INTRODUCTION

The Story of Honda begins with Honda's founder, Soichiro Honda, who had a great interest in automobiles. He worked as a mechanic at a Japanese tuning shop, Art Shokai, where he tuned cars and entered them in races. Since its inception in 1948, Honda has remained on the leading edge by creating new value and providing products of the highest quality at a reasonable price, for worldwide customer satisfaction. The company has assembly plants around the globe. These plants are located in China, the United States, Pakistan, Canada, England, Japan, Belgium, Brazil, New Zealand, Indonesia, India, Thailand, Turkey and Peru. Today Honda stands at seventh largest producer of automobiles, by having more than 13 million cars produced every year. Although the automobile industry showed decline in recent years, but its impacts did not hamper the sales of Honda due to its presence worldwide. Honda Atlas Pakistan Limited (HACPL) was incorporated on November 1992 as a joint venture between Honda Motors Japan & Atlas Group of Companies. The first car rolled off the assembly line on May 26, 1994.It is the constant endeavor of Honda Atlas to achieve No .1 Customer satisfaction by meeting customer expectations, and to provide good value for money. Currently Honda Atlas is offering 6 different models of Honda Civic and City cars with a blend of style & technology in an affordable way. They are also offering SKD cars namely Accord and CR-V. We have divided our report into 3 major components; Production, Quality Control & Human Resource practices. Lastly we have comments & recommendations on our analysis

PRODUCTION AT HONDA

The throughput time for the process is sixteen hours. This means that the car is ready to be delivered in sixteen hours. The Japanese throughput time is estimated to be ten hours. Each car is produced in 345 seconds compared to 54 seconds in Japan. Their daily target which reflects the production per shift is of eighty units. On Fridays due to Juma Break, the production per shift is 70 cars. To monitor this they have electronic systems being displayed for

each and every process. The screen displays them the target to achieve in a shift. It also displays that to a particular time how many units have been completed and are they exciding the limit of production or lagging behind. The annual target for Honda atlas is to produce around the forty thousand mark. To date they have been very successful in achieving their targets. The process flow uses 3 three types of inputs as raw material. These inputs are namely CKDs, local and in house material: CKD: CKDs are the imported parts that Honda atlas imports from countries like Japan, Thailand and Philippines. Locals: these are the basic tools used at Honda Atlas at their plant. These include the services of vendors as well. In-house: these are the tools used at their production facility used mainly for processes like engine assembly, pressing and PO injections.

There are 3 different processes taking place at HACPL. One is assembly line where the automobile is being assembled. This consists of 41 different processes in an area of 5280 meter square with a production capacity of 80 units. Second one is PO injection where domestically produced plastic fabricating parts are being manufactured and lastly the engine assembling is taking place. This department consists of 342 processes in an area of 1292 meter square with a production capacity of 80 engines a day. For our analysis we have analyzed automobile assembly line where Honda Civic is being manufactured. Metal sheet which are imported from Japan is bought in the Press department. Here these shapes are molded in press and is transformed in different body parts like doors, fenders, bonnet etc. Imported body parts which are required in production of a specific batch are also transported.

Metal sheets press output which is the body parts, along with imported spares parts are bought into the welding department. This process takes 170 seconds. The basic output of this department is the shell or foundation of the car. Here two different processes are taking place. Firstly the components are welded together to form larger parts of the shell. Then these components are welded to form a body shell. Hence this marks end of the process which takes place at welding department. Next, the body shell is bought into painting department. this part of the product flow is the bottleneck at automobile manufacturing. Because it takes a lot of time to apply different specified coats of the paint and later next process has to wait until it dries. At the painting process, firstly a foundation coat is applied which is same for all colors, the later 3 coats are applied as per the required color specifications. And finally polishing the colored car is also similar for all the produced cars. To ensure quality of paint, Honda uses electro-deposition method where car shell is given a negative electronic charge and the paint is given a positive charge. Now the painted shell of the car is moved to assembly department. the doors are removed so that it is convenient for an associate to get in the shell and assemble the interior parts and auxiliary equipment. Firstly the wiring is laid in the car by an electrical expert. Then lights, both head lights and rear tail lights are assembled. Thirdly instrumental panels and other interior parts are inculcated in the car. By now the car is finished with most of the interior parts. Then the suspension is fixed along with fuel tank and other parts which are to be fixed underneath the car. Lastly the engine is mounted in the car. As mentioned earlier that HACPL has a separate engine assembly, the finished engine is bought to the semi-finished Honda Civic through a conveyer. In the next step, the frame is assembled to transform the semi finished car into a drivable car. This process rolls out each car after 42 seconds. Under this process, the tyres along with alloy/metal rims are assembled into the car. The seats are fixed through a semi-automated machine which lifts are seats into the car. These seats are manually placed and screwed with bolts and nuts. Finally the doors are attached back to the car and you have a completely produced Honda Civic. In the final frontier of this

process the car is rowed on the assembly rail for a complete and thorough assembly inspection. The car is inspected for any starches or defects which can be seen with a naked eye. If the inspected car is approved, it is sent to Vehicle Quality Department. But if the car is faulty, it is sent back to the concern department for corrective actions. Now the car is getting ready for finishing. Because the next process after this Vehicle Quality is Road test, it is made sure that the produced Honda Civic is good to be delivered to the customer. Here wheel alignment is done, brakes and speed tests are carried and the head lights are aimed and aligned. The fuel is filled in the car and engine is started to check if the noise and vibration is not exceeding the specified Dolby In this second last process, the car is check for water penetration and road test is carried. First the road test is carried. The car is tested on two different tracks, slow track; where the road is driven on bumpy and curvy track and fast track where the car is driven on speedy and smooth driving conditions. The assured car is sent for water penetration or shower test where water is sprayed on car to check if the Honda Civic resists water inside the car. Finally the car along with its report from previous department is sent to Pre-Dilvery Inspection department which inspects and car and put the DPI Sticker on the car. Now the car is ready to be dispatched to respective dealerships. Honda atlas is working on zero defects process. They believe in the fact that every next step is the customer. With this optimistic approach towards work they are surly making huge profits. Each and every step being put to operational level and to reduce lag time they have the system running on conveyer belts. According to the step or nature of work being performed the speed of the belt is adjusted. To ensure smooth operations at production department and minimize the supply fluctuations of spare parts and fabricating materials, an inventory of 2 to 3 lots is maintained. Each lot of car contains 60 cars, either Honda City or Honda Civic. Marketing Department sends the forecasted sales and on the basis on this forecast the product is carried. This forecast in Honda Terminology is called Niguri Forecast.

QUALITY CONTROL AT HONDA ATLAS

We, at Honda Atlas Cars Pakistan Limited, strive for supplying top quality Honda Cars to get complete customer Satisfaction. We accomplish this by Smart Team Work, Meeting all applicable legal regulatory requirements and continually improving our strategies and goals. This is the quality mission statement of HACPL. As their mission is to deliver top quality and high performance cars, quality control is a department that is in most action. There are 17 employees in QC. As the product is entered into a new process, the quality control department comes in action and plays its part. Honda Civic is 40% domesticated while Honda City is 53% domesticated. Hence the entire local parts are checked thoroughly by the quality supervisor at each process flow. The function of QC department can be summed up as:

Conceiving Inspection

Trouble Shooting

Calibration

Conceiving inspection is when each process flow receives the semi finished car from the previous department; it inspects so as to save resources to be wasted on a faulty unit. Troubleshooting is when a fault is detached it is repaired. Lastly calibration is evaluation of spares which were manufactured locally. The imported parts or SKDs are quality approved from the source supplier but the local parts are inspected. Different tools are used to measure these spares. By the turn of 2008, Honda had set a maximum defect ratio of 250 part per million but today they have successfully bought it down to 170 parts per million. To ensure quality, HACPL has a simple policy that the production will be carried as per the Drawing and Specs of the car. Their benchmark for quality standard is 100% compliance to standard Drawing and Specifications which they get from Japan. There are continuous Quality Audit Visits (QAV) by the Japanese to see if the plant is being operated in required standards. Honda Atlas uses 7 different QC techniques like Histograms, Check Sheets, QC Circles, Kaizan. Because quality is the prime concern at Honda, it uses Process Assurance Capability Verification Test (PACVT). Under this method they have different ranks with respect to quality of the production process. For example they have a rank of HA for safety, HB for stop where sign are noted for a problem. The normal or minimum acceptable rank is C. Honda has its own quality inspectors whose job is to pay visits to Honda Atlas Vendors in Pakistan and check for quality standards if t they are being met or not. Honda has a Global Quality benchmark. They make sure that quality of each Honda plant is comparable and equal to another. A spare being manufactured in US should same in quality as the same spare being produced in Pakistan. Honda has numerous certifications from around the globe like ISO 9000, ISO 9001 2008, UKAS etc. Honda has a standard rule to minimize defects and faults in process flow- Dont Receive Bad, Dont Make Bad and dont deliver Bad. This high lights the fact that each part of process should not accept a bad or faulty unit in its process. Then it should not work on this faulty unit so that a bad or faulty unit is delivered to the next department.

Each time HACPL launches a new model, it makes sure about quality in a very unique manner. First the car is driven approximately 2,000 KM in the road tests in Pakistan. Then it is sent to Japan headquarters when it makes 2 months to get it checked. It is driven 10,000 KM in the most extreme conditions like car the passed through heat chambers or it is driven in mud. Once Honda Motors Japan approves it, the domestic manufacturing is started. At Honda Quality is an ongoing process and this is what has made their product so reliable. Till date the warranty claims are a fraction of 0.0005 meaning that 5 sold units claim warranty out of 1ooo units. It has never recalled a Honda Car in history. But there has been times when certain defects were witnessed but a very short time, there defects were eliminated from the production.

HR PRACTICES AT HONDA ATLAS

Organizational culture at HACPL promotes equality. There is an open mode of communication between bottom and top management, there are no communication barriers. There is a hall with number of work station where all the management sits together. There is no separate cubical or cabin for any employee. There is no boss; all the employees are treated equally. Each employee is called Associate regardless of his rank or department. Even the CEO is an associate. They dress up in standard uniform (white Shirt and White Pants) which is the dress code at Honda Atlas. Honda is not an equal opportunity employee. It doesnt mean that HACPL doesnt employee woman but its primarily because of nature of job. For administrative affairs, they do employee women Hiring process at Honda is liaison between the industrial practices and Honda Atlas Pakistan. A Human Resources analysis is conducted in all departments of the company. The finance department approves the budget and on the other hand, each department sends a requisition for the required human resource. Once this requisition reaches HR department, they prepare Job specifications and place an advertisement in news paper. Honda discourages referrals and hence adopts procedures of external hiring. Fresh graduates are hired as well, HACPL visit

universities in job fairs and short list candidates. These short listed candidates are called for a screening interview. Those who qualify in screening are invited for a written test. In this test General English, Quantitative & Motor Abilities are tested. Those who pass the test are called for a couple of more interviews, one with HR manager and other with General Manger of concerned department.

Pool of Candidates

Test

Interviews

Medical

Hired

Once a candidate is hired, it has to be trained. Firstly job rotation is practiced under which the newly hired employed is trained in different departments. Then in his destination department, he is trained for 2 years. This is called on Job Training. In case of production department, the employee is sent for training in Thailand or Japan. It goes without a saying that world class quality and performance doesnt come easy, they at Honda Atlas spends heavily on training and development of employees. He believe that if they dont train employees adequately, they under-deliver which inversely effects the organizational goals and objectives. HACPL adapted to the policy of KIZAM, a Japanese word which means the New Circle. Under this policy, they will attempt to minimize cost, minimize time and increase productivity of man power. To increase productivity, we motivate our employees says Jamshaid Siraj Yousufi, Assistant Manager HR. Hence to increase productivity which is a function of productivity,

HACPL

has

practices:

Yearly Bonuses New Honda Circle Process Improvement 3 Team Win

Yearly bonuses are given to employees who perform above in performance indicators. These bonuses vary from department to department. For example, an employee who is working in production department will be given 20% bonus on gross salary if we abide by the conformance standards (170 parts per million, previously 250 parts per million). Under New Honda Circle policy, there take place seminars and extensive coaching to train employees on their soft & productivity skills. Training is an ongoing process at Honda. Each time new processes are invited in Honda Japan, they are translated to Pakistan as well. Hence training is required to educate the employee as per the new standards. A team is made of three to five employees. Out of these employees one is made the group leader who has responsibility that other are working on the benchmark standards. 3-Team Win is another approach to assure employees motivation and commitment. Different production teams complete within HACPL and the top three teams are sent to other countries to complete with other teams at Honda worldwide. Appraisals take place once a year in the month of April. Points Method is used where each employee is given score out of 100 points.60 points are assigned to Key Performance Indicators while 40 points are for meeting Objectives & targets. Promotion is due for employees who exceed the bottom line which is drawn by the top management. The key

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performance indicators (KPI) vary from department to department. For example KPI for Production are Motor Skills, Machine Handling, new process adoptability, diagram reading and so on.

Recommendations
Honda Atlas is one of the most sophisticated and technologically advance companies operating in Pakistan, yet it cannot function on its own. The current model offerings by Honda are City and Civic of which the former is 53-55% domesticated while the latter is only 42% domesticated. The low levels of domestication coupled with high taxes on imports of parts and value added processes makes the vehicles expensive and not good value for money. We would recommend Honda to develop the local vendor industry. They have the facility and the support from Japanese counterparts who visit periodically to train and guide the employees here. If we believe the price of vehicle to be inversely related to the level of domestication then if we can increase Civics domestication from 42% to say 52% we will surely be lowering the cost by 10%. This would provide them the following benefits o Significant competitive advantage on basis of Price o Diversification of risk i.e. less dependence on Japans economic conditions o Efficient processes by adopting the Just In Time (JIT) approach o Good publicity for stimulating economy by developing local vendor industry Increase the level of automation because currently Honda is offering a 2 month delivery time and their current system is making to Stock. The Make to Stock system is based on Niguri which is a Japanese tool for forecasting for the coming year. Increased automation would decrease the lead time depending on the level of automation that is

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achieved. It would make the cars more competitive and allow Honda to strengthen their share in the market. Honda along with Suzuki and Toyota should lobby in the parliament to reduce taxes such as commercial vehicle tax (CVT), sales tax, value added tax so that the production can increase and the per unit cost are minimized. Currently the taxes are lowering the production of vehicles by increasing prices and the government is also not profiting from it because of lower production.

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