Transforming supply chain Harish Bawari - Hero MotoCorp May 2016

Using IT to Strengthen
Supply Chain Planning  
Tuesday, 10th
May’2016
Harish Bawari

External - General e-Material Flow
• The world’s largest two wheeler
manufacturer
• Presence in 30+ countries outside India
• 6500+ Customer Touch points in India
• 4 Manufacturing Plants in India
• One in Columbia
• Overseas Assembly operations:
Kenya, Uganda, Tanzania, Bangladesh
Hero MotoCorp Ltd.

Supply Chain is about…
Flow of products and services from
–Raw materials manufacturers
–Component and intermediate manufacturers
–Final product manufacturers
–Wholesalers and distributors and Retailers
–Finally to Customer

And Supply Chain Management is
about…
Design and management of seamless,
value-added processes across
organizational boundaries to meet
the real needs of the end customer

Key Focus Areas in Supply Chain
Management
–Improving Service Levels and
efficiency
–Cost reduction
–Continuous Improvement
through automation

Today we want to Share a
Project we have done in IT to
Strengthen Supply Chain at
Hero MotoCorp

Business Scenario
• We have grown tremendously in our operations, resulting in
complex Operations and Supply Chain
• The flow of materials is a key factor in making sure that
production is smooth and streamlined
• The material and information at the right place and right
time is very important
• It flows through various points in the operations chain
• The cycle of transfer of information ends up being too
complex owing to the scale of operations and the Bill of
Materials

So, we implemented a System

The system was conceptualized and
designed to make sure that the
supply chain becomes more
efficient, cost effective and
information is easily available
9

e-Material Flow
Business Objectives

To have smooth material flow at optimum costs
across the Supply Chain based on JIT principles
– Inventory management
– Production Sequencing and scheduling
– Uniform communication to all vendors and
the Shop floor
– Enhance quality and productivity -
removing NVAs

• To streamline the Supply Chain by making
available the right information at the right time
to the right stakeholders
• Enabling real time visibility of production status
to the vendors as well as shop floor to enable
the right people to act in time
• Proactively get alerted in case of any
abnormality in Operations

e-Material Flow
What was done…

• The project entailed using the SAP ERP system and
integrating it with various other systems to achieve
the objectives
• The solution was designed in SAP system for making
the delivery schedule available to the vendors online
based on the production
• Automation in assembly lines with initiatives like
scanning of SKU, hanger and VIN number at different
stages
14

• Scanning at the time of Gate entry and goods
receipt, etc. were done which added to the overall
automation of the chain
• To streamline SC, the delivery schedule is made
available online to the vendors based on production
forecast and detailed planning
• Further automation has been done through this
system in the related processes such as Gate entry
and GR to create synergy in the entire material flow
15

EMF System is integrated with multiple systems :
– SAP EP – for delivery schedules publishing and bar
coded tags printing
– SAP BI – for analytics to improve the abnormalities
– Extensive integration with the barcode system so
that the processes are automated across the
Supply Chain
– Gmail for communication of exceptions/alerts
– SMS system for sending alerts
– Empty Return system to reduce efforts of
duplication
– Truck Turn Around Time system

Enhanced HMCL-Vendor Interface Portal
• Information flow through the portal
• All schedules uploaded in the portal which vendor can access-no
emails
• Vendor prints all tags (Vehicle Tag, Receipt Tag, Bin Tag) from
portal
• Only those material for which schedule is given can be printed
• All acknowledgements & discrepancy note, if any, generated
through the same portal & can be seen on real time basis
• The vehicle entry time and exit time can also be viewed by
vendor on real time basis from the portal
18

e-Material Flow
How the Way of Working has
Changed

PPC
20
# Before emf system After emf system
1 Plan is issued monthly and inconsistently
Plan is being issued fortnightly and on
time
2 Colour wise plan is issued very late after
the start of month
Production plan is being released at
SKU level
4 All work is done manually/in excel and
then loaded in SAP
System generates the plan
5 Frequent changes in production plan, no
rules are set for the changes
Minimum changes in the production
plan as per set rules and due approval
6 Plan if not completed by month end is
treated as cancelled
Plan once issued will not be cancelled
but shifted

External - General e-Material Flow 21
1 Monthly schedules are sent indicating
total requirement
Fortnightly day wise/line wise schedules are
sent
2 Day wise schedules are not sent Daily day wise schedules indicating time &
unloading location
3 Vendor usually supply material in the
beginning of the month
Vendor can supply day wise required material
only
4 Plan is issued to vendors. Vendors do
their own manual calculations
Daily System generated part wise schedule
are released.
5 Daily meetings & constant follow up to
ensure supplies
Time wise schedule will take care,
monitoring screens are available. Auto alerts
available in case of deviation.
Supply Chain

Supply Chain
22
06 Inventory adjustments are possible
only at month end
Inventory adjustments are done on daily
basis based on actual production
07 Due to uncertainty vendors keep
inventory of all items for all models
As schedules are fixed therefore vendors to
keep inventory of required items only
08 Inventory norms are fixed for all items No Inventory norms. Material will be
available as per advance time
09 Line stoppages due to component
shortages
Minimum Line stoppages due to component
shortages
10 Segregation inside the plant No Segregation inside the plant

Stores
23
1 Exact time of receipt, unloading
location & consumption point is
not known
Time of receipt, unloading location &
consumption point is mentioned on tags
2 Manual punching at gate, Manual
counting of trolley/bins & GRN
creation etc.
No manual punching. Every entry, counting of
trolley/bins, GRN creation is through the reading
of the bar-coded documents
3 Any material in any quantity is
sent by the vendor
Material can be sent only as per the daily
schedule
4 Vendor persons inside the plant to
take physical stock etc
No need of vendor persons inside the plant
5 Real time information of dispatch
of material, GE and GR not
available
Real time information is available

e-Material Flow
Key Benefits Achieved

The project benefited the organization in multiple
ways. The key benefits that we realized post
implementation
• Inventory carrying cost reduction - parts and engines
• Lesser instances of line stoppages, helped in
increased production and lot of savings in the labour
cost
• Manpower savings which resulted from automation
across the supply chain, store and planning
departments
25

• Truck Turn Around Time reduction and in turn,
increase in the logistics efficiency
• We also realized a lot of other benefits as a
result of streamlining of the Supply Chain and
the automation at various levels
• Benefits which we reaped from this project -
way surpassed the cost of the project
• RoI within 6 months of the launch owing to the
scale and the effectiveness of implementation
26

Benefits to Suppliers
• To the minute firm scheduling system helped Suppliers
-Optimise human resources
-Inventory optimization
-Reduction in manufacturing losses
-No requirement calculation from rolling plan
-Simpler material reconciliation at both locations
-Standardize production lot size and economise on logistics
costs
• Real time information of truck entry, acknowledgement,
discrepancy if any, return of empties and truck exit etc.
• Reverse logistics management is simpler and efficient
• The number trolleys/bins in circulation reduced
• Truck TAT improved
27

e-Material Flow - Achievements
Particulars Before EMF @6600VPD After EMF@9100VPD
No. of filled trolleys 2200 nos. ~700 nos.
Avg. Inventory of
emf parts
15 Crore 9 Crore
Avg. engine inventory 3200 Nos. 2700 Nos.
Line stoppages Avg. 3073 Min/Mth Avg. 1350 Min/Mth
Production plan changes
Avg. 75 /Mth
(Unplanned)
Avg. 10/Mth
(Approved)
Manpower in Stores 184 148
3PL operators
(stores + vendors)
244 112
Manpower in PPC 231 201
No. of 3PL trucks 102 85
Truck turn-around time Avg. 130 Min Avg. 90 Min

e-Material Flow - Achievements
Particulars Before EMF @6600VPD After EMF@9100VPD
Schedule adherence No day wise schedule Avg. 95% for daily schedules
On-time delivery NA 87% on time achieved
% Lot segregation 1.2% 0.04%
Accuracy-BOM 86% 100%
Minor injuries/Annum
(PPC + Stores)
50 16
Visuals/FIFO No Visuals/FIFO Day-wise colour tags and emf
layout ensures FIFO
Information flow Slow: combination of manual
and emails.
Fast: Combination of real time
reports and Auto alerts
Total 2.83 Crores/Annum recurring cost has been saved from one
plant.

e-Material Flow
Key Business Challenges Faced

The complexity of the project was huge.
There were so many areas which the project
touched and hence the challenges. Top 3
Challenges :
• Physical changes on shop floor ( stores
layout changes without stopping
production ) Overcome by Detailed planning
for contingency and top management drive

• Cultural changes (Change Management)
Adherence to MRP (legacy System) –
Overcome by involvement of key
stakeholders in testing and suggestions
during the project
• Availability of business experts for sufficient
and quality time – Overcome by calendar
planning and top management involvement

e-Material Flow
Key Technical Challenges Faced

The system is unique. The challenge was high
risk on account of system failure. Top 2
Challenges:
• Since the system was evolving, the iterations
were more and to be done within stipulated
time frame. Overcome by Rigorous testing of
all scenarios and training to users before Go-
Live and building of robust fall back systems
for each and every process

• Development and support capability of internal
and external (Consultants) teams. Overcome by
motivating both teams (Business & Technical)
and involving external process experts to
achieve a unique and effective integrated
solution/system for complete supply chain, to
work as single team and complement each other

e-Material Flow
Next Steps

The EMF Journey Continues
• Continue to implement e-Material Flow System in all
our manufacturing plants - existing and upcoming
• Our endeavour always is to make sure that
– Technology is used in the most optimal way
– Functional processes designed efficiently
– Proposed benefits reaped thoroughly

Transforming supply chain Harish Bawari - Hero MotoCorp May 2016

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