmarking studies, and
       development of the Supply-Chain Operations Reference-model (SCOR), the process
       reference model designed to improve users' efficiency and productivity
                                                                                  36

                                                        Promotes research and thought
        leadership in the supply chain management area
                                                        Adoption of common standards for
        reference to process, information and material goods flows is essential to enable
        trading partner collaboration




                          Process Reference Models

•       Process reference models integrate the well-known concepts of business process
reengineering, benchmarking, and process measurement into a cross-functional framework
                 37




SCOR Structure
                           38




SCOR 7.0 Model Structure
                              39




SCOR Implementation Roadmap
    40




.
                                                                                               41




                                Examples of SCOR Adoptions



•   Consumer Foods
•   Project Time (Start to Finish) – 3 months
•   Investment - $50,000
•   1st Year Return - $4,300,000
•   Electronics
•   Project Time (Start to Finish) – 6 months
•   Investment - $3-5 Million
•   Projected Return on Investment - $ 230 Million
•   Software and Planning
•   SAP bases APO key performance indicators (KPIs) on SCOR Model
•   Aerospace and Defense
•   SCOR Benchmarking and use of SCOR metrics to specify performance criteria and provide basis for
    contracts / purchase orders
                                                                                         42




The SCOR Model as Context for This Course

•     Pharmaceutical sales and marketing activities have their own set of logistics related
activities that can be fully described using the SCOR model




                                                             interrelated “supply chains” work
together to deliver drugs to market:
                                                             The Marketing and Sales “supply
chain” which is principally information-based
                                                             The Logistics supply chain which is
principally product-based
43
                                                                                       44




                            INDUSTRY OVERVIEW


Historical Developments


The Electronics Industry in India took off around 1965 with an orientation towards space
and defence technologies. This was rigidly controlled and initiated by the government. This
was followed by developments in consumer electronics mainly with transistor radios, Black
& White TV, Calculators and other audio products. Color Televisions soon followed. In
1982-a significant year in the history of television in India - the government allowed
thousands of color TV sets to be imported into the country to coincide with the broadcast of
Asian Games in New Delhi. 1985 saw the advent of Computers and Telephone
exchanges, which were succeeded by Digital Exchanges in 1988. The period between 1984
and 1990 was the golden period for electronics during which the industry witnessed
continuous and rapid growth.


From 1991 onwards, there was first an economic crises triggered by the Gulf War which
was followed by political and economic uncertainties within the country. Pressure on the
electronics industry remained though growth and developments have continued with
digitalization in all sectors, and more recently the trend towards convergence of
technologies. After the software boom in mid 1990s India's focus shifted to software. While
the hardware sector was treated with indifference by successive governments. Moreover the
steep fall in custom tariffs made the hardware sector suddenly vulnerable to international
competition. In 1997 the ITA agreement was signed at the WTO where India committed
itself to total elimination of all customs duties on IT hardware by 2005. In the subsequent
years, a number of companies turned sick and had to be closed down. At the same time
companies like Moser Baer, Samtel Color, Celetronix etc. have made a mark globally.


1.2 Current Scenario


In recent years the electronic industry is growing at a brisk pace. It is currently worth US$
32 Billion and according to industry estimates it has the potential to reach US$ 150 billion
                                                                                       45

by 2010. The largest segment is the consumer electronics segment. While is largest export
segment is of components.


The electronic industry in India constitutes just 0.7 per cent of the global electronic
industry. Hence it is miniscule by international comparison. However the demand in the
Indian market is growing rapidly and investments are flowing in to augment manufacturing
capacity.
The output of the Electronic Hardware Industry in India is worth US$11.6 Billion at
Present. India is also an exporter of a vast range of electronic components and products for
the following segments
• Display technologies

• Entertainment electronics
• Optical Storage devices
• Passive components
• Electromechanical components

Telecom equipment

• Transmission & Signaling equipment

• Semiconductor designing

• Electronic Manufacturing Services (EMS)




This growth has attracted global players to India and leaders like Solectron, Flextronics,
Jabil, Nokia, Elicited and many more have made large investments to access the Indian
market. In consumer electronics Korean companies such as LG and Samsung have made
commitments by establishing large manufacturing facilities and now enjoy a significant
share in the growing market for products such as Televisions, CD/DVD Players, Audio
equipment and other entertainment products.


The growth in telecom products demand has been breathtaking and India is adding 2
million mobile phone users every month! With telecom penetration of around 10 per cent,
this growth is expected to continue at least over the next decade. Penetration levels in other
high growth products are equally high and growth in demand for Computer/ IT products,
auto electronics, medical, industrial, as well as consumer electronics is equally brisk.
Combined with low penetration levels and the Indian economy growing at an impressive 7
per cent per annum, the projection of a US$150 Billion+ market is quite realistic and offers
an excellent opportunity to electronics players worldwide.
                                                                                                    46



Electronic Manufacturing Services


India is well-known for its software prowess. But on the hardware front, the progress is
rather slow. However, the country has been making gains in this sector also. Already, 50
Electronics M a n u f a c t u r i n g Services (EMS)/Original Design Manufacturers (ODMs)
providers are operating in India, ranging from global players including Flextronics and
Solectron to indigenous firms including Deltron, TVS Electronics and Sahasra. Further
moves by international players are expected to add production in India in the coming years.




Obvious allure of locating electronics production in India is the nation’s low labor costs.
Labor costs for conducting electronics manufacturing in India are between 30 to 40 per
cent less than in the United States or in Western Europe. Other equally important benefits
from operating in India include a fast-growing domestic market, an excellent education
system, the nation’s technology parks and the recent improvements in the country’s transit
and utility infrastructure.




However, the Indian contract-manufacturing industry is not expected to pose a significant
threat to China’s position as the epicenter of electronics manufacturing in the short term.
India’s contract manufacturing activities primarily serve the nation’s indigenous demand.


OEMs primarily outsource manufacturing to cater to the Indian domestic market, although
export of Indian-assembled electronic goods does occur. In the longer term, i.e. 2009
onward, it is predicted that India may compete with the Chinese providers in select
products as the nation’s share of the global electronics market increases.


For OEMs, using contract manufacturing services in India can help them penetrate the
local m a r k e t . However, O E M s f a c e s p e c i f i c r i s k s a s s o c i a t e d w i t h u s i n g
contract manufacturers in India. Fluid exchange rates combined with volatile oil and
component prices lead to unpredictable costs. Changing government policies along
with    shifting government        regimes     also contribute       to an unpredictable           political
environment. Doing business in India is often disjointed, with an inefficient bureaucratic
system that causes frequent delays. However, for OEMs able to manage these risks, the
opportunity in India is significant.
The semiconductor fabrication segment has a small existing base in India with only two
fabrication units, which both are developing chips for the defense and strategic sectors.
                                                                                     47

However, semiconductor suppliers are expanding their manufacturing activities in India to
serve the growing contract-manufacturing industry in the nation. As evidence of this trend,
groundbreaking commenced on a 200 mm fabrication unit in Hyderabad operated by
Nano-Tech Silicon India Ltd.




Recent trends show that an increasing number of engineering and design activities are
also being outsorced to EMS companies and they are becoming ODMs (Original Design
manufacturers) and also provide final system integration and logistical support




The recent acceleration in EMS activity is mainly due to rapid growth in the electronic
Hardware market in all segments particularly rapid growth has taken place in Telecom
Infrastructure Equipment, computers, Consumer & Hand held devices.




The Growth Drivers


Behind the impressive growth of the electronics industry is the robust and consistent
growth in Electronic Hardware market of approximately 25 per cent due to a stable
economy & large middle class of 350 million people. The fastest growing segments are
demand for telecom services particularly cell phones, internet subscribers & growth in
demand for it products with increasing penetration of computers, falling prices &
Government support to rapidly encourage usage of IT in all sectors. Penetration of
telephone users (both landline & mobile) is projected to increase exponentially. Some of
the other factors are

          Highly talented workforce, especially for design and engineering services with
good communication skills.
•         Rising labor costs in China.
•         Presence of global Electronics Manufacturing Services (EMS) majors in India and
their plans for increased investments in India.
•         More outsourcing of manufacturing by both Indian and global Original Equipment
Manufacturers
                                                                                    48



Production Trend of Different Segments




Consumer Electronics


Consumer electronics (durables) sector continues to be the main stay of the Indian
electronic industry contributing about 32 per cent of the total electronic hardware
production. The market is expected to grow at 10 to 12 per cent annually. The urban
consumer durables market is growing at an annual rate of seven to 10 per cent, the rural
durables market is growing at 25 per cent annually. Some high-growth categories within
this segment include mobile phones, TVs and music systems




Computer Industry


The high growth in PC sales is attributed to increased consumption by Industry verticals
such as Telecom, Banking and Financial Services, Manufacturing, Education, Retail and
BPO/IT-enabled services as well as major e-Governance initiatives of the Central and
State Governments. Significant consumption in the small and medium enterprises and
increased PC purchase in smaller towns and cities was witnessed during the year. It is
expected that increased Government focus on pan-India deployment of broadband at one
of the lowest costs in the world will soon lead to accelerated PC consumption in the home
market.




The growing domestic IT market has now given impetus to manufacturing in India. The year
witnessed    not only capacity expansion by the existing players, but also newer
investments in hardware manufacturing. India is also high on the agenda of electronics
manufacturing services companies.


1.5.3 Control, Instrumentation and Industrial Sector


This is now a matured industry sector in the country at least as far as various application
segments is concerned. State-of-art and reliable SCADA, PLC/Data Acquisition systems are
being applied across various sections of the process industry. Latest AC drive systems
                                                                                       49

from smaller to very high power levels also find application in large engineering industries
like steel plants and/or metal industries. World class UPS systems are being
manufactured in the country to cater to the need of the emerging digital economy.
However, it appears there is really no manufacturing base in the country for the whole
range of the latest test and measuring instruments which are invariably procured from
outside. A good number of Indian companies in the control and instrumentation sector are
able to acquire orders for export systems through international competitive bidding.

However, the creation of knowledge base in the country through industrial R&D in this
critical sector has not been improving as desired. There is still lack of needed R&D
activities by the industry looking at the global market. On the part of Department of
Information Technology some of the latest technology development and applications in
this area include Intelligent SCADA Systems for monitoring and control of Mini Hydel
plants, Advanced Traffic Control System for urban transportation, Intelligent Power
Controllers for improvement of quality of electric power, etc. These systems have been
successfully developed and applied in real field conditions.


Communication & Broadcasting Sector


The telecommunication industry has gained tremendous recognition as the key driver for all
round development and growth.


India has emerged as one of the largest in the world and second largest in Asia.
Broadband connectivity is holding tremendous potential in the country.
India has emerged as the second largest market for mobile handsets. Following the
unprecedented growth in the mobile market, a number of companies are planning to set
up production base for mobile hand sets in the country for meeting local as well as export
markets.




Direct to Home (DTH) broadcast service has gained more and more popularity Better
quality digital broadcast reception is now available almost everywhere in the country to the
common people on their TV sets through the use of small dish antenna and a Set-Top Box
(STB).




Strategic Electronics
                                                                                        50




Though the government has started the process of getting private sector involved in the
production of strategic electronics equipments, the private involvement is at its nascent
stage.




Electronic Components




The components with major share in the export are CD-R, CPTs, PCBs, DVD-R,
connectors, semiconductor devices, ferrites, resistors, etc.


Significant developments took place during the year in the area of color picture tubes and
color glass parts. Another CPT manufacturer successfully launched manufacture of pure
flat tubes, leading to availability of flat tubes from three indigenous sources. The CPT units
continued expansion of capacities to improve further their global competitiveness. Two
more lines were commissioned during the year, one for manufacture of large size flat
color


Picture tubes and the second for small size. Two more lines are likely to come up next year.
Keeping pace with the downward trend in prices of color TVs, the prices of CPTs also fell.

One of the CPT manufacturers successfully developed a prototype of the 42 Plasma
Display Panel. This marked a major achievement of a milestone in the area of
developing from green field a Technology development initiative in a Hi Tech area. The
focus of development was in optimizing the Plasma Display Cell design to achieve the
desired parameters of Contrast and Brightness, achieving high speed response times and
parallely designing the Scan and sustain driver boards to match the Panel parameters. A
fully functional video Controller was also designed and developed to match the Logic
Circuits of the PDP Panel.


The color glass parts manufacturer implemented major expansion of its capacity to meet
increased local requirement due to substantial growth in CPT production. The unit also
started manufacture of glass parts for pure flat tubes as the demand for such tubes
increased due to one more unit launching production during the year. Both the existing
manufacturers of B/W glass parts continued the production of color funnels in their
existing lines. They were also planning to make large investment to set up
                                                                                    51

manufacturing facilities for color panels in near future.


A number of existing units imported capital goods under various schemes for expansion of
their capacities in PCBs, connectors, cable assemblies, color picture tubes, compact disc,
glass parts for color picture tubes, etc.
The      serviceable market for professional grade components such as PCBs,
semiconductor devices, connectors, wound components, antennas, etc., is likely to go up
due    to    launch     of    manufacture     of   mobile   handsets   in   the   country
                                                                          52

MAJOR PLAYERS




Solectron




Solectron Centum Electronics Limited is the leading Indian company offering
state of art solutions for Frequency Control Products (FCP), Electronic
Manufacturing Service (EMS) and Hybrid Micro Circuits (HMC). Solectron has a
manufacturing unit and design centre in Bangalore and a post manufacturing
centre in Mumbai. The EMS operation focuses primarily on the domestic
market




Flextronics




Flextronics entered India in 2001 when it purchased a Motorola facility.
Flextronics maintains a Bangalore facility with 18,000 sq ft and 297 employees.
The products manufactured are engine management Ccrd, TV tuners, set top box,
energy meters, cellular phone, networking cards and WLL wall sets.




Jabil Circuits




Jabil Circuit operates a 51,000 sq. ft. plant in Pimpri, which the provider took
over from Philips in 2002. The Pimpri plant manufactures TV analog monitor
cards and certain audio products for Philips. All production today is for the
Indian market.




Samtel Group


The Samtel group is the largest Indian integrated manufacturer of a wide
range of display devices like Color and B&W TV picture tubes, tubes for
                                                                           53

avionics, medical and industrial applications,   CRT   glass,   electron   guns,
heaters and cathodes, deflection yokes and engineering services. Samtel has
registered many patents for developments in video display technology. It is an
ISO 9000, UL and ISO 14000 certified company. Samtel has acquired a facility in
Germany to manufacture high tech, high resolution CRTs for demanding
applications such as aircraft avionics, medical monitors and a variety of
industrial applications through a continuous focus on R&D.


Another major player and exporter in this segment is Hotline Group which
manufactures
B/W and Color Picture
Tubes.




Moser Baer India Ltd.


In the Optical Storage Device segment, Moser Baer India Ltd., is today the
world's third- largest optical CD maker in an industry dominated by Japan and
Taiwan. MBIL supplies to a number of branded players like Sony, Verbatim,
TDK, Maxwell, Imation, Samsung etc, and has collaborative R& D programs as
well as reciprocal training programs with these world class companies.
                                                                        54

Hical Magnetics




India has several world class companies manufacturing electromechanical
and wound components. These include MNCs as well as Indian companies such
as Hical Magnetics, a QS9000 company, which designs and manufactures
professional grade transformers. Hical also offers world class design services
for the state-of-the art power converters and qualification services for both
power converters and magnetics. Hical has also established a subsidiary in USA
with focus on giving Design, Engineering and Sales support to their North
American customers.




Tyco Electronics


Tyco Electronics, an MNC, with a modern facility in Bangalore specialises in
high grade connectors such as fibre optic interconnection systems and smart
card connectors.


Midas Communications




Another example is the development of CorDect technology, India's very own
Wireless Local Loop technology, jointly developed by Midas Communication
Technologies, TeNeT group, IIT Madras and US based Analog Devices Inc.
Based on the Digital Enhanced Cordless Telecommunications standard
specified by the European Telecommunications Standards Institute (ETSI),
CorDect provides cost-effective, simultaneous high-quality voice and data
connectivity in both urban and rural areas.


Elin Electronics Ltd




A major player and pioneer in the Entertainment electronics segment is Elin
Electronics
Ltd, manufacturing Tape Deck and CD Mechanisms. The company also
manufactures AC
& DC Micro Motors for OEM's and provides Contract Manufacturing
                                                                       55

Services.




Cadence Design




Electronic Chip Design is another growth area for the electronics industry,
which can provide support for growth of manufacturing as well as greater
value addition. World leaders such as Cadence have set up shop in India and
more and more companies are relocating design centres due to technical skills
available here.
                                                                           56




REGULATORY ENVIRONMENT


Implementation of ITA-I under WTO


India has been successfully promoting reforms in all the constituents of the
Internet, Communication and Entertainment sector. Being a signatory to
the     Information Technology Agreement (ITA-I) of           the World Trade
Organization and with effect from March 1, 2005 the customs duty on all the
specified 217 items has been eliminated.


Industrial Licensing has been virtually abolished in the Electronics and
Information
Technology sector except for manufacturing electronic aerospace and defence
equipment.


There is no reservation for public sector enterprises in the Electronics and
Information
Technology industry and private sector investment is welcome in
every area.


Electronics and Information Technology industry can be set up anywhere in the
country, subject to clearance from the authorities responsible for control of
environmental pollution and local zoning and land use regulations.


Foreign Investment Policy


A foreign company can start operations in India by registration of its company
under the Indian Companies Act 1956. Foreign equity in such Indian companies
can be up to 100 per cent. At the time of registration it is necessary to have
project details, local partner (if any), structure of the company, its management
structure and shareholding pattern. Registration is a kind of formality and it
takes about two weeks. It can forge strategic tie up with an Indian partner.


A joint venture entails the advantages of established contracts, financial
support and distribution-marketing network of the Indian partner. Approval of
foreign investments is through either automatic route or Government approval.
                                                                           57




Foreign technology induction is encouraged both through FDI and through
foreign technology collaboration agreement. Foreign Direct Investment and
Foreign technology collaboration agreements can be approved either through the
automatic route under powers delegated to the Reserve Bank of India (RBI) or
otherwise by the Government.


Foreign Trade Policy


In general, all Electronics and IT products are freely importable, with the
exception of some defence related items. All Electronics and IT products, in
general, are freely exportable, with the exception of a small negative list which
includes items such as high power microwave tubes, high end super computer
and data processing security equipment.


Export Promotion Capital Goods scheme (EPCG) allows import of capital goods on
payment of 5 per cent customs duty. The export obligation under EPCG Scheme
can also be fulfilled by the supply of information Technology Agreement (ITA-1)
items to the DTA Provided the realization is in free foreign exchange.




The Import of second hand computers including personal computers and
laptops are restricted for imports.
                                                                                 58

SEZ Scheme




Special Economic Zone (SEZ) is a specifically delineated duty free enclave and
shall be deemed to be foreign territory for the purposes of trade operations and
duties and tariffs. SEZ unit may import/procure from the DTA without payment
of duty all types of goods and services, including capital goods, whether new or
second hand, required by it for its activities or in connection therewith,
provided they are not prohibited items of imports.




The units shall also be permitted to import goods required for the approved
activity, including capital goods, free of cost or on loan from clients. SEZ unit
may, on the basis of a firm contract between the parties, source the capital
goods from a domestic/foreign leasing company. SEZ unit shall be a positive
Net Foreign Exchange earner. Net Foreign Exchange Earning (NFE) shall be
calculated cumulatively for a period of five years from the commencement of
production.


As       per   the   “Special   Economic   Zones   Rules,   2006”,   notified   by    the
Department of Commerce, in case a SEZ is proposed to be set up exclusively for
electronics hardware and software, including information technology enabled
services, the area shall be ten hectares or more with a minimum built up
processing area of 1,00,000 square meters.




Export Oriented Units




Special schemes are available for setting up Export Oriented Units for the
Electronics/IT Sector. Various incentives and concessions are available under
these schemes. The schemes are:




     •    Export Oriented Unit (EOU) Scheme
     •    Electronics Hardware Technology Park (EHTP) Scheme
     •    Software    Technology    Park   (STP)
                                                                               59

       Scheme
   •   EOU/EHTP/STP Schemes




Units undertaking to export their entire production of goods and services,
except permissible sales in the Domestic Tariff Area (DTA), may be set up under
the EOU, EHTP or STP Scheme for manufacture of goods, including repair, re-
making, re-conditioning, re- engineering and rendering of services. Trading units,
however, are not covered under these schemes.




100 per cent Foreign Direct Investment is permitted through automatic route for
the units set up under these schemes. These units may import and/or procure
from the DTA or bonded warehouses in DTA, without payment of duty, all types
of goods, including capital goods, required for its activities, provided they are not
prohibited items of import in the

ITC(HS). The units shall also be permitted to import goods including
capital goods required for the approved activity, free of cost or on
loan/lease from clients.
An unit under any of these schemes may, on the basis of a firm contract
between the parties, source the capital goods from a domestic/foreign
leasing company without payment of customs/excise duty. This unit shall be a
positive net foreign exchange earner. Net Foreign Exchange Earnings (NFE)
shall be calculated cumulatively in blocks of five years, starting from the
commencement of production.
Supplies of Information Technology Agreement (ITA-1) items and notified
zero duty telecom/electronic items effected from EOU/EHTP/STP units to DTA
will be counted for the purpose of fulfillment of positive NFE.
The Software Technology Parks of India (STPI) scheme has played a pivotal
role in catalyzing the growth of this sector and supporting its rapid
proliferation across the country. The tax holiday has helped attract much needed
investments (MNC and Indian) in the sector and the virtual model has allowed
firms to avail benefits without constraints on their choice of location –
encouraging entrepreneurship and integrated growth.


Although the existing term of the STPI scheme is nearing its end (in
2009) the Government intends to continue the benefits offered, by introducing
similar provisions in the Special Economic Zones (SEZ) policy – and further
                                                                       60

relaxing the minimum area requirements (to qualify for an SEZ status), for the
IT-BPO sector..
CHALLENGES AND OPPORTUNITIES


Challenges


Major challenges facing the Indian electronic manufacturing market are an
infrastructure that needs to be improved at the earliest possibility, easing of
foreign    investment procedures, which is underway,             and a restructured
government tariff that now makes domestically manufactured goods more
expensive than imported goods with zero tariff.


There are also other problems, which are hampering the growth of the Indian
electronics industry. Some of them are:
   •    Lack of World-class infrastructure.
   •    Lack of clear-cut government policy for the industry.
   •    Very little expenditure in Research and Development
        area.
   •    Power of Marketing not harnessed to the maximum



   •    Opportunities



   •    While the Electronics sector in India is currently small, there are several
        advantages that India offers that can be effectively leveraged to achieve higher
        growth. These can be categorised under three heads:
   •    Manpower
   •    Market Demand
   •    Policy and Regulatory Support




   61
Abundant Availability of Man Power


India produces over 500 PhDs, 200,000 engineers, 300,000 non-engineering
postgraduates and 2,100,000 other graduates each year. The Indian Institute of
Technology (IITs) and The Indian Institute of Management (IIMs) produce
graduates and post graduates with best-inclass skills and capabilities in technical
and management fields. India’s capabilities in IT and engineering make it an
attractive location for sourcing engineering services such as Research &
Development (R&D) and design.



Top Consumer Electronics Companies




Top Ten consumer companies at globally are:



                     Sr. No.           Company Name

                     1                 Sony
                     2                 Toshiba
                     3                 Panasonic
                     4                 Samsung
                     5                 LG
                     6                 Microsoft
                     7                 Apple
                     8                 Intel
                     9                 IBM
                     10                Nokia

   62
Top Three consumer companies at India are:




                    Sr. No.          Company Name

                    1                Videocon
                    2                Voltas
                    3                BPL




   63
Consumer electronics has become a part of our everyday life. Electronics products
and gadgets in the group of consumer electronics include all such electronic
equipments that we use in our everyday life - entertainment, communication and
other home and office electronic equipments and gadgets. Personal computers,
laptops , television, telephones, mobile cell phones, MP3 players, MP4 players, audio
equipment, calculators, GPS navigation systems, cameras, DVDs, VHSs, camcorders.


Consumer electronics products, equipments and gadgets are manufactured all
around the world. Japan and South Korea are the world leaders when it comes to
research and development as well as manufacturing and export or consumer
electronics products.


Most of the consumer electronics products today are getting more and smaller,
slimmer and smarter. All this is possible because new and more advanced technology
is being used to manufacture these equipments. The latest trend in manufacturing
consumer electronics products is the use of Surface Mount Technology and RoHS
Lead-Free.




Surface Mount Technology (SMT)




   64
Surface mount technology (SMT) - Tutorial and complete information on principles
and practice of surface mount technology in electronics and PCB soldering.

Surface Mount Technology (SMT) is practice of soldering or mounting surface mount
devices (SMD) on the surface of a printed circuit board (PCB). The principle behind
surface mount technology is different from the conventional soldering process to
solder thru-hole electronic components.

This comparatively new technology uses different different soldering principles and
equipments. Also the process is little more complex than thru-hole technology but
offers better reliability and electrical conductivity.

What is Surface Mount Technology?

Surface Mount Technology is a soldering technology where surface mount electronic
components, also known as surface mount devices (SMD) are mounted or soldered
on the surface of the printed circuit board. This technology uses solder paste in place
or solder wire that is used in thru-hole soldering process.

SMT is mostly done using surface mount soldering equipment even though hand
soldering is also done occasionally. Most manufacturing units using surface mount
technology    are    cleanroom      because    most      SMD   electronic   components,
like semiconductors, are very sensitive to static charge. The cleanroom environment
prevents these components from getting damaged.

SMD stands for Surface Mount Device. These are electronic components with no
leads like thru-hole components. These devices have tiny metallic legs very close to
the surface of the components. These metallic legs are soldered on the copper tracing
on the PCB using solder paste. BGA or Ball Grid Array is also a kind of SMD with no
leads or legs at all. These special electronic components have tiny metallic spots
underneath the components. They are soldered on the PCB using solder balls.

    65
Most common SMD electronic components are:

SMD Passive Surface Mount Electronic Components for SMT -

        Surface Mount Discrete Resistors
        Surface Mount Resistor Networks
        Ceramic Capacitors for SMT
        Surface Mount Tantalum Capacitors
        Tubular Passive Components for SMT

SMD Active Surface Mount Electronic Components for SMT

        Leadless Ceramic Chip Carriers (LCCC)
        Small Outline Transistors (SOT)
        Small Outline Integrated Circuit (SOIC and SOP)
        Plastic Leaded Chip Carriers (PLCC)
        Small Outline J Packages (SOJ)
        Fine Pitch SMD Packages (QFP, SQFP)
        Ball Grid Array (BGA)

Surface Mount Technology Equipment

Surface mount equipment are different from equipment used in thru-hole soldering.
There can be a number of SMT equipment but the most common of them are:

        SMT Solder Paste Screen Printer: A solder paste screen printer for SMT is
needed to screen solder paste onto the printed circuit board (PCB) before placement
of surface mount components.
        SMT Pick-and-Place Machine: A pick-and-place machine picks and places SMD
electronic components onto the PCB prior to soldering.



    66
        SMT Reflow Soldering Equipment: A reflow soldering equipment / machine is
the second major equipment after pick-and-place machine in any SMT line.
        SMT Curing / Baking Oven: An oven is required for both adhesive curing and
solder paste baking operations. The same or different ovens may be used for
adhesive curing and baking of solder paste.
        SMT Solvent Cleaning Equipment: After soldering, the electronic assemblies
must be cleaned to remove the flux and flux residues. The selection of solvent and
cleaning equipment depends of the flux used and the cleanliness requirements.
        SMT Repair and Inspection Equipment: There are two main types of
automated inspection equipment on the market: x-ray and laser. However, most
electronic companies depend on visual inspection at 2 to 10X, using either
microscope of magnifying lamp.

SMT Magazine and SMTA (Surface Mount Technology Association)

SMT magazine is an online magazine dedicated to old, latest and upcoming
developments in the field of surface mount technology. It publishes news and
Information for and about the global printed circuit board industry.

SMTA membership is an international network of professionals who build skills,
share practical experience and develop solutions in electronic assembly technologies,
including microsystems, emerging technologies, and related business operations.

Implementing SMT in Production Line for Manufacturing

Implementing SMT in production line needs some study and research. Without
proper study and research, any SMT production line bears the risk of failure and
increased cost. There are SMT experts who offer classes and tutorial on proper
implementation and use of SMT.




    67
Not all electronic components are available in SMD. So thru-hole soldering
technology is bound to exist. Combining SMT and thru-hole technology for successful
PCB assembly is a challenge. So, manufacturers and engineers should do their study
and research and take expert classes to avoid failure and increased cost.

Surface mount technology offers benefits in terms of design and manufacturing.
Design-related benefits include savings in weight and real estate and electrical noise
reduction. SMT also provides improved shock and vibration resistance as a result of
the lower mass of components. Manufacturing benefits of SMT include reduced
board cost, reduced material handling cost, and a controlled manufacturing process.




Growth Prospects of Consumer Electronics Goods:

Retail sales of electronic goods and appliances to homes in the United States will
continue modest growth through August this year, according to a new forecast
released    this   morning     by    IBM     Global    Business    Services   (GBS).


The news should provide some measure of comfort to electronics component
suppliers who wonder if anyone is actually buying the goods flowing out the ends of
global supply chains. But it may sound a cautionary note, as well, because the annual
growth in US consumption is more than an order of magnitude less than recent
growth                    in                   semiconductor                    sales.


Michael Haydock, practice leader for analytics at IBM GBS, said his organization's
model, based on Holt-Winters Triple Exponential smoothing of time-series data,
predicts total retail sales of electronics and appliances to be $24.6 billion in June
through August of this year, a 4% increase from the same three months in 2009. He
noted that this figure would still be about $1.4 billion--or more than 5%--smaller


   68
than sales in the first three months of calendar 2007, 18 months before the financial
implosion.


Haydock said his figures were used primarily by retailers to fine-tune such decisions
as inventories, hiring, and advertising. "The forecast helps retailers assess their own
gut feel," he said. "Today they might be thinking, based on these numbers, that they
should make sure they have enough inventory, and the skilled staff they need.
Today's products are complex and require explanation. And in this scenario of
continuing growth, they might look at moving their ad mix toward longer-term
contracts                       to                   reduce                      rates."


Haydock emphasized that the forecast was based on time-series analysis, not on
econometric models. So it could not predict a change in the underlying statistics such
as could result from an external event-a Eurozone banking crisis or a war on the
Korean Peninsula, for example-suddenly altering consumer confidence. But he does
watch external factors, such as the gradually strengthening US Consumer Confidence
Index,        for       early        warning          of        statistical      shifts.


Haydock explained that the analytical technique does not deal with causal
relationships, only results. But his personal speculation suggests that there are three
major components to the growth. First, there is a somewhat pent-up baseline of
demand: people starting new households or replacing the broken dishwasher.
Second, there is a returning comfort among employed consumers about making
larger discretionary purchases: finally getting the 1080p big-screen. And third, there
is the unquenchable impact of the compelling new product: when the Apple faithful
queue up for their iPads. Each of these components has its own dynamic.


For retailers, Haydock said, the news is joyful. "They are just thrilled that people are
out shopping." For semiconductor vendors, the message is more complex. The

   69
Semiconductor     Industry    Association   recently   reported    that    worldwide
semiconductor sales in March grew 58% from March 2009. These sales serve all
users of electronics, not just consumer goods. And the figure is global growth, not US
growth, so it could be distorted by the rapidly waning Chinese binge on consumer
durables. But still, with real semiconductor growth almost 15-times greater than US
retail sales growth forecasts, you have to wonder who is watching inventories in the
consumer-durables supply chains.




Faster growth ahead for CONSUMER ELECTRONICS GOODS companies

The abolition of fringe-benefit tax and higher allocation under NREGS would be
positive trigger for consumer sector at large, increase in MAT rate from 10% to 15%
would adversely impact the earnings of Dabur and Godrej Consumer Products.

No change in excise duty structure for cigarettes does provide a much needed
booster for ITC in the near term.

On the other hand, higher allocation towards various agri and irrigation-linked
schemes would propel the micro irrigation business growth, the measures fall short
of our expectations (expecting micro irrigation to be included under mission mode).
Sectors like media, education and aviation were more or less untouched.




With government continuing to focus on 'higher disposable income' in the hands of
rural India and 'inclusive growth', it has increased the budget allocation towards
National Rural Employment Guarantee Scheme by 144% at Rs 39,100 crore. This
would propel consumption spends in the economy and thereby help volume growth
for CONSUMER ELECTRONICS GOODS companies at large. We could see faster


   70
growth in the coming quarters. Government has also abolished fringe benefit tax
(FBT), thereby aiding a 1-1.5% improvement in earnings per share for most of the
CONSUMER ELECTRONICS GOODS players barring Godrej Consumer. While all the
CONSUMER ELECTRONICS GOODS companies would tend to gain from this, GCPL
and Dabur are adversely impacted by 5% increase in MAT rates (from 10% to 15%).
This would result in 2.5-3% drop in EPS of Dabur and GCPL, net of the gains from
savings on FBT.

Ciggarretes:With fiscal deficit being the biggest concern for the government and post
the increase in sales tax on cigarettes in Delhi and Maharashtra (up from 12.5% to
20%), we were expecting tax increase on cigarettes, either in the form of excise duty
increase or VAT increase. Increase in taxation at over 5% would have impacted our
volume growth estimates for ITC. However, cigarettes excise rates have been left
untouched. This would have a positive impact on the cigarettes business, as after a
span on 2 years the sector gets relief from price increases (VAT implementation in
FY08 and higher taxation on non-filters in FY09) and thereby will see no disruption
in volumes (saw 1.5% volume decline in FY08 and 3% in FY09). We are expecting
3% volume growth for ITC's cigarettes portfolio for the next couple of years.

Media: The government has made no changes to the foreign ownership rules
pertaining to media, news media in particular. While the sector remains largely
neglected, government has extended the stimulus for print media by 6 months,
besides imposing 5% customs duty




on set-top boxes. We believe neither of the two measures would have any material
impact on media sector.


   71
Education: While lot was expected from the budget for the education sector --- in
terms of higher budgetary allocation, opening up of the sector for more private
participation and more public private partnership projects, the Union Budget has
eluded from making any moves in the direction. Most of the education sector stocks
have witnessed a sharp run up in anticipation of budget, which we feel will see
material price correction.

Aviation: Indian aviation sector, highly indebted and making losses of $1 billion
annually, was expecting government to open up the sector to FDI. This would have
helped the players in the ailing sector to deleverage the balance sheet as also fund
the capex. However, government has made no such announcement, extending the
pain period for the aviation sector.

Exchanges: The government has announced abolition of commodity transaction tax,
which was proposed in the interim budget. While it does not have any bearing on the
financials (as it was not yet implemented), abolition clears the overhang. We remain
positive on the exchange sector and Financial Technologies.

Removal of Quantitative Restrictions and Reservation Policy:


The Indian government has abolished licensing for almost all food and agro-
processing

industries except for some items like alcohol, cane sugar, hydrogenated animal fats
and

oils etc., and items reserved for the exclusive manufacture in the small scale industry




(SSI) sector. Quantitative restrictions were removed in 2001 and Union Budget
2004-05
      72
further identified 85 items that would be taken out of the reserved list. This has
resulted

in a boom in the CONSUMER ELECTRONICS GOODS market through market
expansion and greater product

opportunities.



Central and state initiatives


Various states governments like Himachal Pradesh, Uttaranchal and Jammu &
Kashmir

have encouraged companies to set up manufacturing facilities in their regions
through a

package of fiscal incentives. Jammu and Kashmir offers incentives such as allotment
of

land at concessional rates, 100 per cent subsidy on project reports and 30 per cent
capital

investment subsidy on fixed capital investment upto US$ 63,000. The Himachal
Pradesh

government offers sales tax and power concessions, capital subsidies and other

incentives for setting up a plant in its tax free zones. Five-year tax holiday for new
food

processing units in fruits and vegetable processing have also been extended in the
Union

Budget 2004-05. Wide-ranging fiscal policy changes have been introduced
progressively.


     73
Excise and import duty rates have been reduced substantially. Many processed food
items

are totally exempt from excise duty. Customs duties have been substantially reduced
on

plant and equipment, as well as on raw materials and intermediates, especially for
export

production. Capital goods are also freely importable, including second hand ones in
the

food-processing sector.




Food laws


Consumer protection against adulterated food has been brought to the fore by "The

Prevention of Food Adulteration Act (PFA), 1954", which applies to domestic and

Imported food commodities, encompassing food color and preservatives, pesticide

Residues, packaging, labeling and regulation of sales.




Critical operating rules in Indian CONSUMER ELECTRONICS GOODS sector




      74
• Heavy launch costs on new products on launch advertisements, free samples and
product promotions.


• Majority of the product classes require very low investment in fixed assets



• Existence of contract manufacturing


• Marketing assumes a significant place in the brand building process


• Extensive distribution networks and logistics are key to achieving a high level of
penetration in both the urban and rural markets




• Factors like low entry barriers in terms of low capital investment, fiscal incentives
from government and low brand awareness in rural areas have led to the
mushrooming of the unorganized sector




• Providing good price points is the key to success

Indian Competitiveness and Comparison with the Numerous countries Markets


The CONSUMER ELECTRONICS GOODS sector is among the largest employers in
India and livelihood of 13 million people associated with it across 8 million Kiranas
are directly depended on it. While talking about potential of the sector. Indirectly, 25
million more people employed at wholesalers, distributors, stockiest, etc are also

   75
affected with well-being of sector. The CONSUMER ELECTRONICS GOODS sector is
also one of the major contributor to the exchequer as it contributes Rs 31,000 crore
($6.5 billion) though direct and indirect taxes.

The following factors make India a competitive player in CONSUMER ELECTRONICS
GOODS sector:

1. Availability of raw materials

Because of the diverse agro-climatic conditions in India, there is a large raw material
base suitable for food processing industries. India is the largest producer of livestock,
milk, sugarcane, coconut, spices and cashew and is the second largest producer of
rice, wheat and fruits &vegetables. India also produces caustic soda and soda ash,
which are required for the production of soaps and detergents. The availability of
these raw materials gives India the location advantage. India is the largest producer
of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest
producer of rice, wheat and fruits & vegetables.




India also has an ample supply of caustic soda and soda ash, the raw materials in the
production of soaps and detergents – India produced 1.6 million tones of caustic
soda in 2003-04. Tata Chemicals, one of the largest producers of synthetic soda ash
in the numerous countries is located in India. The availability of these raw materials
gives India the location advantage.

Labor cost comparison

Low cost labor gives India a competitive advantage. India's labor cost is amongst the
lowest in the numerous countries, after China & Indonesia. Low labor costs give the
advantage of low cost of production. Many MNC's have established their plants in
India to outsource for domestic and export markets.
   76
Presence across value chain


Indian companies have their presence across the value chain of CONSUMER
ELECTRONICS GOODS sector, right from the supply of raw materials to packaged
goods in the food-processing sector. This brings India a more cost competitive
advantage. For example, Videocon Telecommunications Limited supplies milk as well
as dairy products like cheese, butter, etc.

Large domestic market

India is one of the largest emerging markets, with a population of over one billion.
India is one of the largest economies in the numerous countries in terms of
purchasing power and has a strong middle class base of 300 million. Around 70 per
cent of the total households in India (188 million) reside in the rural areas. The total
number of rural households is expected to rise from 135 million in 2001-02 to 153
million in 2009-10. This presents the largest potential


Market in the numerous countries. The annual size of the rural CONSUMER
ELECTRONICS GOODS market was estimated at around US$ 10.5 billion in 2001-02.
With growing incomes at both the rural and the urban level, the market potential is
expected to expand further.


Presence across value chain:
Indian firms also have a presence across the entire value chain of the CONSUMER
ELECTRONICS GOODS industry from supply of raw material to final processed and
packaged goods, both in the personal care products and in the food processing
sector. For instance, Indian firm Amul's product portfolio includes supply of milk as
well as the supply of processed dairy products like cheese and butter. This makes
the firms located in India more cost competitive.
Analysis of CONSUMER ELECTRONICS GOODS Sector in India:
    77
   Strengths:
   1. Low operational costs


   2. Presence of established distribution networks in both urban and rural areas


   3. Presence of well-known brands in CONSUMER ELECTRONICS GOODS sector
   Weaknesses:
   1. Lower scope of investing in technology and achieving economies of scale,
   especially in small sectors
                 Low exports levels


   3. "Me-too" products, which illegally mimic the labels of the established brands.
   These
   Products narrow the scope of CONSUMER ELECTRONICS GOODS products in
   rural                  and                   semi-urban                  market.


   Opportunities:
   1. Untapped rural market
   2. Rising income levels, i.e. increase in purchasing power of consumers
   3. Large domestic market- a population of over one billion.
   4. Export potential
   5. High consumer goods spending




1. Removal of import restrictions resulting in replacing of domestic brands
2. Slowdown in rural demand
3. Tax and regulatory structure

   78
                   OVERVIEW OF




       VIDEOCON:

Type                  Public (BSE: 511389)

Industry              Conglomerate
Founded               1979
Founder(s)            Nandlal Madhavlal Dhoot
Headquarters          Aurangabad, Maharashtra,India

Key people            Venugopal Dhoot
                      (Chairman)
                      Consumer Electronics
                      Home Appliances
                      Components
Products              Office Automation
                      Mobile phones
                      Wireless
                      Internet
                      Petroleum
                      Satellite television
                      Power
Revenue               US$ 4 billion (2010)

Employees             5,000+ (2011)

  79
80
BRAND WITH HIGH EQUITY




BUSINESS VERTICALS




   81
82
MANUFACTURING PLANTS OF VIDEOCON :




   83
BRIEF INTRODUCTION OF A COMPANY




Videocon is an industrial conglomerate with interests all over the world, and is an
Indian multinational company. The group has 17 manufacturing sites in India and
plants in China, Poland, Italy and Mexico. It is also the third largest picture
tube manufacturer in the world. The group is a USD 4 billion global conglomerate.




Corporate profile

The Videocon group has an annual turnover of 4 billion USD, making it the
largest consumer electronic and home appliance companies in India. Since 1998, it
has expanded its operations globally, especially in the Middle East.

Today the group operates through six key sectors: Mr. Dheeraj Tiwari also works in
Videocon Mobile services in Bhopal. The Brand Trust Report, 2011 has ranked
Videocon as the 42nd most trusted brand in India among the top 300 brands.

Consumer electronics

In India the group sells consumer products like Color Televisions, Washing Machines,
Air Conditioners, Refrigerators, Microwave ovens and many other home appliances,
selling them through a Multi-Brand strategy with the largest sales and service
network in India. In India after LG entering into market Videocon was not able to
stand in market with such a tough Competitor and it has seen a down fall in profits
and faced a huge loss.



   84
Mobile Phones

In November 2009 Videocon launched its new line of Mobile Phones. Videocon has
ever since launched a no. of Innovative handsets ranging from Basic Color FM phones
to High End Android Devices. And in February 2011, Videocon Mobile Phones
launched the revolutionary concept of ZERO paise per second with pre-bundled
simcards of Videocon mobile services along with 7 of its Handset Models. All India
network of Vodeocon was designed by Dheeraj Tiwari.

Color picture tube glass

Videocon is one of the largest CPT Glass manufacturers in the world, operating in
Mexico, Italy, Poland and China..

Oil and Gas

An important asset for the group is its Ravva oil field with one of the lowest
operating costs in the world producing 50,000 barrels of oil per day.

DTH

Main article: Videocon d2h

In 2009, Videocon launched its DTH product, called 'd2h'. As a pioneering offer in
the Indian DTH market,       Videocon      offered LCD &      TVs       with     built-
in DTH satellite receiver with sizes 19" to 42". This concept in the DTH service is
relatively new in the presence of other players like ZEE tv's Dishtv, Tata Sky, Air tel
Digital Tv and Reliance's BIG TV providing only the set top box.

Telecommunication

Videocon Telecommunications Limited has license for mobile service operations
across India. It launched its services on 7 April 2010 in Mumbai. In Bhopal videocon
is lead by Genius Engineer Sir Er. Dheeraj Tiwari




   85
Acquisition of Thomson SA

Videocon through its Wholly Owned Offshore Subsidiary acquired the Color Picture
Tube (CPT) businesses from Thomson S.A having manufacturing facilities in Poland,
Italy, Mexico and China along with support research and development facilities.

Acquisition Rationale

The acquisition came at a time when Thomson was facing a fall in demand in
developed markets for television with CPTs and was moving more towards Flat-
screen and Plasma Television. However, Videocon saw an opportunity in the
emerging countries for CPTs and hence pursued with the acquisition. Besides, the
acquisition gave Videocon, the access to advanced technology giving the company
control over an R&D facility in Agnani, Italy. The major reasons behind this
acquisition . were

Cost cutting – Videocon was better positioned to shift the activities to low-cost
locations and also it could integrate the operations with the glass panel facility in
India with the CPT manufacturing facilities acquired from Thomson S.A. Videocon
wanted to leverage its position in the existing parts of the business and this
acquisition would give it a strong negotiation position and could reduce impact of
glass pricing volatility. Videocon could also reduce the costs by upgrading and
improving the existing production lines.

Vertical Integration – The acquisition helped Videocon in vertically integrating its
existing glass-shell business where it had been enjoying substantially high
margins.[7] Videocon’s glass division had the largest glass shell plant in a single
location. This gave the company an unrivalled advantage in terms of economies of
scale and a leadership position in the glass shell industry. The acquisition also gave
Videocon a ready-market for its glass business and it was part of Videocon’s long-
term strategy to have a global vertically-integrated manufacturing facility.



   86
Rationalization of Product Profile – Videocon modified its product profile to cater to
the changing market needs like moving away from very large size picture tubes to
smaller ones.[8]

Apart from the overall strategy Videocon also had a plan on the technological front. It
wanted to improve the setup for the production line and line speed post-merger. Its
focus was to increase sales while reducing the costs and thereby improving the
productivity of the existing line. The company also wanted to foray in a big way into
LCD panels back-end assembly . On the sales front the company wanted to leverage
on the existing clients of Thomson and build relation as a preferred supplier to
maximise sales. Also, Videocon could benefit from OEM CTV business with the help of
Videocon’s CTV division, invest for new models and introduction of new
technologies.

Thomson’s perspective

In 2004 Thomson planned entry into the high-growth digital media and technology
business. Also, Thomson wanted to exit consumer and electronics businesses as they
were incurring significant losses. After sale of its TV business to Chinese group TCL,
and Tubes to Videocon, Thomson divested from the audio/video accessories
business which was the last unit of its consumer electronics business. The need to
divest are quite evident from the losses that it incurred in these businesses
particularly that the unit that it sold off to Videocon, the Optical Modules activity, and
the Audio/Video & Accessories businesses which totalled around €749 million for
2005. Moreover Thomson had done some acquisitions that were in line with
boosting their revenues in the following years. [

Other Competitors for the Acquisition

When Videocon entered the race for the color picture tubes manufacturing capacity
of Thomson SA in November 2004, there were 16 other bidders. Videocon stood slim
chances    given   the   fact   that   it   had     to   battle   it   out   with   players
like LG, Philips, Samsung and Matsushita, Daewoo and               several          Chinese
    87
manufacturers but finally managed to close the deal. The deal catapulted Videocon
into the No. 3 slot in the global pecking order for CPTs. An official of Videocon said on
the deal "The word is out in the world that India and Indian companies are not just a
good bet by themselves, but also a hedge against China.“

Pre-merger scenario analysis

CPT industry is affected by many competitive factors such as change in the consumer
preferences ,the product offer strategy of retailers, the progress made by alternative
technology manufacturers ,capacity adjustment facility of competitors etc. Based on
all of these factors there were two scenarios that emerged from the 2005 budget of
Videocon. The first scenario is a conservative one. It mainly assumes Price pressures
similar to those in the past(-8 to -12%),capacity reduction over a period of two years,
a gradual shift to newer technologies like True Flat and good amount of growth for
LCD makers.

The second scenario is a more aggressive one in term of trends predicted. It assumes
that the switch to True Flat would be faster, more overcapacity, more competition
from LCD manufacturers and rising price strategy pressures in general. The second
scenario obviously requires an industrial strategy which is more adapted to the
environment.

However even if the second scenario arises, Videocon believes there is an
opportunity in the CRT business. Though it is very obvious that in the developed
markets of the western world the demand is shifting towards the flat panel side(FPD
it is expected to contribute 70% of TV market in these regions),in the emerging
markets like BRIC CRT still holds forth. CRT holds a dominant 70% share in these
markets. When translated into number of units the demand is more than 100 million
units. As Videocon is primarily based in these countries, it hopes to harness the value
of the Thomson acquisition in the coming years.[citation needed]




    88
Post merger situation (2008)

Videocon has not been able to turn the plant around in Italy still. However it is
getting support from the local government(which wants to prevent job cuts) in form
of grants. The government is in fact trying to set up a Greenfield venture in form of a
LCD manufacturing facility in partnership with Videocon. The banks are also
supporting Videocon and with help from all these quarters Videocon expects to turn
around the plant in Italy.[12] The Thomson plant has not turned around in Mexico as
well and in fact production has been reduced over there. In Poland, the situation is
more promising and Videocon hopes that plant over there will get in black in the very
near future.[13] However the surprise has been in the Chinese market .Despite facing
a highly competitive market Videocon has managed to turn a plant around while the
other is on its way. In China Videocon is adopting a different strategy for
manufacturing CTVs as the local players dominate the market .It plans to supply
these players by taking advantage of low-cost nature of mainland(the number
targeted by it about 6 million CPTs).[14]

Role of local government in the acquired units

Italy

The LCD television segment is one of the fastest in terms of growth rate in Italy. The
compounded growth rate is projected to be around 70% in the next few years.
Videocon in partnership with the local government is going for a Greenfield venture
in this segment. The Italian central government is giving a euro 180 million grant
whereas the regional authorities are giving a 40 million grant. Videocon would itself
pitch in with about euro 300 million whereas bank loans would provide a further
700 million.

China

In the Thomson plant located in China the local Chinese Government is the minority
shareholder.


    89
Mexico

When Videocon acquired Thomson’s CPT business, it also gained control of
Thomson’s Mexican plants. However Videocon Industries has a view that it would
expand in the country only if the government gives it enough incentives. Videocon is
demanding a 25-30% cash benefits from the government of Mexico.

Thomson’s exit from Videocon

Thomson is looking to sell out its stake in Videocon (a 10 percent stake via GDRs)
and in most likelihood it would be bought by Videocon itself. Thomson would be
exiting at a loss as it had acquired the stake at around Rs 400 per share
(approximately equal to $10 per share).The deal is expected to happen at current
market prices. Videocon’s GDR is currently traded at around $5.06 on the
Luxembourg Stock Exchange. On the Bombay stock exchange it’s trading around Rs
150 against the 52 week high of Rs 868 in Jan 2008. Another point to be noted is that
this won’t attract the market regulator’s “creeping acquisition” norm which comes
into force once they acquire more than 5% stake, as the deal would be an overseas
one.




   90
SUPPLY CHAN MANAGEMENT OF VIDEOCON
Videocon has been using following procedure for Supply chain management :




Item / Service Identification


1.0.1 Item /Service Identification
a)        Item/Service Identification shall be based on domain nature of the
item/service.
b)        There shall be four levels of categories- Major, Minor and Item Family.
c)        All category (Item/Services) creation/modification/deletion rights must be
with Process and systems that shall be responsible for any changes in these
categories.
d)        Item/Service Code creation shall be centralized while the request can be
generated by any user groups across all circles keeping the concerned SCM SPOC in
loop.
e)        Services which are not frequent in nature or one time small payments do not
require code creation.
f)        Before creating a new item/service exhaustive search shall be done on the
existing database to avoid any duplicate entries.



1.0.2 Item/Service code creation
a)        Item code shall be running serial number.
b)        Item code shall consist of 10 digits (alpha numeric)
c)        Item Code consists of Major-3, Minor-01, Item Family-02, Item Code-3 digits
and last Digit for provision in case code number increases.




     91
1.0.3 Item/Service description creation
a)         Description shall be as per the guidance provided by the requester.
b)         All letters in Item/Service shall always be in “Upper Case” or Numeric

All abbreviation in the description shall be always in “Upper Case”




1.1        Item/Service Identification



Process Name:        Item/Service                   Process Owner:        SME
                     Identification
Department:          SCM                            Date:
Process No:          1.1                            Version               VTL1.0
Prepared by          Sharad Jindal ; SCM            Approved by:




Sub Process                           Process Linkage              Output
1.1.1        :     Add      New 5.1.2           :   New     Item New Item/Service Creation
Item/Service                          Requisition
                                      6.1.1 :
                                      6.1.2 :
1.1.2        :     Block/Modify 6.1.1 :                            Blocking/Modification   of
Item/Service                          6.1.2 :                      Item




      92
   Applicability             All VTL Circles/HUB/Corporate




   Objective
   To Define the process of creating new Item/Service
   Scope
   START:      New    Item/Service    creation END: New Item/Service creation or
   request from authorized user                  rejection


                                                        Responsibility
                                                        RASCI        (R-Responsibility,      A-
Process Description
                                                        Accountability, S-Support, C-Consult, I-
                                                        Inform
                                                        R           Authorized User thru (SCM)
1. Raise New Item/Service code creation requisition
                                                        I           SME
2. Search the current database to check whether the
                                                        R           SME
Item/Service already exists or not.
3. Send mail info to user incase of Item/Service
                                                        R           SME
already exist in system along with the Oracle Code.
4. Validate the new Item/Service creation request in
                                                        R           SME
case of Item/Service does not exist in system.
5. Check if the attributes are accurate to create the
                                                        R           SME
new Item/Service.
6. Send the mail to user to correct the attributes of R             SME
the new Item/Service (if attributes are not I                       User


       93
  accurate)
                                                        Responsibility
                                                        RASCI        (R-Responsibility,      A-
  Process Description
                                                        Accountability, S-Support, C-Consult, I-
                                                        Inform
                                                        R          SME
  7. Send correct attributes.
                                                        I          User
  8. Use attributes in the request received to create
                                                        R          SME
  new Item/Service code if attributes are accurate.
  9. Item/Service code to be running unique serial                 SME
                                                        R
  number
  10. Create Item/Service code in the system.           R          SME
  11. Update internal Item/Service description with                SME
  their properties and attributes in the system and R
  manual tracker.
  12. Allocate Major item and category as per the                  SME
  Item/Service categorization as per 1.0.2 (C) policy R
  guidelines.
  13. Auto mail trigger to user for information of R               SME
  creation of the new Item/Service                      I          User
  14. Process End




Reference Documents

Item Code request format
Item Catalog format


         94
        Key Performance Indicators (KPIS)

        1.    Time taken for Item code generation process = Difference of time
        for requisition submission to Automatic rejection/creation mail send to
        user (TAT- Maximum 8 Working Hours)

        2.    No. of request received for already existing Item/Service

        3.    No. of request received with inaccurate data




1.1.2             Item/Service Identification –Block/Modify Item/Service
                     Item/Service Identification –
Process Name :                                       Process Owner :       SME
                     Block/Modify Item/Service
Department :         SCM                             Date :
Process No. :        1.1.2                           Version :             VTL 1.0
Prepared By :        Sharad Jindal; SCM              Approved By :
Applicability :      All VTL Circles/HUB/Corporate




Objective
To define the process of blocking/modifying the existing Item/Service
Scope
START : Blocking/Modification of Item/Service request from user               END : Blocking/Modification
of Item/Service




                  95
                                                             Responsibility
Process Description                                          RASCI   (R-Responsible,   A-
                                                             Accountable, S-Support, c-
                                                             Consult, I-Inform.)
1. Raise request to block/modify the Item/service in the R   User
system with reasons for the same                        I    SME
2. Check if more clarification is required              R    SME
3. Send mail to user for further clarification          R    SME
4. Send clarification                                   I    SME




               96
          ;
Process Description                                                               Responsibility
                                                                                  RASCI             (R-
                                                                                  Responsible,       A-
                                                                                  Accountable,       S-
                                                                                  Support, c-Consult, I-
                                                                                  Inform.)
5. Receive and validate the request.                                              R       SME
6. Auto triggered mail to user if blocking/modification of existing Item/Service R        SME
code is not required
7. In case blocking/modification is required, system to check for the update of R         SME
the in stock, In transit and release schedule for the calculation of inventory.
8. Send a mail to user to provide Approval as per DOA for modification/up R               SME
gradation of already existing Item Code having inventory.                         I       User
9. Receipt of Duly Approved note from user                                        R       User
                                                                                  I       SME
10. SME to take the help of ERP through IT and get the modification done.         R       SME


              97
                                                                                I      IT
11. Communicate the Stakeholders on TAT as per VTL IT/ERP.                      R      SME
                                                                                I      IT/User
12. Communicate to all stakeholders about blocking/modification of the R               SME
Item/Service as per request.                                                    I      User




             Reference Documents

             Item modification/Blocking request format



             Key Performance Indicators (KPIS)

             1.     No. of requests rejected = No requests received – No of Item/Service
             blocked/modified
             2.     Time take for blocking/modification process = Difference of time for
             requisition submission to   Automatic    rejection/ updating mail send to
             user




             98
2.        Vendor Identification


2.0.1 Vendor Identification
g)        There shall be no category on Vendor’s Code.
h)        A single Vendor can be used as Supplier or Service provider and the type of
supply does not have any impact on Vendor code.
i)        Vendor Code creation shall be centralized while the request can be generated
by any user groups keeping the concerned SCM in loop.
j)        Before creating a new Vendor code exhaustive search shall be done on the
existing database to avoid any duplicate entries.


2.0.2 Vendor code creation
d)        Vendor code shall be running serial number.
e)        Vendor code shall consist of numeric digits only.


2.0.3 Vendor description creation
a)        There will be no Description in Vendor code.
b)        First letter in Vendor Name shall always be in “Upper Case”
c)        No Title is given during Vendor Code Creation i.e M/s, Mr, Shri etc.
d)        All the fields of the Request form must be filled properly else subject to
rejection.


2.0.4 Necessary Documents required along with Vendor Creation Request Form.
a)        Copy of PAN Card number (Mandate)
b)        VAT No (as applicable)
c)        CST No (as applicable)
d)        VAT / CST Registration Copy if VAT no available
e)        Service Tax No (Mandate in case of Vendor provides Service Bills)
f)        Service Type (Mandate)

     99
   g)         Excise Registration No (as applicable in case of supply only)




   2.1        Vendor Identification



   Process Name:              Vendor                     Process Owner:       SME
                              Identification
   Department:                SCM                        Date:
   Process No:                2.1                        Version              VTL2.0
   Prepared by                Sharad Jindal ; SCM        Approved by:




   Sub Process                        Process Linkage            Output
   2.1.1 : Add Vendor                 5.1.2 : Vendor Code New Vendor Creation
                                      Creation Request




   2.1.2       :   Block/Modify 6.1.1 :                          Blocking/Modification       of
   Vendor                                                        Vendor


   Applicability                                 All VTL Circles/HUB/Corporate




Objective
To Define the process of creating new Vendor
Scope
START: New Vendor creation request from END: New Vendor                                creation or

        100
authorized user                                     rejection




                                                                        Responsibility
                                                                        RASCI        (R-
                                                                        Responsibility,
                                                                        A-
      Process Description
                                                                        Accountability,
                                                                        S-Support,    C-
                                                                        Consult,      I-
                                                                        Inform
                                                                             User thru
      1. Raise Vendor code creation requisition                         R
                                                                             (SCM)
                                                                        I    SME
      2. Search the current database to check whether the Vendor
                                                                        R    SME
      already exists or not.
      3. Send mail info to user incase of Vendor already exist in
                                                                        R    SME
      system along with the Oracle Code.
      4. Validate the new Vendor creation request in case of Vendor
                                                                        R    SME
      does not exist in system.
      5. Check if all the required fields are accurate and filled up
                                                                        R    SME
      properly to create the new Vendor .
      6. Send the mail to user to correct the required fields of the new R   SME
      Vendor request form.                                              I    User
                                                                        R    User
      7. Send Properly filled up form.
                                                                        I    SME
      8. Use data’s in the request form received to create new Vendor
                                                                        R    SME
      code on receipt of properly filled form.


     101
   9. Vendor code to be running unique serial number                      R   SME
   10. Create Vendor code in the system.                                  R   SME
   11. Auto mail trigger to user for information of creation of the R         SME
   new Vendor Code                                                        I   User



   Reference Documents

   Vendor Code request format



   Key Performance Indicators (KPIS)

   1.        Time taken for Vendor code generation process = Difference of time
   for requisition submission to         Automatic rejection/creation mail send
   to user

   2.        No. of request received for already existing Vendor

   3.        No. of request received with inaccurate or incomplete data




2.1.2 Vendor Identification –Block/Modify Vendor
                        Vendor Identification –Block/Modify Process Owner
Process Name :                                                                  SME
                        Vendor                                 :

  102
Department :            SCM                                 Date :
Process No. :           2.1.2                               Version :       VTL 2.0
Prepared By :           Sharad Jindal ; SCM                 Approved By :
Applicability :         All VTL Circles/HUB/Corporate


Objective
To define the process of blocking/modifying the existing Vendor
Scope
START : Blocking/Modification of Vendor request from user                        END :
Blocking/Modification of Vendor


                                                                            Responsibility
Process Description                                                         RASCI        (R-
                                                                            Responsible,
                                                                            A-
                                                                            Accountable,
                                                                            S-Support,     c-
                                                                            Consult,       I-
                                                                            Inform.)
1. Raise request to block/modify the Vendor in the system with reasons for R User
the same                                                                    I    SME
2. Check if more clarification is required                                  R SME
3. Send mail to user for further clarification                              R SME
4. Send clarification                                                       R User
                                                                            I    SME
5. Receive and validate the request.                                        R SME
6. Auto triggered mail to user if blocking/modification of existing Vendor R SME
code is not required


  103
                                      Responsibility
Process Description                   RASCI (R-Responsible, A-Accountable, S-Support, c-
                                      Consult, I-Inform.)
7. In case blocking/modification is R                                         User
required, User      to check   from I                                         Finance
Finance for any pending payment I                                             SME
related to Vendor. If no then
request validated if yes then New
Vendor Code will be created and
only after final payment and PO
closure the Old Vendor code will
be deactivated.
8. Tick flag in Vendor Master for R                                           SME
blocking of Vendor      for further
document for further purchasing
and Payment.
9. Communicate to User about R                                                SME
blocking/modification     of    the I                                         User
Vendor



Reference Documents

Vendor Name Modification/Blocking request format

Key Performance Indicators (KPIS)

1.         Time taken for Vendor code modification/blocking process =
Difference of time for requisition submission to            Automatic
rejection/modification/blocking mail send to user


     104
 2.         No. of request received with inaccurate or incomplete data


3.          Purchase Request Process


3.0.1 Purchase Request
a)          Any kind of material requirement
b)          Any kind of job work requirements
c)          Any kind of Service requirements
d)          Marketing Opex related items & services
e)          Spare requirements.




Process Name:               Purchase Request        Process Owner:       SCM
Department:                 SCM                     Date:
Process No:                 3.1                     Version              VTL3.0
Prepared by                 Sharad Jindal ; SCM     Approved by:


Sub Process                       Process Linkage             Output
3.0.1 : Create purchase                                       New Item/Service Purchase
Request                                                       Request approved


Applicability                                  All VTL Circles/HUB/Corporate




Objective
To Define the process of creating new Vendor
Scope



      105
START: New Item/Service purchase request END: New Item Service Purchase
from authorized user                               Request Approved Finally as per DOA


                                                                    Responsibility
Process Description                                                 RASCI            (R-
                                                                    Responsibility, A-
1. Raise New Item / Service Purchase requisition                   R User
                                                                   Accountability, S-
                                                                   I SCM
                                                                   Support,        C-
2. Send the PR Hardcopy to Circle Function Head (In case raised by R User
                                                                   Consult, I-Inform
                                                                   I Circle
Circle)
3. Send the PR Hardcopy to Circle Business Head (In case raised by R User
                                                                      Function Head
Circle)                                                            I CBH/Circle
4. Send the scanned copy of duly signed PR to Hub/Corporate R User    HOD
Functional Head (In case raised by circle)                         I Hub
5. Validates the Purchase Request of Item/ Service                 R Hub
                                                                      HOD/Circle
6.                                                                 R Hub
                                                                      HOD/Circle
                                                                      HOD
a)Rejects with justification if Item/Service not required          I User
                                                                      HOD/Circle
                                                                      HOD
7. In case of with Signatures/Remarks if any
b)Approves Rejection PR goes back to User                   R          Hub
                                                                       HOD
                                                            I          User/Circle
                                                                       HOD/Circle
8. In case of approval (Duly approved PR (HUB/CORPORATE) is R          User
                                                                       SCM
                                                                       HOD
submitted to Concerned SCM Buyer.                           I          Circle
                                                                       HOD/SCM




     Reference Documents

     Item / Service Purchase Request Format



     Key Performance Indicators (KPIS)




    106
      1.      Time taken for Purchase Request Process=
      Difference of time for requisition submission to
      Final Approval

      2.      No. of Rejections

      3.      No. of Revision


4.         Purchase Trigger



4.1        General Purchasing Policies.
a)         All Materials/Services shall be purchased from VTL approved supplier’s only.
b)         All Materials/Services shall be purchased only after the receipt of Duly
approved NFA.
c)         Purchase commitments to the supplier shall be made by only authorized SCM
person.
d)         At any circumstances no verbal purchase orders shall be released to the
suppliers.
e)         All the Purchase Orders must be system (Oracle) generated & duly approved
in systems only.
f)         For employee related expenses like petty cash, Travel expenses, Gifts,
rewards, meetings etc no Purchase Order is required.


4.0.1 Supplier Identification & Short Listing for Bids
a)         For regular supply of Item/Service preference must be given to the already
enrolled suppliers.
b)         For New Supply of Item/Service at least 3 bids to be invited from different
suppliers.
c)         Supplier must not be in any case related to any VTL employee.


     107
d)         Regular Item/Service Supplier must not be a defaulter in past.


4.0.2 Quote Analysis & Negotiation
a)         During Negotiation a MOM with Supplier to be maintained.
b)         While preparing a analytical chart other parameters like Credit period,
Quality, Delivery period, Past experience if any and Market goodwill etc also to be
considered.
c)         While negotiating the rates the complete scope of service or the exact specs of
item should be clear.
d)         There should be apple to apple comparison.


4.0.3 Note for Approval for Purchase
f)         This NFA always has to be raised by only authorized SCM person after the
receipt of an approved Purchase Request.
g)         It should contain comparative Chart of at least 3 quotes by different
competitive vendors (In case of New Item Requisition)
h)         For regular Item requisition NFA should mention the details of vendors
selected for Purchase.
i)         The final price agreed with proper justification on vendor selection and
pricing must be incorporated clearly
j)         For all MARCOM related purchases the budget allocated, Utilized and Balance
must be shown clearly as per Format.
k)         All NFA’s must contain the Delegation of Authorities and must be approved as
per DOA.
4.0.4 Awarding Purchase Order
a)         All Materials/Services shall be purchased from VTL approved supplier’s only.
b)         All Materials/Services shall be purchased only after the receipt of duly
approved NFA.



     108
c)         Purchase commitments to the supplier shall be made by only authorized SCM
person.
d)         At any circumstances no verbal purchase orders shall be released to the
suppliers.
e)         All the Purchase Orders must be system (Oracle) generated & duly approved
in systems only.


Process Name:                  Purchase Trigger       Process Owner:         SCM
Department:                    SCM                    Date:
Process No:                    4.1                    Version                VTL4.0
Prepared by                    Sharad Jindal ; SCM    Approved by:


Sub Process                           Process Linkage            Output
4.0.1           :        Supplier                                Short listed Suppliers
identification & short listing
for Bids
4.0.2 : Quote Analysis &                                         Final short listed suppliers
Negotiation                                                      for Purchases
4.0.3 : Create Note for                                          NFA   for         Item/Service
Approval for Purchase of                                         Purchase              Request
Item/Service                                                     approved
4.0.4       :       Awarding     of                              Final signing of approved
Purchase               Order/Rate                                PO/ Rate contract
contract


Applicability                                     All VTL Circles/HUB/Corporate




     109
Objective
To Define the process for enabling timely & efficient request of Items/Services and
trigger an approval process for Purchasing.
Scope
START: Requirement from User                     END: Delivery of Items/ Services


                                                                Responsibility
                                                                RASCI               (R-
                                                                Responsibility,      A-
 Process Description
                                                                Accountability,
                                                                S-Support, C-Consult, I-
                                                                Inform
                                                                      Authorized User
                                                                R
 1. On receipt of approved Purchase Request from User                 thru (SCM)
 department SCM process the Purchase Request.                         User
                                                                I
                                                                      Department
 2.     For all Marcom Indent/PR the SCM will check the
                                                                R     SCM
 allotted budget.
 a) In case the request exceeds the budget or no budget the
 PR sent back to MARCOM for budget approval.
                                                                I     User
 b) In case the request is within Budget the NFA is
 processed further.
 3. For Regular supply of Item/Service the NFA is prepared R          SCM
 on the basis of Qty allocation and regional benefit with the
                                                                I     User
 regular supplier and forwarded for approval as per the


   110
                                                                  Responsibility
                                                                  RASCI               (R-
                                                                  Responsibility,       A-
Process Description
                                                                  Accountability,
                                                                  S-Support, C-Consult, I-
                                                                  Inform
DOA.
4. For New Items request the concerned SCM will search
probable suppliers from the registered database of R                    SCM
Suppliers or from the Market source.
5. Select the Supplier for RFQ process and float or invite R            SCM
RFQ with a direction to provide the information as per
                                                                  I     User
standard RFQ template.
6. Supplier responds to the RFQ with their specification of R           SCM
Item/Service                                                      I     User
7. Supplier meeting the VTL expectation is then asked to R              SCM
submit samples (case to case basis) & if required field
                                                                  I     User/Supplier
trials with the user department may be initiated.
8. If required the SCM will plan & finalize the schedule for R          SCM
supplier visit for facility survey and audit (This activity can
be performed at any stage before final Purchase Order is I              User/Supplier
placed.)
9 In case of rejection of sample or specification offered by R          SCM
the Supplier by User the concerned SCM invites new
                                                                  I     User/Supplier
sample or advanced specifications for the Item/Service.
10. In case of approval of sample or specification offered R            SCM
by the Supplier by User the concerned SCM starts the
                                                                  I     User/Supplier
Negotiation Process.


 111
                                                             Responsibility
                                                             RASCI               (R-
                                                             Responsibility,       A-
Process Description
                                                             Accountability,
                                                             S-Support, C-Consult, I-
                                                             Inform
11. Negotiation with short listed supplier for agreement on R      SCM
the Price and other terms and conditions of supply. The
negotiation process could follow any of the following
means as decided by SCM                                      I     User/Supplier
a) In-Person one time negotiation
b) Through VC/ Telephonic or E-sourcing.
12.Final rating & comparison of the suppliers is done on R         SCM
the basis of the output of negotiation & considering
                                                             I     User/Supplier
warranty, SLA, Penalties & awards offered to the supplier.
13.Supplier is identified & proposed for business with VTL R       SCM
with reasons for selection & rejection to the approval
                                                             I     User/Supplier
authority in form of NFA.
14.SCM prepares the NFA in a pre approved template and R           SCM
sends the NFA to the User department. This NFA carries all
the   background      from   Purchase   request   to   Final I     User/Supplier
negotiation.
15. The NFA then sent to CBH for approval.                   R     SCM
                                                             I     User/CBH
15. The NFA then sent to Hub User department Head for        R     User
approval.
                                                             I     SCM/Hub Head

16. The NFA is then forwarded to Corporate for Functional    R     User


 112
                                                                Responsibility
                                                                RASCI               (R-
                                                                Responsibility,      A-
Process Description
                                                                Accountability,
                                                                S-Support, C-Consult, I-
                                                                Inform
Head Corporate approval                                         I     SCM/Hub Head
                                                                R     SCM
17. The NFA is then Forwarded to SCM Head’s approval
                                                                I     User
18. On receipt of approved NFA as per DOA the process of
Purchase Order starts. In cases LOI is issued to Supplier for
                                                                R     SCM
starting the process of supply of Item/Service if the supply
or production is a time taking process.
19.If the supplier is New or the Item is New the process of
                                                                R     SCM
Registration of Supplier/Item starts.
20. On creation of Codes for Item/Supplier the concerned R            SCM
SCM will punch the Purchase Order in Oracle with all
                                                                      To
details and required inputs. The Purchase Order is
                                                                I     User/Approving
submitted in the systems (Oracle) along with the PR and
                                                                      Authorities
NFA concerned.
21. The Purchase Order moves in system from one
                                                                R     SCM/User
authority to other as per DOA.
22. Approving Authorities to check the credential attached            Approving
                                                                R
with PO and approve, in case any authority finds the PO not           Authority
matching with NFA/PR on Qty/Value or any other
mismatch the Purchase Order is rejected and clarification I           User/SCM
is sought from the Buyer.(SCM)
23. Clarification is given to the authority who has rejected R        SCM/User


 113
                                                             Responsibility
                                                             RASCI               (R-
                                                             Responsibility,      A-
Process Description
                                                             Accountability,
                                                             S-Support, C-Consult, I-
                                                             Inform
the PO and the PO is re-submitted.                                 User/Approving
                                                             I
                                                                   Authority
                                                                   Approving
24. The PO gets approved from all concerned authorities as R
                                                                   Authorities
per DOA.
                                                             I     SCM
25. A mail confirmation on final approval is being sent to
                                                             I     User
the Buyer(SCM)
26. The approved Purchase Order softcopy/hardcopy being R          SCM
sent to the Supplier for confirmation and acceptance of
                                                             I     User/Warehouse
supplier sought on the same.
27. Supplier confirms the acceptance of the Oracle R               Supplier/SCM
Purchase order and its terms and conditions.                 I     SCM/User

28. SCM to ensure delivery of services/Items ordered on R          SCM
time at proper destination.                                  I     User

29. Hard copy of approved Purchase Order to be signed by
                                                             R     SCM
the Circle SCM Head

30. Acceptance/Rejection of Item/Service by User             R     User
a) User confirms the acceptance of Item/Service on Quality
and Quantity.
                                                             I     SCM/Supplier
b) User rejects the service/item delivered on ground of
quality/Quantity.


 114
                                                             Responsibility
                                                             RASCI               (R-
                                                             Responsibility,      A-
Process Description
                                                             Accountability,
                                                             S-Support, C-Consult, I-
                                                             Inform
31. On rejection of Item/Service by User the SCM R                 SCM
concerned call the Supplier for discussion and solution on
                                                             I     User
delivery of Item/Service.
32. Supplier rectifies the error in quality/quantity and seek R    Supplier/SCM
acceptance from User.                                        I     User
33. Process End




  Reference Documents

  Item / Service NFA Format
  DOA
  Item/ Service Purchase Order Format

  Key Performance Indicators (KPIS)


  1. Response time to select suppliers for RFQ process


  2. Response time for Final negotiation and closure

  3. Response Time to Create NFA and final Approval

  4. Response Time to Issue LOI/Purchase Order from the
  date of NFA approval




 115
Polices & Process

Name            of
                     Process Description      Start                   End              Status
Process
Item                                                                                   Completion
                     In this process any Receive          request
Idenification                                                                          stage.   To
                     New item inclusion / from          User/SCM Creation         of
Addition                                                                               be
                     Deletion                 on      creation   of Item ID in
/Deletion/                                                                             reviewed
                     Modification would any Item ID in Oracle
Modification                                                                           by FD and
                     be described.            Oracle
Process                                                                                BA.
                     Process description
                     on flow of Purchase
                                              Receive     request Receipt         of
                     Request or Indent
Indenting                                     from      User     for Approved
                     from             User                                             Raw Stage
Process                                       procuring               Indent      at
                     department and final
                                              Item/Service            SCM Desk.
                     approved PR/Indent
                     receipt at SCM desc.
                     Process          after
                     receiving          an Creation of NFA
                                                                      Item/Service
Purchase             approved    PR     till against             an
                                                                      delivery till Raw Stage
Trigger              supply             of approved
                                                                      User End
                     Item/Service at User PR/Indent
                     end
                     Process of flow from Receipt of Invoice
                     Invoice receipt till at                          Final Cheque
Payment
                     Payment      through Circle/Corporate            /     ET    to Raw Stage
Process
                     Cheque or Electronic payment                     Vendor
                     Transfer to Vendor.      helpdesk



 116
       Item/Service Identification : Add New Item/Service



               Send the new
User            Item/Service                    Start
              creation request


                                                                                Correct the
                                                                            attribute and send
                                                                            the request to SME




                                                                      Attributes
            Recieve & validate
                                           Item /Service            are accurate                  Use attributes in   Item /Service Code
                  the new
                                               request                to creat e                 the item to create   to be running serial
SME            Item/Service
                                            already exist                New                     New Item/Services            no.
             creation request
                                                                    Item/Service             Send the new Item/Service creation request


                                                        Yes

                                                                    Allocate Main and             Update Internal
SME                       Process       Send information to User                                                          Create New
                                                                   Sub Category as per             Item/Service
                            End                 with code                                                              Item/Service Code
                                                                     Policy Guideline                 catalog


                         Department Name:SCM




                           117
              BIBLIOGRAPHY


    MAGAZINES

             India today

             Business today

             News papers (Economic Times, Business standards, Business week)



    WEB SITES LINKS:

       http://the-engineer.hubpages.com/hub/Consumer-Electronics-Companies-in-the-World

       http://en.wikipedia.org/wiki/Videocon

       www.google.com




    OTHER

    Material Given by kind goodness of Company Employees




        118
                             WORD OF THANKS

I take the opportunity to pay heartily regards to Mr. Shekhar for lending me their kind
support for completion of my project.


I thank all those who directly or indirectly supported me morally, financially and through
providing knowledge by which I could complete my Research.


Last but not the least I am thankful to Mr. Sharad Jindal & entire team of Videocon SCM
for their thankful hands whose co-operation and guidance was a milestone in completion
of my project




  119

				
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