Strive 5 - Automobiles

IIM Raipur

Vol. 3, Issue 1, Oct. 2013

Theme: Automobiles

 Emergence of Supply Chain & Operations in Indian Automotive Industry, Dr. Tapan Sahoo, VP, Maruti Suzuki  Supply Chain Performance Measurement System, Prof. Parikshit Charan, IIM Raipur  Interview with Mr. Sanjeev Khapre, VP, Exide Industries

 Guru Mantra, Car Sharing

Operations and Supply Chain Club

Contents Features

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Supply Chain Performance Measurement System (SCMPS) – The Supply Chain Excellence Way – Prof. Parikshit Charan , IIM Raipur

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Emergence of Supply Chain & Operations in Indian Automotive Industry - Dr. Tapan Sahoo (VP, Maruti Suzuki)

23

Charging You Up Interview with Mr. Sanjeev Khapre (EVP, Exide Industries India Ltd.)

Specials

Regular

07

The Scenario of Hybrid Cars - Indian Context

13

Reverse Logistics in Indian Automotive Industry

Trends

39

Green Revolution Part - III

43

Evolution of Supply Chain in Automotive Industry

27

Guru Mantra – Car Sharing

31

Summer Internship Experience

49

Book Review – Lee Iacocca

53

Debate – Two Wheeler or Four Wheeler

57

Crossword

On the Cover Page The Ford’s T model on the cover page was the 1st affordable car introduced in America in 1908; it changed the way Americans lived. It marked the beginning of an era which changed the way of personalized transportation. In similar lines this edition on Automobiles takes its readers through breakthrough changes that are happening in the industry in the field of technology, business practice, supply chain, operations and business model.

STRIVE Vol. 3 Issue 1 | Oct 2013 |

From The Editors The Indian Automotive Industry is in the middle of a crisis. With car sales falling continuously for 9 consecutive months, the automotive industry is paralyzed and is already in a fix about whether the bottom of the crisis has been hit or is the scenario set to continue. A slight ray of hope with the month of August 2013 as the car industry has snapped the decline with a growth in sales of 15% year on year, and the two wheelers with 4% growth year on year. With the short and medium term actions on restructuring underway it is time for the managers to also think about the long-term perspective to compete in the industry. It is in such time of crisis that most of the optimization happens in the way of conducting business. More emphasis is laid down to reduce the cost so as to increase the bottom-line.

With the already existing question of whether automotive market would return to its pre-crisis state, it is time for the present day managers to think about new business models that would change the future of mobility solutions so as to create a paradigm shift in the automotive business world. In addition to this the automotive industry also faces enormous restrictions in the form of environmental laws and regulations which has to be complied.

It is in this view that, OPEP, the Operations and Supply chain club of IIM Raipur, has come up with Strive – the bi annual e magazine to share the current trends in the field of automobiles from the industry and academia perspective through this fifth edition.

The magazine has insights from Dr. Tapan Sahoo, Vice President (Engineering, Research, Design & Development) at Maruti Suzuki India Limited, on the changes the industry has undergone in the last decade in the domain of both its operations and supply chain

management. Also, Mr. Sanjeev Khapre, Chief Technology (Executive Vice President) with M/S Exide Industries Limited, is sharing his viewpoints on energy management and future of automobile industry.

From the view point of academia, Prof. Dr. Parikshit Charan, Chairperseon of Operations and Systems area shares the importance of the right performance metric systems in the supply chain.

The students have also written articles on the contemporary topics of ‘Hybrid Cars’, ‘Reverse Logistics in Automotive Industry’. Also we have specials on ‘Evolution of Supply Chain in Automotive Industry’ and ‘Green Revolution – III’.

‘Guru Mantra’ handles the new emerging business model of Car Sharing as a mobility solution. In ‘Book Review segment we have the ‘Auto Biography of Lee Iacocca’ reviewed. Two of the students who had interned in the field of Operations with automotive firms have shared their experience of their projects.

We are thankful to Prof. B. S. Sahay, Director, IIM Raipur for his motivation and support. We also thank Prof. Parkshit Charan for guiding us throughout. We also thank all our authors for taking out time from their schedule and contributing to the magazine. Our editorial would be incomplete without acknowledging the support of Subhash Kumar, Vanamamalai, Thousif, Ankit Saxena and Neha Khapre in bringing out this issue and the whole Team OPEP for their commitment and dedication towards the club activities.

Manoj H. & Ruchi Sao Editors

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Director’s Message I am happy to see Indian Institute of Management Raipur grow from its modest beginning to its present day. In this journey students have played a key role through various clubs activities.

OPEP, the Operations and Supply Chain Club of the Institute has worked hard to make their presence felt in pan IIM operations arena. Our students have successfully launched four issues of the biannual eMagazine ‘STRIVE’.

Prof . B.S. Sahay

Since 2010, the Club is releasing its biannual EMagazine STRIVE with each edition focusing on one specific field. The fifth edition of STRIVE is focusing on Operations and Supply Chain in the automobile sector. I hope that this magazine will give you a brief insight into the current and future trends of automotive industry in India.

I wish OPEP a great success in their endeavor and hope that you enjoy reading this publication.

Prof. B.S. Sahay Director IIM Raipur

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SUPPLY CHAIN PERFORMANCE MEASUREMENT SYSTEM (SCPMS) –THE SUPPLY CHAIN EXCELLENCE WAY

Dr. Parikshit Charan has completed his graduation from Jain Narain Vyas University in Industrial and Production Engineering followed by Post-Graduation from Malaviya National Institute of Technology in Manufacturing Systems and Engineering and his Ph.D from Indian Institute of Technology Delhi in Supply Chain Management. At present he is the chairperson of Operations and Systems area at Indian Institute of Management Raipur.

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Supply Chain Performance Measurement System (SCPMS) –The Supply Chain Excellence Way In today’s world, supply chain (SC) is playing a strategic role in increasing organizational effectiveness and accomplishment of organizational goals such as enhanced competitiveness, better customer service and increased profitability.

There is an emerging requirement to focus on the performance of the extended supply chain or network in which company is a partner. Firms have now realized the potential of SC, but many of them still lack in selecting the proper performance measures for a fully integrated supply chain.

A key feature of present day business is the idea that companies compete through their supply chains (Christopher and Towill, 2001), and success or failure of supply chains is ultimately determined in the marketplace by the end consumer.

Saad and Patel (2006) observed that in general the understanding of supply chain and its implementation in Indian scenario is not very good. Moreover, in most cases efforts to measure performance were confined to only organizational boundaries rather the whole supply chain, though there are using some kind of performance measurement system to measure supply chain performance. Some of the peculiarities of Indian automobile sector are: large number of auto assemblers, low technological capability, poor quality, lack of reliability in terms of delivery, large number of players in automobile component sectors, small capacity of auto ancillary firms leading to shortages and lack of availability of components, and lack of partnership among partners in the supply chain (Saad and Patel, 2006).

A good supply chain management (SCM) program will bring about improved crossfunctional, inter-organizational process planning and control, and enhanced supply chain integration. Supply chain performance measurement system can facilitate interunderstanding and integration among the supply chain members. It also provides insight to reveal the effectiveness of strategies and to identify potential opportunities. It makes an indispensable contribution to decision making in SCM, particularly in re-designing business goals and strategies, and re-engineering processes.

With the opening up of the Indian economy due to liberalization, the Indian automobile industry is flooded with automobile manufacturers like General Motors Corp., Hyundai, Fiat, Honda, Toyota Motor Corp., Volkswagen AG, Daimler Chrysler etc., setting up manufacturing bases in India. On the other hand, liberalization have fueled the growth of Indian automobile industry along with its supply chain partners, which according to Automotive Mission Plan (AMP) 2006-16 envisages an investment of $ 40 billion. As projected in the document, the turnover of the automobile industry

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To gain an insight into SCM practices in India, with a focus on supply chain performance measurement system, a questionnaire-based survey was undertaken to address various issues related to supply chain performance measurement systems of select Indian manufacturing industries. The questionnaire was tested for (i) content validity, and (ii) construct validity. The following findings are based on approximately two hundred responses:

Cousins et al. (2008) reported that performance measurement covers the array of individual performance measures, performance measurement systems and frameworks, and their interactions with a large number of other variables.

Performance measures assist decision makers to plan, control and direct the activities of the organization (Cousins et al., 2008). Cousins et al. (2008) have reported that performance measurement has a

The findings indicate that Indian companies are moving ahead to adopt the supply chain practices and these are in line with the practices elsewhere. Yet, a lot need to be

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Trends From Industry

Drawing from the relational view of competitive advantage, which has its roots in the resource-based view (RBV) of the firm, Lee et al. (2007) found that strong supplier, customer and internal linkages enhance supply chain performance which further lead to cost containment and performance reliability. Similarly, they found that there is partial support for strong customer linkage enhancing supply chain performance in cost-containment and performance reliability. Further, they found that there is partial support for strong supplier linkage enhancing supply chain performance in cost-containment and performance reliability, and there is partial support for strong internal linkage enhancing supply chain performance in costcontainment and performance reliability.

Tangen (2004) suggested that a PMS should support strategic objectives and have appropriate balance.

Guru Mantra

chain

SIP’s

supply

Specials

on

Book Review

positive impact performance.

Debate

would increase to $145 billion by 2016 from the current $35 billion, accounting for 10 percent of the GDP (Ministry of Heavy Industries & Public Enterprises, Government of India, 2007). But due to recent economic crisis, automotive sector’s contribution to GDP growth rate is 5% (Shukla and Banerjie, 2009). Thus, the competition among the firms is very intense, prompting them to be innovative in order to reduce costs, enhance quality, and improve their performance and responsiveness to customers’ demand. To achieve these goals, existing firms as well as new entrants needs to improve their supply chains performance.

Gunasekaran et al. (2004) have suggested that in order to evolve an efficient and effective supply chain, SCM needs to be assessed for its performance. Ren et al.

(2004) put similar views forward when they stated that design, implementation and use of adequate performance management system (PMS) could play an important role if supply chains are to succeed in an increasingly complex, interdependent and changing world. For that selecting supply chain performance measurement system which is appropriate for a particular supply chain is of paramount importance.

Academia

STRIVE Vol. 3 Issue 1 | Oct 2013 |

STRIVE Vol. 3 Issue 1 | Oct 2013 |

done, so that collaborative relationship develops throughout the chain. It is observed from the survey that firms have upgraded their internal capabilities in terms of computer hardware, internet, extranet, ERP etc., but have been less successful in utilizing their capabilities for external coordination. The survey also found that a majority of the companies use some form of supply chain performance measures, but only a few have moved towards the adoption of the requisite software and integration of these software with their supply chain partners to measure the supply chain performance. Out of one hundred and twelve widely used measures, order fill rate was considered as the most important indicators for the performance evaluation of a supply chain. Yet, when it came to measurement, cost was the most widely used evaluation criteria. This reveals that Indian industries have still not moved away from the traditional way of evaluating supply chain based on cost. The observation of Saad and Patel (2006) is valid in the Indian context, as Indian industries are not adopting the supply chain philosophy in a holistic sense.

SCPMS implementation works when there is a focus on tangible and intangible benefits. SCPMS, as part of a firm’s resource portfolio, may not meet the resource-based view criteria when acting alone. Due to the relatively low barriers to imitation and acquisition by other firms, SCPMS-based advantage tends to diminish quickly. The value of SCPMS can be augmented only when it is embedded in an organization through resource complementarity and co-specialization. The study, examines the implementation of SCPMS and selection of performance measures from the four perspectives of balanced scorecard in the supply chain.

Through embedding SCPMS in a firm’s supply chain process, SCPMS can facilitate the development of higher-order organizational capabilities, namely supply chain capabilities, which are firm specific and hard to duplicate across organizations.

The advantage achieved through the adoption of sophisticated technologies and the synergistic benefits achieved through an integrated system provide the sources of sustained competitive advantage for a firm.

This survey also brings forth the point that awareness about supply chain performance measurement system is very low in the Indian context.

Therefore, creating awareness can play a big role in the effective implementation of the PMS in the SC. This in turn could lead to effective integration and synchronization among partners, thereby, eliminate excess inventory, reduce lead times, increase sales, and improve customer service (Agarwal and Shankar, 2002; Anderson and Lee, 1999).

In discussion with the respondents, many felt that SCPMS implementation is desirable; the drive to implement it has been rather uneven. Some respondents were not yet fully convinced of the need for supply chain wide PMS. While these managers had no objection to sharing some data, they were not quite ready (or fully convinced of the need) to provide suppliers access to sensitive and proprietary data pertaining to core competence areas. Thus, SCPMS at the implementation stage did not include suppliers as part of basic implementation

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Trends Debate

Book Review

Specials

Supply chain up-gradation is a continuous process; therefore, the research may continue to include new challenges and the use of new technologies in meeting these challenges. The organizations should develop and adjust to these dynamics, uncertain and unpredictable environment to survive in the market. As Charles Darwin has said: “It is not the strongest of the species that survives, not the most intelligent, but the one most responsive to change�

From Industry

Supply chain performance measurement is an issue that is gaining importance in the spheres of supply chain management research. Modern supply chains are very complex, with many parallel physical, financial, and information flows occurring, thereby, requiring parallel control of physical goods, logistical information, payments and ownership rights in order to ensure that products are delivered in the right quantities, to the right place, at the right time, in a cost-effective manner. For that selecting the right performance measures and metrics for the given supply chain and then prudently applying them in practice for a continuous improvement is very important.

Guru Mantra

Slone et al. (2010) opined that supply chain excellence is the most underutilized tools which 21st century organizations have at their disposal. Further, supply chain excellence DNA can be acquired with: hiring and grooming talent with supply chain acumen, and converting board room into supply chain champions; select and apply the right technologies; eliminate cross-functional disconnects; collaborate with internal and external customers; and implement a disciplined process of project and change management (Slone et al. 2010).

SIP’s

team. Rather in rare instances when performance measurement in supply chain took place, it was more of a related with cost as primary focus. All the respondents agreed that while considering supply chain performance measures they are not considering a holistic view.

Academia

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HYBRID CARS The Scenario of Hybrid Cars- Indian Context Abstract: The article illustrates the evolution of transportation through history and explains the current issues being faced to create a sustainable transportation system. Hybrid transportation technology is being termed as the solution to our current environmental problems. India being the second largest population with a large market for four wheelers has a very small presence in the hybrid market. We evaluated multiple parameters which are acting as barriers to successful adoption in India with some proposed improvements.

Devasheesh Nautiyal has completed his graduation in Computer application from Graphic era Institute of Technology Dehradun. He has a work experience of 33 months in iGate computer systems. He is now pursuing his first year of post-graduation course from Indian Institute of Management Raipur. His interest lies in operations and finance.

He could be reached at pgp13014.devasheesh@iimraipur.ac.in

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STRIVE Vol. 3 Issue 1 | Oct 2013 |

Hybrid Cars The Scenario of Hybrid Cars –Indian Context

In evolutionary context, it is a fact that humans have not evolved at all or even shown ‘green shoots’ towards the ‘next stage’ of our evolutionary progress in 10,000 years of our existence. We grew faster and stronger and are currently competing to outsmart none other but ourselves and yet cannot outrun a stallion nor crush rocks with our bare hands.

Confused? Look all around you, if closely observed you will see our unique way of evolving, possibly faster than any other species. To gain speed we built cars or ride a horse, to crush rocks we user hydraulic cranes and crushers. We grow inorganically by absorbing the resources around us provided by nature. Feeding the long accumulated resources to the tools or to the machines that helps us make these tools.

introduced a relatively new player in the market to sustain our transport needs of present and future.

Enter ‘Hybrid Cars’, solution to our energy woes, these vehicles may look as simple as a normal car but have been internally designed in a way to reduce dependence on the conventional sources of fuel while ensuring sustained performance.

The internal combustion engines are included in some models to complement or to supplement as and when required. With Indian energy consumption in volume for the transportation sector

One of the first areas where we have shown a consistent need to improve and shown significant development has been transport.

The most popular invention of the early man was the wheel which led to carts and cars and so on. Once powered by animals, today we have fossil fuels powering our cars, ships, locomotives, and aircrafts. Recently we witnessed spiking demand in fuel prices further exaggerated by the short supply and increased demand for the fuel. It is logical for us to pursue cleaner and efficient substitutes to our exhaustible fossil fuel sources already showing signs of stress. We

Source: Multiple Sources

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TYPE OF VEHICLE

CAP ON INCENTIVES

Hybrid Cars

Surprisingly (or not), Prius is the least sold car in India.

From Industry

its part being the one of the fastest growing economies and harboring one of the largest potential markets for vehicular purchases.

On the global front, the picture does not look rosy, as the energy consumption projections for as far as year 2035 do not see the Natural gas and Liquids contract much further.

Guru Mantra

plays the biggest spoilsport for the hybrid car market here, something we will realize as we progress in the article. We have not been able to promote manufacturing of most of the high end technology products including hybrid cars, with the exception of Reva and the less renowned Hybrid Scorpio from Mahindra. Instead of manufacturing, we import them as CBU (Completely Built Units) attracting 110% import duty on each car.

These results in severely inflated product prices, for e.g. Toyota Prius, the global leader in terms of hybrid car sales costs a whopping USD 62,000 as compared to USD 33,000 in the United States of America and around USD 23,000 in Japan.

SIP’s

skyrocketing from 5043 Kilotonne (kT) in 1971 to 40,830 kT in 2008, we cannot afford to ignore the fact that the pressure on our fossil fuels needs to be redirected to other alternatives, introducing an alternative and efficient source of energy for our transport will greatly help the cause. With the west and the far-east (read Japan) already leading the way, India can also play

Academia

STRIVE Vol. 3 Issue 1 | Oct 2013 |

High speed electric INR 5000 two-wheelers

Electric Cars

Manufacturing: One of the most debated and ignored sectors of the Indian growth story, failing to promote the manufacturing sector along with the service sector possibly

three- INR 60000 INR 100000

Policy Initiatives: Indian policies for manufacturing hybrid cars till January 2013 were not encouraging to say the least. The

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Book Review

Seven-seater wheelers

Debate

In the Indian context, the prominent issues faced in establishing an efficient and sustainable ecosystem for eco-friendly transport alternatives have been discussed below in brief:

Specials

Low-speed electric INR 4,000 two wheelers

STRIVE Vol. 3 Issue 1 | Oct 2013 |

idea to incentivize the manufacturing and import of hybrids was discussed way back in 2011 during the tenure of Mr. Praful Patel as the Public Enterprises Minister.

in India to reduce dependency on traditional fuels.

Infrastructure: The Hybrid vehicles, especially the electric ones need hybrid specific support infrastructure to sustain.

You may bring the best vehicle of its class in India but it will not help if the owner cannot find the charging station or the know how to repair.

However, the incentive was considered too small to lure the automakers.

Companies like Honda, Siel and TVS Scooters launched their electric and hybrid vehicles but received poor response from

2008

2035E

Considering this from a ‘different’ perspective, it is a good strategy to maintain exorbitant duty on the CBUs till we develop sustainable infrastructure. The duty would limit the inflow of too many hybrid vehicles in India. Otherwise, it would not be wise the flood the market with affordable products that the consumers may be able to buy but the infrastructure cannot sustain.

customers as the prices were much higher than the petrol variants of these vehicles.

The high import prices already drove Honda CIVIC Hybrid away from India as they did not find the proposition financially feasible.

It was only in 2013 that the government took concrete pro- manufacturing steps by committing USD 4.1 billion over the next 8 years to promote electric and hybrid vehicles

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the public domain. RECC the manufacturers of Reva have partnered with multiple petrol pumps and some malls in Bengaluru to provide charging points in public that would charge your car in 5 minutes. At the moment the onus of providing refueling points seems to lie with the manufacturers rather than the administration. Hopefully this trend will discontinue soon.

Conclusion: Indian passenger and commercial vehicle manufacturing industry is the third largest car exporter in Asia and the sixth largest manufacturer in the world with 3.6 million units produced in 2011. We have our basics covered in the car manufacturing industry; promoting production of hybrid vehicles in India is the next step. With the second largest automobile consumer market after China, India is definitely a place to be as the market

Hybrid Cars From Industry

Debate

Brining prospect of a better hybrid growth in India, Toyota in August 2013 decided to assemble and sell petrol-electric Camry hybrid in India to reduce price to Indian customers. At 29 lakhs it will be dirt cheap as compared to the 40 lakhs Toyota Prius (1 USD = 65.70 INR).

Guru Mantra

Source: CMIE Economic Outlook

SIP’s

We need to create an environment where companies can manufacture or import products and sell them at sustainable price that would help them maintain their business. The educated Indian customer is sensitive to the environment and will readily adopt a better alternative, but not at the cost of convenience and scrupulousness. The initiatives by the government raise hope of better times to come. Importers and manufacturers still believe that the Indian story will turn around. With RECC and Toyota holding on to the hope of growth, I hope we don’t let them down.

Specials

remains largely untapped. Steps like reducing the subsidy in import of hybrid technical parts is a welcome step but we can do more.

Book Review

As per the case with Reva, there are not many electrical charge points available in

Academia

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References: Content Reference:

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1. http://economicoutlook.cmie.com/ 2. http://www.thetruthaboutcars.com/20 12/06/indias-least-selling-car-toyotaprius/ 3. http://articles.economictimes.indiati mes.com/2008-1113/news/27694534_1_honda-s-civichybrid-honda-siel-cars-india-ecofriendly-cars 4. https://en.wikipedia.org/wiki/Autom otive_industry_in_India#Electric_ve hicle_and_Hybrid_vehicle_.28xEV.2 9_industry 5. http://goodtimes.ndtv.com/blog_mor e_comment.aspx?blog_id=252 6. http://articles.economictimes.indiati mes.com/2011-02-

8.

9.

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13/news/28540682_1_hybrid-carshybrid-vehicle-toyota-prius-hybrid http://indiatoday.intoday.in/story/bud get-2012-2013-electric-hybrid-carsto-get-boost/1/168393.html http://www.hybridcars.com/india-toinvest-more-than-4-billion-topromote-ev-hybrid-industry/ http://www.eia.gov/forecasts/aeo/er/e arly_fuel.cfm http://data.worldbank.org/indicator/I S.ROD.ENGY.KT?cid=GPD_31

Image References: 



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http://www.asmediadesign.de/Human_evolution.jp g http://savemoney.my/wpcontent/uploads/2012/07/WK10_Hy bridCar2.jpg

STRIVE Vol. 3 Issue 1 | Oct 2013 |

REVERSE LOGISTICS IN INDIAN AUTOMOTIVE INDUSTRY Abstract: This article depicts the need for reverse logistics in Indian automobile sector. It showcases the road map of future automobile market and challenges which must be overcome. Investments in reverse logistics can be the game changer in automobile segment in India. It would create a WIN-WIN situation for all the stakeholders of Automobile segment.

STRIVE Volu Amit Kumar Gandhi has completed his graduation in mechanical Engineering from Veermata Jijabai Technological Institute Mumbai.

He has a work experience of 22 months in Blue Star Ltd. He is now pursuing his first year of Post-Graduation course from Indian Institute of Management Raipur. His interest lies in operations and finance. He could be reached at pgp13017.amitkumar@iimraipur.ac.in

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STRIVE Vol. 3 Issue 1 | Oct 2013 |

Reverse Logistics in Indian Automotive Industry Reverse logistics is defined as “The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.”

Reverse logistics includes all of the activities of logistics. The difference is that reverse logistics encompasses all of these activities as they operate in reverse (from consumer to manufacturer).

Reverse Logistics in Indian Automobile: 





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Resources are scarce whereas demands are increasing.

Sales of passenger car and van segment was2.5 millionin2012-13 which has grown by 97% compared to 2003-04. Total of more than 180 million sold from 2000. While Average expected life is 10-15 years.

Easy Resale / Disposal will Encourage customer to buy, will switch more easily in less time

Passenger cars & Vans Sales - India

18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0

Scrapped vehicles are cut and sold as scrap by lowtech units in the unorganized sector using crude polluting techniques.

Scientific recycling could result in reduction of global warming and greenhouse gases. Captain N. S. Mohan Ram, Chairman, SIAM is of the opinion that about 7-10 % of the cost of vehicle can be recovered through modern techniques.

Two wheeler / four wheeler is one of the most significant buying decision for Indian customer hence its price has significant impact on them.

Sales

Cummulative sales

Source: www.industryoutlook.cmie.com/ Implementation Strategy: The Strategy of Reverse Logistic will only work if following stakeholders are confident of the systems and support for cause which makes a win-win situation. 

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Customers: Given the assurance by the Manufacturer / Dealer.





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  

/ reuse of the used part based on its efficiency.

Service Providers: Should return the defective parts which they replace while servicing the automobile and are repairable and should also encourage customer to donate unwanted / defective parts which can reused. They should also encourage customers to use such parts.

Scrap Dealer: End of vehicles or vehicle parts are mostly sold to scrap dealers hence they can act as gate keeper of that part which can go to manufacturer or which are to be send for recycling. As they have the high volume of useable part they can help to improvise reverse logistics.

Quality Checks: While reusing the refurbished part it is important the Automobile’s Efficiency is not decreased.

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



Scrap/Destroy Third Party Sale Markets) Third Party Disposal Salvage Secure Disposal

(Secondary

capacity, labor and inventory is necessary. While giving them required quality of part.

Manual/Labor Work: Right from collection of part from customer to identify the useful Part/ one has to disassemble the parts to delivery of such part to service center or Manufacturer.

Valuation: Determining the cost of the part at the time of collecting it from customer is very difficult & will vary from very person to person.

Infrastructure: Lack of infrastructure facility creates difficulties for new business set up.

As handling of goods collected from customer required entire new facility to be replaced/ rectify the defective parts, warehouses to keep parts in stock and redeploy when required.

Reverse Logistics From Industry

 

Debate

 

Incorrect Order/ Order processing Errors Damaged/Defective Goods Contractual Agreements (mostly for Dealers) like Excess Stock, Stock Adjustments, obsolete.

Service/Maintenance Factory Repair – Return to vendor for repair

Guru Mantra

Current Disposal Scenario of the Indian Automobiles

Reasons for Returning Automobile   

Meeting Customer Expectations: Reverse logistics being a service industry, meeting customer demands with effective and efficient use of resources including distribution

SIP’s



Specials

Challenges:

Book Review



Customers must buy the remanufactured part / automobile or the second hand replacement offered to them.

Government: Government should support for the manufacturer in terms of regulatory law and taxes for resale

Academia

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

Unorganized Retail: There are massive supply and return issues with 70% of growing population, living in rural areas, hence the reason that only 5% of sales are through organized retail channel. 95% of sales are from unorganized retail channel.

Inc., company will upgrade the same product as per latest technology and sell it in refurbished product. The consumer who is unable to afford latest technology will buy refurbished product, while consumer who are able to set bear difference between the products he selling & new product will buy the latest product. It’s a win/ win situation for all. The same principle can be applied to Indian Automobile sector. Manufacturer should start refurbish market where the car is collected from customer upgraded & resold to in market.

Indian consumers are good at maximizing the benefit of any purchased product. They use the product as long it works even if its efficiency or performance is decreased or new technology has arrived in market they are reluctant to change. Even after product has become obsolete they sell the product in scrap market or sell in resale market.

Reluctant to change the product forced Indian auto manufacturer to make this market the organized market E.g. Maruti True Value, Tata Motors Assured, Hyundai Advantage. This has market has helped manufacturer to increase the sales of cars to some extend as people replace their car’s/ bikes within few years after purchase as they get better resale value. To further increase sales of Automobile manufacturer should move to reverse Logistics.

Reusing & Recycling of resources reduces environmental pollution impact which can generate carbon credit which gives commercial advantage. As it create the new market of refurbished automobile increases employment rate. Reverse logistics creates WIN- WIN situation for all the stake holders of Automobile industry.

References: 1. Going Backwards: Reverse Logistics Trends and Practices By rogers and Tibben-Lembke, 1998.

2. www.livemint.com/Politics/LmlyZ0l 7Q3ZVEcA71p6W6K/A-mountainof-hurdles-confronts-efforts-torecycle-old-cars.html 3. http://store.apple.com/us/browse/hom e/specialdeals/mac

Apple Inc. has been able to increase to the sale of its products & increase in profit margin through its refurbished market.

Every customer want to use the latest technology knowing this what apple did is created its refurbished market where customer can sell it apple product to Apple

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EMERGENCE OF OPERATIONS AND SUPPLY CHAIN IN INDIAN AUTOMOTIVE INDUSTRY The Journey of Indian Automobile Industry over the Last Decade Abstract: In this article the author briefs about the growth of Indian automotive industry and the multitude of factors that are responsible for its growth. He writes about how the entry of global players has changed the automotive industry’s operation and supply chain.

He also explains the current practices in the area of green supply chain and impact of technology in the automotive industry.

Dr. Tapan Sahoo is leading the Automotive Electrical, xEV and electronics technology domain as vice president at Maruti Suzuki India’s R&D center. His research papers in the areas of strategic technology management, xEV technologies and automotive product development have been published in national and international journals of repute. He is the Co-chair of the Frontier Technology Group of SIAM (Society of Indian Automobile manufacturers).He is the secretary of Society of Automotive Engineers (SAE) Northern Indian Section. He is an Electrical Engineer from UCE-Burla. He has completed his MBA and Ph.D. from 17 IIT Delhi.

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Emergence of operations & supply chain in Indian automotive industry exports during this period. This will have multifaceted impact in the way industry operates in India. Let’s have a look at the growth of automobile industry in India in the last decade.

Automotive industry in India has evolved dramatically since inception, particularly in the last one decade. Despite the global economic crisis, most segments of the industry had double digit CAGR in last decade. The high growth can be attributed to factors such as the increased economic activity, increasing customer aspirations, high growth potential, and entry of global players. Today, India is proud of the status the industry has achieved, though it still has a long way to go.

CAGR in last decade Segment CAGR Percentage Two wheelers 12% Passenger cars 14% HCV 6% LCV 35%

The growth of the industry in India, which started with establishment of Maruti Udyog Limited in 1983, also paved the way for introduction of modern management and supply chain practices.

In case of passenger cars, the industry size has grown to 3.2 million in 2013. This growth was possible because the overall vehicle penetration is very low in India.

Today it stands at approx. 18 cars per 1000 persons. Comparing this with any emerging countries in Asia, India is still at a low penetration level. The case with other segments is similar. Low penetration levels clubbed with long term economic growth, rising disposable incomes and a young population gives rise to a positive outlook for the industry in long term.

Growth Scenario & Potential: Long ago, Peter Drucker called the auto industry, “The mother of all industries”, and that was not an understatement. As per the Automotive Mission Plan (AMP) 2006-2016, automobile industry in India is expected to contribute to about 10% of GDP by 2016, with target output of $145 billion. AMP envisages 2 fold increase in GDP contribution, 3 fold increase in employment, 5 fold increase in industry revenue and 9 fold increase in

Industry Dynamics: Considering the huge opportunities and growth potential, the past decade witnessed entry of almost all major global players in the Indian market. Parallel to these developments, the technology and regulatory framework of the country was undergoing a major change. Introduction of Emission norms in line with EU, mandate of basic safety norms and inherent change in competitive dynamics among global and regional players had a significant effect on

India’s Global Position Segment India’s Position Two wheelers Second Passenger cars Sixth Trucks Fourth Tractors Second

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Increase their technology absorption and development capability Enhance the Quality level Manage and reduce their cost

This was necessary to remain competitive enough to compete against the global component manufacturers that had entered into India, following the footsteps of global OEM’s.

When we look back, we can see that the supply chain grew at a manageable pace during the liberalization phase. But when the industry globalized in India, we could see a clear trend of Tierisation. The value addition done by component suppliers changed dramatically during this phase. For example, OEM today design and develop passenger cars, Tier I design and develop the systems and modules like the A/c system, Tier 2

The technology strategies deployed by component manufacturers are:

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Specials

SIP’s

Develop capabilities in house Enter into a TA (Technical agreement) with technology provider

Debate

 

Trends

 

Evolution of Supply Chain: Original equipment manufacturer (OEM) on the other side had to manage the existing and new global suppliers, which were introduced for new technology products. So, in the overall supply chain, the number of component supplier increased, which logically got the industry to restructure itself by way of Tierisation and Consolidation.

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

Form a JV with global partner Acquires companies overseas

Guru Mantra

 

operations and supply chain practices. Not only OEM’s, but it also impacted the component suppliers in India to a great extent. Most importantly, component supplier in India had to:

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develops a component like compressor and Tier 3 three will do housing casting. On the other hand, we see a trend of vertical integration of operations at OEM/ some supplier end to better control and manage costs.

time, it has been real challenge to provide better value to the customers, thereby putting pressures on cost reduction activities across the supply chain. But at the same time cost has to be reduced. So, efforts have been made to implement quality systems as per latest globally recognized standards.

Growth in domestic and export volumes had its own set of challenges, both for OEM’s and suppliers. Added to this due to cyclic nature and global economic crisis, the industry went through a slowdown and surged back. Besides managing and meeting the fluctuating demand challenges, mitigating the risk of volatility in raw material and volatility in the foreign exchanges put a greater responsibility on OEMs. OEMs had to support not only Tier I, but also the Tier II or III component manufacturers to increase their operational capabilities so that they are able to meet the challenges. Hence, overall industry has gone from a transactional relationship to more collaborative relationship leading to overall growth.

Quality Status of component industry Certification / Award Name ISO 9001 TS 949 ISO 14001 OHSAS Deming Award Winners Japan Quality Winners TPM Award winners Shingo medallions

Number 576 467 208 105 2 4 15 2

Also, efforts are being put to adopt and adapt Lean operations management practices like JIT, Kanban and improve efficiency across the value chain. There is a greater emphasis on localization of components by OEMs. In addition, there is an emerging trend of early involvement of vendors in the product development cycle to design parts collaboratively between OEMs and suppliers. However, current supplier capability still remains a challenge.

However, there are many challenges that the industry is facing today and has to face in future. The success of the industry will depend how all partners in the supply chain meet the key challenges.

1. Quality & Cost 2. Managing Risk

Managing Risk: Second issue is of managing risk. Risk is associated with markets in which product is sold, economic fluctuations, disruption in operations due to unforeseen events like natural disasters.

Key Challenges: Quality and Cost:Like we discussed before, there has been growing emphasis and focus on Quality due to increasing customer demands, focused effort to increase exports and competitive dynamics. At the same

When global OEMs entered Indian market, they did so not only take advantage of inherent domestic demand, but also to take advantage of lower manufacturing costs and

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Conclusion: And miles to go before I sleep… The automotive industry in India has evolved over the last decade and is based today on a strong foundation.

Concerted efforts need to be put on all dimensions for the industry to lead the growth of 21st century India.

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Trends From Industry

Guru Mantra

The second important risk which is required to be mitigated is the impact of foreign exchange.

For example, electronic components and a lot of raw materials are not produced in India today. Due to the volatility in the foreign exchange, it has become difficult to manage cost and price relationship. Therefore, there has been a lot focus given by OEMs for localization of components. Localization of child parts is therefore another area which needs to be looked into seriously by the automotive supply chain. It also provides a great opportunity to budding entrepreneurs to invest in these areas.

SIP’s

Technology: The evolution in technology has happened over the last years which have definitely influenced the operations and supply chain management. Radio frequency identification (RFID), Enterprise resource planning (ERP), and similar technologies have helped the OEMS to improve their operations and supply chain. OEMs are deploying IT solutions to accurately capture real time demand and then link it to production planning, in order to achieve high efficiency of the supply chain.

However, meeting the growing customer expectations and demand volatility will continue to remain a challenge.

Specials

Green Supply Chain: One of the key drivers in the automotive industry has been the environmental regulations. There have been serious efforts to reduce CO2 emissions of vehicles in Europe, Japan and other countries and India is not far behind.

Products like hybrid and electric vehicles have been developed worldwide to mitigate the impact. The emphasis on “going green” is not restricted to products only, but is extending to the entire supply chain.

Therefore, we see the emergence of green supply chain practices in India as well.

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Emerging Practices

Debate

make India as an export base. The required thrust for this was also given in the AMP 2006-2016. The key differentiator between the domestic and international market is the requirement of regulations. Each country has its own set of regulation and meeting these requirements is a must for being eligible for exports. Therefore, risks associated with exports have to be very well understood and mitigated. For example, legal issues like product liability clause can make companies go bankrupt in case of major quality problems in vehicles/ components. Also, in case of Europe, there is regulation for end of life of vehicle (ELV). Hence, recyclability and reusability norms have to be met. The industry in India need to understand these challenges well and mitigate associated risks.

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Interview With:

Mr. Sanjeev Khapre Executive Vice President & Chief Technology, Exide Industries Limited Mr. Sanjeev Khapre is the Executive Vice President & Chief Technology at M/S Exide Industries Limited which is India’s No 1 Lead Acid battery manufacturing company. He is a B.Tech in Chemical Engineering from Laxminarayan Institute of Technology Nagpur.

Mr. Khapre started his career with M/S Albright Moraraji & Pandit Limited, a subsidiary of Dharamasi Morarji Limited, Ambarnath, as a Trainee Engineer & worked in various capacities with Amar Dye Chem & Borax Morarji Ltd. He moved in to Lead Acid Battery manufacturing industry in the year 1981 with Willard India Limited.

Mr. Khapre has been associated with Battery Industry for the past 32 years and he held various positions like Technical Manager, Executive Manufacturing, Vice President etc.

Currently he is located at Pennsylvania USA, at East Penn Battery Manufacturing, world’s no 2 Battery Company, on behalf of Exide Industries. East Penn being Exide’s technical collaborators. Mr. Khapre holds the responsibility of introducing latest technology in battery manufacturing for automotive as well as industrial applications.

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1. What are the challenges that Exide had to face in order to rise to the position it is now?

A: Solar and Wind are currently among the safer options. Nuclear energy has many hazards. As solar and wind power are natural, they are the way forward. There is a lot of emphasis being placed on solar power by the government, so we are working towards making it commercially viable and successful.

A: Exide's motto has always been – ‘Good quality product at affordable price’ and this has been our guiding principle in product design.

2. How is the concept of recycling and bio degradation used in the batteries industry?

5. Where do you see the automobile industry is heading with the above mentioned energies made commercially available?

A: Lead acid batteries are not bio degradable but can be recycled. Lead can be recycled through the smelting process and can be reused. Every battery carries a recyclable symbol both nationally as well as internationally. The body of the battery is plastic and can be recycled. The electrolyte used is Sulphuric Acid and this can be recovered. So if we look at it this way, batteries are recyclable.

A: Automobile industry is looking at solar and electric energies as the future, for example: electric and hybrid cars. The industry is looking at Li-ion batteries to power the electric vehicles. So automobile industry is undergoing a key change in terms of alternative sources of energy and in the coming years I'm sure these technologies will become part of mainstream vehicles production.

3. Can you tell us about any recent development in production of Liquid fuel cells (hydrogen) for hybrid automobiles?

“Business has to

be looked at from a human angle also.”

A: Although there are research works in progress in the area of fuel cell technology and in other eco-friendly battery technologies, they are not commercially viable. There are a few safety concerns with the fuel cell technology. So at this point of time lead acid batteries are the most reliable and commercially viable technology available.

6. Though the concept of electric car is present in India for a while now it is far from creating a breakthrough change.

What according to you are the major challenges that are faced by electric car?

4. What in your opinion would be the safest energy options in the near future in place of traditional fuel cells?

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7. What are the eco-friendly practices adopted by Exide industries?

SIP’s

A: Battery being an energy storing device, we consume a lot of energy. So the focus has been on reducing the consumption of energy in our transformation process by looking and alternatives like solar energy, wind energy, recycling of materials and waste heat recovery. So such methods are adopted to make our value chain process more eco-friendly.

HYBRID CARS

A: Today, the most important feature of management is human understanding and human relationships. Understanding the employees and developing a healthy relationship with them is very critical irrespective of what business or sector you are working in. It is important to understand the human aspects of that particular industry- who are the stakeholders involved, the end users and who will be the benefactors and if you use your resources to develop products or services keeping in mind the human aspects involved in it then it will be a great success because at the end of the day any product or service is used by a human being, so this should be the main driving force. Thus, business has to be looked at from a human angle also.

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9. What is the one advice that you would give to young managers aspiring to join the supply chain management sector?

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A: Electric vehicles are still an expensive proposition in terms of manufacturing costs when compared to conventional vehicles. If the Government provides subsidies to manufacturers and consumers to make it commercially viable, then the segment can quickly pick up in India. China and Italy have been successful in launching electric bikes because the respective governments have supported the initiative. But in India there is no distinction for such products in terms of manufacturing or consuming.

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Specials

8. Nowadays, a lot is happening and is being talked about in the field of energy.

How should the academic focus be given on this sector for the continuous growth?

Debate

Book Review

A: The current challenge faced by the energy sector is of energy becoming more and more expensive. So elite educational institutions like the IIMs and IITs should focus on how to make energy available at an affordable price and also find alternate sources of commercially viable energy. That will be the biggest challenge.

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gle.

GURU MANTRA Car sharing-the new business model in India

Guru Mantra is the special article from the OPEP team which explains in detail a new emerging area.

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Guru Mantra they could collect the cars and keep them charged for the next trips.

Q) Sir, the business model of Car sharing has created a lot of interest among many entrepreneurs in the recent times. What is it all about?

Q) When did the practice of car sharing begin?

Car Sharing is a business model of renting cars for a short period of time to customers/ users. Initially, the concept was started by a group of people in order to commute on an ad-hoc basis. Now, the car sharing concept is acting as a substitute to the personal ownership and gives the users the benefit of having a leisurely and affordable access to a multitude of options on vehicles.

The first program of car sharing refers to the Car Sharing program of “Selbstfahrergenossenschaft" in Zurich in the year 1948. In 1960, there were studies conducted to see the possibility of having computer based transportation system which are precursors to the current model. In early 1970’s projects like Procotip in France and Witkar in Amsterdam were underway. In the year 1977, the official British experiment named “Share-a-car” was conducted

Q) What are its benefits?

The benefits to the individuals are to enjoy the benefits of a car without facing the hassles of owning one. Thus, Car Sharing is emerging to be the future of mobility solutions with addressing the issues of congestion in urban areas and also a powerful way to control greenhouse gases.

Q) Can you say some existing practices of car sharing?

Zipcar is the major player in the business of car sharing. It was recently acquired by Avis Budget group. Hertz on Demand (formerly known as Connect by Hertz), We Car by Enterprise Rent-A-Car, Uhaul Car Share owned by U-Haul and Avis on Location by Avis are some of the other players globally.

Q) How successful would it be?

Car Sharing is expected to attain 420% growth by end of this decade. i.e., from 2.3 million subscribed users currently to 12 million users worldwide. Also the global revenue based on car sharing is expected to zoom from $ 1 Billion to $ 6.2 Billion by 2020[1]. For future applications, most of the car sharing companies have started investing in plug-in hybrid electric vehicles (PHEV).

This is done with the view to reduce the consumption of fuel. Also since most of the car sharing would happen for short journeys,

Q) Sir, why is it really necessary for the automotive OEM’s?

The future of mobility is set to change. More and more urban dwellers are having an aversion towards owning a car due to space constraints and other factors [2]. The commuters expects the ‘mobility as a service’ (MaaS) rather than as a product.

They want to access the transport through

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other means and the trends and macro economic factors are set to drive the same

plays a greater role in finalizing the solution for the city. For example, the city of Mumbai is completely different in geographic and demographic parameters from Tokyo. Hence these have to be taken into considerations for successful implementation of the model

Q) Are there any automotive players in this business?

Trends

Daimler's car2go, BMW's DriveNow and Volkswagen's Quicar are some of the OEM’s who have ventured into this business model to provide Mobility as a service.

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Q) What is the potential in a country like India?

The business model suits only the mega cities as megacities offers a more conducive environment for car sharing concept. The mobility service demand is seen high in only mega cities.

[3] Winterhoff, M., Kahner, C., Ulrich, C., Sayler, P., & Wenze, E. (2013). Future of Mobility 2020. Arthur D' Little. Retrieved September 21, 2013, from Arthur D' Little: www.adlittle.com/downloads/tx.../ADL_Fut ure_of_Mobility_2020.pdf

Q) What care should be taken in designing the model?

Debate

Care should be taken in designing the solution for a megacity as no one size fit all solution is possible. The design of the city

Guru Mantra

Q) Is this business model only set for mega cities?

SIP’s

[2] Mathieu Meyer. (2013). Global Automotive Executive Survey. KPMG. Retrieved September 21, 2013, from KPMG: http://www.kpmg.com/global/en/issuesandin sights/articlespublications/globalautomotive-executivesurvey/pages/default.aspx

Specials

[1] Car sharing services will surpass 12 million members worldwide by 2020. (n.d.).

Retrieved September 21, 2013, from Navigant Research: http://www.navigantresearch.com/newsroom /carsharing-services-will-surpass-12million-members-worldwide-by-2020

Book Review

There are online platforms which integrates the idea of car sharing in India. The potential should set to grow only with more players entering the market. For a country which has witnessed a tremendous revolution in automobile sector with many OEM’s entering, the car sharing is just an impending business that is set to go big.

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REFERENCES:

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MARUTI SUZUKI INDIA LTD Summer internship experience

Production Management System (PMS) 3K

5S

Kimeraareta Koto Ga What has been decided Kihon Dori - As per the standard Kichin To Mamoru Must be followed

3G

Seire - Proper selection

Genchi - Actual place

Seiton - Arrangement

Genbutsu - Actual thing

Seiso - Cleaning

Genjitsu - Actually

Seiketsu - Cleanliness Shitsuki - Discipline

Umang Agarwal is a PGDM student of 2012-14 batch of IIM Raipur. He did his B.Tech in Automobile Engineering from SRM University Chennai and has keen interest in Operations. He plans to start his own venture in near future. He can be reached at pgp12111.umang@iimraipur.ac.in

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Summer Internship Experience – Maruti Suzuki Summer Internship plays a crucial role in the life of a management student as it gives a chance to showcase and implement the knowledge acquired in the first year of MBA. My internship at Maruti Suzuki India Ltd. (MSIL) gave me that opportunity in the domain of Operations Management.

As a fresher, I did not have any experience of working in a company and the internship helped me understand the organizational working and dynamics.

high precision and accuracy is required. It involves monitoring the production by taking periodic samples and plotting them on a chart in order to see if the process is within the control limits. The tool thus helps in detecting and preventing poor quality of products. Variation in a process is bound to be present and could be due to two reasons.

One is the inherent random variability which can be due to the machinery, engineering, operator, etc. which cannot be resolved.

Other is the unique variability due to broken machinery, operator fatigue, lack of training, etc. which can be resolved.

Maruti is a company that has successfully implemented the best of processes in its Production Management System (PMS).

Tools, techniques and concepts like 3K (Kimeraareta Koto Ga, Kihon Dori, Kichin to Mamoru), 3G (Genichi, Genbutsu, Genjitsu), 3M (Muda, Mura, Muri), 5S (Seiri, Seiton, Seiso, Seiketsu, Shtisuke) and many more are being used by the company on a daily basis to maintain its high quality and efficiency. In such a highly sophisticated company, it can be extremely difficult to identify areas of improvement. My project titled “Establishing Management Controls for Enhancing the Body Accuracy using Statistical Process Control� was based on this idea where I had to create a system that would identify defective areas in the weld shop and suggest ways of solving that defect.

Apart from SPC, I used Process Capability (Cp) as a means of measuring the variation in the production process. The Cp value helps determine if the process is efficient enough such that the natural variability in the process does not exceed the tolerance limits.

Control Chart

Using the two processes, the defective points were identified in the weld shop which was then grouped in parts based on

Statistical Process Control (SPC) is a method which is used in industries where

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This control gave confidence to the shop floor managers to carry out the corrective actions. Also, the control gave a target area to the managers for the future where they could focus and do a regular check to identify the reason for the defects. It can be seen that the problems that existed were mainly due to two reasons:

The biggest achievement for me was the fact that before leaving the organization, I could see the project being implemented into the production system. A manual was created which would guide the employees in learning the working of the system and using it effectively. Overall, the internship was a once in a life time experience which I shall cherish.

1. Vendor/supplier problem 2. Inbound manufacturing problem.

Trends Debate

Book Review

Specials

To find the actual problem, we had to take a perfect dimensioned part and carry out the manufacturing processes. By taking the

From Industry

The benefit of applying this process was that it was an iterative tool. As time progresses and production continues, the output will change. The tool will give the target areas based on the deviations and defects in the jigs and processes. Hence, this gives a scope of continuous improvement in the process till a long way. Even if we reach a point when all the points are totally under control, Nelson’s other rules (SPC rules) can be brought into the picture to take quality of the bodies to the next level.

Guru Mantra

measurement, the reason for the defect was known which could then be resolved to perfection.

SIP’s

the company specifications. A criticality factor was found which showed the severity of the process defect. The areas with the highest criticality were to be treated on a priority basis followed by the areas with lesser criticality. Hence, a dashboard was created which showed which part defects were to be resolved at a given time. Car part pictures were embedded into the system that would show the exact location of the area that is defective and needs action.

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HERO MOTOCORP Summer Internship Experience

` Inventory Management

Data collection from SAP, Store & PPC department

Visual observation of site

Modifications in existing situation.

Ex: space requirement & availability

Reduction in Inventory norms

Development of inventory norm model

This article has been written by Subhash Kumar. He is an Electrical Engineer from B.I.T.,Sindri (Dhanbad) and has worked in Tata Motors Limited for 5 years. His interest areas are Operations and

Supply

Chain.

He

pgp12098.subhash@iimraipur.ac.in

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can

be

reached

at

STRIVE Vol. 3 Issue 1 | Oct 2013 |

Summer Internship Experience – Hero MotoCorp

I did my summer internship at Hero

As per guidelines from my guide I divided

MotoCorp Ltd, Gurgaon in Strategic

the project into two parts. In the very first

Sourcing and Supply Chain Department. It

part I focused on existing situation at the

had been a great learning experience to work

company i.e., space availability as of now in

with the world's largest manufacturer of two

store for both type of parts-Bin and Trolley

- wheelers, based in India. Each day of those

as well as if the parts are procured and

two months during my internship was full of

stored as per existing inventory norm then

challenges and excitement.

how much space will be required. Once I got this result, I was in a position to compare the

I did my project on “Analysis of present

requirement of the space versus availability

inventory norms of bought out parts at HMCG,

comparison

with

of space then it was clear to me that there is

space

a shortage of space even if the company

availability and to propose an optimal

store materials as per inventory norm.

solution”. The aim of the project was to find out the gap present between availability and

In the second part of the project my focus

requirement of storage space if the materials

was to work on solution part wherein I

are stored as per existing inventory norm

worked on all the possibilities by which we

and to find out ways wherein maximum

can save the space. The reduction of

quantity can be stored in such a way that

inventory norm was a quick fix solution, so

store space utilization is optimum.

there was high probability of missing out many other possibilities, hence me and my

The project journey started with detailed discussion with project guide regarding

“The reduction of inventory norm was a quick fix solution, so there was high probability of missing out many other possibilities, hence I and my guide decided to consider this option at the last stage only.”

project methodology and project timelines.

At the first stage Data collection from SAP, Stores and PPC department was done and then visit and observation was made for different packaging type and storage areas in the plant.

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extended support. As a tool of self-

at the last stage only. I visited many times to

evaluation and monitoring the progress I

store, observed the various aspects of

adopted Daily Work Management approach

material storage. I took advice from my

wherein I note down each day activity and

faculty mentor as well. Then it was clear to

evaluated the planned versus actual task.

me that parts arrangement in bins or trolleys

The whole project gave me deep insight of

and subsequently the bins or trolleys

inventory

arrangement in the available space needs

mode efficiency. Apart from this inventory

like tunnel racking, adding layers in bins,

norm for parts needs regular check as

allocation on bin as per envelope size of

supplier location, cost, and SOB etc. change

parts etc., and it saved us space.

with time.

At the last stage I developed the inventory

It was really a great enriching experience

norm model considering it as in dependent

and exposure to know how the practical

variable and cost, location of vendor, SOB,

The concepts and model which we learn in

variables. When we worked further we

books gives us guidelines and confidence to

found that for many parts inventory norm

apply in the real world – industry.

can be reduced and this will give us direct

Specials

savings of space. I discussed with many for

SIP’s

world is different form theoretical world.

quality were considered as independent

checked

From Industry

efficiency, shelf efficiency and packaging

properly used. We worked on many ideas

Guru Mantra

storage capacity by improving the space

there but also available space was also not

and

the

improvement in store for maximization of

only inefficient use of bin or trolley was

managers

and

understanding that there is always scope of

optimization. We found cases wherein not

SCM

management

Trends

guide decided modifying the inventory norm

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STRIVE Vol. 3 Issue 1 | Oct 2013 |

its

feasibility since situation varies case to case.

Book Review

During the internship I got the opportunity to meet managers and officers of different department who were having a rich and extensive knowledge of their respective

Debate

area. Each of them offered me their

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STRIVE Vol. 3 Issue 1 | Oct 2013 | Green

Revolution

Part -III PART-III GREEN REVOLUTION

Is India Ready for the Next Revolution - Hybrid Cars?

Abstract: Electric cars have long been trying hard to penetrate the market but with minimal success. This article discusses the present trends in electric car industry in India and provides insights on the growth potential for these cars in future.

Ruchi Sao is a graduate in Chemical Engineering from Institute of Chemical Technology; she has worked in United Phosphorus Limited for two years and is now pursuing her first year Post Graduation course from Indian Institute of Management Raipur. Her areas of interest include Operations and Supply Chain Management. She could be reached at pgp13048.ruchi@iimraipur.ac.in

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Green revolution part - III 1940 & 1970 were the years of green revolution where all the forces of research, development and technology were used with an objective to increase the agricultural productivity. The year 2013 could also be quoted as the year of green revolution.

Green because it’s eco-friendly and revolution in context to automobiles.

Now what automobiles?

is

this

revolution

1) Battery Problem: It was found earlier that batteries would run for 160,934 km maintaining a decent average for the car.

But these same batteries have a huge replacement cost starting from 5, 50,000 for Nissan leaf.

But after lot of research in lithium ion batteries, German scientists have developed the battery that would work with more than 85% of its capacity even after 27.4 years of every day charging and discharging. Also the power densities of these batteries are 1,100 watts per kilogram which would result in short charging time and more acceleration speed.

Indeed, this invention is very recent and its implementation is still under consideration.

2) Dealer Problem: Most dealers have a great know-how of gasoline vehicles but when asked about electric vehicles they have no idea as to its functions, how will it fulfill buyers need and how will its performance be after some years. The solution is to make dealers aware of all its functions and parameters by the manufacturers so that the transparency between manufacturer and buyer increases.

3) Owner Problem: This is basically an attitude problem. If on someday the owner wakes up late one fine morning and gets ready in hurry for office, take out his electric car and starts driving in hurry to reach office. At that point it could be irritating to travel at such low speeds and be overtaken by others by

in

This revolution is that of Electric Cars.

Electric cars were developed way back in 1934 but because to its limitations over gasoline cars, it lost its value. But now the world realizes the need for social responsibility and eco-friendly atmosphere, one of the ways to achieve this is the use of electric cars.

As the name goes, electric cars run on electrical energy which is stored in Lithium ion batteries which are rechargeable. The biggest advantage of it is no pollution and not impact of oil prices which are of major concern to mango people of India. The problems that caused the near death of electric cars were: High cost compared to other gasoline vehicles The disinterest of dealers The mentality of owner.

But now, the world is ready to move ahead of gasoline cars, so the solutions developed for these problems are:

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According to 2011 census, in India 4.7% of households have cars/jeeps/vans. Per capita income was Rs. 68,747 in 2012-2013. For a common man who wants to buy car irrespective of its engine in range of 6 L, the options which are sought after mainly includes Maruti Swift and Alto.

Fuel

Price / L

Mahindra REVA has set up a plant in Bangalore with a motive to produce 30,000 vehicles per year. Mahindra’s e20 is the electric car which was launched in India in late march 2013 with government providing around 29% of subsidy on sales of electric cars. But every new technology is initially resisted as it takes time for people to accept it and realize its long term benefits.

Average Cost / Km

Petrol

Rs. 68

Rs. 4.5

Diesel

Rs. 52

Rs. 2.7

Electric

Rs.

Rs 0.5

Very soon large number of electric cars will be running on Indian roads. This hope is because of the benefits that this car has.

Guru Mantra Debate

Above data look impressive, right?

SIP’s

But even if buyer gets attracted to the above data still it would be difficult for any buyer to actually purchase it because one of the reason being lack of government intervention. Government does not provide any rebate to buyer of electric cars it is been offered in US and china. Hence there is lack of interest from manufacturer side. Many big players like general motors, Nissan backed out due to such market conditions.

Specials

other gasoline vehicles. Hence if electric vehicle are to be, there has to be a significant change in owner’s behavior, which would come through time and patience.

Book Review

Source: http://mospi.nic.in/Mospi_New/upload/SYB2013/CH-20-MOTOR%20VEHICLES/MOTOR%20VEHICLE-WRITEUP.pdf

From Industry

Trends

Number of registered vehicle in India 2011

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There always involves a trade-off between the battery cost and the oil prices. But when looked on a longer run the fluctuations in oil prices are never to be predicted, it may increase or may decrease. But in case of electric cars expected life of car is 8 years minimum, with no maintenance cost and fuel cost. With the emerging technologies and great benefits let’s hope this car and many more electric cars will initiate another green revolution in India.

2. http://www.howstuffworks.com/willelectric-cars-require-moremaintenance.htm 3. http://www.plugincars.com/electriccar-dealers-must-address-concernsabout-batteries-126992.html 4. http://www.businessstandard.com/article/companies/why -e-cars-struggle-in-india113031900146_1.html 5. http://www.businessstandard.com/article/economypolicy/india-s-per-ome-rises-to-rs-5729-per-month113020700995_1.html

References: 1. http://inhabitat.com/germanscientists-create-lithium-ion-batterythat-can-charge-an-electric-car-for27-years/

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EVOLUTION OF SUPPLY CHAIN IN AUTOMOTIVE INDUSTRY Abstract: This article discusses the various stages of development in the concepts, philosophies and practices in the field of Supply Chain Management across the world in the automobile sector. Starting from simple supply chain of Ford the article discusses the evolution of supply chain leading to the contemporary aspects of Green Supply Chain and Triple Bottom Line principles.

Aditya Polisetty is 2nd year PGDM student in IIM Raipur. He is B.Tech graduate from NIT Jalandhar. He has worked in Hero Motocorp Ltd in R&D. He is passionate about automobiles and motor racing.

He can be reached at pgp12006.aditya@iimraipur.ac.in 43

STRIVE Vol. 3 Issue 1 | Oct 2013 |

Evolution of Supply Chain Automotive Industry

General Motors, contrary to the Ford’s philosophy believed in outsourcing. GM had reliable suppliers for various components.

They could leverage this do research for better and efficient performing components and systems (transmission, axles etc.), which helped them to produce better performing and visually pleasing automobiles.

Automobile industry has evolved since the late 19th century. Technological innovations were the rule of the game then. Only the rich could afford to buy cars due their higher cost of production. Henry Ford introduced the concept of mass production in the automobile industry to reduce the costs and thus made the car affordable (Ford Model T) for the average American. The raw materials would enter from one side of the plant and the finished goods would move out from the other end. Ford believed in ‘all production in’ (vertical integration) where in all the components were manufactured within the factory. ‘Mass Customization’ is the key for his success. He used same platform for various T models, with the help of which he could retain the efficiencies of mass production. This resulted in a simple supply chain for Ford. By 1920Ford could capture 50% share in the car market.

Chrysler which was lesser vertically integrated than Ford and GM could seek competitive advantage through flexibility in product engineering and styling. This helped them to bring new technology at a faster rate than its competitors. Other distinguishing factor for the success of Chrysler was the strong dealership network it could build over time.

Over time the Supply Chain Management (SCM) has evolved by integration of various domains, shifting its referred name from

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Trends From Industry

Guru Mantra Debate

Phases and characteristics of physical distribution development Phase Typical characteristics Phase I: Shortage of Goods Main concern of firm was to enhance the level of production Phase II: Transition Period Supply and demand were balanced Phase III: Mass Production Sales limited by demand, than by the level of production capacity Source: Kotler (1967) were made to improve product quality and Development. process design. This resulted in huge By the 1970s due the combination of various inventories, both the raw materials and factors like Changes in the customer demand work-in-progress (WIP). During this period, patterns (increased variety of products), the physical distribution was given Economic pressure (increasing logistics cost importance and manufacturers looked to and decreasing profit margin), reduce costs.

Technological changes (advent of electronic Drucker (1962) summarized distribution data processing capability and growth of functions commonly considered as ‘low transportation industry etc.) resulted in grade nuisances’. Warehousing was rethinking the philosophy of Logistics. considered as ‘necessary evil’ (Warman, With the advent of 1980s, there were 1971) and freight transport as ‘a dismal significant changes in the SCM. Inventory calculus of rates and routes’(Alexander, management and Ware housing become the 1969).In 1961, Reese, in the article part of corporate decisions. Measures like “Physical Distribution: The Neglected central distribution, severe reduction in the Function” published in Inventory stock holding and use of computers for Management, stated that for the average information processing. Third Party firm, physical distribution consumed 25% Logistics (3PL) were coming up during the and 33% of each sales dollar. This amount is same time. third highest cost of doing business after labor and materials.

SIP’s

Prior to the 1950’s logistics was not considered the function of the strategy makers. In late 1950’s the companies of the west looked to reduce the costs and improving productivity. Very little efforts

Specials

In 1962, Peter Drucker, a management expert, published an article in Fortune about business logistics, or distribution (as called during that period), which “is one of the sadly neglected, most promising areas of American Business”. Kotler (1967) has divided the development of physical distribution in three phases. The phases and characteristics of physical distribution development are given in Table – Phases and Characteristics of Physical Distribution

Book Review

various terms like ‘physical distribution management’, ‘logistics management’, ‘business logistics management’, and ‘integrated logistics management’ to ‘supply chain management’.

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Around the same time the Japanese were working to smoothen the flow of material and information. Toyota has developed the Toyota production system. With the help of which they could reduce the various wastes (7 types – over production, waiting, transportation, processing, stock at hand, movement and making defective products ) and increase the overall productivity.

Similar philosophies like Lean Manufacturing, Just-in-time, and Total Quality Management (TQM) etc. were developed by the other manufacturers.

share the investments, risks and profits.

Honda shares high level collaboration with various organizations like Showa (suspensions), Denso (electrical and electronic components) and Nissin (brakes).

Advent of IT: The Information technology has been the key enabler in helping the improvements in the SCM. Electronic data interchange (EDI) (reduced the use of paper), bar coding, data warehousing, MRP tools, ERP tools, etc. have helped the organizations in using their resources effectively and efficiently.

Supply Chain Collaboration (SCC): The open economy and globalization have taken competition to a new level. Porter’s (1985) value chain brought focus on strategic networks advocating contracts between coordination chains of organizations.

The Internet: The use of internet in SCM is relatively recent phenomenon. Its principle applications are in the areas of vendor management, communication, procurement, purchase, production scheduling, transportation scheduling, vehicle tracking and customer service.

There are four levels in SCC, first is communication, second is coordination where the companies’ focus on intra and inter organizational processes, third is Intensive collaboration in which the partners of the supply chain involve in a higher-level partnership for strategic advantages and fourth is Partnerships where the companies

The IT and internet has helped the companies to reduce inventories and save lot of cost. The EDI data is shared with vendors thus VMI,JIT etc. were implemented effectively.

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References: 1. “Evolution of Supply Chain Management: Developments in Academia and Industry” by GunjanSoniand RambabuKodali.

2. “SUPPLY CHAIN AGILITY CONCEPT EVOLUTION (19902010)” byKristina Rimienė.

3. “Supply Chain Collaboration: Evolution Management Framework”

by Dr. S. Jaya Krishna 4. “Co-evolution of Supply Chain Strategiesand Technologies” by Mohdzaher B. Mohdzain, Andrew D. White and John M. Ward 5. “The Role of the Internetin Supply ChainManagement” by Richard A. Lancioni, Michael F. Smith and Terence A. Oliva.

The objective of GSCM is to reduce the environmental impact at each and every stage of the product life cycle i.e. Design, raw material selection, manufacturing, transportation, and the reverse logistics (disposal of the product at the end of it life).

All the major automobile manufactures like Toyota, Honda, and Volkswagen etc. have embraced this philosophy. They have set targets for each year and measure them against the triple bottom line principles.

Conclusion: The supply chain strategy of organizations have shifted from lean to

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Trends From Industry

Guru Mantra

Green Supply Chain: With increased environmental risks, Green Supply chain management (GSCM) has evolved as an important philosophy and strategy to reduce the environmental pollution and increase the sustainability.

SIP’s

Despite the widespread perception that organizations should choose between being environmental friendly and saving cost, they can do both. One long term solution is to have a ‘closed loop supply chain’ (ability to re-use the product either by servicing or remanufacturing it). However, this required a dramatic shift in the consumer mindset from ‘make-use-dispose’ to sustainable and green solutions.

Specials

According to Christopher (2000), in the developed world, it is not the companies that compete but it’s their supply chains.

According to him an agile supply chain has four key constituents – market sensitive, a virtual supply chain (supply chain based on information rather than inventory), process integration and a network structure.

Book Review

agile, where as in supply chain it is technology from individual to interorganizational systems. Across the industry in spite of the developments in technology and infrastructure the SCM is plagued by many challenges such as visibility, cost containment, risk, volatile customer demand and globalization. Along with these there is ever increasing need to transform into green supply chain.

Debate

Agile Supply Chains: Agility is the capability of the company in the changing market environment to profitably exploit market opportunities, quickly flexibly; respond to the customer needs and suffer minimum cost using innovative solutions and partnership cooperation. The agile companies achieve lower production cost, launch new products rapidly and gain the maximum market share.

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BOOK REVIEW

Pulak Jain has completed her engineering in Electronics and Communication from IGIT, GGSIPU Delhi. She is now pursuing her second year post graduation course from Indian Institute of Management Raipur.

She could be contacted at pgp12113.pulak@iimraipur.ac.in

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STRIVE Vol. 3 Issue 1 | Oct 2013 |

IACOCCA: AN AUTOBIOGRAPHY $56 for three years. His plan ’56 for 56’ placed Philadelphia district at no. 1 position for the Ford. It was surely his ticket to the General Manager post at Ford and with the support of Robert McNamara, former president at Ford, he started working as the division head at Ford.

IACOCCA is no usual autobiography which tells the story of an individual taking on tides of time, but rather it is a story of a sharp shooting businessman whose life was intervened with two iconic firms in automobile industry, Ford and Chrysler.

Iacocca is the roller coaster ride of a businessman who takes a company to the top of its glory, gets fired from it and then joins a bankrupt company which he again takes to the top. The book fills you with the thrill of moving through the economic cycles of a company. It tells you how desperate times demands desperate measures. It tells you the story of an honest employee who embraces the company he is in and turns their fortunes with passion and drive to be best.

After becoming the GM, he implemented a quarterly review system making each executive accountable to themselves. The system prevented bad people to hide and good people to get buried. After this he soon flew to Europe to overlook the new car in pipeline ‘Cardinal’ but soon realized it was a loser. He set on his own projects and with his team wanted to tap in the younger market growing in America, who were in a search of a car that was sportier and luxurious car rather than an austere and functional. Focusing on great styling, strong performance and a low price he came up with his first car ‘Mustang’ price at $2500 stated to be launched at ‘ The World’s Fair’ in 1964. Mustang was a clear winner with its value proposition to both white collar and blue collar population. Following the Mustang success, Iacocca revived LincolnMercury line with the introduction of Mercury cougar and Mercury marquis. He also brought in Mark III which outsold Cadillac Eldorado in its very first year. He knew that these cars were profit makers as what they made on selling one Mark could only be made by selling 10 falcons. He finally became the president of Ford in December 1970 and took on to implement his plan of cost cutting. His aim was to cut

Lee Iacocca is a first generation ItalianAmerican who loved cars. Hence after completing his studies with Princeton, he joined his dream company Ford as a student engineer in August, 1946 but soon he realized he didn’t want to just make the parts of the car, he wanted to be in the middle of action. Hence in the middle of his training, he leaves Ford only to join it as a sales person in Chester. Honing his skills he steadily moved up the ranks and learning his most crucial lesson of the automobile industry that dealers are the guts of car business, selling and servicing every car that is churning out of the factory. Lee Iacocca finally gained the national recognition in 1956, when he came up with the loan plan of selling 1956 models with 20% down payment followed by monthly installment of

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Now it was again time for fun and Chrysler brought in their new convertible, Lebaron and for a change became a market leader.

Soon GM and Ford followed and started bringing out their own convertibles.

Chrysler again brought out a new market winner ‘Minivan’ which was refused by Henry II when Iacocca was at Ford but Dodge Caravan and Plymouth Voyager turned out to be great fruit bearer at Chrysler. Finally Iacocca propagates that seat belts and not air bags are the key to reducing traffic fatalities. While in the car business, nobody wants any of its customers to get hurt or make a car intentionally unsafe in an accident. It’s a tough business to be in and Iacocca’s story is a great way to have an

Trends From Industry

Guru Mantra Debate

They came up with first of its kind marketing plan giving money back guarantee and the campaign really kicked

SIP’s

At 54 Iacocca joined Chrysler, a company taking its last breath. There were no systems in place, the company has worst deficit in its account, 80000 unsold vehicles and practically no quality product on offer for dealers. In the end business operations boils down to three things: people, product and profits. Working on this principal, Iacocca first began to build his team. He brought in significant people from Ford, his old partner Hal Sperlich, Greenwald and the retired directors of Ford. He sacked a lot of people who were unproductive at Chrysler and also found out talent who were buried somewhere in the weak structure of Chrysler. For product quality a joint UAWChrysler Management Quality program was set up to ensure no compromise on product quality is done. Some discipline in the manufacturing was required and 250 new people were brought in to ensure quality in the system. Chrysler replaced his two adagencies Young & Rubicon and BBDO with just one Keith and Eckhardt who worked with the Chrysler team from the very beginning with their products giving out the signal that Chrysler was a no-nonsense company.

Specials

off. With the economy falling apart and leaving of Shah, the oil prices went sky rocketing high. It badly hit Chrysler and ultimately they had to go to the government for help. Many people were against saving Chrysler, and many people wanted it to die its death. But with Iacocca’s argument they were given a loan guarantee of $ 1.5 billion from the entire U.S. congress in lieu that the government owned everything Chrysler had in case it fails to return the money. Finally after their loan was set, Chrysler rolled out the winner car ‘K-car’ America’s first fuel efficient and front wheel driven small car. It was priced at around $5880 making accessories like air conditioning, automatic windows as an option. By 1983 Chrysler was back on its feet with a profit of $925 million and in July 1983 Chrysler paid back their loan, so early and so huge an amount that government didn’t know how to cash that check.

Book Review

the operating expenses in all four areas – timing foul ups, product complexities, design costs and out molded ways of doing business by $50 million. He focused on freight and closing of the departments making losses. But his journey at Ford finally came to an end and he was fired from Ford in 1975 over no particular reason.

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STRIVE Vol. 3 Issue 1 | Oct 2013 |

insight into automobiles.

the

exciting

world

part of a consumer’s life and automobile industry survives on what the customer demands, is it fuel efficient, is it style, is it luxury? Car makers have to constantly figure that out and this book only tells the story of a person who tried to be close to his customers and know what they want.

of

The book gives real insight into the automobile industry and tells you how a heavy investment industry with passionate people is run. Automobiles are an integral

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STRIVE Vol. 3 Issue 1 | Oct 2013 |

DEBATE TOPIC: WHICH IS MORE CONVENIENT FOR INDIANS- TWO WHEELER OR FOUR WHEELER?

Aashwij Mallya has completed his Sreejith Sreekumar is graduate in graduation in Civil Engineering from Indian Computer Science Engineering from Institute of Technology Roorkee. He has Amrita School of Engineering, Bangalore. worked in L&T for 3 years. He is pursuing He has a work experience of 2 years with PGP in management from Indian Institute of Infosys Limited. He can be reached at Management Raipur. He can be reached at 53 pgp12037.sreejith@iimraipur.ac.in pgp13030.aashwij@iimraipur.ac.in

STRIVE Vol. 3 Issue 1 | Oct 2013 |

Four Wheeler Perspective The Indian automotive industry has made tremendous progress post the 1991 liberalization. At present 100% FDI is permissible under the automatic route leading to increase in the competition and in turn benefiting the consumer. Gone are the days when common man had limited options like Ambassador or Premier Padmini for buying four wheelers. Today the market is filled with a plethora of companies like Tata Motors, Maruti Suzuki, Hyundai, Honda, Volkswagon, General Motors etc. which cater to needs of all classes of the society.

Safety: From the safety point of view four wheelers are way ahead than two wheelers.

Two wheelers are more susceptible to road accidents than four wheelers. It is too risky to drive motorbikes on major national highways and on potholed filled roads on rainy days. A recent study has shown that death rate per 100 million person-miles of travel of motorcycles is more than 35 times that of cars.

Social Equalizer: Buying a new car increases the social recognition of a person among his peers. Owning a luxury car like Audi or BMW is a symbol of wealth and high standard of living of a person.

Investment: Buying a car is similar to making an investment as the value of car depreciates over time. The utilities and value provided by the car are the returns on the investment. Cars also have a higher resale value than motorcycles.

Economy: Manufacturing sector has registered a growth of only 2.7%. RBI’s rigid monetary policy (caused mainly because of high inflation levels) is one of the major reasons for lack of credit availability in the market and poor performance of the manufacturing sector. Car sales registered a dip of 6.69% in the fiscal year 2012-13 for the first time in the decade. High interest rates (11-15%) and high fuel prices are the major reasons for dip in car sales.

Family Size: For bachelors and small families motorbike may seem more convenient considering the price, lower maintenance cost, lower fuel consumption and better convenience. But this stage lasts for a limited amount of time in an individual’s life. For a typical Indian family of more than four, motorcycle is highly inconvenient. Ratan Tata was inspired for making Tata Nano after watching the difficulties faced by a family of four riding a bike in congested roads on a rainy day.

However, inflation levels have gone down gradually over the past few months (it was 4.8% in June) and this has prompted the RBI to reconsider its monetary policy. If the RBI considers reducing the interest rates drastically into future to pump cash in the market, the production and sales of automobile industry, especially that of cars is likely to improve. So, four wheelers still remain a convenient option for Indians than t

SME’s Logistics: Four wheelers also offer tremendous advantage over two wheelers for SMEs to transport products. Pick-up trucks like Tata Ace are highly essential for brick and mortar companies for managing their logistics.

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Affordability: India is a country of developing road networks and relatively low income. Affordability is a major factor that influences the consumer behavior in this sector. Even the cheapest of the four wheelers holds no competition to the affordability and easy financing options available for the two wheelers.

India has a growing working-age population who has a perception of status in owning a specific personal vehicle and a negative image of public and non-motorized mode of transport. This is expected to stimulate the burgeoning market for personal vehicles.

The rising prosperity, increasing affordability and easy access to finance might incre the four wh volumes. But the primary choice of purchase for majority of the consumers will continue to be two wheelers due to the presence of huge rural areas, the youth market and women who prefer affordable, convenient, comfortable and low cost mode of private transport.

Operating Costs: The Indian consumer is very sensitive to the operating costs which includes fuel costs, service costs and spare part cost and availability. The customer friendly strategies adopted by the dealer and the unmatched network of authorised and unauthorised service stations keeps the costs of owning a two wheeler much below a four wheeler.

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Trends From Industry

There are multiple factors that attributes to the preference of two wheelers over four wheelers in the Indian context like economic pricing, public safety issues, fuel efficiency, convenience, size, loan repayments, etc.

Guru Mantra

Public Safety Issues: The public transport system in India does not guarantee safety, especially for women. This feeling of insecurity and the untowardly incidents in public transport during odd hours can be limited by the use of personal vehicles. Two wheelers are the preferred choice of personal vehicle among the working women owing to affordability and convenience factors.

SIP’s

Convenience: Roads and traffic conditions are major contributors to the choice of personal vehicles. Two wheelers provide the consumers with better maneuverability and parking options on the congested Indian roads. The consumers who own both four wheeler and two wheeler prefer two wheelers for short trips and four wheelers for longer trips. This shows a higher preference towards two wheelers since short trips are frequented by majority of the consumers.

Specials

The dominant product of the Indian automobile industry is two wheelers which has a market share of over 75%. India is the second largest producer of two wheelers in the world. The Indian two wheeler industry posted a growth of 2.9% in 2012-13, an expansion significantly lower than the 13.7% volume CAGR posted by the industry over the last five years. This is often mistaken as a change in preference of the Indian customers towards four wheelers, while the actual reasons are surging oil prices, high interest rates, rise in cost of inputs, delayed monsoons, etc.

Book Review

Two Wheeler Prespective

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REGULARS

r

CROSSWORD

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ACROSS 3. This country awards MBNQA to recognize the performance excellence of the organizations in it.

8. The city known as the world's traditional automotive center.

9. It is the machine design to affect the principle of Jidoka in TPS 12. Four car companies, called the "quattro" or "Auto Union" makeup this famous car company.

16. Ten US Army Air Force veterans of World War II recruited into Ford.

17. It is one of the highest awards of TQM 18. It is the famous model of volkswagen that has been produced for 65 years between 19382003.

19. He published "The Principles Of Scientific Management ".

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STRIVE Vol. 3 Issue 1 | Oct 2013 |

DOWN 1. This systematic technique for failure analysis was developed by the US army.

2. This company produced India's first iconic MUV. 4. This company developed JIT. 5. This company made the first ever diesel-engine passenger car.

6. The current Chairman and Chief Executive Officer of Nissan & Renault 7. This company developed the world's most advanced humanoid robot named ASIMO. 10. This car recently created a Guinness record by pulling a fully loaded cargo plane.

11. This famous German car company BMW is pursuing research in mobility for future related to______management 13. He is the inventor of Toyota Production System.

14. Adolf Hitler gave a contract to this famous company to make a cheap and simple car.

15. The company named to DJSI for the 12th straight year as one of the sustainability leaders.

17. This logistics company is the official partner of F1 for 8 impeccable years.

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STRIVE Vol. 3 Issue 1 | Oct 2013 |

Solution to crossword

PAN IIM OPERATIONS MAGAZINE On behalf of Pan IIM Operations group we invite articles for its annual magazine- 'OPSWORLD' related to the theme 'Productivity & Efficiency' for the upcoming issue.

Submit your articles relating to the theme by October 20th 2013 to opep@iimraipur.ac.in

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STRIVE Vol. 3 Issue 1 | Oct 2013 |

Team OPEP Bharath Arava

Anubhav Sood

Manoj H

Gautham Jayan

Subhash Kumar

Sameer Pandey

Ruchi Marotrao Sao

Sujitha Tikka

Vanamamalai. R

Thousif Mohammed A

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For Details, Contact

Operations and Supply Chain Club Indian Institute of Management Raipur GEC Campus, Old Dhamtari Road, Sejbahar Raipur 492015, India Email: opep@iimraipur.ac.in

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Cover Design: Ankit Saxena & Manoj H