Production Sales Interface: MPS at Hyundai Motorpresented by:-DIXON DOMINIC PALETTISHAN PARASHAR

Main purpose……

Illustrating how a large automobile company addresses the interface problems between the manufacturing and sales departments.

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

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

HMC Objectives And ChallengesShort 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

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

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

Planning at hyundai Long Range Planning

o Next 5-10 yrs.o Analyze long term trend of industryo Top management’s long term vision

Annual Business Planningo Next 12 monthso Expressed as monthly sales vol./model typeo Corporate Planning Departmento Reviewed twice a year + monthly revision MPS process

Short Terms Production Planningo MPS (next 8 months) + daily production schedule + weekly production

scheduleo Sales and production department interface critical

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

Timeline

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

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

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”

Thank You!