An In-depth Analysis of Honda Motor Corporation's Global Supply Chain

This report provides a detailed analysis of Honda Motor Corporation's global supply chain management. It examines various aspects, including global procurement changes, the selection and management of international suppliers, and the tools used for international sourcing. The report also delves into the importance of technology and knowledge transfer within Honda, discussing the company's absorptive capacity and how it leverages these elements to improve its supply chain. The analysis covers topics such as supplier selection processes, purchasing codes of conduct, and the implementation of new technologies. The report highlights the importance of research and development, opening new facilities, and launching new models to maintain a competitive edge. It also addresses the transfer of both explicit and tacit knowledge, along with the configuration and coordination advantages in international manufacturing networks. The report concludes with recommendations for enhancing Honda's supply chain, emphasizing the need for investment in research and development, expansion of facilities, and the introduction of innovative models to meet evolving market demands. Appendices provide additional figures and data to support the analysis.

Running head: SUPPLY CHAIN
Supply Chain
Name of the student
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Table of Contents
Introduction......................................................................................................................................4
Global Procurement Change............................................................................................................4
Figure No 1: Supply Chain of Honda..........................................................................................5
Selection of International Suppliers.................................................................................................5
Figure No 2: Supplier Selection Process of Honda.....................................................................7
Supplier Management and Development.........................................................................................7
Figure No 3: Purchasing Code of Conduct of Honda..................................................................8
Tools for International Sourcing......................................................................................................9
Buying from Global Suppliers.......................................................................................................13
Management of Global Networking..............................................................................................13
Technology and Knowledge Transfer...........................................................................................14
Absorptive Capacity of Honda......................................................................................................15
Conclusion.....................................................................................................................................17
References......................................................................................................................................18
Appendices....................................................................................................................................20
Appendix 1.................................................................................................................................20
Figure No 4: Purchasing System of Honda...............................................................................20
Appendix 2.....................................................................................................................................21

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Figure No 5: Shared Responsibility and Complex Challenge...................................................21
Appendix 3.....................................................................................................................................22
Figure No 6: History of Honda Global Operation.....................................................................22

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Introduction
The following report is based on Honda Motor Corporations which is a Japanese public
multinational organization. The organization is mainly known for the manufacture of
automobiles, motorcycles as well as heavy range power equipment. The report is based on a
logical understanding on the ways to implement the recommendations regarding International
Supply Chain Management of the organization. It has also been suggested to search for opening
up new facilities in Europe and launch new models in India and some other developing
economies that has been slowly becoming one of the largest hubs of automobile sales for the
company.
Global Procurement Change
The following part of the report will address the different kinds of the recommendations
made in the analysis of the supply chain of Honda. The way by which the raw materials are
acquired and the products and the services are procured by executing the operations of an
organization can be done either in-house or be outsourced. The changes can be addressed in a
proper manner. The change will be brought in to expand and internationalize the company. The
following part details out all the important changes that the management of the company needs
to undergo in order to ensure that they achieve the recommendations as made in the analysis of
the supply chain management. The process by which the management of Honda procures the
different kinds of the raw materials and other items from the suppliers can be termed as
procurement (global.honda 2019). The management of the Japanese company can easily be
outsourced or completed within the production unit. Such a function helps in the growth and
expansion of the business organization.

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Figure No 1: Supply Chain of Honda
Source: (global.honda 2019)
Selection of International Suppliers
The identification and selection of the right suppliers in the automobile industry is
extremely important for the choice of the right suppliers. The absence of a proper supplier can
lead to the decline of the quality and revenue of the organization. The rising adoption rate of car
amongst the individuals has forced Honda to raise its production capacity to meet the demand of
the car makers of its different plants across the globe (global.honda 2019). In this particular
scenario supplier selection becomes one of the main criterions for most of the stakeholders of
Honda Automobiles. The management of Honda Automobiles is renowned for its supplier
selection process as it engages the renowned solution providers that help to choose the best
suppliers for the business (global.honda 2019). This process chosen by the management of the
business thus significantly reduces the production costs and improves the production capacity of
Honda Automobiles. The management of the company always wants to identify new suppliers in

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order to gain a cost advantage over other suppliers in the market. Honda rewards the deal to that
particular supplier who offers a standard price and offers top notch quality products for the
production process. Apart from this the most important transformation of the Honda company is
the change in its marketing strategy. The shift of the management of the company from the
traditional advertisement perspective and the use of the most modern forms of advertisement
campaigns is really one of the most important for the business organization (global.honda 2019).
The present criterion for the selection of the suppliers is mostly oriented by the capacity of the
suppliers. The selection process of the suppliers for Honda is so effective and tough in nature
that it brings out the best in improving the supply chain of the business organization. The
suppliers are generally expected to develop a proper strategic pool amongst the existing set of
supply pool of the organization.
Figure No 2: Supplier Selection Process of Honda
Source: (Govindan Soleimani and Kannan 2015)

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The management of Honda has its task cut out while managing the suppliers of the
business. The increase in relationship amongst the suppliers of the company and Honda will
provide a large number of different opportunities for the growth and the expansion within the
Honda network (global.honda 2019). Through the commitment to purchase raw materials from
the suppliers, the management of Honda also provides opportunities to these suppliers to supply
their products to their manufacturing locations worldwide which further helps to enhance the
relationship of the companies and favors the retention of the suppliers. The following
management technique is unique to Honda and has helped it to be one of the largest automobile
makers of the globe.
Supplier Management and Development
Honda’s main goal is to achieve a sustainable society across the supply chain of the
company. The management of the company implements different types of initiatives with
consideration for the environment, safety, human rights amongst the others. The company
generally defines all the concerns and the needs of the organization to the suppliers and then
buys the products only when the products offered by the suppliers meet the exact demands of the
organization (global.honda/sustainability 2019). Based on the philosophy of Honda, the
Company established the purchasing belief along with three different purchasing principles. It
also engaged in business that is quite fair as well as equitable with transparency. The company
also follows the purchasing code of conduct while buying different kind of raw materials needed
in the production process from their suppliers. The company has established an international
purchasing organization to facilitate easy purchase of raw materials. This organization helps to
establish local purchasing offices in locations where the both the suppliers are comfortable to
deliver the product and the manufacturer have their factory located. The three purchasing

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principles are illustrated in the below mentioned figure. The change in the purchasing principles
and the opening of new channels for the suppliers of the business is one of the most important
elements of the business (global.honda 2019). The implementation of the fair and open trade
policy, equal partnership and the increase in the respect for the suppliers will be the new changes
in the set up of the Honda management.
Figure No 3: Purchasing Code of Conduct of Honda
Source: (global.honda/sustainability 2019)
The different kinds of the technological measures include the likes of the implementation and
innovation of futuristic technologies that can change the face of the world as well as help in the
development of the world. According to, Govindan Soleimani and Kannan (2015) the latest
technologies of the organization include the likes of the production of biologically blended fuel
based cars, futuristic vehicles, robotics, robotic technology, futuristic jets and many more as
such. Honda Motors being a global Automobile company has its task out as because the
implementation of technology will involve a good amount of explicit as well as implicit

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knowledge that is essential for the business to gain a competitive advantage in the business. The
management of Honda can easily transfer the tacit knowledge in different kinds of informal
settings generally face to face and therefore requires close ties between different kinds of
subsidiary locations as well as the headquarters. The main forms of barriers that restrict the
company to successfully transfer knowledge are as follows;
 Absence of time
 Absence of proper communication
 Absence of proper culture in the workplace
 Absence of proper organizational structure
Honda Company generally transfers complex technologies across the international borders to
the other firms of the company. The transfer of this technology is mostly concentrated on the
likes of transfer of complex technologies to develop cars especially customized cars suitable for
a particular country (global.honda 2019). The development of Green energy powered vehicles
has now become one of the topmost priorities of the company which has helped the organization
to set out a unique name for it.
Tools for International Sourcing
The different processes that will serve as the Tools for International sourcing are
discussed below;
1. Investment towards Research and Development- Research and development is perhaps
one of the most important aspects of different businesses. Honda Motor Company in such
a case is not an exception. According to, Ahmed and Shaikh (2017) the international
supply chain analysis has analyzed the following developmental process in a proper and

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effective manner and has recommended the use of the Research and Development
process to make the organization more and more developed in nature. The main need for
the investment in the research and developmental process is the changing nature of the
market and the nature of the competition in the market (Ahmed and Shaikh 2017). The
aim of the management will be to strengthen the Toyota production System and
effectively ensure the cost reduction process. The arrival of the electric vehicles has
changed the nature of the market and thus Honda must ensure to carry on a proper and
efficient market strategy to ensure the creation of new and innovative technologies and
vehicles that can easily fit into the use for future generation.
2. Opening New Facilities- The international supply chain strategies have shown that the
management of the automobile company is one of the leaders in the world market as far
as the assembling of the automobiles are concerned (Barchiesi 2016). The focus of the
management on expanding its supplier and production facility bases has helped the
organization to manage the large-scale demands in the best possible manner. The strategy
of Honda to set up production facilities and engage local workforce has been highly
successful. The best success has come from India and Saudi Arabia where the company
has been able to generate huge revenue by producing and selling customized cars.
However, the company currently has a shortfall of production and research centers in
Europe. However, according to the statement of Christopher (2016) the recent deal of the
management with CEVA logistics can help in this cause as the latter company has a
global presence which can be used by Honda to expand its presence in Europe
(global.honda 2019). The company can earn huge revenue from the continent from

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researching and launching new and innovative vehicles which will be used in the future
in different European markets.
3. Launching New Models- As mentioned earlier the automobile market has transformed
into a highly competitive market. The demands of the people and the industry have been
changing within a few days and the companies are finding it hard to adjust to these
demands. The sudden push of the automobile companies towards the research and
development of new models and producing technologically better set of cars and vehicles
is one of the major aspects of future sustainability. The introduction of new and better
models that meets the specifications of the environment and production of cars through
implementation of new and advanced form of technology has to be done by the
management of Honda to ensure success in the future (De Stefano Montes-Sancho and
Busch 2016). The report on Honda’s international supply chain management clearly
states that some of the developmental measures towards becoming environmentally
sustainable have resulted in a decrease of market share of the company by 2% and the
utilization of the resources has been just 70% of its actual strength. Therefore a joint
effort by the management, shareholders and the other concerned individuals can help
Honda to regain the market share and also utilize all its resources to bring in
environmental sustainability.
4. Trade Publications- The presentation of business and trade publications lays out
different kinds of advertisements regarding the different type of the products and the
services that are provided by Honda to their customers. This can be one of the most
essential tools for Honda to search for new suppliers in the business market.

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The location of facilities is a strategic decision that must be closely aligned with the
company’s strategic direction. Part of Honda strategic direction involved focusing on the
assembly of the vehicles and leaving the production of the raw materials to suppliers who
operate as partners with a vested interest in the success of Honda (global.honda 2019). By this
approach Honda has been able to set up production facilities across North & South America,
Europe, Asia and the Middle East Honda assembles at almost 134 productive facilities in 28
countries and has developed 31 R&D centers in approximately 15 countries withdrawing the
potential from above than 140,000 associations worldwide. Honda has focused on decentralizing
their production facilities and more importantly their research and development. It is the
decentralized facilities of Honda that allow them to adapt their vehicles to meet the market
requirements. According to, Barchiesi (2016) the decentralized facilities give Honda the benefit
of flexibility to adapt their vehicles quickly to match the market requirements. Furthermore, by
decentralizing the facilities and setting up multiple facilities across the world Honda can reduce
the cost of transportation from the distribution center to the showroom and pass the cost savings
to the. Honda Canada encountered a marketing misstep in 2018 which made them to lose 12.4%
in sedan cars market share since they chose to rely on positive press and word of mouth instead
of the traditional marketing launch for their Accord launch. Due to lack of research centers inside
Canada to understand the local market and develop strategies which would be recognized by
consumers, the initiation failed (global.honda 2019).
Buying from Global Suppliers
Globalization has been one of the major revolutions in the modern business world. The
globalization of the different industries has changed the way; the organizations operate in the
highly competitive world. Since the beginning of the 90’s the exchanges of intermediate goods