Toyota: From Excel to Business Intelligence

This article illustrates a typical case in which information flow could not meet the needs of managers. Information was late sometimes inaccurate and not shared by all. The old system did not meet the needs to make fast decisions, evaluate large amounts of information that was stored in different locations and collaboration. The solution is a technology called business intelligence (BI) which is based on data warehouse and provides a strategic advantage.

Problem
Toyota Motor sales USA (TMS) sells its vehicles to Toyota dealers across the USA used to take 9 to 10 days in transit and an average vehicle costs about $8 per day to keep while in transit. The financial charge was $72 to $80 per car. For 2 million cars per year the cost to the company was $144 to $160 million. The company faced increased problems in its supply chain, operations and car-keeping mounted in the late 1990s. Disappointed with the inability to deliver cars to the dealers unhappy customers purchasing cars from competitors such as Honda. The competition became intensified in 2003 and 2004 when hybrid cars were introduced by Honda. TMS managers used computers that generated huge numbers of directionless reports and data also unable to use such data and reports strategically. Internal departments regularly failed to share information or they did it too slowly. Actionable reports were often produced too late and overlapping reporting systems provided data that were not always accurate. Managers were unable to make timely decisions because they were not certain what portion of the data was accurate. The situation was especially dire in the Toyota logistic Services (TLS) division which is manages the transport of vehicles. The TLS managers require precision tracking and supply chain management to ensure that the right cars go to the right dealers in a timely manner. Manual scheduling and other related business processes that were conducted with incorrect information caused additional problems. If one individual made a data entry mistake when a ship docked the mistake would endure throughout the entire supply chain. The mistake maybe indicated to managers that ships never made it to a port weeks after the ships had safe docked. The information technology (IT) organization was unable to respond to the growing needs to the business.

Solution
A new chief information officer (CIO) was hired in 1997 in order to fix the problems. Barbara Cooper the new CIO started by trying to identify the problems. Cooper realized that a data warehouse was needed. A data warehouse is a central repository of historical data organized in such way that it is easy to access using a web browser and it can be manipulated for decision support. Cooper also saw that software tools to process, mine and manipulate the data were needed. A system therefore set up to provide real-time, cal data input into the system included years of human errors that had gone unnoticed including inconsistent duplicated data as well as missing data. The new system lacked capabilities to provide what managers needed. By 1999 it had become clear that the solution did not work. It was the right concept but used the wrong technology from the wrong vendors. In 2000 Toyota switched business intelligence platform. The system also included Hyperion’s dashboard feature which allows executives to visually see hot spots in their business units and investigate further to identify problems and their causes. With the new TLS system which uses colors meaningfully (red for danger) a business manager can see in real-time such as when delivery times are slowing and can immediately find the sources of the problems and even evaluate potential solutions by using ‘what-if’ analysis.

Results
Within a few days the new TLS system started to provide eye-popping results. The system helped managers discover that Toyota was getting billed twice for a specific rail shipment an $800,000 error. Overall Toyota USA managed to increase the volume of cars it handled by 40 percent between 2001 and 2005 while increasing head count by just 3%. In addition in-transit time was reduced by more than 5%. Word of the success TLS new business intelligence quickly spread throughout Toyota USA and then all over the company and many other areas of the company started to adopt BI. The more people who use data analysis tools the more money Toyota can earn. The TLS system was upgraded in 2003 and 2005 and tools are continuously added as needed. Toyota Motor Corporation reached the highest profit margins in the automotive industry in 2003. Toyota’s market share has increased consistently.
An independent study by IDC,Inc. indicates that Toyota achieved a 506% return on its BI investment.
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