Revving up supply chain: The case of Honda

Revving up supply chain: The case of Honda

Summary: Honda's process for allocating cars to its dealers was so complex that no single person understood all of it. That all changed when the auto giant enlisted the help of e-business consultancy, Syncata.

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TOPICS: Tech Industry
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Manufacturing cars without knowing whether customers will want to buy them does not seem like a formula for business success. But that was the situation at American Honda in Torrance, Calif., and in the rest of the auto industry in the mid-1990s.

Honda's plants produced "pretty much what they wanted," says Honda VP Dan Bonawitz, and where the cars went after that was problematic.

Indeed, as Bonawitz discovered, Honda's process for allocating cars to its dealers was so complex that no single person understood all of it. Seven manufacturing plants in the United States and Japan were producing more than a million Hondas and Acuras each year. The cars were divided equally among 16 U.S. zones (10 zones for Honda, six for Acura), then pushed through to districts, and on to 1,300 dealers who had to sell them. More than 600 variations of models are active in Honda's channels each month. Because the auto industry is regulated, the process is further subject to numerous geographical and state restrictions.

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Bonawitz created committees so that employees and partners involved in different parts of Honda's supply chain could talk to each other. "Our first challenge was to graph every bit of the flow, and the reports generated, and the users and their touch points, to totally understand the current system," he says. "From that we could look at where we could make changes."

Honda began by allowing its 16 zone managers to request cars based on the sales history of the dealers in their zones. Honda had been allocating cars with no regard for preferences, but letting zone managers have a say improved customer service. For example, dealers in the South tended to get lighter-colored cars, and the lead time required for Honda's plants to fill orders dropped by 25 percent—from 120 days to 90 days.

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Topic: Tech Industry

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