Reference no: EM131985445

Procurement management - Procurement Policy of Honda

Reports that Honda is reviewing its parts procurement strategy and, in a bid to cut costs, will be reducing the number of parts it buys from developed countries from 90% to 60%, applies only to the company's Japan region - one of six regions under which it organizes its global operations. The move does not apply to procurement in the company's other regions, as some reports this week have suggested. Commenting on the North America region, American Honda Motor spokesman Ed Miller said: "There is no change in our long-held strategy. In North America, we seek to proactively source parts locally [and] there has been no change in our fundamental approach of purchasing parts here."

American Honda has more than 600 tier one suppliers in North America, with about 525 of them being in the US (34 states, led by Ohio) and most of the rest in Canada. A spokesperson for the Japan region told reporters this week that the company will be increasing its sourcing into Japan from emerging markets such as China, India and Brazil.

Last October Honda started importing engine components to Japan from its joint venture operation in India with Siel Group - Honda Siel Cars India, based in Rajasthan - for domestic production of the Jazz. The move, which included the export of 54,000 sets of crank-shafts and connecting rods, brought HSCI into Honda's pan-Asia supply chain network. Cost cutting measures are being pursued in the US, meanwhile, as seen when the company took measures to reduce logistics costs at its Lincoln, Alabama plant last year by bringing parts assembly work in-house.

Questions:-

A. Examine the model of procurement of Honda.

B. Critically analyze the advantages of the procurement strategies of Honda.

C. Elaborate on the role of technology in strategizing the purchasing function?