This document provides information about Hero Honda and its main competitor TVS Motors. It discusses Hero Honda and TVS Motors' sales performances over several months. It also provides background information on both companies, including their history, product lines, and key financial details.

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WORKING CAPITAL MANAGEMENT IN
HERO HONDA
Discuss WORKING CAPITAL MANAGEMENT IN HERO HONDA within the Financial Management
forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT
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HONDA INDEX PARTICULARS 1. Company profile 2. Analysis ...
WORKING CAPITAL MANAGEMENT IN HERO HONDA
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WORKING CAPITAL MANAGEMENT IN HERO HONDA -
December 18th, 2008
This project tries to look into the WORKING CAPITAL
MANAGEMENT IN HERO HONDA
INDEX
PARTICULARS
1. Company profile
2. Analysis & Comparison
A. Working capital style in India
B. Working capital style Abroad
C. Working capital style in Automobile industry
D. Working capital constituents
E. Operating cycle
F. Ratios
G. Qualitative Analysis
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4. COMPANY PROFILE
(COMPETITORS)
TVS Motor
Company’s two wheeler sales in August 07 at 102,734
units
TVS Motor Company reported total two wheeler sales of
102,734 units in August 2007 compared to 135,533
units in August 2006. The overall industry slowdown
witnessed by the motorcycle segment continued in
August 2007 resulting in high levels of trade stock for
most players. During the month the company’s
motorcycle sales recorded 46,235 units compared to
83,014 units recorded in August 2006. The company is
consciously reducing the stock of motorcycles in trade,
even as it witnessed a 4% increase in motorcycle sales
over last month. TVS trade stocks will be lower than
most players in the industry.
The company has rolled out a new 110 cc StaR City,
which will be available for the forthcoming festival
season. Among the other models that were
simultaneously rolled out, the new 125cc Flame and
Apache EFI will hit the market in the coming months
and is expected to provide impetus to sales. With the
other products that were rolled out expected to hit the
market in the coming months, TVS would have
significant presence in the economy, executive and
premium segments. The company will also enter the
three wheeler market, having already rolled out three
variants Petrol, LPG and CNG in the two stroke version.
Four stroke three wheelers are also expected to be
launched in the coming months. The company hopes to
capitalize on growth of the three wheeler market, which
has witnessed a 21% compounded annual growth rate
in the last five years.
TVS Scooty sales clocked 24,645 units in August 2007
compared to 23,118 units recorded during the same
period last year. This segment witnessed a 7% growth
over the same period last year. The company will also
foray into the electric scooter market with the roll out
of its Scooty Teenz Electric that has been designed to
address all the performance issues that plague the
current electric vehicles.
On the export front, TVS Motor Company exported
12,006 units of two wheelers in August 2007 recording
a growth of 9% over August 2006.
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5. TVS Motor Co. records highest ever two wheeler sales
of 15, 28,214 units in 2006-07
Total motorcycle sales for the year record 15% growth
records highest ever exports, crosses 1 lakh mark in
2006-07
TVS Motor Company has closed the financial year 2006-
07 with 15% growth in the sale of motorcycles. The
motorcycles sales recorded 9,24,813 units in the
financial year 2006-07 compared to 8,06,708 units
2005-06. The total two wheeler sales witnessed 14%
growth by clocking 15, 28,214 units compared to
13,42,204 units recorded in the previous financial year.
This represents the highest volumes ever in the history
of TVS Motor Company both in motorcycles as well as
in the overall two-wheeler segment. The Company’s
scooter sales recorded 2,58,888 units in the financial
year 2006-07 compared to 2,45,276 units in 2005-06,
recording a growth of 6%.On the export front too, TVS
Motor Company registered its highest ever sales,
clocking 1,03,013 units in the financial year 2006-07
compared to 79,679 units last year, at a growth of
29%.
In the month of March 2007, the motorcycle sales
recorded 73,239 units compared to 83,896 in March
2006. The total two wheelers units sold in March 2007
were at 1, 28,207 units compared to 1, 28,857 units
recorded last year. The company’s March 2007 total
two wheelers sales saw an increase of 7% over its
February 2007 performance.
The company, during March 07, launched StaR Sport, a
new and compact styled motorcycle for the economy
segment. The initial response to StaR Sport has been
very encouraging and together with StaR City the
company will increase its market share in the segment.
The coming year will see a spate of new launches that
will spur the sales further.In scooters, TVS Scooty
clocked 20,297 units of sales in March 2007 compared
to 17,410 units in the previous year. In exports, the
company recorded 8,508 units in March 2007 compared
to 6,032 units recorded last year, at a growth of 41%.
TVS Motor Company records 7% growth in two
wheelers in January’07
TVS Motor Company has recorded a growth of 7% in
total two wheelers during January 2007 over the
corresponding period in the previous year. The total
two wheeler sales in January 2007 stood at 121,147
units compared to 112,910 units recorded during
January 2006.
The company’s total motorcycle sales in January 2007
recorded 69,634 units compared to 69,279 units in
January 2006. The performances of brands launched
last year, in particular, StaR City Electric Start version
and Apache continue to receive favourable response.
The company’s accelerated drive in achieving top
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6. quality in all its products has resulted in Apache
winning the ‘NDTV Car & Bike – AAA viewer’s choice
Bike of the Year 2007’ award, thus reinforcing
customer’s preference. Last year, TVS Apache, which
was awarded ‘Bike of the Year 2006’ by several leading
auto magazines, was chosen as the number 1
motorcycle brand in its class, in an all India customer
satisfaction survey conducted by TNS Automotive
StaR City ES with its attractive pricing is India’s first
and only electric start 100cc motorcycle. This coupled
with the unique 5-year warranty offered on the vehicle
has proved a big hit and brings great reassurance and
value to the discerning motorcycle customers in the
country.TVS Scooty recorded 20,534 units in January
2007 compared to 17,957 units in the same period last
year recording a growth of 14%. Scooty Pep+
continues to be the market leader in the sub 100 CC
scooter segment. In the export front, TVS Motor
Company continued its good performance having
exported 7,049 units in January 2007. Exports recorded
a growth of 11% compared to the same period last
year.
TVS Motor Company records 28% growth in
Motorcycles
Buoyed by a 28 per cent growth in its motorcycles, TVS
Motor Company’s total two wheeler sales in July 2006
clocked 1,21,462 units compared to 1,01,359 units,
during the same period last year. The total two-wheeler
growth stood at 20 per cent.The motorcycle sales in
July 2006 were higher at 68,335 units compared to
53,215 units during the year-ago period largely due to
the growing popularity of Apache and TVS StaR brands
across all markets.
In a short period of time Apache has become the
second-largest brand in the premium segment and the
company continues to ramp up its production to meet
the growing demand. The TVS StaR brand too has
achieved significant growth. During the month it
crossed the cumulative 8,00,000 unit mark.
TVS Scooty sales clocked 25,356 units in July 2006 as
against 24,244 units of July 2005. The brand continued
its market leadership in the sub-100 cc scooter
segment. TVS Motor Company exported 10,382 units in
July 2006, the highest ever export sales in a single
month, reflecting a growth of 15 per cent over the
same period last year.
Bajaj Auto is a major Indian automobile manufacturer.
It is India's largest and the world's 4th largest two- and
three-wheeler maker. It is based in Pune, Maharashtra,
with plants in Akurdi and Chakan (near Pune),Waluj
(near Aurangabad) and Pantnagar in Uttaranchal. Bajaj
Auto makes and exports motorscooters, motorcycles
and the auto rickshaw. The Forbes Global 2000 list for
the year 2005 ranked Bajaj Auto at 1946
Over the last decade, the company has successfully
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7. changed its image from a scooter manufacturer to a
two wheeler manufacturer. Its product range
encompasses Scooterettes, Scooters and Motorcycles.
Its real growth in numbers has come in the last four
years after successful introduction of a few models in
the motorcycle segment.The company is headed by
Rahul Bajaj who is worth more than US$1.5 billion
.
Company's history
Bajaj Auto came into existence on November 29, 1945
as M/s Bachraj Trading Corporation Private Limited. It
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 1970, it rolled
out its 100,000th vehicle. In 1977, it managed to
produce and sell 100,000 vehicles in a single financial
year. In 1985, it started producing at Waluj in
Aurangabad. In 1986, it managed to produce and sell
500,000 vehicles in a single financial year. In 1995, it
rolled out its ten millionth vehicle and produced and
sold 1 million vehicles in a year
Products:
Some of the models that Bajaj makes (or has made)
are:
• Scooters
• Bajaj Kristal DTSi
• Motorcycles
• Hilti Dulti Bikes
• Bajaj CT 100
• Bajaj Platina
• Bajaj Discover 110cc
• Bajaj Discover DTS-i 125cc
• Bajaj XCD 125 DTS-Si
• Bajaj Discover DTS-i 135cc
• Bajaj Pulsar 150 DTSi
• Bajaj Pulsar 180 DTSi
• Bajaj Pulsar 200 DTSi
• Bajaj Pulsar 220 DTS-Fi
• Bajaj Avenger
Dealers:
The company has a network of 498 dealers and over
1,500 authorised service centers and 162 exclusive
three-wheeler dealers spread across the country.
Around 1,400 rural outlets have been created in towns
with population of 25,000 and below. The current
dealer network is servicing these outlets. Bajaj has
identified a segment of customers 'Probikers', who are
knowledgeable, appreciative of contemporary
technology, they are trendsetters and very choosy
about what they ride. Hence, Probikers need to be
addressed in a meaningful way that goes beyond the
product. Bajaj Auto is in the process of setting up a
chain of retail stores across the country exclusively for
high-end, performance bikes. These stores are called "

8. Bajaj Probiking". Eight such stores have been opened,
viz in Pune, Ahmedabad, Chennai, Hyderabad, Kolkata,
Navi Mumbai, Chandigarh and New Delhi.
Another landmark has been broken in terms of the
investment required to create a plant with a capacity of
1 million vehicles annually. Bajaj Auto has directly
invested only Rs. 150 crores in this new manufacturing
unit for an investment cost of merely Rs.1500/vehicle a
benchmark perhaps unequaled elsewhere. This will
enable one of the shortest payback periods for any
Plant globally.Bajaj Auto, the pioneer in performance
biking has further extended the portfolio with the
launch of the new 200 cc ‘Pulsar’ DTS-i in New Delhi
today. The latest offering has set new benchmarks in
technology, performance, and styling to address the
needs of a growing segment of pro-bikers.
December 07
Particulars December 2007 December 2006 Growth %
MOTORCYCLES 176,441 187,063 -6
TOTAL 2 WHEELERS 177,249 187,179 -5
3 WHEELERS 22,221 27,749 -20
TOTAL 2 & 3 WHEELERS 199,470 214,928 -7
Exports out of the above 50,702 39,385 29
YTD 2007-08:
Particulars April – December 2007 April – December
2006 Growth %
MOTORCYCLES 1,660,182 1,843,654 -10
TOTAL 2 WHEELERS 1,678,491 1,858,641 -10
3 WHEELERS 220,636 237,198 -7
TOTAL 2 & 3 WHEELERS 1,899,127 2,095,839 -9
Exports out of the above 460,591 325,728 41

9. WORKING CAPITAL STYLE
IN
INDIA
CONSERVATIVE POLICY AND AGGRESSIVE POLICY
The working capital management style adopted in India
is both conservative and aggressive. In most of the
industry they have fewer amounts of current assets and
more amount of fixed assets. This ensures profitability
but at the same time when the current assets are less
current liabilities may not be met with this. Such style
is followed in industry like automobile industry.
Whereas in the case of industry like some sensitive
industry conservative policy is adopted which is
opposite of aggressive policy.
OPTIMUM INVENTORY:
Every firm likes to keep inventory in stores for the least
possible days. In India such policy is achieved by the
use of inventory management technique like Just In
Time, Supply Chain Mnangement etc. In India much
stress is given to convert the inventory in the
production.
SELF COLLECTION POLICY/AGENCY OR DEALERSHIP
SYSTEM:
In India the policies followed for debtors are generally
the self collection policy where the company itself
collects the amount from its debtors. The other forms
to manage debtors is also the discounting of such
debtors through bills receivable. In various companies
the system followed is Agency, Franchise or the
Dealership system. In this system the organization
transfers its goods to debtors and receive immediate
payment and the dealer later on sells the goods and
collect payment from customer.
DISTRIBUTED CASH MANAGEMENT SYSTEM:
For managing cash most of the organization in India
follows distributed cash management system where
every branch has its own cash accounts and they
manage these cash accounts. In India the centralized
cash management system is followed in very few
organization because of inadequate resources like in
terms of good information and customer system.
USE OF CREDIT DEFERRAL POLICY AS FINANCING
ALTERNATIVE:
In India for financing its current asset is done by
various techniques like discounting of bills receivables,
obtaining short term bank borrowings etc, but in India
use of deferral credit is also a popular technique for
financing the current assets of the company. Under the

10. deferral credit system a firm defers the payment to its
supplier for a longer period and use that fund to finance
its current assets. Generally the payment period for the
creditor is more than the collection period from debtors
and the period for which cash and bank balance is
required.
WORKING CAPITAL STYLE
ABROAD
USE OF INFORMATION SYSTEM AND GOOD TECHNIQUE
LIKE JIT FOR
INVENTORY OPTIMISATION:
At abroad most of the companies use the information
system ad IT technologies coupled with good inventory
technique to minimize the inventory conversion period.
By the use of these techniques they are able to reduce
the amount of inventory blocked in the inventory.
Example of such technique is supplier chain
management technique coupled with just in time
system. A company like Toyota is using such
techniques effectively and is able to reduce the amount
of inventory. This is further coupled with good
distribution management system. This is used to
reduce the time for which inventory is stored in the
storage area. Whenever the company receives the
material they issue the material directly to the shop
floor with the use of these techniques.
DEBTORS - TECHNIQUES LIKE FACTORING:
In most of the developed countries Factoring is used to
finance its accounts receivables. This technique is not
so widely used in developing country like India. Apart
from factoring there are other modes to finance the
accounts receivables like drawing of the bills
receivables and discounting of these bills receivables.
Short term bank finance is also used to finance the
accounts receivables. The company is able to manage
the amount blocked in the accounts receivable through
the use of these techniques.
CENTRALISED CASH MANAGEMENT SYSTEM:
For managing the cash and bank balance portion of the
current assets the companies in the abroad countries
uses techniques like centralized cash management
system. Under this system the company maintains the
cash and bank balance at the centralized location and

11. payments are made from this cash and bank balance
account. One major advantage of this system is that
the surplus cash balance can be effectively invested in
marketable securities which ensures good return for the
company. At the same time one major disadvantage in
this system is that the payment gets delayed and the
branch offices has to rely on the centralized office for
its cash payments.
USE OF CREDIT DEFERRAL POLICY AS FINANCING
ALTERNATIVE AND ALSO BANK CREDIT:
In the abroad countries the credit deferral system is
followed which is same as the one discussed in working
management style in India.
WORKING CAPITAL OF THE INDUSTRY
WORKING CAPITAL OF THE INDUSTRY
• USE OF INVENTORY CONTROL TECHNIQUE: in the
automobile industry, from the last two years,
companies are more inclined toward using of
information technologies in maintain their inventory
weather it is raw material or the finished goods. Many
companies are using JUST IN TIME in controlling their
inventory on the shop floors. Using JIT in controlling
the inventory, company are able to reduce the handling
cost which means when the raw materials are needed
for the input at that time only the inventory are
brought down on the job floor.
Inventory also means the finished stocks, so when the
output as the finished goods are produced then using
supply chain management system , company directly
send it to the customers so again it reduces the
handling cost of the finished goods. Using supply chain
management system, the company also reduces the
time of converting raw material into finished goods and
then selling it to end customers.
• DEBTORS - DEALERS: companies like TVS, they are
more focused in system called DEALERS MANAGEMENT
SYSTEM, and this is an online network system through

12. which the companies are directly related to their
dealers all over the INDIA. For example when any
dealers are shortage of the products then the demand
is directly is send to the companies so the time gap is
reduced in placing the order and then receiving the
order. DMS system also helps in receiving the money
from debtors on time, as debtors get aware when they
have to pay to the company and it also helps in
determining the discounts availed in different order of
lots of goods.
• DECENTRALISED CASH MANAGEMENT SYSTEM:
collection of money from dealers or other debtors is a
big problem for the company these days in any
industry. In the last two years many companies have
decentralized their system in collecting the cash from
the debtors. By this system many companies have
reduced their cost of collection from their debtors and
even they have increased the working capital of the
company.
• USE OF CREDIT DEFERRAL POLICY AS FINANCING
ALTERNATIVE AND ALSO
BANK CREDIT: Many companies finance their working
capital by the deferral policy of credit or by bank credit.
Using deferral policy many companies are able to
manage their working capital at very low cost. Use of
bank credit is very old system but thing which matters
is how they use their credit system in managing
working capital. Companies try to pay their debts as
late as possible through which they can use their credit
period in managing working capital which also not
affects their goodwill in the industry.
WORKING CAPITAL
CONSTITUENTS
HERO HONDA MOTORS LTD:
The major components of the working capital of Hero
Honda Motors Ltd are Inventory, Debtors, Cash and
Bank balance and the Creditors. In this working capital
structure there are few interesting things to note and
analyse. These are as follows
No short term bank borrowings: There are no short
term bank borrowings taken by the company to finance
the current assets of the company. This is mainly
because the current assets of the company are finance
by the credit deferral toward its creditors.
Negative working capital: The working capital of the

13. company is negative this is because the current
liabilities of the company are more than the current
assets of the company. The reason behind this is that
at any given point of time the amount blocked in
creditors is more than the amount blocked in its current
assets, mainly in the inventory cash and debtors.
Lower current ratio: The current ratio of the company is
very low (this is discussed later) which indicates that
the company is following aggressive policy. Under this
policy the company does not have the short term
liquidity but the amount blocked in the net working
capital is zero which gives the company more
profitability.
BAJAJ AUTO LTD
The major components of the working capital of BAJAJ
MOTORS LTD Ltd are Inventory, Debtors, Cash and
Bank balance and the Creditors. In this working capital
structure too there are few interesting things to note
and analyse. These are as follows
Presence of short term borrowing: in order to finance
its current assets bajaj auto had to take shortterm
borrowings from the bank. This was the highest in the
year 2002-03, followed by the year 2006-07. In the
intervening years the borrowings from the bank were
minimal and was even nil for the year 2004-05. This
trend comes as a consequence of the changes in the
net working capital that has been explained next.
Net Working Capital: the net working capital of Bajaj
auto is negative for most of the years except for the
year 2002-03 when it was positive. The reason for this
has already been given while explaining the negative
working capital for Hero Honda. However one
interesting thing to note is that the company’s short
term borrowing was the maximum in the same year
when its net working capital was also maximum. We
will see an interesting trend regarding this relationship
between NWC and short term borrowings when we
discuss TVS.
Current Ratio: the current ratio for the company is less
than 1 for most of the years except for the year 2002 -
03. This shows that the company is following an
aggressive policy. But again as compared to Hero
Honda the company seems less aggressive which can
be seen from the higher values of its current ratio.
TVS AUTO Co.
The components of the working capital are the same as
in the earlier two companies discussed. The other
things to be noticed are as follows:
Presence of short term borrowings: TVS motors have
been taking short term loans to finance its current
assets. Hence the relationship between net working
capital and the short term borrowing mentioned earlier
is more prominent in the case of TVS motors.
Whenever the working capital is positive the company
has gone for short term borrowings. This will become
apparent from the following data

14. constituents 02-03 03-04 04-05 05-06 06-07
Short term Borrowings 16.13 -10.71 -5.42 34.12 70.02
NET WORKING CAPITAL -9.06 -17.38 4.27 34.6 125.63
Net working capital: the net working capital for TVS for
the first two years i.e. 2002-03 and 2003-04 was
negative where as the same for the later years is
positive throughout and is constantly increasing. This
shows that the company’s current assets were greater
than the current liabilities and a part of the net working
capital was financed by the short term borrowings. In
the year 2005-06 almost the complete gap in the
working capital was financed by the short term
borrowings.
Current ratio
The current ratio for the company is constantly
increasing and has been greater than one for the past
three years i.e. since 2003-04. This is a marked shift
from its earlier aggressive policy when the current ratio
was less than one.
OPERATING
CYCLE
ANALYSIS
Financial analysis
Raw materials conversion period: How much time does
it take to convert the raw materials into finished goods?
There has been a constant decline in the raw materials
conversion period.
We cited two reasons for this-
1) Good vendor management system
2) Just in time ( JIT )
3) E-Kanban system
Bajaj auto is better in converting raw materials into
work in progress because they have better operational
efficiency in this aspect.
TVS, on the other hand, the raw materials coversion
period is constantly decreasing because of poor vendor
management system and poor operational efficiency
and their conservative approach and they like to keep
more of stock for safety purposes.
Work in process conversion period: how much time
does it take to convert the work in process into finished
goods.
Hero Honda has a low WIP Conversion period of .72
days due to its high techonological know how as it has

15. a collaboration with the Honda company, Japan. Also
their operational efficiency and their e-kanban system
is in place. They use the JIT system and all this
decreases their wip conversion period.
1) There has been an increase of 11.2% in the sales of
hero Honda but the overall figure has changed from
3000751 to 3336756 so the absolute figure is very
large so to change the work in process into finished
goods at a fast pace was very important in case of hero
Honda.
2) In the case of bajaj auto ltd. There was a sudden
jump from 1.49 to 2 and again fallen back to 1.49 the
reason cited was that the increase in sales was from
85,498 million to 1,06,060 million so the absolute
increase was less and thus the inventory of conversion
of work in process to finished goods was high. The tvs
is also trying to decrease their wip conversion period
and we can see a constant decline in their wip
conversion period.
Finished goods conversion period: how much time does
it take to convert the finished goods into sales.
In the case of hero Honda ltd the FGCP is 2.4 which is
vey less as compared to the industry. The reasons are
their better relationship with their dealers, better
network and the CRM and SCM in place.Whereas in
case of bajaj auto ltd. They are still trying to reduce
their FGCP but it would take time they are having IT
and ERP of SAP R/3 but still the maximum use is yet to
be seen. Whereas in the case of TVS its increasing
because they don’t have SAP in place and the industry
is becoming competitive day by day.
Debtors conversion period: it is the time taken to
convert the receivables into cash.
The trend is the same across all the companies as there
has been a sudden increase in the prices of raw
materials( steel, nickel and aluminium ) and that’s why
the receivables are increasing throughout the industry.
As they want to have better relationship with their
creditors.
Creditors deferral period : the time taken to pay back
our creditors.
The hero Honda is cashing on the better relationship
with their suppliers and the cash discount they give,
they are capitalizing on that. Whereas bajaj auto ltd.
And TVS are increasing their creditors deferral period
as they want to pay their creditors late and keep the
money with them as they want to invest this money in
other areas.
RATIO
ANALYSIS

16. Current ratio and quick ratio: it is the ratio of the
current assets to current liabilities.
In the case of hero Honda it is low, showing the
aggressive polices the hero Honda is following and the
same case is with the bajaj but in case of TVS it is
increasing as they have a conservative approach.
Inventory turnover: how many times do you convert
your inventory in a year?
In the case of hero Honda we see a gradual increase in
the inventory turnover whereas in case of bajaj auto ltd
there is a sudden increase the reason cited is the better
percentage increase in the sales of hero Honda and also
the raw mater costs as a perentage of total sales
increase from 69.5% to 72.5% i.e. a increase of 3%.
But in the case of TVS it is constantly decreasing
because of their aggressive approach.
No. of day’s inventory: how many days do we keep the
total inventory?
There has been a constant decline in hero Honda and
bajaj auto ltd. As their conversion of inventory is better
because of their efficient operations and their JIT and
SAP in place whereas in case of TVS it is increasing
because they have a conservative approach and they
keep a high level of safety stock.
Debtors turnover: the number of times in a year your
debtors are converted into cash?
What we see here is a trend in the entire industry for
the last three years its decreasing as hero Honda has
implemented dealer management system where they
sell their product to the dealers and then the dealers
sell it to the consumers.
Current assets to fixed assets ratio: this shows what
kind of policy we are following a high ratio shows
conservative approach whereas a low ratio shows
aggressive approach and that’s what we see in the hero
Honda and bajaj auto ltd. A aggressive approach
whereas in TVS a conservative approach.
QUALITATIVE
ANALYSIS
QUALITATIVE ASPECTS OF THE COMPANY:
WHAT IS?
VENDOR MANAGEMENT SYSTEM: vendors are the
suppliers of the company which supply raw materials or
other goods which is required to produce the final
product. Vendors’ management is also known as the
suppliers’management. It is information technology
method which supports the process and management
of acquiring the inputs or raw materials from the
suppliers.
Tasks associated with vendor management are:
• Managing suppliers performance
• Negotiating with the suppliers

17. • Obtaining and evaluating quotes from suppliers
The performance of supply management departments
and supply management professionals is commonly
measured in terms of amount of money saved for the
organization.
JUST IN TIME: it is an integrated set of activities
designed to achieve high-volume production using
minimal inventories of raw materials that arrive at the
workstations exactly when they are needed. JIT helps
in avoiding waste, machine downtime and it also keeps
proper check on the quality aspect of the inventory.
ENTERPRISE RESOURCE PLANNING: ERP is software
which integrates the different functions in the
organizations. It eliminates the need to obtain different
applications for each of the business needs.
SUPPLY CHAIN MANAGEMENT: it is a technique in
which the idea is to apply a total systems approach to
managing the entire flow of information, materials, and
services from raw materials suppliers through factories
and warehouses to the end customers.
DEALERSHIP MANAGEMENT SYSTEM: this is a program
which manages the entire dealer of the company which
improves the communication level between dealers and
the company and it also reduces the cost of handling
them
IMPLICATIONS IN THE COMPANY:
HONDA: IT has a direct online network with its
suppliers to ensure a seamless flow of parts from
vendors to its units. Through vendors management
system HONDA has reduces it manufacturing and
processing cost from to 1.74% to 1.64%.
To improve the efficiency and inventory cost, it is also
using the concept of JUST IN TIME beyond the shop
floors. With the help of vendors management HONDA
uses only the required inventories which is to be
processed as to avoid the inventory cost on the shop
floors. Through this concept the raw materials can be
properly checked on the aspect of quality the company
is also able to reduce the handling cost of inventory on
the job floor.
The implications of vendor management system in
HONDA, has increased the total numbers of vendors to
135 from 46 and in the same time the ordering cost
and handling cost have also decreased which in the end
affecting the company’s working capital. The company
places online order to the suppliers which is reducing
the time gap taken in supply of raw materials.
HONDA also uses the enterprise resource planning
which is SAPR/3 through which it is able to integrate its
different functions inside the organization. Using the
ERP System, Honda was easily able to implement the
new system of VAT when it was implemented by
Haryana government, without much investment in its
financial system.
BAJAJ:
Bajaj is one of the companies in automobile sector in
India which is using ERP system and supply chain
system. Through supply chain management, the
company is able to reach the zero defects point in
which the cost of selling the products to the end

18. customers is reduced. The supplier also supplies the
raw materials to the company at the right time which
reduces the idle time cost.
TVS:
To reduce the working capital cost, TVS uses the
concept of dealership management system. TVS is able
to manage the entire 280 dealer under them and also
dealer uses this system. When the dealers face any
shortage of product, it directly informs the company
which instantly cover up the shortages faced by them.
Through DMS, TVS is able to manage its entire dealer
with less cost which reduces the working capital of the
company. Company is also using the supply chain
system in order to manage the entire network from
supplier to customers.
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