ZENITH

International Journal of Multidisciplinary Research

Vol.2 Issue 6, June 2012, ISSN 2231 5780

MEASURING SUPPLY CHAIN PERFORMANCE BY ORDER RELATED

METRICS - A STUDY ON SELECTED TWO WHEELER COMPANIES
PROFESSOR RUDRA SAIBABA*; R.VENKATESHWAR RAO**

*Professor of Business Management,

P.G Centre, L.B College, Warangal.
Formar Prinicipal,
University College, Mahatma Gandhi University
Andrapradesh, India.
**Research Scholar,
Kakatiya University,
Department of Business Management,
Sree Chaitanya P.G College,
L.M.D Coloney, Thimmapoor, Karimnagar,
Andrapradesh, India - 505527.

ABSTRACT

The present article Measuring Automobile Supply Chain Performance by Order Related
metrics-A Study on Selected Two Wheeler Companies examines the data relating to the Hero
Honda and Bajaj Auto Dealers on their supply chain practices. This chapter critically examines
supply chain management practices adopted by dealers in general and company practices in
particular. The supply chain metrics are calculated with the data collected at dealer point. The
calculated result is compared to ascertain performance and practices adopted by respective
supply chains.

This article examines practices of Hero Honda and Bajaj Auto by developing metrics related to
order frequency, order lead times and process time to deliver customer order etc practices in
respective automobile supply chains. The results of above metrics are compared with dimension
of efficiency or responsiveness of supply chain management practices.

KEYWORDS: Order Frequency, Order Lead Time, Preprocessing Lead Time, Time To Deliver
Order, Supply Chain efficiency and Supply Chain Responsiveness.
______________________________________________________________________________ www.zenithresearch.org.in

INTRODCUTION

The present article Measuring Automobile Supply Chain Performance by Order Related
metrics-A Study on Selected Two Wheeler Companies examines the data relating to the Hero
Honda and Bajaj Auto Dealers on their supply chain practices. The automobile supply chain can
be either responsive or efficient in practice. A responsive supply chain is distinguished by short
production lead-times, low set-up costs, and small batch sizes that allow the responsive firm to
adapt quickly to market demand, but often at a higher unit cost.
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International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

An efficient supply chain is distinguished by longer production lead-times, high set-up costs, and
larger batch sizes that allow the efficient firm to produce at a low unit cost, but often at the
expense of market responsiveness.

The firm's choice of responsive supply chain will be associated with lower growth rates, lower
market share, higher contribution margins, higher product variety, and higher demand or
technological uncertainty.

This article examines practices of Hero Honda and Bajaj Auto by developing metrics related to
order frequency, order lead times and process time to deliver customer order etc practices in
respective automobile supply chains. The results of above metrics are compared with dimension
of efficiency or responsiveness of supply chain management practices.

OBJECTIVES OF THE STUDY

More specifically the following are the objectives of the proposed research:

1. To examine the extent of S.C.M practices adopted by the select Two Wheeler
Automobile units.

2. To study the supply chain performance of select Two Wheeler Automobile Units on
S.C.M practices at dealers decoupling point.

3. To elicit information from dealers of select Automobile Units on S.C.M policies and
practices to develop order management metrics.

SOURCE OF THE DATA

The present study is based on both primary data and secondary data.

PRIMARY DATA

Primary data is collected through administering a pre- tested and structured questionnaire to the
dealers of select automobile companies of Hero Honda and Bajaj Auto.

SECONDARY DATA www.zenithresearch.org.in

Secondary data were collected from various sources like reports from company annual reports,
SIAM, CII, Association of Indian automobile manufacturers, C.S.O and National Sample Survey
etc, and also published data of Automobile Industry Associations, In-House bulletins, books,
research journals. Trade magazines, websites, company portals etc.

SAMPLE DESIGN

The present study Measuring Automobile Supply Chain Performance by Order Related metrics-
A Study on Selected Two Wheeler Companies is based on survey of 20 dealers of select
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ZENITH
International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

automobile companies, for these purpose two different types of dealers i.e. Company Authorised
Dealers and Sub-Dealers are selected from select automobile companies.

For the purpose of selecting the sample from above two categories random sampling method is
adapted. The total sample size is 20 (twenty) dealers of Hero Honda Motors Limited (Hero Moto
Corp) and Bajaj Auto Limited companies.

S.No CATEGORY SAMPLE SIZE

1 Hero Honda Dealers and Sub-Dealers 10
2 Bajaj Auto Dealers and Sub-Dealers 10
Total Sample Size 20

PERIOD OF STUDY

The present survey of Dealers and Sub-Dealers of selected two wheeler companies is restricted
to Telangana region (Karimnagar, Warangal, Nizamabad,Medak and Hydrabad Districs) of
Andrapradesh state, India only and the period of study is 2010 -2011.

Below is the dealers profile, who is the respondents for the survey. Total 20 dealers and sub-
dealers are participated in this survey. From Hero Honda 10 dealers/sub-dealers and from Bajaj
Auto 10 dealers/sub-dealers is part of the present study.

DEALERS PROFILE

Dealer Demographic Variables Number of Respondents Percentage of Respondents

Location of the Dealer
Urban 11 55
Semi-Urban 9 45
Total 20 100
Turnover per Annum
Below 15 lakhs 3 15
16 to 50 lakhs 7 35
50 lakhs to 1 crore 4 20
1 crore and above 6 30 www.zenithresearch.org.in
Total 20 100
Dealer of the Company
Hero Honda 10 50
Bajaj 10 50
Total 20 100
Type of Dealership
Company Dealer 9 45
Sub-Dealer 11 55
Total 20 100
Source: Field survey
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International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

ORDER METRICS

Automobile dealers have a number of objectives to meet with respect to stock levels. These
include maintaining the right level of stock inventory, minimising stock holdings, keeping stock
costs to a minimum and maximising efficiency in stock use. A consistent ordering process
reduces business pressure to meet stock levels and allows dealers and sub-dealers to manage the
exceptions to stock levels as opposed to moving from one crisis to the next.

Without an efficient forecasting process in place, a dealer will simply aim to minimize stock
holdings. However, if dealers are not forecasting correctly, stock levels will be incorrect. There
are obvious inventory costs in holding too much stock, but at the same time, too little may
require emergency orders. Dealers who require such emergency orders bear not only higher costs
of stock purchase but also increased freight costs. In addition, dealers have traditionally decided
not to order extra stock because, in the event that the dealer is unable to move that stock within a
reasonable time frame, there may be a higher cost of managing and warehousing inventory. The
data related to order frequency of dealer to company, and mean of orders are calculated for Hero
Honda and Bajaj Auto and presented in the following two tables.

TABLE 1 ORDER FREQUENCY

Dealer Of The Company Total

Order Hero Honda Bajaj
No. of
Frequency No. of No. of Percentage
Percentage Percentage Respondents
Respondents Respondents

7 Days 7 70.0 5 50.0 12 60.0

15 Days 1 10.0 2 20.0 3 15.0
30 Days 2 20.0 3 30.0 5 25.0
Total 10 100.0 10 100.0 20 100.0
Source: Field survey

TABLE 2.1AVERAGE ORDER FREQUENCY

Name of The Company Mean (Average No. of Days) N Std. Deviation

Hero Honda 12.40 10 9.606 www.zenithresearch.org.in
Bajaj Auto 15.50 10 10.501
Total 13.95 20 9.923
Source: Field survey

The above table-1 and table-1.1 represent the data related to the frequency of orders placed by
Hero Honda and Bajaj Auto dealers and the average (mean) order frequency to their respective
companies for the supply of two wheelers.
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International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

The 70 percent of Hero Honda dealers are placing the order to the company for supply of two
wheelers within every seven days, 10 percent of dealers said they or placing the order in every 15
days interval, 30 percent of Hero Honda dealers are placing the order in every 30 days.

In case of Bajaj Auto dealers, 50 percent of dealers are placing the order to the company for
requesting for the supply of vehicles in every 7 days, 20 percent of Bajaj Auto dealers are
placing the order within 15 days and 30 percent of dealers are placing the order to the company
in every 30 days.

As the data is varying dealer to dealer, to find out the average days for comparison, mean and
standard deviation are calculated for days of order frequency. The average days taken by Hero
Honda dealers for placing the orders are 12.4 days, whereas in case of Bajaj Auto it is 15.5 days.

By using the average order cycle time, the total number of cycles per year can be calculated as
follows:

Total Number of Order Cycles (Per Year) = 365/Average Order Frequency of Dealer.

TABLE 2 NUMBER OF ORDER CYCLES (PER YEAR)

Company Average Order Cycle Time(in Days) Total Number of order cycles(per year)
Hero Honda 12.4 Days 29.44 Times
Bajaj Auto 15.5 Days 23.55 Times
Source: Field survey

From the table-2 it is clear that, the total number of orders cycles per year for Hero Honda
dealers is 29.44, and for Bajaj Auto it is 23.55. Relatively Hero Honda dealers are placing more
number of purchase orders comparing with Bajaj Auto dealers. If the supply chain is adopted
lean supply chin, and Just-In-Time practices (JIT), then there is a possibility of more order cycles
in supply chain. This tendency also indicates supply chain efficiency by decreasing inventory
handling cost and ware housing cost. However, at the same time the less number of order cycles
by dealers indicate that, they are maintaining sufficient inventories at their ware houses, which
increases the supply chain responsiveness. This type of supply chain can face uncertainties in
demand and supply condition, and can serve customers with more option to choose from product
lines by managing complete product variety. So, it can be concluded that Hero Honda supply www.zenithresearch.org.in
chain at dealers decoupling point is practicing efficient supply chain, Bajaj Auto dealers
practicing responsive supply chains.

PREPROCESSING LEAD TIME

Lead Time is the time between the initiation of a process and its completion. Preprocessing Lead
Time is the time required to create a Purchase Order from the time it learn of the requirement for
stock. As for Automobile products, the buy item preprocessing lead time is also known as
"planning time" or simply "paperwork". The below tables depicts the data related to pre
processing lead time for purchase order by Hero Honda and Bajaj Auto dealers.
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International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

TABLE 3 LEAD TIME FOR PLACE ORDER

Dealer of the company Total

Lead time
Hero Honda Bajaj Auto
for purchase No. of
No. of No. of Percentage
order Percentage Percentage Respondents
Respondents Respondents

7 Days 5 50.0 5 50.0 10 50.0

15 Days 3 30.0 3 30.0 6 30.0
30 Days 2 20.0 2 20.0 4 20.0
Total 10 100.0 10 100.0 20 100.0
Source: Field survey

TABLE 3.1 AVERAGE LEAD TIME FOR PLACE ORDER

Dealer of the company N Mean Std. Deviation Std. Error Mean

Lead time for Hero Honda 10 14.00 9.189 2.906

purchase order
Bajaj Auto 10 14.00 9.189 2.906
Source: Field survey

As per the table-3, the pre processing order lead time for Hero Honda dealers is as follows, 50
percent dealers said they took 7 days for order preparation, for 30 percent of dealers it is 15 days,
and for reaming 20 percent it is 30 days.

The pre processing lead time for Bajaj Auto dealers is, 50 percent of dealers said they require 7
days to prepare purchase order, for 30 percent dealer lead time is 15 days and 20 percent of Bajaj
Auto dealers need 30 days to prepare purchase order.

To compare order lead time, average (Mean) lead times of Hero Honda and Bajaj are calculated
and presented in table-3.1. The average order lead times of both companies dealers are 14 days.
Thus Independent sample t-test has applied to study the difference in mean values and result is
presented in table-3.2.
www.zenithresearch.org.in
HYPOTHESIS

Null Hypothesis Ho: There is no significant difference between Hero Honda and Bajaj Auto in
Dealer lead time for placing order to the respective companies.

Alternative Hypothesis H1: There is significant difference between Hero Honda and Bajaj Auto
in Dealer lead time for placing order to the respective companies.
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International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

AVERAGE LEAD TIME FOR PLACE ORDER

TABLE 3.2 INDEPENDENT SAMPLES T-TEST

Levene's Result
Order Lead Test for t-Test for Equality of Means
Time Equality of
Variances
95%
Sig.
Mean Std. Error Confidence
F Sig. t df (2-
Difference Difference Interval of the
tailed) Difference
Lower Upper

Equal Accept
variances .000 1.000 .000 18 1.0 .00 4.110 -8.634 8.634 Ho
assumed

Equal
variances
.000 18.0 1.0 .00 4.110 -8.634 8.634
not
assumed

Source: Field survey

CONCLUSION: As per the result presented in table-3.2, there is no significant difference

between Hero Honda and Bajaj Auto in Dealer lead time for placing order to the respective
companies.

TABLE 4 SIZE OF ORDER (NUMBER OF UNITS)

Dealer of The Company Total

purchase
order Hero Honda Bajaj Auto
size(no. of No. of
No. of No. of Percentage www.zenithresearch.org.in
vehicles) Percentage Percentage Respondents
Respondents Respondents

10 to20 3 30.0 0 .0 3 15.0

20 to 50 5 50.0 6 60.0 11 55.0
50 to 100 2 20.0 4 40.0 6 30.0
Total 10 100.0 10 100.0 20 100.0
Source: Field survey
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International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

TABLE 4.1 AVERAGE SIZE OF ORDER (NUMBER OF UNITS)

Name Of The Company Mean(No. Of Units) N Std. Deviation

Hero Honda 37.00 10 22.01
Bajaj Auto 51.00 10 20.66
Total 44.00 20 21.98
Source: Field survey

The a table-4 and table-4.1 represents size of purchase order and average size of purchase order
of Hero Honda and Bajaj Auto dealers respectively.

From the table-4, the 30 percent of Hero Honda dealers size of purchase order is 10 to 20
vehicles, 50 percents dealers are placing the purchase order for 20 to 50 vehicles and remaining
20 percent of Hero Honda dealers are placing purchase order for 50 to 100 vehicles.

From the table-4, the 60 percent of Bajaj Auto dealers purchase order size is 20 to 50 vehicles
and 40 percent of Bajaj Auto dealers are placing purchase order in the size of 50 to 100 vehicles.

To compare order size of Hero Honda and Bajaj Auto mean value is (Average size) and standard
deviation is calculated. As per the table-4.1, the Hero Honda dealers average size of purchase
order is 37 vehicles and standard deviation is 22.01. The Bajaj Auto dealers average size of
order is 51 vehicles and standard deviation is 20.66.

From table-4.1, the average size of purchase order of Bajaj Auto dealer 51 vehicles is higher than
Hero Honda dealer order size 37 vehicles. The Hero Honda dealers have to place more number
of orders, comparing with Bajaj Auto dealers to meet the demand. Hero Honda dealers are
maintaining fewer inventories than that of Bajaj Auto dealers.

From the above analysis it is clear that Hero Honda supply chain at dealers point is efficient and
lean supply chain and Bajaj Auto supply chain at dealers point is responsive supply chain as it
maintains more inventories at dealers stock point, so that it will meet customer demand
immediately with very less lead time.

ORDER-TO-DELIVERY LEAD TIME

The order-to-delivery lead time is the time elapsed between the placement of order by a customer www.zenithresearch.org.in
and the delivery of products to the customer (in this case dealers, as the dealer is customer to
company) .The longer supply chain requires more order- to- delivery lead time than shorter
supply chain. The dealer always expects shorter lead times from manufacturers front. The
shorter lead time will enable the dealer to react very quickly to the market dynamics. This
dimension of service has significant impact on responsiveness of supply chain. Dealers always
expect much shortened delivery lead times. Shorter lead times, higher responsiveness and higher
reliability will lead to better customer service. The following table-5 represents delivery lead
time of Hero Honda and Bajaj Auto companies after receiving purchase orders from their
dealers.
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International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

TABLE 5TIME TAKEN BY COMPANY TO DELIVER THE ORDER

Dealer Of The Company Total

Order-To-
Hero Honda Bajaj Auto
Delivery No.of
Lead Time No.of No.of Percentage
Percentage Percentage Respondents
Respondents Respondents

7 Days 5 50.0 7 70.0 12 60.0

15 Days 2 20.0 2 20.0 4 20.0
30 Days 3 30.0 1 10.0 4 20.0
Total 10 100.0 10 100.0 20 100.0
Source: Field survey

TABLE 5.1 MEAN TIME TO DELIVER THE ORDER

Name of the Company Mean N Std. Deviation Minimum Maximum

Hero Honda 15.50 10 10.501 7 Days 30 Days
Bajaj Auto 10.90 10 7.490 7 Days 30 Days
Total 13.20 20 9.186 7 Days 30 Days
Source: Field survey

The above table-5 and table-5.1 shows the data related to order-to-delivery lead time and average
order-to delivery by Hero Honda and Bajaj Auto companies to its respective dealers.

From the table-5,the 50 percent of Hero Honda dealers said the order-to-delivery lead time is
7 days, 20 percent of the dealers said time taken by company to delivery of the vehicles after
placing of the purchase order is 15 days and remaining 30 percent of Hero Honda dealers said
the order-to-delivery lead time of company is 30 days.

The 70 percent of Bajaj Auto dealers said the company is taking 7 days to delivery of the
vehicles after placing the purchase order by them. The 20 percent of dealers said the order-to-
delivery lead time is 15 days and remaining 10 percent of dealers of Bajaj Auto said the order-to- www.zenithresearch.org.in
delivery lead time is 30 days.

To compare order-to-delivery lead times of Hero Honda and Bajaj Auto the mean and standard
deviation is applied and result is presented in table-5.1. The Hero Honda mean time for time to
deliver the order is 15.50 days, whereas Bajaj Auto mean time to deliver the order is 10.9 days.
The Bajaj Auto is quickly responding to their dealers order than Hero Honda. Bajaj Auto is
better than Hero Honda in responding to dealers request for stock.
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International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

ORDER DELIVERY LEAD TIME TO CUSTOMERS

Order delivery lead time is the time taken by supply chain to complete the all the activities from
customer order to product delivery to customer. This dimension of customer service has
significant impact on responsiveness of supply chain. Customers always expect much shortened
delivery lead times. Shorter lead times, higher responsiveness and higher reliability will lead to
better customer service. The below table-6 represents delivery lead time and average deliver lead
time of dealers of Hero Honda and Bajaj Auto to their respective customers.

TABLE 6 TIME REQUIRED FOR DELIVERY OF CUSTOMER ORDER

for Dealer of The Company TOTAL

Time
Delivery of Hero Honda Bajaj Auto
No. Of
Customer No. of No. of Percentage
Percentage Percentage Respondents
Order Respondents Respondents

2 to 4 Hours 4 40.0 6 60.0 10 50.0

4 to 8 Hours 2 20.0 2 20.0 4 20.0
8 to 12 Hours 2 20.0 2 20.0 4 20.0
More Than 12 2 20.0 0 .0 2 10.0
Hours
Total 10 100.0 10 100.0 20 100.0
Source: Field survey

TABLE 6.1 AVERAGE TIME REQUIRED FOR DELIVERY OF CUSTOMER ORDER

Dealer of The Company Mean(In Hours) N Std. Deviation Variance

Hero Honda 7.20 10 4.492 20.178
Bajaj Auto 5.00 10 2.906 8.444
Total 6.10 20 3.851 14.832
Source: Field survey

From the table-6 it is clear that, the 40 percent of Hero Honda dealers is taking 2 to 4 hours to
deliver the two wheeler to the customers after receiving customer order, 20 percent of dealers www.zenithresearch.org.in
require 4 to 8 hours to deliver the vehicle to the customer, the 20 percent of Hero Honda dealers
are taking 8 to 12 hours for the delivery of the vehicle and 20 percent of dealers need more than
12 hours to deliver the vehicle to customer.

In case of Bajaj Auto, the 60 percent of Bajaj Auto dealers require 2 to 4 hours to deliver the two
wheelers to customer after receiving the order from customers, 20 percent of dealers are taking 4
to 8 hours and another 20 percent of dealers are taking 8 to 12 hours to deliver the vehicle to
customer.
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International Journal of Multidisciplinary Research
Vol.2 Issue 6, June 2012, ISSN 2231 5780

To compare the order delivery lead times of Hero Honda and Bajaj Auto mean time and standard
deviation is calculated and the results are presented in table-5.1. The order deliver lead time of
Hero Honda dealers is 7.2 hours and order delivery lead time of Bajaj Auto dealer is 5 hours. The
standard deviation in order delivery lead time of Hero Honda is 4.492, whereas Bajaj Auto
standard deviations for order delivery lead time only 2.906.

The shortest order delivery lead time represents firms supply chain efficiency in processing the
customer order. Every customers expects the fast delivery of product, supply chain must be
responsive towards the order delivery lead time. Relatively Bajaj Auto dealers are better than
Hero Honda dealers in the order delivery lead time. The Bajaj Auto supply chain is more
responsive than Hero Honda supply chain in managing order delivery lead times.

CONCLUSION

The present article demonstrated measuring supply chain performance by using order related
metrics. As per the metrics in the article, the Hero Honda supply chain is responsive supply chain
in its practice and Bajaj Auto supply chain is efficient supply chain in practice. The complete
responsiveness and efficiency in a supply chain is not possible to practice all the time and the
same is also represented in order metrics of Hero Honda and Bajaj Auto companies. Supply
chains strive to maintain a trade-off between responsiveness and efficiency at various decoupling
points.

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Devid Simchi-Levi, Philip Kaminsky, Edith Simchi-levi and Ravi Shankar Managing the
supply chain, Tata McGraw-hill publication, Newdelhi-2009.
B.Rajashekar and G V R K Acharyulu Logistic and Supply Chain Management, Excel Books,
New Delhi-2009. www.zenithresearch.org.in

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