How Honda's Global Supply Chain Improves its Inventory Control
Inventory Reduction Report, Issue 12, December 1998

Honda Trading America Corporation (Marysville, Ohio), in 1993, recognized that to support its growth opportunities and meet its strategic objectives to become a complete global supply chain organization, it had to gain better access to its information. Its most pressing issue was the management of the entire steel and aluminum supply chain. According to Greg Norval, senior manager, accounting / administration, there were "four crucial events that had to be met for the supply chain to be considered a success."They were:

• Inventory had to be completely visible throughout the system.
  Steel and aluminum is received directly at Honda of America Manufacturing, Inc. or as many as five different processing centers (for slitting, cutting, stamping) and 30 to 40 sub-assemblers. "Operating in a tight delivery environment, Honda Trading must be assured that inventory is available to meet demand throughout the supply chain while maintaining minimal floor inventory,' Norval explains.
• Steel and aluminum have to be tracked and costed through slitting, cutting and stamping at the processors.
  The system has to provide comprehensive transformation audit trails with a history of the converted product back to the plant. In fact, every steel piece and part has to be tracked back to its original steel coil for complete quality management.
• Waste resulting from slitting and cutting at the processors had to be visible.
  "To efficiently control finished costs through the entire transformation process, tracking the costs related to the waste and recycling the scrap had to be managed within the software solution selected," he describes.
• Maintaining integrity of inventory cost at the SKU-level.
  There was also the critical requirement to report raw material inventory cost as it moved through its various transformations.

Other needs also required from the supply chain management software solution. Honda Trading America also had to consider its export/ import needs. "We needed a system that allowed us to upload and track multi-line orders, often greater than 1,000 lines, validate the information, and prepare all export documentation," Norval offers. Operating in a global trading environment, the company required a system that supported multi-languages for documentation and multi-currency for accounting purposes.

Further, the solution also had to have a solid integrated accounting system. "The proper solution would provide us with the ability to balance our accounts quickly so we could pass accurate information to other enterprise wide systems at our business partners."

Honda finds solution at small niche software developer, Blinco Systems Inc. For the supply chain management implementation to be successful Honda Trading had to support its steel procurement and inventory management group; its metals, plastics and recycling group; its import and export department; and provide complete cost control throughout the system.

After an in-depth search and review of potential solutions, Norval reports the team decided to partner with Blinco Systems Inc. (Toronto). "The company demonstrated to us a significant expertise in international supply chain and logistics solutions," Norval declares. "And a review of its 3rdwave software convinced us it was adaptable to the rigors of Honda’s environment." Additionally, he offers, "Blinco’s representatives exhibited a quick and comprehensive understanding of our current and future requirements.

Honda/Blinco collaboration achieves primary objectives. Edward (Ned) Blinick, vice president, Blinco Systems reflects, "3rdwave's fully integrated core solution provides a comprehensive enterprise-wide foundation that could be customized to meet Honda Trading's specific needs."

For instance, the core solution of purchase order management, traffic control, inventory management, sales order processing and accounting modules touched on Honda's main business processes. "The solution also provided us with gateways to automate communications with our suppliers, customers and other corporate systems," Norval describes. "Through the collaboration with Blinco's development team, we have been able to achieve all of our primary objectives, he reports.

Inventory clearly visible throughout the process. Today, Honda Trading is able to closely match its supply and demand requirements. With 3rdwave providing complete inventory status throughout the global supply pipeline, Honda Trading can "immediately" determine availability of inventory to meet demand.

Working closely with its processors, Honda Trading gathers demand data within the software, analyzes it, and drives its purchase order to mills. "This process ensures that the right product is produced and delivered according to actual demand needs," Norval explains.

EDI receipts of ASNs (advanced shipping notices) from its suppliers streamlines Honda Trading's receiving processes. "This virtually assures the accuracy of inventory throughout the supply pipeline," he notes.

If delivered to a processor, 3rdwave monitors the inventory derived from the parent, its waste and its cost. "Providing visibility into the status of inventory through the transformation process insures that delivery to Honda of America Manufacturing and its tier one suppliers are met according to its tight JIT programs," Norval insists.

Benefits realized in related supply chain activities as well. With the software's integrated purchase order management, sales order management, documentation, traffic and accounting modules, Honda Trading has full visibility into the status of domestic, export and import orders.

For instance, the company has been able to increase the accuracy and dramatically streamline the time required in documentation preparation for its export business. A process that took days to complete is now accomplished in several hours.

With 3rdwave, Honda Trading generates the proforma invoice, commercial invoice, packing lists/ manifests, bills of lading and other documentation in multiple languages, as required.

In addition, the company has achieved its accounting objectives. "Maintaining accounts in the currency of their transaction and being able to mediate exchange rates against the U.S. dollar provides us with accurate account statuses," Norval details. In addition the system provides complete exchange rate profit and loss analysis.

"With the complete cost integration within 3rdwave, we're also able to balance inventory costs with the general ledger and analyze any variances quickly," he explains. "We now close our books within days of period end to provide more timely accounting reporting." Norval adds, "Since we now have access to accurate information in real-time, we're better able to support the functional needs of our operators and the strategic requirements of management." The new solution ensures that accounts are in balance throughout the system with complete audit trails. "The information we report across the system now has full integrity," Norval declares.

For related information, please go to:
3rdwave MTD (for Metals Trading and Distribution)
3rdwave CGD (for Consumer Goods Distribution)
Honda Trading America Case Study