OPERATION MANAGEMENT 1

PROJECT WORK -HONDA MOTORCYCLE & SCOOTER INDIA

SUBMITTED BY GROUP: 7HITESH BANSAL ISHA KHATRI JASRAJ SOKHISHIV RAMAKRISHNAN SANJEET KUMAR INDEX

1. Introduction2. Company philosophy3. Technology 4. Organization Structure5. 5S principle of Honda6. Assembly line of Honda Activa7. Work Shifts in the Organization8. Problems in the Organization9. Suggestions for improvement10. Problems in implementation of solutions

INTRODUCTION TO THE COMPANY

Established in 1999, the Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI) is a wholly owned subsidiary of Honda Motor Company Ltd. Its production facility started In 2001 in Manesar, Haryana, India. The company's most well known brand is the Honda Activa that revolutionized the Indian scooter market in terms of design and features. It has the biggest market share of 51% in gearless scooter. The company exports scooters to the European Union. Company is now for its quality product and services.

Factory: The HMSI factory is spread over 52 acres, with a covered area of about 85,815 square meters at Manesar, Gurgaon district of Haryana. The foundation stone for the factory was laid on 14th December 1999 and the factory was completed in January 2001. The initial installed capacity was 100,000 scooters per year, which has reached 6,00,000 scooters by the year by 2007 and motorcycle capacity shall be 4,00,000 per annum. The total investment outlay for the initial capacity was Rs. 215 crores and now the accumulated investment is 800 crores.

Location: The Company is located in Haryana. This gives it immense competitive advantage. Haryana is the temptation of all entrepreneurial eyes as it is a hub of industrial investment and of special economic zones (SEZs). Pro-industry policies pursued by his government have made Haryana attract hordes of investment, both domestic and foreign.

Distribution Network: The Company has a conscious strategy of penetrating new markets and unrepresented territories through its distribution network of dealers, authorized representatives, stockiest and SSPs. In March 2001, the company had 826 such sales and service points in India. By March 2009, this number had grown to more than 3500.

COMPANY PHILOSOPHYHMSI operates on a principle, which is followed worldwide by all Honda companies. Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality, yet at a reasonable price for worldwide customer satisfaction. Honda's philosophy is based on the company's guiding principle and advocates 2 fundamental beliefs:

Respect for the Individual

Honda recognizes and respects individual differences. The respect for individual stems from the following three points:

Initiative Equality Trust

It is the contribution from each individual in the company that has made our company what it is today and that, which will take us into the future.

The Three Joys

In line with Honda's Philosophy, HMSI conducts all its daily activities in pursuit of the following joys:

The joy of manufacturing high quality products. The joy of selling high quality products The joy of buying high quality products

TECHNOLOGYHonda has regularly worked with R& D to enhance the safety and performance of their product. Some of the technologies are as follows:

1. Combi Break System

Generally it is not easy to control a 2-wheeler while braking during emergencies and bad road conditions. This system not only allows easy & simultaneous operation of the front & rear brake but also provides optimal braking performance. Once the left side brake lever is pressed, the system distributes the appropriate braking power between the front and rear wheels, which assures complete safety for the rider.

2. HondaMatic Transmission

The compact, efficient & oil pressure controlled Hondamatic Transmission is the world's first fully automatic transmission system, which delivers a dynamic combination of torque & excellent accelerator response for a constant and superior driving experience. The transmission is being used in Honda's all terrain vehicles. Honda is working hard to introduce this Hondamatic in two-wheelers.

3. Fuel Injection System

Honda's fuel injection technology is designed to realise ideal combustion, which results in delivering maximum power output, greatly improved fuel efficiency and yet be environment-friendly.

4. Idle Stop System

Honda has created an advanced Idle Stop System (see image below) that reduces fuel consumption while totally blocking out toxic exhaust gas and unwanted noise. It enables the engine to stop automatically for 3 seconds after the vehicle stops moving. And when the throttle is opened, the vehicle engine restarts and takes off smoothly.

5. Honda Fuel Cell Vehicle, Honda FCX

The Honda FCX has become the first fuel cell vehicle in the world to receive government certification, paving the way for the commercial use of fuel cell vehicles. Honda FCX has earned approval from the US EPA (Environmental Protection Agency) and CARB (California Air Resource Board). Honda FCX manages to produce 81 bhp and 26 massive kgm of torque. The vehicle is said to achieve powerful off- the- line acceleration and a top speed of 150 kph. With 156.6 litre capacity in the 350 - atmosphere high pressure fuel tank, FCX has a range of 355 kms.THE COMPETITION

The Indian motorcycle industry has become extremely competitive. Global auto giants from Yamaha to Suzuki to even Harley-Davidson are keen on India. Bajaj Auto and TVS Motor are not taking it easy either. Undoubtedly, the new competitors pose a formidable challenge in the premium segment with dazzling models, which will attract the affluent metro crowd. Despite the adverse conditions in the two-wheeler industry.HMSI currently occupies the leading position in the scooters segment with a market share of 51% (April-January 2010) and drawing on its flagship brand Activa (besides Aviator and Dio). It is followed by TVS (Scooty Pep+ and Streak), which has a market share of 22%. In the past, several players such as Scooters India Limited, Kinetic Motor Company Limited (KMC), and LML Limited exited the segment, unable to run a profitable business in a scenario of declining volumes industry-wide; even BAL has recently announced that it plans to exit from scooters. That notwithstanding, the segment has also seen several relatively new entrants in the form of HHML, which launched Pleasure in January 2006 and MIPL which launched Access 125 in September 2007. Besides, Mahindra & Mahindra has also entered the 2W circuit via its acquisition of the business assets of KMC in July 2008.

With the likely slowdown in volume growth over the medium term that will arise from a maturing motorcycle market, competition for market share and volumes from these players will exert pressures on the profitability of the industry and consequently HMSI.Current Market TrendThe two-wheeler (2W) industry has shown a healthy volume growth of 21.9% (y-o-y)

2W sales in India are spread across three main product categories: motorcycles, scooters, and mopeds. While in the previous decade, scooters were the largest selling product category, in the current one, consumer preferences appear to have shifted decisively in favour of motorcycles, which now account for over 80% of total 2W sales in India.

ORGANIZATION STRUCTURE OF HMSIManufacturing This section is divided into two parts the Scooter and Motorcycle DivisionProducts manufactures in Motorcycle division Honda AviatorHonda DioHonda EternoHonda UnicornHonda ShineHonda CBF Stunner

Products manufactures in Motorcycle division Honda ActivaThe motorcycle division currently produces scooters such as Dio, Aviator and Eterno also. This is due to the very heavy demand for the Honda Activa. This is the solely produced in the Scooter division so that its production capacity can be maximised.Function of different departments 1) Manufacturing This is the primary division of the company manufacturing all the products in the HMSI lineup. The parts that are currently manufactured in this department are the engine and the steel body, all other parts are sourced from vendors. It is further divided into a) Power train it is concerned with the production of critical parts like the engine, crankshaft, transmission and their assembly. Assembly of the vehicle frame takes place in further assembly linesb) Paint painting of parts such as the steel body is carried out in this sectionc) Welding Weld Shop has spot welding, seam welding and MIG welding machines to weld various sheet metal parts to form the basic frame and other scooter panelsd) PPC production planning and control. This department decides the amount of various products to be produced each day. It handles capacity utilisation and has to work closely with the purchase and the sales department

2) Services This department is involved with the services that are provided to each customer. Customers are a high priority for Honda and it constantly innovated itself to provide maximum customer satisfaction.a) Training it provides training to the employees at various dealers and services stations about how to service Honda productsb) CRM Customer Relationship Manager. It handles all customer grievances as well as follow ups for prospective customersc) Warranty takes care of the warranty services and addressal of customer problems

3) SalesIt is concerned with the marketing and sales of the products. It sets out the sales targets for each year and works closely in hand with the dealers for final sales. It has developed its own software called the dealership management System through which it gets instant updates related to sales at various dealers. This helps to identify any shortfalls in sales or excess demand which has to be met. Honda has a policy of marketing through dealers rather than doing the companys advertising. For this the sales division provides help and support to all dealers to achieve their objectives.a) Business plan unit this section sets out the marketing plans for each year. Sales targets are decided and marketing strategy is worked outb) Training Honda has come up with a new system through which it provides driving training to new customers. This is done through test driving and use of simulators. It achieves the twin objectives of maximising sales and providing customer satisfaction.c) Network plan unit it deals with the distribution network for sales. New dealers are developed, service centres are added. New markets are identified for sales.

4) Purchase It is another critical department for the factory. Its work is to procure the parts and supplies for the manufacturing plant. Honda has a policy whereby almost all the parts that go into a product are sourced from outside vendors. This has helped to keep down production costs. Every day the purchase department is in contact with the vendors to obtain details about the supplies to be expected. This then decides the plant production for that day. There are many large and small vendors of Honda located in various locations like GurgaonFaridabadLudhianaBangalorea) MPD mass production department. It handles procurement of parts that are needed daily in huge quantities for manufacturingb) CPD - Cost plan department it works to identify cost of new supplies when there is change in any product or a new product is to be launched. It helps to decide the costing of the products c) PDD product development department it concerned with the research into new vehicles or improvements in the existing onesd) GP general supplies it procures the office supplies

5) QualityHonda believes in supplying the highest quality products to its customers. Therefore the quality department receives high priority. It is divided into multiple departments which perform quality checks at various stages of production to ensure there are no quality issues. This department has a lot of work as Honda procures supplies from outside vendors whose quality might not match Hondas quality standards.

a) Vehicle quality it performs quality checks of the final assembled product such as wheel alignment, working of brakes, handle alignment. These are only external checksb) Parts quality it checks the quality of each part that is received from the outside before it can be put into productionc) Homologation this section ensures that vehicles meet the standards that are set by the Government such as emission and fuel consumption and parts quality. There is a 20 point agenda that is followed. A few sample vehicles are check in each batch in this departmentd) Engineering quality this section performs more detailed inspection of each unit such as checking electrical connections, screws etce) Export this section deals with those vehicles that are to be exported. Due to different regulation and rules in foreign countries higher quality standards have to be maintained in the export units. Also many vehicles have to be modified due to certain regulations, such as engines have to be upgraded due to stricter emission norms. Export units are sent via two methods

CKD Complete knocked down units in this the disassembled parts are exported to a country. Factory present in the export country will then reassemble the vehicle and inspect it before sending it to salesCBU Completely built unit in this the fully assembled vehicle is shipped in boxes to the foreign country. In certain cases the vehicle name is different in the export country. So appropriate changes are made before it is packedEx. Stunner is shipped under the name CBF 125 and the Deo has the name Lead

6) HRThe human resource department is concerned with employee management and training. HR policies are constantly updated for employee satisfaction and optimising workload. Every new employee is trained in all departments so they can develop a complete idea about the working of the company. A major challenge for HR is the labour force. Due to the labour union there have been many problems related to their management. The permanent labourers take their work very casually and take holidays without notice. Many of them are not efficient at work.

7) LogisticsIts concerns are transportation of the finished goods. It mainly involves utilising the right amount of trucks for transportation thereby minimising costs. The trucks available have a capacity of 45, 54 or 62 vehicles. Another concern is safety while transportation. The vehicles are adequately packed so there is no damage during transportation. The material to be used for this purpose is also efficiently utilised to keep costs down5S METHODOLOGY OF HONDAThe term 5s refers to the methodology of workplace organization. The fives refer to the Japanese words seiro, seiton, seiso, seiketsu, shitsuke. The 5s methodology comprises of five phases, and each of these terms represents a particular phase.The five phases of 5s are: Sorting (seiro) Stabilize (seiton) Systematic Cleaning (seiso) Standardizing (seiketsu) Self Discipline (shitsuke)Sorting (seiro):This phase involves sorting of all the tools, materials, instructions etc so as to retain only the essential ones and eliminate the rest.Another important objective of this phase is to prioritize the things as per their requirement, and keep them at distinct but easily approachable places as per their priorities.Stabilize (seiton):This phase is also referred to as Straightening, Simplifying, or Setting in Order.The first step is to ensure there is a place for every item clearly demarcated arranged properly so as to promote efficient workflow. Each item should be placed as close as possible to the point where it is to be used, thus ensuring comfort for the operating workers. The next step is to make sure that all items are placed at their respective demarcated locations.Systematic Cleaning (seiso):The other terms used for this phase are Sweeping, Shining, or Cleanliness.The major focus of this phase is on keeping the workplace tidy and organized, to inculcate cleanliness as part of the daily routine, and not an occasional activity. The workplace should be cleaned and every item restored to its particular place after each and every shift positively.Standardizing (seiketsu):This ensures that the workplace is standardized. All the workplaces that perform the same jobs should be made exactly identical, including the location of the tools and other items. This would enable all the workers performing same jobs to work at any of these workstations without any impact on the work output.Self Discipline (shitsuke):After the successful implementation of the first for S, this phase takes care that there is no degradation or decline in the workplace organization, while simultaneously looking out for better ways, exploring further possible improvements in the workplace organization.ASSEMBLY LINE CONCEPT BRIEF EXPLANATIONThe term Assembly Line refers to a plant layout in which the manufacturing process involves addition of parts or components to a product in sequential manner in order to obtain the final product output. The assembly line model was first conceived by Henry Ford of the Ford Motor Company. Ford used the Assembly Line model which led to the mass production of the famous Ford model T.Assembly line provides the following advantages: Optimal usage of logistics and materials The end product is created much faster Reduction in the labour hours required per unit of output Reduced cycle time leading to increase in the total production output Mass production leading to economies of scale resulting in reduced costs Production of standardized output with minimal tolerance levelsThe assembly line model is particularly suitable for products that involve sequential production activities, and involve highly standardized and uniform output.The products that are well suited for assembly line method of production involve toys, appliances, automobiles, planes, guns, garden equipment, clothing etc. To generalize, it may be concluded that any product that involves multiple components and is produced In large quantities would qualify as a good candidate for assembly line production. The assembly lines may be classified on many basis, a few of which are as follows: Material handling devices Belt or roller conveyor Overhead crane Line configuration U-shape Straight Branching Pacing Mechanical Human Product mix Single product Multiple products Workstation characteristics Workers sit Workers stand Workers walk with the line Length of line Few workers Many workersImpact of Assembly Line:The widespread use of assembly lines has led to a dramatic increase in the output rates. The major reason for this being the reduced cycle times coupled with the better utilization of labor as well as machinery. The focus in assembly line has always been on reducing the idle time both human as well as of equipments thus resulting in better utilization.Current Focus in Assembly Line:The current view of assembly lines focuses on the following aspects: Greater flexibility of the products produced Higher variability in workstations Improved reliability through preventive maintenance High quality output through improved processes and trainings.The Product Honda ActivaThe company set benchmarks in the Indian scooter industry with the launch of its gearless scooter Honda Activa. Honda Activa is an easy to ride two wheeler with good pick-up and high reliability. Thanks to its user-friendly features, it has been quite successful in India. The vehicle has the option of kick and self-starts, and one can choose according to ones preferences. Activa has been catering the need of gear less scooters since a long time in Indian markets. The performance outcomes are really amazing. Honda Activa is always a priority for people because of its high performance and efficiency. Technical Specifications Type 4-stroke, Single cylinder, air cooled, OHC Displacement 109 cc (New) Max. Power 8bhp (6.0 kW) @ 7500 rpm Max. Torque 0.9kg-m @ 5500 rpm Transmission V-matic Ignition Self / Kick Fuel Tank Capacity 6 liters

Assembly line of Honda ActivaVendors supply raw materialPurchase departmentMaterial Service

Storage area Issue Area Rejection areaManufacturingSheet metal taken to press shopWelding ShopPaint ShopSteel body sent to frame shopFrame shopFrame body is stamped with chassis no.Assembly of fork and handleEngine is received from engine assembly lineEngine attached to frame using axle and rear shockersSteel body is then attached to frameAttachment of parts such as front cover, pillion and seatsElectrical connections are done and brakes attachedManual, first aid box and tool kit are addedBar code scannedSent to quality department for checksLogistics department then receives it for shippingWORK SHIFTS IN THE ORGANIZATION

For the administration -8:30 am to 5:00 pmWork shifts in the manufacturing plant A 6:30 am to 3:00pmB 3:00 pm to 11:30 pmC 11:30 pm to 6:30 amOut of these 3 available shifts only shift A and B operate on a regular basis. Shift C is used only in times of emergency such as underproduction in the first 2 shifts or there in an intense demand in the market. The productivity level in shift C is much lower than A and B as it only few workers work in itIn each shift a total of 1200 Activas and 1100 other vehicles can be produced at full capacity. Thus a total of 4600 vehicles can be produced at a regular basis in the shift A and B Shift AShift B

Activa12001200

Scooters and motorcycles11001100

This means that it takes about 24 seconds for one Activa to come out of the assembly line. For a motorcycle the cycle time is 26.2 seconds

PROBLEMS IN THE ORGANIZATIONThe main problem is under utilisation of manufacturing capacity.With 300 working days in a year it gives a capacity of 13,80,000 vehicles in a year. With the added capacity of shift C a total of 16,00,000 vehicles can be made in an year. However actual production is much lesser than this. On some days production falls down to 2000 vehicles in a shift which is a drop of almost 23%. Due to under production full capacity utilisation is never achieved. Last year with a capacity of 15,00,000 vehicles it could produce only 11,00,000 vehicles which is a utilisation of only 73% of the capacity. In the current year Honda estimated that only 13,00,000 vehicles will be produced despite the larger capacity. This gives a capacity utilisation of just 81.25% percent which is higher than the last year but still not adequate.

The under utilisation is not because of assembly line problems. Honda has a highly efficient assembly line process which makes sure that there are no bottlenecks in the system. All the assembly lines are completely integrated to ensure that there is minimum waiting time. The causes for this are 1) Vendor supply problemsAs Honda almost completely sources its parts from outside it is highly dependent on them to achieve its daily production targets. A number of suppliers both large and small send their parts to the Honda plant in trucks, autos and sometimes in cars. Any shortfall in supply from even one vendor can lead to production shortage. To prevent such occurrences frequently they have 2 to 3 backup suppliers for certain parts but this also is not enough to ensure consistent supply. They have been working on vendor development to ensure a more reliable supply of parts but there are still problems2) Quality issuesHonda believes in setting the highest possible standards for its products. However its dependence on external suppliers causes conflict with this principle. Certain times the parts they receive are of poor quality are rejected by the materials service department. This then leads to shortfall in production as parts from other vendors cannot be obtained so easily.

3) Workers UnionThe labour union in Honda is very strong. It is very difficult to manage them. The permanent workers are the main problem as they cannot be reprimanded or fired. They take long breaks during work hours or sometimes go on long holidays without informing. Even on a daily basis they cause problems by arriving late or not working for a complete shift. This also affects the production process which is highly dependent on the workers. Many times the supervisors themselves have to step in to get the work done.

SUGGESTIONS FOR IMPROVING THE SITUATION Our suggestion to improve the situation is backward integration. The company needs to more integrated with its vendors for the parts that it cannot manufacture, as well as try to manufacture more of its critically important parts in-house.

Strategic Advantages of Backward Integration Generates cost savings, only if volume needed is big enough to capture efficiencies of suppliers Potential to reduce costs exists when Suppliers have sizable profit margins Item supplied is a major cost component Resource requirements are easily met Can produce a differentiation-based competitive advantage when it results in a better quality part Reduces risk of depending on suppliers of crucial raw materials / parts / components Reduce transportation costs if common ownership results in closer geographic proximity Improves supply chain co-ordination Increase entry barriers to potential competitorsTaking a leaf out of the books of Tata Motors, who had also faced in the past similar vendor related issues and who had resorted to backward integration to solve the same, we can see that Honda can too take refuge in this method. They need to work very closely with one or two of their trustworthy vendors and help train them up and bring them at par with the latest technologies and techniques in the field of manufacturing for the parts that they produce.Honda needs to gain their trust and possibly take up a stake in the company and push them towards upgrading their current facilities and technology, the plant workers need to be trained to be more efficient. If possible, the vendor should be turned into an exclusive supplier of Honda.The added advantage for Honda would be that since these vendors would be trained Honda personnel their manufactured supplies would consistently be of the best quality that they require.As for the problems with labour it is an HR issue. There are not many options available to the company for dealing with these problems due to the strict labour laws in India. However the management is in negotiations with the labour union to reach more agreeable terms on the work related issues.

PROBLEMS IN IMPLEMENTING OUR SOLUTION

Backward integration does not come without its drawbacks.Strategic Disadvantages of Vertical Integration Boosts resource requirements Locks firm deeper into same industry Results in fixed sources of supply and less flexibility in accommodating buyer demands for product variety Poses all types of capacity-matching problems. For example, the firm may need to build excess upstream capacity to ensure that its downstream operations have sufficient supply under all demand conditions May require radically different skills / capabilities Reduces flexibility to make changes in component parts which may lengthen design time and ability to introduce new productsPros and Cons of Integration vs. De-IntegrationWhether vertical integration is a viable strategic option depends on its Ability to lower cost, build expertise, increase differentiation, or enhance performance of strategy-critical activities Impact on investment cost, flexibility, and administrative overhead Contribution to enhancing a firm's competitivenessComing specifically to the problems that Honda might face:They have traditionally been distant from the prospect of backward integration in India. They are already facing union issues with their main plant and matters would further escalate with the integration of companies upstream/downstream. They would also have to deal with the union related issues of the plant they integrate with theirs. Bureaucratic issues can arise while acquiring the new plants. Political ramifications of a FDI venture. Trust issues of training the vendor and competitors benefitting from them. Honda has recently invested heavily in the setting up of a new plant in Rajasthan, hence the costs associated with integration may be too hugeAlternatives to backward integration:Though backward integration maybe the most apt solution for Honda it may not be the most feasible one.There are alternatives to backward integration that may provide some of the benefits with fewer drawbacks. The following are a few of those alternatives for relationships between vertically-related organizations: Long-term explicit contracts Franchise agreements Joint ventures Co-location of facilities Implicit contract (relying on firms reputation)Honda already uses a few of these methods suggested.

HMSIManufacturingServiceSalesPurchaseQualityHRLogisticsPaintPower trainWeldingWarrantyCRMTrainingNetwork PlanTrainingBusiness PlanGPPDDCPDMPDCBUCKDEngineeringQualityHomologationPQVQExportPPC