Download - OM Presentation: Honda vs Toyota
Comparison of Operational Strategies of
Toyota Motors vs Honda Motors
Group # 5
Janmey Patel ( 202 )
Nikhil Arora ( 206 )
Shashank Mohore ( 228 )
Aniket Gupta ( 229 )
Parandeep Chawla ( 231 )
Flow Of presentation
Automotive Industry today
Toyota Motors1. Operations Strategies2. C2C Structure3. Supply Chain Management
Honda Motors1. Operational Strategies2. QCDDM3. Supply Chain Management
The Market Today
In the past few years, General Motors, Ford, and DaimlerChrysler’s market share for cars has been cut in half.
Toyota , Honda , Nissan have shown a positive trend.
While domestic manufacturers still dominate their foreign competitors, the Japanese market share of cars is growing.
Consumers are choosing Japanese cars over domestic because of their competitive price, and high quality reputations.
These advantages are results of a very organized and innovative way of doing business.
Company's Profile
Toyota is Japan's biggest car company and the second largest in the world after General Motors.
It produces an estimated eight million vehicles per year, about a million fewer than the number produced by GM.
The company dominates its home market, with about 40% of all new cars registered in 2011 being Toyotas.
Cash to Cash: Toyota, Inventory Management
Both Accounting and Supply Chain professionals rely on Cash to Cash (C2C) measures to make processes more efficient and cost-effective.
C2C is generally the number of days it takes to convert the expenses for raw materials into payment for the finished product (1).
Many factors influence this, including inventory management, supplier performance, 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 entire process, from suppliers, to manufacturing, through to order fulfillment (2).
Toyota takes three actions to decrease the C2C cycle:
Extend average accounts payable
Reduce inventory by reducing the production cycle
Decrease average accounts receivable
Internal Structure
One organization that has successfully implemented a C2C system is Japanese automaker Toyota. Its operational success is often attributed to the focus on reduction in inventory.
The term Toyota uses for their system is “HEIJUNKA”. Translated from Japanese, it means “make flat and level.” In particular, it refers to eliminating spikes in demand, but also creating operational efficiency and reducing overall supply chain costs.
Toyota’s lean operation focuses on the idea of buy one, sell one. Toyota is able to manufacture vehicles in about the same order customers buy them . This adaptability to demand has given Toyota the advantage of carrying the least inventory in the field of Japanese auto manufacturers .
Working with suppliers
This concept is one that Toyota uses internally and it also requires of its suppliers to improve the overall C2C cycle.
In the North American auto supply market, suppliers working with Japanese-owned automakers perform at higher levels than those working with U.S. automakers.
Toyota works with U.S. suppliers to teach them the lean manufacturing techniques used in Toyota’s manufacturing facilities (4). These techniques ensure a short amount of time between when Toyota needs an item and when the supplier makes it.
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 customers’ demands because manufacturing facilities do not have to wait on a particular part before beginning production on a vehicle .
Benefits of Heijunka
Toyota’s improvement in its supply chain benefits the automaker in many ways:
Inventory levels at parts distribution centers have decreased by 53 percent from stocking levels in the 1980s.
Since 1994, the inventory turn of parts in the average dealership has increased from 3.7 to 5.7.
•Toyota dealerships have achieved 20 percent to 40 percent reductions in floor space utilization.
The time spent improving the systems of U.S. suppliers shows results as well.
From 1997 to 2000 alone, supplier on-time delivery increased from 76 percent to 93 percent.
Sixty-six percent of suppliers on daily order status are able to deliver within five days or less.
While inventory management is an effective way to reduce the C2C cycle, it not only requires efficient manufacturing, but also effective forecasting.
Supply Chain Management
Supply chain management (SCM) is the management of a network of interconnected business involved in the provision of product and service packages required by the end customers in a supply chain.
Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption
Toyota Supply Chain
Suppliers Parts
DEALERS
Customers
Outbound Logistics
Production
Inbound Logistics
INSPECTION
Assembly Plant
Inbound Logistics
Determine which cross dock is
located neares to suppliers
Network Design to analyze lacations of
Suppliers
Transport parts to cros docs and stage
them for coach assemply
Transport to plants and containers
travel in reverse route
Outbound Logistics
Vehicles at Marshalling
Yard
Accessories installation
Final Quality Assurance
Transport TO Dealers
Company’s Profile
Honda is the number 2 car maker in Japan and the 5th largest in the world.
Renowned for innovative ideas and engineering excellence, Honda has an unusually strong image among mainstream car makers.
This ensure it can remain independent when rivals merge or form partnerships.
Honda’s Operational practices show a great example of the innovations the Japanese automobile manufacturers perform.
Operational Strategies
Careful site selection
In- depth supplier relationship Close and interactive, similar to a partnership
Japanese/ American manager mix
Honda Purchasing
Suppliers are involved with development and design of new products
Relationship is much like a partnership
Requires an in-depth supplier selection process
Honda Supply Chain
Honda uses their economies of scale by working with their parts suppliers to order raw materials in large quantities.
Honda Supply Chain
Honda Purchasing
Honda Purchasing
Parts Supplier
Parts Supplier
Parts Supplier
Honda Trading
Raw MaterialsMill
Parts Supplier
Parts Supplier
Parts Supplier
Honda Assembly
Plant
Honda Assembly
Plant
Supply Chain Characteristics
The key element for Honda is the flow of information with their suppliers 12 steps:
Initial contact, preparation/investigation of Honda parts, quotations, initial plant visit, prototype development, testing and evaluation, mass production quotation, preparation for mass production, trial run, Quality Assurance Visit, agreement, purchase order
In-house guest engineers
Structural Characteristics
Also known as exceptional drivers that reduce operating costs and increase productivity
Economy of Scale – All purchasing done by Honda Trading America Corp.
Technology – Multipurpose machinery
Capacity Utilization – Honda operates facilities in every major market they enter
Market Characteristics
IT advancements 3rdwave distribution software by Blinco Systems
Assures parts quality, controls availability, guarantees delivery, provides consistent materials pricing
Competitive Characteristics
Strategic and operational variables that must be factored into the design of a company’s global value chain Global value chain
Demand chain (marketing, sales, service) Supply chain (sourcing, manufacturing, logistics) Product development (R&D, design, engineering,
development, and launch)
Company Specific Characteristics
Strategic sourcing – “maximizing the value added through your external suppliers” Will chose highest supplier in overall service (not just
lowest price)
“Target pricing” Price table for parts If price cannot be met, Honda will work with supplier
to get costs down
Q.C.D.D.M
Customer Satisfaction is top priority Accomplished through suppliers competitiveness in
quality, cost, delivery, development, and management (Q.C.D.D.M.)
Quality Most important factor Must be built into production process
Q.C.D.D.M cont’d
Cost Suppliers are given target costs Cost reductions through own ideas, technology,
improved productivity, along with joint efforts with Honda in value engineering, and value analysis
Delivery Suppliers must use just-in-time production system
Q.C.D.D.M cont’d
Development Uniqueness in design and specifications Helps create identity for Honda
Management Positive attitude Measured by Q.C.D.D
Feedback Grade cards for suppliers
Honda Quality and Efficiency
Quality and Continuous Improvement Employee Driven “Kaizen” “Quality Circles” “Domestic Trouble Reports” (DTRs) MRP II and Web-based Ordering for
Supplier Base as a whole
Extent of Efficiency in Supply Chain Honda Trading “Soybean Example” New Honda Ridgeline Composite Bed/Box
In Conclusion : Toyota and Honda share a Similar
Philosophy
Customer Service is key Provides more predictable demand schedule Allows for a stronger relationship with Suppliers
Keys to achieving Cost Effective Customer Service
Monopolistic Purchasing Power
Strong Financial Health Able to ask more from Suppliers
Understanding of global Economic environment