Supply Chain

A

PROJECT REPORT

ON

“SUPPLY CHAIN MANAGEMENT”

IN CONTEXT WITH “CHAUHAN AUTOMOBILES”

DURG (C.G)

Submitted in the partial fulfillment for the award of degree

OF

BACHELOR OF BUSSINESS ADMINISTRATION

Of

Pt.Ravishankar Shukla University, Raipur (C.G)

Session 2009-2010

Submitted byGUIDED BY

ABHISHEK KUMAR MR.SANDEEPJASHWANT BBA 6TH SEM

HOD (MANAGEMENT)

DEPARTMENT OF MANAGEMENT

SHRI SHANKARACHARYA MAHAVIDYALAYA

SECTOR-6 BHILAI (C.G)

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Declaration I ABHISHEK KUMAR student of sixth semester at ‘shri shankaracharya mahavidyalaya ‘ hereby declare that this research report under the title”SUPPLY CHAIN MANAGEMENT” is the record of my original work under the guidance of Mr. Sandeep Jashwant (H.O.D ) B.B.A . This report has never been submitted anywhere for award of any degree or diploma.

Place: ABHISHEK KUMAR

BBA 6TH SEM

Date:

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Certificate

This is to certify that ABHISHEK KUMAR a student of B.B.A sixth semester of our institute under my guidance and supervision she had carried out the research project under title

“SUPPLY CHAIN MANAGEMENT“

This research report is the original one.

Project guide PRINCIPAL (H.O.D management)

Place:

Date : Page | 3

AcknowledgementPerhaps the most awaited moment of any endeavor in its successful competition of their project report cases study having worked on her project for the whole academic session. I would like to express my sincere gratitude to all those who made it possible.

Firstly I am heartily thankful to my guide Mr. Sandeep Jashwant (H.O.D) of the B.B.A department under whose able guidance. I had the privilege to work and who guided at every stage.

I take this opportunity to express my sincere gratitude to our principle for being guide of philosopher throughout B.B.A program.

I shall be failing in my duty if I don’t express my deep sense of gratitude to all my friends and the relatives who have share their

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valuable time and helped me directly or indirectly in the preparation of my project .

At the end last but not the least, I would like to thanks the other staff and non staff member of this college.

SHRITEE DUTTA

BBA 6TH SEM

Preface

The topic chosen by me for my project is “ SUPPLY CHAIN MANAGEMET”In reference to CHAUHAN hero Honda automobiles the two wheeler especially in the stylish motorcycle. At present hero Honda is market leader in the Indian market.

Today there are various companies coming in India and these certainly will exist a cutthroat

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competition in these field. I have chosen a hero Honda as a topic essence of my project. Today two wheeler consumer due to new manufacturing entrant has started getting a wide choice while buying one these gave to considered the facility provided by the two wheeler the price mileage , maintenance and service etc. while buying a two wheeler .

A normal customer is quite puzzled and faces for an uneven some time huge problems in deciding which vehicle to buy. I realized the problem and decide to take these up as the

challenge and provide answer to as the requirement of the Hero Honda.

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Chapter (1) ›Introduction Chapter (2) Company profile

›Introduction › History

›Two wheeler in India › Company profile

›Our brand › Product profile

Chapter (3) Supply chain Chapter (4) Factor influencing

Channel strategies › Distribution channel › Market consideration

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› Multiple channel › Product consideration

› Traditional cannel

Chapter (5) Factor considered in supply management

Chapter (6) Operational research &supply chain Chapter (7) Driving to new destination

› Vendor’s management › Operation

› Distribution network › working with supply chain

› Rural network › the green supply chain

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Chapter-8 Supplier relationship management Chapter-9 Different range of product

› Processing order manually Chapter-10 Bibliography

› Automating supplier transaction

›End to end process integration

›Improved collaboration analytics

Index

Serial no: Chapter: Page no:

1)

2)

3)

4)

5)

INTRODUCTION

PROFILE

SUPPLY CHAIN

FACTOR INFLUENCING CHANNEL STRATEGY

FACTOR CONSIDERED IN SUPPLYMANAGEMENT

10-16

17-22

23-28

29-31

32-38

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6)

7)

8)

9)

10)

OPERATIONAL RESEARCH &SUPPLY CHAIN

DRIVING TO NEW DESTINATION

SUPPLIER RELATIONSHIP MANAGEMENT

DIFFERENT RANGE OF PRODUCT

BIBLIOGRAPHY

39-45

46-51

52-58

59-60

61

Chapter - 1

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Introduction Satisfaction is the persons feeling of pleasure (or) disappointment resulting from comparing a product perceived performance (outcome) in relation to his/her expectation. If the performance falls short of expectation the customer is dissatisfied. If the performance matches the expectation customer is satisfied, if the performance exceeds the expectation the customer is highly satisfied (or) delighted. Many companies are aiming for high satisfaction because they are much ready to switch. ]

Buyer’s expectation formed on the basis of past buying experience,

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friend and the associate advice and the marketers and the competitor’s information and promises. If marketers raise expectations two high, the buyer is likely to be disappointed. Even if the company sets expectation should match the performances.

≈} A customer is the most important person even in any company

≈} A customer never depend on company, but the company depends on him.

≈} A customer is the person who bring company his Wants.≈} A customer is not a interruption of marketers Work he is the purpose of it.

Two wheelers in India

In 60s decade several vehicles were running in the Indian roads those are the sun beams, AIS, BBA and Royal Enfield. From these motor cycles only the Royal

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Enfield has existence in the motorcycle market.

After 60s decade some other motorcycles and scooter had been launched in Indian two wheeler market those are the Rajdoots, Java, Vespa and Lamrata .

Indian witrossed the first spate of modernization in two wheeler industry in 1978-79 during that period Piaggio sauntered the Indian market in a joint venture with the Lohia machines and our major Japanese motor cycle manufacture set up joint venture companies to produce 50cc two wheeler for the first time.

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Objectives of the study

≈} To know the customers’ expectations

Towards hero Honda.

≈} To find out the customer opinion regarding

Various aspect of the bike.

≈} To give the appropriate suggestion to the

company regarding he performances.

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Our brand Our brand identity:

Our brand is the visual expression of the ought and the action it conveys to everyone our intention two constantly inspire the confidence.

Our customers are the primary audience for our brand.

Indeed, our brand identity is shaped as much by their belief in hero Honda as the as it it’s our brand.

We can do this by the living on the brand essence and by

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continuously seeking to enhance our customer experience.

In doing so, we ensure a special pace for our self in the heart and in the mind of the customer.

Our brand essence Our brand essence is thje

soul of our brand Our brand essence

encapsulates or mission at Herohonda

It is the singular representation of our terms of endearment with our customers.

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It provies the basis on which we grow profitability in the market.

Our brand essence is excitement

Hero Honda strives to inspire the confidence through te excitement engineering.

Blending together youthfull creativity and competitive technology to exceed the spoken and the implict expectations of our customers.

By challenging the given . by exploring the unknown and thereby stretching ourself towards tomorrow, today.

Learning

Learning is how we insure our proactively

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It is the values that embraces knowledges as the plat form for the building well informed.

Innovation

It is how we can create the future

It is that which provokes us to reach beyond the abivous in persuite of that which exceeds the ordinary.

Speed

It is how we convey clear convection.

It is the value that keeps us sharpley responsive , mirroring our commitment towards our goal and process.

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Chapter -2

History

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India has the largest number of two wheeler in the world with41.6 million vehicles. India has a mix of 30 percent automobile and 70 % two wheeler in the country. India was the second largest two wheeler manufacture in the world starring in 1950’s with the British automobiles product of India (API) that manufactured the scooter. API manufacture the lamberts but, another company Bajaj automobiles LTD. Surpassed API and remaining through the turn of the century from its association with piaggio of Italy (Manufacturer of Vespa) the license raj that exist between the 1940s to 1980s in India , did not allow the foreign companies to enter the market and import were tightly controlled .these regulatory maze , before the economic liberalization , made the business easier for local player to have a seller market . Customer in India was forced to wait 2 years to buy a scooter from Bajaj. The CEO of Bajaj commented that he did not make a marketing department, only in dispatch department. By the year 1990, Bajaj has a waiting list that has twenty six times of annual output for scooter.

The motorcycle segment has the same long wait time with three manufacture; Royal Enfield, ideal Jawa and Escorts. Royal Enfield made a 350cc bullet wit the only four – stroke engine at that time and took the higher end of the higher end of the market but , there was little competition for there costumer .

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Ideal Jawa and escorts took the middle and lower end of the market respectively.

In the mid-1980s the Indian government regulation changed and permitted companies to enter the Indian through minority joint venture. The two wheeler market with for indo Japanese joint venture: Hero Honda TVS S Suzuki, Bajaj Kawasaki and kinetic Honda. The entry of these foreign companies changed the Indian market dynamics from the supply side to demand side with a large selection of two wheelers on Indian market customer started gain over the product they bought and raise the higher customer expectation.

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Hero entered the joint venture for technical and financial participation with one of the largest automotive makers

Honda motors company limited of Japan, in 1984 for the manufacturing of 100cc motor cycles in India.

Group companies Hero corporate service limited – Hero mind mine –munlal

In 1984-1985 HHML came in existence by collaboration of hero motor limited and Japans Company Honda motors limited for the first 100cc with four stroke motorcycle is made by

Hero Honda motor limited in India.

Company profile

Hero is the brand name used by the Munjal brother in the year 1956 with the flag ship company hero cycle’s .the two wheeler manufacturing business of bicycle component had originally started in the 1940’s and turned

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in the world largest bicycle manufacture today. The Munjal run their own steel make free wheel and other critical bicycle component and and have diversified in to different like product design. the Hero group philosophy is;

“ To provide excellent transportation to the common man at easily available and affordable and to provide the total satisfaction in all its sphere of activity “

The hero group has a passion for setting the higher standard and engineering satisfaction is the prime motivation way of life and work culture of the group .In year 1984 Mr. Brijmohan lal munjal , the chair man and managing director of hero Honda motors , headed an alliance between the Munjal family and Hero Honda company LTD HHM mission statement is :

” We, at hero Honda , are continuously striving for synergy between technology , system and human resources to provide product and services that meet the

quality price and aspirations of the

customer”.

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Product profile

Price list

Model PRICE RTO INS TOTAL

CD-Dawn 33250 1805 853 35908

CD-DLX(MAC) 36420 1932 900 39252

PLEASURE 37600 1979 914 40493

SPL.NXG 40100 2029 950 43079

SPL.PLUS 41635 2140 972 44737

PASION PLUS 44550 2257 1012 47819

SUP.SPL.(RING) 46290 2327 1037 49654

SUP.SPL(MAC) 44900 2399 1109 48408

GLR.(MAC/SELF) 47880 2390 1059 51329

GLR.(DISK/SELF 48820 2428 1072 52380

CBZ.EXE (SELF/DISK) 59670 2862 1225 63757

HUNK 59390 2851 1221 63462

KARIZMA ZMR 94640 4261 1782 100683

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Colors in Vehicle GLAMOUR

Candy blazing red, cloud silver metallic, tornado metallic grey, impulse orange metallic, excellent blue metallic.

CD DELUXE

Candy blazing red, cloud silver, candy Tahitian blue, amaranth maroon, cool mint grey.

SPLEDOUR

black candy red , blaze , boon silver, metallic, sierra metallic, granti blue metallic.

PLEASURE

Orange , Candy blazing red, grey silver, Tahitian blue metallic.

CD DAWN

Black ,maroon, red

CD 100SS

Candy ruby red black , amazing blue metallic,green metallic.

PASSION PLUS

Moon yellow, cloud silver ,amaranth maroon, Tahitian blue, Candy blazing red,black with purple strips.

KARIZMA

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Green , sky blue black metallic, yellow shade.

Chapter -3

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SUPPLY CHAIN

≈} Selling direct with an outbound sales force via mail order: internet .TV home shopping and telephone.

≈} Distributor (also called whole seller), who sell to retailer.

≈} Agent who typically sells direct on behalf of producer.

≈} Retailer (also called dealer or reseller), who sell to end customer.

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Distribution channel

Direct selling (company own

stores, own sales force, television information, mail order, internet, and telephone).

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Multiple types of channels

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Multiple channel of distributionFor many product &services their manufacturer or provider uses multiple channel of distribution, a personnel computer , for examples might be bought directly from the manufacturer , either over the telephone ,direct mail ,or the internet or through several kind of retailers , including independent computer stores .In addition ,large and small business may make their product through others outlet .

Channel structure ranges from two to five levels .The simplest is the two level structure in which goods and the services move directly from the manufacture or provider to the consumer. In three level channels structure retailer’s serves as an intermediaries between producer and consumer. A four level is added when manufacturer sell to wholesaler rather than retailers. In four level structure, retailers order goods from wholesaler rather than manufacturer. Finally, a manufacturer agent can serve as an intermediary between the manufacturer and its wholesalers creating a five level channel structure consisting of manufacturer and its whole seller, retailer, and consumer levels a five level channel structure, and jobber service smaller retailers not covered by the large wholesalers in the industry.

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Company traditional distribution channel

The dealers keep in contact with the manufacturer or the head office or the regional office. As the order fax reaches the manufacturer, as in Delhi it takes only one-night time of transit from the manufacturer to the dealer. The dealers in far off places like in Assam, South India and others, it takes a maximum of 7 days to reach the placed order due to the transit. Basically, the delay of delivery of the order is basically due to the transit time. The transit time in near places is not more than one night.

The manufacturer's have their own transportation facilities. The manufacturers have trucks which can load 18-25 units of bikes at a time, individually. When the units are dispatched from the factory, or manufacturing it, it is in its standard form and

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accessories like seat cover, handle cover, back-looking glass and others are not part of the standard unit of the two wheeler of Hero Honda.

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Factor influencing marketing channel strategies

Market consideration: - another important factor influences the choice of distribution channel in the nature of the target market.

If the market for the product is meant for industrial use the channel of distribution will not need any middle men because they buy the product in large quantity.

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If the number of the prospective customer is small or the market for the product is geographically located in limited area , direct selling is more suitable.

If the customer place order for the product in big lots, direct selling is preferred. But if the product is sold in small quantity middlemen are used to distribute such product.

Product consideration:-The

type and the a nature of the product s manufactured is one of the important element in choosing the distribution channel

Product of low unit value and of common use is generally sold through middle men. Whereas expensive consumer goods and industrial product are sold directly from himself.

Perishable product: product subjected to frequent changes in fashion or styles as well as heavy and bulky product flow relatively shorter routes are generally distributed directly to minimize costs.

Industrial product requiring demonstration, installation and after sale service are often sold directly to consumer.

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An entrepreneur producing a wide range of product may find it economical to step his own retail outlet and sell directly to the consumer

On the other hand firms, producing a narrow range of product may their product distribute through wholesaler and retailers.

A new product needs greater promotional efforts in the initial stages and hence few middle men may be required.

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Factor considered in supply management

Planning for new motorcycles

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Acquire month wise brand wise, motorcycle sales data for the past year from the local RTO.

On the basis of prospective base, identify hot , warm cause.

Prepare a forecast, brand wise, color wise. Tie up with banks in command area of ARDs/SSPs for

availability of finance.

Planning for local promotion

Decide on budget. Create a mix of activity. Acquire the reach of each event: compare effectiveness of

each media vehicle (radio/newspaper/interests). Make a check list of all items involved. Assign responsibility. Estimate cost of each element. Identify the location, decide the periodicity. Send an indent well in advance to RTO/HO for making

collaterals.

Planning for new dealership appointment:-

Explore your territory Look out for unrepresented potential, where demand exist or

area where have seen a surge of demand.

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Scout out for financially sound parties with good business acumen and with a central location.

Short list from among those who meet the eligibility criteria. Spare the business preposition Share the terms and the condition of becoming an ARD.

Planning for increasing under warranty turnout :-

Obtain database of customer residing in ARD/SSP territory from mother dealership.

Plan for increasing awareness of new facilities in all populated motorcycle pocket.

Plan for improving workmen ship and efficiency in service.

Plan for increasing passport.

Planning for increasing post warranty turnout:-

Prepare a list of consumer who insurance is about to expire and prepare a action plan for their insurance renewal.

Make a provision for conducting free checkups camp, demonstration of hero Honda genuine parts.

Plan for minimum number of calls to e made by (CRE’S) as timely reminds to those customer whose insurance is about to expire.

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RENEWAL OF INSURANCE:-

Plan for minimum number of calls to e made by (CRE’S) as timely reminds to those customer whose insurance is about to expire.

Plan for deputing manpower to the field to reach out the customer whose about to expire.

PLANNING FOR INVENTORY:-

Observe sales pattern of the spare parts – both workshop consumption and of the counter sale.

On the basis combined with anticipated growth, identity requirement of specific items and their quantities.

Plan to stock critical spares.Plan to dispose dead stock.Plan for methodology and periodicity of physical

verification of stock.

PLANNING FOR RESOURCE AND INFRACTURE:-

Identify resource/infrastructure requirement for ARD.

Estimate of each type of resources. Shortlist equipment/ manpower/acquisition of

land /up keep of promises. Prepare training center and calendar for

providing the product update periodically.

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PLAN FOR GATHERING MARKET INTELLEGENCE:-

Identify element of marketing intelligence.(Competitors sale, competitors standing, market price,

potential market).

Decide on the source of information.(R.T.O transporters GR’S published data)

Decide the periodicity of obtaining information.(Weekly/ monthly/quarterly/annually)

IMPLEMENTING TRANING –ADULT LEARNING PRINCIPLES:-

Focus on real life and work place issue.Greater focus on the why of the situation Encourage trainees to share ideas and viewsListen to respect participant Ideas phased learning is major effective.Build on prior knowledge and facts.Use aid for long term memory retention.

visual aids visualization

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reviews physical action

ARD means authorized representatives of dealer.

It determines exactly where you are in your progress toward your business development goals.

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OPERATIONS, REACH & SUPPLY CHAIN

“Price is what you pay. Value is what you get”

Manufacturing Hero Honda commissioned its third, plant at Haridwar during the year, with an initial installed capacity of 500,000 units. With this new capacity expansion, HHML now has an overall annual capacity of 4.5 million two wheelers. With this, the Company has become a global-scale manufacturer. The Haridwar complex is the largest of the three Hero Honda plants, spanning about 275 acres.

The plant has lean manufacturing and practices that ensure efficiency. It is connected with vendors through conveyors so that the material can avoid multiple handling and is delivered on time. The Haridwar plant is one of the greenest automobile plants in the country. Effluents are minimized, and there is zero discharge on liquid effluents. All waste is treated and consumed within the factory. The plant has 70 per cent of its area as green open spaces, and approximately 45,000 square meters of the plant roof area is being converted into a green roof. 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, the company managed an average cost reduction of Rs. 343 per vehicle

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despite volatility in metal price

Vendors managementVendor management is critical to Hero Honda, as nearly 73 per cent of the production is currently made up of material cost. During the year, 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.

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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, 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.

Distribution NetworkThe 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. In March 2001, the company had 826 such customers’

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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 review.

Rural NetworkPage | 47

During the year, 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. This national level program has made strides into thousands of Indian villages with a population of

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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.

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DRIVING TO NEW DESTINATIONS,STRENGTHENING PROCESSESALONG THE WAY

OperationsHero Honda has two key priorities: first, to expand and grow aggressively, and second, to develop capabilities and innovate constantly. Keeping these priorities in mind, Hero Honda undertook the following activities during the year:Commissioning of a new plant at Haridwar: The commissioning of this third plant gives Hero Honda a total installed capacity of 4.2 million two wheelers. A capacity of this magnitude has enabled Hero Honda toRetain its position as the world's largest two-wheeler manufacturer for eight successive years.The full commissioning of the Haridwar plant allowed the company to plan its production better. Depending on volumes, production was rationalized across the three plants. This reduced changeover time helped the company increase its overall efficiency level. In turn, this helped Hero Honda bring down overall manufacturing cost per vehicle during the year. New Models: During the year, seven new models were introduced across segments. Out of these four models were launched in the space of a month. The variability of the product mix could have posed a challenge; but, flexible systems at the three plants allowed production to proceed smoothly. Distribution Network: The company has a conscious strategy of penetrating new markets and unrepresented territories through its distribution network of dealers, authorized representatives, stockiest and SSPs. In March 2008, the company had 826 such sales and service points in India. By March 2009, this number had grown to more than 3500. All the four marketing zones of the company demonstrated a uniform increase in new dealerships and SSPs during the year in review.

Rural network: During the year, Hero Honda's ambitious rural connect program—Har Gaon, Har Aangan gained critical mass. Currently, every non-metro dealership has a dedicated “Rural Sales Executive” who travels to villages, meets people and drives the initiative on a sustainable basis across the country. At the moment, there is a network of more than 500 rural sales executives working on the rural vertical—which works on the hub and spoke model. There is a plan to substantially boost this number in the coming years. Typically, the

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rural executives fan out and visit villages with a population of more than 5000 people. Apart from meeting opinion leaders, the executives are also tasked with organizing Loan Melas in partnership with Gramin Banks, License Camps and Riding Schools. The idea is not just to increase awareness about the two wheeler industry but also to increase buy-in for Hero Honda products.

AN INDUSTRY THAT IS RIDING AHEAD

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Working with Supply chainHero Honda continues to build and maintain sustainable relationships with its supply chain particularly in relation to long-term strategic direction of the business. Vendor management is critical to Hero Honda, as nearly 73 per cent of the production is currently made up of material cost. A national network of 256 vendors - including 36 ancillaries - forms the backbone of its plant operations.Softening metal prices, particularly of aluminum & nickel in second half of the year, combined with better sales realization worked together to bring down the share of material costs considerably. Raw material costs as a proportion of total costs scaled down from 72.5 per cent to 69.5 per cent. Simultaneously, a more streamlined sourcing policy also helped in lowering costs.During the year, the inbound logistic system at the Haridwar plant was revamped; Hero Honda switched from the individual logistic model to a specialized thirdparty logistic service provider for all Haridwar-based suppliers. This switch helped the company reduce logistics cost and improve the operational efficiency of the value chain. During the year, the company also paid considerable attention to developing a multi-modal transport system, in order to derive cost economies.Also at the Haridwar plant, Hero Honda switched from individual purchase of basic materials by supply chainPartners to consolidated settlements by the company itself. The resulting economies of scale

have resulted in greater leverage with suppliers and have helped bring down material costs. 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 72 per cent of the vendors and their supplies were connected online.

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During the year, Hero Honda also worked with vendors to develop and produce alloy wheels within Haridwar. This considerably reduced dependence on costly imports.

The Green Supply Chain

Hero Honda believes the process of sustainable development is incomplete without involving the company's supply chain. With this in mind, the company has put together a “Green Vendor Development Program” for the front end and a “Green Dealer Development Program” for the back end of the supply chain. In each of these programs, the partners' are expected to manage their environment involving material resources, industrial wastes, energy resource, pollution and other effluents based on a number of pre-determined parameters. Hero Honda plans to support all its partners in the Green Supply Chain venture by developing required competencies, sharing knowledge, and by providing technical support. 31 vendors enrolled under this program in 06/2009underwent requisite training and were certified as green vendors during 06/2009. A fresh lot of 40 vendors were inducted during the year for the program.

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Contents of green supply chain

Information SystemsA number of key technology initiatives were either initiated or completed in2009-10. The application infrastructure of the organization was extended to support business processes at the new production facility at Haridwar. This is expected to be operational in 2010-11..During the year, the organization’s entire network was revamped and redundancies were built to support business users. The IT team also deployed applications for sending real time business alerts related to production, sales, service notifications automatically from the system using SMS technology. This helped business users immensely. This real time system was also used by business partners to manage their dispatches and outstanding. To improve productivity, a number of applications with work flow capabilities were developed or enhanced. Also during the year, the entire information security policies of the organization were revamped in order to mitigate risks.

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Green vendor programme

Material resources

Energy resources

Pollution sources

Industrialwaste

Other Effluents

A new eco-friendly state-of-the-art data centre was set up and Hero Honda migrated to a new technology architecture that included blade servers and virtualization. This would help consolidate servers and storage as well as reduce complexity. To help Hero Honda prepare for the future, two major strategic initiatives are being planned for 2009-10.. The first is Product Lifecycle Management software. This will help the company in managing the increase of complexity of a diverse product portfolio and help reduce cost and time for developing new models. The new software is also expected to improve and scale up design-level collaboration with vendors on an on-line basis. The software is also expected to reduce warranty costs. The second initiative comprised of rolling out Dealer Management System software across the front end of the supply chain. This will help Hero Honda connect with its entire dealer network. Once the project is complete it is expected to improve customer service and supply chain performance extensively.

]

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HERO HONDA MOTORS LTD.World’s Largest Two-Wheeler Manufacturer UsesMy SAP™ Supplier Relationship Management toStreamline Supply Chain Processes

For New Delhi–based Hero Honda, success has brought significant rewards – and some daunting challenges. The company, established in 1985 as a joint venture between Hero Group of India and Honda of Japan, holds a 50% market

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share in India and has grown to become the world’s largest two-wheeler manufacturer. In the last six years Hero Honda’s sales volume grew by 400%, and this year the company expects to manufacture and sell more than 3 million motorcycles.

But growth has brought unique challenges, too. Hero Honda now supplies motorcycles through more than 500 dealers and 700 service points, institutions, and overseas customers. In addition, the company calls on more than 240 suppliers for its parts and subassemblies. The challenge for Hero Honda: cut time and waste out of its supply chain and add more flexibility in meeting the fast-changing dynamics of the modern market in India.

Processing Orders Manually“We have a large supply chain,” says S.R. Balasubramanian, vice president of information systems at Hero Honda. “And we need accuracy and speed in the deliveries of raw material and components that we get.” Balasubramanian continues, “Our suppliers are given a plan for the month but

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changes are often necessitated by market conditions – like changes in the mix of models and colors. And there’s also increase or decrease in demand. We want the ability to respond to these changes by aligning the production plan, supply schedule of components, and other resources to handle this efficiently.”

“We had no visibility of materials in transit and a lot of time was wasted on follow-ups. We also had to deal with incorrect deliveries from vendors when they sent us either less or more than the scheduled quantity. For example, we might have ordered 100 units but the supplier delivered 110,” says Balasubramanian. “This kind of error would slow down the receiving station while our people would seek approval for receiving the extra quantity. Also, mismatches like this meant that we either carried more inventory than we needed or caused production holdups if the quantity supplied was less than ordered,” he adds.

Automating Supplier TransactionsPage | 61

Hero Honda began a pilot test, bringing in my SAP Supplier Relationship Management (my SAP SRM) as well as my SAP Customer Relationship Management (my SAP CRM),Both solutions in the SAP Business Suite family of business solutions.For the rollout of its supplier portal, Hero Honda chose its top125 suppliers – together, they account for 95% of the company’s supplies. Most of these suppliers now perform their transactions with Hero Honda through the Web-based self-service portal, in real time. Suppliers can now see the status of their orders, shipments, and invoices, and they can see new delivery schedules as soon as they’re processed by the Hero Honda production plan. They can also use the portal to make confirmations along the way – for example, to confirm that they can handle a certain variation and to confirm that they’ll meet the delivery schedule.

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End-to-End Process IntegrationHero Honda also implemented a customer portal, as a feature of my SAP CRM. With the two portals now in place, Balasubramanian says the company benefits from end-to-end process integration. “Our dealers place their orders once a month,” he says. “Typically, a dealer might order several hundred motorcycles, as well as spare parts. So every Friday we get our orders in, we consolidate them on Saturday, and on Monday morning our suppliers are all receiving our delivery schedules, directly from our production planning system.” Because the ordering process is now fully automated, Hero Honda saves approximately three days over the time it used to take to complete this process. That translates into an inventory savings of about 10%, which in turn translates into a substantial cost savings.

“. . . we can get the change in on Fridayand be pretty sure that the entireshipment will go out, as scheduled, thefollowing week.”S.R. Balasubramanian, Vice President, Information Systems,Hero Honda

The automation also increases Hero Honda’s own ability to be responsive to its dealers. Even though dealers normally place their orders on a monthly basis, there are many times when they want to revise an order that’s already in process. They might do this to account for a sudden change in customer demand – for instance, their customers might start asking for a new color or a different model. “For these

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revisions, we can get the change in on Friday and be pretty sure that the entire shipment will go out, as scheduled, the following week,” says Balasubramanian. “Our customers appreciate this kind of responsiveness and it’s just what they, and we, need in order to continue to take advantage of this fast growing market.”

Improved Collaboration, AnalyticsAs valuable as Hero Honda’s supply chain automation is, in many ways the new system represents only the tip of a much larger iceberg. “We have just upgraded to a later version of my SAP SRM and this will usher in added functionality,” says Balasubramanian. “We’ll be able to do more strategic sourcing by evaluating our suppliers and forming strategic partnerships,” he says. “We’ll also implement self-service procurement for indirect materials. And we’ll extend the supplier portal by implementing a vendor-managed inventory function, as well as improved analytics through the data warehousing capabilities of SAP Business Intelligence.

“Hero Honda expects steady growth in motorcycle demand in the future, as well as a steady increase in the complexities of manufacturing the two-wheelers”

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The motorcycle market in India continues to be strong,” says Balasubramaniam. “For one thing, many people who used to ride scooters now prefer motorcycles. For another, we’re fortunate that the economy is strong and financing is readily available.” Balasubramanian points out that the spectrum of motorcycle models and colors is also growing. His company averages about three new models each year and, with the current selection of models and colors, Hero Honda is responsible for producing about 150 variations of motorcycle – not including accessories. “But now we’re well equipped to handle our growing market and product mix,” he says. “And at the same time, we’re more responsive than ever before to our dealers and other customers, thanks to my SAP SRM and my SAP CRM.”

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“. . . now we’re well equipped to handle our growing market and product mix . . . [W]e’re more responsive than ever before to our dealers and other customers. (S.R. Balasubramanian, Vice President, Information Systems, Hero Honda)

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Different range of product

Karizma Hunk Hero Honda CBZ

Glamour Glamour Hero Honda shine

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Some interesting facts Over 20 million Hero Honda two wheelers tread Indian roads

today. These are almost as many as the number of people in Finland, Ireland and Sweden put together!.

Hero Honda has consistently grown at double digits since inception; and today, every second motorcycle sold in the country is a Hero Honda. Every 30 seconds, someone in India buys Hero Honda's top -selling motorcycle – Splendor.

Hero Honda bikes currently roll out from its three globally benchmarked manufacturing facilities. Two of these are based at Dharuhera and Gurgaon in Haryana and the third state of the art manufacturing facility was inaugurated at Haridwar, Uttrakhand in April this year.

These plants together are capable of churning out 3.9 million bikes per year.

Hero Honda is world’s third largest two wheeler maker.

Today Hero Honda has an assembly line of nine different models of motorcycles available. It holds the record for most popular bike in the world by sales for Its Splendor model.

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Bibliography NEWS AND VIEWS FROM MARKETING DIVISION OF HERO HONDA.

AME BUSINESS MAGAZINE.

AUTO MAGAZINE.

BUSINESS INDIA

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Profit

sales

&

trst

by

comsumer

workers &wide distribution

FINANCIAL EXPRESS

BUSINESS LINE

OVER DRIVE MAGAZINE.

WWW. INDIAINFOLINE.COM

WWW. HEROHONDA.COM

WWW.ECONOMICTIMES.COM

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