At Toyota Motor Sales, the acronym DOD stands for the Distribution Operations Department—not the Department of Defense. However, it’s understandable that the one might be confused with the other. From the outside looking in, both DODs appear complex and impenetrable.
“Many associates don’t really know what we do,” says Eric Peterson, national manager of Vehicle Production Planning. “Our role is central to the vitality of the business. We have a hand in every single vehicle that ends up at a dealership for sale to a customer.”
In simple terms, DOD manages the company’s vehicle pipeline. It works with the Regions and private distributors to develop sales plans, then coordinates with manufacturing, both in Japan and North America, to ensure the desired units are produced and delivered to the appropriate dealers when needed.
DOD’s mantra: Get the right vehicle to the right place at the right time.
Fulfilling this mission has never been more challenging. The combined Toyota/Lexus/Scion product lineup has more than doubled in complexity over the past 15 years, from 18 series and 88 models in 1998 to 38 and 210 today. Meanwhile, dealer and customer expectations continue to ratchet up. Everyone wants what they want when they want it. The automakers who come the closest to meeting that demand are the most likely to prosper.
Behind the scenes, DOD is taking bold steps to become increasingly responsive to the marketplace. Several related initiatives are now in the works or have recently been implemented under the heading of Demand and Supply Kaizen. What follows are descriptions of two such breakthroughs that are already making a difference.
TOMS Pipeline Visualization (TPV)
As noted, DOD works with the Regions/private distributors to help them develop their vehicle sales orders. In the past, the tool provided by the department to facilitate this process was so complex, few associates made use of it.
Taking Orders -- The Regions use this screen in TOMS to place vehicle orders.
TPV, by contrast, aims to keep it simple. Peterson said the new application began as a “proof of concept built in an augmented Excel spreadsheet.” It identifies where the Region’s inventory currently stands, where it hopes to go and how to bridge the gap. The pilot proved so successful, DOD made it available to all Regions ordering vehicles through TOMS, the Toyota Order Management System.
“TPV makes it much easier for a Region to analyze their order and identify the vehicles they need to replenish their dealers’ inventory,” says Peterson. “It’s so simple to use that it doesn’t require any special training. And the numbers feed directly into TOMS, so there’s no need to re-key everything. Our objective is to produce the most efficient and accurate vehicle orders possible at the start of the process so we don’t have to make a lot of adjustments down the line. TPV helps us get there.”
And the icing on the cake? Developing TPV cost less a 10th of any of its predecessors.
Completely Built Unit (CBU) Order Change
Thanks to tools like TPV, about 85 percent of the monthly vehicle orders align with customer demand. But the market is so complex and volatile (just consider the impact of rising gasoline prices), that some fluctuation is inevitable. To help fine-tune the ordering system, DOD recently launched CBU Order Change, making it possible to modify orders for vehicles manufactured in Japan. TMS has had this capability for units assembled in North America for over 20 years.
Time for a Change -- This screen summarizes changes to vehicle orders before they go into production.
For example, let’s say the Lexus Western Area has placed a large order for Deep Sea Mica Lexus GS sedans but its dealers are now seeing high demand for Meteor Blue Mica. Up to eight days before the originally ordered GS sedans were manufactured, DOD could request a color change. That would mean the extra allotment of Meteor Blue Mica GS sedans would arrive on dealership lots 6-8 weeks sooner than if DOD had to re-start the process with a new order. Typically, it takes 10-14 weeks for a vehicle to be ordered, manufactured and transported from Japan to a U.S. dealership.
Audrey Mito, national vehicle administration manager, says TMC’s lean production practices can make late-order changes more problematic, especially if the change requires a different mix of components or parts.
“There is a tension between lean production and order change,” she says. “But manufacturing has become very creative at finding ways to provide more flexibility.
Mito stressed that this new capability only applies to a small percentage of overall production. Ideally, most units follow the conventional timeline. Still, even a little give-and-take can make a big difference.
“A mistake in vehicle ordering can be very costly to the company,” she says. “We’re talking about hundreds of millions of dollars of inventory. These new tools make it easier for the regions and dealers to adjust when necessary. That’s good for them and it’s good for us. And, most importantly, it’s good for our customers, who end up with the vehicle they really want much sooner.”