OSM Club, Indian Institute of Management Kashipur
Presents
OPERATIUS
Indian Transport Company: Medium Commercial Supply Chain Case
This case has been written by Operatius team for a National Level Case Study Competition organized by OSM Club, for Agnitray2015 at
IIM KASHIPUR. The case describes a real business management situation however the authors have no intention to illustrate either
effective or ineffective approach to solve a managerial problem. The authors may have used fictitious names and other identifying
information to protect confidentiality.
Version: 2015-01-11
Indian Transport Company is the leading manufacturer of commercial vehicles in
India, the 4th largest manufacturer of buses in the world and the 16th largest
manufacturer of trucks globally. Over 70 million passengers use Indian Transport
Companys buses to get to their destinations every day while over 700,000 trucks
keep the wheels of economies moving. With the largest fleet of logistics vehicles
deployed in the Indian Army and significant partnerships with armed forces
across the globe, the company keep borders secure. The company has been
pioneering commercial vehicle technologies being Indias first to introduce Air
brakes, Double Decker bus, Vestibule Bus, Multi Axle Trucks, Tractor-Trailer,
compliance to emission standards, CNG-powered bus, Hybrid Electric Vehicle,
Hythane engine etc. The present case is based on successful and award winning
new medium commercial vehicle (also known as intermediate range commercial
vehicle) CityStar Truck launch in 2013.
Project Background
Indian Transport Company though has been 2 nd largest truck maker in India with
around 30% market share in 16-49T segment, it has not been successful volume
player in medium commercial vehicle range of 7.7-15T with market share of
around 5% only until 2010. Its existing MCV product EcoStar launched in 2003 is
preferred mainly in the niche segment of overload applications only. With further
product improvisation and increased network support, Indian Transport Company
has been steadily improving its market share in MCV up to 15%. The CV industry
has witnessed the negative growth at compounded annual growth rate ( CAGR) of
-4% in 7.5-49T in the last 5 years
in line with the tepid economic growth of
Indian economy resulting subdued GDP growth and general sentiments of
uncertainty of future growth.
In the same period MCV range grew modestly at CAGR of 2.2%. MCV is expected
to grow further with increasing restriction of entry of heavy commercial vehicles
in cities. Its two main rivals hold 60% and 30% market share in MCV with the
their 15 year old product platform being manufactured with fully depreciated
investments.
Project Case: MCV Strategy on Product Mix, Manufacturing and Supply
Chain
CV Industry during last 5 years and performance
in MCV segment
Indian Transport
Company has
developed the award
300
251
250
53
69
product with extensive
market research and
10
139
MCV(7.5-15T)
82
winning contemporary
14
12
150
M& HCV(7.5-49T) 6.4
TIV,000
4.9
100
14.8
12.7
200 189
50
263
16
75
59
FY10 FY11 FY12 190
FY13 FY14
MCV-MS
%
MCV
MS%
customer feedbacks
are very encouraging
and has been able to
capture market share
upwards of 30% in all
hubs wherever launched (covering 20% of TIV). The existing competition is also
readying with the contemporary product and has started offering discounts up to
Rs 1.5 lakhs. Further multinational automakers are also ready to launch new
range of products with deep pockets to face the price competition and to
establish its foothold with aggressive market share presence. Indian Transport
Company has made significant investments at Pant Nagar in Excise free zone to
manufacture the new platform. It has also offered the Truck on truck delivery
model to offer the brand new truck to customers in Car like condition. Following
are the additional inputs that can be considered;
Product Options: Existing platform EcoStar and New Platform- CityStar
Product.
Invoiced value of Vehicle: Rs 10 lakhs. Contribution Margin existing EcoStar
Rs 50,000 more than New MCV.
Manufacturing locations:
o Pant Nagar, Uttarakhand- Fully invested and doing the production.
Vehicle Excise duty free. Excise duty of 12% on components outsourced
beyond excise free zone or Pant Nagar to promote local manufacturing.
Currently components worth Rs 6 Lakhs outsourced and there is no
feasibility of reducing this to less than Rs 4 lakhs.
o Ennore, Chennai- Existing assembly suitable with minimum changes.
Vehicle Cabin has to be shipped from Pant Nagar with transportation
cost of Rs 24,000 per piece. Excise duty of 8% applicable only on
vehicle invoice value.
o Hosur, Tamilnadu- only for existing platform product EcoStar.
In the interim budget in Feb 2014, UPA II Government offered special excise
rebate on small cars and commercial vehicles and reduced excise duty from
12 to 8% until Dec 2014.
Sales Hub Potential in domestic market: 30% North, 25% South, 20% West,
15% Central, 10% East. 10% of sales export to Srilanka, Middle East and
Africa.
Truck on Truck transportation charge from North to South: Rs 50,000 per vehicle.
Steel load body fitment is optional from plant and required on 80% of the
vehicles only. Supplier quote: Rs 75,000.
Required: Develop the product mix strategy, manufacturing and supply chain
strategy of the MCV model supporting with appropriate business case.
