REPORT ON VALUE CHAIN ANALYSIS OF

Submitted To - Prof. Prakash Kadakol

Submitted By- Group 3:

Saba Shaikh Hafsa Mujawar

42 09 61 36

Vijay Belgaumkar Rishikesh Javalkar -

VALUE CHAIN ANALYSIS

It is fairly clear that Hero Honda enjoys some competitive advantage over the competition, and for 7th year in a row make them largest two wheeler manufacturer in the world. In the two wheeler market of India Company commands a robust market share of 52% and is continuously growing at a healthy rate of 13%. By analyzing its value chain we make an effort to ascertain competitive advantage it has.

Primary activities

Inbound logistics
Material components make 73% of production cost, so Honda always tried to have close integration with suppliers. Hence, when procuring components it is very important to control tightly and reduce the logistical cost. Moreover, diminution of inventory will be an added benefit so that working capital requirements will be less.

JIT manufacturing philosophy is being adopted by the company, and it demands close coordination among manufacturing units, vendors and ancillary units. Efforts are going on to broaden JIT ahead of shop floor in the operational & strategic decisions of the vendors as well like production planning, capacity expansion etc. Online real time connectivity between the operations and that of 72% of its 300 plus strong vendor base has been established and its a success of the company. All this has resulted in the reduction of logistical & transactional cost.

Operations
Only Indian company that has mastered the art of JIT is Hero Honda. To ensure the high efficiency and low inventory production, Hero Honda uses high degree of automation and pursues lean manufacturing, with the usual benefits of increased cash flow, reduced cash & operating cycles and hence improved working capital conditions. The unique tangible assets that Hero Honda Ltd. has are these fully equipped plants where manufacturing concepts are applied. With annual production capacity of 4.5 million units the company has three manufacturing facilities at Haridwar, Dharuhera and Gurgaon.

With workforce in range of 4320 productivity/employee is high. To make Haridwar plant efficient the concepts of lean manufacturing, JIT & integrated supply chain have been applied from very start.

Technological know-how, improving designs etc. for two-wheelers are offered by Honda after the initial design requirements as promoted by customers and market trends put in structured appearance by Hero Honda R&D team of India.

Outbound logistics
Through its well established delivery channels from three plants, Hero Honda is fulfilling the demand in India is exporting approximately 95000 bikes. The effort is to provide for minimum waiting period or rather filling regions as per demand forecasts and market trends.

Marketing & Sales

Years ago Fill it, Shut it, Forget it campaign was started by marketing department of Hero Honda to pitch for better fuel efficiency and hence lower owning cost. To attract new customers, retain previous customers and reliability of its products the marketing department of Hero Honda strived constantly. It came up with Honda passport program to ensure the loyalty of customers. Company has also faced complaints of the customers like company dont present powerful bikes like competitor Bajaj is doing; there is no product differentiation to justify price differences etc. To make its offerings well accepted Hero Honda improved its 4Ps and paid attention to customers needs.

Dealers, authorized representatives, stockers etc together form distribution network of Hero Honda and use conscious strategies to penetrate new markets and unrepresented territories. From 2001 to 2008 company customer points increased from 826 to 3500 in India. Within same period 50 dealers, 150SSPs and 45 city work agents were added. The distribution network of Hero Honda is wide & deep rooted; it is based on mutual trust and relationship between company and its distributors and its philosophy to ensure growth of partners with its own growth. It has unique intangible resources in the form of strengthened supply chain and distribution networks. And the outcomes of it are its superior brand image and reliability of its brand.

Services
Hero Honda comprised one of the best after-sales services network in the industry. In addition to providing better quality service and trouble-free availability of spare parts, company also paid attention to tidiness and other aesthetics of service stations and added facilities like airconditioned waiting rooms, coffee shops etc

To provide service stations at every nook and corner of the country is almost impossible for the company, so it introduced mobile service stations to ensure the customers in rural areas. In this way increased loyalty of customers is ensured.

Support Activities Research, Technology & system Development

Management information system is one of the system development used in Hero Honda to run organizations efficiently, the flow of information has to be quick and efficient; management information system provides help in doing this. For solving the business processes like pricing, costing etc of products or services, a subset of the whole internal control processes in an organization which consists of the documents, applications of people, technologies and processes is used by the management accountants that can be regarded as Management Information system (MIS).

Hero Honda has also invested in new bike models and new factories in order to be competitive in market. It also works with dealers to improve selling product mix. Hero Honda also consists Full Automatic robotic system in welding and some other specific areas) to ensure high efficiency, low inventory production, with usual benefits like increased cash flow, reduced cash & operating cycles and thus improved working capital conditions.

Human Resource management

Hero Honda consists of personnel groups like virtual teams, distribution, marketing & service and supplier management personnel who are engaged in managing the entire operations & administrative functions of Hero Honda. And also consists employee strength of 4320 working in production department .

Procurement
Hero Honda procures their equipments or parts through railroads & trucks, and their source parts or components are purchased from the key suppliers. It has close integration with suppliers as vendor management is critical for its operation, for the simple fact that 73% of production cost is due to material components and it also follows Just in Time (JIT) manufacturing philosophy which helps in coordinating manufacturing facilities and the vendors and ancillary units. All its vendors are connected to the main plant by conveyors to prevent chances of time & material loss due to multiple handling.

Bibliography

www.herohonda.com www.herogroup.com