Engine Inventory Management at Hyundai

Posted in Operations & IT Articles, Total Reads: 1344 , Published on 26 February 2016
Advertisements

Engine Inventory Management at Hyundai is studied through this article. Hyundai Motor Company was founded by Ju-Yung Chung and younger brother Se-Yung Chung in December 1967. Hyundai Motors India Limited (HMIL) is a wholly owned subsidiary of Hyundai Motor Company (HMC), South Korea. In India it currently markets nine car models across segments - in A2 segment it has the Eon, Santro, i10, Grand i10 and the i20, in the A3 segment the Verna, in the A4 segment the Elantra, in the A5 segment Sonata and in the SUV segment the Santa Fe.


Current Market Share: approx 20%

Turnover : US $ 1 billion(approx)

Success story : Santro and Accent

The Hyundai logo, stylized “H” symbolizes the company shaking hands with its customers.

HMIL set up a modern multi-million dollar R&D facility in Hyderabad. The R&D centre endeavors to be a center of excellence in automobile engineering.


Image: pixabay


Objective of the Study

The objectives for this research study are:

1. To understand the Inventory Management System of Engines of Hyundai Motor India

2. To do a comparative study of the Engine Inventory Management System for two models of car of Hyundai Motor India, i.e. the “i10” and the “i20”

3. To determine if market demand has an effect on the procedure and efficiency levels of an Inventory Management System


Value Creation Process at Hyundai


Inventory Management at Hyundai

The manufacturing of the different models at Hyundai is based on the process of make to order strategy. The dealers receive their orders from the customers and it is communicated to the sales team who sells the cars to the dealers of various showrooms. The sales team communicates the requirements to the production planning and control (PPC) department. The frequency of meeting is generally once in a month.


The PPC then communicates the demand and requirements to different functions like Press Shop, Body Shop, Engine Shop, Assembly Shop etc. The material management teams (PMT) in of these shops are communicated about the demand and requirements of the number of cars which translates to the number of corresponding parts to be developed.


The material management team then places the order and asks for the daily or weekly delivery of inventories to reduce the costs of storing the inventories and also to reduce the risk of misplacing them.


After the scheduling the orders will be placed by the material management taking in to account the material rejection and process rejection allowances at the machining and also at the assembly. The industry standards are 5% for material rejection and 2% for process rejection for machining and 5% rejection for engine assembly.

The engine shop is involved with the machining of the cylinder block, cylinder head, and crankshaft and then these parts are sent to the engine assembly where all these parts get assembled.

After the engine and transmission parts are docked together then it is carried to the vehicle assembly depending upon the requirement or stored in the engine shop in the ASRS having a capacity to accommodate 1486 engine units.

The cycle time of the engine machining line for i10 1.1 L Epsilon engine is 120 sec

The cycle time of the engine assembly for i10 1.1 L Epsilon engine is 48 sec

The following table shows the inventory orders placed for the Epsilon Engine 1.1L i10 model.


INVENTORY MANAGEMENT OF ENGINE i10 1.1L EPSILON MODEL

i10

DESCRIPTIONS

NOV'13

DEC'13

JAN'14

CYLINDER BLOCK

18159

18000

16000

CYLINDER HEAD

18500

18500

16000

CRANKSHAFT

LP (70%)

14000

15000

12000

KD (30%)

4200

4500

3600

ENGINE ASSEMBLY

14992

14340

13037


The orders have been placed taking into account the material rejection of 5%, process rejection of 2% for the machining and process rejection of 5% in the engine assembly.

For the manufacturing of one engine we need a cylinder block, cylinder head and a crankshaft as inputs. These three parts are outsourced as raw cast materials from the vendors.

The figures of number of engines manufactured by the engine assembly are also tabulated in the table above. The i10 engines are manufactured in the plant 1 of the Engine Shop at Hyundai and there is a single engine assembly line in which engines of Santro Xing, Eon, i10 & Accent gets assembled. The cycle time of this engine assembly line is 48 sec.


DESCRIPTION

RAW MATERIAL TYPE

CYLINDER BLOCK

CAST IRON

CYLINDER HEAD

CAST ALUMINIUM

CRANKSHAFT

CAST IRON


The i20 engine is also based on the same logical flow as explained in i10 and for manufacturing one engine we need one cylinder block, one cylinder head and a crankshaft. The machining of these respective parts are done in the machining line of the Engine shop plant 2 at Hyundai and then fed to the engine assembly in the plant 2 engine shop. The engines manufactured in plant 2 are kappa engines and the i20 engine is 1.2L kappa engine with DOHC (double over head camshafts). The machining cycle time for the parts cylinder head, cylinder block and crankshaft are each 67 sec and the engine assembly cycle time is 42 sec.

Machining cycle time is 67 sec

Engine assembly cycle time is 42 sec

The material details for i20 are as follows

DESCRIPTION RAW MATERIAL TYPE

CYLINDER BLOCK CAST ALUMINIUM

CYLINDER HEAD CAST ALUMINIUM

CRANKSHAFT CAST IRON


The material management team here in plant 2 places order for the engines manufactured at plant 2 which is again in conformance with the production schedule plan developed by the material management team and the production department in coordination with the PPC.

The repeat orders are placed monthly depending on the orders received from the customers. The orders are again received on a daily basis and all their vendors is located in a range of 10 km and in case of the vendors or suppliers are from distant locations the inventory is stored for a period of 1 week. The order placed again here accounts for the material and process rejection rates of 5% and 2% respectively for the engine machining and a 5% process rejection in engine assembly.


The following is the table showing the inventory order placed for the i20 engines by the PMT during the month of Nov’13~Jan’14.

INVENTORY MANAGEMENT OF ENGINE i20 1.2L KAPPA MODEL

i20

DESCRIPTIONS

NOV'13

DEC'13

JAN'14

CYLINDER BLOCK

15500

15500

14000

CYLINDER HEAD

15500

15500

13500

CRANKSHAFT

LP (70%)

12000

12000

10000

KD (30%)

3600

3600

3000

ASSEMBLY

14278

13658

12416


Analysis

Calculation for Stored as finished WIP (Engines)

TO calculate the finished WIP, we first select the Optimal Engines to be built, i.e. the least number of parts produced out of the parts to be produced. Then a rejection rate of 12% is put this and we get the expected number of engines to be built. If we subtract the actual number of engines produced from the expected, we will get the finished WIP.

INVENTORY MANAGEMENT OF ENGINE i10 1.1L EPSILON MODEL

i10

DESCRIPTIONS

NOV'13

DEC'13

JAN'14

Optimal engines to be built 

18159

18000

15600

Rejection rate

-12%

-12%

-12%

Expected to be built

15980

15840

13728

Actual built

14992

14340

13037

finished WIP

988

1500

691


According to this table there was finished WIP of 988 in the month of Nov’13 and so on.

INVENTORY MANAGEMENT OF ENGINE i20 1.2L KAPPA MODEL

i20

DESCRIPTIONS

NOV'13

DEC'13

JAN'14

Optimal Engines to be built

15500

15500

13000

Rejection rate

-12%

-12%

-12%

Expected to be built

13640

13640

11440

Actual built

14278

13658

12416

finished WIP

-638

-18

-976


There is an unexpected finding, that of negative WIP, which theoretically cannot exist. Hence, it’s concluded that the approx rejection value of 12% is not applicable here. Hyundai has reached greater efficiency in the production process of i20 and hence the rejection rate has reduced.

Another inference of this finding is that the production process of i20 has achieved greater efficiency as compared to i10.


Calculation for percentage of exports

We can then calculate the percentage of cars exported and sold domestically.

i10 Epsilon Model 1.1L

 

Nov,13

Dec,13

Jan,14

Actual Built

14992

14340

13037

Sales (domestic market)

4094

3975

4116

Exports

10898

10365

8921

 

 

 

 

Domestic Sales as a percentage of actual built

27.3079

27.71967

31.57168

Exports as a percentage of Actual built

72.6921

72.28033

68.42832


The above table illustrates the percentage of exports and domestic sale for i10.

The average percentage of exports for i10 is 71.13%.

i20 Epsilon Model 1.2L

 

Nov,13

Dec,13

Jan,14

Actual Bulit

14278

13658

12416

Sales (domestic market)

4643

3491

8655

Exports

9635

10167

3761

 

 

 

 

Domestic Sales as a percentage of actual built

32.51856

25.560111

69.708441

Exports as a percentage of Actual built

67.48144

74.439889

30.291559


The above table illustrates the percentage of exports and domestic sale for i20.

The average percentage of exports for i20 is 57.4%.


This article has been authored by Suvayan Roy from IMI New Delhi


References

http://www.hyundai.com/in/en/AboutUs/HyundaiMotorIndia/WhoWeAre/index.html

http://en.wikipedia.org/wiki/Hyundai_Motor_India_Limited

http://www2.isye.gatech.edu/~dai/thesis/ormeci_melda_200608_phd.pdf

http://en.wikipedia.org/wiki/Inventory

http://managementstudyguide.com/types-of-inventories.htm

http://home.snc.edu/eliotelfner/333/333_mrp.htm


INVENTORY MANAGEMENT OF ENGINE i10 1.1L EPSILON MODEL

i10

DESCRIPTIONS

NOV'13

DEC'13

JAN'14

Optimal engines to be built 

18159

18000

15600

Rejection rate

-12%

-12%

-12%

Expected to be built

15980

15840

13728

Actual built

14992

14340

13037

finished WIP

988

1500

691


Advertisements


If you are interested in writing articles for us, Submit Here