May 22 2009.

Honda will reduce the number of parts suppliers for its small motorcycles from around 10 to three within a few years, a move that would cut procurement costs for such vehicles by 10-20%.

Motorcycles accounted for about half of the company's operating profits in fiscal 2008, with this performance largely thanks to robust demand in emerging markets. Yet given the uncertain global economic outlook, Honda is looking to further improve profitability in the segment.

Honda turns out 14 million units each year at 32 plants in 22 countries, including Thailand, India, China and Brazil.

Because Honda's factories purchase components from various suppliers, manufacturing is not standardized across the company, and costs are higher than they might be.

The company's development and procurement teams will ensure that 80% of parts are standardized across the company. To this end, they will narrow down suppliers by picking those best able to provide a steady stream of high-quality components at low prices.

Source: The Nikkei