Logistics

and
Supply
Chain
Managem
ent
Assignme
nt
SCM System of
Honda Motors
P.M.Somanna - 09109

Supply Chain Management System of Honda Motors

The study of Hondas SCM system is of its operations in the US. Along with
Toyota, Honda have one of the strongest SCMs in the automotive industry and
this strong tradition arises from the fact that they belong to the Japanese stable
of quality development and quality processes.
Hondas Operational practices show a great example of the innovations the
Japanese automobile manufacturers perform and some of their operational
strategies are as follows:

Careful site selection of their US manufacturing plants

Greenfield Manufacturing Plants
In- depth supplier relationship which is close and interactive, similar to a

partnership
Autonomic organizational structure
Japanese/North American manager mix
New entrants focus on more established products and processes

Honda Purchasing Process and Differentiators

Honda uses their economies of scale by working with their parts suppliers to
order raw materials in large quantities and therefore integrate their suppliers into
the entire purchase process in the following ways:

Suppliers are involved with development and design of new products

Relationships with suppliers is much like a partnership
For the success of the functioning of the unit it requires an in-depth
supplier selection process

Some of the structural characteristics of the Honda supply chain are also
known as executional drivers that reduce operating costs and increase
productivity. Economies of scale are achieved as all purchasing is done by Honda
Trading America Corporation and the technology used are multipurpose
machinery which further reduce the associated manufacturing costs translating
into lower costs of production. With regard to capacity utilization also Honda
operates facilities in every major market they enter and therefore cut out
problems of outsourcing and dependence on external markets to drive local
ones.

Example of Honda Supply Chain

Market Characteristics
IT advancements in the market have been pioneered by the Japanese car
manufacturers especially Honda with technologies such as the 3rdwave
distribution software by Blinco Systems which assures parts quality, controls
availability, guarantees delivery and provides consistent materials pricing
External factors such as increasing oil prices also effect transportation costs
for all markets
Competitive Characteristics
Strategic and operational variables must be factored into the design of a
companys global value chain which can be covered in the following:

Demand chain (marketing, sales, service)

Supply chain (sourcing, manufacturing, logistics)
Product development (R&D, design, engineering, development, and
launch)

Supply Chain Characteristics

The key element for Honda is the flow of information with their suppliers which is
covered in the following 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
and purchase order.
Company Specific Characteristics
Strategic sourcing involves maximizing the value added through Hondas
external suppliers and they always will choose the highest supplier in overall
service (not just lowest price)
Honda also practices Target pricing wherein they prepare a price table for parts
and if the price cannot be met, Honda will work with suppliers to get costs down.
Q.C.D.D.M at Honda
At Honda customer satisfaction is top priority and this is accomplished through
suppliers competitiveness in quality, cost, delivery, development, and
management (Q.C.D.D.M.)
This principle is what drives Hondas entire manufacturing and final delivery
process.
Ingredient
Quality

Elements
Most important factor in final
perception and sale of

product
Must be built into production
process

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

Delivery

analysis
Suppliers must use just-intime production system

Development

Uniqueness in design and

specifications
Helps create identity for
Honda

Management

Positive attitude and

encourage new ideas

Measured by Q.C.D.D
Grade cards for suppliers to
gain feedback into the
process

Now India is a part of Hondas Global Supply Chain

Honda Motors' has a plant in Rajasthan which is an export base for certain key
engine components, and not a manufacturing hub like some other auto-makers
such as Hyundai, Suzuki and Renault already have. The company has similar
bases in other ASEAN countries.
Honda Siel Cars India (HSCI), a subsidiary company of Honda Motor Corporation
(HMC), Japan, is the sourcing base for critical engine components to other Asian
markets. HMC is the second most profit-making car company in the world, behind
Toyota.
With the global markets plagued by currency fluctuations importing components
isnt a feasible option. So, it is only natural for international auto makers to set
up their own production facilities in the country and also tie up with local vendors
for component.
Thus we see how Hondas robust supply chain management system has
managed to integrate international markets to add to its overall efficiency and
reduce costs on the whole.