A

DOCUMENTORY

REPORT

ON

SUPPLY-CHAIN MANAGEMENT

OF

Bajaj Auto Ltd.

SUBMITTED TO:
MR. JIGNESH DARJI

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)

CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY

(CHARUSAT)

Submitted By
Harsh patel
09 MBA 29

1
 DECLARATION

I, Harsh v PATEL (09MBA 29), hereby declare that the every part of the report
presentation on “SUPPLY CHAIN MANAGEMENT OF “Bajaj Auto Ltd.” is a
result of my own work and my indebtedness to other work publication, if any,
have been duly acknowledged.

Place: Changa Signature

Date: 22 / 02/ 2010 Harsh v PATEL

INDEX

2
 ORGANISATION DETAIL
TITLE PAGE NO.

ORGANIZATION DETAIL 3
 NAME
 INCEPTION,GROWTH
 BRACHES/PLANT LOCATION
 PRODUCT/SERVICE LINE
 ORGANIZATION STRRUCTURE
 COMPETITOR
SUPPLIER DETAIL 9
 RAW MATERIAL REQUIRED
 SUPPLIER INFORMATION
 SUPPLIER LOCATION
 PROCESS OF ORDERING/FULLFILMENT
 RELATION WITH FIRM
OPERATIONAL DETAIL 12
 PRODUCT USE AND CHARACTERISTICS
 MANUFACTURING PROCESS
 INFRASTRUCTURE FACILITIES (PLANT, MACHINERY,
TECHNOLOGY, HUMAN RESOURCE, ETC.)
 CONCEPTS LIKE JIT, SIX SIGMA (INVENTORY
MANAGEMENT)
 SUBSTITUTES AND COMPLEMENTARY
PRODUCT/SERVICE
DISTRIBUTION DETAIL 16
 MARKETING/PROMOTION
 TRANSPORTATION/LOGISTICS
 WAREHOUSING
 CHANNEL STRUCTURE
 CHANNEL MANAGEMENT
 TARGET MARKET (LOCATION)
CUSTOMER DETAIL 20
 TYPE OF CUSTOMERS
 TARGET MARKET (DEPENDING UPON CUSTOMER
CHARACTERISTICS)
 AFTER SALES SERVICE
 CUSTOMER RELATION MANAGEMENT
SUPPLY CHAIN DIAGRAM AND EXPLANATION 23
REFERENCE 28
3
NAME OF COMPANY:

“Bajaj Auto Ltd.”

INCEPTION, GROWTH OF THE COMPANY:

The Bajaj Group was founded in 1926 by Jamnalal Bajaj and now consists of 27
companies. In 1945, Jamnalal Bajaj had formed M/s Bachraj Trading Corporation Private
Limited, the flagship company, to sell imported two-wheelers and three-wheelers. The
company acquired a license from the government in 1959 to manufacture these vehicles
and went public the next year. By 1977, the company saw its plant rolling out 100,000
vehicles in a single year. In another nine years, Bajaj Auto could produce 500,000
vehicles in a year. The present Chairman of the Bajaj group, Rahul Bajaj, took charge of
the business in 1965. He was the first licensee of the Indian make of the Italian Vespa
scooter. Japanese and Italian scooter companies began entering the Indian market in the
early 1980s.

Although some boasted superior technology and flashier brands, Bajaj Auto had
built up several advantages in the previous decades. Its customers liked the durability of
the product and the ready availability of maintenance; the company's distributors
permeated the country. By 1994-95, Bajaj was racing to beat Honda, Suzuki and
Kawasaki in the two-wheeler segment internationally. By 1997, Bajaj faced tough
competition in the domestic market and its market share stood at 40.5%. Under the
leadership of Rahul Bajaj, the turnover of Bajaj Auto has gone up from Rs.72 million to
Rs.46.16 billion (USD 936 million), its product portfolio has expanded from one to many
and the brand has found a global market. Bajaj as a brand is well-known across several
countries in Latin America, Africa, Middle East, South and South East Asia.

The company has a network of 498 dealers and over 1,500 authorised service
centers and 162 exclusive three-wheeler dealers spread across the country. Around 1,400
rural outlets have been created in towns with populations of 25,000 and below.

The current dealer network of Baja is servicing all these outlets. Bajaj is
convinced that the real impetus of future two-wheeler growth will come from upcountry
rural India. Bajaj Auto has defined specialist dealerships for rural markets, called 'Rural
Dealerships'. During the year 2008-09, twenty new rural dealers became operational.
Bajaj has identified a segment of customers called 'Probikers', who are knowledgeable

4
about motorbikes and appreciative of contemporary technology. They are trendsetters and
very choosy about what they ride. Hence, Probikers need to be addressed in a meaningful
way that goes beyond the product.

Product/Service line:

Bajaj Auto is in the process of setting up a chain of retail stores across the country
exclusively for high-end, performance bikes. These stores are called “Bajaj Probiking".
Fifty two such stores have been opened across the India. Catering to demand in this
sector requires a strong and effective distribution network as consumers are more
demanding and expect delivery on time. Early delivery is a cause of delight for
customers. With such vast global and Indian rural presence, designing an efficient
distribution system becomes a complex task even for a company like Bajaj Auto. Lot of
time and effort goes into designing a strategy based efficient distribution system.

Key products- two wheeler

Premium segment Executive segment Entry segment

Pulsar 220 dtsi Xcd 135 Discover 100 dts-si

Pulsar 180 dtsi Discover 135 Platina
Pulsar 150 dtsi Pulsar 135 Kristal
Avenger dtsi Platina 125

Key products – three wheeler

Passenger carrier Goods carrier

Re CNG GC diesel
Re diesel GC CNG
Re petrol Re 600
Mega Max

5
 Product Segmentation

The company classifies motorcycles into three segments, based on consumer

categories and approximate price points. These are:

 Entry Segment: These are typically 100 cc motorcycles at a price point in the
neighbourhood of Rs.35000. Bajaj Auto has a presence in this segment through the
Platina. Here, Bajaj Auto has been a major player and despite an overall market de-
growth, it accounted for 34% of this segment in India in 2008-09.

 Executive segment: This largely comprises 100 cc to 135 cc motorcycles, priced

between Rs.40000 to Rs.50000. Bajaj Auto has two brands in this segment, namely XCD
and Discover.

These are sleek, high performance bikes with price points in excess of Rs.50000.
They are present here with their flagship brand, the Pulsar and cruiser, the Avenger. They
dominate this space with a domestic market share of more than 47%.

6
Competitors

Key competitors (3 wheeler)

Bajaj manufactures commercial vehicles for passenger carrier as well as goods carrier
other players in the three-wheeler segment in India are Mahindra and Mahindra , Piaggio
and atul auto. Bajaj is Facing tough competition by aggressively launched Mahindra gio

7
Organization Structure

Branches/Plant location
Manufacturing Plant

Bajaj Auto’s vehicle manufacturing capacity currently stands at 3.96 million units —
comprising 3.6 million two-wheelers and 360,000 three-wheelers. The newest plant at
Pantnagar (Uttarakhand) has a capacity to produce 900,000 two-wheelers.

8
9
 Supplier Detail

Key suppliers:

Bajaj auto has approximately 198 suppliers for their raw materials.

Some of the key suppliers are:-

JBM - Frames
MRF & Dunlop – tires
Minda - locks & ignition system
Reinder – headlamps & lights
Endurance – brakes, clutch & Cast wheel
Varroc – Plastic parts & Digital Meter
Max auto components – ignition system and switches
Silco cable – wires and cables
Makino industry – Brake shoes . Brake lining, clutch center

Inventory policy-

Bajaj auto maintains seven days inventory . Demand Estimations were based on
Panel Regression, which takes into account both time series and cross section variation in
data .All the Mediators are connected with each other through IT linkage to know exact
status of delivery of goods

With operations spanning to such vast geographies, managing a supply chain

globally becomes more and more complex. In countries where Bajaj perceives a strong
market potential, they establish a tie up with one major industrial establishment eager to
invest in the project. This investment may include setting up strategic manufacturing or
assembly units, apart from a well-established nation-wide network for marketing,
distribution and after sales services. These investors who form alliances with Bajaj Auto
are termed as “Business Partners”. Bajaj Auto offers a number of services to its business
partners. They include:
 Training in sales, service and spare parts management based on the Bajaj distribution
system

 Active support for setting up manufacturing facilities overseas including transfer of

technical know-how

10
 Assistance in setting up an assembly plant for assembly of vehicles from complete
knocked down (CKD) kits

 Selecting of machinery and equipment and training of technical personnel, all in a

phased manner as required by the regulations in the recipient country

 Active support in setting nation-wide dealer network, also involving identification and
recommending suitable partner who would assist the distributor in Business growth

11
 Operation Detail

Manufacturing locations

Akurdi, Pune 411035

This is one of the oldest plant of bajaj auto ltd with production capacity of 0.6 million
vehicles/ year. The plant has been closed in order to equip for four wheeler production

Bajaj Nagar, Waluj Aurangabad 431136

This is second plant with production capacity of 0.86 million/ year.products
manufactured here are Kristal, XCD and platina andcommerial GC series

Chakan Industrial Area, Chakan , Pune 411501

This is the biggest plant of bajaj auto Production Capacity of 1.2 million/ year , Product
manufactured here are pulsar and avenger and commercial Ge series
Pantnagar , Uttarakhand
The most advanced plant of bajaj auto .It has Capacity of 0.9 million vehicles per year .
product manufactured here are platina and XCD.

12
Manufacturing process

Usage of IT at all Levels

For decades, Bajaj Auto was riding high. The company was enjoying market
share the only way it knew to: by building basic, durable scooters on the platform of
‘value for money.’ But when the marketplace changed, Bajaj was late to respond. It
became clear that the company could no longer derive big market shares from limited
brands and products. Then started the restructuring—of products, channels and the
performance management system. Along with that, the company realised that it had to
redesign its IT structure. Bajaj Auto announced the successful “Go Live” of their
External Portal Initiative for their sales and service employees, dealers and suppliers.
SAP’s mySAP Enterprise Portal was implemented simultaneously with the current SAP
R/3 ERP implementation. Business information is available to the company’s external
community in real time. This assists in improved decision-making, whether it is to meet
customer requirements or to maintain efficiency in supply chain management. The
company’s field sales teams get full visibility on all dealer activities while the dealers get
real-time access to relevant information on operational activities.

13
 The dealers and sales employees get information relevant to their respective
region and territory by aggregation from the underlying SAP R/3 ERP database. Bajaj has
linked 380 out of its 483 dealers through this system. Also connected are 165 out of a
total of 200 suppliers. The dealer portal, in addition to operating information, provides
access to unstructured information like news items, new product releases, new product
introduction, dealer discussion groups and internal marketplace. The supplier gets up-to-
date information on purchase orders and contracts, material schedules, and payment
details. Bajaj Auto, in turn, gets invoicing information from suppliers for its automated
material receipt system. This helps in streamlining the supply chain, optimising
inventories and reducing non-value-adding activities at both ends.
Every PC has a hardware lock so that the correct terminal is established and does
not travel out of the dealer’s premises. Bajaj is also planning to extend the IT system
even as it plans to launch a major marketing initiative in rural areas. “As this project gets
implemented, we have to see how IT can support it. There is an issue of Internet
connectivity. But the infrastructure is changing with telecom majors expanding their
network. We are looking at connectivity through WLL,” said Mr Bajaj. 11 Before
understanding the channel design, we need to know the components that are involved in
the channel network. Various players involved in the channel design are:
 Manufacturing Plants
 Depots
 Carrying & Forward Agent
 Dealers
 Sub Dealers
 Logistics

Each of these players and their key role and deliverable will be dealt in detail later.
Channel Design is dependent on the segmentation that Bajaj have done in the geographic
and product category segments.

Infrastructure facilities:

Bajaj Auto Ltd. has well designed infrastructure facilities. They highly care of
clarity and arrangement. The whole plant has divisional area like, offices, operation
house, godown, and packing department.Bajaj Auto Ltd. l has modern technological
machines, from this it can produce products.These machinery arranged in operation
department systematically. The production process is step by step so as per this the
machinery also arrangeBajaj provide all the best facilities to their employees, like
parking, canteen, rest room, and also proper working conditions. They greatly care of
their employees. They pay on monthly basis and also give bonus on special occasions. In
this way Philips can compete with best plant, machinery, technology and human
relationship

14
 Distribution Detail

For distribution bajaj auto uses mix of depots and Cnf agents. This is completely
dependent on the distance of manufacturing location from dealer point .For example due
to extensive distance from manufacturing plant from west Bengal to north-east India
,there exist a depot in Khadakpur with capacity of housing 800vehicles. There are similar
depots in Punjab , Rajasthan and southern India.

Dealers

Like mentioned above, the company has a network of 498 dealers and over 1,500
authorised service centres and 162 exclusive three-wheeler dealers spread across the
country. Around 1,400 rural outlets have been created in towns with population of 25,000
and below. The current dealer network is servicing these outlets. Dealers can be classified
under 3 heads. They are as follows:

 COCO-
These are Company Owned & Company Operated showrooms. These concepts exist only
for Pro-Biking showrooms. Here Bajaj Auto has tried showcasing their muscle power in
high end biking segment. The concept has evolved very fast and now there are 52 Pro-
Biking showrooms in the country. The company itself does not take any order from the
customer in these showrooms. The giant dealer of the region who is acting as a logistics
partner for the pro-biking concept takes the order on behalf of the company and fulfils the
customer requirement.

 CODO-
These are Company Owned & Dealer Operated showrooms. In case of this concept,
showrooms are owned by the company but the operations in the showroom are managed
by the dealer. This is generally the case where Bajaj wants to provide the dealer financial
benefits considering the high working capital requirement of the company.

 DODO-
These are Dealer Owned & Dealer Operated. These dealers are fewer in number because
they are generally the giant dealers who are the financial muscle for the company. In our
talks, the management indicated that the top management wants to do away with this
concept. The reason behind this is that the bargaining power increases in the hands of the
dealer, which puts the company in an knotty situation.
National Level Partnerships

15
 There is an exisisting generic channel which is used for segmentation of this category of
two-wheelers and three wheelers.

Transport & Logistics

This function of distribution is not owned by the company in any form. This is
outsourced in toto to the third party vendors. The third party here is Transport
Corporation of India (TCI) and a few other private vendors. The fleet to be transported is
custom-designed for Bajaj Auto by the vendor. Key Facts
 There are twenty vendors all across India
 OSL
 Jamuna Transport
 Sumit Transport
 A Transit Insurance Compliance Letter(TICL) is signed between the two parties
 The local level sub-dealer sometimes gets to decide the last mile logistics, as he can
decide to pick up the vehicles himself or have it transported to him
 Logistics of the vendor is decided by the company
 Freight charge is built-in in the product price

Bajaj selects those suppliers who provides majority of the required raw materials
together. The company believes in situation so if any suppliers do not keep their
requirement so at that time bajaj left the contract.

Process of ordering :

Bajaj lighting refers a systematic process in selecting suppliers and deal with
them. Production manager of the company study the application received by the suppliers
and select proper suppliers as per their requirement. The selected suppliers invite for
general meeting with the production manager and purchase manager of the company. In
this meeting they decided conditions and time period of supplying raw materials to the
company.

Once the contract signed by both the routine work continue. Whenever the
company required raw material they send e-mail or call the suppliers just before three
days. And within two days company gets raw materials. The payment done after getting
the raw materials on the basis of the cash or chaque. If the suppliers are unable to
provide raw materials than Bajaj immediately inform them and getting solution.

16
Relation with the supplier firm :
B.ajaj auto lt believes in good relationship with its suppliers and customers. The
suppliers who supply raw material to the company, Bajaj auto pay them regularly. If any
when advanced payment required Bajaj also pay advance for bulky consumption. During
annual day of the company, Philips rewarded those suppliers who contracted with
company for whole year and survive company without any problems.

Services provided by Bajaj Auto to the dealer

 Workshop Training
 In a month:
 30-40 Mechanics can be trained per dealer
 15-20 Sales personnel can be trained per dealer
 New Product Launch
 Information is percolated around a month before the product is to be launched
 The date of launch can be rescheduled in case the current stocks of the dealer are not
getting cleared.
 Promotional Activities
 The cost of sending the staff to the Pune branch for training is borne by the dealer.

Key Role & Deliverables

The most important loop that is the outcome of the dealer management is the
feedback loop. Using this loop company designs its strategy for different segments.
Dealer need to fill in the required form provided by the company and update it to
company on monthly basis. The three heads under which the feedback is filled are:
 Monitoring Sheet
 Daywise Summary of Customer Satisfaction Feedback
 HealthCard For Monitoring Workshops

Bajaj has total of approx 498 dealers 1500 authorized service stations and 1400
rural outlets for population of below 25000

This function is not owned by bajaj auto in any form . This is outsourced to third
party vendor . The third party here is TCI along with some others like OSL , Jamuna
trasport and Sumit transport -Logistics to the vendor is decided by the company -A
Transit insurance compliance is signed between the two parties -Freight charges are
included in product price.

Bajaj rides the SAP advantage. In year 2000 ‘Project 110 percent’ was launched
to spearhead Bajaj’s growth in the future. Bajaj auto has linked 386 dealers out of 498

17
and 165 suppliers out of 198 Business information is available to company external
community in real time.

The dealers can get real time information ,unstructured information like news
items, new product releases, dealer discussion group and internal market place. On
operational activities and also the company can monitor the external members The
suppliers gets up-to date information on purchase order, contracts and material schedule

Key Deliverables in terms of Sales & Distribution Management

 Order Tracking-Taking a daily account of the order received from various dealers
and Regional Offices (RO). Orders from dealers are punched in by dealer themselves.
Orders are followed up in the system only if the credit limit is not crossed. This credit
limit is preset into the system depending upon the dealer and his/her track record.
 Packaging-Packaging in factory is outsourced to third party vendor. These vendors
are generally from the Transport & Logistics partners
 Despatching Goods-Goods need to be despatched via third party vendor TCI. State
corporations and other private players are also part of the vendor list.
 Generating Invoice & Waybill-These documents need to be generated and
despatched to the respective dealer

Key Role & Deliverables of Depots

Setting up depots is a geographical strategy adopted by Bajaj Auto. But this does
not mean that the company has gone all out to open a large number of depots. It has
chosen strategic locations. The key role played by depots is that they are meant to cater to
any sudden rise in demand of vehicles, and to cover the existing geographic span of
India. When we spoke to the management, they explained to us the reasons behind having
a depot in Kharagpur. There are two reasons for which Kharagpur was chosen to hold a
depot for Bajaj Auto. They are as follows:
 Catering to a sudden shooting up of demand- In Bengal itself, it is common
knowledge that during the festive season which spans from September to November,
there is a huge demand as people spend more on festival extravaganza, and it is
considered an auspicious time to buy household gadgetry. There is a conspicuous rise in
the sales of white goods, motor vehicles and jewellery.

 Reaching the states of the North-East- As per the people at Bajaj, “We take 15 days to
reach the North-East if we go via the carrying and forwarding agent concept. Generally
bikes reach West Bengal in 7-8 days. The bottleneck is the Darjeeling route. Hence, came
in the concept of a depot whereby we can reach the North-East in the same time, instead
of experiencing a lag of almost a week.”

18
Dimensions for Choosing Depot or Factory Approach
A dealer needs to consider his order requirements and then come up with an order
to place to the regional office. If the demand is immediate, he may approach a Depot for
the load. Else, he has to try to stick to factory load. Both of these loads have their own
sets of pros and cons. We have listed them in the following table

Depending upon the criteria that are more important to the dealer, he places his
order to either the factory or the Depot. Generally, orders are placed to the factory but in
case of urgent requirement, due to which the lead time reduces considerably, the order is
procured from the depot.

19
 Customers Detail
 CUSTOMER DETAILS:

• Types of Customers:
Bajaj Auto ltd. produces goods by considering the different types of customers. They
distribute products in small towns of the country and all over the world. The bykes lights
produces as per the cerrent trend of the customers.

• After sales Service:

Bajaj Auto ltd. is one of the most accepted products by the customers. With best
quality products Bajaj Auto ltd. can survive customers after selling products.

• Customer relation management:

Bajaj Auto ltd. believes in customer satisfaction. They try to earn
consumers trust by providing good quality products and after sales services. Every two
months Bajaj Auto ltd. researches the market and tries to implement the problems. They
also believe in innovation and produce different variety of products with minimum price.

Daywise Summary of Customer Satisfaction Feedback.

This is a method to record customer feedback.

20
21
 On the basis of all the above inputs the Service Quality Index for a particular
dealer is calculated. On the basis of SQI achieved by the retailer over a period of one year
the dealer is rated as A+, A, B+, B. These ratings decide the type of credit that the dealer
receives, the type of bargaining power he/she enjoys with the company.

22
Supply chain diagram and explanation

23
 The physical flow of goods takes place from the factory to either the depot or to
the carrying and forwarding agent, depending upon the geographic distance and the
location of the Depot. The transport & logistics for this is outsourced to third party
vendors which are under Transport Corporation of India (TCI). Depending upon the
demand these goods have, they flow from Depot or the C&F agent to the dealer and their
network. In case of high profile dealers, the dealer can himself take the physical delivery
of goods directly from the manufacturing plant. The dealer, at the last juncture, caters
ASC, RSO, Sub Dealer & its own branch. The channel members and the key roles for
each of these channel members is detailed below.

Bibliography

http://www.channelbajaj.com

http://www.scribd.com

http://www.bajajauto.com/

http://www.bajajauto.com/bajaj_dealer_locator.asp

http://www.bajajauto.com/services_troubleshooting.asp

24