Master Production Scheduling at Hyundai Motors in its initial years

1. Production Sales
Interface: MPS at
Hyundai Motor
presented by:-
DIXON D. PALETT
ISHAN PARASHAR
Faculty : Dr. Debashish Jena

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

3. 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

4. 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

5. HMC Objectives And Challenges
Short 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

6. 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

7. 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

8. Planning at hyundai
 Long Range Planning
o Next 5-10 yrs.
o Analyze long term trend of industry
o Top management’s long term vision
 Annual Business Planning
o Next 12 months
o Expressed as monthly sales vol./model type
o Corporate Planning Department
o Reviewed twice a year + monthly revision MPS process
 Short Terms Production Planning
o MPS (next 8 months) + daily production schedule + weekly production schedule
o Sales and production department interface critical

9. 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

10. Timeline

12. 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

13. 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

14. 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”

15. Thank You!