Honda retailers MOVE to improving allocation mix

Since 1997, American Honda has been counting on its dealers to help them forecast demand, and now both parties seem pleased with the results of the web-based system called MOVE. That's short for market-oriented vehicle environment.

As a result, the company's inventory went to 38 days compared to the industry average of 70 days.

“From a tactical standpoint, we understood the success of this project hinged on our ability to collaborate effectively with our dealers,” says Dan Bonawitz, vice president of corporate planning and logistics for American Honda. “This CPFR (collaborative planning, forecasting and replenishment) initiative has been able to accommodate dealer requests 95% to 98% of the time, it has dramatically reduced the number of dealer trades and given the factory better visibility over customer tastes.”

Dealers, too, seem pleased. “It's a better system than before,” says G.R. Tarr, general manager of Brandon Honda in Tampa, FL. “There wasn't a system before.”

In the past, zone managers determined the number of automobiles and the allocation mix, based solely on historical sales. Allocation took place without consideration of customer preferences from market to market, meaning that individual dealers had little, if any, ability to alter their own allocation.

“It's still not defect-free, but it's better than it was when it came out,” says Mr. Garr, who adds that the MOVE system allows dealers to choose colors, models and even transmissions better than before.

“I like it,” says Rick Holder, general manager at Anderson Honda in Bloomfield Hills, MI. “It gives you a little more control of what you get. It gives you a chance for input. But it's kind of irrelevant now because they can't produce enough product for us to sell.”

Driving the system, which works via Honda's web-based dealer communication system, is a CPFR product developed by Syncata, a supply chain management consultant. In essence it is an extranet that allocates cars to dealers using various factors, including market-specific consumer preferences.

“It's a better system than before. There wasn't a system before.”
— G.R. Tarr
Brandon Honda
Tampa, FL

It also lets dealers modify their orders within the limits of their basic vehicle allocation. The CPFR system lets dealers choose from roughly 500 options for configuring vehicles in their monthly orders. It then consolidates those orders to the individual plants for factory production.

“It's an industry initiative to put some standards around CPFR that was actually started in the consumer products industry,” explains Rakesh Batra, Syncata's supply-chain management practice area leader.

He adds, “Nowadays the trend is to do collaborative planning anyway. It's a decision support system, from the dealer's perspective, that helps them make an informed decision about cars they should be ordering one or two months down the road.”

The first phase of the system was deployed four years ago. Now all 1,300 Honda and Acura dealers are using the system. Mr. Batra says Syncata is in talks with other manufacturers as well.

Could this be the next step in the industry's move toward a built-to-order “pull” system rather than its current “push” model?

“This is more of a demand chain optimization system rather than a build-to-order system,” says Lalit Jain, Syncata's engagement manager on the MOVE project. “Honda is still building to a forecast. The difference is that the forecast is collaborative in that the dealer has input into what he's going to order or what the suggested forecast is for them. Honda is then able to optimize that demand against its supply constraints so that they're able to minimize their overall inventory in the demand chain.”

It also helps reduce inventory levels, transaction costs and lead times.

“It's no secret automakers can boost per-vehicle profits if they don't have to slash prices to sell cars that aren't what consumers really want,” says Mr. Jain.

Syncata says MOVE gives Honda business intelligence to give its sales force the models and styles they want, based on what their customers really want, making the initiative a win-win for consumers and dealers alike.