By Neil Bentley, chief knowledge officer, ActiveOps
Despite troubling product recalls in the not too distant past, Toyota’s relentless strong financial performance confirms its continued position at the top of the automotive tree.
One of the earliest adopters of the Lean and Six Sigma methods still being pursued in many service organisations (with mixed results), Toyota’s textbook experiences in manufacturing still reveal plenty of important lessons for other industries – if they are prepared to listen.
The secret of Toyota’s success lies in its production system, where logic pervades over everything from customer relations to product development, manufacturing and supplier relationships. Writing in International Commerce Review, Daniel T Jones and Philip Clarke said: “Because Toyota buys in three-quarters of the value of the car, a key part of its success is spreading this logic to its first, second and third-tier suppliers, giving it the most efficient supply base in the world.”
Lessons for the service sector
Along with the important role of supply chain integration, this analysis of Toyota highlights the lessons the service sector can draw from manufacturing.
Looking back to the automotive sector in the mid to late 1980s, there was a substantial shift from ‘push’ to ‘pull’ scheduling (i.e. where production is made to order (pull) rather than made to stock (push) and not based on actual demand) and a related shift from material requirements planning (MRP) to KANBAN scheduling. Significant interest also arose in the Toyota Production System and in Total Quality Management, which are essential precursors of today’s Lean and Six Sigma management methodologies.
This was also a time of significant growth in manufacturing outsourcing and the subsequent rise in supply chain integration that occurred alongside it. No sooner had manufacturing companies dismantled their vertical integration (in some cases handling everything from raw materials to warehousing and logistics themselves), it seemed they were scrambling to stitch the different elements back together again.
Having reduced its suppliers, one large company stopped pitting competing companies against each other and moved towards a partnership approach, where common interests were shared and the customer was the main priority. It was so committed to this new strategy that some parts of the business even trained suppliers in just-in-time manufacture and supply.
Three decades on and linked to the maturity of outsourcing and offshoring, the same trends are now occurring in service operations – including the banking sector. In particular, there continues to be an increasing move towards collaborative, partnership-style relationships, rather than transactional customer-supplier contracts.
Increasingly, outsourcing organisations have become more sophisticated in the process of selecting a BPO provider. In response, the providers have adapted to meet the challenge of delivering integrated value to the end-customer.
As the experts have pointed out, key to the success of the Toyota supply chain was the ‘logic that pervades everything’. Increasingly, there are also signs of this equivalent trend now emerging in banking and other service sectors, in many cases linked to production planning and control, albeit improved operations performance management rather than manufacture.
In one instance, a mortgage services BPO employing a best-practice operations performance management method was so successful in improving its performance that it prompted a major client to adopt the same structure in its organisation. In another case, a BPO provider won a significant deal partly because the client was using the same process logic and was able to discuss the business requirements using a common frame of reference.
Elsewhere, some organisations are beginning to mandate that their BPO providers adopt this structured approach in the service they provide. Banks are also reporting more control and responsiveness in their relationships with their BPO providers having used the method to standardise management control and their management information (MI) systems.
The parallels with Toyota are clear. Having a common method in the adjoining stages of the end-to-end process results in the more efficient transfer of information and the management of service levels, while at the same time improving customer/supplier communication.
Using this increasingly common method, one day a leading service organisation will become so good at service operations management that it will, like Toyota, set a defining standard for others to follow, both within its own supply chain and across the whole of its industry. A capability maturity model will then emerge that is identifiable with one or (at most) a handful of service organisations, setting them apart from their competitors.
Just as the Toyota brand has become synonymous with operations innovation and excellence in manufacturing, one day a bank (or perhaps insurance company) will emerge to claim the crown as a leader for operations in financial services, the ‘Toyota’ of the banking world.
Neil Bentley has been helping organisations to improve their front-line operating performance for over 20 years. Originally qualified in psychology, he worked for Lucas Industries in the 1980s, gaining experience in manufacturing production management, before focusing on financial services and the public sector. He launched ActiveOps, with fellow OCP partner Richard Jeffery, in 2005.
For more information, please visit www.activeops.com
Aston Martin says back on the road to profitability after 2020 loss
By Costas Pitas
LONDON (Reuters) – Aston Martin expects to almost double sales and move back towards profitability this year after sinking deeper into the red in 2020, when the luxury carmaker was hit by the pandemic, changed its boss and was forced to raise cash.
The British company’s shares jumped 9% in early Thursday trading after it kept a forecast for around 6,000 sales to dealers this year as new management turns around its performance.
The carmaker of choice for fictional secret agent James Bond has had a tough time since floating in 2018, as it failed to meet expectations and burnt through cash, prompting it to seek fresh investment from billionaire Executive Chairman Lawrence Stroll.
The firm made a 466-million pound ($660 million) loss last year, compared with a 120 million pound loss in 2019, as sales to dealers fell by 42% to 3,394 vehicles, hit by the closure of showrooms and factories due to COVID-19.
For 2021, it expects “to see the first steps towards improved profitability” but is still likely to post a pre-tax loss, the carmaker said.
“I am extremely pleased with the progress to date despite operating in these most challenging of times,” Stroll said.
Aston said demand for its first sport utility vehicle, the DBX, which rolled off the production line at its Welsh plant in 2020, was strong in a lucrative segment of the market it entered to widen its appeal.
The model accounted for 1,516 of deliveries to dealers last year and the company expects further growth in its first full-year of sales, including in the key market of China, where rivals such as Bentley are also seeing high demand.
“We had not even a half-year DBX production in wholesome so probably we are going to see over-proportional growth in China,” Chief Executive Tobias Moers, who took over in August, told Reuters.
($1 = 0.7065 pounds)
(Reporting by Costas Pitas. Editing by Estelle Shirbon and Mark Potter)
Oil prices hit 11-month highs on tighter supplies, Fed assurance on low rates
By Florence Tan
SINGAPORE (Reuters) – Oil prices rose for a fourth straight session on Thursday to the highest levels in more than 11 months, underpinned by monetary easing policies and lower crude production in the United States.
Brent crude futures for April gained 19 cents, 0.3%, to $67.23 a barrel by 0400 GMT, while U.S. West Texas Intermediate crude for April was at $63.30 a barrel, up 8 cents, 0.1%.
Both contracts touched their highest since January earlier in the session with Brent at $67.44 and WTI at $63.67.
An assurance from the U.S. Federal Reserve that interest rates would stay low for a while boosted investors’ risk appetite and global financial markets.
“Comments from Fed Chairman, Jerome Powell, earlier in the week relating to the need for monetary policy to remain accommodative have probably helped, but sentiment in the oil market has also become more bullish, with expectations for a tightening oil balance,” ING analysts said in a note.
A rare winter storm in Texas has caused U.S. crude production to drop by more than 10%, or 1 million barrels per day (bpd) last week, the Energy Information Administration said. [EIA/S]
Fuel supplies in the world’s largest oil consumer could also tighten as its refinery crude inputs had dropped to the lowest since September 2008.
The Organization of the Petroleum Exporting Countries and their allies including Russia, a group known as OPEC+, is due to meet on March 4.
The group will discuss a modest easing of oil supply curbs from April given a recovery in prices, OPEC+ sources said, although some suggest holding steady for now given the risk of new setbacks in the battle against the pandemic.
Extra voluntary cuts by Saudi Arabia in February and March have tightened global supplies and supported prices.
(Reporting by Florence Tan)
Australian media reforms pass parliament after last-ditch changes
By Colin Packham and Swati Pandey
CANBERRA (Reuters) – The Australian parliament on Thursday passed a new law designed to force Alphabet Inc’s Google and Facebook Inc to pay media companies for content used on their platforms in reforms that could be replicated in other countries.
Australia will be the first country where a government arbitrator will decide the price to be paid by the tech giants if commercial negotiations with local news outlets fail.
The legislation was watered down, however, at the last minute after a standoff between the government and Facebook culminated in the social media company blocking all news for Australian users.
Subsequent amendments to the bill included giving the government the discretion to release Facebook or Google from the arbitration process if they prove they have made a “significant contribution” to the Australian news industry.
Some lawmakers and publishers have warned that could unfairly leave smaller media companies out in the cold, but both the government and Facebook have claimed the revised legislation as a win.
“The code will ensure that news media businesses are fairly remunerated for the content they generate, helping to sustain public-interest journalism in Australia,” Treasurer Josh Frydenberg and Communications Minister Paul Fletcher said in a joint statement on Thursday.
The progress of the legislation has been closely watched around the world as countries including Canada and Britain consider similar steps to rein in the dominant tech platforms.
The revised code, which also includes a longer period for the tech companies to strike deals with media companies before the state intervenes, will be reviewed within one year of its commencement, the statement said. It did not provide a start date.
The legislation does not specifically name Facebook or Google. Frydenberg said earlier this week he will wait for the tech giants to strike commercial deals with media companies before deciding whether to compel both to do so under the new law.
Google has struck a series of deals with publishers, including a global content arrangement with News Corp, after earlier threatening to withdraw its search engine from Australia over the laws.
Several media companies, including Seven West Media, Nine Entertainment and the Australian Broadcasting Corp have said they are in talks with Facebook.
Representatives for both Google and Facebook did not immediately respond to requests from Reuters for comment on Thursday.
(Reporting by Colin Packham in Canberra and Swati Pandey in Sydney; Writing by Jonathan Barrett; Editing by Leslie Adler, Stephen Coates and Jane Wardell)
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