Honda Motors Company Supply Chain Management - Case Study Example

Honda Motors Company: Supply Chain Management Introduction The advent of automobile industry was influenced by innovation of fuels, vehicle components among other factors however it is believed that the development of automobile industry started with the advent of engines. It was in the year 1876 after the invention of 4-stroke internal combustion gasoline fueled engine, when the first motor vehicle was developed. Immediately after the invention of first motor vehicle, the automotive firms were established in Europe and America. With the advent of floor mounted accelerators and steering wheels in the year 1890’s and early 1900’s, there was rapid growth in the automotive industry. It was during the year 1920’s when many of the companies started merging like Benz and Daimler, Ford and Lincoln among others with the development in infrastructure and adoption of new manufacturing process. Since 1930 onwards many new vehicles were developed and consumer preferences were given more priority. Then, slowly military cars as well as weapons were manufactured in order to support the war. There was more technological innovation in the decades of 1950s and 1960s like fiberglass bodies and elevated compression ratio fuels which met the needs and preferences of the customers. It was during the year 1970s that there were strict rules and regulations with regards to environment and this led to the development of low vehicle emission technologies. In 1980 the companies started becoming globalised and this allowed them to penetrate into the market. However the automaker industries must identify the new and more specialized markets and try to penetrate into emerging markets in order to satisfy the needs and wants of the customer. Honda Motors Company Honda Motor Company Ltd is the international corporation from Japan which manufactures motorcycles and automobiles. It is the major producer of motorcycles as well as internal combustion engines in the world. The company manufactures in excess of 14 million internal combustion engines annually. Head office for Honda Motors Ltd is at Japan. It was established in the year of September 24, 1948. The President as well as CEO for the company is Mr. Takanobu Ito. The total amount of capital employed in the business as on March 31, 2009 was ¥ 86 billion. The total number of consolidated employees as on March 31, 2009 was 181,876 and the total number of unconsolidated employees as on March 31, 2009 was 26,471. There are 396 consolidated subsidiaries as on March 31, 2009 in Honda Motors Ltd. The chief products for the company are automobiles, motorcycles, power products, etc (Honda, 2010) Rationale History/Background Honda was founded by Mr. Soichiro Honda as he was very fond of automobiles at his very young age. At Art Shokai, he worked as a mechanic where his main job was to tune the cars and then enter them in races. Later he worked on piston design with a hope to sell that to Toyota but then the first draft was rejected. So in order to make the draft perfect Mr. Soichiro worked very hard and finally his design was accepted by the Toyota. He then started making pistons which was unfortunately destroyed during an earthquake. There was huge gas shortage at the time of World War II because of which Mr. Honda couldn’t use his car and he started developing ideas on attaching an engine in his bicycle. This curiosity led to the establishment of Honda Technical Research Institute in Japan at Hamamatsu. This institute specialized in the invention of engines for small 2 cycle motorbike. In order to manufacture his first motor bikes called Honda Cub Soichiro called ahead more than 18000 bicycles shop owners. These people helped him with enough of capital in order to engineer his product. It was from that time Honda motor started its operation and later became the world’s largest manufacturer of motorbikes in the latter years. The main products of the companies are Power Equipments, Automobiles, Motorcycles, Engines, Robots, Aircrafts, Mountain Bikes and Motor Sports (Carrier, 2010). Supply Chain Management for Honda Motors A supply chain is a chain of processes where the goods are moved from the suppliers through the raw material stage and then supply, production and finally distribution of the goods to the customer. Honda uses their economies of scale, in order to achieve its work with its part suppliers so that they can order raw materials in large quantities. Honda tries to meet the dynamic needs of the customers all the way through improved technologies. In order to do so, it requires support from its existing suppliers as well as dedicated suppliers who work for common goals. As it is known that the nature of purchasing function is internationalized, it believes in maintaining free trade where all the suppliers are treated equally. At Honda, it is believed that suppliers must have the same dedication and commitment toward satisfying the customers as Honda has. Honda believes at maintaining the quality of the product to ensure customer satisfaction. Hence, it is the duty of the supplier from the top management to the individual worker to work continuously to maintain the quality of the product. Suppliers are expected to reduce the overall cost every year through technologies, ideas and value engineering activities. Honda follows the just in time techniques and the suppliers are expected to have a production system which is flexible so that the lead time can be responded in a short period. The diagram below shows Hondas supply chain (Brown, n.d.) Honda has been successfully resolving various issues that have been coming along the company. This is evident from the fact that there had been a strike in Honda Motors China because of the labor disputes and the production was interrupted because of it. Honda increased the wage rates to 24 % so that the operation starts as soon as possible and there is a smooth flow of work. This made the workers happy and motivated them to work hard. Honda has transferred its technology from its motorcycle business to automobiles. By doing so, it has been able to make a unique development as well as manufacturing capabilities to produce consumer’s products. With the development manufacturing as well as supplying quality product which has been made to suit the local markets, Honda is able to fulfill its social as well as corporate responsibilities. It employs local resources and reinvests the capital in those markets. There is a quality innovation center at Honda that prevents the company to produce poor quality products and to increase the capability to handle the difficulties. There are specialized service departments which resolve any matters relating to the quality issues. It is trying to implement global quality assurance system to maintain the quality of every Honda products around the globe (CSR Report, 2007). Honda follows JIT approach where the necessary materials arrive at soon as they are required so that there is no interruption in the production process. This is evident from the following example where the small firm assembles stereo speakers from Honda and finally delivers it to Honda three times a day. This arrangement helps Honda to reduce the inventory cost (Griffin, 2007). Literature Review A study conducted by Donald Bradley and fellow researchers on automotive industry analysis concentrated on the automotive industry like Honda, Hyundai, General Motors, and Ford etc. Honda Motors were founded in the year 1946. It’s the biggest producer of motor cycles and automobiles. It has two automotive brands i.e. Honda and Acura and produces more than 20 models like Accord, Element, and Pilot SUV in addition to the production of motorcycles and power products. From the day Honda began to produce automobiles it has been the leader in producing low emission as well as fuel efficient cars. There has been constant rise in the sales as well as the revenue of the automotive. According to them, looking at the past performances of the Honda and at the strategies that they have adopted it is proved that they will have a strong presence (Bradley, n.d.). Another study was conducted by Billy Brown and others named ‘The Automotive Industry Supply Chain Management for Honda and Foreign Automakers’. According to them, the largest industry in United States is that of the automotive industry. Honda has been good enough in terms of innovations. At Honda, suppliers are continuously involved in the development of the new products and it believes in maintaining good relation with its suppliers. Honda follows economies of scale for ordering raw materials in huge quantities by working it with their suppliers. According to them, there must be flow of information with the suppliers in order to provide quality products to its customers (Brown, n.d.). Findings The detailed analysis of the supply chain management of Honda Motors depicted that there was a problem with the braking system that was making it tougher to stop the vehicles. There was a dispute over wages systems for the laborers. This led to strike and later it led to shutdowns. It was found that Honda discriminated in the selection procedure between women and black. It was also evident from the report of Consumer Federation of America that showed that American Honda Finance Corporation was charging high financial markups. It was done intentionally to African - American borrowers but not to white customers. Emission was another biggest problem for Honda Motors (CFA, 2004) There is growing need and demands of the customers. But there may be delay in the supplies of goods and services from the side of suppliers which will hamper the complete production processes that was faced by Honda. Recommendations JIT technique can be applied by the company which will help to reduce the delays in production. There must be continuous improvement in the performance of the suppliers which will benefit the company to a great extent. As there are not enough sources for the development of suppliers’ base, there must be commitment of joint resources in order to make the process successful. Kaizen technique can be applied by companies in order to ensure continuous improvement in the overall performance of the product as well as the system. It can expand its operation so that the products and services penetrate into each and every segment of the market. Suppliers can be rewarded for their performances so that they get motivated and they don’t switch to competitors. In order to ensure smooth production processes the companies need to have a good transportation facility so that the raw materials reach in time and there is no hindrance in the production processes. Honda must not only depend on the local suppliers but it must also invite suppliers from all over so that if one supplier denies to supply raw materials then the raw materials can be procured from other suppliers too. Conclusion Supply chain management is very important in order to develop close relation with the internal as well as external groups. For the reasons, there is a need to develop a working knowledge of the principles of manufacturing, quality assurance and team dynamics. Supply chain management helps the supplier to participate in team meeting and to help to solve the conflicts between the supplier and the team. It would not be wrong to say that effective and efficient supply chain management is imperative for the successful growth and functioning of the organization and Honda Motors is not an exception either. References Bradley, D., & Et. Al. (No Date). Automotive Industry Analysis. Home. Retrieved Online on August 4, 2010 from http://pdfcast.org/pdf/automotive-industry-analysis Brown, B., (No Date) Honda Supply Chain. Honda Purchasing. Retrieved Online on August 4, 2010 from fisher.osu.edu/.../The%20Automotive%20Industry%20Presentation.ppt. CSR Report, (2007). Insisting on Quality. Fundamental Approach to Quality. Retrieved Online on August 4, 2010 from http://world.honda.com/CSR/html/2007/quality-safety/quality01/ CFA, (2004). Report Finds Discrimination in Honda Auto Loan Markups. Consumer Federation of America. Retrieved Online on August 4, 2010 from http://www.consumerfed.org/pdfs/072704_Honda_Loan_Discrimination_Release.pdf Carrier, T., (2010). History of the Honda Motor Company. LoveToKnow Corp. . Retrieved Online on August 4, 2010 from http://www.2020site.org/n/history-of-the-honda-motor-company.html Griffin, R.W.(2007). Fundamental of Management. Cengage Learning. Honda, (2010). Company Overview. Established. Retrieved Online on August 4, 2010 from http://world.honda.com/profile/overview/ Bibliography Monezka, R.M., (2008). Purchasing and Supply Chain Management. Cengage Learning, 2008. Read More