OPERATIONS MANAGEMENT

ATLAS HONDA LTD.

FINAL PROJECT REPORT

SUBMITTED TO : MR.SALMAN EHSAN

LAHORE SCHOOL OF ECONOMICS

ATLAS HONDA LTD.

Table of Contents
Introduction .................................................................................................................................................. 3 Process .......................................................................................................................................................... 3 Manufacturing process flow design .......................................................................................................... 4 Supply Chain Management ........................................................................................................................... 4 QUALITY ........................................................................................................................................................ 8 Inspection by the line workers .................................................................................................................. 8 Inspection by the next department .......................................................................................................... 8 Random inspection ................................................................................................................................... 8 APPLICATION OF JAPANESE PHILOSOPHIES AT THE AHL............................................................. 9 KANBAN .................................................................................................................................................... 9 KAIZEN....................................................................................................................................................... 9 POKAYOKE ............................................................................................................................................... 10 ANDON .................................................................................................................................................... 10 RECOMMENDATIONS: ................................................................................................................................ 11 APPENDIX .................................................................................................................................................... 13 REFERENCES ................................................................................................................................................ 18

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Introduction
Atlas Honda Limited (AHL) is a joint venture between the Atlas Group and Honda Motor Co. Ltd., Japan. The company was created by the merger of Panjdarya Limited and Atlas Autos Ltd. in 1988. AHL has undertaken to develop local manufacturing capabilities to the highest, economically feasible level. While a major role in localization has been assigned to vendor industries, Atlas has the countrys largest in-house manufacturing capability at its Karachi and Sheikhupura plants. To support the production facilities, the company has established an R&D wing and tool making facilities through CAD/CAM which are growing rapidly in size and function as the company expands. Atlas has managed to execute 12 Joint Venture/Technical Assistance Agreements between local vendors and foreign manufacturers for transfer of technology. Besides, Atlas has directly executed 9 Joint Venture/Technical Assistance Agreements other than Honda. AHL management is striving to modernize company operations by adapting applicable aspects of research and theory and more specifically, Hondas unique philosophy of hard/soft technologies to the realities of Pakistani conditions. Company management structure, systems and processes are changed according to the demands of the customer, growth and new technology. Efforts are being made to develop participation at all levels of personnel in decision-making and a substantial and effective delegation has been established at levels where applicable. Various participation programs such as Ala Mayar Quality Circles movement, launched in 1985, are strongly encouraged to allow constructive self-expression and teamwork. The Company training and development programs encourage all members to develop themselves and contribute to their full potential.

Process
Process selection is an important part of operations of a company. Process selection may be defined as the strategic decision of selecting which kind of production processes to have in the manufacturing plant. Among the processes Honda Atlas make use of Assembly processes. It is because Honda in take different parts from different industries and assemble them to make their motorcycles.

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Process flow structure refers to how a factory organizes material flow using one or more of the process technologies. Honda Atlas makes use of the assembly line. In this process discrete parts move from workstation to workstation at a controlled rate. It can also be referred to as the production line of the company. The current assembly time of Honda Atlas is 26 minutes. The full capacity at Honda Atlas is 500,000 bikes. Global culture of Honda is followed in the organization. The capacity of production is between 1650-2300 units per day. The current demand is around 1650 units per day. The demand level fluctuates with the marketing mix. The cycle time of the operation is 26 seconds. The assembly line is never kept dry. The process goes on the whole time. It is because the products are made on order, so soon as the order gets complete a truck is loaded to deliver it to the dealers in market. Assembly line works 18hours and manufacturing line works 24hours.

Manufacturing process flow design

This is a method to evaluate the specific processes that raw materials, parts and subassemblies follow as they move through the plant. Honda Atlas assembles the engine and the structure of their motor cycles. Honda Atlas operates at two levels, one is the manufacturing line in which the engine is manufactured and the other is assembly line that assembles all the parts into one structure. The company uses a multi-stage process, which has multiple groups of activities that are linked through flows. The firm believes in zero buffering (JIT) and the products flow frequently as they are produced.

Supply Chain Management

Supply chain management is a very important topic in businesses and it is considered to be essential for the success of every business. Atlas Honda Limited applies a very efficient total systems approach to manage the entire flow of information, materials, and services from raw material suppliers through factories and warehouses to the end customer. This is the way Atlas Honda achieves competitive advantage. The supply chain of atlas Honda goes something like this. It starts with the suppliers, manufacturer, distributor, retailer and then finally the customer.

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Supplier

Dealer

Customer

Manufacturer

Show Room

Raw materials are supplied by the vendors from Karachi or Baluchistan. This takes around two days every time and so the production margin is set at two days by the delivery control centre. The delivery control centre at Atlas Honda pays a vital role in efficient and smooth management of supply chain. Atlas Honda motorcycles are a functional producer because people buy it in a wide range. Its demand uncertainty is low because Honda practices advance buying. All of the motorcycles are already sold that are standing in their facility. Demand of Atlas Honda Motor cycle is 1650 per day and that is what they are producing. They are currently operating at maximum efficiency. Because of the reason mentioned above their supply uncertainty is also low because they are producing only what is demanded and also the supply of their raw materials is also set in such a way that it produces maximum efficiency. Atlas Hondas supply chain is an efficient supply chain that utilizes strategies aimed at creating the highest cost efficiency. It pursues economies of scale and optimized techniques. The capacity is utilized fully and information linkages with the all the channels of the supply chain are maintained to ensure the most efficient, accurate and cost effective transmission of information. The ratio of outsourcing of parts is 70:30. 70% of it is produced in house and only 30% is outsourced . 91% is indigenized which means that 91% is produced in Pakistan and only 9% is imported. they have the capacity if producing that 9% in Pakistan as well but that would disturb their equity ratio. Atlas group has 80% share in Atlas Honda Ltd whereas only 20% is owned by Honda but they still have to follow the global Honda culture. the company somehow practices forward buying but makes sure that there is no bull whip effect in it.

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The raw materials that go into the Atlas Honda motorcycle are 6000 in number. The primary raw materials used in the manufacture of the body of motorcycle are metal, plastic and rubber. The motorcycle frame is composed almost completely of metal, as are the wheels. The frame may be overlaid with plastic. The tires are composed of rubber. The seat is made from a synthetic substance, such as polyurethane. The power system consists of a four-stroke engine, a carburetor to transform incoming fuel into vapor, a choke to control the air-fuel ratio, transmission, and drum brakes. The transmission system contains a clutch, consisting of steel ball flyweights and metal plates, a crankshaft, gears, pulleys, rubber belts or metal chains, and a sprocket. The electrical system contains a battery, ignition wires and coils, diodes, spark plugs, head-lamps and taillights, turn signals and a horn. A cylindrical piston, made of aluminum alloy (preferred because it is lightweight and conducts heat well), is an essential component of the engine. It is fitted with piston rings made of cast iron. The crankshaft and crankcase are made of aluminum. The engine also contains a cylinder barrel, typically made of cast iron or light alloy. Of these parts, the seats and the muffler are outsourced in Lahore city whereas the oil tanker is outsourced in Karachi along with the clutch plates. The rest of the parts are produced in house. The outsourcing done by Atlas Honda is mainly due to cost driven reasons which enables the company to reduce costs through superior provider performance and the providers low cost structure and also it enables the company to turn its fixed costs into variable costs. They have the ability to produce 100% in-house but that will disturb their equity position. Outsourcing helps the company to product the motorcycle at a much cheaper cost. the company following the global Honda culture requires the inter city suppliers to come in their facility and setup their facility so that supply of raw material can be Just in time. They only keep inventory buffer of one day. Vendors maintain this buffer stock and supply the raw materials JIT. This improves production efficiency and therefore competitiveness. It does this by

preventing over-production minimizing waiting times and transport costs

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saving resources by streamlining your production systems reducing the capital you have tied up in stock dispensing with the need for inventory operations decreasing product defects

However not all of inventory is JIT. 80% is JIT and the rest is inventory storage. However they are making continuous improvements and are on their way to 100% JIT. To minimize bargaining power of suppliers Atlas Honda has agreement with around 3 to 4 suppliers. They have multiple sources for their raw materials. This avoids any monopoly amongst the suppliers. Vendors are given contracts according to their capability. Atlas Honda uses an ERP system. An ERP system can either reside on a centralized server or be distributed across modular hardware and software units that provide service and communicate on a local area network. The distributed design allows Honda to assemble modules from different vendors without the need for the placement of multiple copies of complex and expensive computer systems in areas which will not use their full capacity. It facilitates the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. Built on a centralized database and normally utilizing a common computing platform, ERP systems consolidate Honda operations into a uniform and enterprise-wide system environment. It a B2B link to minimize surprises. Atlas Honda uses outbound logistics which is the Movement of material associated with storing, transporting, and distribution a firm's goods to its customers. Within the factory proper stock level is maintained all over and the ready to go motorcycles are stacked at 2 different floor levels which are automatically loaded to the truck from their respective floors this saving time. A lot of care is required while loading the finished product on to the truck because the motorcycle is a cosmetic product, even the slightest mistake can destroy the product altogether. It is a fool proof system that is being practiced there. The operation time is 1.5 hours. One motorcycle is produced every 26 seconds so the line is never dry. Since all of the motorcycles are already sold (advance selling) they are all made to order.
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QUALITY
The quality of a companys products greatly influences the customers buying decisions. The company has a separate quality assurance department in addition to the three tiered system of quality assurance. Quality assurance at the AHL consists of the following three stages: 1) 2) Inspection by the line workers Inspection by the next department

3) Random inspection Besides, the above mentioned techniques which ensure quality of the work done at AHL, the company also makes efforts to control the quality of the parts produced by local vendors through better coordination with them. The vendors are being encouraged to get ISO 9000 certification with the incentive that the materials of such vendors are exempt from inspection.

Inspection by the line workers

Every line operator is responsible not only for the work he does and dispatches but also for the work of the previous team member. He has to ensure that whatever he receives is according to the quality standards of the company and also what he dispatches is of quality. The AHL follows the Japanese system of Pokayoke according to which any worker is allowed to stop the production line if he feels that the work is not upto the quality standards.

Inspection by the next department

Whenever a shop receives its share of work the first step is to ensure that all jobs performed in the previous section are according to the quality standards.

Random inspection
After the end of every shop a random check is conducted on a few units to see if the work done in that particular shop conforms to the quality standards. The implementation of Atlas Honda Production System based on Just-in-time (JIT), Built-inQuality and continuous improvement through Kaizen has been further consolidated and this has helped in improving efficiencies of all production activities.

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A comprehensive and independent Quality Assurance division of professionally qualified engineers is exercising strict Quality Control in three vital areas namely: Incoming materials including process checks at vendors site Component processing and assembly check at plant Final delivery of products at plant

The role of the Quality Assurance department has been expanded to support and train vendors, conduct process audits at vendor premises and also support the Service Department in grasping customers quality expectations and taking corrective measures to meet them*.

APPLICATION OF JAPANESE PHILOSOPHIES AT THE AHL A number of Japanese management techniques are followed at the Atlas Honda. These include:

KANBAN
Kanban is the word used to signify the passage of information from one department or individual to the other. The most common application of this is the placement of a metal sheet with the engine number and the chassis number of the Motorcycle on its body so that it is easy to track. This quick passage of information helps increase the quality and eliminate waste.

KAIZEN
Continuous search for a better way. Kaizen is the creative suggestion system aimed at continuous improvement in all departments of the organization. Since it involves recognition, analysis and solution of problems, it is considered as a very effective problem solving process. Kaizen activities are carried individually as well as in the form of groups called Quality Circles. The prime focus of these activities is to bring continuous improvements in terms of quality, productivity, safety and cost effectiveness. Kaizen works in two ways: 1. At Atlas Honda, every worker is referred to as a team member so as to foster a feeling of belonging and thus motivate the worker to perform better. The first manner in which Kaizen is implemented is that each team member can give suggestions related to his area of work with regards to Efficiency
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Productivity Cost effectiveness Work simplification

A committee analyzes every suggestion and if it is found practical and feasible, the team member gets a reward of Rs.100 per suggestion. 2. In the second method, a team studies the problems faced by them and work to solve the problem. The following steps are taken to identify solutions: Identification of the problem Analysis Countermeasures Implementation Final report Evaluate

Every year a Kaizen convention is held where Kaizen teams from the AHL make presentations on the improvement of certain processes and problem solving methods. The team with the most effective presentation wins the right to represent the AHL at the International Kaizen Convention held annually at the Honda, Japan. An Indus Kaizen Steering Committee oversees the activities of all the Kaizen teams.

POKAYOKE
Pokayoke is another word that illuminates the AHL standard of quality control. It means that workers are not allowed to let any defect pass if detected. At AHL any worker is allowed to stop the production line if he finds that a product is not up to the high standards of quality that AHL follows. AHL uses timer clocks to determine the total duration for which a line was stopped during the day. This helps to keep a check on the delays and their causes.

ANDON
Andon is an offshoot from Pokayoke as it empowers every member of the team to be a quality inspector. At the slightest deviation from quality, colour coded lights are used to alert the foreman.
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RECOMMENDATIONS:
Atlas Honda Limited is a joint venture which has countrys largest in-house manufacturing capability at its Karachi and Sheikhupura plants. Efficient supply chain management system should be the key to concern for any company. Supply chain department though is a separate department but it is integrated in Atlas Honda in such a way with other departments which helps them in better production plan and capacity. The supply chain department is focusing on supplier suppliers to customer customers. The Production area is well organized that there are less chances of faults. Atlas Honda is using SAP (System Application & Products). Master Production Scheduling (MPS) system helps them to identify the forecasting factor of each production plan. MPS helps to forecast when they can have a finish good for a specific Production Plan and it also indicates if there is any shortage or the excess of finish goods. In order to manage the material Atlas Honda is using Material Requirement Planning (MRP). They should have strong backup facilities. The company should install an extra server as a backup. For this IBM Trivoli solution is a good option. The major benefit of it will be that if a LAN or a switch fails it should just take 10 minutes to switch to another LAN or switch. They must fully automate their Production System which will eventually reduce lead time e.g. use only robotic welding instead of manual welding that is being done for most of the parts Atlas Honda should use Aluminum Alloy Chassis instead of steel, as aluminum reduces the weight and consequently fuel mileage will increase. Atlas Honda must sponsor projects related to Renewable energy to take measures of carbon foot prints like PTC has done this year that they are accepting anything from Renewable energy. Honda must introduce Racing bikes as there is a market of Racing Bikes in Pakistan but none of the Bike Manufacturer is dealing in this category. Honda must make loyal customers to their racing bikes by arranging rallies like Harley Davidson rally.

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Atlas Honda must actively work towards establishing an environment management system to implement the Green Factory concept which is to aggressively take initiatives to reduce the environmental impact of manufacturing operations They must introduce Honda riding trainers on their official dealer shops to create safety awareness as Honda India has done. They have introduced 125 riding trainers across India.

Atlas Honda must introduce air bags in their motor bikes in order to reduce the impact of the accident. The picture of this is attached in the appendix.

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APPENDIX
Process Flow chart:
Painted Parts Stock Paint shop

Parts coming from other firms

Fuel Tank shop Press Shop

Storage Area

Manufacturing Department

Car Stand

Heat Treatment

Gear Shop

Engine Plant
Cylinder Head Crank Case & cover CAM shaft

Finished Product stock Crank Shaft

GDC

Cushion Shop

LPDC

HPDC

Casting Plant

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Parts from the manufacturing plant

Synchronized Assembly Plant

Finished products from Engine plant

Engine Assembly

Frame Assembly

Finished products from casting plant Dispatch Final Inspection

ASSEMBLY DIAGRAM

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REFERENCES
Mr.Jamil Ashgar-HR manager Atlas Honda Ltd Mr.Kaleem Manager Atlas Honda Ltd Miss Asma-Assistant manager HR Mr.Riaz Engineer & Manager casting plant www.google.com www.scribd.com www.docstoc.com www.atlashonda.pk

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