INSTITUTE OF PROFESSIONAL EDUCATION AND

RESEARCH

ASSIGNMENT

ON

PRODUCTION &OPERATIONS MANAGEMENT OF

HERO CYCLE

Submitted to: Submitted By:

Prof. Hersh Sharma Mohit Malviya (21)

Varsha Nair (48)

Aniket Bushal (57)

ANALYSIS OF CASE HERO CYCLE

This case is about Hero Cycle that company can compete with their competitors in mass
manufacturing. Co-Chairman and CEO of the company, Om Prakash Munjal is the close
observer of the practices, his first priority of each day is to check that if there is any defective
component returned by the dealer and to assemble a cross-functional team to solve the problem
immediately. Company responses speedily to the changing market demand. Hero Cycle is the
worlds largest bicycle manufacturer. As if we look the figures:

In 1956 – 639 (manufactured)

In 2002-03 -- 6.1 million (manufactured)

Market share of
the company in India - 50% plus.

Company’s 90% vendors are located within 10 km due to which cost of stock is reduced. And if
we look from 1956 to now there is a continuous process of change and innovation. Company,
also has the collaboration with National Bicycle industries, which is a part of the Matsushita
group, to manufacture high-end bicycles. Company’s R&D is so strong that they response
quickly to there competitors with a new product, if there competitors launch a new product,
company can design a simple model in just 2 days and a more complex model in 10 days.
Company has installed ERP software and it is technology-oriented company. This software
helps them to coordinate between marketing R&D, tabular department, the paint shop and
inventory. Company’s product development time is extremely fast.

Company had fully focused on quality. They had a system called QMS (quality management
system), this system helps them to audit the quality of there end product. For manufacturing a
bicycle, quality raw material is used for each and every component and for this they have expert
to decide. Company has 225 vendors and as there 90% of vendors are located in the radius of
10 km, this helps them to facilitate there product just-in-time. Company does not store raw
material inventory for more than two days and there never allow overloading of shipment.
Company does not store raw material inventory for more than two days, there WIP (work in
progress) does not stay in factory for more than half a day and there FGI (finished good
inventory) is either removed from the shop floor or sent directly to dealers. Company does not
allow any kind of over loading of shipment.

For maintenance of machine and equipment, they have adopted various measures. As if any
machine downtime and failure, it is recorded and corrective action is taken by qualified
engineers. They also have adopted a concept of MTBF (mean time between failure) and MTTR
(mean time to repair). Company has developed a 4E’s safety program i.e. Education,
Engineering, Enforcement and Encouragement. At Hero they practice TQM (total quality
management), TWE (total waste elimination), Pokayoke (zero defect or zero-proofing) and
Jidoka ( automation with human touch) and various inspection and this has reduced defects in
end product and due to this there market complaint has declined by 63% between January,
2001 and 2003.

To keep in touch with changing market trend, as there executive regularly takes feed back from
there dealers and IT and R&D immediately respond to the market change. Hindustan
Thompson, there advertising agency also helps them in delivering the product at the right time.

TQC TWE

TQM
TEI

Company also has a concept Kaizen. Golden rules of Kaizen are:-

• Clean and oil-free floor is the first index of the good shop management.
• Produce just in time.
• No storage of materials at work.
• No obstruction in material flow.
• Everything in place and a place for everything.
Therefore Company has adopted the entire key concept like TQM, TPM,
Kaizen, TEI, TWE etc.
Every employee Junior or Senior is treated equally and they traine, educate, motivate
and encourage there employees and to there dealers and vendors they also provide
finance of 50% of cost of modification of showroom. They provide regular incentives and
interest to there workers.
Operation management of Hero cycle is so strong that it can compete easily with other
companies in mass manufacturing. Through this case we came to know that Hero cycle
is focused an each and every work and every one is dedicated to there work. Operation
management of the company response quickly to the market need. And the company is
fully focused on the quality of the product and speedy production.

Deliveri
ng
Quality
speedy
HERO CYCLE

Availabili Innovati
ty on
COMPETITIVE ADVANTAGE:-

• Process of change, innovation: From 1956 to now there is continuous process of

change at Hero and what has not changed there is commitment to change.

• 90 percent of vendors are located within 10 km 90 percent of Hero Cycle’s vendors are
located within 10 km due to which cost of vendor is reduced as a percentage of sales.

• Speed in development of new product: Company can design a simple model in just 2-
3 days; more complex model can be done in 10 days.

• Manufacturing Capability: Bicycle manufactured in 1956 is 639 and bicycle

manufactured in 2002-03 is 6.1 million. Bicycle manufactured per day is 16000 approx.
and market share of Hero Cycle in India is 50% plus.

• Technical Collaboration with National Bicycle: Hero Cycle has a technical

collaboration with National Bicycle industries, which is a part of the Matsushita group, to
manufacture high-end bicycle.

• Strong R&D and IT: Hero is an IT-savy, technology-oriented company. Company’s R&D
response quickly to the changing market demand. If there competitor launches any new
product, they response quickly to that need.

• Specialization is the hallmark: Specialization is the hallmark of the manufacturing

process at Hero Cycle. Experts are involved right from the stage of choosing the highest
quality raw material to applying to various techniques.

• TQM (total quality management): Company provides a best quality product to there
customers. For this they has a concept called QMS (quality management system), this
system audit the quality of the end product.

• Various inspection stages: This inspection has dramatically reduced defects in end-
products. Market complaint has declined by 63 percent between Jan, 2001 and 2003.

• Concept of Kaizen: Kaizen is a concept that’s midway between an existing situation

and striking innovation. It means common sense and continuous improvement, which
comes from people themselves.

• Helps Vendors and dealers: They supports there vendors by providing them the tools
for manufacturing apart from drawings, specifications and financial help. There dealers
are provided with standard showroom design specification and they finance them up to
50 percent of the cost of modification.

• Feed backs from Dealers: To keep in touch with market trend there field executives
regularly takes feed backs from there dealers. And there Advertising agency, Hindustan
 Thompson, also does research work for them and tells them when is the right time to
launch a product for a particular segment.

• Make to Stock: Hero cycle is a make to stock kind of company. There Raw Material and
Finished goods is always high while work-in-progress is low.

• Education and training: Every employee, senior or junior, is treated equally at Hero
and they regularly discuss issues with engineers that how to prevent machine downtime
and increase productivity.

• Quality Control: Company just check if any defective component returned by there
dealers. And if there is any they held a meeting and corrective action is taken by the
department.

• Does not store stock for more than two days: Company does not store raw material
inventory for more than two days. Work-in-progress does not stay to factory for more
than half a day and finished good inventory is either removed from the shop floor or sent
directly to the dealers.

• World’s largest manufacturer: Hero Cycle is the world’s largest bicycle manufacturer,
whose core strength is the first-rate production competence.

• All key concepts such as TQM, TPM (total productive maintenance), Just-in-time (JIT),
Kaizen and sex sigma.

• Concepts like MTBT and MTTR for machine: In day to day maintenance, they has
adopted concepts like MTBF (mean time between failure) and MTTR (mean time to
repair). They has also developed a 4E’s safety program i.e. education, engineering,
enforcement and encouragement.

• Availability: Due to easy reach to vendors deliver of the products become easy, so
products are easily available for there customers.

These all characteristics and uniqueness in their productions and operations

management makes Hero Cycle a different company. These all helps in the successful
inventory management which makes the company a profitable organization. The
changes which make in their model are minor which means that low variety but high
volume. This is the characteristics of Make to Stock organization.