OPERATIONS

MANAGEMENT

Section B Group 7
Bharat Agarwal 15B
Rohit Raj 36B
Sheryl DSouza 39B
Siddharth Tripathi -42B
Sumit Tyagi 47B
Tushar Tatawat 50B

AGENDA

History
About Hero
Products
Manufacturing Locations
Headcount
Sales
Material Cost
Capital expenditure
Manufacturing Cost
Distribution Logistics Cost
Inventory

History
1956

Formation of Hero Cycles Ltd. in Ludhiana by the Munjal brothers.

1984

Hero Honda Joint venture between Hero Cycles Ltd. of India and Honda Motor Co. Ltd. of Japan.
The company introduced motorcycles that were popular in India for their fuel economy and low cost.

2001

Hero Honda becomes the largest two-wheeler manufacturing company in terms of unit volume
sales in India and globally.

2010

Honda decides to move out of the joint venture and the company is renamed Hero MotoCorp Ltd. with a
new corporate identity.
The termination of the JV was attributed to the Hondas reluctance to share technology with Hero and
Heros uneasiness over the high royalty payouts to the Japanese company.

About Hero
VISION
- A mobile and an empowered India, powered by its two-wheelers.
- By the year 2020, Hero aims to surpass 100 million units in cumulative production with
annual bike and scooter sales of 12 million units and also plans to have more than 20
manufacturing and assembly plants globally with sales in more than 50 countries by that
year.

MISSION
- To become a global enterprise fulfilling its customers needs and aspirations for mobility,
solidity and sturdiness.
- Aim to set benchmarks in technology, style and quality to convert its customers to brand
advocates.

STRATEGY
- To build a robust product portfolio across categories, explore growth opportunities
globally, continuously improve operational efficiency, aggressively expand to reach
customers, continue to invest in brand building activities and ensure customer as well as
shareholder delight.

Products (1/2)
Hero offers one of the widest range of two wheelers with 25 different products across the 100cc, 125cc,
150cc, 225cc and scooter categories.

100cc

125cc

150cc

225cc

Scooters

Splendor +/ PRO/
NXG/ iSmart/ PRO
Classic

Super Splendor

Achiever

Karizma R/ ZMR

Duet

Glamour/
Glamour
Programmed FI

Hunk

Passion PRO/
XPRO/ PRO TR
HF Deluxe ECO/
Deluxe/ Dawn

Ignitor

Xtreme

Xtreme Sports
Impulse

Maestro/ Maesto
Edge
Pleasure

Products (2/2)

Launches
FY 14-15

FY 13-14

FY 12-13

Splendor iSmart
Karizma R

Ignitor
Passion XPRO

Karizma ZMR

Splendor PRO
Classic

Xtreme

Passion Pro TR

Pleasure

Financial Year 2015-16 (Ongoing)

Launched:
Hero Xtreme Sports
PRO
Hero Passion PRO

Planned*:
Upgradation on Passion
Impulse 200/250cc

*Source: http://auto.economictimes.indiatimes.com/news/two-wheelers/motorcycles/hero-motocorp-lines-up-35-new-launches-for-next-three-years/46606787

Manufacturing Locations (1/2)

FY 14-15

Domestic

Gurgaon, Haryana

FY 13-14

Dharuhera, Haryana
Haridwar, Uttarakhand

FY 12-13

Gurgaon, Haryana

Dharuhera, Haryana
Haridwar, Uttarakhand
Gurgaon, Haryana
Dharuhera, Haryana

Haridwar, Uttarakhand
Combined Total Installed
Capacity: 6.90 million units

Combined Total Installed

Capacity: 7.0 million units

Global Parts Centre,

Neemrana, Gujarat
Combined Total Installed
Capacity: 7.65 million units

Manufacturing Locations (2/2)

International
FY 14-15

FY 13-14
Africa:
- World class assembly units
in Kenya, Tanzania, Uganda
Bangladesh:
- JV with Nitol Niloy Group
to build the first overseas
manufacturing plant.

Africa
Bangladesh
Colombia:
- state-of-the-art
manufacturing plant at Villa
Rica, Colombia.

- Initial Production Capacity

of 80,000 units per annum
expected to expand to
150,000 units.

Headcount
FY 12-13

Permanent Employees 5,842

Employees hired on temporary basis 13,800
Permanent women employees - 66

FY 13-14

Permanent Employees 6,782

Employees hired on temporary basis 13,231
Permanent women employees - 76

FY 14-15

Permanent Employees 7,334

Employees hired on temporary basis 16,412
Permanent women employees - 88

"With Hero MotoCorp

increasingly turning global in
its operations, we have
undertaken a robust initiative
to enhance gender diversity...
This not only involves
reviewing our talent attraction
and retention strategies,
systems and procedures, but
also drawing out tiered
leadership development
mantel for women employees.
We have also been engaging
in coaching and mentoring
women staff to take up
leadership positions. *

*Source: http://economictimes.indiatimes.com/articleshow/49588782.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Sales (1/2)
Product Sales (No. of units)
6631826

6245960
6075583

FY 12-13

FY 13-14

FY 14-15

World market Share (in percentage)

39

Hero MotoCorps Sales (in million units) have been steadily

increasing owing to the fact that both the domestic sales and the
export sales have been increasing (as shown in the next slide).

38
37

The market share has seen a marginal decline in through the

years due to excessive competition from rivals Bajaj Auto and
Honda.

36
35
34
FY 12-13

FY 13-14

FY 14-15

Sales (2/2)
Sales (in million units)

FY 12-13

FY 13-14

FY 14-15

Product Category

Domestic

Exports

Domestic

Exports

Domestic

Exports

Motorcycles

5.3

0.14

5.4

0.14

5.67

0.12

Scooters

0.61

0.02

0.67

0.03

0.76

0.08

Total

5.91

0.16

6.07

0.17

6.43

0.2

Total Sales (in Rs. Crores)

27350.6

This is attributed to the fact that Bajaj Auto has a

diversified product portfolio of commercial vehicles and
two-wheelers which gives it an edge when the twowheeler market is wobbling.

25125

23583

FY 12-13

FY 13-14

Even though Hero MotoCorp shows a steady increase in

the Total Sales in terms of units as well as Rs. Crores,
there is a possibility that competitor Bajaj Auto may
have an edge over Hero.

FY 14-15

Also, exports account for nearly half of Bajaj Autos

revenues while for Hero, this is a fairly new terrain.*

*Source: http://www.livemint.com/Money/7osb1kcbFRRCiSJPHPKhXM/Why-Bajaj-Autos-performance-may-overtake-Hero-MotoCorps-in.html

Material Cost
Material cost(in Rs.Crore)
19,874.66

18314.38

17458.31

FY 12-13

FY 13-14

Purchase of raw materials

Sales of components to ancillaries
on cost to cost basis
Consumption of raw materials
Steel sheets

FY 14-15

Despite strong sales riding on the new launches -- Splendor i-smart, Karizma R, Karizma ZMR and Xtreme -- and higher
revenues, operating profit growth came in at only 3.5 per cent, while margins fell 138 basis points to 13.4 per cent. Raw
material costs, which account for 72 per cent of sales, were up 15 per cent year-on-year, about 30 basis points higher
than the previous year. The management explained that the excise duty anomaly between inputs and final product at the
tax-free Haridwar plant impacted profits to the tune of Rs 90 crore.

http://www.business-standard.com/article/companies/hero-motocorp-higher-costs-hit-profits-114080501503_1.html

Capital expenditure
Capital expenditure (in
Rs.Crore)

1,232.93

The company plans to spend over Rs.1,000 crore

towards capital expenditure in fiscal 2014 and also
formulate a strategy to maintain its leadership
position.
The capital expenditure includes an investment of
Rs.600 crore on its upcoming fourth plant and global
parts centre at Neemrana and Rs.100-150 crore on
a state-of-the-art integrated research and
development centre at Kukas.

941.47

607.64

The company also plans to spend Rs 400 crore on IT

instruments, existing plants and its proposed fifth
plant in Gujarat.
FY 12-13

FY 13-14

FY 14-15

http://www.business-standard.com/article/markets/hero-motocorp-up-on-capex-plans-to-maintain-leadership-113032200085_1.html

Manufacturing Cost
Year

FY 12-13

FY 13-14

FY 14-15

Material cost

17458.31

18314.38

19874.66

Employee benefit

820.92

930.04

1178.72

Other expenses
Total

2265.05
20544.28

2575.48
21819.9

3116.34
24169.72

Manufacturing cost (in Rs.Crore)

24169.72

21819.9
20544.28

FY 12-13

FY 13-14

FY 14-15

Increment in employee benefit is

attributed to the increment in 16% of
headcount.
Packing, forwarding ,freight etc. and
Advertisement cost were the major
expenses that increased YOY.

Distribution Logistics Cost

PROCESS FLOW DESCRIPTION
AO reports go to
RO

Consolidated
RO reports
go to HO

Picklist
generation

Daily
dealer-wise
plans

Monthly
Plan
updation on
SAP

PPC & Sales

formulate
plan

Invoicing
&
Document
ation

Truck
Parking &
Inspection

Loading of
trucks

Shipping
bikes to
Dealers

Out Bound Logistics

Involves planning , implementation of the distribution of vehicles to 815 dealers

across the country.

Vehicle
Movement

Offloading from
PDI Conveyer

Warehousing

Dispatch to dealers

Loading of bikes in
trucks
Final
Inspection

Inventory
Inventory (in Rs.Crore)
815.49
636.76

669.55

FY 12-13

FY 13-14

Shares in Hero MotoCorp (HROM.NS)

fell 1.8 percent after the motorcycle
maker said inventory levels have
risen to 4 weeks from a usual
average of 2 weeks.

FY 14-15

Weak demand conditions have prompted the world's largest two-wheeler maker Hero MotoCorp to decide
to lower production by 15-18 per cent in September over the first five months of fiscal 2013. The flagship
model Splendor faces the biggest slash. "We have seen a slowdown in retail sales for the two-wheeler
industry in July and August and it is expected to continue in September; so we are correcting production
in order to avoid an inventory pile-up, which has been happening over the last few months. We have
inventory stuck at our plants and with our dealers," said Pawan Munjal, MD & CEO,

http://articles.economictimes.indiatimes.com/2012-09-07/news/33677371_1_hero-motocorp-ignitor-passion-xpro
http://in.reuters.com/article/market-eye-hero-motocorp-shares-fall-idINDEE86J03920120720

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