Supply Chain Automotive Industry

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While sometimes characterized as “stable” the World automotive industry continues to experience dynamic change—change that sweeps across national borders. These changes have struck in particular, the U.S and the Japanese automotive industries. To succeed, auto manufacturers must manage large and complex supply chains, spanning many geographic regions, and pursue opportunities in diverse national markets. While national policies play an important role in shaping the environment for local manufacturing operations and resulting products, cost competition increasingly drives the industry toward global product offerings. This report explores several important dimensions of the forces of change facing the U.S. and the Japanese auto industry. We will present a comparison between the Asian and North American automobile manufacturing practices and in particular, the two companies, Ford and Honda Motors. A comparison will be made between the two markets on how each handles product varieties, their delivery methods from the factory to consumers, as well as the markets channels used. A comprehensive study is made to compare the automobile product varieties in the two regions and explain how customer choices and the effect of competition have led to this diversification in the products. The importance of marketing channels has gone largely unnoticed. For this purpose, marketing channel strategies will be discussed in detail. The relationships among suppliers, customers and logistics service providers will also be analyzed, in other words, the sourcing and the in-bound supply strategies. North America


Ford Motors “Ford Taurus”
Honda Motor “Honda Accord”
Table 1: North American and Asian automakers to be analyzed in this project These two models have been chosen based on the annual report posted at the corporate sites for both companies. Honda Corporate site shows that Honda Accord achieved its highest sales recently. The choice of Ford Taurus comes from the many similarities it has with Honda Accord concerning its size, price and demands. iii

1. Introduction
U.S. Sales of Honda Automobiles (by Model)
Worldwide vehicle production ability is growing today more rapidly than it has in the last 20 or 30 years, and this has interesting implications for the world’s auto makers. Clearly most automobile manufacturers are very optimistic about the willingness of consumers to buy up this capacity. While environmental issues exist, they are not being factored into investment decisions about increases in car production capacity. At present, the world has the capability of producing 15 to 20 million more vehicles than it is currently buying. The last four years have been extraordinary for U.S. auto companies, earning them every year between 13 and 14 billion dollars. This is not bad financial performance for an industry that was viewed as dead in 1990, when both GM and Chrysler were on the verge of filing bankruptcy. This year again will be an outstanding year both for Ford and GM. In examining how the Japanese and U.S. auto industries have changed and adjusted to adversity, we find that the turnaround of the Japanese industry has had more to do with the value of the currency than it has had to do with fundamental change for several companies. While Japanese automobile companies have suffered fairly staggering losses over the last few years, both 2001 and 2002 showed improvement because of the stronger dollar. What happened to Japanese manufacturers during the bubble economy? First, all had huge, very unrealistic expectations about where the Japanese market was going. Japan is as saturated with motor vehicles as the United States, and yet during the last few years virtually every Japanese automaker built another factory to expand capacity and maintain market share. Companies rationalized this massive increase in capacity by believing that somehow their company’s market share would grow and another company’s market share...
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