case study of supply chain management of honda

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Honda Canada (A): Tsunami and Communications

By: Mary Weil, Dina Ribbink, Ramasastry Chandrasekhar

Honda Canada was coping with a communication and supply chain crisis after a triple disaster - an earthquake followed by a tsunami and a nuclear meltdown - that hit Japan in March 2011. Honda's…

• Length: 11 page(s)
• Publication Date: Mar 23, 2016
• Discipline: Operations Management
• Product #: W16152-PDF-ENG

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Honda Canada was coping with a communication and supply chain crisis after a triple disaster - an earthquake followed by a tsunami and a nuclear meltdown - that hit Japan in March 2011. Honda's worldwide supply chain was characterized by a just-in-time, single-source approach, wherein the supplier for each component provided the best quality at the lowest price. The approach normally ensured economies of scale but now, in an abnormal time, Honda's supply chain was vulnerable. In the short term, Honda Canada had to manage the chaos through effective communication with its stakeholders. In the long term, it had to ensure checks and balances in its supply chain. See supplemental case B.

Learning Objectives

In a core operations management course, this case could be included in a supply management module. The case could also be used as part of a global purchasing course. For a communications course, this case would fit nicely after an introduction to cross-cultural communications, as part of a module on stakeholder communications, or as part of a module on public relations/media relations. The case has the following learning objectives: To illustrate the strategic principles that a company should keep in mind while developing its tactical approach to crisis management. To identify the conceptual approaches a company can examine when revisiting its supply chain. To examine single sourcing versus diversified supply networks, as well as contingency planning in dealing with supply chain disruptions.

Mar 23, 2016

Discipline:

Operations Management

Geographies:

Canada, Japan

Ivey Publishing

W16152-PDF-ENG

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From Dr. Paolo Trucco and Dr. Alessandra Negri.

Honda Motor Co. Ltd. is among the largest automobile manufacturers in the world. Its main business divisions are motorcycles, automobiles and power products, but it also operates in aviation, marine and robotics industries and financial services. Moreover, Honda Racing is dedicated to motor sports. In the financial year ending on the 31st of March 2017, the company reported sales for €116,468 million and an operating income of €6,994 million, with a workforce of to 211,915 employees. In addition, Honda has a global footprint, with production facilities and R&D centers all around the world. Given the huge dimensions of the company, Honda’s supply chain is complex, both from a structural and dynamic point of view. In July 2011, Honda was affected by severe flooding in Thailand, which forced more than 1,000 factories to close, leading to global shortages, especially in the automotive and electronics industries.

The event had a double impact on Honda’s operations: it directly affected a manufacturing facility and it disrupted the supply of specific components, since Thailand is the regional production base for stamped parts, body panels and engines. The company was forced to suspend production at the assembly plant in Ayutthaya, north of Bangkok, which was damaged in October. The plant was responsible for 5% of Honda’s global output, producing up to 240,000 vehicles a year. Furthermore, the company suffered a supply chain disruption due to a lack of parts from Thailand. Honda Motor stopped production in Malaysia and other Honda plants in Asia adjusted their production volumes or suspended production due to limited supply.

Such shortages had negative impacts on vehicle availability in North America and Europe too: adjustments such as overtime cancellation and non-production days scheduling were adopted in Canada and USA. This led Honda’s production of automobiles to decline by 4.6% from the previous fiscal year and net profit decreased more than half (60 billion JPY instead of 136 JPY). The production was gradually resumed at all factories only in January 2012. The decisive element that allowed Honda to promptly react to the event was the collaboration, not only among its subsidiaries and affiliates around the world, but also with suppliers and the public sector. Its supply chain structure, both internal and external, played an important role in it. As previously described, Honda’s internal supply chain is characterized by many production facilities located around the world. The close cooperation among these subsidiaries and affiliates allowed to keep production lines running and to support a smooth recovery. For instance, Thai-built models made for Australia in the directly affected plant were temporarily substituted with Japanese-made models, leveraging the collaboration among facilities and their subsequent flexibility. However, the greatest support was received by suppliers, who worked together with the company to change production bases and switch to alternative parts in order to face the supply shortage.

Even though obtaining general-purpose electronic parts was difficult, Honda shared information with suppliers and worked with them to minimize the effects of the disaster by securing market inventory on a global scale and quickly developing alternative parts. To better assist providers in their operations, the company dispatched support teams to suppliers’ facilities. For instance, regarding the affected plant in Ayutthaya, several Japanese engineers and production equipment staff managed to get the factory back on its feet in just three months. Therefore, collaboration with suppliers was determinant and Honda presented special letters of appreciation to 25 suppliers that made a particularly significant contribution to the recovery. It emerges that only some of the thousands of suppliers closely collaborated with Honda, demonstrating that a low number of providers allows more stability and closer relationships, thus a negative link between external supply chain complexity and resilience. Nevertheless, single-sourcing determines a lower flexibility in the supply: having only certain providers for some raw materials and parts, Honda could not shift requests to alternative sources or diversified suppliers and was forced to suspend production due to limited supply.

As for the demand side, both Honda and dealer representatives visited every Thai customer, in order to apologize for the delay and promise to deliver the cars as soon as possible. This had a positive effect on Honda-customer relations and most customers retained their order. It is quite logical to suppose a negative link between the number of customers and the velocity of action: the more customers to visit, the higher the required time.

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Unveiling the structure of supply networks: Case studies in Honda, Acura, and DaimlerChrysler

• Management and Entrepreneurship

Research output : Contribution to journal › Article › peer-review

Three complete supply networks have been mapped in this study. These supply networks pertain to the center console assembly and come from three different product lines - Honda Accord, Acura CL/TL, and DaimlerChrysler (DCX) Grand Cherokee. Based on these three cases of supply networks, propositions are built concerning how the structure of supply networks operates. Based on the extant literature, we frame structure in three dimensions - formalization, centralization, and complexity. As an underlying methodology, we first conduct the within-case analysis and then expand the analysis to cross-case context. The three structural dimensions affect one another progressively, and the cost consideration appears to be the overarching force that shapes the supply-network structure.

• Case study research
• Operation strategy
• Supplier management
• Supply chain
• Supply networks

ASJC Scopus subject areas

• Strategy and Management
• Management Science and Operations Research
• Industrial and Manufacturing Engineering

Access to Document

• 10.1016/S0272-6963(02)00025-6

Other files and links

• Link to publication in Scopus

Fingerprint

• Supply Network Business & Economics 100%
• Costs Engineering & Materials Science 34%
• Centralization Business & Economics 20%
• Case Analysis Business & Economics 19%
• Formalization Business & Economics 18%
• Product Line Business & Economics 18%
• Network Structure Business & Economics 17%
• Methodology Business & Economics 9%

T1 - Unveiling the structure of supply networks

T2 - Case studies in Honda, Acura, and DaimlerChrysler

AU - Choi, Thomas

AU - Hong, Yunsook

N1 - Funding Information: This research received funding from the National Science Foundation (DMI-0075293), the National Association of Purchasing Managers, Center for Advanced Purchasing Studies, and Department of Management at Arizona State University. Thomas Choi is grateful to Honda, DaimlerChrysler, and many supplier companies that participated in this research. They have been extremely cooperative and gracious.

PY - 2002/9

Y1 - 2002/9

N2 - Three complete supply networks have been mapped in this study. These supply networks pertain to the center console assembly and come from three different product lines - Honda Accord, Acura CL/TL, and DaimlerChrysler (DCX) Grand Cherokee. Based on these three cases of supply networks, propositions are built concerning how the structure of supply networks operates. Based on the extant literature, we frame structure in three dimensions - formalization, centralization, and complexity. As an underlying methodology, we first conduct the within-case analysis and then expand the analysis to cross-case context. The three structural dimensions affect one another progressively, and the cost consideration appears to be the overarching force that shapes the supply-network structure.

AB - Three complete supply networks have been mapped in this study. These supply networks pertain to the center console assembly and come from three different product lines - Honda Accord, Acura CL/TL, and DaimlerChrysler (DCX) Grand Cherokee. Based on these three cases of supply networks, propositions are built concerning how the structure of supply networks operates. Based on the extant literature, we frame structure in three dimensions - formalization, centralization, and complexity. As an underlying methodology, we first conduct the within-case analysis and then expand the analysis to cross-case context. The three structural dimensions affect one another progressively, and the cost consideration appears to be the overarching force that shapes the supply-network structure.

KW - Case study research

KW - Operation strategy

KW - Supplier management

KW - Supply chain

KW - Supply networks

UR - http://www.scopus.com/inward/record.url?scp=0036722585&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0036722585&partnerID=8YFLogxK

U2 - 10.1016/S0272-6963(02)00025-6

DO - 10.1016/S0272-6963(02)00025-6

M3 - Article

AN - SCOPUS:0036722585

SN - 0272-6963

JO - Journal of Operations Management

JF - Journal of Operations Management

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