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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Questions?