Honda and Ford production reorientation will have major long-term implications for their logistics

The announcement of the closure of production lines at Honda’s Sayama assembly plant is an augur of things to come. Once Honda’s largest assembly facility, the move is highly symbolic.

As ever, the decision is a complex one. Sales in Japan are flat and Honda has an excess of capacity. The plant complex is old and investment can probably be spent better elsewhere.

However, Honda’s CEO explained that a major reason behind the decision was the need to introduce new systems in order to accommodate electric vehicles. He said that Honda needed to “share new production technologies to accommodate new automotive technologies such as electrification technologies”.

Honda is trying to manage the difficult business of building internal combustion, hybrids and electric cars in the same plants, even on the same assembly lines. This is likely to require fundamental redesigns of plants and the introduction of new technology. In particular, the level of automation in in-plant logistics is increasing rapidly.  

The implications of all this new technology for the supply chain will be substantial. The sourcing of batteries and electronics will be very different from the components required for internal combustion vehicles. The price of delivering this change will be very substantial.

And Honda is not alone. Ford has also just outlined a huge rationalisation of it business, shifting resources into new technology. It will reallocate billions of dollars of investment away from the design of conventional cars and into new propulsion systems. This repositioning covers not only electric vehicles but also the increased automation of its assembly plants.

The automotive sector is under immense pressure. It faces huge technological hurdles which many of the leading vehicle manufacturers will struggle to clear. The implications for all of the logistics service providers in the market for automotive logistics are too great to ignore. Not only will their customers require fundamentally different services but many of them may have no future. However, for those with the right technology and the right services, the opportunities are huge.

Source: Transport Intelligence, October 5, 2017

Author: Thomas Cullen


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