Hyundai: Get Them While They're Hot!

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.