Hero Honda Case Analysi1s

8/8/2019 Hero Honda Case Analysi1s

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Mr. Ajit Bisoi (04)

Mr. Ajay Gupta (37)

Mr. Venumadhav (41)

GROUP - 5


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HHML is leading player in the Indian Two-wheeler

market with more than 50% market share.

The company is headquartered in New Delhi with 22

regional sales offices and has 3 state-of-art

manufacturing facilities at

- Dharuhera

- Gurgaon

- Haridwar (started in Apr 08)

Annual Capacity : 5.4 million motorcycles (2009-10)

Annual Sales 2009-10 : Rs 15,860.51 crore

The companys entire range of products caters to all

customer segments

It also operates automotive insurance, financing and

spare parts business


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Managing double digit growth in production volumes andrevenues

Intensifying customer focus and research

Managing costs and increasing efficiency of its business

operations Broadening its product-mix and launching new models

Honing its R&D capability & competency

Managing entry into new markets and market segments


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Market slowdown Risk for the company

Competition Aggressive marketing strategies, a matter of

concern

Imports - Threat, if import duties further fall in future

Input costs Increase in steel, aluminum and oil pricesthreat to profit margin


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Achieving its objectives and addressing the concerns byleveraging on IT

Actively expanding its manufacturing capabilities to cater

to current and projected future demands

Emphasis on cost control, quality, efficiency andproductivity in its plants and other business operations

Implemented JIT initiative along with online vendor

connectivity program

To build a seamless communication and supply network


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Overall IT plan to have a transactional platform

For standardizing and streamlining many operational

processes across different functions with in the

enterprise

To enable more efficient processes and bettercollaboration with in the enterprise


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To begin with, HHML implemented thefollowing modules of SAP R3 in 2001

- Financial Accounting (FI)

- Cost Controlling (CO)

- Sales and Distribution (SD)- Material Management (MM)

- Production Planning (PP)

- Quality Management (QM)

Extended its capabilities with the

following SAP Applications in 2002

- Plant Maintenance

- Material Resource Planning


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Real time status of production plans, quantities, vehicle

dispatches

Availability of on line stock status for analysis, better

control over inventories & production planning

Synchronized planning across the organization for

procurement, manufacturing

Reduction in planning cycle time as daily plan is generated

by MRP based on requirements & stocks availability

Transparency of data stock status at material level across

various locations within plant

Stock status at both plants is visible & there can be

interplant stock transfer in case of shortage


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Better visibility of slow moving parts for inventory

controlling

Inventory reduction by continuous monitoring of related

cost & accurate planning through MRP

Better control over material issues & consumption

Real time data availability for analysis & monitoring of

parameters

Possibility of intra/inter plant comparisons leading to

visibility of best practices in both plants


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Following its overall IT plan, HHML after implementingERM within the enterprise, the focus was extended to its

external supply chain

To optimise the cost and restrict increase in cost of

materials

Vendor management is critical, as 68-70% of the cost of

production is made up of material cost.

Improve information with its business partners

Enable suppliers to perform transactions online

Reduce inventories

Requirement of SRM from purchase department


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Formation of internal core team to finalise its plan andsource for the appropriate solution

Inputs from external consultant, Gartner

Shortlisted 2 vendors

- i2 SRM solution from Logis- mySAP SRM from SAP

Inputs from external consultant, Gartner

Finally opted for mySAP based on

- Powerful self-service features of mySAP SRM

- Better integration with its existing SAP infrastructure


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The company was to be a ramp-up site for mySAP SRM

software. This meant that the company would be a test

site for the software package

However the risk was justified, as the company felt

Risk taken would be justified by strategic edge a

successful implementation would confer upon the

company over its competitors

Better support from SAP due to mutual benefit


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Needs of internal functions related with SRM in addition

to main functions of finance, procurement & production

Supplier collaboration component (including the supplier

self-service functions) of mySAP SRM

The system will cater to 400 vendors and 2manufacturing sites


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PhaseNo. of

VendorsCompletion plan

Pilot 53 months

(Feb 04 to May 04)

I 252 months

(Jun 04 to Jul04)

II 7517 months

(Aug 04 to Dec 05)

III 400 By Mar 08


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A core team of 4 (1 from IT, 2 from purchase, 1 fromadmin) with 5 external SAP consultants was involved

Completed mySAP SRM Supplier Self-service (SUS)

module pilot in record 3 months

System went live in May 2004 with 5 of its key suppliers

and further extended to 125 by Mar 2007 against

requirement of 400 vendors

The entire project investment was Rs 9.9 million excluding

external costs (The software was part of companys earlier

SAP investment) Hardware: 35%, Services 65% As a result of the high quality and speed of its SRM system

implementation, HHML was awarded the Computer

Associates Intelligent Enterprise Award in the

manufacturing vertical category in 2004


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Identification and involvement of key suppliers for pilotphase has ensured early successes, which were

instrumental for future development

Need for strong processes that supports incremental

supplier on boarding was understood.

Availability of strong core support team is essential.

Need of working closely with suppliers to ensure proper

infrastructure was considered essential .

It is essential to develop internal system promptly before

collaborative initiative with external constituents


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Improved collaboration through real time transactionswith supplier.

Suppliers is kept informed on all issues related to

deliverables and invoices, purchase order history,

incoming payments, automatic delivery schedules,advanced shipping notifications, automatic updating of

goods receipt note, better forecast purchasing behavior

Compressed cycle times from automation and online

approvals, leading to lower connectivity cost and quick

supplier response.


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Reduced process costs from automating streamlinedprocesses and greater compliances.

Reduction in communication errors.

Reduction in inventory days from 14.4 days to 11.8 days

in FY04. It accesses 70% of the materials in value terms by

maintaining zero inventory.

Improved accounting for production process

Earlier cost was captured on production order , now it ison material cost which is more accurate.


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Increased process transparency

Reduced phone/fax traffic

More integrated process and data

Reduced order and delivery mismatch

Better decision making from self analytic reports


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End to End process integration:

Hero Honda implemented a customer portal, as a feature

of My SAP CRM. With these 2 portals company

benefited from end to end process integration. Dealers

place their orders once a month. Every Friday companyget order in, consolidate them on Saturday and on

Monday morning suppliers receive their delivery

schedules directly from production planning system.


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mySAP CRM has two components namely BusinessIntelligence(BI) and Netweaver. While BI provides variousanalytics, Netweaver provides the platform forintegration with legacy and other ERP systems.

It has five distinct modules, namely - marketing,telesales, service, analytics, and change management

SAP R/3 was earlier purchased with 350 user licenses atHero Honda. This time, mySAP CRM 4.0 has beenprocured with more than 800 additional licenses.


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SMS SAP implementation:

The SMS-based solution allows a Hero Honda staffer to

share information with the company's servers

irrespective of his location. This information is flashed to

key personnel's mobile phones nationwide, removing theneed of their logging onto the website. Now, the moment

the complaint is entered in SAP from anywhere in India,

an SMS gets sent directly to the dealer. All the

intermediary people have been removed


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Strategy for IS planning is in favor of conceptual

approach to distribution of integrated systems rather than

a step by step development of applications.

HHML has kept ERP as the core and expanded in the

inter-organizational domain by adopting additionalapplications.

Focus on optimal use of existing IS concepts to achieve

the network objective rather than a fresh development of

technical solution for the network.


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Hero Honda is planning to set up its 4th manufacturing

unit in the state ofHimachal Pradesh

More strategic sourcing by evaluating suppliers and

forming strategic partnership.

Self service procurement for indirect material.

Enhancing suppliers portal by implementing a Vendor

Managed Inventory (VMI)

Improve analytics through data warehousing capabilities

of SAP business intelligence.


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Thank you !

Hero Honda Case Analysi1s

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