Research Paper Impact Factor: 3.072 Peer Reviewed, Listed & Indexed IJBARR E- ISSN -2347-856X ISSN -2348-0653 International Journal of Business and Administration Research Review, Vol. 2, Issue.1, Jan-March, 2016. Page 301 LEAN MANUFACTURING THROUGH VENDOR DEVELOPMENT : A CASE STUDY OF THERMAX LTD Dr. R.M.Indi* Sarang Dani** Sudeep Baj*** * Professor of Management at Sinhgad Institute of Business Administration and Research. ** Professor of Operations Management at Sinhgad Institute of Business Administration. *** Student in Operations Management at Sinhgad Institute of Business Administration and Research. Abstract Lean manufacturing practices are concerned with elimination of all types of waste in manufacturing practices & processes followed. One of the approaches towards this is to build the strong vendor chain. Thermax Ltd., a thermal and an environmental engineering major uses a Green Channel Methodology for rating its vendors. The paper highlights a case study of this methodology implemented at Thermax and results achieved by implementation of this methodology. Key Words: Lean Manufacturing, Green Channel, Vendor Management. 1. Introduction Lean is about standardizing work processes to make problems noticeable and developing employee’s critical thinking ability so that they can solve those problems and improve work processes. Lean may be defined as the relentless pursuit of the strategic elimination of waste. Or Lean can be defined as a systematic method for elimination of waste. Through the continuous refinement of practices and procedures, lean management seeks to produce more goods more quickly while using fewer resources - less factory space, fewer worker movements and fewer assembly steps. Although often associated with leaders in manufacturing eg. Toyota, Ford etc. it is more significant in services settings such as Southwest Airlines, Wal-Mart etc. as the waste is hidden. The three types of wastes primarily noticed and they provide a framework for their identification in production and service processes are, Muri: Overburden on the worker resulting from poor management practices Mura: Unevenness in scheduling (variation) and Muda: Non-value-added work or any non-value-adding activity in the process. When the waste is reduced, overall quality is improved with reduction in production time and production costs. One of the approaches to lean manufacturing in the context of outsourced material is to improve the flow or smoothness of work flow of vendor supplied material. Green Channel is the direct channel where vendors can deliver the parts directly at the assembly line or point of ultimate use, hence the inspection is carried out at the vendor’s site, physical check at the entry point of OEM and line side inspection is totally eliminated. The vendor is termed as ‘self certified vendor’ and hence inspection and re -work of vendor supplied parts is waived off. By Green Channel, quality and delivery performance improves dramatically; it ensures optimum utilization of resources; vendors take responsibility for smooth execution of delivery process and hence Green Channel implementation ensures win- win situation for OEM as well as Vendor. Hence implementation of Green Channel would minimize or remove the waste in terms of operators waiting for getting the material on line, unnecessary inventory pile up alongside the line, excess transportation and excess inspection at different levels in entire supply chain. This project discuss about implementation of Green Channel as a vendor performance optimization method by Thermax Ltd. for the vendor M/S. Decon equipment private limited, Pune. After implementation, entire wastes were eliminated resulting in optimizing cost of inspection and reducing inspection time throughout the process is reduced to the minimum. Operational advantage for vendor was flow of the material is streamlined which enabled vendor to deliver the material alongside the assembly line. Strategic advantage for vendorwas vendor became self certified vendor of Thermax and this status helped them to expandtheir business. 2. Review of Literature The engineering industry continuously faces the challenge of improving performance of production processes and efficiencies. With this objective at the background coupled with management of cost, it becomes more important to develop a strong chain of the suppliers and make them strategic partners of the company. Willis and Huston (1990) in their research work on ‘Vendor Work and Evaluation in Just -in-Time Environment’ estimated that almost 50% of manufacturing costs are attributed to purchased items, and raw materials account for 80% of a finished product’s lead time and 30% of its quality problems. According to Babineaux (2002) suppliers are key value chain participants who affect the firm’s total performance. Global leaders in engineering industry have proved that collaborating with suppliers can help in gaining competitive advantage. Good supplier measurement systems allow companies to improve quality and dramatically reduce both order cycle times and inventory levels. Thus there needs an effective system in which supplier performance is objectively measured and one such system is supplier score card.