Honda Motor Company Ltd.
International Purchasing Division
Questions for Discussion:
1. How does Mr. Honda’s history with suppliers relate to Honda’s current supply management strategy?
2. Why is purchasing so important at Honda?
3. How does purchasing rank in the corporate structure at Honda?
4. How is Honda organized globally? How does this help/hinder the purchasing function at Honda?
5. What are the key elements of Honda’s supplier evaluation policy? How does it differ from others (e.g. the Big Three)?
6. What is Honda’s policy on new product development and supplier involvement? How does it differ from other automotive companies?
7. Does Honda ...view middle of the document...
S., and also purchase a significant amount ($22 B ) worth of auto parts from U.S. suppliers. Over the last twenty years, Japanese companies have invested $14 B, and now employ 43,000 US workers directly, plus 300,000 in the dealer networks. Of all the companies, Honda has one of the largest investments ($3B), surpassed only by Toyota’s facility in Kentucky ($3.9 B). However, Toyota has produced the most vehicles (634,374) than any other Japanese manufacturer.
Honda’s Export Strategy The fact that Honda is leading the Japanese effort in the U.S. is not surprising. Honda is today the most globalized automobile manufacturer, (although still not the highest sales). In November 1997, the Honda Washington D.C. office released the report “Honda and U.S. – Japan Automotive Trade” (attached), which summarizes how Honda has become a leading automotive exporter from North America, has boosted the domestic content of its U.S.-built cars to more than 90%, and has purchased over $6 B annually from US suppliers. The report provides an overview of Honda’s commitment to global trade and the positive benefits that result for U.S. jobs, suppliers, consumers and exports. Honda has also recently partnered with Chrysler to sell their Jeeps in Japan. Other reports include the Annual Report, the Semi annual report, and the “Global Partnership” document which is used as an orientation guide for new suppliers.
Honda truly pioneered the ramping up and localization of production in the U.S. This strategy has been very successful in neutralizing the effect of currency exchange rate problems between the U.S. and Japan. Today, there is a great deal of “cross-fertilization” between the two companies. Honda is very sensitive to international requirements, and has always believed that exporting from other countries to Japan was important. Evidence of this trend can be seen in the career path of Mr. Obi.
Mr. Obi majored in English at Tokyo University, and joined Honda in 1962 (a total of 35 years with Honda!) Today he is 58 or 59 years old, and is close to mandatory retirement (at60). At that time, Honda was not producing automobiles, only motorcycles (see History of Honda table in “Tochigi Plant” document). He has worked abroad 4 different times, two of which were in the U.S. The first time he worked in motorcycle sales for 5 years in Los Angelex (between 1962-1967), and later worked for HAM to export Hondas to Japan (in 1977). He also worked with Honda International Trading, which was started in 1972. This organization is a branch of Honda, and Mr. Obi’s task was to find and export original equipment parts from the U.S. to Japan. Examples include carpeting, GE headlamps, PPG glass, seat fabrics, and catalytic converters produced by Englehard. Today, converters are still exported to Japan. In other cases, such as headlamps, exporting is not done. This is because the original headlamps were all circular and the same size – today, each headlamp is...