hinopak production managment

INSTITUTE OF BUSINESS MANAGEMENT 1

PRODUCTION & OPERATIONS MANAGEMENTSEC A

5th JAN ‘09

TERM REPORT

ON

“HINOPAK”

S U B M I T T E D TO :

http://images.google.com.pk/imgres?imgurl=http://www.zaibengg.com/images/icon/logo_hino.jpg&imgrefurl=http://www.zaibengg.com/clients.htm&h=154&w=181&sz=6&hl=en&start=3&usg=__3FiKsi-qGAM6siUWbLSoOlIqbmU=&tbnid=Zj0rxGqcLk0IKM:&tbnh=86&tbnw=101&prev=/images%3Fq%3Dhinopak%26gbv%3D2%26ndsp%3D20%26hl%3Den%26sa%3DN

TABLE OF CONTENTS

LETTER OF ACKNOWLEDGEMENT .................... 5

EXECUTIVE SUMMARY....................................6

INTRODUCTION..............................................7

SITUATIONAL ANALYSIS.................................9

APPLICATION OF OGSM PHILOSOPHY AT HINOPAK..................................................................................................................................12

What OGSM...............................................................

How Hinopak Develops OGSM.............................

Benefits Reaped By Hinopak:.....................................

OGSM Next Steps.......................................................

A Live Document........................................................

MARKET SUMMARY......................................17

Target Market............................................................

Market Needs............................................................

Market Trends...........................................................

Market Growth...........................................................

RECOMMENDATION TO USE ‘JIT’ PHILOSOPHY31

What’s JIT..................................................................

Objectives.................................................................



Keys To Implementation and Integration...................

Suppliers...................................................................

Advantages and Disadvantages.................................

MARKET SEGMENTATION..............................27

Types of Customers.........................................................................................................

COMPETITIVE ANALYSIS...............................30

CAPACITY PLANNING AT HINOPAK.................32

APPLICATION OF TQM..................................33

PDSA Cycle................................................................

Two Systems For Improvement (SIX SIGMA & LEAN). .

SWOT ANALYSIS..........................................40

CUSTOMER RELATIONSHIP MANAGEMENT.....41

RECOMMENDATION TO APPLY GEMBA...........43

RECPMMENDATION TO APPLY BALDRIGE CRITERIA.....................................................45

GRADING OUR PM INC. SUBSIDIARY (MBNQA)48



LETTER OF ACKNOWLEDGEMENT


We are truly indebted to Dr. MUFADDAL MIRZA for giving us this incredible opportunity to gain exemplary experience of preparing a Total Quality Plan for a real world company. He showed commendable gesture of believing in our potentials and guided us throughout the completion of this project. He had faith in us which helped us overcome all the obstacles and developed passion with regard to the project.


EXECUTIVE SUMMARY


Hinopak is one of the matchless manufacturer of trucks, buses and spare parts headquartered in Karachi which launched itself in a maturing market. Hinopak’s offering combines exclusive products and services at value-added price.

They have targeted specific segments in the consumer and business market, taking advantages of opportunities indicated by higher demand for transportation facilities and commercial vehicles.


INTRODUCTION

Hino Motors Japan and Toyota Tsusho Corporation in collaboration with Al-Futtaim Group of UAE and PACO Pakistan formed Hinopak Motors Limited in 1986.

In 1998, Hino Motors Ltd., and Toyota Tsusho Corporation obtained majority shareholding in the company after disinvestments by the other two founding sponsors. This decision to invest in Hinopak at a time when the country's



economy was passing through a depression and the sale of commercial vehicles was at an all time low reflects the confidence their Principals have in the company and their commitment to the Pakistani market. Hinopak is the trusted market leader with over 65% share in the Pakistani Truck and Bus industry. Hinopak is a vital contributor in saving of foreign exchange. The company was founded in 1985 and is headquartered in Karachi, Pakistan.

Hinopak Motors Limited assembles, manufactures and markets world renowned Hino diesel trucks and buses, and spare parts primarily in Pakistan. The Company has held the top position in the domestic market for medium and heavy-duty vehicles for 17 consecutive years and is highly acclaimed for quality and technological excellence.

Hinopak is first in commercial vehicles sector to start the establishment of 3S Dealership network, which offers Sales, Service and Spare parts facilities all under one roof. This comprehensive network of offices, 3S Service Dealers and Spare parts Dealers are strategically located throughout the country. The company primarily operates in Pakistan, Japan, Australia, New Zealand, Thailand, Canada, and the US. It is headquartered in Karachi, Pakistan and employs 313 people.

The company recorded revenues of PKR7, 826.8 million (approximately $129.3 million) during the fiscal year ended December 2007. The net profit was PKR590 million (approximately $9.7 million) in fiscal year 2007.

Hinopak Motors Limited engages in the assembly, manufacture, and marketing of Hino diesel trucks and buses, and spare parts. It manufactures bus chassis and various types of bus bodies. The company’s bus product line includes Roadliner Shangrila luxury bus for long journeys, Citiliner Intercity buses, Citiliner urban buses, and luxury Senator coach and Rapidliner Deluxe coaches. It also manufactures and sells specialized vehicles that are used for hauling of various supplies, such as food, equipment, and machinery. These products include prime movers, high wall dumpers, cargo carriers, garbage collectors, school buses, mobile kitchens, beverage carriers, water/fuel browsers, mobile eye clinics, NLC trucks, and mobile registration vans.

Hinopak firmly believes:

o In Total Quality Management; a process for managing quality; it must be a continuous way of life; a philosophy of perpetual improvement in everything they do

o Everyone can improve. A problem occurs when someone believes that everyone else, excluding them needs to change.



SITUATIONAL ANALYSIS

Backed by Hino's expertise Hinopak has achieved standard of quality and excellence that rival the best in the region. With over 39,000 vehicles on road, Hinopak has gained over 65% market share making it the largest manufacturer in medium and heavy-duty truck and bus industry in Pakistan.

HinoPak's product range has been designed and built in Hino's traditions of automotive excellence to be the leader in its category and the main emphasis has been given to passengers' safety & comfort.

Hinopak also offers a complete in-house facility for designing and building buses, ambulances, cargo trucks, dumpers, water boozers and a wide range of specialized superstructures. Unlike small body makers who spray paint the vehicles, Hinopak actually uses baked paint to give a longer life and better



finish to the vehicles. Even the 36-foot long Rampliners and Roadliner buses are baked in the gigantic ovens at the Body operations plant.

In the face of growing competition, Hinopak is resolved to achieving total customer satisfaction by providing quality products at competitive prices and supported by the best after-sales service in the commercial vehicle market. This quest for excellence is evidenced by the fact that Hinopak is the only manufacturer to succeed in exporting complete built-up buses to the Middle East and African countries.

Hinopak delivers only the safest most reliable products and remains the Pioneer in supplying the largest number of Urban Buses those are successfully facilitating the commuters of Punjab and Sindh. Hinopak is fully-equipped to design and manufacture a wide range of Bus Chassis and all types of Bus Bodies.

Hinopak is the first Pakistani commercial vehicle manufacturer to introduce a complete range of environment friendly vehicles. It has been especially developed and designed keeping in mind the rugged terrain in order to meet the requirements of the diverse Pakistani automobile market.

Hinopak is Pakistan’s first automobile company to export its buses to Middleast and African countries.After successfully establishing itself as the market leader at home, Hinopak proceeded to explore its product potential for the export market. This entry into the export market was an

important milestone for Hinopak and lead Pakistan into an exciting new era for the automotive industry, fulfilling Hinopak’s commitment towards the economic growth of Pakistan.



The year 2007 marked the year of great success, as Hinopak Motors broke record in three fields: volume of sales, chassis assembly, and body fabrication.

Following are the highlights of Hinopak's ongoing achievements, which make Hinopak Motors Limited the leading manufacturer of trucks and buses in Pakistan.

• 'Market Leader' in Pakistan/ holding over 65% of the Truck & Bus market share.

• First Pakistani automobile company & Hino affiliate to receive ISO-9001 certificate in 1997. First automobile company in Pakistan to obtain ISO-14001 Certification on its Environmental Management system.

• Listed among the "Top 25 Companies" at Karachi Stock Exchange.

• First company to export buses from Pakistan.

• First automotive company to introduce "3S" concept in heavy-duty commercial vehicles market in Pakistan.

• First company to supply buses under "Urban Transport Scheme" in Pakistan.

• Recipient of Employers Federation of Pakistan's Golden Jubilee Award for best HR/IR practices.

• Recipient of Corporate Excellence Award from Management Association of Pakistan.

• Recipient of Employer's Federation of Pakistan's Golden Jubilee Award for "Excellence in Productivity".

Hinopak has modern plants equipped with advance facilities for vehicle assembly and fabrication of buses and superstructures. These comprise of modern paint booths and baking ovens, axle assembly shops, chassis assembly line, trim line, and engine assembly shop, which strictly adheres to high Japanese standards. Hinopak also houses a comprehensive engineering and design section with highly qualified professionals, promising the best solutions to their wide range of customers' requirements.



Hinopak's product line has three distinct segments i.e. Trucks/ Buses and Specialized vehicles.



APPLICATION OF ‘OGSM’ PHILOSOPHY AT HINOPAK

Hinopak uses the OGSM methodology to help build a strategic plan for its automobile business.

OGSM:

A strategic planning framework that uses a top-down approach to define the Objective, Goals, Strategies & Measures (OGSM) of their business. The output is a clear, simple and concise (ONE page) strategic plan:

Objective: The objective / vision for their business

“Total Customer Satisfaction” a set vision for the company.

The mission of Hinopak Motors Limited is: “To provide the society with safe, economical, comfortable and environment friendly means of transportation by manufacturing and supplying commercial vehicles and services.”

Goals: Translation of their vision into specific goals e.g. turnover, profit, market share, professional organisation etc.

Hinopak’s goals for year 2009:

Decrease turn over by 6% Increase production by 8% Increase sales by 11%

Strategies & Measures: What strategies (i.e. ‘choices’) will be necessary in order for you to achieve the goals (& ultimately the vision) and the specific measures (milestones) used to track progress.



To achieve the mission they commit themselves:

To their individual, institutional and international customers: to deliver high quality, safe, durable, reliable, comfortable, environment–friendly and economical products and services to their total satisfaction.To their employees: to foster corporate culture of mutual trust; respect for

fundamental human rights at work; opportunities for professional growth and personal welfare so that they are proud of being a member of the “Hinopak Family”.To the community and the nation: to contribute in economic and social

development by providing means of transportation and by progressive localization of the vehicles.To the shareholders: to act in compliance with the norms expected of a

subsidiary of the Toyota Group of companies and make a meaningful financial return to the shareholders.

The OGSM methodology makes a clear distinction between the ‘business’ and the ‘organisation’ i.e. people. In this respect, goals, strategies & measures are developed for both the business and organisation (but united under a single overall objective).

How Hinopak Develops Its OGSM:

Following the philosophy – helping businesses build themselves – Hinopak’s OGSM is developed in full partnership with themselves:

2 day off site ‘event’ (location & logistics to be decided by client) On your side: representation from every function of your business

(ideally 10-20 people)



Full OGSM training provided by The Hinopak Group Professional facilitator / moderator from Hinopak Post event: full write-up by Hinopak – a ONE page OSGM and

recommended ‘next steps’

Benefits Being Reaped By Hinopak

The primary purpose of an OGSM is to guide their business to long-term success. An OGSM ensures that they have a medium- to long-term strategic plan that can guide their short-term choices & targets across their total business e.g. annual sales targets, brand acquisition strategy / portfolio rationalisation, investments in the organisation etc.

Hinopak also develops multiple OGSMs that all link to one another. This ensures their different businesses / divisions (3S Dealership) are united under a single objective and that cohesive strategies exist between them.

OGSM Next Steps

Many actions emerge following an OGSM, such as:

Deployment to wider organisation: if deployed efficiently, an OGSM can unite their whole organisation behind a common business objective. This helps ensure their people are focused on achieving the big picture and NOT wasting time on non-value-adding work. Deployment to their wider organisation could take the form of a deployment ‘event’, or a series of training workshops.

Deployment to stakeholders: by sharing their OGSM with key stakeholders e.g. distribution companies, this allows key influences of their business to be aware of and be aligned to their objectives and strategies.

Translation in balanced scorecards: using Kaplan / Norton methods.



Development & implementation of measuring tools: some goals are easy to measure e.g. turnover. For other goals e.g. having a professional organisation, Hinpak designs and implements effective measuring tools to track progress. For example, cost-effectiveness of their methods.

Re-alignment of organisation: once Hinopak is clear on its objective, goals and strategies, they review their organisation to align it fully to the developed OGSM.

A Live Document:

Hinopak believes that an OGSM is a live document and should be reviewed regularly, i.e. annually. The objective of each review is to take into account progress and any changes in the macro-environment / consumer trends, then update the goals, strategies and measures accordingly.

OBJECTIVEBe the leading facilitator of commercial vehicles and services

GOALS (by 2012) STRATEGIES MEASURES (by 2012 latest)

8% profitability ($11M)

$140m sales

Serve 250M consumers in Pakistan, Japan, Australia, New Zealand, Thailand, Canada, and the US

Be facilitator for specialized commercial vehicles

Markets, Channels, Categories

Focus on (key priorities): Pakistan, USA, and Australia

Focus on distributionGrow retail operationsExit non-profitable Communications operations (outsource)

Focus on luxury (vs prestige / mastige)

- ≥60% revenue from Canada and USA- Focus on Distribution operations

- 5 year transition plan in place- 15%-20% CAG (support focus specialized vehicles expansion)

- All catogories ≥ 8% profitability

Actions to Take

-Forge strategic partnership to outsource logistics -Invest in BIC I.T. operations-Improve efficiency by leveraging technology

-Understand the consumer

- Identify strategic partner - All logistics & warehousing outsourced by end 2009 (except US)- Automated payment for collectables / receivables ≥90% cash


HINOPAK MOTORS LTD. - OGSM: Highly Confidential


-Invest in market data

-Maintain positive cash flow

-Keep inventory at manageable levels

-Drive customer and consumer satisfaction culture

-Build, document, implement and review BIC systems & processes

-Drive Hinopak brand amongst key stakeholders (NOT consumers)

flow (reduction in cash handling) - 0.5% sales revenue invested in consumer research- Build telemarketing unit (200 operators) by Q3 2009- For key markets (Japan, Canada, USA) buy data for all categories worth $30M+ (on-going)- +ve cash flow with no external finance (across group) (on-going)- Max. 45 stock days (group average)- All business units to have customer satisfaction measurement tools in place by End 2009- Satisfaction (surveys): 90% “satisfied” or “very satisfied”- Key systems & processes reviewed, documented & implemented (trained) by End 2009

Efficient, well trained and motivated organisation

Building the OrganizationInvest in training

-Comprehensive overview of evaluation & compensation system

-Leverage diversity as key competitive advantage

-Create healthy work / life balance

-Review and live “Hinopak Culture”

-Invest time in creating well-motivated organization

- Corporate Training Department in place by end 2009 (with clear deliverables)- Minimum 5 working days per year per employee invested in training- Training plan in place & tracked for 100% employees- By mid 2009; clear job descriptions / work plans and reporting lines for 100% employees- New system in place by End 2009- Compensation directly linked to performance that build the business AND organization- 50% local talent / 50%



-Leverage Intranet as a key organizational tool

-Activity build / support the communities in which we serve

expatriate- 30% women. At band 5 and above (inc. Board level) 2/10 positions filled by women- Maximum 50 hours working week- Culture of “take 100% holiday entitlement – undisturbed”- Hinopak culture – mission, values, principles etc. reviewed and approved by board (mid 2009)- All senior management trained to promote culture across whole organisation (Q3 2009)- Employee survey: key measures (e.g. perfection, integrity) top scores (on-going)- Job satisfaction (survey): 90% “satisfied” or “very satisfied”- Formalise / standardise informal rewards & recognition programme (end 2009) across group- BIC Intranet tool that promotes networking and learning culture in a transparent environment- 2% profits donated to “charitable causes” / each legal entity to support charitable cause

BIC = Best In ClassHinopak is the leading manufacturer of automobiles

MARKET SUMMARY

TARGET MARKET:

1. Institutions:

These are the main customers including:



Educational centers (universities, schools and colleges).

Pakistan Army.Pakistan Navy.Pakistan Air Force.Government.MNCs (Shell, Caltex, Coca

Cola).

Transport Companies.Pakistan Cricket board.Town Municipal

Administration.Police.Water supplying

corporations.Oil Companies.

Order from Coca Cola Beverages

The quality of the vehicle speaks for itself, & this is the reason why it has been receiving repeat bulk orders from various institutions on regular basis. The Company has received repeat orders from leading Beverage manufacturer “Coca Cola Beverages Pakistan Ltd.”, which placed an order of 57 units of Beverage carriers on Hino Dutro, Hino FG1JKPB &Hino SG1JDP, truck models.These repeat orders demonstrate that existing customers are benefiting from their adoption of the Hino technology.

Hinopak Delivers Citiliner buses to Institute of Management Science

Hinopak recently delivered 02 units of Hino Citiliner buses to Institute of Management Sciences, Peshawar. Mr. Faridullah Khan Manager Sales & Product Support handed over the buses to Mr. Naseer Ali Khan, Director Institute of Management Sciences, Peshawar.Dr. Naseer Ali Khan on the occasion said, their steady growth now calls for expansion of their transport fleet, where they will include high performance, high quality, comfortable and durable vehicles like Hino buses.

Hinopak Delivers Hino Senator Coach to Pakistan Cricket Board



Recently Hinopak delivered Hino Senator Coach to Pakistan Cricket Board. The handing over ceremony of one of these Coaches was held at National Cricket Stadium, Karachi. Mr. Mohsin Khan, regional GM Sindh, PCBreceived the symbolic key of the vehicle from Mr.M. Irfan Shaikh, Director Sales & Marketing.

Order of 10 units of Hino Dutro from TMA, Bin Qasim

In order to tackle the problem of solid waste management TMA(Town Municipal Administration) Bin Qasim has recently placed the order of 10 units of Dumpers on Hino Dutro Truck Chassis. The Hino Dumper trucks have been supplied in a very short time to meet the customer’s urgent requirement. These dumpers are specially designed to carry maximum load and are able to maneuver in congested and narrow roads. The robust and long

lasting vehicles will fulfill the demanding task of solid waste management in an economical and efficient manner.

Repeat Order from Punjab Police

Recently Punjab Police placed an order of 10 units of Troop Carrier on Hino DUTRO chassis. The above order was awarded to Hinopak because of the performance and optimum price in previous order, high quality units delivered well in time and the best product service.

2. Individuals:

The individual customers buy the product to earn money directly by operating their product. It is their main business.

MARKET NEEDS:



Pakistan is a nation with a diverse economy that includes textiles, chemicals, food processing, agriculture and other industries. It is the 25th largest economy in the world.

Approximately 49% of adults are literate, and life expectancy is about 64 years. The population, about 168 million in 2007, is growing at about 1.80%.Bus is a relatively cheap and easy method of transport, with services run by both public and private companies.

With the rebuilt of national highways, construction of Makran Coastal Highway, the construction of Motorways such as M1, M2, M3 etc, grew the demand of buses and trucks for transportation and commercial purposes.

MARKET TRENDS:

Mobility has been an important objective for mankind since the beginning of time. The invention of the wheel about the year 3000 B.C. was the first great achievement. Then in the 18th century the steam engine, one of the greatest gifts of the Industrial Revolution made a major impact on the life-style of the human race. The mating of the 'wheel' with the 'engine' made it possible to transform animal driven carriages into automobile.

From the 18th century to the 20th century the history of the automobile is a tale of human ingenuity and passion for comfort, fastness, safety and a better quality of life.

Heavy truck demand is driven by growth in the agriculture, manufacturing, construction, and retail sectors. Bus demand is driven by growth in the number of school-aged children and investment in public transportation systems. The industry is capital-intensive.

MARKET GROWTH:

In the year ended December 31, 2007 Hinopak made the highest ever profit in its history. The production and sales revenue have also been the highest. While the sale of locally manufactured trucks declined nationally, Hinopak was able to claim a larger share in the reduced numbers.

National Sales:


http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

http://en.wikipedia.org/wiki/Agriculture

http://en.wikipedia.org/wiki/Food_processing

http://en.wikipedia.org/wiki/Chemicals

http://en.wikipedia.org/wiki/Textiles

http://en.wikipedia.org/wiki/Pakistan


The national growth in Large Scale Manufacturing in 2007 fell to 8% from 9% in 2006 and an average of 11.6% over the last five years. In the automotive sector it fell more steeply. In 2007, it grew only by 3.8% against the five-year average of 25.8%.

The increased freight movement because of growth in industrial production and exports had substantially increased the demand for trucks in recent years. The benefit of this increase however all went to the second-hand or illegally imported (later regularized) heavy and medium duty trucks. The sale of locally produced trucks of this category in 2007, ironically, fell to 2544units from 3154 in2006. The sale of light duty trucks however increased from 1404 to 1554.

The sales of buses increased by 16% from 928 in 2006 to 1078 in 2007 as the sales tax was reduced to zero towards the end of 2006. However, it still fell considerably short of the level of 2004 when1411 buses were sold. The bus sales, it seems, will remain depressed till the time the second-hand imports are altogether stopped and the policy incentives for urban transport, under consideration since long, are announced by the federal and provincial governments.



OUR RECOMMENDATION TO HINOPAK TO USE “JIT MANUFACTURING”

Just-in-time (JIT) manufacturing is a way of managing manufacturing systems that could reduce waste, and lower cost, thus increasing profit. In its most basic explanation and principle JIT is every component in the manufacturing system arriving just in time for it to be used. Since the products arrive just in time there is no need for stock holding facilities of any kind. The most common industry using JIT manufacturing is the automobile industries. Therefore, it’s advisable for Hinopak as well to apply JIT principle in its production system.

The following are more specific areas that could be corrected to improve efficiency:

overproduction - waste from producing more than is needed time spent waiting - waste such as that associated with a worker being

idle whilst waiting for another worker to pass him an item he needs (e.g. such as may occur in a sequential line production process)

transportation/movement - waste such as that associated with transporting/moving items around a factory

processing time - waste such as that associated with spending more time than is necessary processing an item on a machine

inventory - waste associated with keeping stocks defects - waste associated with defective items"

Objectives

An overall objective is to limit resources used in the manufacturing system to only those needed. There are six other objectives that are a key part to obtain the overall objective.

The first is to optimize each individual step of the manufacturing system. In other words make part as efficient as possible to get the most from the least. Second is to make a product with no flaws or defects. This ensures that each part of the production line will go as planned. Third is to reduce the manufacturing cost, the cheaper it is to make the product the larger the profit for the company. Fourth is to make a product that is demanded by consumers. If there is no demand then there is only money lost. Fifth there needs to be flexibility in the system. Things will not always go as planned and there needs to be a flexible enough system so that it can be modified easily. Sixth, there needs to be a strong and reliable relationship between customers and suppliers. Since JIT technique has virtually no extra stock or materials the companies need to rely on each other to be reliable and on time.



These objectives need to be taken into consideration by Hinopak to integrate JIT, and are crucial to being successful in the integration.

Keys to Implementation and Integration

Just-in Time manufacturing is difficult to setup because each company needs to personalize for their type of company to fit their specific needs. Although many companies seek help from consultant firms for the difficult task ahead, there are many key points that they can address themselves. Changing over the current output production in the company’s factories to limited or constant quantity is a good start in the process to determine exactly how many resources are going into making a certain amount of products. Setup time is an issue that each company can look to improve its efficiency. A good rule is to be able to change the setup in a single digit time frame. Schedule meetings on a regular basis with the workers to gather information on problems as well as possible solutions, and other suggestions. This will make the workers feel involved in the implementation, and may result in a positive attitude about the change over. This could mean redesigning several areas such as the product or the process itself. Once a reduced setup time is achieved the system now has the ability to more efficiently produce smaller batches of products. However, this will require deliveries of materials to be more often. Reducing time in between the transportation of the individual parts can also improve the efficiency. To accomplish this, work stations can be moved closer together. As well as the amount of time a part is waiting to be processed at an individual station can be lowered. Finding a supplier closer to the factory or convincing one to relocate closer will also reduce lead time. Using down time is also another way to help with productivity and efficiency. While a worker or machine is waiting for other parts of the system to be used maintenance can be performed on the machinery. This makes the most of the workers time and can help to prevent future breakdowns do to lack of maintenance. Provide the workers with more responsibilities and training. This can include training on several machines, ability to maintain the machines, and perform correct inspection. This will make the companies work force more versatile and can help with issues of absences. Although the kanban system is not required in a JIT system it is a good organizational tool to help eliminate misunderstandings and increase communication. These points are things the company can control and improve to help the successful integration of the JIT system.

Suppliers

Since JIT is a stockless production and does not allow room for defects or error having trustworthy reliable suppliers is an important factor. When



choosing a reliable supplier, consider their location and prior occurrences with labor issues such as strikes. Once a reliable supplier is found, creating a good relationship is the next step. This is a two way relationship in that both the company and supplier get some positive out of it. The company gets products or material with no errors or defects, a quality partnership, and gets everything on time according to delivery schedules. Also the supplier must have a back-up plan incase for emergencies such as strike, weather conditions, and any other problem that many arise. The supplier gets a long term contract, constant demand for their product, and a good constant price.

Advantages

There are many advantages of that Hinopak can receive from JIT. Listed below are some of the advantages:

Possible increase in profits Quality products Quicker setup Eliminates costs of storage facilities More flexible employees Quality relationships with suppliers Elimination of waste No down time

Disadvantages

Although the advantages outweigh the disadvantages, the disadvantages can have a negative effect on the company. Listed below are some of the disadvantages:

Long term commitment Possible large initial cost with no short term returns Problems with supplier can cost company large amounts of money Risk of never successfully implementing JIT

Conclusion

Just-in-time manufacturing can be a positive influence on Hinopak. However there are many risks associated with attempting to implement JIT manufacturing techniques. When looked at it appears to be a very simple, quick, and easy thing to do. In reality it is a very complicated technique that takes long term commitment and a initial cost with no guarantee of success. If implemented successfully it would eliminate waste, make the company more productive and more efficient. It does this through shorter transportation and increased communication. Although there are many companies that are successful, many companies are not. Even though there are enormous risks many still consider implementing JIT for it many advantages.



MARKET SEGMENTATION

Hinopak’s customers:

Those people who are looking to make money by operating their product. Like CNG bus owner will buy CNG bus from them because this bus will carry



passengers from one point to another and thus earn money through fares charged to the passengers.

They have done Behavioral Segmentation. Unlike cars these Buses and trucks are very expensive. They are bought when there is a special need on special requirement. It is basically a Procedural segmentation. When there is a need, customers come to them with different requirements. The Sales force attracts them and then the customers usually give their specifications and the structure they want on the chassis. For e.g. a customer might want a High wall trailer built on FM2PKPA 6X4 Prime mover but with changes in standard specification.

TWO TYPES OF CUSTOMERS

1. Institutional Customers:

Description :

These are the main customers. They include Pakistan Army, Pakistan Air Force, Pakistan Navy, Shell, Total, Caltex, City District Government Karachi, NED, KU, CNG Bus owners and others.

Behavior : These are the customers who buy in Bulk.

They want to add buses to their fleet. For e.g. CNG bus owner would like to add new CNG buses to his existing fleet.

These customers have different specifications, deals, and different sort of requirements which is required by their business.

They buy products with customized body. For e.g. some client might need bowzer with high density.

Special attention is paid to these customers as they buy in bulk and buying effects their business.

Deliveries are made over a period of time as it requires time to complete the paperwork, and then assemble the product according to the demand of the customers. Delivery depends upon who came first and the number of trucks or buses already in the queue for the production.

What they want and the use of product:

The institutional customers buy the product to earn money indirectly by operating their product. In other words it helps them in their main line of business.



Reliability & AvailabilityCustomers look for reliability and availability of parts.

The auto parts should be easily available in the market and they should be able to get service in remote areas.

Objective:

The objective of customers while buying the product is that the cost should be minimal, the product should be helpful in overall business and the most important factor is that the operating cost should be low. Also the initial cost should be low.

Price sensitivity:

Institutional clients are more price sensitive then the individual clients. You cannot dictate them. The product has to be very good. 80% of the times customers demand low price and they are looking for lowest tender.

Percentage (%) of sales:

The sales of Hinopak overall increased in the past. The ratio of Institutional to Individual customers is 80-20 %. As in past the purchases of Institutional customers increased with the increase in purchases of the government and the armed forces.

But in the past few months the ratio has changed to 60-40%. This is because of the increase in the purchase of individual customers and the decline in government purchases due to political instability. The government is not building infrastructure as it was in the past. Therefore, they are buying less.

So the sale to this segment, i.e. Institutional customers, is 60-65% of the total sales.As in September 2008 Hinopak sold 149 trucks, 89.4 trucks (estimated as 60% of 149) were sold to institutional customers.

Also because of the high inflation all the customers are holding money and thus the sales of the industry has declined as buying of such vehicles is not everyday task and involves high investment.

2. Individual Customers:

Description:

Dealers, people who want to make money while using the product.

What they want:

The customers in this segment want a product which is profitable. They look for profitability of the product.



Operating cost should be less. The auto parts should be easily available in the market and they

should be able to get service in remote areas. Service:

Hino has specialized mechanics and they are given free training as well paid training. These mechanics come for training to Hinopak from all over Pakistan. Since the service is available to customers everywhere in Pakistan, so customers are happy.

Loading capacity: The capacity a truck/ bus can carry is also an important factor which is influencing the customers. As we know that the public Buses everywhere in city are overloaded and this also happens in the case of trucks that they are over loaded. So the customers do look for trucks which have high loading capacity as well as it can take overload.

A product which has a high resale value and can be easily sold.

Use of product:

The individual customers buy the product to earn money directly by operating their product. It is their main business. They buy these products for commercial use.

Objective:

The objective of customers while buying the product is that it is profitable as the use of the product is to make profit out of it by running it, customers look for profitability. They look for Operating cost. It should be less.

Percentage (%) of Sales:

The ratio of Institutional to Individual customers is 80-20 %. But due to decrease in buying of institutional customers as well as the increase in purchasing of individual customers, who buy from authorized dealers, the sales ratio has changed to 60-40% recently. This was the ratio some years back. For example, the sales of trucks in September ’08 were 149 so approximately 60 trucks were sold to individual customers. Selling Strategy:

The selling is done by using the advantage Hino has in the market of being the market leader and the favorable opinion market has about the products of Hino.

As the brand image is big, the company uses it in selling the product. Hino is known for its reliability and availability. They use this image in selling their product.

Also, the goodwill is high. They have free service camps in which they give service free of cost to the customers; they are given free oil change and a



new filter. A new filter usually cots around Rs.7000. so it’s a big thing for the customers.

The price of Hino’s products are relatively higher than their competitors, this is because their product is of good quality. They easily use this image. The quality of the competitor’s products is lower mainly because they sell low quality products

COMPETITIVE ANALYSIS

July'08 Aug'08 Sep'08 Cumulative

Hino Prod. 209 133 155 497

Sale 180 176 149 505

TRUCKS July'08 Aug'08 Sep'08 Cumulative

Hino Prod. 209 133 155 497

Sale 180 176 149 505

Nissan Prod. 116 48 54 218

Sale 79 34 11 124

Dong Feng Prod. - - - -

Sale - - - -

Master Prod. 99 27 26 152

Sale 48 41 24 113

Isuzu Prod. 68 35 23 126

Sale 40 36 15 91

BUSES July'08 Aug'08 Sep'08 Cumulative

Hino 84 54 12 150

41 64 43 148

Nissan - - - -

- - - -

Dong Feng - - - -

- - - -

Master - - - -

- - - -



Isuzu 24 6 18 48

11 2 1 14

TOTAL BUSES Prod. 108 60 30 198

Sale 52 66 44 162

ANNUAL PLANT CAPACITY

TRUCK

Hinopak Motors Ltd. 10,000

Ghandhara Industries Ltd. 3,000

Sind Engineering Ltd. 3,000

VPL Limited 500 ****

Master Motor Corporation Ltd. 8,050

BUS

Hinopak Motors Ltd. 2,000

Sind Engineering Ltd. 1,000

Ghandhara Industries Ltd. 1,800 ***

Ghandhara Nissan Ltd. -

Capacity Planning at Hinopak



Process Flowchart

APPLICATION OF TOTAL QUALITY MANAGEMENT AT HINOPAK

1. Pursuing New Strategic Thinking

First in commercial vehicles sector to start the establishment of 3S Dealership network, which offers Sales, Service and Spare parts facilities all under one roof. This comprehensive network of offices, 3S Service Dealers and Spare parts Dealers are strategically located throughout the country.

Hinopak's product line has three distinct segments i.e. Trucks/ Buses and Specialized vehicles.

2. Knowing their Customers

Big vehicles, like trucks and buses, are bought when there is a special need on special requirement. Hinopak basically has Procedural segmentation. When there is a need, customers come to them with different requirements.

3. Setting True Customer Requirements

Customers have different specifications, deals, and different sort of requirements which is required by their business. Sales force attracts customers and then the customers usually give their specifications and the structure they want on the chassis. For e.g. a customer might want a High wall trailer built on FM2PKPA 6X4 Prime mover but with changes in standard specification.

4. Concentrating on Prevention, Not Correction Unlike small body makers who spray paint the vehicles and then later receive numerous customer complaints, Hinopak actually uses baked paint to give a longer life and better finish to the vehicles.

5. Reducing Chronic Waste

Hinopak Motors Ltd. has reduced its chronic waste by 18% and as a result its annual plant capacity has increased to 10,000

6. Pursuing a Continuous Improvement Strategy

Hinopak’s approach to continuous improvement:“The best approach is to dig out and eliminate problems where they are assumed not to exist.”

7. Using Structured Methodology for Process Improvement

Hinopak believes in using structured methodology for process improvement. Improvement efforts in Hinopak generally focus on improving process productivity, quality, and cycle time. Intangible customer needs (ease of use, trust, etc.) are quantified, Critical Success Factors (CSFs) are determined, and performance is evaluated. The process is mapped and quality issues are examined. Brainstorming is used to resolve issues, eliminate non-value added activities, and reduce cycle times. Action plans are developed for high priority recommendations..

Hinopak applies After-Action Review (ARR) process for continuous improvement, which is actually Lean Six Sigma (LSS) in disguise.

8. Reducing Variation

Hinopak follows the following steps in reducing its undesirable variations

Some Changes to Focus On

Eliminate Waste o Remove any activity or resource in the organisation that does not add

value to an external customer/patient Improve Work Flow

o This is an important way to improve the quality of service provided by any process

Stock Control

o Stock of all types is a possible source of waste; understanding where stock is stored is the first step in finding opportunities for improvement

Focus on Variation o Reducing variation improves the predictability of outcomes and

reduces the frequency of poor results

We suggested Hinopak to use PDSA cycle for testing a change.

Once a team has set an aim, established its membership, and developed measures to determine whether a change leads to an improvement, the next step is to test a change in the work setting

The Plan-Do-Study-Act (PDSA) cycle is shorthand for testing a change This is a scientific method for action-oriented learning

Reasons to Test Changes

Increase your belief that the change will result in improvement Decide which of several proposed changes will lead to the desired

improvement Evaluate how much improvement can be expected Decide whether the proposed change will work in the real world Decide which combinations of changes will have the desired effects on

the important measures of quality Evaluate costs, social impact, and side effects Minimise resistance upon implementation

PDSA CYCLE

The "Plan-Do-Study-Act" (PDSA) cycle is shorthand for testing a change — by planning it, trying it, observing the results, and acting on what is learned. This is the scientific method, used for action-oriented learning.

Use of PDSA cycles is a way of testing an idea by putting a change into effect on a temporary basis and learning from its potential impact. This approach is quite different from the approach traditionally used in healthcare settings, where new ideas are often introduced without sufficient testing.

A PDSA cycle involves testing change ideas on a small scale. By building on the learning from these test cycles in a structured and incremental way, a new idea can be implemented with a greater chance of success.

There are four stages to a PDSA cycle:

Step 1: Plan

Plan the test or observation State the objective Make predictions about what will

happen and why Develop a plan to test the change.

(Who? What? When? Where?)

Step 2: Do

Try out the test on a small scale

Carry out the test Document problems and

unexpected observations Begin analysis of the data

Step 3: Study

Set aside time to analyse the data and study the results

Complete the analysis of the data Compare the data to your predictions Summarize and reflect on what was learned

Step 4: Act

Refine the change, based on what was learnt from the test

Determine what modifications should be made Prepare a plan for the next test

9. Using a Balanced Approach

We also suggested Hinopak to use a balanced approach by using two systems for improvement.

Two Systems for Improvement

Both the Lean and the Six Sigma methodologies have proven that it is possible to achieve dramatic improvements in cost, quality and time by focusing on process performance. Whereas Six Sigma focuses on reducing variation and improving process yield by following a problem-solving approach using statistical tools, Lean is primarily concerned with eliminating waste and improving flow by following the Lean principles and a defined approach to implement each of these principles. However, using either one of them alone has limitations: Six Sigma will eliminate defects but it will not address the question of how to optimize process flow; and the Lean principles exclude the advanced statistical tools often required to achieve the process capabilities needed to be truly 'lean'. Most companies embarking on Lean and Six Sigma create their own combination - picking and choosing which elements to emphasize. However, we suggest Hinopak to embrace the basic methodology of each system.

Six Sigma (6σ)

"This big myth is that Six Sigma is about quality control and statistics. It is that - but it's much more. Ultimately, it drives leadership to be better by providing tools to think through tough issues. At Six Sigma's core is an idea that can turn a company inside out, focusing the organization outward on the customer."

A process that is in Six Sigma control will produce no more than two defects out of every billion units. Six Sigma uses many statistical tools but applies them in a clear 5 stage project oriented cycle: Define, Measure, Analyze, Improve, Control (DMAIC). Tools used in the Six Sigma approach include Flow charts, Run charts, Pareto charts, Check sheets, Cause and effect diagrams, Opportunity flow diagrams, Control charts, Failure mode and effect analysis, Design of experiments

Lean

Lean is aimed at the elimination of waste in every area of production including customer relations, product design, supplier networks and factory

http://sa-health.wikidot.com/local--files/pdsa-cycle/PDSA_02.png

management. Its goal is to incorporate less human effort, less inventory, less time to develop products, and less space to become highly responsive to customer demand while producing top quality products in the most efficient and economical manner possible. The keys to Lean are understanding where the value in your process lies, identifying all non value adding activities as waste and devising plans to remove the waste from the process. Flowcharting is a core tool of Lean - as flowcharting provides a visual image of a process enabling waste identification to take place. This flowcharting is known as value stream mapping. Lean considers that there are 7 wastes - Defects, Overproduction, Transportation, Waiting, Inventory, Motion, and Processing (DOTWIMP). The worst of all the 7 wastes is overproduction because it includes in essence all others and was the main driving force for the Toyota JIT system Ohno and Shingo were smart enough to tackle this one to eliminate the rest.

| Project Management | Play Factory 10. Apply to All Functions

We then recommended Hinopak to apply Continuous improvement strategy, PDSA cycle, Six sigma and Lean to all functions in order to maintain lifetime competitive edge in the market place.

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SWOT ANALYSIS

STRENGTHS

Hinopak has 65% market share. It is already at the pinnacle.

•Listed among the "Top 25 Companies" at Karachi Stock Exchange.

The only Pakistani manufacturer to succeed in exporting completely built-up buses to Middle East and Africa.

Highly acclaimed for quality and technological excellence.

Environment friendly low emission standard engines EURO engines produced.

Highly developed state of the art Technical training centre ranging from mechanics to managers.

3S Dealership network, which offers Sales, Service and Spare parts facilities all under one roof.

First Pakistani automobile company & Hino affiliate to receive ISO-9001 certificate in 1997.

Hinopak has modern plants equipped with advance facilities for vehicle assembly and fabrication of buses and superstructures.

WEAKNESSES

Has from beginning been an expanding company. In current environment it must adapt to consolidating.

Small variations in certain vehicle models make them redundant and unnecessary.

Not enough focus for specialized vehicle department.

HELPFUL(to achieving objectives)

HARMFUL(to achieving objectives)

INTERNAL

ORI

GI

N

OPPORTUNITIES

With infrastructure already in place, branching out into other products might be advisable to offset low vehicle consumption.

Buy other manufactures at low cost while economic situation is gloomy to increase market share.

Construction of China Corridor karakoram highway. Highway which links China to middle east through GWADAR port.

THREATS

Oil price fluctuation makes production forecast risky.

World Economy recession makes business tighter than usual.

Multinationals leaving Pakistan decreasing potential business.

EXTERNAL

ORIGIN

Customer Relationship Management

Organize and make accessible a database of information on individual customer needs, preferences, contacts, purchase frequency, and satisfaction.Example: Contact customers every time a new product launch, feature enhancement, or upgrade is undertaken in a vehicleMake it easy for customers to reach appropriate company personnel and express their needs, perceptions and complaints

Customer Relationship Management enables real-time availability checks, contract management, billing management, fulfillment visibility, and order tracking, giving the company the features and functions necessary for marketing planning, campaign management, telemarketing, lead generation, and customer segmentation. In addition, CRM allows Hinopak to offer ongoing customer care across all channels – with a customer-interaction center, Web-based customer self-service capabilities, service and claims management, field service and dispatch, and installed-base management.

CRM helps the business:

Provide better customer service Make call centers more efficient Cross-sell products more effectively Have sales staff close deals faster Simplify marketing and sales

processes Discover new customers

Increase customer revenues

Customer Relationship Management goes beyond sales, marketing and customer-service applications into business intelligence, analytics, hosted applications, mobile capabilities and much more! By thinking more insightfully about what the customers are worth, the company can focus its resources on attracting and keeping the right type of customers. This focus, in turn, will make the CRM efforts more productive and position the company better for innovation and growth.

RECOMMENDATION TO APPLY GEMBA AT HINOPAK

Five Golden Rules of Gemba:

Golden Rule One: When a problem (abnormality) arises, go to gemba first'. So what's gemba? It's the shop floor, or equivalent. Once there, you apply Rule Two.

Golden Rule Two: check with gembutsu (relevant objects).

Golden Rule Three: take temporary counter-measures on the spot.

Golden Rule Four: find the root cause.

Golden Rule Five: standardise to prevent recurrence.

Standardisation is the managing part of getting good gemba. Hinopak also needs good housekeeping (that includes cleaning machines) and muda, the elimination of waste.

To be truly efficient in operations, Hinopak must GO TO GEMBA!

The aim of TPS is to eliminate all muri, mura, muda (overburden, unevenness, waste) from the operations. It is a system that uses the PDCA approach to involve everyone in solving problems and improving quality, cost, delivery, safety, and morale.

TPS continues to evolve today. Toyota people are beginning to call TPS the "Thinking People System" instead of the Toyota Production System. TPS is always improving.

TPS is the Operational Blueprint for a Lean Enterprise

The organizations that have implemented Lean most successfully have adopted TPS as their operational blueprint. They have studied and understood the system, renamed it to take ownership of it as their own system, and adopted as pure a form of TPS as possible

Make what the customer needs, when it is needed, and in the right amount

Minimize inventories Separate machine work from human work and fully utilize both Build quality into the process and prevent errors from happening Reduce lead-times to allow for rapid, flexible scheduling Produce a high mix of low volume products efficiently

The GRPS house shows how to build a world class production system that continuously improves by eliminating waste.

Left PillarJust-in-Time (Takt-Flow-Pull)

Eliminate the 7 Wastes of ProductionCreate a smooth flow of product and information, minimize inventory and space.

Right Pillar

Jidoka (Autonomation)Build quality into the process, separate man & machine using intelligent automation.Implement low-cost automation, error-proofing, equipment upgrades and reliability improvement.

FoundationHeijunka (Leveling)

Stabilize production schedule variabilityReduce total Lead-time, coordinate sales, scheduling, and customer needs

OUR RECOMMENDATION TO HINOPAK TO APPLY Malcolm Baldrige Criteria for Performance

The Baldrige Criteria for Performance Excellence provide a systems perspective for understanding performance management. They reflect validated, leading-edge management practices against which Hinopak will be able to measure itself. With their acceptance nationally and internationally as the model for performance excellence, the Criteria represent a common language for communication among organizations for sharing best practices. The Criteria are also the basis for the Malcolm Baldrige National Quality Award process.

If Hinopak applies for the Baldrige Award, it will be judged by an independent board of examiners. Recipients will be selected based on achievement and improvement in seven areas, known as the Baldrige Criteria for Performance Excellence:

1. Leadership: How upper management leads the organization, and how the organization leads within the community.

2. Strategic planning: How the organization establishes and plans to implement strategic directions.

3. Customer and market focus: How the organization builds and maintains strong, lasting relationships with customers.

4. Measurement, analysis, and knowledge management: How the organization uses data to support key processes and manage performance.

5. Human resource focus: How the organization empowers and involves its workforce.

6. Process management: How the organization designs, manages and improves key processes.

7. Business/organizational performance results: How the organization performs in terms of customer satisfaction, finances, human resources, supplier and partner performance, operations, governance and social responsibility, and how the organization compares to its competitors.

We designed a Self-Analysis worksheet for Hinopak, which it can use to assess itself after adopting Baldrige Criteria for Performance

SELF-ANALYSIS WORKSHEET FOR HINOPAK

While insights gained from external Examiners or reviewers are always helpful, you know your organization better than they will. You are currently in an excellent position to identify your organization’s key strengths and key opportunities for improvement (OFIs). Having just completed your responses to the Baldrige Criteria questions, you can accelerate your improvement journey by doing a self-analysis of your responses to all seven Criteria Categories using this worksheet.

Start by identifying one or two strengths and one or two OFIs for each Criteria category. For those of high importance, establish a goal and a plan of action.

Criteria Category

Importance(High,

Medium, Low)

For High-Importance Areas

Stretch (Strength) or Improvement

(OFI) Goal

What Action Is Planned? By When? Who Is

Responsible?

Category 1—Leadership

Strength

1.

2.

OFI

1.

2.

Category 2—Strategic Planning

Strength

1.

2.

OFI

1.

2.

Category 3—Customer Focus

Strength

1.

2.

OFI

1.

2.

Category 4—Measurement, Analysis, and Knowledge Management

Strength

1.

2.

OFI

1.

2.

Criteria Category

Importance(High,

Medium, Low)

For High-Importance Areas

Stretch (Strength) or Improvement

(OFI) Goal

What Action Is Planned? By When? Who Is

Responsible?

Category 5—Workforce Focus

Strength

1.

2.

OFI

1.

2.

Category 6—Process Management

Strength

1.

2.

OFI

1.

2.

Category 7—Results

Strength

1.

GRADING OUR PM INC. SUBSIDIARY BASED ON MBNQA

We, four members, worked as a team and came up with valuable recommendations for Hinopak what will assist the company have a life time competitive edge in the marketplace.

This is how we grade our PM Inc. subsidiary based on MBNQA:

S.No Category DescriptionPoints

Out Of Obtained

1. Category 1 Leadership 120 110

2. Category 2 Strategic Planning 85 80

3. Category 3Customer and Market

Focus85 83

4. Category 4

Measurement, Analysis, and Knowledge

Management

90 85

5. Category 5Human Resource

Focus85 80

6. Category 6 Process Management 85 80

7. Category 7 Business Results 400 390

hinopak production managment

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