CHAPTER VI LOGISTICS MANAGEMENT IN AN AUTOMOBILE INDUSTRY - A CASE STUDY OF ASHOK LEYLAND
The auto industry is one of the key sectors of the Indian economy. The Industry comprises of automobile and the auto components sectors and encompasses commercial vehicles, multi-utility vehicles, passenger cars, two wheelers, three wheelers and related auto components. The industry has been growing since the opening up of the sector to foreign direct investment (FDI) in 1993. It has deep forward and backward linkages with the rest of the economy, and hence, has a strong multiplier effect. India is a large and diverse country, in which surface transportation is governed and administered by a large number of agencies, whose objectives and key result areas do not necessarily coincide. Regulation of traffic is a state subject, whilst several elements of infrastructure are controlled by the Central Government. It is also seen that in many places, railways are competing with road transportation system, even though this is an unequal match. Ideally these two modes of transportation should complement each other for their service to the nation. Auto industry being the driver of economic growth, India is keen to use it as a level of accelerated growth in the country. During the last decade
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conscious efforts have been made to fine-tune state policy in a manner that would help this industry realize its full potential. The automatic approval of up to 51 percent for foreign investment in priority sectors also included the automotive industry. Freeing the industry from restrictive environments has helped it to restructure, absorb newer technologies, align itself
to global
developments and realize its potential. It has also significantly increased the sector’s contribution to overall industrial growth in the country. Ashok Leyland Limited Ashok Leyland is the flagship Company of the Hinduja Group with business interests diverse as transport, energy, chemical & pharmaceuticals, InfoTech, media and financial services. In 1948, when independent India was one year old, Ashok Leyland was born with its Head Quarter at Chennai. It started manufacture of commercial vehicles in 1955, with technology from and equity participation by Leyland Motors Ltd., UK. With its own Research & Development base, strengthened by collaborations with international automotive leaders, the company has established a tradition of technological leadership and a strong reputation for product reliability. Since then it has been a major presence in India’s commercial vehicle industry. These years have been punctuated by a number of technological innovations which went on to become industry standards. This tradition of technological leadership was achieved through tie-ups with international technological leaders and
164
through vigorous in-house Research & Development. Ashok Leyland has reached the present status after passing through various milestones. In 1987, the overseas holding by LRLIH (Land Rover Leyland International Holdings Limited) was taken over by a joint venture between the Hinduja Group, the Non-Resident Indian transnational group of IVECO Fiat SpA, part of the Fiat Group and Europe’s leading truck manufacturer. The blueprint prepared for the future reflected the global ambitions of the company, captured in words: Global Standards, Global Markets. Ashok Leyland embarked on a major product and process technology up gradation to world-class standards. In the journey towards global standards of quality, Ashok Leyland reached a milestone in 1993 when it became the first in India’s automobile industry to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994. In 1995 Namakkal (Tamil Nadu) Driver Training Center was started in order to inculcate good driving habits among the driver community. It has state of the art facilities to enable the drivers’ upgrade their skills. In 1997, vehicles powered by CNG (Compressed Natural Gas) were launched first in the country in Delhi. Irizar TVS – A new venture to offer
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fully built passenger vehicle was started in 2001. 2003 was the year with major up-gradation in technology of engine with tie-up of Hino. Table 6.1 A Tradition of Technical Leadership Achievements
Year
Fill air brakes
1966
Double Decker buses
1967
Muti-axle trucks
1979
Rear engine buses
1979
Integral buses
1980
Vestibule buses
1992
CNG buses
1997
Hybrid Electic Bus
2002
H-CNG blend engine
2008
Hybrid CNG Pulg-in Bus
2010
Ashok Leyland is the
second largest
commercial vehicle
manufacturers in India. Ashok Leyland manufactures various ranges of commercial vehicles and diesel engines. Its current production capacity is 1.5 lakh vehicles per annum. The Company’s annual turnover exceeds US $ 1.61 billion.
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Hinduja Automotive Ltd 50.98%
Residents 10.54%
Body corporate & others 6.35% Banks & MFs 5.56%
Fis, Insurance Co, State Govt, Govt Companies 13.89%
FIIs 12.68%
Figure 6:1: Ashok Leyland Shareholding Pattern (as on 31st March, 2010) The Company’s product range spans from 7.5 Ton GVW to 49T GTW in goods transport, from 18 seaters to 80 seaters in passenger transport. Four out of five metro transport buses in India are from Ashok Leyland. At 60 million a day, Ashok Leyland buses carry more passengers than the Indian Railways. The Company makes over models in the Light, medium and heavyduty vehicle segments with diverse applications in moving people and material. The Company’s different range of special vehicles serves some very special customers, some of them are double Decker and vestibule buses, and these are unique models from Ashok Leyland, tailor-made for high-density routes. Ashok Leyland vehicles have built a reputation for reliability and ruggedness. For 30 years, Ashok Leyland has remained a pioneer in the design & development and manufacture of special vehicles for the Armed Forces
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developing a host of modern special application vehicles to address special needs and offers a logistics solutions for the Armed Forces. Besides, Rapid Intervention Vehicles and Crash Fire Tenders made by Ashok Leyland are on the alert at India’s international Airports. Ashok Leyland also makes water sprinklers, oil field trailer cementing units and dumper trucks. Ashok Leyland makes 95% of the Marine Engines of the requirement of the country. Ashok Leyland also manufactures Industrial Engines and a range of products that meets the varying needs of their customers. Ashok Leyland has seven group companies as 1). Automotive Coaches & Components Ltd.(ACCL) 2). Lanka Ashok Leyland 3). IndusInd Bank Ltd. 4). Ashok Leyland Project Services Ltd. 5).
Hinduja Foundries Ltd.
6).
IRRIZAR TVS
7).
Gulf Ashley Motors Ltd. Ashok Leyland has a wide dealer network for sales and for after sales
service. Dealership has the following responsibilities: •
Sales of vehicles
•
Service of Vehicles
•
Sales of Spare Parts
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Figure 6.2: All-India Marketing Presence
Ashok Leyland
has its associate companies operating in project
development, after-chassis products, foundry and overseas vehicle production. Ashok Leyland has currently 6 manufacturing units in India at the following locations: •
Ennore, near Chennai – One Unit
•
Hosur, near Bangalore – Two Units
•
Bhandara, near Nagpur – One Unit
•
Alwar in Rajasthan – One unit
•
Pantnagar in Uttaranchal – One unit
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Pantnagar Alwar
Bhandara
Hosur-1 Ennore Hosur-2 Cab Panel Press Shop
Figure 6.3: Manufacturing Facilities
Ennore is 18 Kms away from Chennai. Ashok Leyland’s (AL) 1st plant is situated at Ennore. AL manufactures most of their vehicles in this factory. Vehicles manufactured at all the factories are moved to different states as per their monthly requirements. AL has assigned transportation of vehicles to outside agencies to move the vehicles from the production centers to the Regional Sales Offices (RSO). Ashok Leyland has 24 Regional Sales Offices in India. The Heavy Commercial Vehicle market (HCVs) in All India level dominated by TATA Motors (65%), Ashok Leyland 30% and others (Eicher, VOLVO, TATRA etc.) 5%. Though All India level Tata Motors hold good market share, but in South India Ashok Leyland holds a very good market share.
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Table 6.2 Composition of Sales Details 2008-09
2009-10
% Inc (Dec) Over 200809
Domestic Civilian Passenger
16 548
17 217
4
Goods
30 651
40 541
32
Total
47 199
57 758
22
420
189
(55)
6 812
5 979
(12)
Total vehicles
54 431
63 926
17
Engines
21 447
19 050
(11)
Spares incl Defence (Rs Lakhs)
79 969
88 506
10
Defence Exports
The share of goods movement by road, rose from 12% in 1950 to 70% in 2005. In passenger transportation, the jump is equally dramatic: from 25% to 80%. The current Automobile trend is bullish and the company's market share stands at over 30% after taking into account of March 2010 sales. 83094 83307
63926
61655 54740
54431
48654 36444 29673
'01-02
'02-03
'03-04
'04-05
'05-06
'06-07
'07-08
'08-09
Figure 6.4: Last 10 years Sales details
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'09-10
Ashok Leyland have implemented the following new projects: 1.
Acquired AVIA an Automobile Unit at Czech. Republic
2.
Body Building Unit at Ras Al Khaimah
3.
Vehicle Production Unit at South Africa (to know the location)
4.
ANG Auto Tech, Uttaranchal.
1)
Ashok Leyland acquired AVIA Truck business Ashok Leyland has signed an agreement to acquire the Truck Business
Unit of AVIA a.s. in Prague. M/s AVIA manufacturers 6T to 9T GVW range of vehicles. This factory has capacity of 20,000 vehicles. This acquisition would help Ashok Leyland to market international vehicle with capacity of 6T to 9T GVW in Indian and European Market. 2)
Ashok Leyland Vehicle Assembly Unit in Ras Al Khaimah, UAE In the first phase a bus body building unit have already commissioned
at Ras Al Khaimah. In the second phase this would be upgraded to a vehicle assembly plant for trucks and buses. This unit with an initial annual capacity for 1,000 buses of international style and manufacturing quality using Ashok Leyland chassis and bus body CKD kits sent from India (including Irizar TVS). The facility, to be built with an initial investment of USD 5 million, will include a state-ofthe-art paint plant for bus bodies. This unit is managed and operated by Ashok Leyland.
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3)
Ashok Leyland Vehicle Production Unit at South Africa Ashok Leyland will be assembling heavy-duty vehicles in South
Africa. Ashok Leyland proposes to sell 1,000 vehicles in the first year from its new facility, mainly for South and Central African countries. Ashok Leyland is planning to outsource some of the parts from AVIA (new factory), Czechoslovakia and some parts from Indian Unit. The cabins will be sourced from Ashok Leyland's recently acquired Czechoslovakian subsidiary AVIA, the transmissions from India and tyres and batteries from South Africa. 4)
Ashok Leyland is in strategic tie-up with ANG, Uttaranchal Ashok Leyland has entered into another strategic tie-up with ANG
Autotech Private Limited (a subsidiary of ANG Auto Limited) for the manufacture and supply of tractor-trailers. Under this agreement, ANG Auto is setting up a capacity of 6,000 trailers per annum for Ashok Leyland from its Sitarganj unit (Uttaranchal), exclusively for Ashok Leyland. ANG will manufacture trailers in technical collaboration with FUWA Engineering, China, one of the largest manufacturers of axles in the world.
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ROBUST MODELS FOR LOGISTICS MANAGEMENT SYSTEM One of the most important aspects of efficient Logistics Management is Transportation, Inventory, Warehousing and Information Infrastructure. Logistics can be viewed as a Logistical extension of Transportation and related areas to achieve an efficient and effective distribution system. Following quantitative models of Operations Research can be used to address the decision areas in Logistics Management. 1.
Forecasting Models
2.
Mathematical Programming Models a). Location Shifting models b). Allocation Model
3.
Alternatives Analysis Models
Forecasting Models These models allow prediction of demand based on past data or other parameters that are independently available. This would enable for a better planning strategies for the organizations. The researcher made an attempt to develop a demand forecasting model for Ashok Leyland. Demand forecast of vehicles in Ashok Leyland is based on the Sales Process system. The Sales Process is being carried out by Dealer Sales personnel and is closely monitored by Ashok Leyland Sales team. Based on the sales forecasts given
174
by dealer, the vehicles are being produced. The produced vehicles are moved to Regional Sales Offices. Moving average forecasting method Moving average forecasting method is one of the most commonly used forecasting methods. It is an extrapolation method which assumes that past patterns and trends in sales will continue in future months. Thus past data on sales are used to generate forecasts for vehicle sales during future months. To do the moving average method, there is a need of choosing N, the number of periods used to compute moving average. Choice of N: To choose N, we need to define a measure of forecast accuracy. For this purpose, we will use Mean Absolute Deviation (MAD) as the measure of forecast accuracy. Before defining the MAD, we need to define the concept of forecast error. Given a forecast error for the n given observations, xn. We define et to be the error in our forecast for xt, to be given by et = xt- (forecast for xt) The MAD is simply the average of the absolute values of all the ei’s.
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Thus, on the average, it can be said that the forecasts are of that much quantity per day/week/month. In this study, we try to forecast next month’s sales as an average of last N months’ actual sales. We should find out the value of N that will minimize our Mean Absolute Error (MAE) (obtained by taking the average of the actual error incurred during each month). MAD is calculated for N=1,2,3,…60 since past data available are of 60 months. The forecasting model has been developed using the OFFSET function in Excel Spreadsheet. This function helps to pick out a cell range relative to a given location in the spreadsheet. The syntax of the OFFSET function is as follows: OFFSET(reference, rows, columns, height, width) Reference
is the reference from which you want to base the offset.
Reference must refer to a cell or range of adjacent cells; otherwise, OFFSET returns the #VALUE! error value. Rows is the number of rows, up or down, that you want the upper-left cell to refer to. Using 5 as the rows argument specifies that the upper-left cell in the reference is five rows below reference. Rows can be positive (which means below the starting reference) or negative (which means above the starting reference).
176
Cols is the number of columns, to the left or right, that you want the upperleft cell of the result to refer to. Using 5 as the cols argument specifies that the upper-left cell in the reference is five columns to the right of reference. Cols can be positive (which means to the right of the starting reference) or negative (which means to the left of the starting reference). Height is the height, in number of rows that you want the returned reference to be. Height must be a positive number. Width
is the width, in number of columns that you want the returned
reference to be. Width must be a positive number. Case 1: PASSENGER SEGMENT Refer the Sales data of passenger segment given in Appendix II and consider the work sheet PASSENGER SALES. The data available are from April’04 to March’09. We have to forecast the demand for April’10 to March’11. We begin creating a forecast in month 61, because that is the first month where 48 months of historical data are available. Step 1: Set the formula in the cell D62 and copied to C63:C73 = AVERAGE(OFFSET(C62,-$G$3,0,$G$3,1))
177
Obtain the average of last G3 months of data. •
C62 ensures that we define our range relative to the cell directly to the left of the cell where the formula is entered.
•
-$G$3 ensures that our range begins G3 rows above the row where the formula is entered.
•
0 ensures that the offset range will always remain in column B.
•
$G$3 ensures that we average the last G3 observations.
•
1 ensures that the OFFSET range includes a single column.
Step 2: Enter the below given formula in E62 and copied to E63:E73 to compute the absolute value of the error in each month’s forecast (based on a G3 month moving average) = ABS(C62-D62) Step 3: In cell H6 , compute the average of absolute errors (often called as MAD) with the formula = AVERAGE(E62:E73) Step 4: Enter the trial number of periods for the moving average (1-60) in I7:I66, and in cell J6, enter the MAD with the formula = H6.
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Step 5: After selecting the table range I6:J65and choosing a one way table with the column input cell of G3, we find that a 25 month moving average yields the smallest MAD.
Step 6: We obtain the minimum MAD in cell J67 with the formula = MIN(J7:J66) Step 7: Entering in cell H22 the formula = MATCH(J67, J7:J66,0) Gives the number of periods (25) yielding the smallest MAD. The details of the analysis is shown in Table 6.3.
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Table 6.3 Passenger Vehicle Segment Moving Average Model Segment
Month
Passenger
Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
88 86 108 86 125 143 91 76 90 105 147 147 109 134 114 142 157 126 43 54 71 118 127 145 70 103 108 111 113 126 125 60 49 74 163 132 70 108 122 148 145 164 129 121 81 126 127 171
Moving average forecast
Abs error
# of periods
25 MAD
180
59.0433
# of periods 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
59.0433 88.58333333 87.29166667 86.22222222 77.625 64.53333333 64.25 63.55952381 63.90625 64.24074074 64.825 63.78030303 62 59.75 60.39285714 60.39444444 60.83333333 59.10784314 59.73148148 60.14035088 61 60.67063492 60.6780303 60.08695652 59.44791667 59.04333333 59.70192308 60.10185185 59.91964286 59.38505747 59.45833333 59.7311828 59.59635417 59.63888889 59.94852941 59.96666667 59.33101852 59.46621622 60.22587719 60.68589744 60.78125 60.60365854 60.45436508 60.44379845 60.94128788 61.62962963
Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10
49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72
88 187 93 111 77 178 113 68 73 134 203 331 23 82 213 168 216 129 153 86 40 129 160 288
132 128 128 132 134 137 136 136 134 131 133 134
109 46 85 36 82 8 17 50 94 2 27 154
46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Min Best
62.02355072 62.11879433 61.90277778 61.64115646 61.72333333 62.05882353 62.21955128 62.11320755 61.91512346 61.88636364 62.04613095 62.22660819 62.23994253 62.15960452 61.975 59.04333333 25
Figure 6.5: Passenger Vehicle Segment Moving Average Model
181
Moving average forecasts perform well for a time series that fluctuates about a constant base level. From the above figure, it appears that the monthly sales fluctuate about a base level .of 125. More formally, moving average forecasts work well if Xt= b+€t Where b is the base level for the series and €t is the random fluctuation in period t about the base level. Case 1: PASSENGER VEHICLES Table 6.4 Passenger Vehicle Segment Details Segmen t
Apr’1 0
May’1 0
Jun’1 0
Jul’1 0
Aug’1 0
Se’1 0
Oct’1 0
Nov’1 0
Dec’1 0
Jan’1 1
Feb’1 1
Mar’1 1
Passeng er
109
46
85
36
82
8
17
50
94
2
27
154
Inference: From the analysis, the data forecasted for the month April’10 to March’11 of the passenger segment is shown in Table 6.4. Case 2: 4 X 2 HAULAGE SEGMENT Now let us consider the 4X2 Haulage segment data and consider the work sheet of Sales Data of 4X2 Haulage. The data available are from
182
April’04 to March’09. We have to forecast the demand for April’10 to March’11. Table 6.5 4 x 2 Haulage Segment Details Segmen t
Apr’1 0
May’1 0
Jun’1 0
Jul’1 0
Aug’1 0
Sep’1 0
Oct’1 0
Nov’1 0
Dec’1 0
Jan’1 1
Feb’1 1
Mar’1 1
4X2 Haulag e
20
25
29
37
43
48
53
58
56
56
61
61
Inference: From the analysis, the forecast data for the month April’10 to March’11 of the 4X2 Haulage segment is shown in Table 6.5. Case 3: 6X2 MAV SEGMENT The data available are from April’04 to March’09. We have to forecast the demand for April’10 to March’11. Table 6.6 6 x 2 MAV Segment Details Segment
6X2 MAV
Apr’1 0
May’ 10
Jun’1 0
Jul’1 0
Aug’1 0
Sep’1 0
Oct’1 0
Nov’1 0
Dec’1 0
Jan’1 1
Feb’1 1
Mar’ 11
22
19
17
18
17
17
14
14
13
13
15
16
Inference:
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From the
analysis, the forecast data for the month April’10 to
March’11 of the 6X2 MAV segment is shown in Table 6.6.
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Case 4: 4X2 TIPPER SEGMENT The data available are from April’04 to March’09. We have to forecast the demand for April’10 to March’11. Table 6.7 4 x 2 Tipper Segment Details Segment
Apr’ 10
May’ 10
Jun’ 10
Jul’1 0
Aug’ 10
Se’0 19
Oct’ 10
Nov’ 10
Dec’ 10
Jan’ 11
Feb’ 11
Mar’ 11
4X2 TIPPER
4
3
3
5
8
8
8
8
7
9
14
17
Inference: From the
analysis, the forecast data for the month April’10 to
March’11 of the 4X2 TIPPER segment is shown in Table 6.7. Case 5: 4X2 TRACTOR SEGMENT The data available are from April’04 to March’09. We have to forecast the demand for April’10 to March’11. Table 6.8 4 x 2 Tractor Segment Details Segment
Apr’ 10
May’ 10
Jun’ 10
Jul’1 0
Aug’ 10
Sep’1 0
Oct’1 0
Nov’ 10
Dec’ 10
Jan’1 1
Feb’ 11
Mar’ 11
4X2 Tractor
1
-1
0
0
01
2
2
2
2
2
2
2
Inference:
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From the
analysis, the forecast data for the month April’10 to
March’11 of the 4X2 TRACTOR segment is shown in Table 6.8. Case 6: 6X4 TIPPER SEGMENT The data available are from April’04 to March’09. We have to forecast the demand for April’10 to March’11. Table 6.9 6 x 4 Tipper Segment Details Segment
Apr’ 10
May’ 10
Jun’1 0
Jul’1 0
Aug’ 10
Sep’1 0
Oct’1 0
Nov’ 10
Dec’1 0
Jan’1 1
Feb’1 1
Mar’ 11
6X4 Tipper
5
5
5
5
5
5
5
5
5
5
5
5
Inference: From the
analysis, the forecast data for the month April’10 to
March’11 of the 6X4 TIPPER segment is shown in Table 6.9. Case 7: 6X4 MAV SEGMENT The data available are from April’04 to March’09. We have to forecast the demand for April’10 to March’11. Table 6.10 6 x 4 MAV Segment Details Segment
6X4 MAV
Apr’1 0
May1 ’0
Jun’1 0
Jul’1 0
Aug’1 0
Sep’1 0
Oct’1 0
Nov’1 0
Dec’1 0
Jan’1 1
Feb’1 1
Mar’ 11
0
0
0
2
0
1
1
2
4
4
1
0
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Inference: From the
analysis, the forecast data for the month April’10 to
March’11 of the 6X4 MAV segment is shown in Table 6.10. WARE HOUSE MANAGEMENT OF ASHOK LEYLAND Ashok Leyland has 24 Warehouses in PAN-INDIA basis and they name it as Regional Sales Offices (RSO).
In south India they have 5
warehouses located one each in Kerala, Karnataka, Andhra Pradesh and two are in Tamil Nadu. These RSOs are used for storing and delivery finished goods (vehicles) to dealers and direct customers. Regional Sales Offices are located at strategic areas. Fig 6.6.
ENNORE
HOSUR - 1
RSO SEMBMBKKAM
HOSUR - 2
RSO HOSUR
ALWAR
RSO ERNAKULAM
DEALER TVS & SONS - TN
DEALER TVS & SONS KERALA
DEALER SUNDARAM MOTORS TN
BHANDARA
Figure 6.6 : Structure of Warehouse Management of Ashok Leyland
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Most of the Regional Sales Offices are on rental basis. A case study on Regional Sales Office Ernakulam has been conducted regarding the expenses for maintaining an RSO. Table 6.11 Current Level Expenses at Regional Sales Office Ernakulam CURRENT LOCATION(Ernakulam) Discrepancy Rent Security Charges Electricity Charges Telephone Charges Additional Manpower Misc. Expenses Monthly Total Annual Total expenses excluding AL Manpower Source: Ashok Leyland
Current Expenses Amount (Rs.) 175000.00 150000.00 10000.00 5000.00 10000.00 20000.00 370000.00 4440000.00
OPTIMAL WAREHOUSING POLICY FOR ASHOK LEYLAND Location Shifting models This model help in planning the optimal location of plants or warehouses considering the inbound and outbound Transportation cost and infrastructure cost at the locations. 90% of the Kerala vehicles are produced from their factories situated in Tamil Nadu are entering Kerala through Palakkad (via Valayar), it is most suitable to relocate the RSO from Ernakulam to Palakkad. The following are
188
the
perceived advantages. If this is implemented transit time of 5 hrs can
be saved for each vehicles.
A study on relocation of Regional Sales Office Ernakulam has been carried and the details are given in the table below. From the table it is clear that the present level of their expenses for maintaining a Regional Sales Office at Cochin is higher than that of an expenses at a proposed Regional Sales Office at Palakkad. Table 6.12 RSO Expenses Working Details as on 01.11.2010 Current Location (Ernakulam)
Current Expenses
Proposed Location (Palakkad)
Differences
Descripancy
Amount (Rs.)
Amount (Rs.)
Amont(Rs.)
Rent
175000.00
75000.00
Security Charges Electricity Charges
150000.00 10000.00
100000.00 7000.00
100000.00 50000.00
Telephone Charges Additional Manpower
5000.00 10000.00
3000.00 10000.00
2000.00 0.00
Misc. Expenses Monthly Total
20000.00 370000.00
15000.00 210000.00
5000.00 160000.00
Annual Total
4440000.00
2520000.00
19,20,000.00
3000.00
Source: Ashok Leyland
Net annual savings of Rs.19,20,000/- per year on Rental, Security and other misc. expenses alone if RSO is shifted from Ernakulam to Palakkad.
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Table 6.13 Annual Savings by AL on Transportation Charges Saving on Diesel
34,43,508.00
Saving on Driver Bata
7,66,800.00
Saving on Return Train Fare
1,33,200.00
Total Savings
43,43,508.00
Source: Ashok Leyland. A detailed analysis has been carried out based on the current structure of operation 1.
Monthly average arrival of vehicles at RSO Ernakulam 300 nos.
2.
Distance between Palakkad and Ernakulam – 140 Kms.
3.
Diesel required for 140 Kms. (average 6 Kms./Ltr.) = 23.33 Ltrs.
4.
Average
Monthly
Diesel
Cost
for
140
Kms.=
(Rs.41.00/-
ltr.x23.33x300 = Rs.2,86,959.00 5.
Average diesel cost for an year = 2,86,959.00X12 = Rs.34,43,508.00
6.
Average annual Driver Bata – 1 day [Palghat-Ernakulam] = Rs.213/x300x12=Rs.7,66,800.00
7.
Annual Return Train fare due to lesser distance [Palakkad-Ernakulam] = Rs.37/-X300X12 = Rs.1,33,200.00
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Table 6.14 Total annual savings by Ashok Leyland if Regional Sales Office is shifted from Ernakulam to Palakkad Diesel expenses
34,43,508.00
Driver Bata
7,66,800.00
Return Train Fare
1,33,200.00
RSO Rent
12,00,000.00
Security
6,00,000.00
Electricity
36,000.00
Telephone
24,000.00
Misc. expenses
60,000.00
Total Source: Ashok Leyland
62,63,508.00
Table 6.14 shows that Ashok Leyland can save an amount of Rs.62,63,508.00, if their RSO is re-located to Palakkad from Ernakulam. Apart from the above cost saving, the following additional benefits are also available, if RSO is relocated to Palakkad: •
Chassis reaches Ashok Leyland RSO 5 hrs. early.
•
Lesser chance of accidents.
•
Chassis can be brought early hrs to avoid detention of vehicles due to Harthal /Bandh Day.
•
One day interest can be saved on the cost of the finished goods (cost of inventory).
191
MODES OF TRANSPORTATION IN ASHOK LEYLAND Ashok Leyland’s Finished Goods (Vehicles) movements. Ashok Leyland has 6 manufacturing units, after producing the vehicles; it is moved to Sales Yard within the factory premises. Vehicles are being manufactured based on the firm requirement given by dealership to Ashok Leyland Area Managers. These Area Managers will provide their total requirement to Regional Managers and Regional Managers will sum-up their requirement to Marketing Head quarter. Marketing HQ will plan the consolidated model-wise and segment-wise total requirement and give to production. Production team produces the vehicle and sends to Sales Yard after clearing the necessary Excise Duty elements. Once the vehicles are arrived at Sales Yard, it will be under the control of Distribution and Invoicing division. Distribution and invoicing team will move the vehicles to each RSOs based on their requirement. Ashok Leyland has 12 authorized Transport Contractors. These transport contractors have almost 3000 experienced drivers to drive Heavy Commercial Vehicles. Ashok Leyland Distribution and Invoicing team will handover vehicles from Sales Yard of each factory to these transport Contractors who in turn will move the vehicles to the destinations where it is required.
192
Basic Issues in Transportation •
Higher transportation cost
•
Delayed delivery
•
Poor fit and finish of vehicle
•
Wear and Tear of vehicle parts
•
Poor Driver availability
•
Poor customer satisfaction Researcher has initiated to overcome the above issues while applying
an alternate mode of transportation.
In this scenario the researcher has
envisaged utilizing railway’s coach for transporting the chassis for long distance. A study has been carried out while accounting the actual movement of three different types of vehicles to three locations from Tamil Nadu during September’10. ALTERNATIVE MODE OF TRANSPORTATION FOR ASHOK LEYLAND Alternatives Analysis This model proposes
the identification of alternatives across the
criteria to arrive the best choice. As far as transport infrastructure is concerned, most freight movement in India takes place through Road and Rail. Pipe line transportation is
193
beginning to grow. Water transportation which is quiet insignificant, is not exploited as much as it could be. Air Transportation is used for high value commodities. In the area of exports and imports, water and air form the major means of transportation. RAILWAYS NEWLY MODIFIED GOODS WAGON Here we consider the alternate mode through railways. Indian Railways has introduced a new class of vehicle for the automobile traffic namely, Newly Modified Goods wagon (NMG). It is a modified passenger sleeper coach developed by removing all the berth and seat structures. A model of NMG is shown in the figure 6.7, 6.8 and 6.9.
Figure 6.7: Outward view of Newly Modified Goods Wagon (NMG)
194
Figure 6.8: Inside view of Modified Goods Wagon (NMG)
Figure 6.9: Specification of Modified Goods Wagon (NMG)
195
COMPARISON
OF
RAIL
AND
ROAD
MODES
OF
TRANSPORTATION A comparative study of Rail and Road transportation modes is made. Following are the details: Table 6.15 Dimensions of Ashok Leyland Vehicles And Railway’s NMG Wagon Al MAV
Al Tractor
Length
9335mm
5679mm
5942mm
21000mm
Breadth
2432mm
2432mm
2432mm
2900mm
Height
1800mm
1800mm
1800mm
2200mm
Reference
Al Tipper
Railways NMG Wagon
Source: Ashok Leyland, MAV = Multi Axle Vehicle
Table 6.16 Details of Road Transportation Expenses of AL during September’10 MAV Location
No. of Veh.
Rate
Tractor Total cost
No. of veh .
Rate
Tipper Total Cost
No. Of veh .
Rate
Total cost
Faridabad
906
25804 /-
2337842 4 339
25804 /-
8747556
198
19606 /-
388198 8
Pune
778
11854 /-
9222412 509
11854 /-
6033686
180
9994
179892 0
Bhubanesw ar
264
11978
3162192 33
11978 /-
395274
206
9235/-
190241 0
Total
194 8
1517651 6
58 4
3576302 88 8 1
Source: Ashok Leyland
196
758331 8
From the above, it is clear that Ashok Leyland has spent Rs.5,85,22,862/- towards transportation of 3413 vehicles to the above three locations during September 2010. Table 6.17 Proposed Expenses of Rail Transportation Mode MAV/Tractor/Tippers Rate Per Wagon
No. of Vehicles Per Wagon
No. of Wagon
Total No. of Vehicles
Total Cost
Faridabad
50036/-
3
588
1443
29421168
Pune
29523/-
3
562
1467
16591926
31869
3
192
503
6118848
1342
3413
52131942
Locations
Bhubaneswar Total
Source: Southern Railway
Given below is the summary of cost working based on the freight rate of railways. Table 6.18 shows the net earning to Ashok Leyland if 3413 vehicle were transported through railways during September 2010. Table 6.18 Summary of Results (Alternate Mode of Transport) Reference
Amount IN Rs.
Cost of road transport
58522862.00
Cost of rail transport
52131942.00
Net Earning if rail Transportation implemented
63,90,920.00
Source: Ashok Leyland & Southern Railway
197
Inference: It is found from the study that ASHOK LEYLAND can save Rs.6390920/- on transportation of their vehicles while utilizing the Railway’s NMG coaches for moving the vehicles. Ashok Leyland has delivered around 41338 vehicles during the last 6 months and surely Ashok Leyland could have made a
massive savings on
transportation if they have opted to
transport the vehicles through NMG of Railways. End price of
product
(vehicles) to end users are arrived while calculating fixed cost, variable cost, cost of
raw materials,
labor, transportation expenses etc. If ASHOK
LEYLAND is able to reduce transportation cost while utilizing Rail Transport where ever possible, the retail price of vehicles can be reduced to that extend, which ultimately would be benefitted to the end users, which leads growth to the rural population and to the nation. Apart from the above savings, the following most important advantages are also observed, while using the Rail Transport mode: 1.
Fuel is very precious and can be saved in large quantities which means saving to the nation and to the world
2.
Fastest mode of transport
3.
Reduce wear and tear of vehicle parts
4.
Accident free transport
5.
Railways carry out more business and make more profits which would be ultimately benefitted to our nation.
198
OTHER POTENTIAL MODES OF TRANSPORTATION Inland Transport through RO-RO Ship In addition to the above study, an investigation of transportation through ship has been carried out.
At present Ships are used only for
international operations. The researcher interviewed Captains of Roll On Roll Off Ships (RO RO) and Officials of Ships doing international operations and a possibility of Inland transportation was discussed.
Figure 6.10: Outside view of RO-RO Ship
199
Figure 6.11: Inside view of RO-RO Ship
Figure 6.12: Inside view of RO-RO Ship with Vehicle
200
Figure 6.13: Specification of RO-RO Ship
OPTIMAL TRANSPORTATION MODEL FOR ASHOK LEYLAND A study has been conducted to reduce the transportation cost of Ashok Leyland Chassis movement from their production centers to their Regional Sales Offices. Ashok Leyland manufactures vehicles at their manufacturing locations and these vehicles are transported to their twenty-four Regional Sales Offices located at different parts of the country through the road by their authorized transporters. Since the study is conducted in South India, the researcher has considered five factories viz. Ennore. Hosur – I, Hosur- II, Bhandara and Alwar and three RSOs viz. RSO Sembrambakkam, RSO Hosur and RSO Ernakulam.
201
ENNORE
RSO SEMBMBKKAM
HOSUR - 1
HOSUR - 2
RSO HOSUR
ALWAR
RSO ERNAKULAM
BHANDARA
Figure 6.14: Current Structure of Ashok Leyland Vehicle Transportation RSO Ernakulam The following table shows the details of demand of various vehicles at RSO Ernakulam during 2009-10 Table 6.19 Demand of Vehicles at RSO Ernakulam during 2009-10 Factories ENNORE H1 H2 ALWAR BHANDARA TOTAL
Pass 1258 58 28 11 0 1355
Ernakulam 4x2 HAULG MAV 73 19 309 73 32 27 1 0 0 0 415 119
Source: Ashok Leyland 202
Total 1350 440 87 12 0 1889
The following table shows the details of transportation cost of various vehicles transported from different factories to RSO Ernakulam during 2009-2010. Table 6.20 Transportation Expenses Per Vehicle w.e.f.02.07.2009 Ernakulam
Factories ENNORE
Pass 5150
4X2 HAULG 4725
MAV 6078
H1 H2
4375 4375
4024 4024
5138 5138
ALWAR BHANDARA
18850 0
17231 0
0 0
Source: Ashok Leyland
RSO Hosur The following table shows the details of demand of various vehicles at RSO Hosur during 2009-10 Table 6.21 Demand of Vehicles at RSO Hosur during 2009-10 Factories ENNORE H1 H2 ALWAR BHANDARA TOTAL
PASS 20 145 0 0 7 172
Hosur 4X2 HAULG 4780 910 136 14 2 5842
Source: Ashok Leyland
203
MAV 4 1162 1427 0 0 2593
Total 4804 2217 1563 14 9 8607
The following table shows the details of transportation cost of various vehicles transported from different factories to RSO Hosur during 2009-10 Table 6.22 Transportation Expenses per Vehicle w.e.f.02.07.2009 Hosur
Factories
Pass
4X2 HAULG
MAV
ENNORE
2726
2534
3143
H1
840
790
949
H2
0
790
949
ALWAR
0
15303
0
BHANDARA
9138
8386
0
Source: Ashok Leyland
RSO Sembrambakkam The following table shows the details of demand of various vehicles at RSO Ernakulam during 2009-10 Table 6.23 Demand of Vehicles at RSO Sembrambakkam during 2009-10 Factories ENNORE H1 H2 ALWAR BHANDARA TOTAL
Pass 2918 22 5 1 3 2949
Sembrambakkam 4X2 HAULG MAV 917 1468 289 608 3 849 27 22 4 0 1240 2947
Source: Ashok Leyland
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Total 5303 919 857 50 7 7136
The following table shows the details of transportation cost of various vehicles transported from different factories to RSO Sembrambakkam during 2009-10 Table 6.24 Transportation expenses per Vehicle w.e.f.02.07.2009 Factories
Sembrambakkam
ENNORE H1
Pass 840 2726
4X2HAULG 790 2530
MAV 949 3154
H2 ALWAR
2726 18418
2530 16820
3154 21906
BHANDARA
9729
8913
11510
Source: Ashok Leyland
APPLICATION OF OPTIMAL TRANSPORTATION MODEL The above data was analyzed using Vogal’s Approximation Method for finding Initial Basic Feasible solution and MODI METHOD was applied for finding the Optimal Transportation Policy for the movement of Ashok Leyland vehicles from the five factories to the three RSOs.
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Passenger Vehicles Table 6.25 Optimal Transportation Solution for Passenger Vehicles For 2009-10 Factories
Passenger Ernakulam
Hosur
Sembrambakkam
Total
ENNORE
1247
0
2949
4196
H1
86
139
0
225
H2
0
33
0
33
ALWAR
12
0
0
12
BHANDARA
10
0
0
10
TOTAL
1355
172
2949
4476
Source: Ashok Leyland
Inference: It has been inferred that the Optimum Transportation Expenses will be Rs.97,68,950/- for transportation of vehicles from the factories to the RSOs, whereas, the current total transportation expense is Rs.1,22,73,323/-. This results a net saving of Rs.25,04,373/- for Ashok Leyland by implementing the Optimal Transportation Policy.
206
Goods Vehicles Table 6.26 Optimal Transportation Solution Of Goods Vehicles For 2009-10 Factories
Goods Ernakulam
Hosur
Sembrambakkam
Total
ENNORE
373
4157
1240
5770
H1
0
1508
0
1508
H2
0
171
0
171
ALWAR
42
0
0
42
BHANDARA
0
6
0
6
TOTAL
415
5842
1240
7497
Source: Ashok Leyland
Inference: It has been inferred that the Optimum Transportation Expenses will be Rs.1,53,76,291/- for transportation of vehicles from the factories to the RSOs, whereas, the current total transportation expense is Rs.1,68,57,196/-. This results a net saving of Rs.14,80,905/- for Ashok Leyland by implementing the Optimal Transportation Policy.
207
Multi Axle Vehicles Table 6.27 Optimal Transportation Solution of Multi Axle Vehicles For 2009-10 Factories
MAV Ernakulam
Hosur
Sembrambakkm
Total
ENNORE
0
0
1491
1491
H1
0
1843
0
1843
H2
97
750
1456
2303
ALWAR
22
0
0
22
BHANDARA
0
0
0
0
TOTAL
119
2593
2947
5659
Source: Ashok Leyland
Inference: It has been inferred that the Optimum Transportation Expenses will be Rs.94,58,730/- for transportation of vehicles from the factories to the RSOs, whereas, the current total transportation expense is Rs.1,23,92,711/-. This results a net saving of Rs.29,33,981/- for Ashok Leyland by implementing the Optimal Transportation Policy.
208
ENNORE
RSO SEMBMBKKAM
HOSUR - 1
HOSUR - 2
RSO HOSUR
ALWAR
RSO ERNAKULAM
BHANDARA
Figure 6.15: Optimal Transportation Model for Ashok Leyland Please refer figure 6.15 were it is clear that the researcher has applied a suitable transportation model for implementing Ashok Leyland vehicle movement.
209
