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Toyota: Daily Dealings

By Mel Duvall  |  Posted 2006-09-05 Print this article Print

Behind Toyota's assembly line are sophisticated information systems supporting and enabling the business processes that help the automaker eliminate waste, limit inventory buildup and continually improve production.

Daily Dealings

A prime example of business process management and the Toyota Production System in action is Toyota's Dealer Daily Internet portal initiative. Toyota operates its North American operations under a holding company, Toyota Motor North America, headquartered in New York. Under that umbrella, it divides its operations primarily into sales and service, manufacturing, and design and R&D.

Toyota Motor Sales (TMS), based in Torrance, Calif., is responsible for the sales and marketing of vehicles in the U.S., and the relationship with Toyota car dealerships. In 1998, using the principles of Kaizen and BPM, it undertook a major project to replace a vehicle ordering and communications system for its roughly 1,200 U.S. Toyota and Lexus dealers with an Internet portal.

Under the old system, Toyota Motor Sales interacted with its dealers through the Toyota Dealer Network (TDN), a text-based application that ran on IBM AS/400 computers installed at each dealership. The system in turn accessed other applications running on a centralized mainframe at TMS headquarters in Torrance.

The 25-year-old system had numerous limitations and was expensive to maintain. TDN did not integrate with any of the applications used internally by the dealers to support their daily operations, such as selling, arranging financing and processing warranty claims. Some Toyota dealers also own other brands of vehicles, and use third-party applications from providers such as Automatic Data Processing, Reynolds and Reynolds, and Universal Computer Systems to run their operations. Again, TDN did not integrate with those applications, so information had to be re-keyed constantly.

In addition, whenever TDN needed to be upgraded, to fix a bug or add new features, Toyota Motor Sales had to create tapes and CDs, mail them to all 1,200 dealers and wait for the dealers to find the time to upgrade their systems. Toyota estimates the upgrade process cost more than $1 million a year alone.

The combined result, says Ken Goltara, vice president of automotive systems for TMS, was a whole lot of Muda—waste. Wasted time on re-keying data, wasted time on errors, wasted opportunities from not being able to serve the customer better, and wasted money.

Toyota began the portal initiative by mapping out its business processes, holding Kaizen workshops with its dealers, and systematically looking at all the areas where waste could be removed. And it didn't take the plunge without thinking long and hard about the possible repercussions. For starters, not everyone agreed with dumping the old system. "There's a certain comfort level with a system that's been in place for 25 years," Goltara says.

The Dealer Daily portal initiative took four years to develop, at an undisclosed cost, and was a partnership between Toyota's I.T. division, Microsoft Consulting Services, Dell Computer and WorldCom (now part of Verizon). It was built on top of Microsoft technologies, starting with the Windows Server System infrastructure, and incorporating SQL Server, Site Server and Microsoft Visual Studio development tools.

As with almost all of its technology implementations, Toyota started small, carefully rolling out the portal to its Lexus dealers as a test. While it worked out the bugs, it continually expanded the offering, eventually making it available to all 1,200 of its U.S. Lexus and Toyota dealers.

The key business process improvement is that the portal now allows dealership personnel to perform daily business activities, such as entering new vehicle orders and arranging financing or warranty claims, without keying data into multiple systems. Instead, staffers enter the information once into Dealer Daily, and the system automatically forwards the data for processing against the various applications from Toyota and third-party providers that also require the data. When a customer wants to finance a vehicle, for example, dealerships can submit a loan application to Toyota's financing system (which runs on an Oracle database), and receive a response in as little as 15 seconds. The quick response greatly increases the chances that Toyota will win the customer's financing business.

Dealer Daily also streamlines a number of other business processes, including allowing dealers to perform "virtual swaps"—essentially letting them swap cars being shipped from the plant, so they can meet customer orders faster. In the past, this wasn't possible until after a car actually arrived at the dealer's lot. Now, it can be completed before shipment and sometimes in transit, providing significant savings. Dealer Daily also serves as a storage site for vehicle service information, so customers can take their new Lexus GS Hybrids to any dealership, and know that there is a complete history of work performed in the past.

In all, the Dealer Daily incorporates more than 120 business applications, and like all Toyota initiatives, it is constantly undergoing Kaizen to look for more improvements and opportunities to remove Muda. Case in point: Toyota recently added the capability for dealers to find out which vehicles it has in the production pipeline, and make changes such as switching a cloth interior to leather. (Dealer Daily is integrated into Toyota's mainframe systems through file transfer protocol and System Network Architecture [SNA], IBM's proprietary networking architecture, although Web services are now being explored.) By logging in the next day, the dealer can find out if the changes were received in time and accepted. This allows the dealers to more closely customize orders to actual customer demand.

Using business intelligence tools from Hyperion Solutions, Toyota tracks the status of the more than 35,000 vehicles that may be in transit from ports or plants to dealerships, constantly looking for the most cost-effective transportation routes based on changing circumstances.

While no exact figures are available, Toyota says Dealer Daily saves the company and its dealers tens of millions of dollars. Toyota also surveyed 3,000 of its dealership employees and found that the average person who had been using the text-based system saved 1.8 hours per day by using Dealer Daily.

Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.

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