OPERATIONS
MANAGEMENT
Section B Group 7
Bharat Agarwal 15B
Rohit Raj 36B
Sheryl DSouza 39B
Siddharth Tripathi -42B
Sumit Tyagi 47B
Tushar Tatawat 50B
AGENDA
History
About Hero
Products
Manufacturing Locations
Headcount
Sales
Material Cost
Capital expenditure
Manufacturing Cost
Distribution Logistics Cost
Inventory
History
1956
Formation of Hero Cycles Ltd. in Ludhiana by the Munjal brothers.
1984
Hero Honda Joint venture between Hero Cycles Ltd. of India and Honda Motor Co. Ltd. of Japan.
The company introduced motorcycles that were popular in India for their fuel economy and low cost.
2001
Hero Honda becomes the largest two-wheeler manufacturing company in terms of unit volume
sales in India and globally.
2010
Honda decides to move out of the joint venture and the company is renamed Hero MotoCorp Ltd. with a
new corporate identity.
The termination of the JV was attributed to the Hondas reluctance to share technology with Hero and
Heros uneasiness over the high royalty payouts to the Japanese company.
About Hero
VISION
- A mobile and an empowered India, powered by its two-wheelers.
- By the year 2020, Hero aims to surpass 100 million units in cumulative production with
annual bike and scooter sales of 12 million units and also plans to have more than 20
manufacturing and assembly plants globally with sales in more than 50 countries by that
year.
MISSION
- To become a global enterprise fulfilling its customers needs and aspirations for mobility,
solidity and sturdiness.
- Aim to set benchmarks in technology, style and quality to convert its customers to brand
advocates.
STRATEGY
- To build a robust product portfolio across categories, explore growth opportunities
globally, continuously improve operational efficiency, aggressively expand to reach
customers, continue to invest in brand building activities and ensure customer as well as
shareholder delight.
Products (1/2)
Hero offers one of the widest range of two wheelers with 25 different products across the 100cc, 125cc,
150cc, 225cc and scooter categories.
100cc
125cc
150cc
225cc
Scooters
Splendor +/ PRO/
NXG/ iSmart/ PRO
Classic
Super Splendor
Achiever
Karizma R/ ZMR
Duet
Glamour/
Glamour
Programmed FI
Hunk
Passion PRO/
XPRO/ PRO TR
HF Deluxe ECO/
Deluxe/ Dawn
Ignitor
Xtreme
Xtreme Sports
Impulse
Maestro/ Maesto
Edge
Pleasure
Products (2/2)
Launches
FY 14-15
FY 13-14
FY 12-13
Splendor iSmart
Karizma R
Ignitor
Passion XPRO
Karizma ZMR
Splendor PRO
Classic
Xtreme
Passion Pro TR
Pleasure
Financial Year 2015-16 (Ongoing)
Launched:
Hero Xtreme Sports
PRO
Hero Passion PRO
Planned*:
Upgradation on Passion
Impulse 200/250cc
*Source: [Link]
Manufacturing Locations (1/2)
FY 14-15
Domestic
Gurgaon, Haryana
FY 13-14
Dharuhera, Haryana
Haridwar, Uttarakhand
FY 12-13
Gurgaon, Haryana
Dharuhera, Haryana
Haridwar, Uttarakhand
Gurgaon, Haryana
Dharuhera, Haryana
Haridwar, Uttarakhand
Combined Total Installed
Capacity: 6.90 million units
Combined Total Installed
Capacity: 7.0 million units
Global Parts Centre,
Neemrana, Gujarat
Combined Total Installed
Capacity: 7.65 million units
Manufacturing Locations (2/2)
International
FY 14-15
FY 13-14
Africa:
- World class assembly units
in Kenya, Tanzania, Uganda
Bangladesh:
- JV with Nitol Niloy Group
to build the first overseas
manufacturing plant.
Africa
Bangladesh
Colombia:
- state-of-the-art
manufacturing plant at Villa
Rica, Colombia.
- Initial Production Capacity
of 80,000 units per annum
expected to expand to
150,000 units.
Headcount
FY 12-13
Permanent Employees 5,842
Employees hired on temporary basis 13,800
Permanent women employees - 66
FY 13-14
Permanent Employees 6,782
Employees hired on temporary basis 13,231
Permanent women employees - 76
FY 14-15
Permanent Employees 7,334
Employees hired on temporary basis 16,412
Permanent women employees - 88
"With Hero MotoCorp
increasingly turning global in
its operations, we have
undertaken a robust initiative
to enhance gender diversity...
This not only involves
reviewing our talent attraction
and retention strategies,
systems and procedures, but
also drawing out tiered
leadership development
mantel for women employees.
We have also been engaging
in coaching and mentoring
women staff to take up
leadership positions. *
*Source: [Link]
Sales (1/2)
Product Sales (No. of units)
6631826
6245960
6075583
FY 12-13
FY 13-14
FY 14-15
World market Share (in percentage)
39
Hero MotoCorps Sales (in million units) have been steadily
increasing owing to the fact that both the domestic sales and the
export sales have been increasing (as shown in the next slide).
38
37
The market share has seen a marginal decline in through the
years due to excessive competition from rivals Bajaj Auto and
Honda.
36
35
34
FY 12-13
FY 13-14
FY 14-15
Sales (2/2)
Sales (in million units)
FY 12-13
FY 13-14
FY 14-15
Product Category
Domestic
Exports
Domestic
Exports
Domestic
Exports
Motorcycles
5.3
0.14
5.4
0.14
5.67
0.12
Scooters
0.61
0.02
0.67
0.03
0.76
0.08
Total
5.91
0.16
6.07
0.17
6.43
0.2
Total Sales (in Rs. Crores)
27350.6
This is attributed to the fact that Bajaj Auto has a
diversified product portfolio of commercial vehicles and
two-wheelers which gives it an edge when the twowheeler market is wobbling.
25125
23583
FY 12-13
FY 13-14
Even though Hero MotoCorp shows a steady increase in
the Total Sales in terms of units as well as Rs. Crores,
there is a possibility that competitor Bajaj Auto may
have an edge over Hero.
FY 14-15
Also, exports account for nearly half of Bajaj Autos
revenues while for Hero, this is a fairly new terrain.*
*Source: [Link]
Material Cost
Material cost(in [Link])
19,874.66
18314.38
17458.31
FY 12-13
FY 13-14
Purchase of raw materials
Sales of components to ancillaries
on cost to cost basis
Consumption of raw materials
Steel sheets
FY 14-15
Despite strong sales riding on the new launches -- Splendor i-smart, Karizma R, Karizma ZMR and Xtreme -- and higher
revenues, operating profit growth came in at only 3.5 per cent, while margins fell 138 basis points to 13.4 per cent. Raw
material costs, which account for 72 per cent of sales, were up 15 per cent year-on-year, about 30 basis points higher
than the previous year. The management explained that the excise duty anomaly between inputs and final product at the
tax-free Haridwar plant impacted profits to the tune of Rs 90 crore.
[Link]
Capital expenditure
Capital expenditure (in
[Link])
1,232.93
The company plans to spend over Rs.1,000 crore
towards capital expenditure in fiscal 2014 and also
formulate a strategy to maintain its leadership
position.
The capital expenditure includes an investment of
Rs.600 crore on its upcoming fourth plant and global
parts centre at Neemrana and Rs.100-150 crore on
a state-of-the-art integrated research and
development centre at Kukas.
941.47
607.64
The company also plans to spend Rs 400 crore on IT
instruments, existing plants and its proposed fifth
plant in Gujarat.
FY 12-13
FY 13-14
FY 14-15
[Link]
Manufacturing Cost
Year
FY 12-13
FY 13-14
FY 14-15
Material cost
17458.31
18314.38
19874.66
Employee benefit
820.92
930.04
1178.72
Other expenses
Total
2265.05
20544.28
2575.48
21819.9
3116.34
24169.72
Manufacturing cost (in [Link])
24169.72
21819.9
20544.28
FY 12-13
FY 13-14
FY 14-15
Increment in employee benefit is
attributed to the increment in 16% of
headcount.
Packing, forwarding ,freight etc. and
Advertisement cost were the major
expenses that increased YOY.
Distribution Logistics Cost
PROCESS FLOW DESCRIPTION
AO reports go to
RO
Consolidated
RO reports
go to HO
Picklist
generation
Daily
dealer-wise
plans
Monthly
Plan
updation on
SAP
PPC & Sales
formulate
plan
Invoicing
&
Document
ation
Truck
Parking &
Inspection
Loading of
trucks
Shipping
bikes to
Dealers
Out Bound Logistics
Involves planning , implementation of the distribution of vehicles to 815 dealers
across the country.
Vehicle
Movement
Offloading from
PDI Conveyer
Warehousing
Dispatch to dealers
Loading of bikes in
trucks
Final
Inspection
Inventory
Inventory (in [Link])
815.49
636.76
669.55
FY 12-13
FY 13-14
Shares in Hero MotoCorp ([Link])
fell 1.8 percent after the motorcycle
maker said inventory levels have
risen to 4 weeks from a usual
average of 2 weeks.
FY 14-15
Weak demand conditions have prompted the world's largest two-wheeler maker Hero MotoCorp to decide
to lower production by 15-18 per cent in September over the first five months of fiscal 2013. The flagship
model Splendor faces the biggest slash. "We have seen a slowdown in retail sales for the two-wheeler
industry in July and August and it is expected to continue in September; so we are correcting production
in order to avoid an inventory pile-up, which has been happening over the last few months. We have
inventory stuck at our plants and with our dealers," said Pawan Munjal, MD & CEO,
[Link]
[Link]
THANK YOU
