2. Main purpose……
Illustrating how a large automobile company addresses the interface
problems between the manufacturing and sales departments.
3. Industry Characteristics
Mature industry
50 million automobiles produced worldwide
Traditional theories:- “make to stock”
Allowing choices for customers is a critical competitive element
Production planning problem:- combination of a large vol. production
requirement with a large variety of “make to order” requirements
Conflict between production and sales department
4. Hyundai Motor Company
Established in December 1967; assembled imported knock downs from Ford
Motor Company
By 1975 became first Korean automaker with integrated manufacturing
facilities
Current Capacity:- over 1 million passenger cars/year
Employees:- 40,000 (incl. 30,000 production workers)
Market Share:- 40% in Korea and 2% in USA
Oversea sales 40% total sales
3 wholly owned subsidiaries in USA and Canada
5. HMC Objectives And Challenges
Short Term Objectives
Deliver automobiles to customers on time
Minimizing inventory
Reducing production Costs
Resulting Challenges
Delivering within 7 days ( popular & domestic ), 15 days ( unpopular
& domestic ) and 45 days ( export )
Not exceeding 7 days ( 4 days ) worth of inventory, no dealer
inventory (direct customer delivery)
Maintaining cost effectiveness and production flexibility
6. Sales v/s Production
Difference between capacity and sales requirements
Competing requests from domestic and export sales departments
Shortages and excess of inventory due to schedule changes
Schedule changes due to new product introduction
Coordinate any schedule adjustment requests
7. Solution....
PRODUCTION/SALES CONTROL DEPARTMENT (P/S C)
1986
Objective : Mediate conflicts : Manufacturing & Sales & Purchasing dept.
7 staff members : Manager directly reporting to VP – Manufacturing/ GM
Ulsan plant
8. Planning at hyundai
Long Range Planning
o Next 5-10 yrs.
o Analyze long term trend of industry
o Top management’s long term vision
Annual Business Planning
o Next 12 months
o Expressed as monthly sales vol./model type
o Corporate Planning Department
o Reviewed twice a year + monthly revision MPS process
Short Terms Production Planning
o MPS (next 8 months) + daily production schedule + weekly production schedule
o Sales and production department interface critical
9. MPS Developing
Monthly time buckets on an 8 month rolling horizon basis
Foreign material suppliers:- confirmed order 4-6 months prior to
production + 2/3 months forecast
Domestic material suppliers:- confirmed order 1 month prior to
production + 1/3 months of forecast
Paint orders:- 3 month horizon
Internal production planning:- 1 month schedule + 1 month forecast
12. Updating the MPS
Done at P/S C meeting or at specially called meeting (called to
address suggested change in MPS due to significant shift in
demand)
According to policy guidelines with consideration to capacity
13. Problems Faced
Structural
•Important issues not
adequately addressed
•Lack of well defined authority
•Lack of well defined policies
or precedents
•P/S C Staff didn’t have formal
training
•Developed plans on manual
basis; little time to focus on
other issues
Environmental
•Unexpected success in in
North American market;
heavy burden on production
vol. and freq. of schedule
changes
•Unexpected explosive
demand in Korea for Sonata;
delivery date extended
•Severe labor problems due to
labor unrest in Korea (1989-
92)
Behavioral
•Preliminary meeting proposal
was frequently changed;
confusion, frustration and
demoralization
•Major difference in position
taken by area representatives;
top management
responsibility
•Responsibility of developing
and providing best data on
P/S C
•Final decision swayed by most
vocal person/department in
meeting
14. Verdict On P/S C
“Although there are some problems that must be addressed, the
process is working fairly well and people involved in the process has
done a wonderful job under the difficult situation”