Nobody's ever accusedMotor Co. Ltd. of rushing into things. The automaker, which built its stellar manufacturing reputation on well-conceived processes and a measured approach, is taking the same slow-and-steady technique with e-commerce.
While several automakers have, in's view, “rushed to the party” when it comes to establishing an information technology-driven e-procurement network, at Honda, it's still under study.
But Honda's cautious move toward e-commerce does not mean the automaker isn't interested, says Larry Jutte, senior vice president and general manager of Honda of America Mfg. Inc.
Honda in July will conclude a lengthy study and meet to decide the first step toward implementing its own e-commerce system. At that point, Mr. Jutte says, decisions will come faster — including whether to join Covisint, the Big Three's virtual marketplace, or a similar online procurement exchange. Honda is in discussions with Covisint.
Honda's studied approach already has paid off, Mr. Jutte says. The first step involved a deep-dive into the existing processes right down into the supply base. Together with suppliers, Honda found room for streamlining existing internal processes. The evaluation — a search to decide the best initial entree into e-commerce — and resulting flushing out of the system will spur cost savings that at least initially will equal those brought about by a new e-procurement system, Mr. Jutte says.
Honda emphasizes that it is trying to establish an e-commerce system that is more about enhancing communications and improving efficiencies than it is about the bottom line. Mr. Jutte says cost savings will be a natural byproduct of an improved system, but Honda is happy with cutting a standard 2% to 3% of costs out of procurement annually.
“We can't put relationships up for auction,” he says.
Results of the forthcoming program, Honda says, include better-managed inventory and turning inventory into information. For instance, if different manufacturing plants use a common system, overall inventory can be reduced through stepped-up communication. A unique piece of equipment that may exist in a Honda plant in Ohio can be shipped to Europe or Canada, for example.
The new system most likely will follow the tenets of Honda's New Manufacturing System and standardize e-commerce efforts between North America and its global Honda counterparts.
Honda also is working through information technology to synchronize production lines with those of its suppliers. On a pilot program with a plastic injection-molded parts supplier, finished goods inventory went from seven days to three, and 152 carts were eliminated from the plant floor.
Honda North America
Purchasing by the Numbers
Number of suppliers of original equipment parts and raw materials for automobiles and motorcycles (total purchases in parentheses)
1983-27 ($13.5 million)
1993-256 ($2.9 billion)
1998-408 ($5.7 billion)
2000-445 ($7 billion)
2001-481 ($7.5 billion)
Larry Jutte, senior vice president and general manager of Honda of America Mfg. Inc.