SCM Hero MotorCorp 11A 29A
[COMPANY NAME] [Company address]
SUPPLY CHAIN MANAGEMENT AT Arun Maithani HERO MOTOCORP 11A Nitesh Singh
1. Hero Motocorp Limited Introduction Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of two - wheelers, based in India. In 2001, the company achieved the coveted position of being the largest two-wheeler manufacturing company in India and also, the 'World No.1' two-wheeler company in terms of unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position till date.
MANUFACTURING Hero MotoCorp two wheelers are manufactured across 3 globally benchmarked manufacturing facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar, in the hill state of Uttrakhand. DISTRIBUTION The Company's growth in the two wheeler market in India is the result of an intrinsic ability to increase reach in new geographies and growth markets. Hero MotoCorp’s extensive sales and service network now spans over to 6000 customer touch points. These comprise a mix of authorized dealerships, service & spare parts outlets, and dealer-appointed outlets across the country. 1 | Page
Hero MotoCorp has presence across more than 30 countries across the world. Africa has recently emerged as a major export partner.
i. Number of Plants – Haridwar, Gurgaon, Dharuhera (upcoming plants Neemrana* and Halol*) ii. Product Portfolio – Karizma, Karizma ZMR, Passion (Plus and Pro), Splendor (Plus and Pro), Pleasure, Ignitor, Maestro, CD Deluxe, Glamour, Achiever, CBZ, Hunk, Impulse etc. The product line of Hero Motocrop is quite impressive. 2. Location Strategy and Production System Location Strategy for Plants: The decision for a new plant is taken by a core committee at Hero Motocorp comprising of Group Executive council and representative of the boards. The location for plant depends on a number of factors:
2 | Page
Excise benefits in case of Special Economic Zone benefits (Haridwar plant) Supplier presence – as in case of Manesar and Haridwar plant Connectivity of the proposed site from adjoining and far off places Power availability and power rates in the state If land is available at a concessional rate
Production System: At Hero Motocorp, we have adopted product (assembly line layout). This is an optimum layout for Hero Motocorp due to high volumes and limited variety. Additionally, this is the most suitable layout for mass production. Characteristics of Product Layouts • Special-purpose equipment are used • Changeover is expensive and lengthy • Material flow is continuous • Material handling equipment is fixed • Little direct supervision is required • Planning, scheduling and controlling functions are relatively straight-forward • Production time for a unit is relatively short Advantages 1. The flow of product will be smooth and logical in flow lines. 2. Throughput time is less. 3. Simplified production planning and control systems are possible. 4. Less space is occupied by work transit and for temporary storage. 5. Reduced material handling cost due to mechanized handling systems and straight flow. 6. Perfect line balancing which eliminates bottlenecks and idle capacity. 3 | Page
7. Manufacturing cycle is short due to uninterrupted flow of materials. 8. Small amount of work-in-process inventory. 9. Unskilled workers can learn and manage the production. 3. Overview of the supply chain and the process flow
This diagram shows the process flow of vehicle manufacturing in the Hero Motocorp Plants. Figure 1: Supply chain overview for Hero Motocorp Ltd.
The above figure shows a brief overview of the entire supply chain of Hero Motocorp Ltd for the manufacture of two- wheelers. In this model it can easily be seen that the company sources many parts from its suppliers. These are parts and materials such as – Steel and other metals, rubber, electronics, plastics, glass, textiles etc. After the sourcing of these materials, they are processed further by operations such as stamping, pressing, painting, welding, forging, casting etc. The following report details the above mentioned supply chain further. 4. Supply Chain Strategy at Hero Motocorp 4 | Page
Hero Motocorp uses the following five step strategy to plan the supply chain. These factors have been carefully developed over the past two decades to ensure long term sustainability while ensuring superior performance: i. Risk Recognition: While initially the entire focus was on the Tier one suppliers, gradually the focus is being extended to the Tier 2 and Tier 3 suppliers as well. The company gauges the criticality of the Tier 2 and Tier 3 suppliers to the supply chain. The risk is estimated by calculating the impact on the entire production if the lower tier suppliers fail to honour commitments. The factories and locations of those lower tier suppliers are also studied to find out the potential impact of calamities like earthquake, civil unrest, flooding fire or financial collapse. Other issues could be accusations against the lower tier manufactures for the use of child labor or labor exploitation. ii. Creating Visibility of lower tier suppliers It is difficult to identify the risks associated with the lower tier suppliers as they mostly deal with Tier 1 suppliers and their activities are not easily visible in the supply chain. It is seen that many companies have no information about their Tier 2 suppliers. Mitigating supplier risk and being able to respond quickly when disaster strikes is dependent upon having visibility of the supply base across all tiers. Hero Motocorp is attempting to create a coordinated global supplier database to increase visibility and enable efficient management. Even though Hero Motocorp relies on Tier 1 suppliers to manage compliances at the lower tier suppliers, they regularly monitor compliances themselves to evaluate the risks independently. iii. Supply Chain Mapping Hero Motocorp uses a standardised approach to the management of supplier information. With an accurate database, buyers can request information from everyone involved in their supply chain. In this system, ‘cascading invitations’ are sent down the supply chain. The buyer instigates the action by inviting its Tier 1 suppliers to join the mapping process. Tier 1 suppliers pass the invite on to Tier 2s, and so on right down through the tiers. The key to success is automation – ensuring that the person in the middle can link what they sell to whom; and that details of what they buy link to the next person in the chain. iv. Collaboration Hero Motocorp realizes that managing the entire supply chain in isolation is a very time consuming and tiresome process. Hero Motocorp leverages 5 | Page
on the presence of the Hero Group across various industries. Most industries share common suppliers, so what may be difficult to do for an individual organisation becomes easier to achieve collectively. The most efficient and effective way that Hero Motocorp has adopted is by working within a collaborative community, where effort and cost are shared. Obviously individual supply chains remain visible to individual buyers only, but the whole effort is shared. And importantly, suppliers appreciate having a single industry approach, rather than having to face a myriad of independent approaches. Collaborative communities that use a central source of verified supplier data provide a perfect environment in which to map out supply chains – making it simple for independent companies to ‘cascade invitations’. The supplier then determines what information to make visible to whom. 5. Strategic Supply and Quality Management Framework at Hero Motocorp Ltd.
Techinical and Logistical aspects
Supply Management Integration
Strategic Importance of parts Supply Manageme nt
Supplier Pool Rationalizatio n
Hero Motocorp uses the above framework to strategically manage its supply chain. i. Supplier Pool Rationalization HMCL has faced the increasing complexities in the supply chain network by means of building a network of hierarchical relationships: the manufacturer or final assembly plant, the first-level suppliers, and the second and lower-level suppliers. 6 | Page
Supplier Relationships One of the main consequences of this new configuration of the supply chain in HMCL’s model is the dramatic reduction in the number of first-tier suppliers that HMCL directly works with. Our interaction with HMCL operations manager reveals that since collaborative relationships with their suppliers were initiated, the number of suppliers has reduced considerably. iii. Supply Management Integration Hero Motocorp has faced challenges due to rapidly declining product life cycles in the automobile industry. To counter this challenge, it has attempted to integrate its supply chain to increase the responsiveness of its supply chain. This has improved its ability to design products faster, with higher qualities and lower costs as compared to a single company. External collaboration among supply chain partners leads to reduction of costs, stock-outs and lead-time. Costs can be minimized through establishing consistent and predictable demand/supply pattern. External (supply chain) integration leads to enhanced effectiveness and efficiency. iv. Strategic importance of Parts This is done by plotting the parts on the Kraljic Matrix. Figure 3: Karljic Matrix
7 | Page
6. IT Systems used by Hero Motocorp for Supply Chain management Hero Motocorp uses and Advanced Planning and Scheduling (APS) which is a form of Decision support system (DSS) to help the managers make informed decision about the dynamic challenges arising in the supply chain. The APS system at Hero Motocorp mainly helps in the following three areas – A. Demand planning It is used to determine accurate forecasts based on historical data. It helps understand buying patterns of customers. It also facilitates collaboration between suppliers and customers. B. Supply Planning These are sometimes known as Distribution Resource Planning (DRP) It helps in inventory planning, transportation planning, procurement planning, strategic supply chain planning. C. Manufacturing planning and scheduling These incorporate the traditional Material Requirement Planning (MRP) system. It helps to efficiently allocate manufacturing resources to meet demand. It can also quote lead times to customers. Decision-support capabilities help to make optimal decisions on distribution, inventory and production. DSS can generate various alternatives on the levels of inventory and production in order to better plan for future and prevent supply chain shocks. It's easy to explore possible future scenarios, and get fast and reliable insights into the impact of decisions on key performance indicators. Thus, 8 | Page
scenarios can be generated to select the most optimal inputs for supply chain. Tools Used by Hero Motocorp i. Enterprise Resource Planning (ERP) • •
ERP offers a centralized system to control information flow through a manufacturing environment. Software System - SAP ERP Software
ii. Transportation Management Systems (TMS) TMS are intended to achieve enterprise-wide load control centers by allowing companies to address the complex requirements of transportation between channel partners. Software System – Descartes iii. Product Data Management (PDM) PDM tools are used to support collaborative engineering. Features such as revision tracking, document workflow, redlining and other tools help make the design engineering and manufacturing process integration easier. Software System – Windchill iv. Customer Relationship Management (CRM) CRM is an intelligent relationship management tool that can offer Webbased analytic and operation systems to unify all inbound and outbound sales, service, and marketing customer interactions. Software System: Siebel v. Automated Quality Control (AQC) AQC Systems help monitor quality assurance process, procedures, specifications, and gauge calibration statistics. Software System: Pilgrim Software
vi. Warehouse Management Systems (WMS) WMS track and control the movement of inventory through the warehouse, from receiving to shipping. It offers systematic management of material handling to optimize and shorten fulfilment cycle time reducing cost. Software System: Manhattan vii. Supply Chain Planning (SCP) SCP systems, such as supply and forecasting planning, demand planning, and advance planning and scheduling (APS), are applications that coordinate limited material and capacity resources in accordance with
9 | Page
business dynamic changes. These systems deal with strategic and tactical planning issues that generally have long time spans. Software System: Manugistics
viii. Manufacturing Execution Systems (MES) MES software provides a single flexible platform for managing customer orders through multiple plants and processes. MES software can deliver real-time visibility and control of manufacturing operations from equipment, materials, and people to the manufacturing processes. It assists companies in responding effectively to unexpected customer requirement changes. Many MES packages offer Internet capability, which offers the visibility and control of production system to suppliers and customers. Software System : CAMSTAR ix. Computer Aided Design (CAD) CAD systems are generally stand-alone design tools. CAD tools are used to design everything from parts to tools and fixtures. Software System : AutoCad and PTC
10 | P a g e