03-10-2012, 11:11 AM
SUPPLY CHAIN MANAGEMENT IN TWO WHEELER INDUSTRY - A STUDY ON HERO HONDA AND BAJAJ AUTO SUPPLY CHAIN PRACTICES
ABSTRACT
The present article examines the practices of Hero Honda (Hero Moto Corp) and Bajaj Auto limited supply chain practices. The two wheeler supply chain is typical
in nature when to compare with other automobile segments. This article examines the practices of vendor selection, manufacturing locations and capacities of
various locations, manufacturing process and technologies, distribution management and other supply chain related aspects of above companies.
INTRODUCTION
upply Chain Management practices may be defined as a set of activities undertaken to promote effective and efficient management of supply chains.
These include supplier partnership, physical movement of goods, meeting customer demands and information sharing throughout the supply chain.
Some of the key logistics and SCM practices that impact performance are related to estimation of customer needs, efficient and effective delivery,
integration and collaboration throughout the supply chain, sharing of information and vision using Information Technology as well as informal methods and use
of specialists for performing specific jobs across the supply chain. All of these practices impact logistics and supply chain performance of companies.
The supply chain management in automobile sector plays pivotal role in managing cost and efficiency. The two wheelers sector supply chain is much more
critical in nature, as customers are spread across the nation and managing the reach of supply chain into rural and semi-urban locations is challenging for two
wheelers manufacturer. The present article examines Hero Honda and Bajaj Auto two wheelers companies supply chains.
HERO HONDA MOTORS LIMITED-SUPPLY CHAIN MANAGEMENT PRACTICES VENDORS MANAGEMENT IN HERO HONDA
Vendor management is critical to Hero Honda, as nearly 73 per cent of the production is currently made up of material cost. During the year 2010, the company
managed an average cost reduction of Rs. 343 per vehicle despite volatility in metal prices. A national network of 256 vendors - including 36 ancillaries - forms
the backbone of its plant operations. To improve plant efficiencies and inventory turns, Hero Honda has extended "Just in Time” (JIT) beyond the shop floor.
Vendors are also making critical investments in quality and capacity in collaboration with the Company. For example, the online vendor connectivity program has
made rapid progress.
Three years ago, the Company had only 46 vendors connected online to the company's factories. By the end of 2009-10, it is estimated that 72 per cent of the
vendors and their supplies would be connected online. Around 100 ancillaries will be setting up their manufacturing base in Haridwar over the next two years to
ensure a fully integrated supply chain. To begin with, 40 ancillaries will set up their facility in the Industrial Parks that are being specially developed for Hero
Honda ancillaries.
During 2009-10, Hero Honda plans to work with vendors to develop new vendor production facilities. 3PL service providers have also been identified for the
Haridwar plant— a first for any two-wheeler company as part of an ongoing exercise aimed at quality control, members of senior management visited vendor
premises for top quality audits. This has resulted in the reduction of rejection parts per million (PPM) by 20 per cent.
During the year 2009-10, the company launched a collaborative cost improvement program with vendors. In this program the processes and methods are
continuously toned so that the material cost can be managed better. Hero Honda is also evaluating horizontal deployment of third party logistic services
providers (3PL) to manage costs along the supply chain better. In 2009-10, the Company plans to further study and tactfully optimize its supply chain. As part of
this plan, raw materials will be optimized so that the best possible cost advantages accrue, to the company.
TIME LEAD AND LAG
Hero Honda being the Assembling unit, thus everything needs to be fitted on time i.e. there is not time lag between two processes. Say there is very less time lag
between fitting engine onto the chassis and the headlamps which are to be installed over the chassis.
Lead time is also not there because all the processes are assembly based and needs to be done one after another. It can only be said that by the time engine gets
assembled in separate division the fuel tanks and mud guards are painted in the paint shop. Thus Lead time, also, is very little or negligible.
DISTRIBUTION NETWORK
Hero Honda has established 4 zonal offices in India at 4 different regions i.e. in North – Delhi, South –Bangalore, East – Kolkata, and West – Pune.
These Zonal offices act as intermediary between the Authorized Centers and the Hero Honda Company, they gather demands from various centers and send
them to Hero Honda to which it acts and supplies the bikes. Every Zonal Office is in networking with every authorized centre in its area.
Hero Honda, in total has 771 Dealers, 693 Spare Suppliers, 1440 Authorized Service Centers and 28 Stockiest in India.
The company has a conscious strategy of penetrating new markets and unrepresented territories through its distribution network which is made up of dealers,
authorized representatives, stockiest and SSPs (Sales and Service Points). In March 2001, the company had 826 such customers’ points in India. By March 2009,
this number went up to over 3500. On an all India basis, 50 dealers, 150 SSPs, 267 dealer’s representatives and 45 city work agents were added. All the four
marketing zones of the Company showed a uniform increase in new customer’s points during the year in 2009-10.
RURAL NETWORK
Hero Honda’s ambitious rural connect program “Har Gaon, Har Aangan”Also got underway. A total of 18,000 villages were covered out of the targeted 23360
villages with a population of 5,000 people. In all, more than 100,000 opinion leaders in these villages were approached. The rural initiative was carried out by
500 specially trained rural sales executives at the dealership level.
The company has made significant progress in its rural marketing initiative called Har Gaon, Har Aangan (HGHA). This national level program has made strides
into thousands of Indian villages with a population of 5,000 and above. In all, more than 125,000 opinion leaders in these villages were met by specially trained
523 rural sales executives. The program itself has added sales of 25,000 vehicles from these villages in just one year. The program focuses on many activities to
align with the objectives that go beyond commercial transactions, in order to build enduring relationship with the customers in these villages. The program
generally covers sales promotions, loan and exchange offers, free service and check up camps, along with host value adds like consultation for obtaining driving
license, safe riding educational programs and other services like health check up and awareness camps. These services are offered free of charges in the interest
of society at large.
Under the HGHA program the company makes all the efforts to be a part of the villages by conducting such programs either directly or by partnering or
sponsoring the events organized by the local administration on regular basis. The company believes that the rural mobility is a major contributor to GDP growth
in an agrarian economy like ours. 'Sikhao Baliye' is company's unique initiative in the rural market that aims at driving the mobility of rural women. The program
aims at promoting company's light and zippy gearless scooter Pleasure by creating awareness amongst its TG which primarily are all rural men, particularly
opinion leaders and those who wish to impart riding training to their wives, daughters, daughter-in-laws, sisters etc., and prospects in general. The program
covered 40 villages, 266 female riders received basic riding training, and 35 of them could ride the scooter immediately after the training.