Supply Chain Benchmarking Study


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Academic project on Supply Chain Management - Supply Chain Benchmarking study of Indian Two Wheeler Industry

• Completed a quantitative supply chain benchmarking study of Indian two wheeler companies namely Hero Motocorp, Bajaj Auto, TVS, Royal Enfield, Mahindra two wheelers

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  • SCOR = (Supply chain operations research)
  • Total length of the supply chain (days of raw material inventory + days of work in progress inventory + days of finished goods inventory)
  • Supply Chain Benchmarking Study

    1. 1. Supply Chain Benchmarking Study Indian Two wheeler Industry
    2. 2. 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
    3. 3. Types of Benchmarking Qualitative Quantitative Study of best practices of the industry or a particular and implementing the findings Developing KPI’s or performance metrics and study competitors on each metric to find possible areas of improvement Overhaul of an existing process or developing an entirely new process. The performance metrics give an idea to the firm for possible improvements in their processes Eg: Adoption of Toyota’s kaizen in various industries Eg: Toyota in early 70’s did qualitative benchmarking of US automotive industry and improved on those practices
    4. 4. Scor® Model Supply 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
    5. 5. Objective of study To 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
    6. 6. Objective of study Longitudinal 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 chain 2. Supply chain efficiency 3. Supply chain working capital productivity
    7. 7. Indian two-wheeler industry Indian 2-wheeler Market Share 3% 2% 1% 13% 38% 18% 25% Hero Motocorp Bajaj Auto Honda TVS Suzuki Mahindra Enfield India
    8. 8. 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
    9. 9. Production Capacity Trend in capacity utilization
    10. 10. 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
    11. 11. Data Analysis Total Length of Supply Chain 1. ◦ ◦ ◦ 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
    12. 12. Interpretation      Hero 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.
    13. 13. Data Analysis Efficiency of Supply Chain Management 1. ◦ ◦ 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
    14. 14. Interpretation       Industry average of 0.25 Bajaj 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
    15. 15. 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
    16. 16. Interpretation  For 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.
    17. 17. Recommendations Bajaj 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. 
    18. 18. 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. 