By on August 9, 2010


When Apple releases a new product, people wait in line for it. Steve Jobs talks, everyone buys. Apple often runs out of stuff that is in high demand. Usually, people will wait. Hyundai has a similar problem. But maybe not a similar solution.

The Montgomery Advertiser’s Cosby Woodruff just found out that, to his great horror, Hyundai’s operates their plant down in Alabama by what’s called the Just In Time production technique. Ever since Ignacio Lopez and his gang of ninja warriors left GM with boxes of documents in 1993, big manufacturers around the globe have switched to just in time. Someone should tell Woodruff that JIT is a great thing for real estate: One by one, suppliers will first build warehouses around the factory, then factories …

Having just found out about just in time, Woodruff thinks it leaves frighteningly little margin for errors. And when he says “little” he means it.

One example is the plant operating on “less than an hour’s supply of many key components.” Mindboggling, isn’t it? Another example is where the plant “rarely has more than 10,000 cars parked in its massive lot behind the plant”. (Actually, for hardcore just in timers, that’s a bad sign.)

Mr Woodruff then states that the problem is so great that to maintain a sustainable supply chain, managers are now monitoring the transit time from plant to dealership. After all, if a dealership has plenty of stock, then they won’t quibble about a 2 week transit time, unless maybe their stock is on the low side?

The scenario that Mr Woodruff paints is a very real one and while having many customers for your product is a great thing, it’s only great provided you have the stock to supply them. What’s the point in having customers at dealerships clamoring for the latest Sonata, only to find there are none available?

Which also brings up another scenario which Hyundai may want to pay attention to. Remember my comparison to Apple? The reason people wait for Apple products is because those customers rarely cross shop. It’s either Apple or nothing. Hyundai, as good as they may be, aren’t in that class. If customers can’t get hold of their Sonata in a reasonable amount of time, maybe the Toyota or Honda dealership across the street will be able to provide them with a suitable alternative at a much shorter delivery time?

To be fair, Hyundai has acknowledged that deep down in Alabama, this isn’t sustainable and needs to be fixed. “Consumer demand continues to significantly outstrip product availability at Hyundai dealerships, ” said Dave Zuchowski, Hyundai America’s vice president of sales.  Then John Krafcik, CEO of Hyundai America, announced that expansion of their Alabama plant’s production capacity will go ahead. But in the mean time, if the scenario I laid out above happens, Hyundai may have trouble winning those customers back. Toyota is in ultra sensitive mode and will do all they can to be the golden boy again. Honda’s sales of the Accord are flagging and could do with a boost. Will Hyundai rectify the situation just in time? I don’t know, but with TTAC constantly monitoring US sales, we’ll find out soon enough.

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34 Comments on “Hyundai: Get Them While They’re Hot!...”


  • avatar
    NN

    This is very true…I’m car shopping now and the Hyundai dealer can’t get any decent higher-end Sonatas. All are base 4-cylinders. I’ll probably buy a Malibu if I indeed buy at all.

    That said, I think this Sonata will be America’s best selling sedan in about 2 years.

    • 0 avatar
      Canuck129

      “That said, I think this Sonata will be America’s best selling sedan in about 2 years.”

      Don’t forget the other big players including Nissan and Toyota will have their own new models by then, and could easily keep par in the ‘value’ game if they wish. However, if Toyota were to attempt a design like this, blogists all over North America would be slamming it as busy, tacky and overdone. And they’d likely be right. Hyundai is volume hungry. Before long they won’t be the underdog darling anymore, they’ll be just like the rest (and perhaps already are).

    • 0 avatar
      carve

      Uhh…ALL Sonotas are 4-cylinders, and will continue to be 4-cylinders. In a few months there’ll be a turbo-4 available, which’ll be the most powerful engine to be offered.

      This car managed to save weight and space by making no accombodation for 6 cylinder engines.

  • avatar
    philadlj

    When it becomes apparent the radio reception in the Sonata sucks, Hyundai will tell everyone to hold the steering wheel differently and offer free front-end bras.

  • avatar
    dwford

    The stocks of Sonatas got really low in the last 6 weeks, but we just got to order a decent amount. Yes the SE and Limited trims are hard to get (but customers still grumble at paying sticker). The bigger problem is that we can’t get Tucsons at all, and Santa Fe production is cut off until November. Good luck getting a Santa Fe Limited or SE in the next 4 months. It will be interesting to see what happens as we transition to the new Elantra.

    Its tough to lose a customer because of availability, but if the customer believes that the Hyundai best meets their needs, they will wait rather than settle for 2nd best. I have had 2 different customers wait a full month because they wanted a certain color Sonata Limited.

    Hyundai was clearly not ready for the upswing in sales from these new models. Now, should they open a new plant to handle the load and risk overproducing, or max out capacity at existing plants and go for maximum profits by eliminating incentives?

    • 0 avatar
      John Horner

      “Now, should they open a new plant to handle the load and risk overproducing, or max out capacity at existing plants and go for maximum profits by eliminating incentives?”

      Both :). Maximize profits and use those profits to carefully build more capacity with which to continue gaining market share.

    • 0 avatar
      PeriSoft

      I have had 2 different customers wait a full month because they wanted a certain color Sonata Limited.

      A month? To get the right version of something you’ll own for years? Jeez, are people so impatient that they’ll say, “Eh, the color isn’t quite right” to themselves every time they look at their car for the next five years so they can save a few weeks right now?

      I spent six months scouring used car ads looking for the Saab I ended up with. If I’d decided I just HAD to have something after two weeks, I’d have paid more and gotten something I didn’t really want. And now it’s worth it when I look at my car I think, “Hell, yeah!” instead of, “Ehhh…”. It defies belief that that attitude is so rare it’s worth remarking on even in extraordinary circumstances.

    • 0 avatar
      dwford

      Waiting a month is definitely considered a very long time these days. Most of the time when we are locating cars for people, they get impatient after 2-3 days! Of course, the salesman setting the proper expectation is key.

      You would be surprised at how many people buy and drive home the same day without shopping multiple dealers. We do what ever it takes to earn your business RIGHT NOW, because we know there is a 90% chance that if you leave, you ain’t coming back.

      PeriSort: you are talking about shopping for a used car. Very different than buying new where all the cars are the same from one Hyundai dealer to another. I could see taking 6 months looking for the right used car.

    • 0 avatar
      PeriSoft

      You would be surprised at how many people buy and drive home the same day without shopping multiple dealers.

      That’s insane. I don’t buy anything bigger than a toaster without sleeping on it – never the same day.

      You’re right, though – it really screws up salesmen. They just haven’t got a response for it, and sit there glubbering the same thing over and over with a dead look in their eyes. Must be people with policies like mine are pretty rare for there to not be some kind of response in their playbooks.

  • avatar
    mikey

    I worked as a GM shipper reciever with a JIT system. It works perfect IF everybody is on the same page.

    The down side? You eat downtime, or you pay premimum transportation. You need great management,that has the autonomy to make fast decisions. Distance from the plant means squat,as long as the pipeline is full.

    In Oshawa we pulled sheet metal from Fort Wayne Ind seven hours away. If they had issues they pulled from us. We kept Arlington Texas running with the 1999/2000 Classic Sierra for over a year. Shipping 6 53 footer’s from the “Shwa” daily,cross docking in Buffalo,then loading by rail to Texas. My boss at the time was a logistic genius.

    Like myself, he was a casuality of 2009. I miss them days

    • 0 avatar
      william442

      Once in the early seventies, at Packard, I chartered a plane for ONE Chevrolet harness. At the time, GM was one of the most profitable companies in the world. Puzzling.

    • 0 avatar
      Nick

      “My boss at the time was a logistic genius.”

      Good thing they got rid of him.  All joking aside, bloodlettings always seem to miss half the deadwood, and nail half the winners.

      And by the way Mikey, thank for telling me about the big car show in the ‘Shwa a week after the fact.  Geesh.

  • avatar
    gslippy

    JIT is one reason the Sonata’s price is so low.

    I’d still wait for a Sonata unless I was in a “must-buy” situation.

  • avatar
    klossfam

    This is a little bit of old news…The supply on Sonatas is freeing up. The model mix is still an issue…

    A GOOD supply of GLS (base) models, SUPER SHORT on SEs and limited Limiteds…An auto carrier of nothing but Sonatas was unloading in front of the local Hyundai dealer just today on my way to work, however.

    Apple may be an exclusive product but if you really compare a Sonata to a Camry or Accord, it is an exclusive product in the midsize sedan field.

    • 0 avatar
      dwford

      Supply is freeing up because Hyundai completely stopped production of the Santa Fe. So we have solved 1 problem by creating another. I have heard that Hyundai is moving Santa Fe production to the Kia plant in Georgia, so maybe that will help.

  • avatar
    Gardiner Westbound

    If customers can’t get hold of their Sonata in a reasonable amount of time, maybe the Toyota or Honda dealership across the street will be able to provide them with a suitable alternative at a much shorter delivery time?

    Just-in-time manufacturing, replacing static warehouses with dynamic warehouses on wheels, requires a cheap oil environment. Expensive oil will see it collapse under it’s own financial and logistical strain.

    Sometimes it just plain backfires. The Honda Accord model we wanted was in short supply. We balked at paying $300 vigorish for a dealer trade, so we bought a Toyota Camry instead. No regrets!

  • avatar
    John Horner

    “Ever since Ignacio Lopez and his gang of ninja warriors left GM with boxes of documents in 1993, big manufacturers around the globe have switched to just in time.”

    Toyota gets the credit for popularizing JIT, not that scum Lopez.

    “The reason people wait for Apple products is because those customers rarely cross shop.”

    Uh, no. People are buying Apple products because they are generally easier to use than are other products in their class. The iPod was hardly the first portable music player and it sold massively to people who previously had never used an Apple product. The iPhone likewise sold initially to people who had been using other brand cell phones and switched. Again, not exactly die hard Apple fans. Heck, if Apply users only bought Apple products then there would be a lot more Macs sold. BTW, I don’t personally own any Apple products, so don’t assume I’m an Apple fan boy.

    As far as the Sonata goes, Hyundai has put out a great new version of its mainstream product and is struggling to catch supply up to demand. The real news is that Hyundai is now making a product which is highly desirable rather than a product which is simply competitive. Hyundai. Desirable. It is a bit jarring to see those two words next to each other, but there you have it!

    • 0 avatar
      Robert.Walter

      Right-on John. I was going to say the same vis a vis JIT and Lopez, but with a different twist, to wit:

      “Ever since Ignacio Lopez and his gang of ninja warriors left GM with boxes of documents in 1993, big manufacturers around the globe have switched to just in time.”

      Anybody writing that a) has no historical perspective, and b) knows nothing about the subject of JIT.

      a & b) JIT was firmly established in the US auto industry by the Japanese transplants well-before that two-watch wearing glory-hog showed-up in Detroit.

      b & a) IIRC, Krafcik is well-acquainted with JIT for more than 20 years, as he worked with Jim Womack at MIT and helped in writing the seminal book on lean manufacturing and JIT (and it was even somewhat behind the Japanese literature and theory) “The Machine That Changed The World.”

    • 0 avatar
      davey49

      Apple products haven’t been “easier to use” in a decade. Now it’s just Apple fanboy snobbery and they don’t cross shop.

  • avatar
    RenoLT

    Unless things have changed mightly in the past year, The 10,000 number of units on the lot is very, very low. In previous years they have had 40,000 some odd units on the ground at one time. They also have had to expand the storage lot at the plant at least 3 times, and have also had to double the size of the out bound building to keep up with production.

    Volume may be down right now due to the change over of the Santa Fe. This plant only produces Sonata’s and Santa Fe’s. With the new Sonata, it may be taking them a little while to get ramped back up.

  • avatar
    goacom

    From an engineering point of view, the Sonata is a great car. However, in terms of design, I do not believe it will age well. Some of Hyundai’s design teams seem to be great at mashing up various design fads, but end up with a compromised, fugly design. When the Audi 100 (5000 in N.America) came out in the early 80′s, Hyundai came up with its first generation of the Sonata (then called the Stellar). This is before Hyundai entered the US market. Although it looked avant garde for a few hours after it was introduced, its appeal did not last very long.
    The clean lines of the previous gen Sonata will be more more timeless. Do you folks who currently fawn over the latest Sonata think that the first Hyundai Stellar still looks great?
    http://en.wikipedia.org/wiki/File:MHV_Hyundai_Stellar_01.jpg
    I thought not.

    • 0 avatar
      PeriSoft

      The previous gen Sonata with the Jag-ish front end was knock-dead, IMO. I was disappointed when they switched away from it, but now that I pay more attention to the industry I realize that they saw the necessity of stretchy headlights, the late ’00s equivalent of massive ’50s tailfins.

      There’s a dark grey one usually parked along the road I drive quite a bit, and I always look at it. For the price, though, I’ll take my 9-5 any day – vastly better interior, lots of perks, and probably three seconds quicker to 60. And it looks good without copying something else that looked good…

    • 0 avatar
      davey49

      The Stellar was RWD.

  • avatar
    JMII

    I can’t believe people still “settle” for whatever car happens to be at the dealership. If your buying NEW you are in control. For example I ordered my truck because I couldn’t get the options I wanted locally. Took 4 weeks but I got everything I wanted… nothing less, nothing more.

    Now if your primary ride is busted, wrecked, your short on coin or if buying used you might have to pick thru the dealer’s inventory.

    The fact that there IS demand for Hyundai is great news. My wife finally admitted this weekend that given the choices out there she would take a new Genesis Coupe tomorrow if she “had to buy new”. We were once die-hard Honda fans but nothing they make now captures our interest since they have NO sporty cars and everything else has been beaten with an ugly stick.

  • avatar
    Darth Lefty

    Any car company not implementing just-in-time is going to get destroyed by its competitors who are. You can’t afford to have money tied up in excess stock, and shelf space to store it on.

    • 0 avatar
      th009

      +1

      And inventory shortages usually have nothing to do with JIT — it’s simply a question of production capacity vs market demand. Non-JIT manufacturing would have exactly the same problem.

  • avatar
    dcdriver

    I may be one of the few who doesn’t like the styling of the new Sonata. I like the previous version much better.

  • avatar
    AaronH

    Good for Hyundai! Good for USA Consumers!

    Hyundai’s initial high Sonata demand is looking permanent…One of those “good” problems to have.

    Competitive free-market choices for consumers is always a great thing. Hyundai is also configuring manufacturing to deal with a new Santa Fe and Kia Optima…And Hyundai Elantra. Looks like Hyundai/Kia is now a permanent 1M+ unit / year USA competitor.


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