Because of the established international nature of the purchasing function, Honda is committed to maintain free trade, treating all suppliers equally regardless of size, location, or national origin. From this international environment, Honda has developed and maintains a basic purchasing policy that can be described using the following principle: Honda will buy from the most competitive suppliers in order to fulfil customer satisfaction. This principle is based on the idea that Honda's suppliers are not simply selling their parts to us, they are selling their parts to our customers through us. We expect each supplier to develop the same commitment and dedication to customer satisfaction as we have. To accomplish customer satisfaction, what Honda requires of suppliers is competitiveness in what we call Q.C.D.D.M.
Quality is the most important factor in ensuring customer satisfaction. We believe quality must be built into the product during the production process. Quality cannot be assured in the final inspection process. It is the responsibility of each supplier and each individual worker to ensure quality. A commitment by the supplier at every level from the top management to the individual worker is essential to continually improve quality.
Competition in the parts supply industry has become very strong in recent years. Honda is determined to provide products at competitive prices and value for the money. Suppliers are expected to achieve target cost through their ideas, technologies, improved productivity, plus joint efforts with Honda in VE/VA (Value Engineering/Value Analysis) activities. We require suppliers' continuous efforts to reduce cost year by year.
Honda employs the just-in-time production system. In order to respond quickly to our customers' needs, it is becoming more and more critical to produce products with the shortest possible lead-time. Suppliers are expected to have a reliable and flexible production system, which can respond in a relatively short leadtime, and can be synchronized with our assembly lines. Suppliers will also benefit from just-in-time production system. Just-in-time production reduces inventories, eliminates waste, and also improves production efficiency. Adopting just-in-time lean production will raise suppliers' competitiveness in cost and quality.
In responding to ever-changing customer demands, and to provide high quality yet cost competitive products, Honda relies heavily on established suppliers as a source for development and improvement of technology. In the course of development, emphasis will be put on uniqueness. We believe uniqueness in design or specification is a part of competitiveness. It is this uniqueness that makes up the identity of our products. Suppliers are expected to have ability to realise such demand of uniqueness through their technology and know-how in development in a timely manner with strong cost performance.
It is important for a supplier's management team to be strongly customer-oriented and to provide effective leadership for the entire company that expects to fulfil Q.C.D.D.M.