Copyright 2014 Mahindra & Mahindra Ltd. All rights reserved. 1

Copyright 2014 Mahindra & Mahindra Ltd. All rights reserved. 1

Automotive Logistics India Conference Spare Parts and After Market Aftermarket growth opportunities, delivery capabilities and strategies to capture market share Girish Bhobe Mahindra & Mahindra 11 th Dec 14 Copyright 2014 Mahindra & Mahindra Ltd. All rights reserved. 2

Agenda Transforming traditional models: changing customer perceptions and building brand loyalty through the aftermarket. Aftermarket segmentation and strategies: Categorising customer segments to forecasting parts availability and demand. Supply chain integration & distribution networks: Parts delivery models, including frequency, and network distribution points Warehouse and inventory management: Optimising warehouse inventory management and demand planning for distribution 3

India is Changing Very Fast & Consumers too Younger More educated Has more choices Demanding on brands Not loyal Value for money Tech savvy 4

Consumers Aspirations Changing Product at door step Speed Of Thought Best Product & Best Service Best Quality Most Competitive Cost Lowest Cost of Ownership Today Customer has Multiple Options 5

Vehicle Life Cycle coming Down New Technology Safety Features Reliability Government Regulations Fuel Efficiency Alternate Fuel Latest Features 6

Spare Parts Industry Players OE Component Manufacturer supplying to OE Organised sector (own brand) Un-Organised sector (Without brand) Spurious Parts Manufacturer 7

Spares Parts-Customer Centricity As customer expectations increase, the service parts is now at the forefront of peoples thoughts Customer Satisfaction index driven by availability of genuine spares Cyclicity of Business Cost Of ownership Spare Parts pricing our models are most competitive in their respective segments Mahindra USP : Spare Parts availability at reasonable price in the nook and corner of the country 8

Genuine Parts Preference High Tech Parts Certified Mechanic Multi Brand Service Chain Network Availability High Penetration 9

Spare Parts Industry Spare Parts Sale Breakup Second & Spurious 42% Genuine 33% Vendor 25% Opportunity Best In Industry 20-25 % Industry Average: 7-10% 10

Spare Parts Industry Spares Business in Revenue 10-15 % of Vehicle Sales In India 7-10 % Industry is estimated to grow by 11% CAGR - ACMA 11

Changing Customer Need Selection of Workshop Reliability Convenience Cost Roadside workshop Low High Medium Relationship Building OUR Technical STRATEGY Up gradation Selection of Parts M&M Genuine Parts OES Parts Reliability High High Second Brand Spares Mediu m Spurious Spares Low Convenience Medium High High High Cost High Medium Low Low Product Range OUR STRATEGY Product Value 12

Closer to Customer Transformation to becoming a Brand of Choice 13

Customer Service Points Automotive Customer Care Service points Dealerships 350+ Authorised Service centre 70+ Farm Equipment Customer Care Service points Dealerships 650+ Authorised Service centre 400+ Two Wheelers Customer Care Service points Dealerships 500+ Authorised Service centre 1000+ Trucks & Bus Division Customer Care Service points Distributors 60+ Retailers 120+ Automotive Car Parc : 2.4 + Million Tractor Parc : 1.7+ Million Two Wheelers Parc : 0.7 + Million Bazaar Sales Distributors 1000+ Retailers 14000 14

First Fill Rate FFR measures the dispatch of material to Customers ( Dealers + Distributors ) within Stipulated Time VOR ( Vehicle Off Road ) / BDT (Break Down Tractor) Order Dispatch from DC in 24 Hrs Commercial Order Dispatch from DC in 5 Days 15

Spares Supply Chain-Complexity 12100 parts 18000 parts 2500 parts 1500 parts 1500 parts 4300 parts 1500 parts 100000 Parts 3500 parts 3000 parts 3200 parts 3000 parts 16

Planning Migration from 3D matrix to 2D Matrix Migration from Forecasting model to Replenishment model Reworking of Max stock levels and Reorder point Double exponential smoothing for new projects and order spikes Categorization of parts (Focused, B2B, B2B Urgent) Multiple MRP runs Projections for N+1 and N+2 17

Categorization using 2-D Matrix Approach Order Lines Basis Category Focus Parts Back to Back Parts Monthly Order Frequency Category All Balance Combinations 18

Challenges Where to Stock the Parts Near the final Customer Near to the Manufacturing locations 19

Challenges No Of Models No Of Variants Engineering Changes ECN s Carryover Parts Service Commitments Cost- Storage of Non current parts 20

Challenges End to End Inventory 70-90 Days? Seasonality 21

Our Crusade 22

Customer Expectation-AV 23

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