1 Copyright © 2012 Mahindra & Mahindra Ltd. All rights reserved. 1

Accelerating Efficiency – Inbound Logistics

9th November 2016

Devendra Bharambe Deputy General Manager, Mahindra & Mahindra Limited

2

Indian Automobile Industry

6th Largest vehicles manufacturer in the world in FY16

Expected to be the world’s 3rd largest in FY17

Annual Production of about 25 Million vehicles

Production increased at a CAGR of 9.4% over FY06-16

Gross Turnover – Over 600 Billion USD

Accounts for 7.1% of India’s GDP

Automotive component industry will be a USD 100 billion

turnover industry by 2020 from the USD 35 billion in FY14

2016 - Overview

3

Logistics in India Quick Facts - Roads

World’s second largest road network (5.23 million km)

Carry nearly 65% of freight and 86% of passenger traffic

Average speed on Indian highways is less than three times the average speed on highways in

developed countries.

National highways form only 2% of the total roads by length and carry about 40% of the traffic

Out of total length of national highways:

27 % - single lane/intermediate lane

59 % - double-lane standard

14 % - four-lane/ six-lane/ eight lane standard

4

World’s 3rd largest rail network (66030 kms spread across 8500 stations)

2.45 lakh wagons, 63045 wagons and 10773 locomotives

Cater to 30 million passengers daily

1107 million tons of commercial freight transported via trains in FY16

Variety of goods such as mineral ores, iron & steel, fertilisers, petrochemicals

& agricultural produce

During FY07–16, revenues increased at a CAGR of 6.4 per cent to USD25.2

billion in FY16

Earnings of USD 16.9 billion from commodity freight traffic during FY16 (> 2/3rd

of railway’s revenues)

Logistics in India Quick Facts - Railways

5

Important rail networks are over-saturated

Rail tariffs are quite high: Indian Railways subsidizes passenger tariff at the expense of freight tariff, resulting in Indian rail freight

rates being amongst the highest in the world

Long and uncertain transit times & poor terminal quality

Less flexibility in carrying different types of goods: This is due to the unavailability of specialized wagons for each type of

product

Lower throughput and longer turn-around period.

Rail

Inadequate Road Network Coverage: National

Highways constitute just 2% of the Indian road network,

but carry 40% of the total traffic, resulting in severe

congestion

Poor road quality

High level of fragmentation of the trucking industry:

This leads to fierce competition, resulting in truck owners

trying to overload to recover their investments

Multiple check-points result in unnecessary delays

Over reliance on roads leads to increased costs, high

energy consumption and adversely impacts environment

Road

High Turnaround times: This is because of the congestion on

berths and slow evacuation of cargo which are unloaded at the

berths

Inadequate depth at the ports: Depth at many Indian ports is

inadequate, resulting in many large vessels choosing not to

dock at Indian ports

Coastal shipping is yet to take off: Inadequate port and land

infrastructure and a non-favourable tax regime has inhibited the

growth of this sector

Higher waiting times, high fuel costs and tariffs negatively

impact the air freight sector

Ports and Air Freight

Transportation in India – All’s Not Well

Lack of infrastructure for interconnectivity between different modes of transport

6

Lack of Availability of quality logistics professionals

Still practising manual operations for stock filing & warehouse

management

Low level of 3 PL usage in warehousing and transportation

functions. Only 55% of Indian companies use 3PL services compared

to 75% globally

Logistics professionals

Other Challenges

The Manual Process of Inbound Freight Management. Piecing

together information from internal paperwork to get info such as

tracking, Bill of lading, etc.

Lack of vehicle tracking systems in use, especially market vehicles.

Inadequate information systems in use to manage the complex

processes

Visibility and Traceability

Focus is on Outbound for customer service, meaning resources for

inbound are limited.

Companies develop routing guides and plans for suppliers but have

little control if they are followed and no way to enforce efficiently

Low Focus on Inbound

Inefficient capacity utilization of return trip

Back Haul

7

Inefficiencies leading to Higher Freight Cost Main engines for increasing GDP is to make logistics sector more efficient & productive

India’s spend as percentage of GDP is 13%, higher than that of US

This is despite the fact that cost of labor is significantly lesser in India

Road transport is 30 per cent more expensive in India

Rail and Waterways are 70 per cent more expensive in India

Transit times are higher owing to lower average speeds

Causes: Waiting times at toll stations, freeze in truck traffic during day, port turnaround times, low priority accorded to

freight trains, poor track infrastructure

Poor transportation equipment is also a major problem

8

1.Reduced freight costs and improved “bottom line”

2.Improvement in on-time deliveries

3.Reduction in purchasing lead times

4.Less handlings and damage

5.Lower inventory levels and reduced carrying costs

6.Providing maximum visibility into the process

7.Improvement in warehouse productivity

8.Increased customer service

Inbound Freight Objectives

9

Opportunities

Government initiative to add 40 km of new roads per day

Inter modal innovation and investment

Inland Waterways

Private infrastructure investment & privately operated rail transportation system

New ports

Goods & Service Tax

Packaging & Logistics as a curriculum – New courses in universities

Renewed focus on Infrastructure development

10

Opportunities

Technology & Logistics

Competitiveness and business improvement

Flexibility and accessibility

Increased intelligence

Enterprise Resource Planning (ERP)

Transportation Management System (TMS)

Warehouse Management System (WMS)

Software as a Service (SaaS)

GPS

RFID

Barcodes

Swipe Cards

11

Opportunities

‘Uberization’ of Logistics

Short Haul (Intra city, Intra zone)

Long Haul (Inter city, Inter zone)

Dedicated or Shared Warehousing

12 Copyright © 2012 Mahindra & Mahindra Ltd. All rights reserved. 12

Case Study

Mahindra Automotive Division

Inbound Logistics

13

Mahindra Group - A Brief

A diversified conglomerate with $17.8-billion

revenue

Among Top 10 Industrial Houses in India

Employs over 200,000 people across 100+

countries

Leadership position in Tractors, Utility

Vehicles, IT & Vacation Ownership

14

Mahindra & Mahindra Ltd.

Automotive Sector

6 Plants across India

15

Regional Stockyard Office (RSO)

Plant

Spares Parts Warehouse Haridwar

Kandivli

Nasik

Zaheerabad

Igatpuri

Chakan

Kanhe

• 5 Vehicle Manufacturing Plants

• 1 Engine Manufacturing Plant

• 350+ Suppliers, supplying

20000+ parts to plants & 50000+

parts to Spare part Division

• 26 Outbound Regional

Stockyards Office (RSO)

• 300+ Dealers

• One of the Complex Supply Chain & Logistics Systems in the Indian Automotive Industry

Supply Chain Complexity Distribution Network

16

IUTN 43%

Exworks 57%

FREIGHT SPENT

IUTN Exworks

Freight Spend – Auto Division

Ex-works space has more to explore on areas of consolidation & utilizations

IUTN – Inter Unit Transfer

Major Aggregates movements between the plants

Strategy – Dedicated Trucks (To & Fro)

17

Big Break through Ideas

1. Consolidation of load at high supplier density zones

2. Long haul movement through Big containers

3. Tracking / Visibility

4. Packaging Efficiencies

5. Synergy

6. Efficient Back Haul

18

Methodology Followed

Data collection in PFEP format (Plan for each part) which has logistics

& packaging details.

Zone wise load Segregation and setting priority for implementation.

Partnering with Mahindra Logistics for setting up crossdock

Selection of Cross dock location based on Supplier density

Defining Guidelines for operation

Completion of Operational SOP by fixing work times, supplier window

time

Commercial agreement

19

Auto Division Supplier Base

9 zones identified for consolidations.

Feasibility worked out for 6 zones.

70

M&M Auto plants

Supplier zones

20

Cross Dock Design - Example (Pune Cross Dock)

Data collection of parts with weight, volume and Avg. Daily Demand

Mapping Supplier density zones & cross dock location

Creating crossdock specific SOP suiting as per operations

Pune Cross dock

24 suppliers

19 suppliers

7 suppliers

4 suppliers

3 suppliers

4 suppliers Supplier Density Map

21

Local Milk Run Planning

No Supplier Name Plant Location Veh Type Coll.Time Act Wt Remarks1 Emdet Nasik Chakan 3:00 PM 900 KLG 60 BOX

2 Emdet Kandivli Chakan 3:00 PM 1050 70 BOX

3 Emdet Zaheerabad Chakan 3:00 PM 525 KG 35 BOX

4 Minda Ind Kandivli Chakan 4:00 PM 90 KG 18 BOX

5 Minda Ind Haridwar Chakan 4:00 PM 30 KG 6 BOX

6 Minda Ind. Nasik Chakan 4:00 PM 70 KG 14 BOX

7 Minda Ind. Zaheerabad Chakan - - Not ready

8 Swapnil Zaheerabad Chakan 6:00 PM 300 KG 10 BOX

9 Takshi Auto Haridwar Chakan - - Not ready

10 IAI Inds Bhivandi Chakan 2:00 PM 1 BOX /30 KG

11 Minda Stoneridge Nasik Chakan 5:00 PM 400 KG 2 PALLET

12 Jai sree swamy Zaheerabad Chinchwad - - Not ready

13 Saki plant-2 Zaheerabad Chinchwad 4:00 PM 500 KG BOX+TROLLY

14 Mayur Ind Nasik Bhosari 4:00 PM 300 KG 20 BOX

15 Precision Zaheerabad Moshi 5:00 PM 600 KG 35 BOX

16 Mahindra CIE Bhivandi Pimpari 709 1:00 PM 1T 864 box

17 Tata Toyo Bhivandi Hinjewadi 4:00 PM FTL Load 17 BOX

18 Pricol Kandivli Pirangut 2:00 PM 150 KG 15 BOX

19 Pricol Haridwar Pirangut 2:00 PM 90 KG 6 BOX

20 Mubea Zaheerabad Pirangute 709 Not confirmed

21 Grupo Zaheerabad Ranjangaon 909 6:00 PM - FTL LOAD

22 Carraro India Bhivandi Ranjangaon 1:00 PM 150 kg 1 Box

23 Exotech Nasik Ranjangaon 3:00 PM 625 KG 125 BOX

24 Lokesh Zaheerabad Ranjangaon 6:00 PM 350 KG 85 BOX

25 Amtek Zaheerabad Sanaswadi - - Material Not Ready

26 Divgi Zaheerabad Shirval - - Material Not Ready

27 KSPG AUTOMOTIVE Kandivli Takve 909 1:00 PM FTL Load 4 PALLET

28 VICTOR REINZ Kandivli Talegaon 407 2:00 PM FTL Load 2 Pallet

709

909

Auto Division  Collection schedule for 30.09.2016 11am

1109

407

407

22

Visibility & System Control

1. Deployed Inbound Logistics System (ILS) & also Cross dock process mapped in SRM web portal (mSetu)

2. Captures Receipts and Dispatches from the cross dock based on ASNs created by Suppliers.

3. Provide Common visibility of Stock at cross dock, in-transit stock and ageing

4. Reduction of manual activities with improved accuracy

23

Enhance Track & Trace – GPS based

24

Long Haul Innovation & Synergy

FTL contracts and use of Scooter Body trucks needing Return Load from West to North

Innovative Aggregate Transportation for Long Distance

Providing Reverse Load for Scooter

Body Containers

25

Equipment Pooling for Returnable Packaging

Service Center

near Supplier

Service Center

near M&M Plant

Service Provider to issue Equipment

on need basis

M&M Plant

Service Provider to collect equipment

when empty

Supplier Plant

Part Supplies to

M&M Plant Payment of Rental Charges to

Service Provider for period of

usage

Mahindra

26

Process for Inbound parts with Equipment Pooling

Supplier

Unloading

Staking on Rack

Opening of Box

in W/H

Waste Disposal Re-Binning Issue on

Assy line

Activities Eliminated

27

Improving Efficiency of ‘Part to Pack’ & ‘Pack to Truck’

Rental FLC

Unitization & Containerization

28

Internal Synergy with other businesses

1. Joint facility usage for SBU outbound material & AD

inbound.

2. Dedicated containers movement between Bengaluru

& SBU warehouses in Kanhe / Bhiwandi.

Bengaluru Cross Dock Example

Reduction in transit time by 20%.

Dispatch frequency improved by 25%

AD Cross Dock usage for Inbound Logistics by Spares Business Unit

29

Network of Cross Docks Pan India Cross Docks

1. Nasik 2. Pune 3. Chennai 4. Gurgaon

Nasik (Mumbai+Vasai)

NASIK PLANT

KANDIVLI PLANT

ZAHEERABAD PLANT

HARIDWAR PLANT

NASIK CD

CHK PLANT

PUNE CD

Pune Aurangabad+

Miraj+Kolhapur

GURGAON CD

CHENNAI CD

North Delhi/NCR+

Parwanoo

Chennai Pondy+Trichy

SUPPLIER ZONES

IGT PLANT

Mumbai/Nasik

NASIK CD

Bengaluru

Mysore+Tumkur

NSK/HDW/ZHB

30

Benefits

Inventory reduction

(25% reduction)

Freight Savings

(8% Savings YOY) Improved Truck availability &visibility

(50% reduction in truck usage)

Simplicity in freight billing process

(90% reduction in freight invoice generation)

31

Disclaimer

Mahindra & Mahindra herein referred to as M&M, and its subsidiary companies provide a wide array of presentations and reports, with the contributions of various professionals.

These presentations and reports are for informational purposes and private circulation only and do not constitute an offer to buy or sell any securities mentioned therein. They do

not purport to be a complete description of the markets conditions or developments referred to in the material. While utmost care has been taken in preparing the above, we claim

no responsibility for their accuracy. We shall not be liable for any direct or indirect losses arising from the use thereof and the viewers are requested to use the information

contained herein at their own risk. These presentations and reports should not be reproduced, re-circulated, published in any media, website or otherwise, in any form or manner,

in part or as a whole, without the express consent in writing of M&M or its subsidiaries. Any unauthorized use, disclosure or public dissemination of information contained herein is

prohibited. Unless specifically noted, M&M or any of its subsidiary companies is not responsible for the content of these presentations and/or the opinions of the presenters.

Individual situations and local practices and standards may vary, so viewers and others utilizing information contained within a presentation are free to adopt differing standards

and approaches as they see fit. You may not repackage or sell the presentation. Products and names mentioned in materials or presentations are the property of their respective

owners and the mention of them does not constitute an endorsement by M&M or its subsidiary companies. Information contained in a presentation hosted or promoted by M&M is

provided “as is” without warranty of any kind, either expressed or implied, including any warranty of merchantability or fitness for a particular purpose. M&M or its subsidiary

companies assume no liability or responsibility for the contents of a presentation or the opinions expressed by the presenters. All expressions of opinion are subject to change

without notice.

Copyright © 2012 Mahindra & Mahindra Ltd. All rights reserved.

Thank you Visit us at www.mahindra.com

32