Enfield sees supply chain a hurdle in doubling capacity

As Royal Enfield, the motorcycles division of Eicher Motors, scales up production by more than doubling its capacity to 150,000, the management sees managing supply chain as “the challenge.”

Royal Enfield's plant in Chennai has been tweaked to produce 70,000 motorcycles a year — the most it can — but a customer who wants an Enfield today will have to wait at least for 7 months.

“Of course, we did,” says Dr Venki Padmanabhan, Chief Executive Officer, Royal Enfield, when asked if the company failed to read the market correctly. But the company is now eyeing expansion — it recently announced a greenfield project which will raise capacity to 150,000.

The challenge is to get the vendors also to raise supplies commensurately. Even at 150,000 vehicles a year, Royal Enfield volumes are still low from a vendor's perspective, and therefore the issue is to ensure that the vendors do not slip up on delivery even if they are under pressure to first satisfy the needs of his customers.

Dr Padmanabhan said Royal Enfield is working on creating a “supplier park” inside the 50-acre site allotted to it by the Government.

No more a blue ocean

With foreign motorcycle biggies such as Harley Davidson, Triumph and Ducati also eyeing the Indian market, the premium-bike market is no more a blue ocean and Royal Enfield knows this well.

Today, there are no players in the 350cc-500cc segment. Below this segment is the large volume segment going more and more ‘mass' with the decrease in engine capacity.

However, the companies in this segment also nurture ambition to enter the 350-500 cc segment. Similarly, the ‘above 500cc' segment, too, would like to come down to the niche now occupied by Royal Enfield.

But Dr Padmanabhan believes that Royal Enfield, being an incumbent in this segment has an advantage, with the new capacity coming up.

As economy of scale kick-in, resulting in cost reduction, Enfield will pack more value into the vehicles, perhaps more than the competition.

On its part, Royal Enfield does have ambitions to go up the ladder and produce bikes of 650 cc and above, (although it will not get into the mass market.)

Key to doing this will be getting an appropriate engine. Would Royal Enfield develop one on its own, or seek technical collaboration? Dr Padmanabhan says the company is looking at both options.

New showroom

Meanwhile, the company today opened a new showroom-cum service centre and a training centre for its technicians on the Old Mahabalipuram Road in Chennai. Also on the cards is an Enfield in a new colour — Desert storm — a sandy beige with mat-finish.

The most macho looking bike is the one painted olive green, but this is a colour reserved for the military and not allowed in India for non-military bikers. Desert storm comes closest to it.

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