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Outsourcing Activities & Vendor Development

The Turnover from the BHEL facility in Trichy, as of year FY2012 was an approximate of Rs. 14,000 crores. Due to an unprecedented demand in the power sector, BHEL in Trichy is out sourcing some part of its work to vendors in and around Trichy area. In order to ensure quality of output from its vendors, BHEL has put an appropriate framework for vendor development in place. Some of the key activities undertaken by BHEL in this context is as follows:

Vendor Selection Process

BHEL has developed stringent vendor selection criteria, so as to ensure quality of their vendors output, as it in turn is contingent on product quality of BHEL. The vendors are selected on the basis of the minimum standards of plant and machinery level and also on the basis of manpower

Vendor Development Process

On selection of a particular vendor, BHEL would provide job work opportunities to them, at conversion rates acceptable to both parties. BHEL would provide the vendor with the raw material required for the job. Designs will also be provided by BHEL. The technical staff of BHEL will provide all inputs to vendors for carrying out the job work. Through this process, BHEL is able to maintain desired quality for its inputs

Conclusion

While BHEL has attained the status of undisputed leader in the Indian utility industry, given the competencies it has developed over the past decades, it is well poised to continue to grow in the years to come. Given the power supply and demand situation in India, choices are very limited for all companies in the power sector (including BHEL), except to expand rapidly

Having put best practices in place for selection and development of vendors, BHEL can garner lot of SME units in and around its plants for outsourcing its requirements. These vendors, as they go along, apart from supplying to BHEL also have the option to cater to requirements across other similar sectors. By becoming vendors for BHEL, the SME units would be exposed to manufacturing best practices, which would be most suitable and acceptable to clients across other related industries. This phenomenon would result in better business opportunities for SME units in and around Trichy area
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