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Chapter No. 1

INTRODUCTION AND HISTORY OF ORGANIZATION

Introduction of ATLAS GROUP OF COMPANIES:

Established 1962

Products Cars, Motor cycles, Batteries,


Insurance, Leasing, Investment
Banking, Trading, Automatic parts,
Information Technology.

Introduction of HONDA ATLAS CARS(PAKISTAN) LTD.:

Honda Atlas Cars(Pakistan) Ltd. is a joint venture between Honda


Motor Company Ltd., Japan & Atlas Group of Companies, Pakistan
signed on August 5, 1993. The agreement signed between the two
sponsors is for collaborations for development of parts and systems for
manufacture of Honda Cars in Pakistan. Pakistani and Japanese cultures
have blended exceptionally well to form a professional team of
dedicated specialists. This team has done wonders since it's inception
and has created many records. It was on April 17, 1993 when the
foundation lying ceremony was held and in a record period of eleven
months on March 31, 1994 the construction and plant and machinery
installation was completed. Running race again time the first car was
rolled out of the assembly line on May 8, 1994 passing the way for a
formal inauguration of the plant.

No other persons than the president of Pakistan and the president of


Honda Motor Company graced the occasion of inauguration on July 13,

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1994. The first CIVIC made in Pakistan started with pomp and grandeur
on July 14, 1994 at 6 dealerships in Karachi, Lahore and Islamabad. The
response received from customer was overwhelming and a morale
booster for all concerned at HACPL. It is to be noted that HACPL was
the first in Pakistan to introduce 1500cc cars, prior to this, there were
same sized cars with smaller engines. With the rapid increase in
business, new warehouse facilities were constructed in June 1995.

HACPL keeping its promise to come upto the customer's


expectations and to give them money's worth introduced a full model
change in January 1996. This was made possible after almost a year and
a half of production of the previous model. These models namely, VTi,
EXi & LXi in 1600 and 1500cc were offered. Later in the year
Automatic Transmission was introduced in EXi & VTi model. These
models were again based on customer's demands gathered from various
surveys. Like previous records, these models also had many firsts in
Pakistan. To name a few:

PGMF-i (Programmed Fuel Injection)

VTEC (Variable Value Timing & Life Electric Control)

Automatic Transmission

The main features being:

Alloy Wheels

Rear seat belts

Power Antenna

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Later on, Honda City was introduced to enable those customers to


own Honda Cars who could not buy CIVIC due to price factor.

Company Philosophy:

1. Dynamic Manufacturing and marketing of prestigious products


to the entire satisfaction of customers.

2. Create ideal working environment for continuous development


of product and personnel.

3. Provide adequate return to shareholders and fulfil corporate


civic and fulfil corporate civic obligations.

Image of Company:

(1) Zero line stop and zero defect.

(2) No.1 customer satisfaction

(3) Fair rules.

(4) Profitable organization

(5) Market leader.

(6) Respect for all.

(8) Self reliant, exceeding the goal.

(9) Open and frank atmosphere.

(10) Believe in originality

(11) Encourage localization

(12) Environment friendly

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Company Information

Registered Office

1- Mcleod Road, Lahore, Pakistan.


Phone: 042-7238005
Fax: 042-7233518

Factory

43-km, Multan Road, Manga Mandi, Lahore, Pakistan.


Ph. No: 042-5750011-17 & 19 Fax No: 042-5750020

Regional Office:

There is only one regional office which is located in Karachi.


This regional office is concerned with the delivery of spare
parts and service only.

Shareholdings

Honda Motor Company Limited, Japan...........51%

Atlas Group Of Companies, Pakistan...............30%

Public offerings.................................................19%

Paid up capital.................................................Rs. 400 million

Dealership Network

Islamabad .......................... 1

Karachi .............................. 4

Lahore ............................... 1

Multan ............................... 1

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Gujranwala ......................... 1

Sialkot ............................... 1

Peshawar ........................... 1

Quetta ............................... 1

Faisalabad .......................... 1

Hyderabad ......................... 1

Important Features Of Honda Atlas Cars (Pakistan) Ltd.

 Honda Atlas Cars Ltd. is rated very high in tons of efficiency,


quality and working condition.

 The buildings of HACPL are neat & beautiful.

 The security system of factory is very tight. Transport vehicles


are carefully checked before allowing them to enter the factory
premises.

 Pakistani and Japanese cultures have been blended to form a


professional team of dedicated specialists.

 "Equality" is a significant feature of HACPL. The president of


the company sits along with other employees in a hall. His desk
is not different from those of others. He has no secretary.

 There is no residential colony for employees.

 Special coasters have been hired for travelling of employees


between Lahore and factory.

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 Following facilities have been provided to employees in factory


premises:

- Mosque

- Canteen

- Fair price shop

- Lockers

Product Range

(i) City ( EX, EL)

(ii) Civic (VTi , EXi, LXi)

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Chapter No. 2

O PE RAT I ON S S T RAT E GY

Product Plans ................................. Assemble to order strategy

Competitive Priorities ...................... Low cost

Consistent quality

On time delivery

Process Design ................................ Labour + Moderate


technological intensive

Material Management ...................... Formal Supplier Relations

Production Plans .............................. For 1 month.

Scheduling ....................................... Planned for ahead

Capacity .......................................... Lower utilization

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Chapter No. 3

FACILITY LOCATION

Facility location is the process of determining a geographic site for


a firm's operations. As mentioned earlier, the factory of Honda Atlas
Cars (Pakistan) Limited is situated near Manga Mandi at a distance of
43 km from Lahore.

Factors Contributing Towards Location

Following are the factors which contributed towards this facility


location.

1. Proximity To Market

Perhaps this is one of the most important factors which contributed


towards the present location of Honda Atlas Cars (Pakistan ) Ltd. The
market of Honda comprises of :

Business executives

Politicians

Landlords

According to information provided by company sources, HACPL


has a network of 14 dealers. Out of these, 7 dealers are located
within a radius of 400 km from the factory. HACPL has an edge over
Indus company ( the manufacturer of Toyota) in this regard. Since
Toyota cars are manufactured in Karachi, so dealers of only two cities
(i.e. Karachi and Hyderabad) fall within a radius of 400 km from the
factory.

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2. Favourable Labour Climate

The factory of Honda Atlas Cars (Pakistan) Ltd. is located near


Manga Mandi which is not very far from Lahore. Lahore is the second
largest city of Pakistan. A large number of industrial units are operating
here and this along with the presence of many technical training
institutions have contributed towards the provision of abundant skilled
labour. Since there is no residential colony of HACPL so some problem
might have been created in this regard. However, the management have
solved this problem by living comfortable coasters for pick & drop of
its employees.

3. Infrastructure

The place where factory of HACPL is located, is rapidly becoming


an industrial zone. Some of the famous organizations having factories
in the area are Rafhan, Volvo, etc. The decision of these organizations
for selecting this location might have been influenced by excellent
infrastructure available here. All these factories like electricity,
telephone, etc are also easily available.

A Negative Feature Of Present Location

Some 62% of the parts used in Honda Cars are imported. Since the
factory of HACPL is at a distance of more than 1,000 km from the
part, this results in higher transportation cost for inputs. Indus
company, the major competitor of HACPL, has an edge in this respect
since it is located in Karachi.

Transportation Cost

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Honda Atlas Cars (Pakistan ) Limited, tries to reduce the


transportation cost through the following ways:

HACPL prefer that vendor who supplies material at the


HACPL's destination (plant) while remaining in suitable price
and quality ranges.

HACPL charges Ex-factory rate for its product from customers.


The customers have to bear the transportation cost from plant
to the respective dealer of their city. (For example, the
customers in Multan have to bear about Rs 5,000 for
transportation and insurance charges. However, sometimes, this
cost is beared by the dealer to satisfy frequent buyers)

The reason why HACPL charges the transportation and insurance


cost from customers is that its insurance cost from customers is that its
market consists of upper-middle and upper class and paying an extra Rs
5,000 is not a problem for members of these social classes.

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Chapter No. 4

FORECASTING

Forecasting is the prediction of future events used for planning purpose.


It may involve taking historical data and projecting them into future
with some sort of mathematical method adjusted by a manager's
judgement.

Planning of an organization depends upon the forecast of the


demand of the product. There are three approaches of forecasting.

Qualitative approach

Quantitative approach

Casual forecasting

Forecasting At HACPL

Honda Atlas Cars Ltd. employees one year forecasting. They


forecast the demand of Civic and City and then make production
decisions.

Method Used For Forecasting

 Sales Force Estimate

 Executive opinion

 Naive Method.

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The method of forecasting in HACPL is the combination of


executive opinion and naive method.

In annual meetings, executives from different departments jointly


determine the product demand on the basis of several factors such as:

⇒ The trend in the economy

⇒ Annual budget of the country

⇒ The policies of government

⇒ The inflation rate

⇒ The policies of large companies regarding the provision of


transport facility to their executives.

⇒ The cotton crop ( to some extent )

⇒ The past sales data.

The role of Marketing & Sales Department is very crucial in the


whole Forecasting Procedure. Hence the influence of Marketing
Manager is more in this regard but the main thing here is the mutual co-
ordination and agreement.

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Chapter No. 5

P ROC E SS D E SI GN

Honda Atlas Cars (Pakistan Ltd. has a separate production department


which is headed by Vice President (Production). A Japanese person is
currently working on this seat.

The production department has a number of sections such as:

 Vendor Section

 Engine Section

 Welding Section

 Maintenance Section

 Paint

 Vehicle quality control.

These along with some other sections are arranged in four groups,
each one headed by a Gm. For Example, there is one GM for welding,
paint and maintenance.

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Plant Capacity

Currently the plant has the capacity of 35 vehicles per day which is
lower than that of Toyota. As for as the production level is concerned, it
varies from time to time.

It was 15 cars per day when I visited the factory. This shows that
the plant is being underutilized. There may be several reasons for this
under-utilization such as:

 Weak economic condition of the country.


 Problems with cotton crop.
 High price of Honda Cars.
 Decrease in purchase of cars by large companies.
 Presence of Toyota
 Decrease in the purchasing power of potential customers.

Machinery:

A brief list of machinery used in HACPL is given below:

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 Boilers

 Compressors

 Water treatment plant

 Ovens (for backing the body of cars)

 Spot welding guns.

 Two-post lifts

 G-SWAT/ B-S / S Side Slip / Shower testers

Important Parts:

Various parts of engine

 Brakes

 Seats

 Lights

 Cooling System

 Tyres

 Rims

 Fuel tank

Production Process:

In order to fulfil requirements of widely diversified needs of the


market, HACPL has developed its production facilities from a dedicated
engineering set up to a highly flexible and wide range production
system comprising of following activities Shown in chart.

Production Procedure

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1. The production procedure starts from welding. This is done with


the help of special machines. In this way the basic frame is
manufactured and is transferred to panting section.

2. The painting section is equipped with modern machinery. Here,


the process starts with wiping, cleaning and degreasing of frame
which are followed by Phosphating and ED coating. Now the
frame is backed in special ovens. After backing, following coat are
applied:

 Base coat

 Final coat

 Clear coat (for shining)

3. After painting, the frame is shifted to assembly line. Here


ornamental parts such as lights are fixed followed by heavy parts
like engine, tyres seats, wind shield, etc. The procedures at
assembly line can be understood by figures mentioned earlier.

4. After passing through assembly line, the car moves to "vehicle


quality department". Here, different tests are applied. Currently,
HACPL is using three QAEs (Quality Assurance Equipment)
which are mentioned below:

 "G-SWAT" ( Geometrical Static Wheel Alignment tester) for


alignment.

 "B-S testor" for testing breaking force and speed meter.

 "S-S testor" for testing side slip:

After applying these test, the car is driven an a 1-km "test course".
Here the noise and performance of car an different road conditions

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are tested. Finally, a "shower test" is applied to find leakages if


any.

5. In this final stage, pre delivery inspection (PDI) is made and a


sticker is attached. Now, the car is ready for shipment.

Quality Control

A lot of importance is given to " quality control" in HACPL. The


personal of HACPL is highly qualified in this regard.

When purchase material arrives, thorough checking of that material


is made. If any deficiency is found then it is reported. If the
deficiencies are beyond the acceptable level then the material is
returned to supplier according to terms & conditions of the contract.
However, the chances of such happenings are very less because HACPL
has very tight purchasing policy and it has no compromise on quality.

Similarly, the finished product is tested before delivering it to the


customers in order to assure the quality standards. On the whole, the
quality control / quality assurance personnel are continuously engaged
in improving quality to need the requirements of each customer
individually and the market as a whole.

HACPL is successfully using "Kaizen" system for quality control.


Employees are encouraged to improve quality and reduce cost. Every
month, about 20-25 prizes are given on showing good performance.

HACPL is ISO 9002 certified. It was the winner of "Best Quality


Award for Asia" in 1996,1997 & 1998.

Chapter No. 6

P L A N NI N G A N D D E VE LOP M E NT

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Currently, Honda Atlas Cars (Pakistan) Limited is not in a position


to make major changes in its cars. Only minor changes can be made
here and decisions about these changes are made at the top level.
Marketing & Production people play an important role in this regard.

Research & Development Department:

The role of research and development is to introduce innovative


ways to achieve the objectives especially through production facilities.
Unfortunately, there is no research and development department in
HACPL. This function is performed by Honda Motor Company, Japan.
All major changes in models of Honda cars are introduced there.
Employees of HACPL are sent to Japan, where they are trained
according to new conditions. Later on, these changes are introduced in
the models offered in Pakistan.

Deletion Programme:

“Deletion is to replace the imported parts of vehicles with the parts


either manufactured in house or purchased through local vender
industries.”

Honda Atlas Cars (Pakistan) Limited is persuing a realistic and


progressive deletion programme for indigenisation of assemblies, parts
and components. This dynamics programme is being implemented
through in-house assemblies and manufacturing operations, and is being
supplemented by vendor development.

HACPL is almost same as that of its major competitor, i.e. the


manufacturer of Toyota Cars. Efforts are being made by top
management to increase this percentage.

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Achievement of Objectives Through Operations:

The production department of HACPL is playing a vital role in


achieving the overall objectives of the company through efficient
utilization of resources.

1. HACPL is achieving production efficiency through:

 Evaluation & improvement of quality control.

 Training of production employees.

 Modernization of plant and machinery.

2. Similarly cost minimization objective is being achieved through:

 Deletion programme

 Avoiding poor quality products, which are a loss for the


company. As mentioned earlier, HACPL is achieving
excellent quality levels through giving training to personal
plus proper use of technology.

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Chapter No. 7

I N VE N T ORY

Inventory is a stock of any things held to meet future demand.


Inventory is created when the rate of receipts exceeds the rate of
disbursements. It is depleted when disbursement exceeds receipts.

There are three types of inventory:

 Raw material inventory

 W.I.P. inventory

 Finished goods inventory

The basic objective of any firm is to minimize total inventory cost


(ordering & carrying). The same is the case in Honda Atlas Cars
(Pakistan) Limited.

In HACPL, the whole inventory system is computerized.


Following are the advantages of this computerized system.

1- Updating records.

2- Providing management reports.

3- Automating the recording process.

4- Re-computing decision parameters.

In HACPL, the inventory basis and audit reports are prepared.

Reason for P-System:

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1. Administration of the system is convenient because


replenishments are made at fixed intervals, Employees can set aside a
day or part of a day regularly to concentrate on this particular task.

2. Order for multiple items from the same supplier may be


combined into a single purchase order. This approach may result in a
price break from the supplier and saves the buyer some paperwork,
thereby reducing ordering costs, suppliers also may prefer combined
orders because all items in the order may be shipped at the same time,
reducing transportation costs and increasing vehicle utilization.

3. The inventory position, IP, needs to be known only when a service


is made.

Safety Stock

HACPL maintains a safety stock of 2 to 3 months. The reason for


maintaining a safety stock is as follow:

 To protect against shortage that occur due to suppliers.

 To protect smooth and continuous operations.

In HACPL, the inventory is held in the following forms:-

 Inventory of imported parts.

 Inventory of local parts.

In order to avoid stock out, they have more safety stock of


imported parts as compared to that of local parts.

Shortage Of Inputs

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There are special warehouse for the purpose. Both imported and
local parts are stored here. The boxes of parts are placed at approximate
distance and fork lifts can easily move within the warehouse. The
results in convenient movement of parts from warehouse to assembly
line etc.

Storage Of Output (Cars)

There is no proper warehouse for parking of cars moving out of


assembly line. A place has been assigned for this purpose but there is no
roof over it. Actually these can are serviced when they arrive at the
showrooms of dealers so management of HACPL does not feel any
need of having a covered place for these cars.

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Chapter No. 8

A GG RE GAT E P L A N NI N G

Aggregate planning is a statement of production rates, work force level


and inventory holding based on estimates of customer requirements and
capacity limitation.

Production Plans

The production plans are prepared for three months based on the
customers orders and uncertainty in demand,

Work Force Level

In HACPL, work force schedules are arranged on the basis of


production plan. If demand is high, then extra workers can be hired on
contract basis or the existing permanent employees can be employed in
extra work to meet the targets.

When I visited the factory of HACPL, the daily production was 15


cars. For this reason, there was a single shift except for maintenance
department.

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Chapter No. 9

M AT E RI A L M A NA GE ME N T

Material management concerns short-range decisions about supplies,


inventories, production level, staffing patterns, schedules & distribution
is as follows:

Purchasing:

Purchasing in the management of the acquisition process, which


includes deciding which supplies to use, negotiating contract and
deciding whether to buy locally or centrally. Purchasing must satisfy the
firm’s supply needs and support the firm’s production capabilities.

In HACPL, the whole action can be described under following


headings.

HACPL imports materials from the parent Honda Motor Co, Japan
in the CKD (complete Knocked Disk) form.

HACPL also purchases materials from the Local Vendors

Supplier Selection:

HACPL prefer those suppliers who fulfill the following


requirements:

 Provide best quality material at low cost.

 Shorter Lead Times

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 Provide material to production plant of HACPL. (i.e.


provide material at destination).

 On time delivery

These are the reasons which forces HACPL to go for local


contracting.

Procedure For Returning Of Low Quality Material:

HACPL has its own quality standards regarding materials. HACPL


has not any habit of accepting Low Quality Raw Material at low rates.
HACPL returns the low quality materials to the supplier according to
the terms and conditions of the contract.

Supplier Relations:

HACPL, Vendor Development is mainly entitled with the


responsibility of establishing working relationship with all the agencies
(Vendors) involved in Supply if materials. Similarly HACPL has formal
relationships with the local vendors.

Distributors:

To store the finished products, (Honda Civic & Honda City),


HACPL uses both FORWARD BACKWARD PLACEMENT.

HACPL has a country-wise network of Sales Dealers who are


actively engaged in promoting the image of HACPL and its cars.

The details of HACPL’s dealers have been mentioned earlier.

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Transportation Mode:

HACPL has a habit of using only one mode if transportation (i.e.


Highway) for the both inputs and outputs. The logic behind this mode is
low cast and flexibility of shipping to almost any location in Pakistan.

Currently, HACPL has no transportation fleet of its own. Nearly


five transportation companies are performing this function on contract
basis. NLC is also included in these companies.

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Chapter No. 10

T OTA L Q UA L I TY M AN A GEM E NT

Total Quality Management: (T.Q.M.)

T.Q.M. stresses three principles:

 Customer Satisfaction

 Employee Involvement

 Continuous Improvement

Attaining quality in all areas of a business is a difficult task. It is


necessary for an organization to provide its customers with best or even
consistent quality products in order to survive in the environment. The
success of any business depends upon how accurately the company
perceives the expectations of Customers plus its ability to bridge the
gap between consumer expectations & operating capabilities.

In HACPL the concept of T.Q.M. is more common. This can be


explained as follow:

Customer Satisfaction:

HACPL’s employees try at their level best in satisfying the customers &
hence stepping forwards the objective of the company. The contribution
of Marketing & Production department is very important in this regard.
These departments continuously go for the ways to improve the features
of existing HACPL’s products and hence satisfying the customers.

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Employee Involvement:

HACPL’s management considers its employees a great asset. The


employees along with sales dealers are part of the large “Honda Family”
and they form an integral part of policies and decisions that help shape
the future of the company.

The management of HACPL considers the proposals/Suggestions


of its employees up to a great extent. It appreciate the employees in this
regard through Monetary or Non Monetary benefits. Management of
HACPL put great emphasis on creating and maintaining an enterprise
environment in the company that maximizes the interest and
motivations of its employees which is very vital to enhance labour
productivity and efficiency.

Training of Personnel:

HACPL puts great emphasis on training and development of


employees to help them realize their full potential. Employees from all
departments especially form production, finance and marketing attend
training courses in their respective fields. This has greatly contributed in
improving employees performance and efficiency at all level.

Continuous Improvement:

The Management of HACPL has a view of continuous


improvement in order for the better Utilization of resources and
improving Honda brand image in the market. HACPL is trying at its
level best to introduce and implement better quality control procedures,
redesigning the production process, automating the whole plant etc.
Employees involvement is playing vital role in this regard.

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Chapter No. 11

S UG GE ST I ON S

1. Efforts should be made to reduce the cost of Honda cars.

2. There should be more coordination between HACPL and its


suppliers.

3. A low-priced model should be introduced to capture the market


share of SUZUKI.

4. Deletion programme should be implemented rapidly.

5. Although HACPL has taken some steps for environmental


protection, more efforts should be made in this regard.

6. The dealership network should be widened.

7. Employees should be encouraged to give suggestions.

8. Some sort of research should be done at HACPL.

9. Efforts should be made for better utilization of capacity.

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