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Logistics & Supply Chain Management

           ASSIGNMENT


    Name of the Student: Paul Franklin
Abstract
       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.
       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.
       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.
Table of Contents

Abstract ....................................................................................................................................... i
Table of Contents .......................................................................................................................ii
List of Figures ........................................................................................................................... iv
List of Table ............................................................................................................................... v
Nomenclature ............................................................................................................................ vi
CHAPTER 1 .............................................................................................................................. 1
   1. Introduction: ......................................................................................................................... 1

       1.2 Stance Taken ................................................................................................................... 1

       1.3 Current Trends on Supply Chain Competitiveness.............................................................. 1

   1.4 Discussion and Interpretations on Managing Complex Supply Chains ..................................... 2

   1.5 Case Study .......................................................................................................................... 3

   1.6 Conclusion.......................................................................................................................... 3

CHAPTER 2 .............................................................................................................................. 5
   2.0 Introduction to Bajaj Auto Limited ....................................................................................... 5

   2.1 Rationale for Identifying the Company ................................................................................. 5

   2.2 Bajaj Pulsar......................................................................................................................... 6

   2.3 Demand Estimation ............................................................................................................. 6

       2.3.1 Forecasting Demand...................................................................................................... 8

   2.4 Translation of demand into deliverable quantities .................................................................. 9

       2.4.1 Capturing Market Share............................................................................................... 10

   2.5 Break down of Manufactured Product in to Key Parts .......................................................... 11

       2.5.1 Engine........................................................................................................................ 12

       2.5.2 Ignition Coil ............................................................................................................... 13

       2.5.3 Handle Bar Assembly.................................................................................................. 13

       2.5.4 Braking System........................................................................................................... 14

       2.5.5 Suspension ................................................................................................................. 14

   2.6 Make or Buy Decision ....................................................................................................... 15

Logistics & Supply Chain Management
                                                                                                                                          ii
2.6.1 Engine........................................................................................................................ 15

      2.6.2 Ignition Coil ............................................................................................................... 15

      2.6.3 Handle Bar Assembly.................................................................................................. 16

      2.6.4 Braking System........................................................................................................... 16

      2.6.5 Suspension ................................................................................................................. 16

   2.7 Discussion on Vendor Base................................................................................................ 16

   2.8 Role of SCM ..................................................................................................................... 17

   2.9 Conclusion........................................................................................................................ 17

CHAPTER 3 ............................................................................................................................ 18
   3.0 Introduction to Bajaj Auto Limited ..................................................................................... 18

   3.1 Manufacturing locations .................................................................................................... 18

      3.1.1 Akurdi, Pune............................................................................................................... 18

      3.1.2 Waluj Aurangabad ...................................................................................................... 19

      3.1.3 Chakan, Pune.............................................................................................................. 19

      3.1.4 Pantnagar , Uttarakhand............................................................................................... 19

   3.2 Data Collection and Evaluation .......................................................................................... 19

   3.3 Modeling a Supply Chain................................................................................................... 20

      3.3.1 Capacitated Plant Location Model ................................................................................ 20

      3.3.2 Gravity Location Model .............................................................................................. 23

   3.4 Analysis and interpretation with respect to framework ......................................................... 24

   3.5 Decision Making From the Analyzed Data .......................................................................... 24

   3.6 Results and Conclusions .................................................................................................... 25

CHAPTER 4 ............................................................................................................................ 26
   4.1 Comments on Learning Outcome: ...................................................................................... 26

REFERENCES ........................................................................................................................ 27
BIBILIOGRAPHY .................................................................................................................. 29




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                                                                                                                                    iii
List of Figures
Figure 2. 1 Two-Wheeler Domestic Sales Trend ............................................................................. 6

Figure 2. 2 Various Two-wheeler Company Sales in 2009 and 2010 ................................................ 7

Figure 2. 3 Bajaj Pulsar 180 Sales in the Months of 2011 ................................................................ 7

Figure 2. 4 Comparison on Current and Future Demand .................................................................. 8

Figure 2. 5 Bajaj Pulsar 180 Specifications ................................................................................... 11

Figure 2. 7 Bajaj Pulsar Engine.................................................................................................... 12

Figure 2. 6 Bajaj Pulsar Engine.................................................................................................... 12

Figure 2. 10 Reflectors on LH & RH Switches ............................................................................. 13

Figure 2. 8 Ignition Coil .............................................................................................................. 13

Figure 2. 9 Handle Bar Assembly ................................................................................................ 13

Figure 2. 12 Bajaj Pulsar Suspension ........................................................................................... 14

Figure 2. 11 Braking System ....................................................................................................... 14



Fugure 3. 1 Distribution Network ................................................................................................ 19




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List of Table
Table 1. 1 Merits & Demerits of the Current Trends........................................................................ 2



Table 2. 1 Demand Forecast for 2012............................................................................................. 8

Table 2. 2 Aggregate Plan Decision Period ..................................................................................... 9

Table 2. 3 Constraints ................................................................................................................. 10

Table 2. 4 Aggregate Plan Costs .................................................................................................. 10

Table 2. 5 Present Market Share .................................................................................................. 10

Table 2. 6 Fine and Whitney Framework ...................................................................................... 15



Table 3. 1 Plant Wise Capacity .................................................................................................... 19

Table 3. 2 Demand in Various Regions ........................................................................................ 20

Table 3. 3 Inputs: Costs,Capacities, Demands .............................................................................. 22

Table 3. 4 Decision Variables ...................................................................................................... 22

Table 3. 5 Constraints ................................................................................................................. 22

Table 3. 6 Gravity Location Model .............................................................................................. 24




Logistics & Supply Chain Management
                                                                                                                                   v
Nomenclature
Acronyms

BAL            Bajaj Auto Limited

GCMMF          Gujarat Cooperative Milk Marketing Federation Ltd

SCM            Supply Chain Management




Logistics & Supply Chain Management
                                                                           vi
CHAPTER 1
1. Introduction:
       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.[1]

1.2 Stance Taken

       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”.

1.3 Curre nt Trends on Supply Chain Competitiveness

       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.[2]

       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.[2]

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. [2]

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.[2]

1.3.1 Merits and Demerits of the Current Trends

                      Merits                                           Demerits
Marking/Retailing- Data mining helps aid in
                                                   Time consuming.
direct marketing
Banking/Crediting- Data mining can assist
financial institutions in areas such as credit     Costly to implement.
reporting and loan information.
Manufacturing Sector- MRP and ERP helps in         Accurate bills of materials, part numbers and
speeding up the whole process.                     inventory records is required
Distribution and retail Stores- DRP helps access
                                                   Not 100% accurate or perfect
the status of the goods.
Transport Sector- MRP and ERP help transmit
                                                   Inconsistent manpower also acts as limitation.
commodities through online transactions.
Project Service industry- MRP and ERP helps        Serious problem may arise if small organization
fastens the compilation of reports.                fails to maintain good inventory record.

                   Table 1. 1 Merits & Demerits of the Current Tre nds[3][4]

1.4 Discussion and Interpretations on Managing Complex Supply Chains
    Upon conducting various researches, it has been discovered that the ideal solution to
manage a complex supply chain is one that:

     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.[5]

The task of simplifying a highly complex global supply chain requires five fundamental
components:

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1. A global data repository to maintain both internal and external data necessary to manage
   and comply with global business requirements.
2. A comprehensive execution platform to enable operations and management to complete
   their job requirements effectively, efficiently and in relative independence.
3. An open, integrated and synchronized information infrastructure to provide total visibility
   of the global supply chain and all supporting information.
4. 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.
5. A business collaboration environment to support the free flow of information to
   authorized individuals.[5]

This ideal solution requires the use of the latest Information Technologies.[5]

1.5 Case Study
       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.[6]

From the very beginning, in the early 1950s, AMUL adopted its network as a basic model for
long-term growth.

  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.[6]

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.[6]

1.6 Conclusion
       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


Logistics & Supply Chain Management
                                                                                         3
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.




Logistics & Supply Chain Management
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CHAPTER 2
2.0 Introduction to Bajaj Auto Limited
       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.[7]

2.1 Rationale for Identifying the Company
       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.




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2.2 Bajaj Pulsar
       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.[7]

2.3 Demand Estimation
       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.

       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.[7]


                            Two-Wheeler Sales Domestic
                     12000000
                     10000000
                     8000000
             Sales




                     6000000
                     4000000
                     2000000
                           0
                                2004-05   2005-06   2006-07   2007-08   2008-09   2009-10

                                                          Year



                        Figure 2. 1 Two-Wheeler Domestic Sales Trend[7]



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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.


                             Company Sales in 2009 and 2010
                      400000
                      350000
                      300000
                      250000
              Sales




                      200000
                      150000
                      100000                                                       2009 April
                       50000
                           0                                                       2010 April




                                         Two-Wheeler Companies



          Figure 2. 2 Various Two-wheeler Company Sales in 2009 and 2010[7]

       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.


                                     Bajaj Pulsar 180 Sales
                      2000
                      1800
                      1600
                      1400
                      1200
              Sales




                      1000
                       800
                       600
                       400
                       200
                         0
                               Jan     Feb     Mar        Apr         May   June     July

                                                     Months of 2011



                      Figure 2. 3 Bajaj Pulsar 180 Sales in the Months of 2011[8]



Logistics & Supply Chain Management
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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.

2.3.1 Forecasting Demand

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.

                                                             Exponential Smoothing
                                Month of                      Forecast for Month of
                   Period        2011           Demand                2012
                     1            Jan               1264              #N/A
                     2            Feb               1463              1264
                     3            Mar               1211             1403.3
                     4            Apr               1743             1268.69
                     5            May               1467            1600.707
                     6           June               1584           1507.1121
                     7            July              1467           1560.93363

                                Table 2. 1 Demand Forecast for 2012[7]


                                 Exponential Smoothening
            2000
            1800
            1600
            1400
            1200
   Demand




            1000
             800                                                      Demand
             600
             400                                                      Exponential Smoothing Forecast
             200                                                      for Month of 2012
               0
                   Jan   Feb     Mar    Apr     May   June   July

                    1       2      3       4     5     6      7

                                       Period



                    Figure 2. 4 Comparison on Current and Future Demand



Logistics & Supply Chain Management
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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.

         2.4 Translation of demand into deliverable quantities
                 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:
             Workforce, resources and facilities available.

             Demand forecast of the period for which the planning has to be carried out.

             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.

             The number of labour/machine hours required for each unit.

             Constraints regarding the usage of above alternatives.

         The goal of aggregate planning is to satisfy the demand from the customers while
         maximizing profit.[9]



            Ht       Lt          Wt            Ot        It         St           Ct           Pt             Dt
                    Laid
Period     Hired     off    Workforce     Overtime   Inventory   Stockout   Subcontract   Production       Demand
  0          0        0         40           0          500          0          0              0
  1          0        0         40           0           0           0          0             764          1264
  2          0        0         40           0           0           0          0           1403.3        1403.3
  3          0        0         40           0           0           0          0           1268.69       1268.69
  4      0.017675     0     40.017675        0           0           0          0          1600.707      1600.707
  5          0        0     40.017675        0           0           0          0         1507.1121      1507.112
  6      11.50567     0    51.52334075       0          500          0          0         2060.9336      1560.934

                                   Table 2. 2 Aggregate Plan Decision Period


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Workforce        Production    Inventory       Overtime

                    -7.10543E-15         836         6.0254E-11          400
                     1.42109E-14        196.7             0              400
                     1.42109E-14       331.31             0              400
                    -6.31439E-15          0        -2.27374E-13       400.17675
                     7.10543E-15       93.5949            0           400.17675
                    -3.55271E-15          0         4.54747E-13      515.2334075

                                         Table 2. 3 Constraints


                                Regular          Over                 Stock      Sub
Period     Hiring   Lay off       time           time   Inventory      out     contract    Material
  1           0       0          40000             0        0           0         0         764000
  2           0       0          40000             0        0           0         0        1403300
  3           0       0          40000             0        0           0         0        1268690
  4        530.25     0        40017.675           0        0           0         0        1600707
  5           0       0        40017.675           0        0           0         0       1507112.1
  6        345170     0       51523.34075          0     1000000        0         0       2060933.6

Total Cost    10202002
                                       Table 2. 4 Aggregate Plan Costs


Total cost for January 2012 to July 2012 is Rs. 10202002

2.4.1 Capturing Market Share

The present market share of two-wheeler automobiles are shown in the figure below.


                         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 Ltd                          0.10%
                              Table 2. 5 Present Market Share[7]

         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
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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%.[11]

2.5 Break down of Manufactured Product in to Key Parts
       The product taken for the analysis is the Bajaj Pulsar 180 DTSi. The figure below
shows the specifications of the vehicle.




                       Figure 2. 5 Bajaj Pulsar 180 Specifications[12]



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                                                                                  11
The manufactured product has been broken down into 5 key parts and analysis is
carried out. The 5 key parts are:

2.5.1 Engine

        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.[17]



                                                      Figure 2. 6 Bajaj Pulsar Engine[13]




                                Figure 2. 7 Bajaj Pulsar Engine[14]




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2.5.2 Ignition Coil

          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.[18]
                                                            Figure 2. 8 Ignition Coil[18]

2.5.3 Handle Bar Assembly

          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.


                                                    Figure 2. 9 Handle Bar Assembly[15]




                        Figure 2. 10 Reflectors on LH & RH Switches[15]




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2.5.4 Braking System

       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
                                              Figure 2. 11 Braking System[16]
below shows the disc brakes of
the Bajaj Pulsar.[12]

2.5.5 Suspension

       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.[12]




                          Figure 2. 12 Bajaj Pulsar Suspension[17]

       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.



Logistics & Supply Chain Management
                                                                                    14
2.6 Make or Buy Decision
       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.[19]

       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.

                        Dependant for         In dependant of              In dependant of
    Product             Knowledge and       Knowledge. Dependant           Knowledge And
                          Capacity              for Capacity                   Capacity

Outsourced Item                                                        Outsourcing Opportunity
                Outsourcing is Risky       Outsourcing Opportunity
Is Modular                                                             to Reduce Cost

Outsourced Item Worst Outsourcing
                                           Outsourcing is an Option    Keep Production Integral
is Integral     Situation

                         Table 2. 6 Fine and Whitney Frame work[20]



2.6.1 Engine

       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.

2.6.2 Ignition Coil

       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.



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2.6.3 Handle Bar Assembly

       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.

2.6.4 Braking System

       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.

2.6.5 Suspension

       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.

2.7 Discussion on Vendor Base
Bajaj auto has approximately 198 vendors for their raw materials and parts.

Some of the key vendors are:-

 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.[22]


    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 t he cost

Logistics & Supply Chain Management
                                                                                      16
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. [21]

2.8 Role of SCM
       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.

       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.

       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.[21]


2.9 Conclusion
       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.




Logistics & Supply Chain Management
                                                                                        17
CHAP TER 3
3.0 Introduction to Bajaj Auto Limited
       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.[22]




                        Figure 3. 1 Manufacturing Plant Layout[22]

3.1 Manufacturing locations
3.1.1 Akurdi, Pune.

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.[22]

Logistics & Supply Chain Management
                                                                                        18
3.1.2 Waluj Aurangabad

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.[22]

3.1.3 Chakan, Pune

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.[22]

3.1.4 Pantnagar , Uttarakhand

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.[22]

3.2 Data Collection and Evaluation

The capacity of the present plants is shown below:

        State                  Town                  Units                 Capacity (Nos)

Aurangabad               Waluj             Kristal, XCD, Platina                  1,860,000

Maharashtra              Chakan            Pulsar, Discover, Avenger              1,200,000

Uttarakhand              Pantnagar         Platina, XCD                             900,000


                              Table 3. 1 Plant Wise Capacity[22]

Products manufactured at these locations are distributed as shown below.
                                                                               Delhi

     Chakkan
                                                                            West Bengal

                                         Khadakpur                            Chennai
       Waluj

                                                                             Bengaluru
     Pantnagar
                                                                                Pune
                              Fugure 3. 1 Distribution Network[22]


Logistics & Supply Chain Management
                                                                                       19
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.

       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.


                             Regions             Demand in Million

                                Delhi                        25
                              Chennai                        25
                                Pune                         32
                            West Bengal                      25
                             Bengaluru                       32

                         Table 3. 2 Demand in Various Regions[22]



3.3 Modeling a Supply Chain

       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.

Two models used for modelling supply are demonstrated below. They are the Capacitated
Plant Location model and Gravity Location Model.

3.3.1 Capacitated Plant Location Model[10]

       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.

The following details are required for creating and calculating the model:
Logistics & Supply Chain Management
                                                                                       20
n = number of potential plant locations/capacity

       m = number of markets or demand points

       Dj = Annual demand from market j

       Ki = Potential capacity of plant i

       fi = annualised fixed cost of keeping factory i open

       Cij = Cost of producing and shipping one unit from factory i to market j

And the variables are:

       yi = 1 if plant i is open, 0 otherwise

       Xij = Quantity shipped from plant i to market j

Formula:




                                                Obj. func. Minimises the total cost (fixed
                                                +variable)

Constraints are:

                            -         Demand to be met at each location.

                            -         No plant can supply more than its capacity.

                            -         Enforces the plant is open or closed.



The formulae and constraints are applied in MS Excel and solved using Solver tool as shown
below.




Logistics & Supply Chain Management
                                                                                    21
Demand Region
                 Production and Transportation Cost per 10,00,000           Fi xed      Low        Fi xed      High
                                      units
  Suppl y                                                                   costs                  costs
               Delhi     Chennai      Pune    West Bengal       Bengaluru             Capacity                Capacity
  region                                                                     Rs                     Rs
   Delhi       1300       2563        1834        1500            1754      8500         15        17000          30
 Chennai       2563       1300        1560        1850            1465      7500         15        15000          30
  Pune         1834       1560        1300        1657            1657      9000         15        18000          30
West Bengal    1500       1850        1657        1300            1547      8500         15        17000          30
Bengaluru      1754       1465        1657        1547            1300      7500         15        15000          30
 Demand          25        25          32          25              32

                               Table 3. 3 Inputs: Costs,Capacities, Demands

                                    Demand Region-Production Allocation                        Plants        Plants
   Suppl y region      Delhi      Chennai  Pune      West Bengal        Bengaluru             (1=open)      (1=open)
       Delhi            25           0       0            0                 0                     0             1
     Chennai             0          25       2            0                 2                     0             1
       Pune              0           0       30           0                 0                     0             1
    West Bengal          0           0       0            25                0                     0             1
    Bengaluru            0           0       0            0                30                     0             1

                                         Table 3. 4 Decision Variables

      Suppl y region           Excess Capaci ty
          Delhi                       5
        Chennai                       1
          Pune                   8.75815E-11
       West Bengal               4.999999999
       Bengaluru                 6.63007E-11
                                    Delhi           Chennai           Pune          West Bengal      Bengaluru
     Unmet Demand                5.54934E-12      6.33804E-12     -5.86198E-11      -9.48219E-10    -3.3296E-11

   Objecti ve Function
         Cost =                    263550

                                             Table 3. 5 Constraints

  Result obtained

       Plants have to be opened at all 5 locations, Delhi, Chennai, Pune, West Bengal and
            Bengaluru to meet customer requirements.
       Plant at Delhi meets requirements at Delhi.
       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.

  Logistics & Supply Chain Management
                                                                                                             22
 Plants at Bengaluru and Chennai meet requirements at Bengaluru.

  3.3.2 Gravity Location Model[10]

          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:

               Geometric distance between two points
               Transportation cost
               Quantity shipped

  Formula:




  Total Cost (TC) is given by:




  The formula is applied in MS Excel and solved using Solver tool as shown below.

                                        Quantity
              Sources         Rs/Unit                   Coordinate        Coordinate
                                          Dn in                                                 dn
              /Market           Fn                         Xn                Yn
                                        Shipment
        Pune                  50,000      2500             18.53              73.87              2
Sources Aurangabad            50,100      2000             19.88              75.33              0
        Uttarakhand           49,900      2000             30.25              79.25             11
        Delhi                 51,000      1250             28.67              77.22              9
        Chennai               51,100      1250             13.09              80.29              8
Markets Pune                  50,000      1500             18.53              73.87              2
        West Bangal           51,000      1000             22.59              88.63             14
        Bengaluru             50,100      1500             12.98              77.58              7



Facility Location


  Logistics & Supply Chain Management
                                                                                           23
X=              20
 Y=              75

Cost=        3852057439


                                Table 3. 6 Gravity Location Model

 Result obtained

         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.

 3.4 Analysis and interpretation with respect to framework

           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.

           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.


 3.5 Decision Making From the Analyzed Data

           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.

 Logistics & Supply Chain Management
                                                                                          24
3.6 Results and Conclusions
       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.




Logistics & Supply Chain Management
                                                                                      25
CHAP TER 4
4.1 Comments on Learning Outcome:
       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.
In short, the module Supply Chain Management and the assignment involved have provided
sufficient knowledge as to how to:-
    Run a successful supply chain.
    Estimate and Forecast product demands.
    Plan on how to manufacture to meet the demand.
    How to make a Make or Buy Decision.
    Modeling a supply chain.




Logistics & Supply Chain Management
                                                                                      26
REFERENCES
[1] Tage Skjott Larsen., Philip Schary., Juliana Mikkolaand., Herbert Kotzab., Managing the
   Global Supply Chain, Transnational Corporations, Vol. 17, Issue No. 1, April 2008.
[2] Boby Jhon Sust., Recent Trends in Supply Chain Management, http://ezinearticles.com
   /?What-Are-Some-Recent-Trends- in-Supply-Chain- Management?&id=6447132,
   Retrieved on August 8th 2011.
[3] Unknown., Merits and Demerits of Data Warehousing, http://www.whamtech.com/
   adv_disadv_dw.htm, Retrieved on August 9 th 2011.
[4] Unknown.,      Advantages         and     Disadvantages      of     ERP,     http://www.systems-
   erp.com/?id_razdel=1107, Retrieved on August 9th 2011.
[5] Blinco Systems Inc., The State of Managing Complex Global Supply Chains, 3rdwave
   GCM, July 2009.
[6] Unknown.,     Assignment     on        Supply Chain   Management,          http://www.scribd.com/
   doc/20277585/Supply-Chain-Management-of-amul-and-Wal- mart,                   Retrieved   on     8th
   August 2011.
[7] Nihareika Sinha., Padmadevi., Saurabh Pandey., Gaurang Sahlot., Isha Vashisht., Siraj
   Siddiqui, Automobile Industry in India, Project Report, LBSIM, 2009.
[8] Unknown, Bajaj Pulsar Sales, www.bajajauto.com, Retrieved on August 12th 2011.
[9] Unknown.,     Aggregate      Planning,       http://en.wikipedia.org/wiki/Aggregate_planning,
   Retrieved on August 12th 2011.
[10]   Asst
[11]   Mahavir., Bajaj Auto Reveals Future Plans, http://bikeadvice.in/bajaj-auto-reveals-
   future-plans/, Retrieved on August 10th 2011.
[12]   Bajaj Auto., Pulsar 180 DTSi, Catalogue and Specifications, 2009
[13]   Unknown., Picture of Pulsar Engine, http://bikeadvice.s3.amazonaws.com/wp-
   content/uploads/2010/02/Bajaj-Pulsar-135-LS-Review-Photos-3.jpg, Retrieved on August
   12th 2011.
[14]   Unknown.,       Picture        of     Pulsar    Engine,        http://imageshack.us/photo/my-
   images/132/79130309qc8.jpg/, Retrieved on August 12th 2011.
[15]   Unknown.,             Picture             of           Pulsar             Handle           Bar,
   http://1.bp.blogspot.com/_Y5JU0n4majU/S27BpiRuayI/AAAAAAAAFR4/1o8z79D4Qt
   Y/s400/2010+Pulsar+150+DTS- i+01.jpg, Retrieved on August 12th 2011.


Logistics & Supply Chain Management
                                                                                               27
[16]   Unknown., Picture of Pulsar Disc Brakes, http://bikes.indiandrives.com/bikes/wp-
   content/themes/bikes.indiandrives/images/photo_gallery/bajaj-pulsar-220f/disc-brake.jpg,
   Retrieved on August 12th 2011.
[17]   Cisituasik.,     DTSi        Technology,     http://www.zimbio.com/Motorcycles/articles/
   2258/DTSi+Technology+Bajaj+Pulsar+Bikes, Retrieved on August 12th 2011.
[18]   Unknown., Ignition Coil, http://www.indiamart.com/nehaimpex/automotive-spare-
   parts.html, Retrieved on August 12th 2011.
[19]   E-notes.,      Make     or      Buy    Decision,    http://www.enotes.com/management-
   encyclopedia/make-buy-decisions, Retrieved on August 12th 2011.
[20]   Charles Fine., Daniel Whitney., Is the make-buy decision PROCESS a core
   competence, MIT Center for Technology, Policy, and Industrial Development, February
   1996.
[21]   Unknown., Vendor Compliance,               http://www.vendorcompliance.info/vc_scm.htm,
   Retrieved on August 12th 2011.
[22]   Harsh Patel., Supply Chain Management of Bajaj Auto Ltd, Documentary Report,
   Indukaka Ipcowala Institute of Management, 2009.




Logistics & Supply Chain Management
                                                                                         28
BIBILIOGRAPHY

[1] Sunil Chopra, Peter Meindl, D.V.Kalra, Supply Chain Management, 3rd edition, Pearson, New
   Delhi, 2007.
[2] David Simchi-Levi, P hilip Kaminsky, Edith Simchi-Levi, Ravi Shankar, Designing and
   Managing the Supply Chain, 3rd edition, Tata McGraw Hill, New Delhi, 2008.




Logistics & Supply Chain Management
                                                                                       29

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Modelling supply chain

  • 1. Logistics & Supply Chain Management ASSIGNMENT Name of the Student: Paul Franklin
  • 2. Abstract 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. 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. 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.
  • 3. Table of Contents Abstract ....................................................................................................................................... i Table of Contents .......................................................................................................................ii List of Figures ........................................................................................................................... iv List of Table ............................................................................................................................... v Nomenclature ............................................................................................................................ vi CHAPTER 1 .............................................................................................................................. 1 1. Introduction: ......................................................................................................................... 1 1.2 Stance Taken ................................................................................................................... 1 1.3 Current Trends on Supply Chain Competitiveness.............................................................. 1 1.4 Discussion and Interpretations on Managing Complex Supply Chains ..................................... 2 1.5 Case Study .......................................................................................................................... 3 1.6 Conclusion.......................................................................................................................... 3 CHAPTER 2 .............................................................................................................................. 5 2.0 Introduction to Bajaj Auto Limited ....................................................................................... 5 2.1 Rationale for Identifying the Company ................................................................................. 5 2.2 Bajaj Pulsar......................................................................................................................... 6 2.3 Demand Estimation ............................................................................................................. 6 2.3.1 Forecasting Demand...................................................................................................... 8 2.4 Translation of demand into deliverable quantities .................................................................. 9 2.4.1 Capturing Market Share............................................................................................... 10 2.5 Break down of Manufactured Product in to Key Parts .......................................................... 11 2.5.1 Engine........................................................................................................................ 12 2.5.2 Ignition Coil ............................................................................................................... 13 2.5.3 Handle Bar Assembly.................................................................................................. 13 2.5.4 Braking System........................................................................................................... 14 2.5.5 Suspension ................................................................................................................. 14 2.6 Make or Buy Decision ....................................................................................................... 15 Logistics & Supply Chain Management ii
  • 4. 2.6.1 Engine........................................................................................................................ 15 2.6.2 Ignition Coil ............................................................................................................... 15 2.6.3 Handle Bar Assembly.................................................................................................. 16 2.6.4 Braking System........................................................................................................... 16 2.6.5 Suspension ................................................................................................................. 16 2.7 Discussion on Vendor Base................................................................................................ 16 2.8 Role of SCM ..................................................................................................................... 17 2.9 Conclusion........................................................................................................................ 17 CHAPTER 3 ............................................................................................................................ 18 3.0 Introduction to Bajaj Auto Limited ..................................................................................... 18 3.1 Manufacturing locations .................................................................................................... 18 3.1.1 Akurdi, Pune............................................................................................................... 18 3.1.2 Waluj Aurangabad ...................................................................................................... 19 3.1.3 Chakan, Pune.............................................................................................................. 19 3.1.4 Pantnagar , Uttarakhand............................................................................................... 19 3.2 Data Collection and Evaluation .......................................................................................... 19 3.3 Modeling a Supply Chain................................................................................................... 20 3.3.1 Capacitated Plant Location Model ................................................................................ 20 3.3.2 Gravity Location Model .............................................................................................. 23 3.4 Analysis and interpretation with respect to framework ......................................................... 24 3.5 Decision Making From the Analyzed Data .......................................................................... 24 3.6 Results and Conclusions .................................................................................................... 25 CHAPTER 4 ............................................................................................................................ 26 4.1 Comments on Learning Outcome: ...................................................................................... 26 REFERENCES ........................................................................................................................ 27 BIBILIOGRAPHY .................................................................................................................. 29 Logistics & Supply Chain Management iii
  • 5. List of Figures Figure 2. 1 Two-Wheeler Domestic Sales Trend ............................................................................. 6 Figure 2. 2 Various Two-wheeler Company Sales in 2009 and 2010 ................................................ 7 Figure 2. 3 Bajaj Pulsar 180 Sales in the Months of 2011 ................................................................ 7 Figure 2. 4 Comparison on Current and Future Demand .................................................................. 8 Figure 2. 5 Bajaj Pulsar 180 Specifications ................................................................................... 11 Figure 2. 7 Bajaj Pulsar Engine.................................................................................................... 12 Figure 2. 6 Bajaj Pulsar Engine.................................................................................................... 12 Figure 2. 10 Reflectors on LH & RH Switches ............................................................................. 13 Figure 2. 8 Ignition Coil .............................................................................................................. 13 Figure 2. 9 Handle Bar Assembly ................................................................................................ 13 Figure 2. 12 Bajaj Pulsar Suspension ........................................................................................... 14 Figure 2. 11 Braking System ....................................................................................................... 14 Fugure 3. 1 Distribution Network ................................................................................................ 19 Logistics & Supply Chain Management iv
  • 6. List of Table Table 1. 1 Merits & Demerits of the Current Trends........................................................................ 2 Table 2. 1 Demand Forecast for 2012............................................................................................. 8 Table 2. 2 Aggregate Plan Decision Period ..................................................................................... 9 Table 2. 3 Constraints ................................................................................................................. 10 Table 2. 4 Aggregate Plan Costs .................................................................................................. 10 Table 2. 5 Present Market Share .................................................................................................. 10 Table 2. 6 Fine and Whitney Framework ...................................................................................... 15 Table 3. 1 Plant Wise Capacity .................................................................................................... 19 Table 3. 2 Demand in Various Regions ........................................................................................ 20 Table 3. 3 Inputs: Costs,Capacities, Demands .............................................................................. 22 Table 3. 4 Decision Variables ...................................................................................................... 22 Table 3. 5 Constraints ................................................................................................................. 22 Table 3. 6 Gravity Location Model .............................................................................................. 24 Logistics & Supply Chain Management v
  • 7. Nomenclature Acronyms BAL Bajaj Auto Limited GCMMF Gujarat Cooperative Milk Marketing Federation Ltd SCM Supply Chain Management Logistics & Supply Chain Management vi
  • 8. CHAPTER 1 1. Introduction: 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.[1] 1.2 Stance Taken 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”. 1.3 Curre nt Trends on Supply Chain Competitiveness 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.[2] 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.[2] 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
  • 9. the most significant factors of the business. Data warehousing is the process of centralization of data which facilitates the available access and analysis. [2] 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.[2] 1.3.1 Merits and Demerits of the Current Trends Merits Demerits Marking/Retailing- Data mining helps aid in Time consuming. direct marketing Banking/Crediting- Data mining can assist financial institutions in areas such as credit Costly to implement. reporting and loan information. Manufacturing Sector- MRP and ERP helps in Accurate bills of materials, part numbers and speeding up the whole process. inventory records is required Distribution and retail Stores- DRP helps access Not 100% accurate or perfect the status of the goods. Transport Sector- MRP and ERP help transmit Inconsistent manpower also acts as limitation. commodities through online transactions. Project Service industry- MRP and ERP helps Serious problem may arise if small organization fastens the compilation of reports. fails to maintain good inventory record. Table 1. 1 Merits & Demerits of the Current Tre nds[3][4] 1.4 Discussion and Interpretations on Managing Complex Supply Chains Upon conducting various researches, it has been discovered that the ideal solution to manage a complex supply chain is one that:  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.[5] The task of simplifying a highly complex global supply chain requires five fundamental components: Logistics & Supply Chain Management 2
  • 10. 1. A global data repository to maintain both internal and external data necessary to manage and comply with global business requirements. 2. A comprehensive execution platform to enable operations and management to complete their job requirements effectively, efficiently and in relative independence. 3. An open, integrated and synchronized information infrastructure to provide total visibility of the global supply chain and all supporting information. 4. 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. 5. A business collaboration environment to support the free flow of information to authorized individuals.[5] This ideal solution requires the use of the latest Information Technologies.[5] 1.5 Case Study 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.[6] From the very beginning, in the early 1950s, AMUL adopted its network as a basic model for long-term growth.  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.[6] 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.[6] 1.6 Conclusion 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 Logistics & Supply Chain Management 3
  • 11. 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. Logistics & Supply Chain Management 4
  • 12. CHAPTER 2 2.0 Introduction to Bajaj Auto Limited 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.[7] 2.1 Rationale for Identifying the Company 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. Logistics & Supply Chain Management 5
  • 13. 2.2 Bajaj Pulsar 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.[7] 2.3 Demand Estimation 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. 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.[7] Two-Wheeler Sales Domestic 12000000 10000000 8000000 Sales 6000000 4000000 2000000 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Year Figure 2. 1 Two-Wheeler Domestic Sales Trend[7] Logistics & Supply Chain Management 6
  • 14. 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. Company Sales in 2009 and 2010 400000 350000 300000 250000 Sales 200000 150000 100000 2009 April 50000 0 2010 April Two-Wheeler Companies Figure 2. 2 Various Two-wheeler Company Sales in 2009 and 2010[7] 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. Bajaj Pulsar 180 Sales 2000 1800 1600 1400 1200 Sales 1000 800 600 400 200 0 Jan Feb Mar Apr May June July Months of 2011 Figure 2. 3 Bajaj Pulsar 180 Sales in the Months of 2011[8] Logistics & Supply Chain Management 7
  • 15. 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. 2.3.1 Forecasting Demand 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. Exponential Smoothing Month of Forecast for Month of Period 2011 Demand 2012 1 Jan 1264 #N/A 2 Feb 1463 1264 3 Mar 1211 1403.3 4 Apr 1743 1268.69 5 May 1467 1600.707 6 June 1584 1507.1121 7 July 1467 1560.93363 Table 2. 1 Demand Forecast for 2012[7] Exponential Smoothening 2000 1800 1600 1400 1200 Demand 1000 800 Demand 600 400 Exponential Smoothing Forecast 200 for Month of 2012 0 Jan Feb Mar Apr May June July 1 2 3 4 5 6 7 Period Figure 2. 4 Comparison on Current and Future Demand Logistics & Supply Chain Management 8
  • 16. 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. 2.4 Translation of demand into deliverable quantities 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:  Workforce, resources and facilities available.  Demand forecast of the period for which the planning has to be carried out.  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.  The number of labour/machine hours required for each unit.  Constraints regarding the usage of above alternatives. The goal of aggregate planning is to satisfy the demand from the customers while maximizing profit.[9] Ht Lt Wt Ot It St Ct Pt Dt Laid Period Hired off Workforce Overtime Inventory Stockout Subcontract Production Demand 0 0 0 40 0 500 0 0 0 1 0 0 40 0 0 0 0 764 1264 2 0 0 40 0 0 0 0 1403.3 1403.3 3 0 0 40 0 0 0 0 1268.69 1268.69 4 0.017675 0 40.017675 0 0 0 0 1600.707 1600.707 5 0 0 40.017675 0 0 0 0 1507.1121 1507.112 6 11.50567 0 51.52334075 0 500 0 0 2060.9336 1560.934 Table 2. 2 Aggregate Plan Decision Period Logistics & Supply Chain Management 9
  • 17. Workforce Production Inventory Overtime -7.10543E-15 836 6.0254E-11 400 1.42109E-14 196.7 0 400 1.42109E-14 331.31 0 400 -6.31439E-15 0 -2.27374E-13 400.17675 7.10543E-15 93.5949 0 400.17675 -3.55271E-15 0 4.54747E-13 515.2334075 Table 2. 3 Constraints Regular Over Stock Sub Period Hiring Lay off time time Inventory out contract Material 1 0 0 40000 0 0 0 0 764000 2 0 0 40000 0 0 0 0 1403300 3 0 0 40000 0 0 0 0 1268690 4 530.25 0 40017.675 0 0 0 0 1600707 5 0 0 40017.675 0 0 0 0 1507112.1 6 345170 0 51523.34075 0 1000000 0 0 2060933.6 Total Cost 10202002 Table 2. 4 Aggregate Plan Costs Total cost for January 2012 to July 2012 is Rs. 10202002 2.4.1 Capturing Market Share The present market share of two-wheeler automobiles are shown in the figure below. 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 Ltd 0.10% Table 2. 5 Present Market Share[7] 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 Logistics & Supply Chain Management 10
  • 18. 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%.[11] 2.5 Break down of Manufactured Product in to Key Parts The product taken for the analysis is the Bajaj Pulsar 180 DTSi. The figure below shows the specifications of the vehicle. Figure 2. 5 Bajaj Pulsar 180 Specifications[12] Logistics & Supply Chain Management 11
  • 19. The manufactured product has been broken down into 5 key parts and analysis is carried out. The 5 key parts are: 2.5.1 Engine 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.[17] Figure 2. 6 Bajaj Pulsar Engine[13] Figure 2. 7 Bajaj Pulsar Engine[14] Logistics & Supply Chain Management 12
  • 20. 2.5.2 Ignition Coil 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.[18] Figure 2. 8 Ignition Coil[18] 2.5.3 Handle Bar Assembly 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. Figure 2. 9 Handle Bar Assembly[15] Figure 2. 10 Reflectors on LH & RH Switches[15] Logistics & Supply Chain Management 13
  • 21. 2.5.4 Braking System 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 Figure 2. 11 Braking System[16] below shows the disc brakes of the Bajaj Pulsar.[12] 2.5.5 Suspension 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.[12] Figure 2. 12 Bajaj Pulsar Suspension[17] 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. Logistics & Supply Chain Management 14
  • 22. 2.6 Make or Buy Decision 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.[19] 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. Dependant for In dependant of In dependant of Product Knowledge and Knowledge. Dependant Knowledge And Capacity for Capacity Capacity Outsourced Item Outsourcing Opportunity Outsourcing is Risky Outsourcing Opportunity Is Modular to Reduce Cost Outsourced Item Worst Outsourcing Outsourcing is an Option Keep Production Integral is Integral Situation Table 2. 6 Fine and Whitney Frame work[20] 2.6.1 Engine 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. 2.6.2 Ignition Coil 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. Logistics & Supply Chain Management 15
  • 23. 2.6.3 Handle Bar Assembly 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. 2.6.4 Braking System 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. 2.6.5 Suspension 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. 2.7 Discussion on Vendor Base Bajaj auto has approximately 198 vendors for their raw materials and parts. Some of the key vendors are:-  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.[22] 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 t he cost Logistics & Supply Chain Management 16
  • 24. 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. [21] 2.8 Role of SCM 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. 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. 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.[21] 2.9 Conclusion 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. Logistics & Supply Chain Management 17
  • 25. CHAP TER 3 3.0 Introduction to Bajaj Auto Limited 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.[22] Figure 3. 1 Manufacturing Plant Layout[22] 3.1 Manufacturing locations 3.1.1 Akurdi, Pune. 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.[22] Logistics & Supply Chain Management 18
  • 26. 3.1.2 Waluj Aurangabad 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.[22] 3.1.3 Chakan, Pune 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.[22] 3.1.4 Pantnagar , Uttarakhand 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.[22] 3.2 Data Collection and Evaluation The capacity of the present plants is shown below: State Town Units Capacity (Nos) Aurangabad Waluj Kristal, XCD, Platina 1,860,000 Maharashtra Chakan Pulsar, Discover, Avenger 1,200,000 Uttarakhand Pantnagar Platina, XCD 900,000 Table 3. 1 Plant Wise Capacity[22] Products manufactured at these locations are distributed as shown below. Delhi Chakkan West Bengal Khadakpur Chennai Waluj Bengaluru Pantnagar Pune Fugure 3. 1 Distribution Network[22] Logistics & Supply Chain Management 19
  • 27. 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. 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. Regions Demand in Million Delhi 25 Chennai 25 Pune 32 West Bengal 25 Bengaluru 32 Table 3. 2 Demand in Various Regions[22] 3.3 Modeling a Supply Chain 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. Two models used for modelling supply are demonstrated below. They are the Capacitated Plant Location model and Gravity Location Model. 3.3.1 Capacitated Plant Location Model[10] 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. The following details are required for creating and calculating the model: Logistics & Supply Chain Management 20
  • 28. n = number of potential plant locations/capacity m = number of markets or demand points Dj = Annual demand from market j Ki = Potential capacity of plant i fi = annualised fixed cost of keeping factory i open Cij = Cost of producing and shipping one unit from factory i to market j And the variables are: yi = 1 if plant i is open, 0 otherwise Xij = Quantity shipped from plant i to market j Formula: Obj. func. Minimises the total cost (fixed +variable) Constraints are: - Demand to be met at each location. - No plant can supply more than its capacity. - Enforces the plant is open or closed. The formulae and constraints are applied in MS Excel and solved using Solver tool as shown below. Logistics & Supply Chain Management 21
  • 29. Demand Region Production and Transportation Cost per 10,00,000 Fi xed Low Fi xed High units Suppl y costs costs Delhi Chennai Pune West Bengal Bengaluru Capacity Capacity region Rs Rs Delhi 1300 2563 1834 1500 1754 8500 15 17000 30 Chennai 2563 1300 1560 1850 1465 7500 15 15000 30 Pune 1834 1560 1300 1657 1657 9000 15 18000 30 West Bengal 1500 1850 1657 1300 1547 8500 15 17000 30 Bengaluru 1754 1465 1657 1547 1300 7500 15 15000 30 Demand 25 25 32 25 32 Table 3. 3 Inputs: Costs,Capacities, Demands Demand Region-Production Allocation Plants Plants Suppl y region Delhi Chennai Pune West Bengal Bengaluru (1=open) (1=open) Delhi 25 0 0 0 0 0 1 Chennai 0 25 2 0 2 0 1 Pune 0 0 30 0 0 0 1 West Bengal 0 0 0 25 0 0 1 Bengaluru 0 0 0 0 30 0 1 Table 3. 4 Decision Variables Suppl y region Excess Capaci ty Delhi 5 Chennai 1 Pune 8.75815E-11 West Bengal 4.999999999 Bengaluru 6.63007E-11 Delhi Chennai Pune West Bengal Bengaluru Unmet Demand 5.54934E-12 6.33804E-12 -5.86198E-11 -9.48219E-10 -3.3296E-11 Objecti ve Function Cost = 263550 Table 3. 5 Constraints Result obtained  Plants have to be opened at all 5 locations, Delhi, Chennai, Pune, West Bengal and Bengaluru to meet customer requirements.  Plant at Delhi meets requirements at Delhi.  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. Logistics & Supply Chain Management 22
  • 30.  Plants at Bengaluru and Chennai meet requirements at Bengaluru. 3.3.2 Gravity Location Model[10] 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:  Geometric distance between two points  Transportation cost  Quantity shipped Formula: Total Cost (TC) is given by: The formula is applied in MS Excel and solved using Solver tool as shown below. Quantity Sources Rs/Unit Coordinate Coordinate Dn in dn /Market Fn Xn Yn Shipment Pune 50,000 2500 18.53 73.87 2 Sources Aurangabad 50,100 2000 19.88 75.33 0 Uttarakhand 49,900 2000 30.25 79.25 11 Delhi 51,000 1250 28.67 77.22 9 Chennai 51,100 1250 13.09 80.29 8 Markets Pune 50,000 1500 18.53 73.87 2 West Bangal 51,000 1000 22.59 88.63 14 Bengaluru 50,100 1500 12.98 77.58 7 Facility Location Logistics & Supply Chain Management 23
  • 31. X= 20 Y= 75 Cost= 3852057439 Table 3. 6 Gravity Location Model Result obtained  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. 3.4 Analysis and interpretation with respect to framework 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. 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. 3.5 Decision Making From the Analyzed Data 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. Logistics & Supply Chain Management 24
  • 32. 3.6 Results and Conclusions 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. Logistics & Supply Chain Management 25
  • 33. CHAP TER 4 4.1 Comments on Learning Outcome: 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. In short, the module Supply Chain Management and the assignment involved have provided sufficient knowledge as to how to:-  Run a successful supply chain.  Estimate and Forecast product demands.  Plan on how to manufacture to meet the demand.  How to make a Make or Buy Decision.  Modeling a supply chain. Logistics & Supply Chain Management 26
  • 34. REFERENCES [1] Tage Skjott Larsen., Philip Schary., Juliana Mikkolaand., Herbert Kotzab., Managing the Global Supply Chain, Transnational Corporations, Vol. 17, Issue No. 1, April 2008. [2] Boby Jhon Sust., Recent Trends in Supply Chain Management, http://ezinearticles.com /?What-Are-Some-Recent-Trends- in-Supply-Chain- Management?&id=6447132, Retrieved on August 8th 2011. [3] Unknown., Merits and Demerits of Data Warehousing, http://www.whamtech.com/ adv_disadv_dw.htm, Retrieved on August 9 th 2011. [4] Unknown., Advantages and Disadvantages of ERP, http://www.systems- erp.com/?id_razdel=1107, Retrieved on August 9th 2011. [5] Blinco Systems Inc., The State of Managing Complex Global Supply Chains, 3rdwave GCM, July 2009. [6] Unknown., Assignment on Supply Chain Management, http://www.scribd.com/ doc/20277585/Supply-Chain-Management-of-amul-and-Wal- mart, Retrieved on 8th August 2011. [7] Nihareika Sinha., Padmadevi., Saurabh Pandey., Gaurang Sahlot., Isha Vashisht., Siraj Siddiqui, Automobile Industry in India, Project Report, LBSIM, 2009. [8] Unknown, Bajaj Pulsar Sales, www.bajajauto.com, Retrieved on August 12th 2011. [9] Unknown., Aggregate Planning, http://en.wikipedia.org/wiki/Aggregate_planning, Retrieved on August 12th 2011. [10] Asst [11] Mahavir., Bajaj Auto Reveals Future Plans, http://bikeadvice.in/bajaj-auto-reveals- future-plans/, Retrieved on August 10th 2011. [12] Bajaj Auto., Pulsar 180 DTSi, Catalogue and Specifications, 2009 [13] Unknown., Picture of Pulsar Engine, http://bikeadvice.s3.amazonaws.com/wp- content/uploads/2010/02/Bajaj-Pulsar-135-LS-Review-Photos-3.jpg, Retrieved on August 12th 2011. [14] Unknown., Picture of Pulsar Engine, http://imageshack.us/photo/my- images/132/79130309qc8.jpg/, Retrieved on August 12th 2011. [15] Unknown., Picture of Pulsar Handle Bar, http://1.bp.blogspot.com/_Y5JU0n4majU/S27BpiRuayI/AAAAAAAAFR4/1o8z79D4Qt Y/s400/2010+Pulsar+150+DTS- i+01.jpg, Retrieved on August 12th 2011. Logistics & Supply Chain Management 27
  • 35. [16] Unknown., Picture of Pulsar Disc Brakes, http://bikes.indiandrives.com/bikes/wp- content/themes/bikes.indiandrives/images/photo_gallery/bajaj-pulsar-220f/disc-brake.jpg, Retrieved on August 12th 2011. [17] Cisituasik., DTSi Technology, http://www.zimbio.com/Motorcycles/articles/ 2258/DTSi+Technology+Bajaj+Pulsar+Bikes, Retrieved on August 12th 2011. [18] Unknown., Ignition Coil, http://www.indiamart.com/nehaimpex/automotive-spare- parts.html, Retrieved on August 12th 2011. [19] E-notes., Make or Buy Decision, http://www.enotes.com/management- encyclopedia/make-buy-decisions, Retrieved on August 12th 2011. [20] Charles Fine., Daniel Whitney., Is the make-buy decision PROCESS a core competence, MIT Center for Technology, Policy, and Industrial Development, February 1996. [21] Unknown., Vendor Compliance, http://www.vendorcompliance.info/vc_scm.htm, Retrieved on August 12th 2011. [22] Harsh Patel., Supply Chain Management of Bajaj Auto Ltd, Documentary Report, Indukaka Ipcowala Institute of Management, 2009. Logistics & Supply Chain Management 28
  • 36. BIBILIOGRAPHY [1] Sunil Chopra, Peter Meindl, D.V.Kalra, Supply Chain Management, 3rd edition, Pearson, New Delhi, 2007. [2] David Simchi-Levi, P hilip Kaminsky, Edith Simchi-Levi, Ravi Shankar, Designing and Managing the Supply Chain, 3rd edition, Tata McGraw Hill, New Delhi, 2008. Logistics & Supply Chain Management 29