Logistics & Supply Chain Management<br />ASSIGNMENT<br />Name of the Student: Paul Franklin<br />Abstract<br />In a competitive world, organizations are constantly looking for opportunities to produce and deliver products at the most cheapest price with a sufficient profit margin and in the process of dealing with these issues, the organizations are required to master the good practices of Supply Chain Management. Organizations are realizing that it is very important to follow good Supply Chain Management practices to achieve the company’s goals and to meet customer requirements. It is imperative that a successful supply chain will win the confidence of stake holders and deliver efficiency and effectiveness in all phases of the organizations processes. So, supply chain management, its tools and techniques are of great importance in the present manufacturing scenario.<br />The assignment consists of 3 parts. Each part is designed in such a way as to cover major principles of Supply Chain Management. The first part consists of a debate validating the statement, ― “Research-based innovative models are essential for managing complex global supply chains”. Appropriate literature reference, case studies, discussions and personal opinions have been provided to validate the statement. The second part of the consists of the Bajaj Pulsar 180’s demand forecasting, planning as to how to meet the demand, breaking down the product into key parts and making Make or Buy decisions for each part. A discussion on the company’s vendor base is also provided to see how cost efficient the process can be made by minimizing logistics cost. Role of Supply Chain Management in each stage is shown. The third part of the assignment consists of two supply chain models for Bajaj Auto Limited.<br />The outcome of the assignment involves: The learning that the organizations need to continuously update their supply chain with the latest technologies and in the most efficient manner; the process of estimating a company’s future demands and planning towards meeting those demands; creating efficient supply chain model based on mathematical calculations. Most important outcome of the assignment is the knowledge received during the process of completion of the assignment.<br />Table of Contents<br /> TOC o "1-3" h z u <br />Abstract PAGEREF _Toc301742299 h i<br />Table of Contents PAGEREF _Toc301742300 h ii<br />List of Figures PAGEREF _Toc301742301 h iv<br />List of Table PAGEREF _Toc301742302 h v<br />Nomenclature PAGEREF _Toc301742303 h vi<br />CHAPTER 1 PAGEREF _Toc301742304 h 1<br />1. Introduction: PAGEREF _Toc301742305 h 1<br />1.2 Stance Taken PAGEREF _Toc301742306 h 1<br />1.3 Current Trends on Supply Chain Competitiveness PAGEREF _Toc301742307 h 1<br />1.4 Discussion and Interpretations on Managing Complex Supply Chains PAGEREF _Toc301742308 h 2<br />1.5 Case Study PAGEREF _Toc301742309 h 3<br />1.6 Conclusion PAGEREF _Toc301742310 h 3<br />CHAPTER 2 PAGEREF _Toc301742311 h 5<br />2.0 Introduction to Bajaj Auto Limited PAGEREF _Toc301742312 h 5<br />2.1 Rationale for Identifying the Company PAGEREF _Toc301742313 h 5<br />2.2 Bajaj Pulsar PAGEREF _Toc301742314 h 6<br />2.3 Demand Estimation PAGEREF _Toc301742315 h 6<br />2.3.1 Forecasting Demand PAGEREF _Toc301742316 h 8<br />2.4 Translation of demand into deliverable quantities PAGEREF _Toc301742317 h 9<br />2.4.1 Capturing Market Share PAGEREF _Toc301742318 h 10<br />2.5 Break down of Manufactured Product in to Key Parts PAGEREF _Toc301742319 h 11<br />2.5.1 Engine PAGEREF _Toc301742320 h 12<br />2.5.2 Ignition Coil PAGEREF _Toc301742321 h 13<br />2.5.3 Handle Bar Assembly PAGEREF _Toc301742322 h 13<br />2.5.4 Braking System PAGEREF _Toc301742323 h 14<br />2.5.5 Suspension PAGEREF _Toc301742324 h 14<br />2.6 Make or Buy Decision PAGEREF _Toc301742325 h 15<br />2.6.1 Engine PAGEREF _Toc301742326 h 15<br />2.6.2 Ignition Coil PAGEREF _Toc301742327 h 15<br />2.6.3 Handle Bar Assembly PAGEREF _Toc301742328 h 16<br />2.6.4 Braking System PAGEREF _Toc301742329 h 16<br />2.6.5 Suspension PAGEREF _Toc301742330 h 16<br />2.7 Discussion on Vendor Base PAGEREF _Toc301742331 h 16<br />2.8 Role of SCM PAGEREF _Toc301742332 h 17<br />2.9 Conclusion PAGEREF _Toc301742333 h 17<br />CHAPTER 3 PAGEREF _Toc301742334 h 18<br />3.0 Introduction to Bajaj Auto Limited PAGEREF _Toc301742335 h 18<br />3.1 Manufacturing locations PAGEREF _Toc301742336 h 18<br />3.1.1 Akurdi, Pune. PAGEREF _Toc301742337 h 18<br />3.1.2 Waluj Aurangabad PAGEREF _Toc301742338 h 19<br />3.1.3 Chakan, Pune PAGEREF _Toc301742339 h 19<br />3.1.4 Pantnagar , Uttarakhand PAGEREF _Toc301742340 h 19<br />3.2 Data Collection and Evaluation PAGEREF _Toc301742341 h 19<br />3.3 Modeling a Supply Chain PAGEREF _Toc301742342 h 20<br />3.3.1 Capacitated Plant Location Model PAGEREF _Toc301742343 h 20<br />3.3.2 Gravity Location Model PAGEREF _Toc301742344 h 23<br />3.4 Analysis and interpretation with respect to framework PAGEREF _Toc301742345 h 24<br />3.5 Decision Making From the Analyzed Data PAGEREF _Toc301742346 h 24<br />3.6 Results and Conclusions PAGEREF _Toc301742347 h 25<br />CHAPTER 4 PAGEREF _Toc301742348 h 26<br />4.1 Comments on Learning Outcome: PAGEREF _Toc301742349 h 26<br />REFERENCES PAGEREF _Toc301742350 h 27<br />BIBILIOGRAPHY PAGEREF _Toc301742351 h 29<br />List of Figures<br /> TOC h z c "Figure 2." Figure 2. 1 Two-Wheeler Domestic Sales Trend PAGEREF _Toc301742225 h 6<br />Figure 2. 2 Various Two-wheeler Company Sales in 2009 and 2010 PAGEREF _Toc301742226 h 7<br />Figure 2. 3 Bajaj Pulsar 180 Sales in the Months of 2011 PAGEREF _Toc301742227 h 7<br />Figure 2. 4 Comparison on Current and Future Demand PAGEREF _Toc301742228 h 8<br />Figure 2. 5 Bajaj Pulsar 180 Specifications PAGEREF _Toc301742229 h 11<br />Figure 2. 7 Bajaj Pulsar Engine PAGEREF _Toc301742230 h 12<br />Figure 2. 6 Bajaj Pulsar Engine PAGEREF _Toc301742231 h 12<br />Figure 2. 10 Reflectors on LH & RH Switches PAGEREF _Toc301742232 h 13<br />Figure 2. 8 Ignition Coil PAGEREF _Toc301742233 h 13<br />Figure 2. 9 Handle Bar Assembly PAGEREF _Toc301742234 h 13<br />Figure 2. 12 Bajaj Pulsar Suspension PAGEREF _Toc301742235 h 14<br />Figure 2. 11 Braking System PAGEREF _Toc301742236 h 14<br /> TOC h z c "Fugure 3." <br />Fugure 3. 1 Distribution Network PAGEREF _Toc301742237 h 19<br />List of Table<br /> TOC h z c "Table 1." Table 1. 1 Merits & Demerits of the Current Trends PAGEREF _Toc301742147 h 2<br /> TOC h z c "Table 2." Table 2. 1 Demand Forecast for 2012 PAGEREF _Toc301742156 h 8<br />Table 2. 2 Aggregate Plan Decision Period PAGEREF _Toc301742157 h 9<br />Table 2. 3 Constraints PAGEREF _Toc301742158 h 10<br />Table 2. 4 Aggregate Plan Costs PAGEREF _Toc301742159 h 10<br />Table 2. 5 Present Market Share PAGEREF _Toc301742160 h 10<br />Table 2. 6 Fine and Whitney Framework PAGEREF _Toc301742161 h 15<br /> TOC h z c "Table 3." <br />Table 3. 1 Plant Wise Capacity PAGEREF _Toc301742167 h 19<br />Table 3. 2 Demand in Various Regions PAGEREF _Toc301742168 h 20<br />Table 3. 3 Inputs: Costs,Capacities, Demands PAGEREF _Toc301742169 h 22<br />Table 3. 4 Decision Variables PAGEREF _Toc301742170 h 22<br />Table 3. 5 Constraints PAGEREF _Toc301742171 h 22<br />Table 3. 6 Gravity Location Model PAGEREF _Toc301742172 h 24<br />Nomenclature<br />Acronyms<br />BALBajaj Auto Limited<br />GCMMFGujarat Cooperative Milk Marketing Federation Ltd<br />SCMSupply Chain Management<br /> CHAPTER 1<br />1. Introduction:<br />Supply chains are continually subjected to forces, internal and external, that are in constant states of flux. Managing a supply chain is therefore a demanding activity that requires a thorough understanding of the concepts and mechanisms that underpin the operation of the supply chain and the factors that influence its performance. In a global environment, these factors are many, often interrelated and beyond the reach of most organizations to influence or control. Knowing what these factors are and understanding how they are likely to impact on the strategic and operational decisions that must be made while managing the global supply chain is critical. Sharing information is critical to the management of relationships, and Information Technology (IT) is an important facilitator in this regard. REF _Ref301735385 r h  <br />1.2 Stance Taken<br />After conducting an analysis on the topic, it has been decided to stand for and validate the statement, ―“Research-based innovative models are essential for managing complex global supply chains”.<br />1.3 Current Trends on Supply Chain Competitiveness<br />Information technology plays a vital role in the field of SCM. To keep up with the dynamic market demands, companies are taking IT support to enhance its SCM system. Proper flow of information is very crucial in SCM system. For smooth operation and taking decision, the information about customer, inventory status, demands, shipment schedule, payment etc. should be available to the supply chain members. Various IT enabled services make this information available to them. REF _Ref301735405 r h <br />Two most important factors in SCM are planning and coordination. Companies now depend on various software like Material Requirements Planning (MRP), Manufacturing Resource Planning (MRP-II), Distribution Requirement Planning (DRP), Advance Planning and Scheduling System (APSS) for effective planning and coordination among various functional part of the organization. REF _Ref301735405 r h <br />Data mining and warehousing are also two important aspects of supply chain management system. Data mining is the process of analyzing data in different viewpoints to emphasize on the most significant factors of the business. Data warehousing is the process of centralization of data which facilitates the available access and analysis. REF _Ref301735405 r h <br />Another current trend in Supply Chain is the electronic services (E-Commerce and Digital Business). Customers are able to purchase goods or book tickets from their home itself through internet services. Going to shops or booking counters are not necessary. REF _Ref301735405 r h <br />1.3.1 Merits and Demerits of the Current Trends<br />MeritsDemeritsMarking/Retailing- Data mining helps aid in direct marketingTime consuming.Banking/Crediting- Data mining can assist financial institutions in areas such as credit reporting and loan information. Costly to implement.Manufacturing Sector- MRP and ERP helps in speeding up the whole process.Accurate bills of materials, part numbers and inventory records is requiredDistribution and retail Stores- DRP helps access the status of the goods.Not 100% accurate or perfectTransport Sector- MRP and ERP help transmit commodities through online transactions.Inconsistent manpower also acts as limitation.Project Service industry- MRP and ERP helps fastens the compilation of reports.Serious problem may arise if small organization fails to maintain good inventory record.<br />Table 1. 1 Merits & Demerits of the Current Trends REF _Ref301735525 r h  REF _Ref301735527 r h <br />1.4 Discussion and Interpretations on Managing Complex Supply Chains<br />Upon conducting various researches, it has been discovered that the ideal solution to manage a complex supply chain is one that:<br /><ul><li>Integrates all activities of the physical and financial global supply chain.
Translates physical and financial activities into information.
Contextualizes information and provides visibility to operators and decision makers.
Supports decision-making and accelerates required action. REF _Ref301735914 r h </li></ul>The task of simplifying a highly complex global supply chain requires five fundamental components:<br /><ul><li>A global data repository to maintain both internal and external data necessary to manage and comply with global business requirements.
A comprehensive execution platform to enable operations and management to complete their job requirements effectively, efficiently and in relative independence.
An open, integrated and synchronized information infrastructure to provide total visibility of the global supply chain and all supporting information.
A business information reporting tool to provide immediate access to the information so that operators and managers can view and quickly analyze critical information to support decisions and ultimately take effective action.
A business collaboration environment to support the free flow of information to authorized individuals. REF _Ref301735914 r h </li></ul>This ideal solution requires the use of the latest Information Technologies. REF _Ref301735914 r h <br />1.5 Case Study<br />AMUL is a dairy cooperative in the western India that has been primarily responsible, through its innovative practices, for India to become the world’s largest milk producer. The distinctive features of this paradigm involves managing a large decentralized network of suppliers and producers, simultaneous development of markets and suppliers, lean and efficient supply chain and breakthrough leadership. REF _Ref301735985 r h <br />From the very beginning, in the early 1950s, AMUL adopted its network as a basic model for long-term growth.<br /><ul><li>The network explicitly includes secondary services to the farmer-suppliers.
Several of the entities in the network are organized as cooperatives linked in a hierarchical fashion. REF _Ref301735985 r h </li></ul>To manage the supply chain at AMUL was a complex task. The task was overcome by the use of a research based basic model that linked everyone involved in the chain. REF _Ref301735985 r h <br />1.6 Conclusion<br />Developing, manufacturing and selling a product can challenge the best organizations in the best of times. As a company’s business driver’s change, SCM technology investment and the overall approach to SCM must change and keep pace. Researches need to be carried out and innovative Supply Chain models need to be created to manage a company’s global Supply chain. An inefficient and poorly functioning supply chain can negatively impact every aspect of an organization, jeopardizing the long-term performance and success of a business. <br /> CHAPTER 2<br />2.0 Introduction to Bajaj Auto Limited<br />Bajaj Auto Limited (BAL) is a major Indian automobile manufacturer and is India's largest and the world's 4th largest two and three-wheeler maker. BAL is based in Pune, Maharashtra, with plants in Akurdi and Chakan (Pune), Waluj (Aurangabad) and Pantnagar (Uttaranchal). Bajaj Auto produces and exports scooters, motorcycles and the auto rickshaws. Over the last decade, the company has successfully changed its image from a scooter manufacturer to a two wheeler manufacturer. BAL’s real growth in numbers came in the last six years after the successful introduction of a few models in the motorcycle segment. The company is headed by Rahul Bajaj. Bajaj Auto came into existence on November 29, 1945 as M/s Bachraj Trading Corporation Private Limited. The company started off by selling imported two and three-wheelers in India. In 1959, it obtained license from the Government of India to manufacture two and three-wheelers and it went public in 1960. In 1977, BAL managed to produce and sell 100,000 vehicles in a single financial year. In 1985, BAL started producing at Waluj in Aurangabad. In 1986, BAL managed to produce and sell 500,000 vehicles in a single financial year. In 1995, it rolled out its ten millionth vehicles and produced and sold 1 million vehicles in a year. REF _Ref301740094 r h <br />2.1 Rationale for Identifying the Company<br />Bajaj Auto Limited is automobile manufacturer that started booming recently. Its top most products the Bajaj Pulsar series hit the market with a huge success. Before the introduction of this product series, the Indian motorcycle market trend was towards fuel efficient, small capacity motorcycles. The introduction of the Bajaj Pulsar in the year 2001 changed the total market trend in India which then later encouraged other manufacturers like Honda, TVS and Hero Honda to come up with higher capacity and more powerful vehicles. Also, it was the Bajaj Pulsar that introduced the trend of alloy wheels, DTS-I (digital twin spark ignition), digital meters, disk brakes, black coloured engine, etc, into the Indian market. The process through which Bajaj was able to change the trend in India without putting a heavy burden on the prices was the inspiration and rationale for selecting the company and carrying out studies on its Supply Chain.<br />2.2 Bajaj Pulsar<br />Bajaj Pulsar is a motorcycle brand owned by Bajaj Auto in India. The two-wheeler was developed by the product engineering division of Bajaj Auto in association with motorcycle designer Glynn Kerr Tokyo. Currently there are four variants available with engine capacities of 150, 180 220cc and 220cc FI. Since the introduction and success of Bajaj Pulsar, the Indian youth began expecting high power and other features from affordable motorcycles. REF _Ref301740094 r h <br />2.3 Demand Estimation<br />Two- wheeler sales in the country have boomed in the recent years and the annual sales of motorcycles in India crossed the 10 million mark in 2010. The low penetration of two-wheelers in the country 31 two-wheelers per 1000 citizens (2004) changed rapidly over the time. Overall the industry sales of two-wheelers have grown by 15% from 6.57 million in 2004/2005 to 7.57 million in 2005/2006. The buoyant Indian economy with a growth rate of around 8% per annum is further expected to fuel the growth of two wheelers in the country. <br />The major factors that determine the demand in the automobile industry are affordability, product innovation, style, looks and power and fuel efficiency. Rapidly growing middle class and the change in life style of Indians has lead to a huge demand in India for performance vehicles like the Bajaj Pulsar 180. Statistics shows a steady upward trend in domestic as well as exports passenger vehicle sales. REF _Ref301740094 r h <br />Figure 2. 1 Two-Wheeler Domestic Sales Trend REF _Ref301740094 r h <br />The graph above shows the two-wheeler domestic sales trend from 2004 to 2010. The steady increase in the sales can be noticed which shows that the two-wheeler demands are increasing.<br />Figure 2. 2 Various Two-wheeler Company Sales in 2009 and 2010 REF _Ref301740094 r h <br />The graph above shows the sales comparison of various companies in 2009 and 2010. The sales of Bajaj Auto Limited increased dramatically from 150,000 in April 2009 to 280,000 in April 2010. <br />Figure 2. 3 Bajaj Pulsar 180 Sales in the Months of 2011 REF _Ref301740165 r h <br />The graph above shows the sales of Bajaj Pulsar 180 in the months of year 2011 (present year). The pulsar 180 series itself accounts for a major portion of the sales with minimum sales of 1220 vehicles to a maximum of 1750 vehicles per month.<br />2.3.1 Forecasting Demand<br />The Bajaj Pulsar demand for the year 2012 is going to be forecasted using the Exponential Smoothing Forecasting Model. Exponential Smoothing Forecasting Model is a weighted moving average in which the forecast for the next period’s demand is the current period’s forecast adjusted by a fraction of the difference between the current period’s actual demand and its forecast.<br />PeriodMonth of 2011DemandExponential Smoothing Forecast for Month of 20121Jan1264#N/A2Feb146312643Mar12111403.34Apr17431268.695May14671600.7076June15841507.11217July14671560.93363<br />Table 2. 1 Demand Forecast for 2012 REF _Ref301740094 r h  <br />Figure 2. 4 Comparison on Current and Future Demand<br />The demand for the next year has been forecasted using the Exponential Smoothing Method. The sales for the next year (2012) have been forecasted. The table and graph above show the forecasted demand.<br />2.4 Translation of demand into deliverable quantities <br />After the demand estimation is carried out, the company must plan in advance as to how it will meet the demand. The planning is done using the Aggregate Planning Method. Aggregate Planning is the plan for the production process which is done in advance based on the demand forecast for a certain period. This provides the company management with an idea about the level of capacity, inventory and subcontracting required over a specified time period. This framework also provides the company with the information as to whether outsourcing is required or not, number of regular time hours and overtime hours of labour required etc. The following information is required to carry out the aggregate planning:<br />Workforce, resources and facilities available.<br />Demand forecast of the period for which the planning has to be carried out.<br />Production cost, inventory holding cost, ordering cost, stock out or backlog cost, labour cost, subcontracting cost, hiring/laying off cost and cost of adding or reducing machine capacity.<br />The number of labour/machine hours required for each unit. <br />Constraints regarding the usage of above alternatives.<br />The goal of aggregate planning is to satisfy the demand from the customers while maximizing profit. REF _Ref301740249 r h <br /> HtLtWtOtItStCtPtDtPeriodHiredLaid offWorkforceOvertimeInventoryStockoutSubcontractProductionDemand000400500000 10040000076412642004000001403.31403.33004000001268.691268.6940.017675040.01767500001600.7071600.70750040.01767500001507.11211507.112611.50567051.523340750500002060.93361560.934<br />Table 2. 2 Aggregate Plan Decision Period<br />WorkforceProduction InventoryOvertime -7.10543E-158366.0254E-114001.42109E-14196.704001.42109E-14331.310400-6.31439E-150-2.27374E-13400.176757.10543E-1593.59490400.17675-3.55271E-1504.54747E-13515.2334075<br />Table 2. 3 Constraints<br />PeriodHiringLay offRegular timeOver timeInventoryStock outSub contract Material100400000000764000200400000000140330030040000000012686904530.25040017.6750000160070750040017.67500001507112.16345170051523.3407501000000002060933.6<br />Total Cost10202002<br />Table 2. 4 Aggregate Plan Costs<br />Total cost for January 2012 to July 2012 is Rs. 10202002<br />2.4.1 Capturing Market Share<br />The present market share of two-wheeler automobiles are shown in the figure below.<br />Hero Honda Motors Ltd 44.80%Bajaj Auto Ltd 23.20%TVS Motor Company Ltd 15.90%Honda Motorcycle & Scooter 12.00%India Yamaha Motor Pvt Ltd 1.50%Suzuki Motorcycle India Pvt Ltd 1.20%Kinetic Motor Company Ltd 0.70%Royal Enfield 0.50%Electrotherm (India) Ltd 0.20%Majestic Auto Ltd0.10%<br />Table 2. 5 Present Market Share REF _Ref301740094 r h <br />Bajaj Auto’s future plans for the year 2012 will be the year of investment for Bajaj Auto. The company is developing an all new breed of its Pulsar range of motorcycles. The company expects a market share growth of 20%. The aggregate plan developed above should help the company grow its market share from the present 23.20% to 35%. REF _Ref301740364 r h <br />2.5 Break down of Manufactured Product in to Key Parts <br />The product taken for the analysis is the Bajaj Pulsar 180 DTSi. The figure below shows the specifications of the vehicle.<br />Figure 2. 5 Bajaj Pulsar 180 Specifications REF _Ref301740375 r h <br />The manufactured product has been broken down into 5 key parts and analysis is carried out. The 5 key parts are: <br />Figure 2. 6 Bajaj Pulsar Engine REF _Ref301740384 r h right6477002.5.1 Engine<br />The DTSi stands for Digital Twin Spark Ignition. It is a technology from Bajaj which potentially revolutionized the motorcycle world in India. The DTSi technology incorporates twin spark plugs at either ends of the combustion chamber for faster and better combustion. This is the heart of the new technology from Bajaj. REF _Ref301740411 r h <br />Figure 2. 7 Bajaj Pulsar Engine REF _Ref301740394 r h <br />right571502.5.2 Ignition Coil<br />Figure 2. 8 Ignition Coil REF _Ref301740423 r h The Ignition coil is another major part of the Bajaj Pulsar DTSi vehicle. This Ignition coil has two terminals and also harness for ground (Earth) connection is provided. The benefits of the DTSi technology engine can only be fully realized when the ignition system consisting of the ignition coil are combined and used. REF _Ref301740423 r h <br />Figure 2. 9 Handle Bar Assembly REF _Ref301740457 r h 267652525622252.5.3 Handle Bar Assembly<br />The handle bar assembly consists of the locking mechanism, switches, and brake and clutch levers. It is this part of the Bajaj Pulsar released in 2006 that created more demand among the customers. The switches on the handle bar come with reflectors. It can be seen in the figures below.<br />Figure 2. 10 Reflectors on LH & RH Switches REF _Ref301740457 r h <br />2.5.4 Braking System<br />2105025428625Figure 2. 11 Braking System REF _Ref301740495 r h The Bajaj Pulsar uses a 260 mm ventilated disc braking system for the front wheel and the traditional 160 mm drum braking system for the rear wheel. The combination of both the braking systems provides the vehicle rider with utmost control of the vehicle. Bajaj Pulsar was among the first two-wheelers to introduce disc brakes in India. The figure below shows the disc brakes of the Bajaj Pulsar. REF _Ref301740375 r h <br />2.5.5 Suspension<br />The Bajaj Pulsar uses 37 mm inner telescopic forks for the front of the vehicle and triple rated hydraulic, gas filled shock absorbers for the rear. This provides a through suspension system providing the rider and pillion rider with utmost comfort. The figures below show the suspension system of the Bajaj Pulsar. REF _Ref301740375 r h <br />Figure 2. 12 Bajaj Pulsar Suspension REF _Ref301740411 r h <br />Breaking down of the product into key parts helps the organization to decide which parts should be manufactured in-house and which parts should be outsourced.<br />2.6 Make or Buy Decision<br />The make or buy decision is the act of making a strategic choice between producing an item internally (in-house) or buying it externally (from an outside supplier). The buy side of the decision also is referred to as outsourcing. Make or buy decisions usually arise when a firm that has developed a product or part is having trouble with current suppliers, or has diminishing capacity or changing demand, or finds it easier and economical to outsource the part. REF _Ref301740556 r h <br />Bajaj Auto Limited does not manufacture all the parts required for the Pulsar 180 motorcycle. Major portion of the parts are outsourced from various suppliers depending on which supplier produces the best of the component in the industry. Bajaj Auto’s decision whether to Make or Buy is based on the Fine and Whitney Framework for Make or Buy Decision. The table shows the framework.<br />ProductDependant for Knowledge and CapacityIn dependant of Knowledge. Dependant for CapacityIn dependant of Knowledge And CapacityOutsourced Item Is ModularOutsourcing is RiskyOutsourcing OpportunityOutsourcing Opportunity to Reduce CostOutsourced Item is IntegralWorst Outsourcing SituationOutsourcing is an OptionKeep Production Integral<br />Table 2. 6 Fine and Whitney Framework REF _Ref301740565 r h <br />2.6.1 Engine<br />The engine of the Bajaj Pulsar is one of its integral parts. BAL has both the knowledge and capacity to produce its own engines. The Pulsar’s engine is also the core competency of the vehicle. So, the decision is to Make the engine internally.<br />2.6.2 Ignition Coil<br />The ignition coil of the Bajaj Pulsar is a modular part. BAL has both knowledge and capacity to produce its own ignition coil, but this part is outsourced reduce cost. Outsourcing option was found more cost effective and so the decision here was to Buy the part from Minda Industries Ltd.<br />2.6.3 Handle Bar Assembly<br />The handle bar assembly of the Bajaj Pulsar is a modular part. BAL has the knowledge to produce this part but does not have the capacity. So, the decision was to Buy this part from Minda Industries Ltd. This decision also gave a boost to the vehicle sales as Minda Industries developed the reflectors for the switches on the handle bar assembly which turned out to be a huge attraction among customers.<br />2.6.4 Braking System<br />The braking system is a modular part of the Bajaj Pulsar. Outsourcing this part is a risky option, but it has been outsourced as BAL does not have the knowledge or the capacity to produce its own braking system. So, the decision was to Buy the braking system from Endurance Group.<br />2.6.5 Suspension<br />The Suspension is a modular part of the Bajaj Pulsar. Outsourcing this part is a risky option, but it has been outsourced as BAL does not have the knowledge or the capacity to produce its own braking system. So, the decision was to Buy the braking system from Endurance Group.<br />2.7 Discussion on Vendor Base<br />Bajaj auto has approximately 198 vendors for their raw materials and parts.<br />Some of the key vendors are:-<br /><ul><li>JBM – Frames. Company located at Faridabad, Noida and Nashik.
MRF–Tyres. Company located at Goa, Medak, Arakonam, Tiruvottiyur, Pondicherry, Kottayam.
Minda – Handle Bar Assembly & ignition system. Company located at Haryana, Pune, Mumbai, Bangalore, Hyderabad, Pantnagar.
Endurance – Brakes and Suspension. Company located at Pantnagar, Pune, Chennai.
Varroc – Plastic parts & Digital Meter. Company located at Aurangabad. REF _Ref301740797 r h  </li></ul>BAL manufacturing plants are situated in the states of Maharashtra, Aurangabad and Uttarakhand. The vendor locations (mentioned above) also come in and around these states and so procurement of parts and raw materials is not a time taking process and also the cost of logistics is reduced thus providing an efficient supply chain. Bajaj auto maintains seven days inventory. All the Mediators are connected with each other through IT linkage to know exact status of delivery of goods. REF _Ref301740637 r h <br />2.8 Role of SCM<br />From the viewpoint of a manufacturing or distribution company, Supply Chain Management can be thought of as the Pull of raw materials or products into a company from suppliers and Vendor Compliance as the Push of manufactured finished goods or products to customers who then sell to consumers.<br />The goal of supply chain management is to bring the most efficiency to the movement of goods. Having all vendors operate in the same manner, utilizing standards such as barcode labels and EDI (Electronic Data Interchange), helps to a huge extent in keeping costs down.<br />The customer, supplier and consumer all benefit from supply chain management. The costs saved by the customer can translate to lower retail prices, ensuring supplier’s products are selling off and more money can be spent on opening retail locations. This increases the sales by the consumer and thus purchases by the customer of the supplier's goods. REF _Ref301740637 r h <br />2.9 Conclusion<br />In today’s global world where competition is extremely high, forecasting demand and manufacturing according plays a crucial role in the survival of the company. This has been carried out using the Exponential Smoothening Method. A plan also has to created to meet the demand requirement forecasted which has been done using the Aggregate Planning Method. Breaking down of the product into key parts and the making decision as to whether to Make or Buy the parts has been carried out using the Fine and Whitney Framework. Selection of suitable vendors also plays a crucial role. The closer the vendor location, the better as the logistics cost reduces there by reducing overall costs. Bajaj Auto Limited efficiently and effectively manages these activities and that is the reason why Bajaj Auto remains competitive as one of the best two-wheeler brands in the country.<br />CHAPTER 3<br />3.0 Introduction to Bajaj Auto Limited<br />Bajaj Auto was founded in 1945.It is India's second largest two wheeler manufacturer and the world's 4th largest two and three wheeler manufacturer. It is based in Pune with plants in Akurdi and Chakan (Pune), Waluj and Pantnagar in Uttaranchal currently. It holds a market share of 22% over all two wheeler industry and a phenomenon 71% share in 125- 250 cc category. It has a joint venture with Kawasaki and 31.72 % stake in Australian based company KTM. REF _Ref301740797 r h <br />Figure 3. 1 Manufacturing Plant Layout REF _Ref301740797 r h <br />3.1 Manufacturing locations<br />3.1.1 Akurdi, Pune.<br />This is one of the oldest plants of BAL with a production capacity of 0.6 million vehicles per year. The plant has been closed in order to equip the plant for four wheeler production. REF _Ref301740797 r h <br />3.1.2 Waluj Aurangabad<br />This is second plant with a production capacity of 0.86 million per year. Products manufactured here are Kristal, XCD, Platina and commerial GC series. REF _Ref301740797 r h <br />3.1.3 Chakan, Pune <br />This is the biggest plant of BAL and it has a production capacity of 1.2 million per year. Product manufactured here are Pulsar, Avenger and commercial GE series. REF _Ref301740797 r h <br />3.1.4 Pantnagar , Uttarakhand<br />This is the most advanced plant of BAL with a production capacity of 0.9 million per year. Products manufactured here are Platina and XCD. REF _Ref301740797 r h <br />3.2 Data Collection and Evaluation<br />The capacity of the present plants is shown below:<br />StateTownUnitsCapacity (Nos)AurangabadWalujKristal, XCD, Platina1,860,000MaharashtraChakanPulsar, Discover, Avenger1,200,000UttarakhandPantnagarPlatina, XCD900,000<br />Table 3. 1 Plant Wise Capacity REF _Ref301740797 r h <br />DelhiProducts manufactured at these locations are distributed as shown below.<br />Fugure 3. 1 Distribution Network REF _Ref301740797 r h PantnagarWalujChakkanPuneBengaluruChennaiWest BengalKhadakpur<br />The present situation does not satisfy the current market requirements and as a result of this customers need to wait for a certain period before the product is delivered to them. This poses a great threat to the company as there is a huge chance of customers focusing their attention to other brands to avoid the waiting period.<br />Data has collected for starting manufacturing and distribution centre at 5 locations, Pune, Bengaluru, Delhi, West Bengal and Chennai. Demand, manufacturing cost, fixed costs and transportation cost are collected. The table below shows the demand in various regions.<br />RegionsDemand in MillionDelhi25Chennai25Pune32West Bengal25Bengaluru32<br />Table 3. 2 Demand in Various Regions REF _Ref301740797 r h <br />3.3 Modeling a Supply Chain<br />Modelling a supply chain is very important task for a company especially when the customer location is wide. This method helps to identify the new plant locations and to find the optimum point at which the supply can be done. Organizations perform supply chain modelling to investigate changes they may have to make to improve the supply chain efficiency.<br />Two models used for modelling supply are demonstrated below. They are the Capacitated Plant Location model and Gravity Location Model.<br />3.3.1 Capacitated Plant Location Model REF _Ref301740194 r h <br />The capacitated plant location model is performed to discover the most convenient location for the plant to be set up to meet the customer demands from the various markets. This is an important factor in designing the supply chain.<br />The following details are required for creating and calculating the model:<br />n = number of potential plant locations/capacity<br />m = number of markets or demand points<br />Dj = Annual demand from market j<br />Ki = Potential capacity of plant i<br />fi = annualised fixed cost of keeping factory i open<br />Cij = Cost of producing and shipping one unit from factory i to market j<br />And the variables are:<br />yi = 1 if plant i is open, 0 otherwise<br />Xij = Quantity shipped from plant i to market j<br />Formula:<br />0229870<br />Obj. func. Minimises the total cost (fixed +variable)<br />0288925Constraints are:<br />Demand to be met at each location.<br />No plant can supply more than its capacity.<br />Enforces the plant is open or closed.<br />The formulae and constraints are applied in MS Excel and solved using Solver tool as shown below.<br />Demand Region Production and Transportation Cost per 10,00,000 unitsFixedLowFixedHighSupply regionDelhiChennaiPuneWest BengalBengalurucosts RsCapacitycosts RsCapacityDelhi130025631834150017548500151700030Chennai256313001560185014657500151500030Pune183415601300165716579000151800030West Bengal150018501657130015478500151700030Bengaluru175414651657154713007500151500030Demand2525322532 <br />Table 3. 3 Inputs: Costs,Capacities, Demands<br /> Demand Region-Production AllocationPlantsPlantsSupply regionDelhiChennaiPuneWest BengalBengaluru(1=open)(1=open)Delhi25000001Chennai02520201Pune00300001West Bengal00025001Bengaluru00003001<br />Table 3. 4 Decision Variables<br />Supply regionExcess Capacity Delhi5 Chennai1 Pune8.75815E-11 West Bengal4.999999999 Bengaluru6.63007E-11 DelhiChennaiPuneWest BengalBengaluruUnmet Demand5.54934E-126.33804E-12-5.86198E-11-9.48219E-10-3.3296E-11Objective FunctionCost =263550<br />Table 3. 5 Constraints<br />Result obtained <br /><ul><li>Plants have to be opened at all 5 locations, Delhi, Chennai, Pune, West Bengal and Bengaluru to meet customer requirements.
Plant at Chennai meets requirements at Chennai.
Plants at Pune and Chennai meet requirements at Pune.
Plant at West Bengal meets requirement at West Bengal.
Plants at Bengaluru and Chennai meet requirements at Bengaluru.</li></ul>3.3.2 Gravity Location Model REF _Ref301740194 r h <br />The gravity location method uses data like co-ordinates of location, demand, supply and transportation cost to find out locations with minimum transportation cost. This is done to find the optimal location for the plant which will minimize the cost for the manufacturer. It will give a particular location at which all the supply chain cost is minimum.. The factors used are:<br /><ul><li>Geometric distance between two points
Quantity shipped</li></ul>Formula:<br />Total Cost (TC) is given by:<br />The formula is applied in MS Excel and solved using Solver tool as shown below.<br />Sources /MarketRs/Unit FnQuantity Dn in ShipmentCoordinate XnCoordinate YndnSourcesPune50,000250018.5373.872Aurangabad50,100200019.8875.330Uttarakhand49,900200030.2579.2511MarketsDelhi51,000125028.6777.229Chennai51,100125013.0980.298Pune50,000150018.5373.872West Bangal51,000100022.5988.6314Bengaluru50,100150012.9877.587Facility LocationX=20Y=75Cost=3852057439<br />Table 3. 6 Gravity Location Model<br />Result obtained<br /><ul><li>A new location for a plant is obtained. The coordinates are ( X=20 , Y=75)
The place best suited for the plant location is identified as Panchora in the state of Maharashtra.</li></ul>3.4 Analysis and interpretation with respect to framework<br />The framework designed solves various issues faced by the previous frame work. In the previous framework, all the products manufactured by the three plants were first sent to Khadakpur and then distributed from there to various parts of India. The derived framework reduces the cost of transportation and logistics as the products are manufactured at locations where major requirements come from. Also, the number of products manufactured has been increased according to the customer requirement which reduces the waiting time spent by the customers to procure the product.<br />The location identified by the Gravity Location model – Panchora, situated in Maharashtra brings in various benefits for the company as well as its suppliers. Most of Bajaj Auto’s suppliers are situated in and around Maharashtra. Also, the state of Maharashtra has a high demand for Bajaj Auto’s products.<br />3.5 Decision Making From the Analyzed Data<br />Bajaj Auto Limited’s products have a huge customer demand and in order to meet this demand, plants have to be set up at areas where the supply chain cost will be least. In this way, the cost of the product can be reduced which in turn increases the competitiveness. The locations, Delhi, Pune, Chennai, West Bengal and Bengaluru have vast lands which can satisfy the land requirement for the plant. Skilled labour is also available in these and so are the materials. So, the decision made from the analysed data is to set up plants as per the framework derived.<br />3.6 Results and Conclusions <br />To model a supply chain, a systematic approach is needed with respect of Quantitative and qualitative factors. The result obtained from the process seems to meet all requirements of the company. <br />CHAPTER 4<br />4.1 Comments on Learning Outcome:<br />Traditional manufacturing knowledge will never help an engineer to grow or permit him to take part in the growth of the business. An engineer who is ignorant of the Supply Chain Management techniques will have to look into learning them, else leaving the field might be the best option. Yet, engineering students often find that they leave the University without learning these important skills. The course module EMM 506 Supply Chain Management and the assignment involved train us in such a manner that almost major portion of the Supply Chain Management techniques and the methods to design an efficient supply chain to help in the growth of a business are understood and learnt.<br />In short, the module Supply Chain Management and the assignment involved have provided sufficient knowledge as to how to:-<br /><ul><li>Run a successful supply chain.
Modeling a supply chain.</li></ul>REFERENCES<br /><ul><li>Tage Skjott Larsen., Philip Schary., Juliana Mikkolaand., Herbert Kotzab., Managing the Global Supply Chain, Transnational Corporations, Vol. 17, Issue No. 1, April 2008.
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David Simchi-Levi, Philip Kaminsky, Edith Simchi-Levi, Ravi Shankar, Designing and Managing the Supply Chain, 3rd edition, Tata McGraw Hill, New Delhi, 2008.