Toyota
shares key insights
Yoshiaki
Kato, the Managing Director of Toyota Lanka (Pvt.) Ltd., Colombo and
President of the Japanese Solidarity Association in Sri Lanka,
delivered an address at the Colombo MBA Alumni Association recently.
Following are excerpts:
Good
evening, ladies and gentlemen.
First of all, I would like to
express my sincere thanks for giving me this opportunity to make a
small presentation in front of so many MBA’s in Sri Lanka. I feel
very honoured and privileged to be here.
I personally do not have
the degree of MBA and I very much doubt if my presentation will
satisfy your academic interest or not; however, I am happy if I can
deliver some hints which have contributed to today’s success of our
business.
I
joined Toyota Tsusho Corporation in 1978 after graduating from Sophia
University in Tokyo where I studied foreign languages and
international relations. My thesis was British foreign policy toward
Japan in the middle of 19th century in comparison with their policy
toward China. The conclusion was very simple.
Japan was too small
a market for the British compared to China, which is very true even
now. Anyway this was long time ago and what I want to say is that I
have learned the most of the things about business after joining the
company.
For
about 20 years, I was in forklift distribution business including
eight years stay in Belgium. After four years in Japan, I was
transferred to Karachi, Pakistan as Deputy Managing Director of
Hinopak which is a manufacturing company of Hino brand trucks and
buses. This was a very exiting assignment in an exotic environment as
you may well know. I stayed 3 years from 2006 to 2009 in Tokyo where
I was general manager in charge of automotive business management
department. The job in short was to control and provide support to
subsidiaries, mainly car distributors and dealers in various
countries.
Assignment
in Sri Lanka
I came to Sri Lanka in April, 2009. Almost always my
new assignment starts at the bottom of the economy of that country.
When I went to Pakistan in April 2001, the company was almost over
indebted. However, within less than six months, there was the 9/11
and subsequently the war in Afghanistan started, which triggered a
hike of demands for trucks in Pakistan and before the end of my term
there, we could pay out 50% dividends. Unfortunately, after my
departure, the situation in Pakistan seems to have deteriorated,
however.
The
same seems to be true also of my assignment in Sri Lanka. I came here
in April, 2009. The car market was at its bottom. The total market
volume used to be somewhere around 25,000untis in 2006,2007 and 2008
but the figure of 2009 was a mere 9,000 units due to global
recession, unfavourable exchange rates, high interest rate and
notoriously high import duties on cars. The situation has changed
completely.
The civil war was over in May, 2009 — just one month
after my arrival. Import duties were brought down to nearly one half
in June this year. Inflation and interest rates are under control.
And we have now very stable and strong government under the
leadership of President Mahinda Rajapaksa. So, according to my past
experience, the economy of Sri Lanka should be all right so long as I
stay here.
Now,
I would like to explain the structure of the Toyota group of
companies.
There are 13 group companies. Toyota Motor Corporation
is off course the manufacturer and brand holder of Toyota cars. But
the mother company of the Toyota group is Toyota Industries
Corporation. This company used to be called Toyoda Automatic Loom
Works and was established by the famous inventor of textile
machinery, Sakichi Toyoda. The car business of the Toyota group was
started by Dr. Kiichiro Toyoda, grandfather of the current president
Akio Toyoda and the starting fund for car business was generated by
selling the patent of textile machinery to a British company.
It
is worth mentioning that Sakichi Toyoda was brought up in a rural
village seeing the back of his mother who was toiling with antique
manual weaving machine every night and he wanted to relieve his
mother from toil by inventing an automatic weaving machine.
I am
from Toyota Tsusho Corporation which is the trading and Investment
Company of the Toyota group.
For your information, Hino and
Daihatsu are consolidated subsidiaries of Toyota Motor Corporation
now.
Toyota
Tsusho
Now, briefly about Toyota Tsusho. Toyota Tsusho is a
trading and investment company and its size in terms of turnover is
No. 6 in Japan. Consolidated highlight figures are indicated here to
give you some idea on the scale of its operation.
There are six
operating divisions; metal, machinery & electronics, automotive,
energy & chemical, produce & food stuff and consumer
products, service & materials divisions.
I
am from the automotive division and we are operating in 47 countries
and we have 177 sales outlets in total. The number of car
distributors and dealership
among
the total is approximately 120 and Toyota Lanka is one of them. Now,
how can we manage over 100 distributors and dealers all over the
world?
Of course there is basic framework provided by Toyota Motor
Corporation. However, with only manuals and guideline of Toyota, your
success is not guaranteed.
As for finance, all of you are MBA
title holders and I do not have to elaborate on financial criteria
like ROE, EVA or return on risk assets. Just for your information,
among these parameters, nowadays we give more weight on return on
risk assets.
With
regard to financial control, we have a global IT system for
consolidation and a unique team of specialists who are visiting our
subsidiaries for periodical financial due diligence for improvement
of balance sheet and fraud prevention.
And
in addition to Toyota’s general support, Toyota Tsusho has
dedicated teams for operational supports and Kaizen.
These are
rather basis or infrastructure to manage subsidiaries. However, on
top of the infrastructure and more importantly, we need clear
identification of core value and clear message from the top
management is to be shared by all subsidiaries.
People
centered approach
To define the guiding principle, a group of
managers and staff have worked for nearly two years and reached the
conclusion that the core value should be people-centered approach.
These
are, respecting people, creating value for people, always delight
people and be loved by people. Now, to understand this people
centered approach a bit more systematically, we normally break it
down into five elements.
These
are:
SS – satisfaction of shareholders
ES – employees’
satisfaction
CS – customer satisfaction
MS – manufacturers’
satisfaction
CSR – corporate social responsibility And for
business development, Kaizen activities and rotation of PDCA
(Plan-Do-Check-Action) cycle form the foundation. These five elements
are interrelated.
First
of all, you cannot make reasonable profit and achieve sustained
growth without repeated purchase of your customers and support of
society in general.
And corporate social responsibility can be
realised only if you can make money. Without profit, you cannot pay
tax and continue social contributing activities.
Manufacturer
satisfaction is a little bit difficult to understand but good
relationship with suppliers and contribution to improvement of brand
in general is an important role of distributor and dealers. This also
is possible with support of your customers.
Customer satisfaction
is off course very important but if your employee is not happy and
does not greet your customer with bottom of their heart, you cannot
expect customer satisfaction.
So,
employee satisfaction is very important. Without satisfied employees,
you cannot achieve customer satisfaction and without customer
satisfaction, you cannot achieve shareholders’ satisfaction or
reasonable profit; but at the same time, without reasonable profit,
you cannot achieve employee satisfaction either. On this issue, I
would like to explain a little more details later. This is the
illustration of the interrelationship of the five elements and
Kaizen/PDCA that I have explained.
Please note that at the core
there are competitive and highly motivated people.
Guiding
principle
Now, let’s look at our guiding principle from
different aspects. Our guiding principle can be explained also from
these three aspects. First; best people and workplace; second lean
operation and third CRM, tight and long term relationship with
customers. To achieve high motivation of employees, reasonable pay
and good physical working conditions are necessary but this is only
the basement.
In addition, we have to satisfy the feeling of
achievement, that is, employees should have a sense of accomplishment
in their jobs and their accomplishment is fairly and well recognised
by the organisation. People complain more about inequality of
treatment and lack of recognition rather than by absolute level of
income of grade.
Therefore,
as the basis of employee satisfaction, I believe that such HR rules,
system and corporate culture are necessary that ensure fair and
transparent target setting and appraisal, salary increment and bonus
evaluation and promotion.
We spent a lot of time and efforts in
developing the HR system and the result is published as this
‘Employee Handbook’.
Internal and external training of our
basic principles, Toyota/TTC way, Kaizen and PDCA are repeatedly
organised to share the core value among all management and employees
in addition to ordinary training on managerial, commercial and
technical skills.
And to work as a team, various corporate events
like Christmas party, group tour etc. are being organised and
recently we started to distribute a quarterly news letter. I would
like to point out the fact that the issuance of this news letter
“Wheels” was proposed by one of our Kaizen teams and many staff
enthusiastically contributed to this news letter spontaneously rather
than by instructions or solicitation of the top management.
Lean
operation
Now, lean operation. Probably you have heard often about
lean operation as an element of Toyota production system like
Kanban.
Even to distribution business like car dealership, we can
employ the concept of lean operation and this can be broken down
into:
Seiryuu-ka
(rectification of flow or streamlining) of products, money and
information.
Seiryuu-ka
of products means, for instance, to try to achieve a sales target
with minimum stock on hand. Another example is to streamline the
parking arrangement of cars of service customers. Parking is an
important factor in running car dealership because most of the
investment goes to the real property or land and the size of the land
is dictated largely by space necessary for parking.
Therefore, we
are continuously improving our operation so that a set output can be
achieved with minimum parking space and flow of vehicle within the
premises is kept as smooth as possible.
Seiryuu-ka
of money means control of total assets by reducing inventory level,
account receivable and other unnecessary assets. Our performance is
measured mainly by return on risk assets and risk assets are
calculated by multiplying certain factors on balance sheet items like
inventory, accounts receivables and we are extremely conservative and
rigid about provisions for obsolete stock and bad debt.
Seiryuu-ka
of information means streamlining of flow of information within the
organisation. It is sometimes surprising to realise to what extent
the information is not shared among various departments and identical
typing and key-in operations are repeated within the same company.
There may be unnecessary documents which are still circulated just
because some boss in the past demanded but is no more required.
Kaizen
activities are in a sense to find out stagnation of flow of products,
money and information and make rectification to the flow.
Muda,
Mura and Muri
Another
three aspects of lean operation are removal of Muda, Mura and
Muri.
Muda means simply waste. Waste of goods, money and time.
This does not need much elaboration but simple example in our company
is, for instance, to use projector extensively at the meeting without
distributing hard copy of presentation documents to participants to
save money, paper and forest.
Mura means unevenness. For instance,
a certain assignment may be very busy at the end of each month and
overtime has to be done like the case of preparing monthly order with
manufacturer.
But the monthly order with manufacturer is more or
less equal to the accumulation of orders received from customers on a
daily basis and you can prepare order with the manufacturer as you
receive order from customers without waiting for the end of the
month. Then you do not have to do overtime at the end of each
month.
Muri means unnatural or forcible work. A simple example is
to remove tires from a car. If the car is on the ground, you have to
bent down to remove the nuts and if you repeat this many times a day,
you will have back pain. But if the car is on the lift, you can
remove the nuts while you are at natural standing position but then
you have to bring down the heavy tires onto the ground. To solve this
problem, we devised a tire holder which catches the removed tire to
reduce the fatigue of operator.
From this aspect, Kaizen is the
activity to remove these Muda, Mura and Muri.
As I said in these
examples, Kaizen activity aims not only at improvement of efficiency
but more at removal of toil of workers for better working
environment. And as I touched upon at the beginning of my
presentation, the founder of the Toyota group, Sakichi Toyoda,
invented automatic looms to relieve the toil of his mother and to see
her happy face. This people or human centered approach is one of the
traditions of Toyota.
Customer
Relationship Management
CRM – Customer Relationship Management
or customer retention management. All of you are MBAs and I think I
do not have to elaborate on this issue. In our automobile
distribution business, customer retention is one of the most
important activities because simply happy customers return and invite
other customers and unhappy customers just do not come back and talk
ill of us.
Fortunately or unfortunately, used car dealers in this
country normally do not provide any after sales service.
They just
import and sell. So, the customer of used Toyota car has to rely on
us or other repair shop for service. Therefore, used car customers
are important customers of our service business and can be future
potential buyers of new car and we treat them just as our own
customers of new cars.
I
have not explained what S-TEAM stands for so far.
S-TEAM means:
S
is Smiling, Superior, Seiryuuka and in a difficult time, also means
Survival
T is off course Toyota Tsusho
E comes from Efficient
A
indicates Affectionate
M is Manner
And the pronunciation of
S-TEAM is similar to “esteem” and we mean by that “esteem of
people”.
Finally, I would like to introduce our vision and
mission.
I
do not say we want to become the biggest automobile distribution
company in Sri Lanka, but we want to be the most respected and
admired one. And to achieve this vision, we create life time customer
and life time employment.
Thank you very much for your attention.