Honda: The Manufacturing Benchmark

Automotive Industries, May, 2001 by Ron Harbour

Flexibility is a huge advantage for providing customers with the hottest selling vehicles.

A visit to Honda's operation in East Liberty Ohio, these days is, for me, a little like taking my inner child on a tour of the best new toy company. Then again, I'm a manufacturing guy.

At Harbour and Associates, our business is all about helping companies improve their manufacturing operations. We even publish an annual report that measures the changes and improvements of the North American automotive manufacturers. And so it would be very hard for someone like me not to get excited about seeing the new flexible production system Honda is putting in place throughout its manufacturing operations.

I won't go into great detail about the changes Honda has made at East Liberty, because that transformation has been well documented in an in-depth story that appeared in the October 2000 issue of Automotive Industries. But it is clear Honda's new global production strategy is setting benchmarks for manufacturing flexibility and for taking out investment and production costs.

What is not so clear, however, is why these improvements are so important -- to both the manufacturers and their customers. Customers may care if a vehicle is built in the United States. But I don't know one customer who has gone into a dealer showroom and asked where a vehicle was built, and then followed up with questions about a plant's productivity and quality levels. It just doesn't happen.

Customers are concerned about a vehicle's quality and the options and other amenities available -- in other words, how much bang for the buck? Truth is, manufacturing improvements and productivity gains are important factors in giving customers more for their money while at the same time producing more profits for the company.

Honda, for example, reportedly has reduced the cost of exclusive body shop tooling for new vehicles by some 50 percent. That's a significant amount Honda can put some of that savings into the price it will charge customers, as well as invest in upgraded materials or added features that will set its vehicles apart from the competition. Investing in improved systems and processes -- everything from product and process engineering to changes on the plant floor -- also will help improve the quality of an operation and the vehicles it produces.

Ultimately, taking cost out and improving quality in manufacturing operations will help companies build better vehicles at lower costs, and thus provide a better return for customers and shareholders.

There's also the issue of flexibility. Honda, with its new manufacturing system, will be able to build just about any Honda vehicle at any of its plants -- a huge advantage for a company that wants to provide customers with the hottest selling vehicles.

General Motors Corp. and DaimlerChrysler certainly could have used such flexibility in recent years. When sales of extended cab trucks became the industry rage, GM had four plants producing trucks -- but only one had the flexibility to build trucks with an extended cab.

DaimlerChrysler is facing similar limitations with its hot-selling PT Cruiser Think how many more Cruisers could have been produced -- and sold -- if DaimlerChrysler could have created additional production at a plan like Belvidere, which is underutilized because of slow Neon sales. As it stands now, by the time DaimlerChrysler readies another plant for production of the PT Cruiser, the vehicle's days as a red-hot seller will be over and more production will not be necessary.

Improving manufacturing operations is not an option for companies that want to respond better to their customers, that must take costs out of their systems and processes, and that hope to grow and improve their bottom lines. As I saw during my visit to East Liberty Honda's new manufacturing system seems to be the industry leader in these areas at the moment. But it's critical for every automaker to work hard and try to move the benchmark Honda has set.

RON HARBOUR is president of Harbour and Associates, manufacturing consultants in Troy, Mich.