Monday, April 30, 2012
By Shilpa Chopra
Maruti to cut down buying costs up to 3% every year to enhance profit margins
In order to improve the profit margins in the Indian car bazaar, India’s largest car manufacturer Maruti Suzuki is planning to reduce its buying cost up to 3% every year. Since past one year, Maruti India has been badly affecting by the deflating rate of Indian currency in the global market and high input costs. Therefore, the reduction of buying costs will help the firm in intensifying its profit margins and comprise it as its cost cutting practice for the Indian car market.
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In the present financial year, the total advantages by cutting down the buyig cost for Maruti Suzuki in the Indian car bazaar is estimated to be a whopping Rs. 800 crore, which is extremely impressive when compared to Rs. 653 crore of net profit decline in fiscal year of 2011-12. On the other hand, in last financial year, the total cost of Maruti’s purchase material came out to be around Rs. 26664 crore.
Commenting on the same topic, the managing executive officer of supply chain of Maruti Suzuki India, Mr. Subir Maitri mentioned that the company is trying its level best to cut down its buying costs to about 3 to 3.5% per year. This will be done by chopping off some component imports, amplifying the use of raw materials and improving output. Mr. Maitri also mentioned that Maruti Suzuki India cutting down the number of tier-I vendors as well. In the financial year of 2003-04, there were about 355 tier-I suppliers, which has been bought down to 250 at present. This has resulted in better quality of machinery as the key suppliers of Maruti India are sourcing the components from international firms, which guarantee better capability to make investments and fabricate high-tech machineries.