HYUNDAI MOTORS

OPERATIONS AND SOURCING OF HYUNDAI

PRODUCTS
CHENNAI CAMPUS: #11/D14, SIPCOT IT PARK OMR ROAD SIRUSERI

PUDUPAKKAM (P O) - 603103

GLOBAL SOURCING AND OPERATIONS

MANAGEMENT

“HYUNDAI MOTORS”

SUBMITTED TO: SUBMITTED BY:

Mr.VISHWANATHAN.R Harish.R

PGDM-IB II YEAR

SRS2010PGDMIB1F014

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 A STUDY ON

GLOBAL SOURCING AND OPERATIONS MANAGEMENT

(“HYUNDAI MOTORS”)
A Dissertation report submitted to ITM INSTITUTE FOR TECHNOLOGY AND
MANAGEMENT

In partial fulfillment for the award of the degree of

(POST GRADUATE DIPLOMA IN MANAGEMENT-IB)

Submitted by

Harish Ravindranathan

Under the esteemed guidance of

Prof. VISHWANATHAN

INSTITUTE FOR TECHNOLOGY AND MANAGEMENT

CHENNAI CAMPUS: #11/D14, SIPCOT IT PARK OMR ROAD SIRUSERI

PUDUPAKKAM (P O) - 603103

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 TABLE OF CONTENTS

S.NO CONTENT PAGE NO

1 INTRODUCTION 5

2 HYUNDAI MANUFACTURING - 7
PRODUCTION IN KOREA

3 GLOBAL PRODUCTION SYSTEM 8

4 SOURCING STRATEGY 10

5 CONCLUSION 14

6 REFFERENCE 14

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 INTRODUCTION

1. HYUNDAI MANAGEMENT OVERVIEW

Hyundai Motor Company achieved much in 2007 despite the challenging business climate.
Numerous sections of the world media have praised Hyundai's high quality. Improvements in
customer satisfaction and a continuous sales growth demonstrate Hyundai Motor's ability to increase
its market share. Hyundai's success, watched closely worldwide, is a result of continuous and
aggressive innovations that have been implemented on behalf of our customers. Hyundai Motor
Company considers its most important mission to be bringing the enjoyment of elegance and
confidence to its customers, rather than just selling products. Hyundai strives to bring its customers
luxury and style. Therefore, Hyundai will continue to stabilize its global management by establishing
an effective cooperation system among production bases around the world. Hyundai Motor
Company's management goal in 2009 is customer–oriented management and continuous execution of
global management.
Best company! „Best sales‟ does not necessarily mean „Best Company‟. Being the best
company is possible only if customers, the community, the environment, and the company are in
harmony. Hyundai Motor Company has continued to engage in environmental management activities
such as development of environmentally friendly technologies and clean production, in order to
address environmental issues. Hyundai seeks innovation with global vision, challenges itself to
embrace new company values, and continues to evolve with our customers.

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1.1. ADVANCED MANAGEMENT PHILOSOPHY OF A WORLD CLASS AUTOMOBILE
COMPANY:

Competition among automobile companies throughout the world has been fierce. In
spite of these conditions, Hyundai Motor Company has made a giant leap forward thanks to its
advanced management philosophy, designed to ensure a better future for Hyundai Motor Company
and its customers. Trust and a hands–on management philosophy are the foundation of Hyundai
Motor Company.
Hyundai Motor Company is growing into a brand appreciated by its customers
because it is continuously striving to achieve the single goal of making good quality products with
an emphasis on the customer first principle across all management levels, including production, sales,
and service. Moreover, Hyundai Motor will continue building its brand image as a top global
automobile company by handling every task with transparency and fairness from the perspective of
business ethics. Marching into the future through the move forward and growth. It will be reborn as
a truly global company gaining a competitive edge in the global market.

1.2. ACCELERATING GLOBAL MANAGEMENT BY EXPANDING THE WORLDWIDE

PRODUCTION BASE:
Further expanding its global reach, Hyundai Motor Company established its
European manufacturing base through construction of a production plant with an annual capacity
of 300,000 units in the Czech Republic in 2009. Additionally, the construction of the Russia
plant with an annual capacity of 150,000 units is set for full operation from 2011, bringing a
strong foothold in the European market. The plant in Brazil is expected to play a key role in
reinforcing the Company‟s market share in Central and South America.

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2. HYUNDAI MANUFACTURING:

2.1. PRODUCTION IN KOREA

2.1.1. THE WORLD’S LARGEST AUTOMIBLE PLANT – THE ULSAN PLANT:

As Hyundai Motor‟s main production facility, the Ulsan Plant sits on a 5,050,000 m2
site and is equipped with five independent plants that employ over 34,000 personnel to produce an
average of 5,400 vehicles a day. Additionally, the plant has its own port where up to three, 50,000-
ton ships can anchor simultaneously. The Ulsan Plant, also dubbed the “Forest Plant,” encompasses
580,000 trees as part of its landscape and state-of-the-art facilities.

2.1.2. THE ADVANCED PRODUCTION BASE FOCUSING ON EXPORT STRATEGY –

THE ASAN PLANT:
With an annual capacity of 30,000 units, the Asan Plant is an entirely self-
contained, independent automobile production complex that mainly produces strategic mid-to
large-size passenger cars for export. The Asan Plant offers a bright and pleasant, people-oriented
and nature-inspired working space, and has proven that the quality of the working environment
determines the quality of products.

2.1.3. WORLD’S LARGEST SCALE COMMERCIAL VEHICLE PRODUCTION

PLANT – THE JEONJU PLANT:
With an annual production capacity of 125,000 units, the Jeonju Plant specializes
in producing mid-to large-size buses, trucks, and specialty vehicles that exceed 2.5 tons.

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2.2. GLOBAL PRODUCTION SYSTEM

2.2.1. MARKING THE TOP 10 DURING ITS FIRST YEAR OF OPERATION IN

NORTH AMERICA – AMERICA ALABAMA PLANT:
Within one year after it began mass production in May 2005, the Alabama Plant
achieved the incredible feat of being placed 10th in product quality among 37 plants in North
America. It focuses on mid-to full-size vehicles, and continues to live up to its reputation as a
comprehensive automobile plant that applies the latest technologies and techniques to its
production lines.

2.2.2. 600,000 UNITS PER YEAR PRODUCTION CAPACITY – CHINA PLANT:

In addition to the existing first plant, a second plant with an annual capacity of
300,000 units was added to the China Plant, increasing its total annual production capacity to
600,000. The plant is a reassuring foothold in securing a sizable share in the automobile market
in China, which is rapidly becoming a global economic powerhouse.

2.2.3. SECOND PLACE MARKET SHARE IN JUST TWO YEARS – INDIA PLANT:
A comprehensive, self-sufficient automobile plant that focuses on the R&D,
testing, manufacturing, and sales of new products that are adapted to the Indian market, the India
Plant added a second plant in 2008 to achieve an annual production capacity of 600,000 units. It
serves as an overseas manufacturing plant for compact cars, such as the first overseas-specific
model i10 and the strategic European model i20. It has accomplished much in India‟s automobile
industry, including setting a production record of 2,500,000 units and sales of 1,000,000 units in
the shortest time, and is responsible for 20% of the market share and 66% of the automobile
export in India.

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2.2.4. CRITICAL FOOTHOLD IN THE EUROPEAN MARKET – TURKEY AND
CZECH REPUBLIC PLANTS:

Turkey: The expansion of the Turkey Plant in March 2007 resulted in an increase in the annual
production capacity from 60,000 units to 100,000 units. A strategic foothold that connects
Europe, Africa, and the Middle East, the Turkey Plant plays a key role in the increase of exports
from the region through the localization of the Accent and i20 models.

Czech Republic: Nineteen months after its historic groundbreaking, the Czech Republic Plant
commenced mass production in November 2008. The Czech Republic Plant focuses on a strategy
of full localization to develop models geared to the tastes of European consumers.

2.2.5. RUSSIAN PLANTS:

Scheduled to commence mass production in January 2011, the Russia Plant is the
only auto plant in Russia that can handle the entire manufacturing process of complete units. The
plant will start off with an annual production of 100,000 units, which will eventually increase to
150,000 units. Comprised of expert employees trained in Korea and in the Czech Republic, the
Russia Plant will focus on production of the C-Class models with reinforced designs adapted to
the local needs in Russia.

2.2.6. BRAZIL PLANTS:

The Brazil Plant will secure a manufacturing foothold in the biggest market in
Central and Latin America and play an important role in increasing sales in the region. The
Brazil Plant will be producing stylish and fuel efficient compact cars suited for the Brazilian
market, and contribute to increasing the market share in the region.

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3. HYUNDAI-KIA AUTOMOTIVE GROUP SOURCING STRATEGY - SEOUL, KOREA

3.1. HYUNDAI-KIA AT A GLANCE:

Established in 1967, Hyundai Motors grown to be one of the largest automakers
in the world. Following the company‟s purchase of Kia Motors in 1998, the Hyundai-Kia
Automotive Group has placed an emphasis on the expansion of its presence in international
markets, particularly the United States, China and Eastern Europe. The company is ranked fifth
of 22 auto brands by AUTO Bild – one of Germany‟s most renowned car magazines - with 4.18
million vehicles sold in 2008.
Headquartered in Seoul, Hyundai-Kia operates six auto production facilities in
Korea. Three of these produce Hyundai vehicles, and are located in Ulsan, Chunju and Asan with
annual capacities of 1,450,000, 600,000 and 250,000 units respectively. Ulsan is recognized as
one of the largest auto production facilities in the world, and also includes an engine and
transmission manufacturing division. Kia‟s three production facilities are located in Hwaseong,
Gwangju and Sohari with capacities of 600,000, 420,000 and 500,000 cars respectively. Total
domestic capacity of Hyundai-Kia amounted to 3.28 million vehicles in 2008.
At the same time, Hyundai-Kia operates seven production facilities overseas, with
two additional plants under construction in Russia and the United States (Georgia). These two
facilities are both expected to be operational by 2012, and will see total overseas production
capacity rise to 3.08 million units per year, representing roughly half of the company‟s total
production capacity. Like all automakers, Hyundai-Kia has been affected by the global economic
situation, with the company now expecting to produce between 4.5 and 5 million units globally
in 2009.
The company‟s corporate research and development centre is located in Namyang,
part of the greater Seoul region. As part of its globalization strategy, Hyundai-Kia also operates
many research and development centers outside of Korea including facilities in China, Japan,
Germany and the United States. The company spent USD 3.5 billion, or 5% of total revenue, on
research and development in 2008.

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3.2. PROCUREMENT:
Hyundai-Kia procures automotive components from roughly 360 Tier-1 suppliers.
Of these, 108 are foreign firms that have established production facilities in Korea and 159 are
overseas suppliers, including Bosch, Delphi and Denso. Hyundai-Kia purchased USD 42 billion
of auto parts in 2008. USD 29 billion of these purchases was produced in Korea, while USD 13
billion were purchased from overseas suppliers. Procurement from overseas suppliers is expected
to grow as new Hyundai-Kia plants come online in the Russia and the United States.
Hyundai-Kia‟s procurement strategy is based upon cost competitiveness, quality
assurance, stable supplier management and optimal purchasing procedures. In recent years, the
company has strived to secure cost advantages by launching competitive-bid sourcing open to
suppliers around the world. The company has expressed particular interest in develop suppliers
in China, Southeast Asia and South America.
As part of these efforts, Hyundai-Kia has implemented an online bidding system
known as Sourcing and Price Tracking Unified Robust Network, or SAPTURN. The entire
process is computerized and has been designed to strengthen transparency and prevent personal
intervention in the sourcing procedures. Under SAPTURN, a sourcing request is made by the
R&D group. Tier 1 suppliers then make bids based upon this request. These bids are evaluated
by the R&D group (for technical specifications) and Hyundai-Kia‟s Sourcing Group (for price
and supply management). Specific internal criteria used in the evaluation process changes from
bid-to-bid, and are not publicly available.
Hyundai-Kia uses three types of sourcing methods, usually dependent upon the
product being sourced. General parts – such as bolts, nuts, tires, press and simple processing
requirements – are sourced through an open bid in which only price is evaluated. Functional
parts – such as electronic components, sensors, lamps and moving parts – are evaluated based on
price, quality and design. Finally, core parts, urgent needs and new and high-tech products are
sourced through a strategic purchasing procedure, and are not usually open to competition
outside of existing Tier-1 or -2 suppliers.

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3.3. SUPPLIER QUALITY MANAGEMENT SYSTEM:
Hyundai-Kia has also implemented a 5-STAR Evaluation Program for Tier-1
suppliers, which is intended to improve overall competitiveness within the supply chain. The
results of these evaluations are also used when evaluating future bids. Tier-1 suppliers are
required to meet the 3-STAR standard those evaluated below this level will not be invited to
make bids on future contracts. Component quality and delivery standards are evaluated every six
months, with product technology evaluated on an annual basis.
The performance of Tier-2 and -3 suppliers is not managed by Hyundai-Kia
directly, but rather by Tier-1 suppliers, using the company‟s SQ-Mark Certification System,
which evaluates up to 13 core categories dependent upon the component being supplied. These
categories include injection, painting, welding, heat treatment and casting/forging. All Tier-2 and
-3 suppliers are required to meet SQ-Mark certification before engaging in Hyundai-Kia related
business. If the company discovers that Tier-1 firms are doing business with their own Tier-2 or -
3 suppliers that are not SQ-Mark certified, Hyundai-Kia will impose penalties on the Tier-1
suppliers by either downgrading their SQ-Mark score or cancelling certification altogether.
Hyundai-Kia generally expects that Tier-1 firms will manage the quality of all of their Tier-2 or -
3 suppliers, although the company will occasionally perform its own quality assessment of these
firms.
Currently, this SQ-Mark Certification System only applies to Korean suppliers,
although Hyundai-Kia is expected to extend this quality management system to overseas
suppliers in the future. In principle, Hyundai-Kia expects that all Tier-1 suppliers – including
overseas firms – manage the quality of Tier-2 and -3 companies, despite the fact that they are not
subject to the SQ-Mark system. In addition, it is noted that the R&D center in Korea plays an
important role in sourcing decisions. While Hyundai-Kia does not publish a comprehensive list
of Tier-1 suppliers, interested Canadian firms are invited to contact the Embassy of Canada in
Seoul.

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3.4. SOURCING OUTLOOK:
As Hyundai-Kia looks to increase its competitive position, the company is
expected to continue the expansion and diversification of its global sourcing networks and
standardize the quality of global suppliers. Given the global economic situation, Hyundai-Kia
estimates that it will produce approximately five million units in 2010 (including CKD), a
decrease of one million units from its previous forecast. Should this forecast hold the company
will be expected to procure roughly USD 59 billion in parts and components from its suppliers,
or USD 23 billion from domestic suppliers and USD 36 billion from overseas suppliers.

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4. CONCLUSION:-
As Hyundai‟s performance is going well in its entire operating region. So, maintaining it
Hyundai should focus on its core competencies more so that it can‟t lose any chance to diversify
and attract its perspective customer throughout the globe. And for entering into new or potential
market it should exercise effective modes of entry so that it can work well in that market.
Before entry it should focus on thorough market research & based on the results it should make
an effective plan to go ahead.

5. REFFERENCE:

1. worldwide.hyundai.com/hyundai-worldwide.html.
2. www.driveinside.com/car/hyundai-motor-india.
3. www.hyundai.com/in/en.
4. www.alphamc.com/news.

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THANK YOU.

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