MANUFACTURING

Toyota employs smart thinking to keep rising car-making costs at bayT o y o t a , t h e w o r l d ’ ssecond-biggest auto mak-er, is eyeing a new cost-saving strategy that wouldrely on a fundamentalshake-up in the design ofcar parts to offset a sharprise in materials prices.

A detailed strategy hasyet to be mapped out, but itwould involve looking forways to develop and pro-duce car parts differently –such as by lumping certaincomponents together intoone module – instead ofshaving costs for eachcomponent under a previ-ous method.

“Let’s take nuts andbolts, for example. What ifwe were to develop com-ponents that don’t requirescrews? That’s the kind ofthinking we’re after,” Mit-suo Kinoshita, senior man-aging director and chiefpurchasing officer, said.

“We’ve pretty muchreached the limits of what

we could do under the pre-vious strategy. Under thenext method, we’re takinga brand new approach andasking our engineers andsuppliers to go back to thebasics of vehicle develop-ment.”

The policy, dubbed “VI”for Value Innovation, wasdrawn up in March andcomes at a time when per-vehicle cost savings atToyota have more thanhalved from just two yearsago, hit by a surge in steeland other materials prices.

In the business year thatended on March 31, Toyota,which has its UK base atBurnaston, neary Derby,saved 21,600 yen (£119) incosts per vehicle sold,compared with 34,230 yen(£174) in the previous yearand 48,031 yen (£244) in2002/03.

Mr Kinoshita said therewere no numerical goalsunder VI. But he said he

hoped the steps to be taken,which will be reflected incars sold from 2007, wouldhelp bring per-vehicle sav-ings beyond the low levelsof last year.

“For the next few years,the best we can hope for isto offset the high materialsprices. But we have veryhigh hopes for VI beyond2007 and eventually we’dwant to do better thanthat.”

After years of double-digit jumps in operatingprofit, Toyota posted amere 0.3 per cent rise to1.672 trillion yen (£8.48billion) in the year toMarch as the impact of costcuts dropped to 160 billionyen (£812,000) from 230billion yen (£1.16 billion) inthe previous year.

Cost-cutting is one ofToyota’s biggest fortes,helping it become the

world’s most profitable carmaker in terms of absoluteearnings. Under the previ-ous strategy, called CCC21(Construction of CostCompetitiveness 21), Toy-ota cut one trillion yen(£5.07 billion) in costs –about 30 per cent of thevalue of parts it buys inJapan.

The vast savings, in turn,have enabled Toyota tobuild in improved features

in i t s cars a t pr icesunchanged from precedingmodels, Mr Kinoshita said.

The company’s ultimategoal is to keep feeding thecycle of offering attractiveproducts, thus increasingsales volumes and reapingbigger economies of scalefor further cost cuts, hesaid.

Along with the VI frame-work, Mr Kinoshita, whowill become an executivevice president next month,said Toyota would aim tocut costs by manufacturingcars in a way that wouldraise the utilisation rate ofsteel when cut into variousparts.

“Right now we only useabout 60 to 70 per cent. Ifpossible, we’d like to raisethis by another ten per-centage points,” he said,noting that even a one per-centage point increasewould translate into hugecost savings.

There was also moreroom to slash costs bya p p l y i n g t h e C C C 2 1method overseas, whereToyota purchases anotherfive trillion yen (£25.3 bil-lion) worth of parts, hesaid.

“We haven’t been able todo much at all vis-a-vis ouroverseas production,” hesaid.

“To this end we’re plan-ning to s igni f icant lystrengthen and expand ourtechnical centre in theUnited States, and we hopeto see the benefits of thatfrom the end of this year.”

Mr Kinoshita also saidToyota could be savingmore in its domestic mar-ket by shrinking its prod-uct line-up.

The maker of the Camryand Prius models sellsfewer cars in Japan than inthe United States but hasroughly twice the numberof models at home.

What if we were todevelopcomponents thatdon’t requirescrews? That’s thekind of thinkingwe’re after

Mitsuo Kinoshita

Learning‘so crucial’to ceramics

growthA vital weapon in the ceramicssector’s growing search forgreater competitiveness wasput under the spotlight whenmore than 100 delegates fromindustry, Government andtraining and educational spe-cialists from across the coun-try joined together to promotethe virtues of work-basedlearning.

The University on the ShopFloor project, which is imple-mented through a partnershipbetween the Ceramic IndustryForum and the Association forCeramic Training and Devel-opment, has seen over 2,400people registered since itslaunch.

Speaking at the BritanniaStadium event, Sue Evans,chief executive of the CIF,said: “The project was con-ceived as a way of helping theindustry equip employees withthe skills needed to embracethe widescale changes seen inthe sector.

“After experiencing anextremely productive couple ofyears we are now rolling theprogramme out to even moreceramic companies and aregearing up for another surge oflearners enrolling.”

The aim of the University onthe Shop Floor is to encouragecompanies to work together asa partnership, making learn-ing and education available toall individuals, groups andbusinesses in the industry.

There have already been anumber of notable successes,not least the achievements ofsuccessful learners and thevalue that companies havederived from empoweringtheir employees to learn.

“Each company that hasemployees registered aslearners at the Universityautomatically becomes amember of the CeramicsIndustry Learning Network(CILN), which allows compa-nies to share information andexperiences and encouragesnon-participating firms tolearn through collaboration,”said Ms Evans. “The result istangible business improve-ments that create value foreveryone involved.” The£3.2 million project is fundedthrough Advantage WestMidlands with all Governmentinvestment matched by theindustry in the form of time,facilities and resources.

Keith Marsh, director of theACTD, added: “The input fromthe industry is absolutelycritical to the success of theproject. We have asked themto contribute not only theirfacilities, but also the time oftheir employees, which intoday’s manufacturing envi-ronment is a scarce commodityindeed.”

The Mini things makesuch a big difference

Thirty minutes before newparts arrive at BMW’s Miniplant at Oxford a detailed planfor the supply chain’s internaloperation is set in action.

Working to a tight scheduleis part of taking the costs out ofbuilding cars and planningeverything down to the lastscrew is essential.

Parts have a colour code anddepending on the colour theywill go into the warehouse forlater direct delivery to theproduction line or take theirplace in the line for just-in-time delivery.

“This is the management ofthe inventory in the earliestphase when it arrives at theplant,” said Ralf Hattler,director of logistics, IT andstructure planning.

About 2,100 part typesmove through the warehouse,which covers 22,000 sq metres,to the Mini assembly line forjust-in-time use.

The parts come in fromvarious manufacturing cen-tres in Europe but they are

kept in stock for only a fewdays before they are used. Allthe parts in the warehouse arefor general use and excludespecific items requested by thecustomer whose car is about tobe built to their specifications.

Mini has about 200 suppli-ers and 119 of them are basedin the UK giving them 60 percent of the parts business forthe plant.

The main components comefrom within the UK. Pressingsare done at Swindon at BMW’sown pressings plant and sub-assembly work is due to bemoved to Swindon in thefuture.

Some pressing are done atLand Rover’s site in LodeL a n e , S o l i h u l l , o n a£60 million press acquired byBMW before it sold the plant toFord.

The Mini cockpit is built byRedditch firm Intier andwithin six hours of arrival theymay be called-off for the pro-duction line.

During a three-day periodthe warehouse operates toreceive parts round-the-clockand the other four days areflexible to accommodate vehi-cles bringing in stock from adistance.

Commercial vehicles carry-ing the parts are not permittedto be driven at weekends inGermany.

The handling of the stock iscomplex and also crucial to thesmooth flow of car productionwhich sees petrol and dieselengine Minis and the variantsoft-top moving along the pro-duction line with left-handdrive models for the US,Europe and other worldwidemarkets.

These ordered cars are fre-quently accompanied by spe-cial request demands from theowners who want their cars tohave an individuality with theavailable extras.

Much of this activity is inthe cockpit area and involvesradios, CD players, satellitenavigation, steering wheelsand steering columns, seats,air conditioning and colours.

Externally it is mainly trimand lights.

Delivery to the productionline has achieved a right-first-time figure of 99.9 percent, a demonstration of accu-rate ordering and handling ofstock.

These operations are car-ried out by external servicespartner Rudolf Hellmann, butresponsibility for the wholeprocess still rests withMr Hattler andhis team.

T h eR u d o l fHellmanncompanylooks afterreceiving ofthe parts, inven-tory levels anddelivery of the compo-nents to the line as well as theoperational management ofthe warehouse.

A good relationship withsuppliers is essential and assoon as a new supplier isselected planning and co-operation gets underway.BMW’s central planningoperation in Munich is verymuch involved at this stage.

Quantities of parts are dis-cussed and how many timesthere will be a call-off for

components and the number ofdeliveries to be made.

“The companies chosenmust have capabilities andhave a high knowledge ofengineering and quality,” saidRalf Hattler, director of logis-tics, IT and structure plan-ning. “The logistics perform-a n c e i s i d e n t i f i e d a n ddeveloped before the start of a

new product. Wemeasure and

monitor

the suppliers.“This is an intensive period

and we also have to maintainthe supply chain quality andfor this function we are in closeco-operation with the suppli-ers so that when they starttheir relationship with useverything is in place.

“During the normal opera-tion process we are in dailycontact with suppliers to call-off parts and to ensure the

correct materials are comingforward. We also have aninternet operation and theycan get into our system.

“We are able to give them anearly forecast of production ona monthly basis and thenrefine it to a weekly productionforecast so that suppliers knowexactly what is required.”

Building one model typeshould mean just-in-time isless complex but that is not thecase when cars are not built inbatches and each car has themark of the individual buyerwaiting to take delivery.

Mr Hatt ler sa id thatbecause of the large number ofpossible specifications only onein 50,000 cars would be thesame. The plant builds theMini One, Mini Cooper, CooperS and convertible variants andthat brings with it differentparts.

“It is hugely complex andeach day we have more than 50to 60 technical changes – weare continuously improvingour cars,” he said.

In 2004, a total of 189,492Minis were built and Mr Hat-tler said the plant will at leastmatch that total and perhapsproduce more. To help theplant cope with increased pro-duc t i on i t i s inves t ing

£100 million in a body-shellproduction extension as wellas the paintshop and finalassembly.

Another continuous chal-lenge is to produce the car thecustomer wants at the righttime and that is one of thereasons for operating a just-in-time system. Customershave up to eight days beforebuilding starts on their car tofinalise the extras they mayrequire on the vehicle.

Suppliers, to all manufac-turers, are working underconstant costs down demands.

Mr Hattler said: “We haveinternal percentage targetswhich we must achieve. It doesnot make sense to keep stockon our site and the suppliers’sites. We work on a continuingimprovement process betweenboth sites to make the supplyroute effective. It is futile forthe supplier to send a lorryevery day. If it is coming fromSpain or travelling some otherlong distance it may be half-full and that is putting up thetransport costs.”

Production workers at theplant total around 3,700 froma payroll of 4,500.

Production is based on threeshifts covering day, night andweekend work.

By James O’BrienSpecial Correspondent

The Mini production line at the Cowley car plantMini has about200 suppliersand 119 of themare based in theUK giving them60 per cent ofthe partsbusiness for theplant

22 THURSDAY June 2 2005 H The Birmingham Post

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