13754548 Supply Chain Management of Honda Toyota

8/3/2019 13754548 Supply Chain Management of Honda Toyota

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The Automotive IndustrySupply Chain Management for Honda and Toyota

Angeerjeet Goswami - 09Ankit Maheshwari - 10Rajat Anand - 52Raveesh Verma - 54Richa Bidasaria - 56Rishi Rathi - 57


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The Automotive Industry

The Automotive industry isone of the largest industries

in the United StatesNew and used automotive

sales and repairs generatesover $200 billion dollars of the GDP each year.

New car and light weight truck sales generated$699 billion dollars in revenue in 2003.


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Trends in the Industry

Traditionally, domestic manufacturershave dominated the market in the United

States.The top three domestic manufacturersinclude:

General MotorsFordDaimlerChrysler


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Trends in the Industry

In recent years, thesetop domestic manufacturers

have concentrated on themarket for sport utilityvehicles and light trucks.

This narrow concentration

has allowed foreign manufacturers, primarilyJapanese manufacturers, to steal some of themarket share for cars.


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The Market Today

In the past few years, General Motors, Ford, andDaimlerChryslers market share for cars has been cut inhalf.

While domestic manufacturers still dominate their foreigncompetitors, the Japanese market share of cars isgrowing.Consumers are choosing Japanese cars over domesticbecause of their competitive price, and high qualityreputations.These advantages are results of a very organized andinnovative way of doing business.


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Hondas Operational practices show agreat example of the innovations theJapanese automobile manufacturers

perform.

Honda


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Operational Strategies

Careful site selection of their US manufacturingplants

Greenfield Manufacturing PlantsIn- depth supplier relationship

Close and interactive, similar to apartnership

Autonomic organizational structureJapanese/North American manager mixNew entrants focus on more establishedproducts and processes


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Honda Purchasing

Suppliers are involved with developmentand design of new products

Relationship is much like a partnershipRequires an in-depth supplier selectionprocess


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Honda Supply Chain

Honda uses their economies of scale byworking with their parts suppliers to

order raw materials in large quantities.


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Example Honda Supply Chain

HondaPurchasing

HondaPurchasing

Parts Supplier

Parts Supplier

Parts Supplier

Honda Trading

Raw MaterialsMill

Parts Supplier

Parts Supplier

Parts Supplier

HondaAssembly

PlantHonda

AssemblyPlant


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Structural Characteristics

Also known as executional drivers thatreduce operating costs and increase

productivityEconomy of Scale All purchasing doneby Honda Trading America Corp.Technology Multipurpose machinery

Capacity Utilization Honda operatesfacilities in every major market they enter


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Market Characteristics

IT advancements3rdwave distribution software by Blinco

SystemsAssures parts quality, controls availability,guarantees delivery, provides consistentmaterials pricing

External factorsIncreasing oil prices effect transportationcosts for all markets


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Competitive Characteristics

Strategic and operational variables thatmust be factored into the design of a

companys global value chain Global value chainDemand chain (marketing, sales, service)Supply chain (sourcing, manufacturing,

logistics)Product development (R&D, design,engineering, development, and launch)


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Supply Chain Characteristics

The key element for Honda is the flow ofinformation with their suppliers

12 steps:Initial contact, preparation/investigation ofHonda parts, quotations, initial plant visit,prototype development, testing andevaluation, mass production quotation,preparation for mass production, trial run,Quality Assurance Visit, agreement, purchaseorder

In-house guest engineers


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Company Specific

CharacteristicsStrategic sourcing maximizing thevalue added through your external

suppliers Will chose highest supplier in overallservice (not just lowest price)

Target pricing Price table for partsIf price cannot be met, Honda will workwith supplier to get costs down


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Q.C.D.D.M

Customer Satisfaction is top priorityAccomplished through suppliers

competitiveness in quality, cost, delivery,development, and management(Q.C.D.D.M.)

Quality

Most important factorMust be built into production process


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Q.C.D.D.M contd

CostSuppliers are given target costs

Cost reductions through own ideas,technology, improved productivity, alongwith joint efforts with Honda in valueengineering, and value analysis

DeliverySuppliers must use just-in-time productionsystem


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Q.C.D.D.M contd

DevelopmentUniqueness in design and specifications

Helps create identity for HondaManagement

Positive attitudeMeasured by Q.C.D.D

FeedbackGrade cards for suppliers


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Honda Quality and Efficiency

Quality and Continuous ImprovementEmployee Driven Kaizen Quality Circles

Domestic Trouble Reports (DTRs) MRP II and Web-based Ordering forSupplier Base as a whole

Extent of Efficiency in Supply ChainHonda Trading Soybean Example New Honda Ridgeline Composite Bed/Box


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Foreign Automakers Share A

Similar PhilosophyCustomer Service is key

Provides more predictable demand

scheduleAllows for a stronger relationship withSuppliers


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Keys to achieving Cost

Effective Customer ServiceMonopsonistic Purchasing PowerStrong Financial Health

Able to ask more from SuppliersUnderstanding of global Economicenvironment


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Able To Get More Out of

SuppliersToyota- Dedicated ManufacturingFacilities

Nissan- Supplier ParksSuppliers willing to do so because ofForeign Automakers Financial Health.


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Postponement

The Suppliers have practicedpostponement, in order to minimize

localized investment.MainManufacturing

Facility (60%)

LocalManufacturing

facility (40%)


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Foreign Sourcing

China: Wage Rate = 20-30 cents / hourPoor Industrial part output

India: Wage Rate = 40-60 cents / hourHigh levels of Technology and knowledge

Mexico: Wage Rate = $2-$3 / hourUse of domestic warehouses

Landed Cost is the ultimate cost factor: Logistics is key


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Complete Supply Chain:

Main Plant Local PlantAssemblyfacility

Warehouse

Mexican Suppliers

Asian Suppliers


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Forecasting Is Key

Demand for Suppliers is DerivedHigh Customer Service Levels

Very Important for Foreign SuppliersA Lot of Statistical Information

Overall Unit MovementSupplier Specific Unit Movements


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Comparison With Domestic

AutomakersMore of a collaborative relationshipHigh levels of information sharing

Better informationLower inventory levelsThe financial health of Suppliers is

extremely importantSharing of Financial prosperity & follies


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The Toyota Way


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JIT Logistics System


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Cash to Cash: Toyota, Inventory

Management and HeijunkaBoth Accounting and Supply Chain professionals rely on Cash toCash (C2C) measures to make processes more efficient and cost-effective.

C2C is generally the number of days it takes to convert the expensesfor raw materials into payment for the finished product (1).

Many factors influence this, including inventory management, supplierperformance, and collection of accounts receivable. In accounting,C2C is a good measurement of liquidity of the firm.

For supply chain professionals, it measures the efficiency of the entireprocess, from suppliers, to manufacturing, through to order fulfillment(2).


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A company can take threeactions to decrease the C2Ccycle:

Extend average accounts payable

Reduce inventory by reducing the productioncycle

Decrease average accounts receivable


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Internal StructureOne organization that has successfully implemented a C2C systemis Japanese automaker Toyota. Its operational success is oftenattributed to the focus on reduction in inventory.

The term Toyota uses for their system is heijunka . Translated fromJapanese, it means make flat and level. In particular, it refers toeliminating spikes in demand, but also creating operational efficiencyand reducing overall supply chain costs.

Toyotas lean operation focuses on the idea of buy one, sell one.Toyota is able to manufacture vehicles in about the same ordercustomers buy them . This adaptability to demand has given Toyotathe advantage of carrying the least inventory in the field of Japaneseauto manufacturers .


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Working with suppliers

This concept is one that Toyota uses internally and it also requires ofits suppliers to improve the overall C2C cycle.

In the North American auto supply market, suppliers working withJapanese-owned automakers perform at higher levels than thoseworking with U.S. automakers.

Toyota works with U.S. suppliers to teach them the lean

manufacturing techniques used in Toyotas manufacturing facilities (4).These techniques ensure a short amount of time between whenToyota needs an item and when the supplier makes it.


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Using small batch production, this short lead-time can be achieved.Rather than running large batches and keeping excess inventory,plants quickly run a small batch and keep inventory low.

For Toyota, this translates to being able to better meet customersdemands because manufacturing facilities do not have to wait on aparticular part before beginning production on a vehicle .


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Benefits of Heijunka

Toyotas improvement in its supply chain benefits theautomaker in many ways:

Inventory levels at parts distribution centers havedecreased by 53 percent from stocking levels in the1980s.

Since 1994, the inventory turn of parts in the averagedealership has increased from 3.7 to 5.7.


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Toyota dealerships have achieved 20 percent to 40percent reductions in floor space utilization.

The time spent improving the systems of U.S. suppliersshows results as well.

From 1997 to 2000 alone, supplier on-time deliveryincreased from 76 percent to 93 percent.


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Sixty-six percent of suppliers on daily order statusare able to deliver within five days or less.

While inventory management is an effective wayto reduce the C2C cycle, it not only requiresefficient manufacturing, but also effectiveforecasting.


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RV Intro Honda (Honda PPT)Richa Slides 7-15

Ankit 16 28RV Toyota intro 29Rajat - 30- 37

Angir 38 - 44Rishi 45-50


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13754548 Supply Chain Management of Honda Toyota

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