Production Analysis – Soln

Honda uses flexible plants in the manufacturing of its cars. Discuss whether this method of production results in optimum output.

The flexibilities in Honda’s production method discussed by Linebaugh (2008) imply that the Honda production method results in optimum output. Firstly, the company can switch from one model to another pretty faster relative to competitors. Rivals, such as General Motors Corp., incur massive expenses to switch a plant between models. Honda has the most flexible production method that enables a faster adjustment. Linebaugh gives an example of the changes in fuel prices that affected the demand for Ridgeline pickup trucks.

The company slowed the production of this model and switched to better-selling vehicles within a short time. As a result, the company has a faster response time to changes in market demand, increasing its ability to capitalize on market opportunities to raise sales volume. It has been a competitive advantage for Honda in the market. Companies with a competitive advantage usually attract more customers and have the resources and experience to anticipate and prepare for market changes.

So, the ability to respond to such demand changes is key to retaining such an advantage in the long run. If Honda’s production method were not optimum, it would have lost a lot of sales to its rivals because the market is relatively perfectly competitive. But, the continued rise and growth of the brand supports the idea that there is optimum output.

Honda’s ability to master changes in supply and demand indicates its readiness to reduce or increase supply whenever necessary. It means that the company can reduce the production of a specific model if potential revenue from its sales is low or increase production if potential revenue seems to be high.

Because it only incurs cost when there is adequate demand, the production method undoubtedly gives optimum output. Similarly, it can control labor and materials used in the production, optimizing the activities in its plants to match the company’s available inputs. It ensures no excess supply that can otherwise be costly to the company.