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    Royal Enfield to consolidate vendor base

    Thursday, September 2, 2010

    Royal Enfield, an Eicher group company, plans to consolidate its vendor base to provide greater order value to its key suppliers and thus incentivise them to focus on the niche bike maker’s needs.

    By cutting its supplier base from 120 at present the company hopes to ensure smoother flow of components which it hopes will help reduce the waiting period and address rising demand for its heavy-duty motorcycle models like Classic, Thunderbird and Bullet among others. “We are revamping our supplier base, since they are not able to meet our demand and deliver quality products on time,” a senior company official told Financial Chronicle.

    Royal Enfield plans to bring down the number of suppliers to 100 by yearend, a cutback of 17 per cent. The company official said, “The component manufacturers from whom we source parts are also suppliers to other automobile manufacturers who are into the commuter segment. Since other players have large capacities and huge demand for components, there is delay in supply of components to us. This has led to nine-month waiting periods for models like Classic 350 and 500, and three months waiting for the Thunderbird.”

    The revamp will see Royal Enfield favour single suppliers, who can produce and supply multiple parts to them. “We will go with a requirement basket of parts to suppliers which will give them a much larger order value to merit focussed attention to our needs,” the official added. At present, Kinetic Engineering is the only company which supplies multiple components to Royal Enfield, he added.

    Royal Enfield also imports some components and is open to importing more if any overseas supplier agrees to supply multiple components of the requisite quality and can meet our production schedules. The company also expects to realise some savings in cost per part from the consolidation of its vendor base.

    Recently, the company expanded the capacity of its plant in Chennai to produce 75,000 units per year from 45,000-50,000 per year to help meet rising demand. When the Royal Enfield paint shop was not able to cope with the demand for painted parts for Classic and Thunderbird, it used the paint facilities of Kinetic Motor and TI Cycles.

    “The company has decided to set up another plant near the existing facility in Chennai. We would be investing around Rs 200 crore in four years to expand our capacity to over 1-1.2 lakh units a year,” he said.

    source: Financial Chronicle

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