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 by
GUIDED BY

ABHISHEK KUMAR
MR.SANDEEPJASHWANT BBA 6TH SEM
HOD (MANAGEMENT)

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 DEPARTMENT OF MANAGEMENT
SHRI SHANKARACHARYA MAHAVIDYALAYA
SECTOR-6 BHILAI (C.G)

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

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 BBA 6TH SEM

Date:

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“
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This research report is the original
one.

Project guide
PRINCIPAL (H.O.D management)

Place:
Date :

Acknowledgement
Perhaps the most awaited moment of any
endeavor in its successful competition of their
project report cases study having worked on

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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
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.

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 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

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 Channel
strategies
› Distribution channel
› Market consideration

› 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

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 › Vendor’s management
› Operation

› Distribution network
› working with supply chain

› Rural network
› the green supply chain

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:

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1) INTRODUCTION 10-16

2) PROFILE 17-22

3) SUPPLY CHAIN 23-28

4) FACTOR INFLUENCING CHANNEL STRATEGY 29-31

5) FACTOR CONSIDERED IN SUPPLYMANAGEMENT 32-38

6) OPERATIONAL RESEARCH &SUPPLY CHAIN 39-45

7) DRIVING TO NEW DESTINATION 46-51

8) SUPPLIER RELATIONSHIP MANAGEMENT 52-58

9) DIFFERENT RANGE OF PRODUCT 59-60

10) BIBLIOGRAPHY 61

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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,
friend and the associate advice and the
marketers and the competitor’s information
and promises. If marketers raise expectations

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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.

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≈} To give the appropriate
suggestion to the
company regarding he
performances.

Our brand
Our brand identity:
➢ Our brand is the visual
expression of the ought and the
action it conveys to everyone

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 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
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.

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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.
➢It provies the basis on which
we grow profitability in the
market.
➢Our brand essence is
excitement

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 ➢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

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our commitment towards our
goal and process.

Chapter -2

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

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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
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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
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 :
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” 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”.

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

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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 10068

3

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.

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 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

Green , sky blue black metallic, yellow shade.

Chapter -3
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SUPPLY CHAIN
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≈} 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

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Direct selling (company own
stores, own sales force, television
information, mail order, internet, and
telephone).

Multiple types of channels

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Multiple channel of
distribution
For 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
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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.

Company traditional distribution

channel

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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
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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Page | 43
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.
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.

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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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Page | 47
Factor considered in supply
management

Planning for new motorcycles

➢ 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.
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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.
➢ 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.

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 ➢ 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.

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.

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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 views
➢ Listen 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.

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✔ 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

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reduction of Rs. 343 per vehicle despite volatility in metal price

Vendors management
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 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)

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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,
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.

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Distribution Network
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. 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 review.

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 Rural Network
During the year, Hero Honda’s ambitious
rural connect program

“ Har Gaon, Har Aangan”

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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.

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 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 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

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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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Page | 66
DRIVING TO NEW DESTINATIONS,
STRENGTHENING PROCESSES
ALONG THE WAY
Operations
Hero 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 to
Retain 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.

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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
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

Page | 68
Page | 69
Working with Supply chain
Hero 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 third
party 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.

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Also at the Haridwar plant, Hero Honda switched from individual
purchase of basic materials by supply chain
Partners 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.
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

Page | 71
of 40 vendors were inducted during the year for the
program.

Contents of green supply chain

Information Systems
A number of key technology initiatives were either initiated or completed in
2009-10. 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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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.

Page | 73
Page | 74
HERO HONDA MOTORS LTD.
World’s Largest Two-Wheeler Manufacturer Uses
My SAP™ Supplier Relationship Management to
Streamline 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
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
Page | 75
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
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.”

Page | 76
“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 Transactions

Page | 77
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.

Page | 78
End-to-End Process Integration
Hero 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

Page | 79
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

Friday
and be pretty sure that the entire
shipment will go out, as
scheduled, the
following 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
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.”

Page | 80
Improved Collaboration,
Analytics
As 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”

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

Page | 81
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.”

Page | 82
“. . . 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.

Page | 83
 (S.R.
Balasubramanian, Vice President,
Information Systems, Hero Honda)

Different range of product

Page | 84
Karizma Hunk Hero
Honda CBZ

Glamour Glamour Hero

Honda shine

Some interesting facts

Page | 85
➢ 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.

Page | 86
Bibliograp
hy
NEWS AND VIEWS FROM MARKETING
DIVISION OF HERO HONDA.

 AME BUSINESS MAGAZINE.

 AUTO MAGAZINE.

 BUSINESS INDIA

 FINANCIAL EXPRESS

 BUSINESS LINE

 OVER DRIVE MAGAZINE.

Page | 87
 WWW. INDIAINFOLINE.COM

 WWW. HEROHONDA.COM

 WWW.ECONOMICTIMES.COM

Page | 88