The products used in the solar industry require a high amount of reliability owing to their long-term warranty and usage. The failure of any product within the warranty period leads to a lot of background checks on the vendors. In order to understand this process better and to know more about the vendor selection procedure in the solar industry, Sneha Ambastha from Electronics Bazaar spoke to Anuj Gupta, GM, Greenergy Technologies.
EB. How important is it for your business to have the correct component from a good vendor? What is the business impact of not ensuring this?
This is very essential as products in the solar industry are sold with at least a 10-year warranty, and that too, with specific supply deadlines. If the right components are not sourced, we will not be able to meet the supply deadlines, and using the wrong component could mean that the final product will not last through even the warranty period.
In the solar industry, where there is a lot of competition and the industry is still small, it can have a negative impact on the business.
EB. Do you have any special programmes for ‘Made in India’ suppliers or MSMEs?
As of now, we do not have any such programmes because the solar industry is still small, and there are not many suppliers here for the kind of products we procure. The majority of our suppliers are from China.
EB. Are there any plans to invest in capital equipment, with regards to electronics manufacturing, in the coming year?
Yes, we are planning for it by the end of 2017, for products like solar inverters, solar chargers, etc.
EB. Which types of electronic products do you procure?
The major electronic products that we procure are the solar modules and solar cells.
EB. Do you have any specific turnover or quality certification requirements for your vendors?
Only vendors with a turnover of over ₹ 10 billion, who have quality products, are enrolled.
EB. Is there any specific process for vendor enrolment?
Yes, the vendors need to fill a form and then, based on the data shared by them, our finance department makes the selection. But there are a few basic points that we look at before the selection, like how many years they’ve been in the business, what brands they supply to, what their manufacturing capacity is, and how they manage their logistics.
EB. How do you classify and define potential, approved and preferred suppliers?
The potential, approved and preferred suppliers are those that meet our requirements. Ideally, we do not go with any new supplier because it’s hard to trust them, both with respect to the products and reliability.
Potential suppliers: Any supplier who meets our quality and turnover requirements is a potential supplier for us.
Approved suppliers: The selected suppliers are approved by our finance department, depending upon their background and their turnover.
Preferred suppliers: The companies that meet our qualifying norms fall into the category of ‘preferred suppliers’.
“The industry runs on high warranty and on high demand. So low quality materials should not be given to the customers”
EB. What are the typical challenges of finding the right vendor?
There are a number of challenges. We need to look at the product quality, the production facility, the vendor’s financial capacity, brand value, and so on. It takes a lot of time to find out the real position of a company in the market.
EB. How do you find a suitable alternative for a failed (end-of-life) component?
This is a big challenge. In the solar industry, we need to give a 10-year product warranty and a 25-year performance warranty. So, if a product fails within a span of say five or 10 years, it becomes really hard to replace that product and, hence, we need good vendors. It’s really very rare that a product fails in this industry as warranty periods are so long, but if it does, we need to replace the product, which eventually becomes a tough task if our vendors are not strong enough to handle these situations. Ideally, we replace the products and to avoid such situations, we make sure that we work with the right vendors.
EB. How do you find a suitable alternative for a component supplier who vanishes from the business due to bankruptcy or business pressure?
This is another big challenge. To make sure the companies don’t vanish in a few years, we select them only after investing a lot of time in checking their background, identifying their brands and finding out how long they have been in this industry. There have been a few companies who entered this industry last year and have gone bankrupt this year. That’s how fast things change in the solar industry. Thus, the challenge for us is huge as it is hard to identify which company will survive, in the long term.
In such a situation, we get back to the lengthy process of re-selecting a new supplier. So if a supplier goes bankrupt, the first and the foremost thing is to find out the defects in our own selection process.
EB. How does your company respond to low-profit or low-sale product line closures by suppliers, which then results in no customer support being offered by them?
Actually, in such situations, you cannot do anything. The industry runs on high warranty and on high demand. So low quality materials should not be given to the customers. It’s not an industry in which someone can sell inefficient products to newcomers and then vanish from the market after five years. It won’t work. It’s very important for the suppliers to make sure that that their products perform for 25 years, which is quite a long time.
EB. How do you combat the counterfeit or grey market?
As of now, we have not faced any kind of challenges on this front because there are no taxes. Since there is no GST, CST or import duty for our products, there’s no question of a grey market. Although, if a brand is successful, a few small companies do make its replicas, which is creating a bit of trouble in the market these days.
