Hero MotoCorp overhauled its dealer management system.
Hero MotoCorp, in the last year, has undergone such a large and public change (with its re-branding, if you were living under a rock), that it’s hard to believe it’s actually the company’s second ground-breaking transformation in recent memory.
Yup, the second.
The first, and possibly more important one, (at least from a bean counter’s perspective) took place in 2008, a year when most other Indian companies had battened down their hatches and were trying to sail out the slowdown. That’s when Hero MotoCorp decided to get ready for the sales explosion that it was sure would take place once the slowdown loosened its icy grip on the economy.
“The slowdown wasn’t a permanent situation. I knew that,” says Vijay Sethi, VP and CIO at Hero MotoCorp. “What I was worried about was whether our current infrastructure would enable us to take up the challenges of heavy growth post-recession,” says Sethi.
To do that, Sethi would need to create a single platform for all of Hero MotoCorp’s hundreds of dealers, a project so complex it would make his first ERP project—the standard against which he measured all tough projects—pale in comparison.
Steering into the Skid
Flashback. It’s the 31st of March 2008, and Sethi is about to walk into a budget meeting at the company’s headquarters in New Delhi. He remembers thinking ‘what next?’
To be honest, he wasn’t sure what to expect. Hero MotoCorp’s performance, although better than its rivals, had been middling: It had sold as many motorcycles as it had in 2006-2007, while the industry had shrunk by 5 percent. That’s compared to its average of 15 percent CAGR. “Flat was the new growth during the recession,” says Sethi. “Many consultants advised us to cut capex and put a hold on new expansions and investments.”
But Hero MotoCorp’s forward-looking management team would have none of this overly-cautious chatter. It had already decided that it wasn’t going to go with the flow—it was going to row against it. So, in April 2008, it unveiled its third manufacturing unit at Haridwar, today the largest two-wheeler manufacturing plant anywhere in the world.
Creating more supply, however, wasn’t going to get the demand. The company’s executives figured that one of the ways they could release Hero MotoCorp from the gravitational pull of this sales plateau was by understanding their customers better, faster, and by doing exactly what Hero MotoCorp’s sales engine, its dealers, had been asking them for sometime: Help them connect in a more predictable, less burdensome way with Hero MotoCorp.
“We wanted to ensure our ability to track customer information, sales and service trends, defect analysis, etcetera, to enhance customer experience. Also, our dealership network had grown to a complex mammoth and we wanted to standardize it because it was only going to get more complex,” says Sethi.
Part of the problem was that Hero MotoCorp’s sales and marketing team interacted with all their dealers separately, leading to a slew of interdependencies. Manual inventory or sales updates, for example, meant a high probability of erratic inventory management at both Hero MotoCorp’s end and at the dealers’. Also, without a common platform where product prices were updated on a real-time basis, keeping up with products and spare part prices was a pain. And that’s just two of the multiple processes between dealers and Hero MotoCorp.
Sethi believed he could eradicate this problem and give Hero MotoCorp’s executives the insights they wanted if he could put all the company’s dealers on a single platform. “This was the time IT could be the business’ biggest enabler,” remembers Sethi. “We had to improve our customer experience and dealers experience to gain a stronger foothold against competition.”
That was the intention of a project that was christened Hero Connect: To make processes uniform across dealers, and introduce a direct, real-time, and predictable information channel between the company and its dealers.
But that would cost money, a lot of it.
Shoulder to the Wheel
The project, Sethi estimated, would need a capex infusion of Rs 80 crore, a number that was significantly larger than his IT budget. To compare, in the two years before Hero Connect, the IT department’s budget was in the Rs 15-20 crore range.
On any other occasion, Sethi would have been worried about the budgetary constraints for a project of this scale. But, not this time. Sethi says he was assured, upfront, of a capital investment of Rs 80 crore and a total of Rs 150 crore over five years, one of the largest IT investments, he estimates, in a single project by any Indian company.
That sort of cash is hard to come by in a slowdown, but money, Sethi believes, is well spent. “I’d rather use IT to allow me to look deeper into my processes to help me cut costs than defer an important project to a later date. For instance, the project would enable us to look into inappropriate expenses,” he says. “It would take us four years to completely reap the project’s benefits. But, I knew it was worth every penny of the investment.”
Money was not the only challenge Hero Connect could potentially face. The pan-India project needed Sethi’s team to involve a large number of users it hadn’t dealt with anytime earlier. Less than five percent of the project’s user profile would be internal users. A majority of key users would be dealers spread across the country.
Sethi says that could have been a daunting proposition, except that dealers actually wanted the proposed project. “Discussions with the dealer community during our regular all-India dealer meets had brought this requirement to our notice earlier. So, when we shared details of the project it was accepted with open arms,” says Sethi.
It helped, Sethi says, that he made it clear that Hero MotoCorp wasn’t interested in a dealer’s financial data. “We told them Hero Connect would only extract data from all major processes except the financials. In our demos, we ensured that the dealers understood that data would flow from our system into Tally and nothing was flowing back into our system,” he says.
In retrospect, that made a huge difference, Sethi says. “Three years down the line, I realize that this assurance was one of the key reasons why there was considerably less resistance from dealers.”
Also, Hero MotoCorp sponsored all the infrastructure needed at the dealer’s end including network infrastructure like routers, MPLS, and internal LAN connectivity.
During the ensuing year, it wasn’t uncommon to see Sethi co-coordinating with his project leads from his office, sometimes till the wee hours of the morning. “I’d sit with the team when they’d come back from dealer visits and explain what they thought dealer requirements were. We’d sift through feedback points and input the most relevant ones into our system. By the time the system went live, I knew about 50-60 dealers on first name basis,” he says.
The solution was laid out using Oracle’s Siebel CRM solution with IBM as an implementation partner. It was integrated with existing enterprise applications at Hero MotoCorp including its ERP in less than six months. “It is arguably the fastest implementation of Siebel in the industry,” says Sethi.
But like all geographically-spread out projects, a primary challenge was in laying out the network required to interconnect the intricate dealer network. With Bharti Airtel as a network service provider, Sethi and his team set out to lay down an MPLS network at 1,000-odd locations for the project.
Why MPLS? “We wanted to ensure that a dealer’s mission-critical business would be backed with a stable, latent and highly-available network. MPLS was hence, the first choice, although expensive,” he explains.
Sethi began to put the infrastructure into place within six months of the start of the implementation in June 2009. “We completed the implementation in nine-and-half-months post which there was two months of testing,” he says.
He says it took them a whole year to implement the system for the first 100 dealers. After September 2010, every day saw three dealers being added to the system. In parallel, Sethi had deployed his IT team to train dealer staff on the system. “Until Hero Connect, I had thought that an ERP implementation, which I undertook 14 years ago, was the toughest project of my life. But with an ERP, your end users are internal, approachable and very predictable. With a dealer network, you don’t know what’s coming your way,” he says.
Sethi says his team had to familiarize dealers’ staff with computer systems, and gain expertise in a variety of languages required to train dealers. Out of 7,000 users, a total of 2,500 users were trained in classroom training sessions at Hero Motocorp’s premises by Sethi’s IT staff. “We’ve also provided hands-on training to 10,000-plus users over three years,” he says.
What he didn’t anticipate was the amount of re-training his team would be required to do because the dealer staff they trained moved to other jobs. In the last three years, they’ve had to train an additional 6,000 replacements or about 40 percent of the complete workforce trained by Hero Motocorp. “We did have other technical challenges, but this was one area where we couldn’t even collate the damages,” he says.
The Open Road
Today, 635 of Hero MotoCorp’s dealers have been synced with the system, which supports about 7,000 users. Sethi says 65 dealers still aren’t on their grid because of connectivity issues due to their remote locations.
In the meanwhile, Hero MotoCorp’s sales have never been better. Two-wheeler sales have jumped from 35 lakh in 2008 to 61 lakh at the end of March 2012. “We are one of the very few companies in India which grew at more than 15-20 percent over the last three years,” Sethi says.
About 90 percent of those sales are handled over the DMS by 2011. In March 2010, for instance, 4.6 lakh of the 5.1 lakh two-wheelers sold by Hero Motocorp had their invoices generated in the DMS. “With above 18,000 sales invoices and above 40,000 services documented in the system per day, the DMS is currently a reliable system,” says Sethi.
On an average, the system handles over 42,000 sales transactions per day. “Our vehicle sales volume translates to about six million a year. On festivals like Diwali, our daily sales could cross up to one to two lakh transactions per day which the system handles without a glitch,” says Sethi.
Hero Connect also introduced more uniformity in customer experience by providing dealer offices with real-time updates. “Customers are also sent scheduled reminders of all major events like vehicles service, insurance renewal, etcetera. We also brought in a centralized customer feedback arrangement,” says Sethi.
Enhancing customer service has been one of the important drivers of the project. “The customer today is becoming more and more IT savvy and Hero Connect is a key step toward enhancing customer service,” says Anil Dua, SVP sales, marketing and customer care and the project sponsor.
Today, Hero Connect helps the company’s staff to make more intelligent decisions, thereby, increasing their effectiveness. With the seamless integration with the company’s ERP, data analytics have reached new heights. “It brought supply chain visibility to the fore which improved our ability to forecast demand patterns leading to better order fulfillment,” says Sethi.
Among other things, the project has gone a long way in increasing IT’s value at Hero MotoCorp. “The project is a key strategic initiative for the organization. I firmly believe that we need to introduce more IT initiatives in sales, marketing and customer care,” says Dua.
But perhaps the most telling outcome of the project is the feedback from the first 80 dealers who are linked to the system. They say that they have already begun to save costs and better their customers’ experience.
Who can deny that that’s a good thing?