Value Chain Analysis of Honda

Value Chain Analysis

Primary Activities

Inbound

Honda purchases raw materials, and certain components and parts, from numerous external suppliers. They rely on key suppliers for items and the raw materials it uses in the manufacturing of its products. Honda's ability to continue to obtain these supplies in an efficient and cost-effective manner is subject to a number of factors. These factors include the ability of its suppliers to provide a continuous flow of supplies and Honda's ability to compete with other users in obtaining these supplies. Loss of a key supplier may negatively affect our production and increase costs. However, since Honda claims to use smaller, more independent suppliers, they have high bargaining power to counter-act risks associated with suppliers (Newview, 2006).

The gathering of raw materials that support the manufacturing process is a major part of Honda's supply chain. That is where its subsidiary, HTA America Corp. (HTA) come into play. Greg Norval, a senior manager for HTA, states, "Our role is primarily support for Honda manufacturing operations directly, and also for a lot of their first and second tier parts suppliers," (Newview, 2006)

Regardless of manufacturing location, HTA is always present to procure raw materials and to facilitate the lower levels of the company's supply chain management. In the US, HTA offices are found in Marysville, Ohio and Torrance, California (Newview, 2006).

By centralizing procurement, HTA has the ability to control quality, guarantee availability of product, accurately determine delivery schedules, and establish consistent costs for Honda, as well as pricing for its major suppliers. "That's the difference between our system and the systems the other automobile manufacturers have," says Lisa Gimeson, manager of the steel division at HTA. "We actually manage that inventory, which allows us to control the raw material price and associated costs at a greater level of detail than outsourcing" (Newview, 2006).

Managing Honda's vast supply chain is a costly and tedious process, as parts management alone is usually done up to four months in advance. In 2006, Honda contracted Newview Technologies Inc.'s to use its Coordinated Network Procurement solutions to manage their product flow within its network. The system "provides inventory management, tracks the various types of materials in the system and their locations, maintains databases of customers, provides accounting and profitability profiles, and delivers timely reports" (Newview, 2006).

The supply chain process begins with the purchasing group at Honda America Manufacturing (HAM). The unit forecasts production quota determine parts needed, and then issues purchase orders to suppliers to meet the demands for up