Operations Honda Atlas Cars

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1 Chapter No. 1

INTRODUCTION AND HISTORY

OF

ORGANIZATION

Introduction of ATLAS GROUP OF COMPANIES: Established Products

1962 Cars,

Motor

Insurance,

cycles,

Leasing,

Batteries, 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, www.reportsmba.com

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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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7 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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8 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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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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11 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 coordination and agreement.

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13 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: www.reportsmba.com

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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 www.reportsmba.com

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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 www.reportsmba.com

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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 www.reportsmba.com

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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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20 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: www.reportsmba.com

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Administration

21 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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23 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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24 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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27 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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29 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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