Bajaj auto solved its products failure

Introduction

Operations management is the process that operating everything in an organisation. Operations management is the main function of management in a company. It's the business function that coordinates and control all the recourses needed to produce a company's goods and services. Operations managements also involve managing equipments, managing people, managing Information etc. It is the central core of function of a company. Every company has got their own operations management functions. The aim or purpose of every organisation involves the production of goods and services. To do this, they have to manage their resources, convert them into outputs and distribute them to their customers. The term operations management includes all the activities required to create and deliver an organisation's goods or services to its clients or customers. It's a very important functional area of any business because it works a crucial role in determining how well an organisation satisfies their customers

Operations managementincludes with the design, management, and improvement of the systems that create the organisation's services and goods. The majority of most organisations' human resources or financial are invested in the activities involved in making products or delivering services. Operations management is therefore very much important to organisational success

The main role of operations management is making good services from the company's Inputs, Which Includes Human recourses, Processing facilities material technology and information. Goods and services are the Outputs. Operations Management involves all the responsibility that ensure business operation with minimum resources as needed and effective outcome to come.

Company Profile

The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches over a wide range of industries, spanning automobiles (two-wheelers and three-wheelers), home appliances, lighting, iron and steel, insurance, travel and finance. The group's flagship company, Bajaj Auto, is ranked as the world's fourth largest two- and three- wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia.

Founded in 1926, at the height of India's movement for independence from the British, the group has an illustrious history. The integrity, dedication, resourcefulness and determination to succeed which are characteristic of the group today, are often traced back to its birth during those days of relentless devotion to a common cause. Jamnalal Bajaj, founder of the group, was a close confidant and disciple of Mahatma Gandhi. In fact, Gandhiji had adopted him as his son. This close relationship and his deep involvement in the independence movement did not leave Jamnalal Bajaj with much time to spend on his newly launched business venture. His son, Kamalnayan Bajaj, then 27, took over the reins of business in 1942. He too was close to Gandhiji and it was only after independence in 1947, that he was able to give his full attention to the business. Kamalnayan Bajaj not only consolidated the group, but also diversified into various manufacturing activities.

The present Chairman of the group, Rahul Bajaj, took charge of the business in 1965. Under his leadership, the turnover of the Bajaj Auto the flagship company has gone up from Rs.72 million to Rs.46.16 billion (USD 936 million), its product portfolio has expanded from one to and the brand has found a global market. He is one of India's most distinguished business leaders and internationally respected for his business acumen and entrepreneurial spirit.

Bajaj Auto is a major Indian automobile manufacturer. It is India's largest and the world's 4th largest two and three-wheeler maker. It is based in Pune, Maharashtra, with plants in Akurdi and Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in Uttaranchal. Bajaj Auto makes and exports motor scooters, motorcycles and the auto rickshaw.

The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1946. Over the last decade, the company has successfully changed its image from a scooter manufacturer to a two wheeler manufacturer. Its product range encompasses scooterettes, scooters and motorcycles. Its real growth in numbers has come in the last four years after successful introduction of a few models in the motorcycle segment.

The company is headed by Rahul Bajaj who is worth more than US$1.5 billion. Bajaj Auto came into existence on November 29, 1945 as M/s Bachraj Trading Corporation Private Limited. It started off by selling imported two- and three-wheelers in India. In 1959, it obtained license from the Government of India to manufacture two and three-wheelers and it went public in 1960. In 1970, it rolled out its 100,000th vehicle.

In 1977, it managed to produce and sell 100,000 vehicles in a single financial year. In 1985, it started producing at Waluj in Aurangabad. In 1986, it managed to produce and sell 500,000 vehicles in a single financial year. In 1995, it rolled out its ten millionth vehicles and produced and sold 1 million vehicles in a year.

Introduction - Operations Problems in Bajaj Auto

Bajaj XCD was one of Bajaj's two wheeler product in 2007 September. The brand was expected to boost the fortune of Bajaj Auto and intended to give nightmares to the market leader Hero Honda. Hero Honda is the world largest selling motorcycle brand with 100 cc bikes. XCD was a 125 cc motorcycle planned by Bajaj to pip the world largest selling motorcycle brand Hero Honda Splendor. Indian two-wheeler market is dominated by the 100 cc segment which constitutes around 60% of the total volume sold. . Bajaj so far was not able to come out with a brand worthy of competing with Splendor. XCD 125 was launched with much hype and fanfare. After Pulsar, (Bajaj's most selling brand) everyone had high expectations over new product launches from Bajaj.

Hence, during the launch phase, Bajaj tried to convince the potential 100 cc bike customers to switch to 125 cc. These customers were in the middle-class segment and the prices of these bikes were in the range of Rs 40,000- Rs 45,000.In India most of the motorcycles companies are looking to market in Middle class People. Despite all these, the XCD failed to take-off. The company was expected XCD to even overtake Pulsar in terms of the sales volume. But after the initial spike, XCD failed to sustain the market.

The first reason was the product failure. Immediately after the launch of Pulsar, there were reports on product problems and recall. Although there was no PR disaster, consumers were taken aback by the newspaper reports .The product also failed to deliver on the expectations generated by the advertisements regarding the mileage. In India people are mainly looking the mileage of every motor product because of cost cutting and commonly they are mainly middle class families. Another significant reason was the positioning issue. Bajaj XCD was destined to fight with Hero Honda Splendor. So through out the campaign, it wanted to establish the Points of Parity with Splendor and other 100 cc bikes. Also consumers never put XCD 125 in the same category as 100 cc. Hence the comparison was with higher CC brands like Pulsar. Since XCD was no where near Pulsar, obviously consumers never were happy with Bajaj XCD. Bajaj wanted to do a break-away positioning but the strategy failed.

How can Bajaj overcome its problems?

Bajaj can emerge from its current predicament by ensuring that its product offering i.e. XCD bike is well differentiated from the rest of the competition. Bajaj should focus its energies on carving a separate differentiated segment for XCD which would distinguish the product from its competitors. The above mentioned differentiator can be quality and the same can be achieved by using the TQM (Total Quality Management) model.

Total quality management (TQM) is a management philosophy that seeks to integrate all organizational functions (marketing, finance, design, engineering, and production, customer service, etc.) to focus on meeting customer needs and organizational objectives. Bajaj can use TQM to improve its offering (XCD bike) thereby meeting the needs of the customers and its organizational objectives as well.

TQM can empower Bajaj, from the employee to the CEO, with the responsibility of ensuring Quality in their respective products and services, and Management of their processes through the appropriate process improvement channels. All types of organizations have deployed TQM, from small businesses to government agencies like NASA, from schools to construction firms, from manufacturing centers to call centers, and from dance sequence to hospitals. TQM is not specific to one type of enterprise, it is a philosophy applied anywhere quality is required.

Elements required for successful implementation of TQM at Bajaj:

  • Leadership especially from the Top Management of Bajaj
  • Strong employee involvement at all levels of Bajaj
  • Product and process excellence across the organization resulting in a better and improved XCD bike
  • Continuous improvement in all areas especially quality and production related areas.

The core of TQM is the customer-supplier interfaces, both externally and internally, and at each interface lie a number of processes. This core must be surrounded by commitment to quality, communication of the quality message, and recognition of the need to change the culture of the organization to create total quality. These are the foundations of TQM, and they are supported by the key management functions of people, processes and systems in the organization.

Poor practices

To be able to become a total quality organization, some of the bad practices must be recognized and corrected. These may include:

  • Leaders not giving clear direction
  • Not understanding, or ignoring competitive positioning
  • Each department working only for itself
  • Trying to control people through systems
  • Confusing quality with grade
  • Accepting that a level of defects or errors is inevitable
  • Firefighting, reactive behavior
  • The "It's not my problem" attitude

The essential components of TQM - commitment & leadership

TQM is an approach to improving the competitiveness, effectiveness and flexibility of an organization for the benefit of all stakeholders. It is a way of planning, organizing and understanding each activity, and of removing all the wasted effort and energy that is routinely spent in organizations. It ensures the leaders adopt a strategic overview of quality and focus on prevention not detection of problems. Whilst it must involve everyone, to be successful, it must start at the top with the leaders of the organization.

All senior managers must demonstrate their seriousness and commitment to quality, and middle managers must, as well as demonstrating their commitment, ensure they communicate the principles, strategies and benefits to the people for whom they have responsibility. Only then will the right attitudes spread throughout the organization. A fundamental requirement is a sound quality policy, supported by plans and facilities to implement it. Leaders must take responsibility for preparing, reviewing and monitoring the policy, plus take part in regular improvements of it and ensure it is understood at all levels of the organization.

Effective leadership starts with the development of a mission statement, followed by a strategy, which is translated into action plans down through the organization. These, combined with a TQM approach, should result in a quality organization, with satisfied customers and good business results.

The 5 requirements for effective leadership are:

  • Developing and publishing corporate beliefs, values and objectives, often as a mission statement
  • Personal involvement and acting as role models for a culture of total quality
  • Developing clear and effective strategies and supporting plans for achieving the mission and objectives
  • Reviewing and improving the management system
  • Communicating, motivating and supporting people and encouraging effective employee participation

The task of implementing TQM can be daunting. The following is a list of points that leaders should consider; they are a distillation of the various beliefs of some of the quality gurus:

  • The organization needs a long-term commitment to continuous improvement.
  • Adopt the philosophy of zero errors/defects to change the culture to right first time
  • Train people to understand the customer/supplier relationships
  • Do not buy products or services on price alone - look at the total cost
  • Recognize that improvement of the systems must be managed
  • Adopt modern methods of supervising and training - eliminate fear
  • Eliminate barriers between departments by managing the process - improve communications and teamwork
  • Eliminate goals without methods, standards based only on numbers, barriers to pride of workmanship and fiction - get facts by studying processes
  • Constantly educate and retrain - develop experts in the organization
  • Develop a systematic approach to manage the implementation of TQM

Performing Fish Bone analysis at Bajaj:

Further, the executives at Bajaj used the Fishbone analysis to tide over their problems. Fishbone Analysis - Is commonly known as the "Problem-Analysis Tool" or the "Cause-&-Effect Diagram". The general process for completing the analysis is to begin by identifying the end effect and working backward, toward the ultimate, or "root" cause. Typically this is the event or defect for which one is trying to determine the cause. The next step in the process is to identify the cause of that effect. This is often accomplished by asking the question, "Why did this effect happen?" Several different answers may be generated and such a list should be anticipated. Once these answers are discovered, you ask the question, "Why did this cause happen?" for each of the causes generated in the previous step.

The potential causes could be due to any of the 6(M's), 8 (P's), & 4 (S's)

  • 6M's - Machines, method, material, maintenance, man & Mother Nature
  • 8P's - Price, promotion, people, process, place, policy, procedure, product
  • 4S's -Surrounding, suppliers, systems, skills

Using the "5 Whys" technique will lead to the root cause of a condition which in the case of Bajaj might be the quality and the features of XCD bike and the need to differentiate the XCD bike from its competitors.

To document what this technique looks like, the condition being investigated is listed on the right side of a piece of paper or on a display. Draw a horizontal line to the left. Ask "why" the condition occurred and note on a line coming off the horizontal line at a tangent the answer to "why". Continue doing this until 5 Whys are asked. The tangent lines will resemble a fishbone which is what this process is frequently called.

An example of the 5-why chain for a company which has just lost a customer follows. The company lost its customer because the price was too high. The price was too high because the assembly process took longer than it should have. The assembly took too long because the workers didn't have the correct tools. They didn't have the correct tools because the tools weren't ordered. The tools weren't ordered because upper management was hoping to cut costs for the quarter.

After the root cause is uncovered, measures may be taken either to either guarantee that the root cause can be prevented in the future if the end result was a negative one, or else that it occurs again if there was a positive result. Only the symptoms of the problem get treated, as opposed to the cause, if the core of the problem is not correctly identified. Practices such as these could bring on extra costs, slower delivery, lesser quality, or all three.

Reference

  • http://openlearn.open.ac.uk/Operations_management
  • http://managementhelp.org/ops_mngt/ops_mgnt.htm

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