10/30/2009 A Competitive Edge | Aamir Chandio, Hasan Tariq, Maniya Khan, Nida Shabbir, K. U. B. S ’2010| | OPERATIONS AND PRODUCTIONS| ACKNOWLEDGEMENTS We would like to pay gratitude to the entire group of Atlas Honda for giving us their precious time to provide us with valuable information of each department and we also like to thank our group members for putting in all their possible efforts and time in understanding the relevant information on the entire Production Process, and in preparing the report on it. It is our honor to present gratitude towards our Professor, Dr.
Yaseen for providing valuable advice and guidance throughout the entire work, without which this task would not have been possible. October 30, ? 2009 Table of Contents ABSTRACT5 MARKETING DEPARTMENT:-5 PRODUCTION PLANNING & CONTROL (PPC) DEPARTMENT:-6 VENDOR PROCUREMENT:-7 COMMERCIAL:-7 LOGISTICS DEPARTMENT:-8 QUALITY ASSURANCE DEPARTMENT:-8 DELIVERY CONTROL CENTRE (DCC):-9 PRODUCTION:-10 ASSEMBLY:-10 COMPONENT:-12 MAINTENANCE:-13 HUMAN RESOURCES:-14 INFORMATION TECHNOLOGY:-15 EXPORTS:-16 CONCLUSION16 October 29, 2009 Aamir Chandio, B. S (VI), K. U. B. S ‘10 K. U. B. S; University of Karachi Mr. Rahimullah Shah,
Manager Human Resources, Atlas Honda Ltd. SUBJECT: Term report on the Operations and production of Atlas Honda Ltd. Dear Mr. Rahimullah: Attached is the report that we were to submit after the study program of Atlas Honda related to our term project. Our approaches to the research involved doing a primary research which included touring the plant and understanding the operations of the all the functional departments of Atlas Honda, focusing on the operations, processes and improvement areas of the latter and critically analyzing possible innovations that could be brought in to further strengthen its operations.
The report, as directed by our professor, Dr. Yasin Malik, focuses on the cost saving possibilities in the operations of Atlas Honda and possible innovations and improvements which would help Atlas Honda achieve its Organizational goal and get an edge over competition. The exports prospects are also discussed in this report. We hope that this report proves a valuable asset to this organization. As a group, we found the research very interesting and enlightening. Thank you for the opportunity to broadening our vision through our research in the best of professional environment. Sincerely Aamir Chandio; Hasan Tariq; Maniya Khan; Nida Asim) B. S-(VI), K. U. B. S University of Karachi ABSTRACT The purpose of this study is to analyze the core processes and identify where innovations can be brought in to improve the processes. The study comprises of the Marketing Department, Production Planning and Control, Vendor Procurement, Commercial Department, Logistics, Quality Assurance, Delivery Control Centre, the Production Department, the Maintenance Department, Human Resources and Information Technology. All the departments are discusses in a sequence describing and discussing its functions and roles in the process system.
At the end, Export prospects are touched where Atlas Honda’s current exports are disclosed and future potential is discussed. MARKETING DEPARTMENT:- “MEIN SE HONDA HE LE SAAN” This slogan indicates the amount of work done by the marketing department. Atlas Honda provides with good quality motor bikes at competitive prices and good amount of durability. With a strong network of 350 Dealers throughout Pakistan, the target is to cater the rural area that usually focuses lower middle & middle class which comprises of 60-65% of the entire market share.
The Marketing Department analyzes the potential market and creates the demand for the product. Atlas Honda even takes part in societal marketing where it sponsored the training of first female traffic wardens who are functional in Lahore. Also Atlas Honda worked to reduce the blow of street crime with other insurance companies but the insurance companies bailed out due to the intensity of the cases and claims. Suggestion:- * Not many advertisements are seen on television specially, the top of the mind recall strategy may be failed in such a manner. Many people are not even aware that Atlas Honda possesses such a great share in the market.
Moreover, this sudden burst in demand due to favorable prices for farmers’ produce this year was not foreseen by the marketing department due to which, Atlas Honda had to come up with on the spot changes in its Production plan. This abrupt increase was also not accommodated by the local vendors causing shortages every now and then because of non-availability of a certain component. Therefore, better insights into the farms need to be worked upon where it can be made sure that the predicted demand is in accordance with the quality and the state of the crops coupled with government policies prevailing.
As the current government tends to support agriculture, it can be safe to assume that the farmers will continue to get incentives in the near future, eventually causing an increase in demand. PRODUCTION PLANNING & CONTROL (PPC) DEPARTMENT:- PPC Department is responsible for the production planning while controlling it. It receives inputs from the Marketing department and runs Material Resource Planning which breaks down the schedule of materials to be used, bought and produced by all the Shops. SAP operating system is very important for PPC as it is highly integrated and has reduced the work load.
However, the workflow is not smooth completely and that’s the reason why the need of PPC department is still necessary. The inputs from marketing and sales forecast are done on yearly, monthly and weekly basis which are thus managed by the PPC department. Tasks carried by PPC * In house production * Spare parts planning * Export Suggestion:- The capacity should be increased so as to expand in the foreign market. VENDOR PROCUREMENT:- Marketing department creates and estimates the demand. This demand is then spread in all the departments including the vendor procurement department.
It is actually a part of the supply chain which ensures the supply of parts from the local vendors. The judgment criteria for vendors is QCDR (Quality Cost Delivery Reliability) If any of the four elements are not present, the vendor would be changed. This department runs the MRP and takes out the demand schedule from SAP through which they get their purchase plan and make their purchases according to this plan. Safety Margins of 5-8% are ensured while ordering consignment to vendors. The problem which Atlas Honda currently faces is a sudden boost in demand which has led to abrupt decision making and sudden increase in the production plan.
These abrupt changes in the production plan were not accommodated by the vendors because they work on a daily basis and do their hiring on a daily basis and because of the recession. The vendors are not big enough to variate their output to that extent resulting the Vendor Procurement Department to go extents in ensuring the availability of parts supply despite which, certain parts get unavailable causing lines to discontinue. Therefore, to avoid situations like these, Atlas Honda must engage more Vendors in times of emergencies and developing them to bring them at par ith the Quality standard of their finished product. Suggestions:- * To increase and develop the standard of vendors. * To bring vendors to Just-in-Time. * Separate time allotments to vendors. * Help the Vendors maintain their information system so as they can ensure the availability of parts in accordance with the production plan. COMMERCIAL:- The processes involved in the Commercial Department consist of the following steps:- a. Commercial department starts the process with planning which is either Miscellaneous (tools, chemicals, oils etc) or Regular planning. b. Order is placed. c.
Sales contract is sent by the supplier. d. Letter of credit is made. It provides protection to the buyer and supplier. It is backed by International Chambers Of Commerce. e. Then supplier arranges the shipment. f. Advance document is sent by supplier to the company. It includes invoice and bill of lading. Suggestions:- The department needs the implementation of SAP to increase the efficiency and moreover, the Lead time of 6 months to import raw materials also needs to be reduced through more efficient handling of all the documentation as the shipment only takes about 12 to 15 days. LOGISTICS DEPARTMENT:-
This Department is also known as the supply chain department. Supply Chain is the backbone of the company which deals with the procurement, logistics and purchase. * Purchase: Includes the indirect parts used in the production process (dies & tools) 1. Local Vendors (local market) 2. Local Vendors (foreign market) * Procurement: It includes the directly used parts in the production process which are bought through vendors. An agreement is made where every month supplies are ensured through Quality Audit Vendor which ensures the quality of the parts being used in the production process. Logistics: Department is responsible for the local market only. It ensures the supplies by roads, by air, and by train. Suggestion:- * The manual purchasing system should be made automatic so as to increase the efficiency of purchase. All the vendors must be developed to be able to use the integrated system where they can have their own portals. QUALITY ASSURANCE DEPARTMENT:- It is responsible to deal with the health, environment and quality assurance. The most important contribution made by this department was to introduce Kaizan which is known as ‘Alamayar’ in the company that helps motivate workers.
By introducing Quality Circle: 1. Productivity enhancement 2. Health 3. To innovate Both, the in-house and the out-house vendors (local & foreign) are inspected by the quality assurance department which includes a) process quality, b) parts quality. Likewise, the new model development which includes the designing of the product is done by the department. QAD is interlinked with the R&D Department and the Production Department for the developing of then producing the product. Suggestion:- * The QCC must control the scrap coming from Production.
Ample material can be saved from qualitative handling of the steel sheets. Through the QC Circle, workers, who are closest to the task must come up with innovative ideas to minimize the scrap as much as possible which might include co-ordination from the product development where the size of the product can be variated to save the material cost. DELIVERY CONTROL CENTRE (DCC):- A kind of transit role is played by DCC; materials are being received and dispatched to the stores. Type of stores: 1. Complete Knock Down (CKD) Store: Receives imported parts known as CKD from different countries. . Raw Material Store (RMS): Focus of Steel Sheet, Pipe, Strip, Aluminum Ingots, Paints & Chemicals, Consumable Items, Maintenance Items (gauges, machine spares) to meet the break down. 3. Press Part Shop (PPS): Receives in-house parts from shops & vendor parts from DCC & prior to issue, it is sent to Welding, Paint Shop and is finally dispatched to SKP plant through DCC (KHI). 4. Delivery Control Centre (DCC): Receives Motor Cycle parts of all models from vendors, in-house, stores & other concerns & dispatches parts to SKP & KHI line according to production plant. . Rejection Part Store (RPS): It’s a central point of rejection, receive from all shops of KHI & SKP plant & ensure their timely rejection. Suggestion:- * More space should be made available or work on the extending strategy so as to achieve the real purpose which is halted due to limited space. * Due to complexity of the materials received by DCC, the channel of distribution of these materials is complicated and leads to wastage by motion. There is too much circulation of the components within the DCC Stores.
In the PPS for example, raw material is received for processing which is sent back for shipment to SKP. If all the Shops could be given the autonomy to enter the transfer their product to the Logistics directly and update the system accordingly, this would reduce the functions of DCC which can just analyze what shipment of the material is to be sent to SKP and what to be received from SKP and delegate the processed components to the Shops. PRODUCTION:- TQM is a management approach of an organization, centered on quality, based on the participation of all its members and aiming at long-term success.
TQM requires that the company maintain this quality standard in all aspects of its business. This requires ensuring that things are done right the first time and that defects and waste are eliminated from operations. This department is the heart of Atlas Honda Ltd and applies this Japanese concept of management. All the departments function in compliance and there is a common focus towards the Production Department. Their main is to keep the line going. Production Department has two sections namely Assembly and Component Section.
All the processes are innovated from time to time to save on costs. On the spot actions are also taken to prevent wastage. Their process and product standards are in accordance with ISO and improvements and revisions are made every now and then. The strength of the Production department is their openness to constant process changes. ASSEMBLY:- a. Press Shop; b. Die and Tool Shop; c. Welding Shop; d. Paint Shop; e. Engine Assemble Shop; f. Frame Assembly Shop; g. Buffing Shop;
The Production Planning and Control runs the Material Resource Planning through SAP which generates different orders to different shops as to how much materials are to be received from the preceding department and in what form and how much are to be forwarded to the next department, updating the system accordingly. Press Shop:- Manufacturing of the Frame body, fuel tank are produced. This Shop uses raw steel sheets and presses them and molds them into the fuel tanks and the frame body. Welding Shop:- The frame body, fuel tanks are welded together.
To form a complete output ready to be painted. The Welding Shop also processes mud guards for CG 125 and is sent for chroming to the Buffering Shop (which is later shipped to SKP). Paint Shop:- The Paint Shop processes these fuel tanks and frame bodies further where they are painted and vinyls are stuck on a complete fuel tank and frame body ready to be assembled. Engine Assembly Shop:- The Engine components are assembled here into the final engine to be assembled. Frame Assembly:- The final stop of the final product, all the finished parts are assembled here and tested.
Die & Tools Shop:- This is the servicing shop and looks after the machinery which presses the upper and lower fuel tank together. It is also responsible for the tools used in the machinery. Parts which get rejected during the production process are also recorded in SAP. These rejections are controlled and a minimum target percentage is set to see whether more has to be focused on controlling the rejections. Some rejections are also reworked upon however they reduce the productivity of labor. Cost is also controlled with a minimized use of consumables.
At the end of every line in every shop, there are supervisors who try to manage the workers who are treated as inspectors themselves. It is believed that they won’t make any mistake however there is a final supervision at the end of every shop which makes sure that there are multiple checks and inspections of a part before it reaches the final assembly line. COMPONENT:- a. Die Casting; b. Drum Gear; c. Fuel Cock; d. Hub Machine; e. ACG Shop; f. Switch Assembly; g. Ignition Coil; Die Casting:- This department produces parts for fuel cock, fuel lever, handles which contains clutch and switches.
Components made here are also sent to the SKP plant for other models which are produced there. Drum Gear:- Important engine parts are made here. The material which this department uses is imported from Japan. This component was imported earlier from Sumi Tech in Japan but is now being produced locally. Fuel Cock Assembly:- Component which controls the supply of fuel in the motor bike is assembled here. This component was earlier imported in its finished form but is now being locally produced. Though the material this shop uses is imported from Japan in the form of steel bars which is further processed.
The final inspection is done at the end of the line where the quality is checked within the department. Hub & Panel Assembly:- Another component, on which the wheel rests is received from the vendors and are processed here. Final output of this shop is both sent to SKP for CG 125, 100 and Delux models and to Karachi plant for in-house production. Alternate Current Generation:- It is the component which starts the engine. It provides current during the process of start-up and works as a generator which charges the battery.
Atlas Honda set up this facility in collaboration with Denso in Japan which provides the technology for this component to be made locally. It was imported earlier. CG 125 ACG is under process to be made in-house. Switch Assembly:- This shop assembles the electric switches received from preceding shop. Ignition Coil:- Set up with the technology provided by Toyo Denso, this shop produces the ignition coil of the motor bike. It was earlier imported but now can be produced locally. The Component Section is comparatively newly established and there is still room for more innovations as Atlas Honda plans to rely less on costly imports.
Most of the parts which were previously imported are now being produced by the Component section providing the Assembly with less costly locally produced components without compromising on the quality which is the motto of Atlas Honda. Process rejections for Component Section was some what around the targets but it incurred high costs in the month of July because of shortages of labor due to absenteeism and overtime costs. Workers on all of the plant are multi skilled so there is work flow continuity. To minimize the monotony coming from specialization, Job Rotation takes place every 6 to 8 months.
Workers receive their targets on a daily basis which are reviewed on a quarterly month basis; through which appraisals and promotions are determined. MAINTENANCE:- * Maintenance is basically a Service Providing Department. * It keeps a check on the wear and tear and operating cost of the machines. This information helps the Finance department make their decisions. * Maintenance management Information system (MMIS) serves as the backbone of this department by providing all the necessary information at the click of a button. * MMIS provides the corrective as well as preventive measures to the department .
Suggestions:- * More skilled workforce which can help reduce break-down time. * Downtime needs to be reduced to 56 hours (currently it is 72 hours on average) Some what more co-operation with the production department to increase the efficiency of machines by maintaining them on time and take preventive measures before the machines actually break down. HUMAN RESOURCES:- The Human Resources Department of Atlas Honda has the responsibility for Recruitment, Selection, Appraisal, Payroll, Attendance, Compensation & Benefits and Compensation of the employees.
Through Registration with Ala Mayar activities, The H. R Department has designed and presented its process innovations which have helped them with accurate estimation of the employees’ Appraisals. It is also responsible for training the workforce which had led to a multi-skilled labor throughout the plant and has eradicated the dependency of the production on one worker. As the majority of the workforce of Atlas Honda consists of unskilled labor who work on the assembly line specializing in one particular task, there is a huge possibility of them getting uninterested in their task.
Though this has not led to a fall in the productivity level as shown by the productivity charts of different shops, this monotony surely affects the job satisfaction of the workforce which was even verified from a couple of workers in different Shops. Atlas Honda’s strength is its highly motivated and loyal employees who consider their jobs as secure and almost all the workers we met have been rendering their services to the Organization since almost a decade. This loyalty has further been reciprocated by Atlas Honda’s considerate attitude towards their employees in the recent global recession.
The labor employed in the Shops have targets and have the autonomy to relax and refresh on the plant if he has finished his work. Moreover, what the H. R can do to improve the productivity and motivation amongst all the teams of different all the shops, is that it can set higher than usual targets for every shop and propose to treat the whole team which completes it in the least time, with a picnic or some sports or other recreational activities. This might add to the cost but will be compensated by the higher level of production.
The frequency with which these competitions would take place can also be adjusted as per the budget of the organization. Moreover, the H. R must ensure the best worker safety throughout the plant. The workers are provided with all the consumables but they are not using it mainly because of discomfort. Earplugs, face masks etc are provided to them but are not is use. They might have become immune to the noise or harmful gasses in the paint shop but this would reduce their work life in the long-run. The H.
R department must implement the use of such consumables for the workers’ benefit even if it causes discomfort. INFORMATION TECHNOLOGY:- The backbone of all the processes of Atlas Honda, the Information Technology Department maintains the Information Systems and connects the whole organization to a common network managed through SAP and Oracle. IT’s role is to enable the system as per requirements of the organization and maintaining it. When the business requirement change, the system is upgraded accordingly and it is the enabling facilitator.
IT is a part of the business and does not sit on the fence. It plays a part in suggesting how a problem should be solved and how IT can further help in the improvement of business processes. With the advent of IT, the working capacity of an organization has been increased multiple folds from a maximum 24 hours a day to 2400 hours a day. The IT Department has reduced the time between the Orders placed to vendors till the finished product is dispatched in the market.
SAP integrates the Material Management, which runs the Material Resource Planning and assigns how much parts are to be produced, purchased and forwarded to the next stage of production (this ensures strong compatibility between the physical process and the system i. e. , the data matches perfectly with the physical condition); Production Planning, which assists the PPC Dept. with their yearly plan in accordance with the demand of the product; Finance Dept. , Costing, Sales and Distribution and Quality Management. The IT Department of Karachi also feeds the Data banks of Multan, Rawalpindi, Lahore, SKP and Rahim Yaar Khan.
This strengthens the network of the organization nationwide through which, Production and Material planning is managed more effectively. The Raw Material stores of the Khi and SKP plant for example, can fulfill each others’ shortages interchangeably and save the cost of purchasing more tools etc. The Plant Maintenance Department and the Commercial Department of Atlas Honda is run through Oracle and is not integrated with SAP yet. This causes problems for the Commercial Department which needs atleast 6 months of lead time for importing parts.
Without adequate integration, the Commercial Department cannot facilitate from the services of MRP run through the system and have to maintain their information system separately on Oracle. Moreover, Atlas Honda does not have its Business Information Warehouse (BIW) which means that there are oceans of Data available but not BIW to access the relevant data and for people to use it effectively. The IT department realizes this and has its Process Integration in the pipeline which plans to integrate the data of two different languages into one.
The IT department also suggests they track their consignments through GPS which can reduce the slackness of truck drivers and thefts and orders can be fulfilled in the least possible time. Moreover, Atlas Honda manages its Customer Service through their website and is also working on enabling the dealers place their orders online. Not only this would help reduce the time the final product reaches the market, it will also help in planning the productions as the exact demand can be estimated direct from the market.
The IT Department also has the development of a BIW which was delayed because of cost constraints. EXPORTS:- Export planning is carried out by the Production Planning and Control Department. Currently there are 400 monthly exports to Afghanistan and Bangladesh. The major competitor of this market is India with a huge product range which leaves less room for Atlas Honda to enter. Moreover, there are capacity constrains due to which Atlas Honda cannot bring in new models. Another major factor for fewer exports is a huge local demand.
With current capacity, Atlas Honda is able to satisfy local demand sufficiently which leaves less room to target international market which is already governed by India. What Atlas Honda can do, is to target the Spare Part market. As more and more finished products are released into the market, Atlas Honda can innovate in such a way which would make their spare parts compatible with most of the products available world wide. Through their Spare Parts, they can gain access to a large market catered by none. CONCLUSION
With a strong cross-functional coordination between all the departments, Atlas Honda aims to cater its customers in a qualitative way which no other competitor is and was able to do so. Even in the world wide financial crunch, Atlas Honda did not compromise on its quality and continued to be persistent with its operations strategies which enabled them to survive it without losing single of their permanent loyal workers. Though Ala Mayar activities, all the Departments ensure that qualitative processes systems are implemented in the organization which enables Atlas Honda achieve its organizational goals most effectively.