"The Joy of Buying": Honda's Journey to Establish a Procurement Business Partner Honda North America Mathew Daniel, Industrial Equipment Indirect Group Lead Bill Harris, Unit Manager North American Indirect Procurement GEP Chetan Rangaswamy, Vice President, Consulting LL FA R E V N E D 4 1 0 2 I T SU MM www.sig.org/eval Evaluation How-to: Why? How? Option 1: App . Your feedback drives 1. Select Schedule SIG Event content 2. Select Schedule by Day . By signing and 3. Select Day 4. Select Session submitting your 5. Scroll to Description evaluation, you are 6. Click on the Evaluation link automatically entered Option 2: Browser into a prize drawing 1. Go to www.sig.org/eval 2. Select Session (#16) LL FA R E V N E D 4 1 0 2 I T SU MM “Joy of Buying” Honda’s Journey to Establish a Procurement Business Partner Introduction to Speakers Mathew Daniel is currently serving as the CAPEX Category Manager for Honda North America. He began his career at Honda over 20 years ago starting out on the production floor and has since Photo served in a varied of roles within the company's Indirect Procurement organization, including business planning, inventory management and procurement. Mathew Daniel Category Manager, CAPEX, Honda North America Chetan is responsible for leading key strategic accounts for GEP. He has managed multiple, large scale supply chain engagements for many private sector clients and brings in more than 15 years of consulting and industry experience. He has spent most of his consulting career delivering cost-reducing transformation projects in retail, manufacturing and automotive industries. He has extensive experience in helping clients with working capital and cost-driven improvements. Chetan Rangaswamy Vice President, Consulting, GEP Objectives of the BPP Session Questions we will answer • What has been Honda’s recent journey in its pursuit to become a world class indirect procurement organization? • How does Honda define at Business Process Partner relationship? • Why did Honda drive towards a Business Process Partner relationship? • How is Honda and GEP working together to co-create Honda’s future of indirect procurement? Who We Are – GEP Overview Helping our clients with Procurement challenges is what gets us excited. GEP PEOPLE are distinguished by their drive to do better, go further and achieve more for clients. A global leader in procurement services and technology (Gartner, Everest, HfS, Ardent, Hackett, Spend Matters) More than 15 years of experience in delivering sourcing & procurement services Managing more than $50 billion in spend annually Processing over 6 million transactions every year End-to-end eProcurement technology – flexible, targeted, unified, complete Innovative, PaaS-based source-to-pay platform – purpose built for mobile, touch, cloud Large repository best practice workflows, tools and templates More than 150 Fortune 500 & Global 2000 Customers Delivery centers in Europe, North America & Asia, supporting multiple languages ISO 9001:2008; SSAE 16, SOC 2 certified Who We Are – Honda Overview • Honda is the 2nd largest automaker in Japan and the 8th largest in the world • Honda Motor Company was founded in 1949 • American Honda Motor opened in Los Angeles, California on June 11th,1959 with $250,000 in capital investment & 3 employees • The Honda Prelude, which started production in 1978, was the worlds first 4 wheel drive vehicle • Honda began motorcycle production in Marysville, Ohio on September 10th, 1979 • The first Honda automobile rolled out of the new Marysville Auto Plant on November 1st, 1982 … the first Japanese car produced in America • Honda has sold more motorcycles than any other company since 1959 • Honda produces 14 million internal combustible engines … PER YEAR, by far the most of any manufacturer in the world •Today, Honda employs over 25,000 people in the United States, Canada & Mexico, is the 12th largest employer in the state of Ohio and has invested over $300B across its North America since 1979 • Honda North America is now a NET exporter of its products North American Locations American Honda Motor Co., Inc. (1959) Sales & Distribution Torrance, California; Duluth, Georgia Honda Trading America Corporation (1972) Torrance, California; Marysville, Ohio; Lincoln, Alabama & Timmonsville, S.C. Honda of America Mfg., Inc. (1979) Automobile, Engine Production and Parts Exporting Marysville, Anna & East Liberty, Ohio Honda R&D Americas, Inc. (1984) California, Ohio, North Carolina, Florida Honda Transmission Mfg., Inc. (1997) Automatic Transmissions, 4-Wheel Drive Systems Russells Point, Ohio Honda Engineering North America, Inc. (1988) Ohio, Ontario, Alabama, Indiana Honda of South Carolina Mfg., Inc. (1998) ATV and Engine Production Timmonsville, South Carolina Honda Power Equipment Mfg., Inc. (1984) Power Equipment and Engine Production Swepsonville, North Carolina Honda Canada, Inc. (1969) Sales & Distribution Scarborough, Ontario Honda of Canada Mfg. (1986) Automobile, SUV and Engine Production Alliston, Ontario Honda de Mexico, S.A. de C.V. (1985) Automobile, Motorcycle & Parts Production El Salto, Estado de Jalisco, Mexico Honda Manufacturing of Alabama, LLC (2001) Minivan, SUV, Truck, Automobile and Engine Production; Lincoln, Alabama Honda Precision Parts of Georgia, LLC (2006) Automatic Transmissions for Honda Manufacturing of Alabama, LLC Tallapoosa, Georgia Honda Aero, Inc. (2004) Parts Procurement and Production Preparations for Aviation Engine Business Reston, Virginia Regional Headquarters GE Honda Aero Engines LLC (2004) Manufacture and Sales of Compact Turbo-fan Engines Sales & Distribution Cincinnati, Ohio Honda Aircraft Company, Inc. (2006) Research and Development Development, Sales Promotion and Production of the HondaJet Greensboro, North Carolina Production (parts included) Honda Manufacturing of Indiana, LLC (2008) Automobile Production Jet Business Greensburg, Indiana Honda is a Global Mobility Company! U3-X Personal Mobility Device Automobiles UNI-CUB Personal Mobility Device Walking Assist Device Motorcycles Recreational/ Utility Vehicles HondaJet Lawnmowers Our Founder – Mr. Soichiro Honda • Born in 1906 near Mount Fuji in Japan • Spent his early childhood helping his father with his bicycle repair shop • At 15 years old and without any education, he left home for Tokyo in pursuit of work, serving as an automotive mechanic for six years • In 1937, Mr. Honda founded the Tokai Seiki Co. to produce piston rings for … Toyota! • After his two Tokai plants were destroyed during WWII (one by a US bomber and one by an earthquake), his salvageable assets were sold to … yes, Toyota … for ¥450,000 • With that money, he founded the ‘Honda Technical Research Institute’, which was a failure and liquidated after a few years for $5,000 USD • Close to bankruptcy and recognizing he lacked critical business acumen, he partnered with Takeo Fujisawa and started the Honda Motor Co., Ltd. in 1948 Hondamentalism … Embrace Failure https://www.youtube.com/watch?v=yn9Ayif3Qpc Honda Philosophy - The Three Joys • Buying - Achieved through providing products and services that exceed the needs & expectations of each customer • Selling – Occurs through the development of relationships with a customer based on mutual trust • Creating - When Honda associates & suppliers involved in the design, development, engineering & manufacturing of our products recognize a sense of joy in our customers & dealers “These three kinds of joys embody our company philosophy. All my energy is devoted to realizing these joys. I count on all of you to remain true to these values every day in your work, without ever compromising them.” - Soichiro Honda Honda’s Journey to a World Class Indirect Procurement Department “We knew were we wanted to be, just did not know how to get there” 10 Groups of North Honda decides it needs American Indirect a BPP, not a BPO 2 Procurement Leaders 15-member team to evaluate Procurement BPOs 7 4 1 After a 12- month search, 5 shortlists a Honda announces SAP ERP single BPO implementation globally provider NA Procurement 3 subcommittee starts 6 benchmarking other companies Honda Senior Leadership rejects the BPO Honda’s Journey to a World Class Indirect Procurement Department “We knew were we wanted to be, just did not know how to get there” NA Procurement leadership backs a Dec new concept to retain the “Joy of Buying” 2013 to Operational Mar Procurement vs 2014 Mar Discovered a wide Category 2012 range of Procurement Management Services available Maturity with suppliers Awareness within Honda Apr that it lacks 2014 Category Jan 2013 Management Oct RFP capabilities 2012 issued Honda and GEP Feb 2013 partnered to build a Oct world-class indirect procurement 2013 organization GEP demonstrates significant Reviewed Aug ROI on BPO, NA Procurement Capabilities of 2012 wants to retain “Joy of Buying” 8 Suppliers Readiness to Aug enhance Category 2013 Management capabilities Selecting the “Right” Partner During the 18-month solicitation process, Honda searched for a partner that had the following characteristics: • Broad range of services, including advisory, outsourcing and technology • Strong capabilities in: • Advisory to assist with organizational design and process re- engineering, etc. • Market Intelligence that was tailored to specific business challenges vs. generic reports • Procurement Technology that could bridge its existing challenges and future gaps • Flexibility to evolve offerings while customizing them throughout the relationship • Partner that could scale up quickly,