Supply Chain Benchmarking Study Indian Two wheeler

Industry

Benchmarking

“the process of comparing one’s business process and performance metrics to industry bests or best practices from other industries”.

Benchmarking can be of two types◦Qualitative ◦Quantitative

Types of Benchmarking

Qualitative

Study of best practices of the industry or a particular

and implementing the findings

Overhaul of an existing process or developing an

entirely new process.

Eg: Adoption of Toyota’s kaizen in various industries

Quantitative

Developing KPI’s or performance metrics and

study competitors on each metric to find possible areas of improvement

The performance metrics give an idea to the firm for possible improvements in

their processes

Eg: Toyota in early 70’s did qualitative benchmarking of US automotive industry

and improved on those practices

Scor® ModelSupply chain council (SCC),

provides an appropriate framework for conducting benchmarking.

Framework links business process, metrics and best practices into a unique structure.

Includes 11 performance measures◦Internal measures – Cost, assets◦External measures - flexibility and

reliability of the firm w.r.t. Customer

Objective of studyTo carry out a supply chain benchmarking study

of Indian Two-wheeler industry.Target area of study

Company Reason

Bajaj Auto Ltd. First entrant in the market

Market leader in scooter segment till 2010

Hero Motocorp Market leader in Indian 2W market

TVS Motor A market follower has been in the shadows of

its more illustrious competitors. TVS motor

Enfield India Niche player in motorcycle segment. A long

history and also first entrant in Indian Market.

Mahindra 2W New entrant of the market

Objective of studyLongitudinal Analysis of Supply

Chain Performance for the period 2009-2012

The companies were evaluated on following three performance measures;1. Total length of the supply chain2. Supply chain efficiency3. Supply chain working capital

productivity

Indian two-wheeler industry

37%

25%

18%

13%

3% 2% 1%

Indian 2-wheeler Market Share

Hero MotocorpBajaj AutoHondaTVSSuzukiMahindra Enfield India

Indian 2W Industry Existing market structure

Year 2000 Year 2011 Remarks

Bajaj Auto Bajaj Auto Bajaj Auto exited the scooter segment

in 2010

Hero Honda Hero Motocorp Hero Honda entered domestic

scooters segment in 2006; ended its

JV with Honda in 2010

TVS-Suzuki TVS Motor TVS and Suzuki parted ways in 2011;

Both Continue to be Indian 2-W

market

Royal Enfield India Royal Enfield India Remains a niche player

manufacturing cruiser bikes

Mahindra 2W Mahindra 2-W Entered the scooter segment in 2010

Production Capacity

Trend in capacity utilization

Methodology

•Identified Indian two wheeler industry

•Study of secondary data for the industry and identifying possible objects of study. (Parameter chosen was , market share)

•Collected financial data for the five companies. Sources used were CMIE "Prowess" & respective company's annual reports.

•Data Analysis was done through MS Excel

•Interpretation and results of data

Data Analysis

1. Total Length of Supply Chain◦ The firm with the minimum length

of chain can be said to have the best performance.

◦ Longer supply chain means more time for conversion of raw materials into finished goods.

◦ Total length of supply chain in days = DRM+DWIP+DFG

InterpretationHero Motocorp has least supply chain

length of 11 days.Hero Motocorp has the lowest DFG of 2

days compared to Bajaj’s 8 days.As expected Mahindra has the highest

supply chain length.TVS has supply chain length of 28 days

which is significantly higher than industry average.

TVS’s DWIP is 2 days compared to industry average of half a day.

Data Analysis

1. Efficiency of Supply Chain Management

◦ Parameter measures the overall inefficiency of supply chain management.

◦ Lower the value, better managed is the supply chain of company

Calculated as SCC = DC + (INV x ICC) SCI = SCC/ NS

InterpretationIndustry average of 0.25Bajaj Auto has the most efficient supply chain.Hero motocorp in spite of highest inventory

costs has inefficiency ratio of 0.3 – because of their higher net sales.

Hero motocorp is incurring maximum inventory cost in terms of raw material (High DRM and High inventory cost)

TVS has the most inefficient supply chain management – because of their longer supply chain length (High DRM, DFG & DWIP).

Mahindra 2W has increased the efficiency of its supply chain since 2011

Data Analysis

1. Working Capital productivity◦gives the overall measure of the

improvements in the organization due to the various improvement projects.

◦Calculated as, SWC = INV+AR-AP SWCP = NS/SWC

InterpretationFor overall industry, this ratio is

negative – due to investment in capacity expansion projects.◦Mahindra 2W is expanding capacity of its

Pithampura plant.◦TVS has invested in Mahabharat motors

mfg ltd in West Bengal, to gain presence in West Bengal.

◦Hero Motocorp is building its fourth manufacturing plant in Rajasthan.

◦Bajaj Auto is planning its fourth plant at Mundra, Gujrat.

RecommendationsBajaj Auto needs to implement

more sales source and outlets to reduce their DFG which is stretching their supply chain and hence the costs of it

TVS motors and Enfield India need a better inventory management system or a implementation of Just in Time to reduce their raw material inventory costs.

Contd…The production process of TVS

motors is highly inefficient and there is considerable scope of improvement. Use of technology can help them reduce their DWIP.

TVS, Bajaj & Hero all have high inventory costs, which need to be reduced to increase the efficiency of supply chain.

Thank You !