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Originally published at Internet.com It's been in the news lately that Toyota has now overtaken Ford to grab the No. 2 slot in worldwide auto sales, and very soon may leapfrog over GM to the No. 1 slot. Toyota's sales for the six months ended Sept. 30 grew more than 15%, even as GM, Ford and the Chrysler Group collectively continued to pile up billions of dollars worth of losses.
Toyota provides a leading example of a business that really understands alignment. Externally, it is closely allied with its customers' demands, and internally, its manufacturing and business operations are closely allied with IT.
The market is moving toward what AMR Research analyst Kevin Reale calls "niche vehicle production." As the traditional Big Three auto companies struggle with overcapacity issues, Toyota reaps the advantage both of having plants that can turn out more than one vehicle line, which gives it the flexibility required to respond to the changing market, and of having an IT infrastructure that streamlines collaboration and production.
In a recent report on the 2007 budget outlook for automotive and heavy equipment manufacturers, which covers 52 companies with revenue greater than $1 billion, Reale finds that these organizations will target their IT investments at improving their competitive position. They will shift some of their enterprise and software investments away from core ERP systems to manufacturing operations, supply chain management, and product lifecycle management technologies.
These efforts will be spurred by the desire - in fact, the need - to reduce time to market, increase manufacturing flexibility, and improve visibility to demand.
"The most important business initiatives affecting IT investment decisions in the next year will involve application of lean processes across the organization and better utilization/analysis of data throughout the organization," Reale notes.
Toyota, of course, wrote the book on lean manufacturing, and is enjoying the benefits of its incisive approach to managing direct materials costs. Reale cites the Harbour-Felax Group finding that Toyota has a greater than $1,000 per vehicle cost advantage over North American legacy auto manufacturers because of its parts reuse capabilities.
Such advantages come to companies like Toyota in part as a result of their embrace of product lifecycle management, which includes but goes beyond CAD and PDM technologies.
"It requires the establishment of a single point of truth of technical and commercial product value chain information," Reale writes. "This information will be required to more effectively and efficiently source parts based on total landed cost, not just price, and improve reusability of strategic common and uncommon commodities." It's been reported that Toyota's heavy investment in CAD tools and electronic parts systems have played a large role in reducing its new vehicle development time to one to two years, down from about four. That's critical given the ever-changing tastes of consumers. Toyota's use of technology has enabled parallel collaboration, which not only speeds the actual design process but also enables the business to jump-start procurement and logistics efforts around parts and delivery. These smart moves don't negate the fact that Toyota has made some missteps. It's trying again to get things right in the American mainstay market of big, tough pick-up trucks, with the re-imagined Tundra. Its relentless focus on process - and how IT enables it - is sure to be in evidence at the plant in San Antonio where the vehicle is being manufactured.
And if it hits the mark this time, by delivering the higher-powered vehicle customers say they want, it may not be long before the smell of burning rubber wafts its way over to GM's headquarters.
Author: Jennifer Zaino
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