A DOCUMENTORY REPORT ON

SUPPLY-CHAIN MANAGEMENT OF

Bajaj Auto Ltd.

SUBMITTED TO:
MR. JIGNESH DARJI

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM) CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)

Submitted By Harsh patel 09 MBA 29
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DECLARATION

I, Harsh v PATEL (09MBA 29), hereby declare that the every part of the report presentation on “SUPPLY CHAIN MANAGEMENT OF “Bajaj Auto Ltd.” is a result of my own work and my indebtedness to other work publication, if any, have been duly acknowledged.

Place: Changa Date: 22 / 02/ 2010

Signature Harsh v PATEL

INDEX
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ORGANISATION DETAIL
TITLE ORGANIZATION DETAIL  NAME  INCEPTION,GROWTH  BRACHES/PLANT LOCATION  PRODUCT/SERVICE LINE  ORGANIZATION STRRUCTURE  COMPETITOR SUPPLIER DETAIL  RAW MATERIAL REQUIRED  SUPPLIER INFORMATION  SUPPLIER LOCATION  PROCESS OF ORDERING/FULLFILMENT  RELATION WITH FIRM OPERATIONAL DETAIL  PRODUCT USE AND CHARACTERISTICS  MANUFACTURING PROCESS  INFRASTRUCTURE FACILITIES (PLANT, MACHINERY, TECHNOLOGY, HUMAN RESOURCE, ETC.)  CONCEPTS LIKE JIT, SIX SIGMA (INVENTORY MANAGEMENT)  SUBSTITUTES AND COMPLEMENTARY PRODUCT/SERVICE DISTRIBUTION DETAIL  MARKETING/PROMOTION  TRANSPORTATION/LOGISTICS  WAREHOUSING  CHANNEL STRUCTURE  CHANNEL MANAGEMENT  TARGET MARKET (LOCATION) CUSTOMER DETAIL  TYPE OF CUSTOMERS  TARGET MARKET (DEPENDING UPON CUSTOMER CHARACTERISTICS)  AFTER SALES SERVICE  CUSTOMER RELATION MANAGEMENT SUPPLY CHAIN DIAGRAM AND EXPLANATION REFERENCE PAGE NO.

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NAME OF COMPANY:
“Bajaj Auto Ltd.”

INCEPTION, GROWTH OF THE COMPANY:
The Bajaj Group was founded in 1926 by Jamnalal Bajaj and now consists of 27 companies. In 1945, Jamnalal Bajaj had formed M/s Bachraj Trading Corporation Private Limited, the flagship company, to sell imported two-wheelers and three-wheelers. The company acquired a license from the government in 1959 to manufacture these vehicles and went public the next year. By 1977, the company saw its plant rolling out 100,000 vehicles in a single year. In another nine years, Bajaj Auto could produce 500,000 vehicles in a year. The present Chairman of the Bajaj group, Rahul Bajaj, took charge of the business in 1965. He was the first licensee of the Indian make of the Italian Vespa scooter. Japanese and Italian scooter companies began entering the Indian market in the early 1980s. Although some boasted superior technology and flashier brands, Bajaj Auto had built up several advantages in the previous decades. Its customers liked the durability of the product and the ready availability of maintenance; the company's distributors permeated the country. By 1994-95, Bajaj was racing to beat Honda, Suzuki and Kawasaki in the two-wheeler segment internationally. By 1997, Bajaj faced tough competition in the domestic market and its market share stood at 40.5%. Under the leadership of Rahul Bajaj, the turnover of Bajaj Auto has gone up from Rs.72 million to Rs.46.16 billion (USD 936 million), its product portfolio has expanded from one to many and the brand has found a global market. Bajaj as a brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia. 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 populations of 25,000 and below. The current dealer network of Baja is servicing all these outlets. Bajaj is convinced that the real impetus of future two-wheeler growth will come from upcountry rural India. Bajaj Auto has defined specialist dealerships for rural markets, called 'Rural Dealerships'. During the year 2008-09, twenty new rural dealers became operational. Bajaj has identified a segment of customers called 'Probikers', who are knowledgeable

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about motorbikes and 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.

Product/Service line: 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 “Bajaj Probiking". Fifty two such stores have been opened across the India. Catering to demand in this sector requires a strong and effective distribution network as consumers are more demanding and expect delivery on time. Early delivery is a cause of delight for customers. With such vast global and Indian rural presence, designing an efficient distribution system becomes a complex task even for a company like Bajaj Auto. Lot of time and effort goes into designing a strategy based efficient distribution system.

Key products- two wheeler Premium segment Pulsar 220 dtsi Pulsar 180 dtsi Pulsar 150 dtsi Avenger dtsi Executive segment Xcd 135 Discover 135 Pulsar 135 Platina 125 Entry segment Discover 100 dts-si Platina Kristal

Key products – three wheeler Passenger carrier Re CNG Re diesel Re petrol Mega Max Goods carrier GC diesel GC CNG Re 600

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Product Segmentation
The company classifies motorcycles into three segments, based on consumer categories and approximate price points. These are:  Entry Segment: These are typically 100 cc motorcycles at a price point in the neighbourhood of Rs.35000. Bajaj Auto has a presence in this segment through the Platina. Here, Bajaj Auto has been a major player and despite an overall market degrowth, it accounted for 34% of this segment in India in 2008-09.  Executive segment: This largely comprises 100 cc to 135 cc motorcycles, priced between Rs.40000 to Rs.50000. Bajaj Auto has two brands in this segment, namely XCD and Discover. These are sleek, high performance bikes with price points in excess of Rs.50000. They are present here with their flagship brand, the Pulsar and cruiser, the Avenger. They dominate this space with a domestic market share of more than 47%.

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Competitors

Key competitors (3 wheeler)
Bajaj manufactures commercial vehicles for passenger carrier as well as goods carrier other players in the three-wheeler segment in India are Mahindra and Mahindra , Piaggio and atul auto. Bajaj is Facing tough competition by aggressively launched Mahindra gio

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Organization Structure

Branches/Plant location
Manufacturing Plant Bajaj Auto’s vehicle manufacturing capacity currently stands at 3.96 million units — comprising 3.6 million two-wheelers and 360,000 three-wheelers. The newest plant at Pantnagar (Uttarakhand) has a capacity to produce 900,000 two-wheelers.

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Supplier Detail
Key suppliers:
Bajaj auto has approximately 198 suppliers for their raw materials. Some of the key suppliers are:JBM MRF & Dunlop – Minda Reinder – Endurance – Varroc – Max auto components – Silco cable – Makino industry – Frames tires locks & ignition system headlamps & lights brakes, clutch & Cast wheel Plastic parts & Digital Meter ignition system and switches wires and cables Brake shoes . Brake lining, clutch center

Inventory policyBajaj auto maintains seven days inventory . Demand Estimations were based on Panel Regression, which takes into account both time series and cross section variation in data .All the Mediators are connected with each other through IT linkage to know exact status of delivery of goods With operations spanning to such vast geographies, managing a supply chain globally becomes more and more complex. In countries where Bajaj perceives a strong market potential, they establish a tie up with one major industrial establishment eager to invest in the project. This investment may include setting up strategic manufacturing or assembly units, apart from a well-established nation-wide network for marketing, distribution and after sales services. These investors who form alliances with Bajaj Auto are termed as “Business Partners”. Bajaj Auto offers a number of services to its business partners. They include:  Training in sales, service and spare parts management based on the Bajaj distribution system  Active support for setting up manufacturing facilities overseas including transfer of technical know-how

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 Assistance in setting up an assembly plant for assembly of vehicles from complete knocked down (CKD) kits  Selecting of machinery and equipment and training of technical personnel, all in a phased manner as required by the regulations in the recipient country  Active support in setting nation-wide dealer network, also involving identification and recommending suitable partner who would assist the distributor in Business growth

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Operation Detail
Manufacturing locations
Akurdi, Pune 411035 This is one of the oldest plant of bajaj auto ltd with production capacity of 0.6 million vehicles/ year. The plant has been closed in order to equip for four wheeler production Bajaj Nagar, Waluj Aurangabad 431136 This is second plant with production capacity of 0.86 million/ year.products manufactured here are Kristal, XCD and platina andcommerial GC series Chakan Industrial Area, Chakan , Pune 411501 This is the biggest plant of bajaj auto Production Capacity of 1.2 million/ year , Product manufactured here are pulsar and avenger and commercial Ge series Pantnagar , Uttarakhand The most advanced plant of bajaj auto .It has Capacity of 0.9 million vehicles per year . product manufactured here are platina and XCD.

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Manufacturing process

Usage of IT at all Levels For decades, Bajaj Auto was riding high. The company was enjoying market share the only way it knew to: by building basic, durable scooters on the platform of ‘value for money.’ But when the marketplace changed, Bajaj was late to respond. It became clear that the company could no longer derive big market shares from limited brands and products. Then started the restructuring—of products, channels and the performance management system. Along with that, the company realised that it had to redesign its IT structure. Bajaj Auto announced the successful “Go Live” of their External Portal Initiative for their sales and service employees, dealers and suppliers. SAP’s mySAP Enterprise Portal was implemented simultaneously with the current SAP R/3 ERP implementation. Business information is available to the company’s external community in real time. This assists in improved decision-making, whether it is to meet customer requirements or to maintain efficiency in supply chain management. The company’s field sales teams get full visibility on all dealer activities while the dealers get real-time access to relevant information on operational activities.
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The dealers and sales employees get information relevant to their respective region and territory by aggregation from the underlying SAP R/3 ERP database. Bajaj has linked 380 out of its 483 dealers through this system. Also connected are 165 out of a total of 200 suppliers. The dealer portal, in addition to operating information, provides access to unstructured information like news items, new product releases, new product introduction, dealer discussion groups and internal marketplace. The supplier gets up-todate information on purchase orders and contracts, material schedules, and payment details. Bajaj Auto, in turn, gets invoicing information from suppliers for its automated material receipt system. This helps in streamlining the supply chain, optimising inventories and reducing non-value-adding activities at both ends. Every PC has a hardware lock so that the correct terminal is established and does not travel out of the dealer’s premises. Bajaj is also planning to extend the IT system even as it plans to launch a major marketing initiative in rural areas. “As this project gets implemented, we have to see how IT can support it. There is an issue of Internet connectivity. But the infrastructure is changing with telecom majors expanding their network. We are looking at connectivity through WLL,” said Mr Bajaj. 11 Before understanding the channel design, we need to know the components that are involved in the channel network. Various players involved in the channel design are:  Manufacturing Plants  Depots  Carrying & Forward Agent  Dealers  Sub Dealers  Logistics Each of these players and their key role and deliverable will be dealt in detail later. Channel Design is dependent on the segmentation that Bajaj have done in the geographic and product category segments.

Infrastructure facilities:
Bajaj Auto Ltd. has well designed infrastructure facilities. They highly care of clarity and arrangement. The whole plant has divisional area like, offices, operation house, godown, and packing department.Bajaj Auto Ltd. l has modern technological machines, from this it can produce products.These machinery arranged in operation department systematically. The production process is step by step so as per this the machinery also arrangeBajaj provide all the best facilities to their employees, like parking, canteen, rest room, and also proper working conditions. They greatly care of their employees. They pay on monthly basis and also give bonus on special occasions. In this way Philips can compete with best plant, machinery, technology and human relationship

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Distribution Detail
For distribution bajaj auto uses mix of depots and Cnf agents. This is completely dependent on the distance of manufacturing location from dealer point .For example due to extensive distance from manufacturing plant from west Bengal to north-east India ,there exist a depot in Khadakpur with capacity of housing 800vehicles. There are similar depots in Punjab , Rajasthan and southern India.

Dealers
Like mentioned above, the company has a network of 498 dealers and over 1,500 authorised service centres 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. Dealers can be classified under 3 heads. They are as follows:  COCOThese are Company Owned & Company Operated showrooms. These concepts exist only for Pro-Biking showrooms. Here Bajaj Auto has tried showcasing their muscle power in high end biking segment. The concept has evolved very fast and now there are 52 ProBiking showrooms in the country. The company itself does not take any order from the customer in these showrooms. The giant dealer of the region who is acting as a logistics partner for the pro-biking concept takes the order on behalf of the company and fulfils the customer requirement.  CODOThese are Company Owned & Dealer Operated showrooms. In case of this concept, showrooms are owned by the company but the operations in the showroom are managed by the dealer. This is generally the case where Bajaj wants to provide the dealer financial benefits considering the high working capital requirement of the company.  DODOThese are Dealer Owned & Dealer Operated. These dealers are fewer in number because they are generally the giant dealers who are the financial muscle for the company. In our talks, the management indicated that the top management wants to do away with this concept. The reason behind this is that the bargaining power increases in the hands of the dealer, which puts the company in an knotty situation.

National Level Partnerships
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There is an exisisting generic channel which is used for segmentation of this category of two-wheelers and three wheelers.

Transport & Logistics
This function of distribution is not owned by the company in any form. This is outsourced in toto to the third party vendors. The third party here is Transport Corporation of India (TCI) and a few other private vendors. The fleet to be transported is custom-designed for Bajaj Auto by the vendor. Key Facts  There are twenty vendors all across India  OSL  Jamuna Transport  Sumit Transport  A Transit Insurance Compliance Letter(TICL) is signed between the two parties  The local level sub-dealer sometimes gets to decide the last mile logistics, as he can decide to pick up the vehicles himself or have it transported to him  Logistics of the vendor is decided by the company  Freight charge is built-in in the product price

Bajaj selects those suppliers who provides majority of the required raw materials together. The company believes in situation so if any suppliers do not keep their requirement so at that time bajaj left the contract.

Process of ordering :
Bajaj lighting refers a systematic process in selecting suppliers and deal with them. Production manager of the company study the application received by the suppliers and select proper suppliers as per their requirement. The selected suppliers invite for general meeting with the production manager and purchase manager of the company. In this meeting they decided conditions and time period of supplying raw materials to the company.

Once the contract signed by both the routine work continue. Whenever the company required raw material they send e-mail or call the suppliers just before three days. And within two days company gets raw materials. The payment done after getting the raw materials on the basis of the cash or chaque. If the suppliers are unable to provide raw materials than Bajaj immediately inform them and getting solution.

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Relation with the supplier firm :
B.ajaj auto lt believes in good relationship with its suppliers and customers. The suppliers who supply raw material to the company, Bajaj auto pay them regularly. If any when advanced payment required Bajaj also pay advance for bulky consumption. During annual day of the company, Philips rewarded those suppliers who contracted with company for whole year and survive company without any problems.

Services provided by Bajaj Auto to the dealer
 Workshop Training  In a month:  30-40 Mechanics can be trained per dealer  15-20 Sales personnel can be trained per dealer  New Product Launch  Information is percolated around a month before the product is to be launched  The date of launch can be rescheduled in case the current stocks of the dealer are not getting cleared.  Promotional Activities  The cost of sending the staff to the Pune branch for training is borne by the dealer. Key Role & Deliverables The most important loop that is the outcome of the dealer management is the feedback loop. Using this loop company designs its strategy for different segments. Dealer need to fill in the required form provided by the company and update it to company on monthly basis. The three heads under which the feedback is filled are:  Monitoring Sheet  Daywise Summary of Customer Satisfaction Feedback  HealthCard For Monitoring Workshops Bajaj has total of approx 498 dealers 1500 authorized service stations and 1400 rural outlets for population of below 25000 This function is not owned by bajaj auto in any form . This is outsourced to third party vendor . The third party here is TCI along with some others like OSL , Jamuna trasport and Sumit transport -Logistics to the vendor is decided by the company -A Transit insurance compliance is signed between the two parties -Freight charges are included in product price. Bajaj rides the SAP advantage. In year 2000 ‘Project 110 percent’ was launched to spearhead Bajaj’s growth in the future. Bajaj auto has linked 386 dealers out of 498

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and 165 suppliers out of 198 Business information is available to company external community in real time. The dealers can get real time information ,unstructured information like news items, new product releases, dealer discussion group and internal market place. On operational activities and also the company can monitor the external members The suppliers gets up-to date information on purchase order, contracts and material schedule

Key Deliverables in terms of Sales & Distribution Management
 Order Tracking-Taking a daily account of the order received from various dealers and Regional Offices (RO). Orders from dealers are punched in by dealer themselves. Orders are followed up in the system only if the credit limit is not crossed. This credit limit is preset into the system depending upon the dealer and his/her track record.  Packaging-Packaging in factory is outsourced to third party vendor. These vendors are generally from the Transport & Logistics partners  Despatching Goods-Goods need to be despatched via third party vendor TCI. State corporations and other private players are also part of the vendor list.  Generating Invoice & Waybill-These documents need to be generated and despatched to the respective dealer

Key Role & Deliverables of Depots
Setting up depots is a geographical strategy adopted by Bajaj Auto. But this does not mean that the company has gone all out to open a large number of depots. It has chosen strategic locations. The key role played by depots is that they are meant to cater to any sudden rise in demand of vehicles, and to cover the existing geographic span of India. When we spoke to the management, they explained to us the reasons behind having a depot in Kharagpur. There are two reasons for which Kharagpur was chosen to hold a depot for Bajaj Auto. They are as follows:  Catering to a sudden shooting up of demand- In Bengal itself, it is common knowledge that during the festive season which spans from September to November, there is a huge demand as people spend more on festival extravaganza, and it is considered an auspicious time to buy household gadgetry. There is a conspicuous rise in the sales of white goods, motor vehicles and jewellery.  Reaching the states of the North-East- As per the people at Bajaj, “We take 15 days to reach the North-East if we go via the carrying and forwarding agent concept. Generally bikes reach West Bengal in 7-8 days. The bottleneck is the Darjeeling route. Hence, came in the concept of a depot whereby we can reach the North-East in the same time, instead of experiencing a lag of almost a week.”

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Dimensions for Choosing Depot or Factory Approach
A dealer needs to consider his order requirements and then come up with an order to place to the regional office. If the demand is immediate, he may approach a Depot for the load. Else, he has to try to stick to factory load. Both of these loads have their own sets of pros and cons. We have listed them in the following table

Depending upon the criteria that are more important to the dealer, he places his order to either the factory or the Depot. Generally, orders are placed to the factory but in case of urgent requirement, due to which the lead time reduces considerably, the order is procured from the depot.

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Customers Detail

CUSTOMER DETAILS:

Bajaj Auto ltd. produces goods by considering the different types of customers. They distribute products in small towns of the country and all over the world. The bykes lights produces as per the cerrent trend of the customers.

• Types of Customers:

Bajaj Auto ltd. is one of the most accepted products by the customers. With best quality products Bajaj Auto ltd. can survive customers after selling products.

• After sales Service:

Customer relation management:

Bajaj Auto ltd. believes in customer satisfaction. They try to earn consumers trust by providing good quality products and after sales services. Every two months Bajaj Auto ltd. researches the market and tries to implement the problems. They also believe in innovation and produce different variety of products with minimum price.

Daywise Summary of Customer Satisfaction Feedback.
This is a method to record customer feedback.

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On the basis of all the above inputs the Service Quality Index for a particular dealer is calculated. On the basis of SQI achieved by the retailer over a period of one year the dealer is rated as A+, A, B+, B. These ratings decide the type of credit that the dealer receives, the type of bargaining power he/she enjoys with the company.

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Supply chain diagram and explanation

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The physical flow of goods takes place from the factory to either the depot or to the carrying and forwarding agent, depending upon the geographic distance and the location of the Depot. The transport & logistics for this is outsourced to third party vendors which are under Transport Corporation of India (TCI). Depending upon the demand these goods have, they flow from Depot or the C&F agent to the dealer and their network. In case of high profile dealers, the dealer can himself take the physical delivery of goods directly from the manufacturing plant. The dealer, at the last juncture, caters ASC, RSO, Sub Dealer & its own branch. The channel members and the key roles for each of these channel members is detailed below.

Bibliography

http://www.channelbajaj.com

http://www.scribd.com

http://www.bajajauto.com/

http://www.bajajauto.com/bajaj_dealer_locator.asp

http://www.bajajauto.com/services_troubleshooting.asp

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