Toyota IS Business Planning - All about Plan Do Check Act
Toyota IS Business Planning - All about Plan Do Check Act
Toyota IS Business Planning All about Plan‐Do‐Check‐Act Xiang Tjoa, BSc BMI, 1202952 27 January 2008 Toyota Motor Europe Information Systems Division Business Planning Avenue du Bourget 60 1140 Brussels Belgium Supervisor: F. Grauls Vrije Universiteit Faculty of Sciences De Boelelaan 1081a 1081 HV Amsterdam The Netherlands Supervisor: Dr. S. Bhulai Second reader: Dr. C. Verhoef Version 2.6
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 5 ‐ Preface This internship is to conclude my Master Business Mathemetics and Informatics at the Vrije Universiteit Amsterdam. Seven months I have spent at Toyota Motor Europe in Brussels to try to understand the business processes within Information Systems and to contribute in improving them. My internship has given fortunately enough foundation of trust for Toyota to ask me to stay at Information Systems division after the conclusion of it. But to come this far, it took also the support and patience of a lot of other people. First I had the goal to search for an internship abroad.
Secondly, it was absolutely not easy when it came to making the final decision. My parents, partner and friends helped me to make this decision and kept supporting me during the entire period as an intern far away in Brussels.
As of the first Monday I came in as an intern at IS Business Planning, my team didn’t hesitate in giving me my first assignment with a deadline set on that Friday already. With the right support from Ricardo (and on the background Frank as manager and Tim as General Manager) I was able to meet that deadline. That culture of no fooling around and to work the best you can was exactly to my liking. The support that was given from the first day continued during my entire internship. After Ricardo left in February, Frank became my direct mentor. Although it was a very hectic period with a merge coming up between two so very different entities (Manufacturing and Sales), the support was there when I needed it.
My team members were fun to work and chat with.
But not only Toyota made the conclusion of my internship possible, also the support and trust of my supervisor from the university pulled me through some more difficult periods. I would like to sincerely thank Sandjai for his support and advices. And not to mention Chris; he (like Sandjai) did read through my report every time I sent it to my supervisors so very short before the deadlines. Even after so many months spent at Business Planning, I still act like a student ☺
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 7 ‐ Index INTRODUCTION ___ 9
1 TOYOTA ___ 11
1.1 KAIZEN ___ 11
1.2 INFORMATION SYSTEMS DIVISION ___ 11
1.2.1 THE CREATION OF TOYOTA EUROPE DATA CENTRE (TEDC ___ 12
1.2.2 A LEGAL MERGER BETWEEN TMEM AND TMME ___ 12
1.3 THE TOYOTA WAY – PHILOSOPHY AND MANAGEMENT TOOL ___ 13
1.3.1 THE TOYOTA WAY ___ 13
1.3.2 THE DEMING CYCLE: PLAN DO CHECK ACT ___ 14
1.4 DEMING IN IS ___ 14
1.4.1 IS DIVISION WITHIN TMME AND RDMC ___ 15
1.5 OBJECTIVES OF MY INTERNSHIP ___ 16
2 THE ANNUAL PLANNING CYCLE ___ 19
2.1 INTRODUCTION ___ 19
2.1.1 TOOLS USED ___ 20
2.2 DRAWING UP BUDGETS ___ 20
2.2.1 BUDGET TYPE ~ PORTFOLIO ACTIVITY ___ 20
2.2.2 BUDGET TYPE ~ MEMBERS ACTIVITY ___ 21
2.2.3 BUDGET TYPE ~ PROJECT ACTIVITY ___ 22
2.2.4 MY SUPPORT DURING THE BUDGET ACTIVITIES ___ 23
2.2.5 HOSHIN ___ 24
2.2.6 MY SUPPORT DURING THE HOSHIN CREATION ___ 25
2.3 DIFFERENCES RDMC/TEDC/TMME IS ___ 26
2.3.1 BUDGET PREPARATION (PROJECT, PORTFOLIO AND MEMBER EXPENSE ___ 26
2.3.2 HOSHIN ___ 26
2.3.3 MANAGER’S VIEW ___ 26
2.4 CHALLENGE MEETINGS ___ 27
2.5 CONSOLIDATION SHEET ___ 27
2.5.1 BASIC IDEA CONSOLIDATION SHEET ___ 27
2.5.2 REQUIREMENTS ___ 28
2.6 AFTER DECEMBER ___ 29
3 KEY PERFORMANCE INDICATORS ___ 31
3.1 INTRODUCTION ___ 31
3.2 TOYOTA KPIS ___ 32
4 HARMONISING THE KPIS ___ 33
4.1.1 NEXT STEPS ___ 34
4.2 RDMC ___ 34
4.2.1 CURRENTLY ___ 34
4.2.2 NEXT STEPS ___ 36
4.2.3 MANAGER’S VIEW ___ 39
4.3 TEDC ___ 39
4.3.1 CURRENTLY .
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 8 ‐ 4.3.2 NEXT STEPS ___ 40
4.3.3 MANAGER’S VIEW ___ 41
4.4 TMME ___ 41
4.4.1 CURRENTLY ___ 41
5 CONCLUSION ___ 43
6 (APPENDIX ___ 45
6.1 TME IS TEAMS ___ 47
6.2 ANNUAL PLANNING CYCLE – OVERALL PROCESS ___ 49
6.3 ANNUAL PLANNING CYCLE MASTER SCHEDULE ___ 51
6.4 ANNUAL PLANNING CYCLE – VISUAL CONTROL ___ 53
6.5 HOSHIN – FIRST DRAFT ___ 55
6.6 HOSHIN – FINAL ___ 57
6.7 BUDGET CONSOLIDATION SHEET ___ 59
6.8 KPI REPORT – FRONT PAGE ___ 61
6.9 GUIDELINES WEEKLY KPI TEMPLATE ___ 63
6.10 TMME AND TEDC KPI REPORT .
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 9 ‐ Introduction Today Tomorrow Toyota. This is the slogan Toyota uses in the current advertisements. Apart from the alliteration (all words starting with the letter ‘t’), this slogan also symbolises the mission of this car manufacturing company. It shows the long‐term view of Toyota and the intention of maintaining and improving the quality of its products in order to become the manufacturer of the car of the future. Toyota has developed a philosophy containing fourteen principles, the Toyota Way, which is famous throughout the world and which has been copied to other organisations, some with more success than others.
One of the pillars of a car manufacturing company is the plant where the cars are being built. The choice for a logistic system is crucial for the success of any manufacturing company. Efficiency, low costs and low inventory stocks being the keywords, Toyota has developed the Just‐In‐ Time pull system. This system is not the only factor to define the success of Toyota, also the philosophy of –amongst others– continuous improvement, respect for your colleagues, standardisation and decision making based on consensus of all parties involved creates an environment which is open for development of both the business processes and the Toyota employees.
Standardisation and continuous improvement will be the keywords throughout my internship and throughout this report. With a merger between the organisations Manufacturing and Sales & Marketing of the European head office, common business activities and functions need to be harmonised. I will be supporting this process within the IT functions for Toyota Motor Europe. I will support the further standardisation of business processes and implementation of improvements within the budgeting processes. As this year will be the first time that IT Sales & Marketing participates in this budget process, it will probably bring forth some adjustments to the IT Manufacturing templates, which are currently being used.
After a further introduction on Toyota in Chapter 1, an elaboration on the budgeting process will follow in Chapter 2.
After establishing the budgets, it is time to define the Key Performance Indicators to measure the progress on both financial and non‐financial terms. Within IT Manufacturing, a set of indicators already exists based on cost, quality, performance and productivity. The goal is to extend this philosophy to the other two IT organisations within Toyota Motor Europe. Before the start of the next fiscal year on April 1 2007, a format for each of the IT organisations should be ready for implementation. In Chapter 3 (introduction into KPIs) and Chapter 4 (way of work and results) you will find this harmonisation process.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 10 ‐
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 11 ‐ 1 Toyota 1.1 Kaizen! Continuous improvement, also known as “Kaizen”, is, next to standardization, one of the magic words within Toyota. According to the Just‐In‐Time method, which was developed in the 1950s within Toyota, Kaizen has always been a part of the manufacturing processes in the plants. With implementing the Deming Cycle (Plan‐Do‐Check‐Act), Toyota has extended this philosophy to the business processes as well (please see next paragraphs for more information about the Deming Cycle).
During 2004 two important changes were to be rolled out next to each other, although they were not directly connected. 1.2 Information Systems Division The Information Systems division (IS) introduces itself with the following texts: “The Information Systems Division develops, installs and maintains the systems, which support all the areas of our business. The team works as an internal provider for other divisions to precisely define user and business requirements, analyse all available options and make the company efficient and effective by recommending the latest hardware and software that provide the most appropriate solutions.”1 and “The Information Systems division is fully involved in providing IT solutions to all business operations from design to dispatching of vehicles, covering as well R&D, pre‐ production support, procurement, supply chain, manufacturing support, Finance and HR.
Most core business related applications are developed in house.”2 The IS division does not exist only of business support teams, that provide IT solutions to the business operations. The Business Planning team, of which I will be part during 1 Source: http://www.graduates.toyotajobs.com/html/grad_prog_is.htm 2 Source: http://www.graduates.toyotajobs.com/download/IS_2006.doc
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 12 ‐ my internship, supports the IS management by consolidating, explaining, and checking the IT results and complex IT plans. This team also provides guidelines, standards, and assistance in IT planning and administration functions for the entire IS division. See the figure below for a visual overview of the portfolio of Business Planning. Business Planning Financial Management Budgeting Performance & Process Key Performance Indicators Resource Management Staff Planning Strategic Planning Mid Term Plan Annual Planning Cycle Vendor Management Contracts Figure 1 ‐ Business Planning (November 2006) 1.2.1 The creation of Toyota Europe Data Centre (TEDC) In 2004, discussions started about bringing IT Services of TMME and TMEM under one organisation.
Common IT services, like hardware and software purchasing and defining IT infrastructure, were provided separately by both organisations and it was thought that more efficiency and lower costs could be accomplished when the services in this part of the IT area would be combined. The virtual organisation came into existence in January 2005 when daily operations started. In 2006 a dedicated organisation was established. The members of this new organisation were transferred from the existing ones. This was to enable and emphasize that TMME and TMEM were integrating their common activities with regard to IT Services.
2004 2005 2006 2007 Start Discussions Start Operations Virtual Organisation Dedicated Organisation Figure 2 – TEDC 1.2.2 A legal merger between TMEM and TMME Next to centralising the IT Services of TMME and TMEM, discussions were held about merging the two head organisations into one. In 2004, three entities existed for Toyota Motor Europe: 1. Toyota Motor Europe – Holding Company; 2. TMEM – Coordinating the Manufacturing and R&D operations; 3. TMME – Coordinating the Sales & Marketing operations.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 13 ‐ In September 2005 it finally came to a legal merger. Instead of separate organisations, the two companies changed into two groups under the responsibility of the official company TME. TMEM changed names into RDMC (Research & Development and Manufacturing Company), whereas TMME kept the old one. Although the merger was official, the operations for common functions such as Corporate Affairs, Information Systems, Finance, and HR for Sales and Manufacturing side continued to be separate. The prospect is to integrate those common functions as well in the very near future.
In this light, harmonising and standardising business processes become a very important topic.
2004 2005 2006 2007 2008 ‐ TMEM ‐ TMME ‐ TME Holding TME TMME RDMC Integrate common functions Legal Merger Sept Figure 3 – Merger 1.3 The Toyota Way – Philosophy and Management tool 1.3.1 The Toyota Way Since the Toyota Way has been successful in the manufacturing plants, this philosophy has been implemented within the business processes throughout the company as well. The Toyota Way consists of fourteen principles: 1. Base your management decisions on a long‐term philosophy, even at the expense of short‐term goals; 2. Create continuous process flow to bring problems to surface; 3. Use “pull” systems to avoid overproduction; 4.
Level out the workload (Heijunka); 5. Build a culture of stopping to fix problems, to get quality right the first time (Jidoka); 6. Standardised tasks are the foundation for continuous improvement and employee empowerment; 7. Use visual control so no problems are hidden; 8. Use only reliable, thoroughly tested technology that serves your people and processes; 9. Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others; 10. Develop exceptional people and teams who follow your company’s philosophy; 11. Respect your extended network of partners and suppliers by challenging them and helping them improve; 12.
Go and see for yourself to thoroughly understand the situation (Genchi Genbutsu); 13. Make decisions slowly by consensus (Nemawashi), thoroughly considering all options; implement decisions rapidly; 14. Become a learning organisation through relentless reflection (Hansei) and continuous improvement (Kaizen).
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 14 ‐ Seven out of these fourteen principles lie at the basis of my internship at Toyota Motor Europe (see the italic principles). 1.3.2 The Deming Cycle: Plan Do Check Act The Deming Cycle is a framework for management to implement continuous improvements into their processes. This Cycle enables them to track, visualise and act upon the actual progress. The Deming Cycle consists of four phases that are connected through a loop construction. Plan Do Check Act Plan: During this phase, a plan has to be drawn up. This plan consists of targets that have to be reached during a certain amount of time.
In a project environment, these targets can be seen as clear milestones achieved through following a schedule. Targets can also be – for example – to plan a cost budget and to not overspend this budget.
Do: After planning, the plan needs to be implemented and executed. Check: During the actual execution, some tracking and checking need to be done to monitor the progress of the project schedules or expenses. Regular evaluations need to be conducted of the original plan versus the actual condition. Act: If during the evaluations issues are identified that may endanger reaching the targets set, countermeasures or improvements can be taken. According to these revised “plans” a new Deming Cycle can be entered. 1.4 Deming in IS The RDMC IS division has implemented the Deming Cycle (or PDCA Cycle) for their own division activities.
In the figure below you can find the link between the Annual Planning Cycle and KPIs.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 15 ‐ Plan Do Check Act Hoshin Mid Term Plan Annnual Planning Cycle Projects HR KPIs Evaluation Improvement Mid Term Plans Figure 4 – The Deming Cycle The Annual Planning Cycle provides guidelines in making a plan on resources, cost budget, and long‐ and short‐term goals, whereas the KPI reporting supports the tracking and evaluating of the progress made during execution of the plan. Both are management tools and should be used and treated like ones. 1.4.1 IS division within TMME and RDMC Both RDMC and TMME have an IS division. Taking the upcoming integration into account, RDMC IS took the initiative to standardise some of their activities, namely the Annual Planning Cycle and the measurement of the Key Performance Indicators (KPI).
As can be seen in Figure 1 – Business Planning, the Annual Planning Cycle has its influence on the financial and resource management. KPIs are part of tracking performance and processes within IS.
Figure 5 – IS organisation chart on page 12 shows the current status of the Annual Planning Cycle and KPI reporting between the three IT organisations of Toyota Motor Europe.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 16 ‐ 1.5 Objectives of my internship During my internship, my responsibilities lie in the support during the Annual Planning Cycle and the harmonisation of the KPI reporting across the three organisations. In Chapter 2, the Annual Planning Cycle will be discussed. The objective here is to support in preparing and answering to requests and concerns with regard to the tools used.
Next to this the goal is also to manage and visualise requests in order to make sure that they are followed up and all stakeholders are aware of them. The KPIs will be elaborated upon in Chapter 3 and 4. The main objective here is to identify the ideal situation based on Executives direction, find the gaps with the current situations and propose a new structure for an equal KPI reporting across TME IS to enable fair comparison and healthy competition.
In addition to supporting everyday operations, I will also try to capture whether the management tools to support the PDCA Cycle is implemented and used as it is meant to be. Within Toyota, the KPI reporting should be used as a management tool rather than another administrative report to check the progress on each target set during the Annual Planning Cycle.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 17 ‐ 2. KPIs TMC Tokio, Japan TME IS Head Office Europe Information Systems (RDMC) Information Systems (TMME/ITD) STEERING COMITEE Business Planning Business Planning Business Management KPIs based on Cost Time Quality Productivity with regard to both Maintenance/Support and Projects.
KPIs regard systems and operations (f.e. topics concerning Helpdesk or outages of systems affecting the Business). First steps for KPIs for Projects based on Cost Time Quality Productivity Maintenance does not have KPIs. 1. Annual Planning Cycle The annual planning cycle has been implemented since 2004. FY2005 has been the first year budget drawn up according to these guidelines.
The annual planning cycle as drawn up for RDMC has been implemented since 2005 for making the budget of FY2006. The annual planning cycle as drawn up for RDMC and TEDC is now in practice for making the budget for FY2007. VP RDMC IS VP TMME IS/ITD TEDC Figure 5 ‐ IS organisation chart (November 2006)
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 18 ‐
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 19 ‐ 2 The Annual Planning Cycle As Figure 5 in the previous chapter shows, the Annual Planning Cycle is more established within the three organisations compared to the set up of KPIs.
However, seen in the light of the philosophy within Toyota, improvements and further standardisation need to be implemented. 2.1 Introduction Before having a final budget for next fiscal year that has been approved by the Accounting & Finance department of TME, an internal budget process has to be followed. The Annual Planning Cycle has been developed by the RDMC IS Business Planning to provide guidelines to come to a plan for next fiscal year. During the Annual Planning Cycle, managers from the first level until the high executive level should think of which way to proceed, which projects to pursue, etcetera.
Planning is the crucial thought behind this Cycle. When the plan is drawn up, the budget, resource plan, annual and mid‐term plans for the next fiscal year for each team within IS over the three groups (RDMC with 16 teams, TEDC with 12 teams and TMME with 10 teams)3 will come naturally.
The Cycle describes the entire budget process that exists of four different budget‐ planning categories of which the fourth is slightly different compared to the first three: 1. Portfolios ‐ The portfolio budget shows the plan for next fiscal year for portfolio items and calculates the budget and resources of support for existing applications, technologies and/or services; 2. Member Expenses – The member expense budget takes expenses into account with respect to ‐for example‐ expected travel, training, and office supplies; 3. Projects – The project budget is used to list all new projects and schedules with their resource requirements (both on personnel as well as on technical area); 4.
Hoshin – Hoshin is the Japanese word for policy management. In the spirit of continuous improvement, Kaizen, the top management evaluates the old and defines the new long‐term visions and company policies. They will be translated into an action plan (Mid Term Plan).
Complete with timelines, this Cycle also provides an overview of how each budget category is linked to the other categories and when they need to be synchronised. From September to November the IS management have to work on drawing up their budgets in order to have a draft ready by the start of December. 3 See for an overview of teams Appendix 6.1. Situation as per October 2006.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 20 ‐ This draft will be reviewed with the General Managers and if all goes well, it will be turned into a final (internal) budget proposal, which will be sent just before Christmas to Accounting & Finance.
From January to March, Business Planning takes the lead to change the status of a final “internal” IS budget into a final “external” IS Budget approved by Accounting & Finance of head office. The fourth category, the Hoshin, is not really a budget category. It is a contemplation about the direction Information Systems has to follow next fiscal year and to translate this into objectives and measurable targets. In general the elaboration of the Hoshin starts in January and continues until a final version is ready. The deadline will be before the start of the new fiscal year, which is April 1.
Although each budget category has its own process, deliverables and deadlines, they are connected to each other and have to be synchronised before they can be finalised. An overview of the whole process can be found in Appendix 6.2. September April October November December January February March GM & IS executives review & SYNCHRONISATION GM review & SYNCHRONISATION TME executives review & SYNCHRONISATION draft final -internal- (approved by IS executives) final -external- (approved by TME executives) draft final -internal- (approved by IS executives) final -external- (approved by TME executives) draft final -internal- (approved by IS executives) final -external- (approved by TME executives) Portfolio activities Project activities Member Expense activities 2.1.1 Tools used The tools that are used to come to a budget are created within Excel.
Each tool is numbered alphabetically (as can be seen in Appendix 6.2). I will go into further detail in the next paragraphs.
2.2 Drawing up Budgets 2.2.1 Budget Type ~ Portfolio Activity Within the Portfolio Budget three types of portfolios exist which are not always applicable to all the IS teams and for some teams more than one type is applicable:
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 21 ‐ Type number of RDMC teams number of TEDC teams number of TMME teams Applications (B) 15 0 4 Services (AA) 5 4 3 Technologies (A) 6 10 1 Per type a file (the portfolio templates A, AA and B) has to be updated by the responsible managers of the IS teams, stating all the expected supporting activities for fiscal year 2007.
These files will be used as a base for drawing up the actual budgets for each team. With regard to the applications, technologies and services, an Asset Usage Forecast (C), also known as Capacity Planning, is needed in order for TEDC to calculate their soft‐ and hardware budgets to support the growth of the business. Next to forecasting the usage of applications, managers also need to define the resources that are necessary to support the several portfolio items in the template Portfolio Budget (D). In short: Portfolio Budget is resource and asset management on all existing support items. PORTFOLIOS ACTIVITY
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 22 ‐ manager’s team – highlighting issues, foreseen business changes – and the proposed structure for next fiscal year. When both have been completed and approved, a Resource Forecast (G) can be drawn up, in which all the names of the contractors and members and a consolidated overview of their expected usage on projects and portfolio items can be found. Next to this forecast, a Member Expense Budget (H) needs to be defined. In this budget, the categories for expenses like long and short haul travel, training, exhibitions and entertainment should be estimated for next fiscal year.
All IS managers should draw up a budget and strategy for their teams.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 23 ‐ PROJECTS ACTIVITY
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 24 ‐ very good tool but formulas and links that work fine at release can get corrupted when during the budget exercise rows get added or deleted. Despite the emphasis of not just merely add or delete lines during the introduction sessions in which the Annual Planning Cycle is introduced process and template wise, IS management still manage to do as they please.
Within Business Planning a visual control has been created to list all requests, who has been assigned to solve them and when they have been completed. In this way we were able to manage and respond to each request timely.
Budget category: Portfolio Expense The framework of templates to come to a Portfolio budget has already been prepared when I started. What still needed to be done was pre‐filling the templates with information available (in the spirit of providing IS management half‐completed templates and hereby reducing the time for them to complete the documents). The information that was already available to prefill this set of templates were taken from last year’s Cycle. Portfolio items regard the IT support of already existing applications/technologies/services. This set of items does not change dramatically on yearly basis.
Next to this the budget as was planned for current year is also provided to create a reference for next fiscal year’s planning.
Budget category: Member Expense I have supported these activities by prefilling the Member Expense Budget template for all managers concerned. The pre‐filled information regards the member expense budget of previous year and the actual expense to year‐to‐date September. This information was provided out of the financial reporting system by the Financial Management area of Business Planning itself. Budget category: Project Expense From the second day of my internship I have participated in preparing the new Mid Term Plans for the senior managers. My task was to set out the first draft taking the old plans and updating them into a new Mid Term Plan template given by TMC.
During the last week before Christmas, all Mid Term Plans of all the IS senior managers need to be bundled into one file according to TMC standards. I have been working on this file as well as on updating the high level IS 5‐year plan. With regard to the Project Budget, I have been supporting the activities by applying Kaizens on the Project templates throughout the planning Cycle (for example updating and correcting formulas).
2.2.5 Hoshin The Toyota Hoshin exists of two sections: IT Processes and IT Products. The first section defines targets to be reached with regard to IT Management topics, such as further harmonisation and improvements of business processes and member development. The second section consists of (large) IT projects that will be carried out through the new fiscal year, supporting the requirements from TME head office functions (such as HR, Logistics and Purchasing).
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 25 ‐ This year will be the first time that a combined TME IS Hoshin will be created, since one IT organisation will be implemented as of April 1st.
Previously, all three organisations have their own Hoshin. The challenge this year is to create a combined one with equal involvement from each organisation. The people involved in this activity are the top management (in providing feedback) and Business Planning in the coordination and ensuring quality of this document.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 26 ‐ When the Hoshin activity was started up, the Annual Reflection had not been conducted yet. My only input for the IT Processes section during that period was the 2010 Vision. Creating the IT Products sections was somewhat easier, since I could use the Mid Term Plans of each Senior Manager as a reference for selecting the largest projects (based on estimated investment cost). Everything more than approximately 250.000 was selected to be on the draft.
Since this first version, the management and executives have given many comments and Business Planning made even more adjustments.
See Appendix 6.5 and 6.6 for a comparison between the first draft and the final version of the TME IS Hoshin. 2.3 Differences RDMC/TEDC/TMME IS 2.3.1 Budget Preparation (Project, Portfolio and Member Expense) Differences have been identified before and during this year’s Annual Planning Cycle. As expected, the templates that have been used in the previous years needed some adjustments for TMME IS. One of the main differences is that RDMC IS and TEDC have teams defined in specific areas and in which the members are set and in general will not change during the year. Whereas in TMME IS a pool of resources is used in which the resource’s profile defines whether he or she will work in a project or portfolio item in a certain area.
For TMME IS the templates had to be adjusted in such a way that managers were enabled to choose out of resource profiles instead of names of their team members.
Other small but natural differences were the rates per resource profile and the travel rates for each of the travel destinations. The first is crucial for calculating the budgets of the portfolios and projects; the latter is necessary in calculating the member expense budget. A difference between RDMC IS and TMME IS is that TMME IS members have a higher allowance for having dinner or other expenses when they are on a business trip. 2.3.2 Hoshin Thanks to the implementation of the Annual Planning Cycle in all three organisations, the information that was needed to create the first draft of the Hoshin was already available.
2.3.3 Manager’s view How managers see the Annual Planning Cycle is different between RDMC, TEDC and TMME managers. RDMC has acknowledged after two runs, that this Cycle has shown an added value to plan as structured as the Cycle prescribes. TEDC has less difficulties in complying with the guidelines since it has shown the first time that in the end it has added value. Still some improvements are needed, like creating more awareness in the importance of good planning and all things connected to that. TMME however, has never really had the culture that the managers had to acknowledge their responsibility to plan and align.
This should gradually change through the Annual Planning Cycle, during which they have to plan, review and obtain approval uptil executive level.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 27 ‐ 2.4 Challenge Meetings Each manager builds his/her plans and budget on these three types. As is common for many plans and budgets, they need to be approved by the top management. First, the managers need to check their plans with their senior managers. When they have agreed on all terms, the general managers will take a look and challenge the figures mentioned. As of December all budgets must be final and checked. These meetings are called challenge meetings. During these meetings the managers will explain any deviations with regard to the previous year, both increases as well as decreases.
A file or system that consolidates all separate budget files of the several IT teams would come in handy. Until now, no formal consolidation file exists and ad‐hoc comparison is taking place. My extra assignment was to build a system or a file in which all amounts were visible and automatically updated and in which graphs were drawn to further support the review meetings.
Although the process to come to an approved budget is the same for RDMC IS, TEDC and TMME IS, the reviews of the budgets is still done separately by each organisation. The Business Planning teams in each organisation will provide the support during and before the reviews. 2.5 Consolidation Sheet 2.5.1 Basic Idea Consolidation Sheet Figure 13 shows the setup of a consolidation overview, which will be made for each organisation. The need to have an overview was identified by the IS Executives (General Manager and above). They have given direction in what they would like to have visualised based on the existing budget templates.
It should be clear how big the budget will be in the different Budget Types (Portfolio, Member Expense and Project Budget). Not only a grand total should be calculated, but since the challenge meetings are to review the budgets per manager, the totals of these Types should also be visualised per manager (manager subtotals) grouped by their responsible senior managers.
Not only the amounts that managers have budgeted for the new fiscal year should be visualised, to be able to build a case why more or less money will be needed a point of reference might be useful. This means that the budget of fiscal year 2006 (which is the current running year) and the forecast for that year should be visualised in the same categories as well. This leads to the identification of an overview per Budget Type and per Senior Manager. The Budget Consolidation Sheet therefore should consist of two ways of visualising all information available.
Figure 11 gives a schematic overview of how this Consolidation Sheet should be set‐ up.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 28 ‐ Budget Consolidation Sheet Overview per Budget Type Portfolio Budget Manager Manager Subtotals per Budget Type Category (4) etcetera Subtotals per Budget Type Category (4) Member Expense Budget Senior Manager Manager Subtotals per Budget Type Category (5) Subtotals per Budget Type Category (10) etcetera Manager Subtotals per Budget Type Category (10) Project Budget Manager Manager Subtotals per Budget Type Category (6) etcetera Subtotals per Budget Type Category (6) Grand Total (Sub) Totals Portfolio Budget Member Expense Budget Project Budget Subtotals per Budget Type Category (4) Subtotals per Budget Type Category (10) Subtotals per Budget Type Category (6) Budget Consolidation Sheet Overview per (Senior) Manager Grand Total (Sub) Totals Senior Manager Manager Manager etcetera etcetera etcetera Manager Manager Senior Manager etcetera Total Portfolio Budget Total Member Expense Budget Total Project Budget Total Portfolio Budget Total Member Expense Budget Total Project Budget Manager Manager Senior Manager etcetera Total Portfolio Budget Total Member Expense Budget Total Project Budget Total Portfolio Budget Total Member Expense Budget Total Project Budget Figure 11 ‐ Setup Budget Consolidation Sheet The main difference can be found in the classification of the rows.
The column classification will be the same for both overviews. It visualises the amounts needed per month and totals for the entire fiscal year 2007 (both in units/man days as well as in euros).
2.5.2 Requirements Next to the requirements of the basic idea in the previous paragraph the following features are desired: - reflect the up‐to‐date data - graph visualisation of the budget amounts per manager For the Budget Consolidation Sheet to reflect data, which is up‐to‐date without performing any manual copy/pasting of figures, I have used formulas that link the consolidated sheet with the dynamic budget templates that the management use to draw up their budget. These links will only work well, if the names and locations of the budget templates are not changed. In other words, version control is only possible within the document itself and not in the document name.
Secondly, it is preferred that the templates will not be stored in a different location on the network. Another point of attention is that when rows are added or deleted in the templates, the links to the correct cells will not be automatically updated in the Consolidation Sheet. So in any case, a check of the links is necessary through the budget process.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 29 ‐ During the meetings a visualisation of the data would add value to the reviews. The idea is to visualise the budget of fiscal year 2006, the actual forecasted budget for that year and the proposed budget for fiscal year 2007. Please see Appendix 6.7 for the results of this Budget Consolidation Sheet. 2.6 After December By December 2006 an initial budget has been drawn up and sent to Accounting & Finance. The remaining months of this fiscal year will be used to finalise the proposed budget through receiving an approval from Japan.
January will be used to explain the budget through a so‐called Budget Story. This Budget Story should not only contain the explanation of the differences with previous year, but also of the strategy for next fiscal year.
The Mid Term Plans need to be aligned with the division and TME Group Hoshins. By March 31st 2007 everything should be ready to start a new (successful) fiscal year using the budgets and plans as benchmark. Another step is a reflection on the past Annual Planning Cycle. As Toyota’s philosophy is to continuously approve processes, this budget cycle will undergo a reflection on the success items and the items that need improvements. This year, as TMME IS participated for the first time, the expectation is that most Kaizen proposals will come from TMME IS.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 30 ‐
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 31 ‐ 3 Key Performance Indicators 3.1 Introduction After defining the planned projects and goals (PLAN), just executing the plan (DO) and see what you have achieved at the end of the fiscal year will not suffice of course. If the intention is to make a success of what you have planned, monitoring of the progress of all the activities related to achieving these projects and goals is necessary (CHECK). Tracking, analyzing, evaluating, defining and implementing countermeasures are activities that are inadmissable in achieving the goals.
During evaluation meetings, sharing experiences in encountering and solving similar issues with other managers will make the problem solving process even more efficient. One of the ways to track the progress of activities and will therefore enable an efficient evaluation is through Key Performance Indicators (KPIs).
- Key Performance Indicators are measurements that are quantifiable and reflect the goals and targets to be met. To define good KPIs, they should be SMART and the right environment should exist. SMART means
- Specific: it should be clear what the expectations are towards the KPI (when is one successfull).
- Measurable: a KPI should be quantifiable.
- Agreed To: KPIs should be built on mutual consensus, the understanding of the target to be achieved should be clear to the people who should realise the KPIs and the ones who are measuring the performance.
- Realistic: a KPI should motivate the people involved to realise the KPI. When too high targets are set or it regards a KPI over which they have no significant control, immotivation already steps in before the activities to achieve them should start.
- Timely : a KPI should be set against time. It should be clear, when the targets have to be reached. The right environment would be one in which the following exist:
- pre‐defined business processes,
- clear goals or performance requirements for these business processes,
- quantitive measurements of results,
- comparison with set goals,
- investigation of variances and
- implementation of countermeasures.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 32 ‐ When KPIs are defined and set, they should remain the same for the years after to enable annual reflection and comparison. This will contribute to continuously improving the definition of the goals of next year. KPIs (Check in the PDCA Cycle) contribute countermeasuring (Act in the PDCA Cycle), which contributes to the Annual Planning Cycle (Plan in the PDCA Cycle) and this makes the circle go round. 3.2 Toyota KPIs The KPIs within TME IS are focussed on progress on the several targets set during the Annual Planning Cycle. These are mainly project process wise defined.
So for example progress on the schedules of projects, progress on spending of the budget to which a specific item is entitled. Out of scope are IT specific KPIs that for example deal with risk (mitigation).
The objective in this part of my internship is to to identify the ideal situation based on Executives direction, find the gaps with the current situations and propose a new structure for an equal KPI reporting across TME IS to enable fair comparison and healthy competition. Within Toyota, the KPI reporting should be used as a management tool rather than another administrative report to check the progress on each target set during the Annual Planning Cycle. This is the reason why direction given by the IS Executives (General Manager and above) is so important.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 33 ‐ 4 Harmonising the KPIs Within the IT activities within Toyota, a distinction has been made between Support (or Portfolio) and Projects.
Support regards all activities conducted to support existing IT technologies, IT applications and IT services. Project activities regard starting the investigation, design and implementation of a new technology or application. With regard to defining KPIs for these two areas, Toyota has identified four different categories: Time, Quality, Cost and Productivity.
Time Quality Cost Productivity Project Delay tracking in the three project phases: 1. User Requirements 2. Development 3. Implementation Quality during the three project phases, based on 1. Resource, 2. Process and 3. Product. Cost tracking (plan versus actual) on investments and labour expenses. (not yet generally defined) Support Meeting the requirements agreed in Service Level Agreements (SLAs). The number of batch failures on network and mainframe against set targets. Cost tracking (plan versus actual) on data processing items, labour expenses and member expenses. Number of transactions on network per Full Time Equivalent.
Information for the KPI reports are in general collected on monthly basis and the reports themselves are also sent out on monthly basis. The reports are sent to the management.
Currently all three organisations have their KPIs differently identified and visualised. As Figure 5 shows, RDMC has its KPIs already defined according to the table as discussed in Chapter 3 – Key Performance Indicators. TMME has taken a few steps to organise their KPIs according to the four categories. TEDC, which is taking care of the IT Infrastructure within Toyota Motor Europe, however, has KPIs only based on their systems and operational activities (for example system outages, helpdesk topics). For fiscal year 2007, the target is to align the KPIs for the three IT organisations. Since all three organisations participated in the Annual Planning Cycle this year, the next step is to identify common KPIs that can be set out in all three organisations.
We should take the different IT activities into account, since taking care of IT infrastructure implies different stakeholders than deploying new technologies or applications. IT infrastructure supports the deployment of the new technologies or applications RDMC and TMME IS is planning. While the deployment of new technologies or applications supports the business needs of the other divisions within Toyota Motor Europe, such as HR and Accounting & Finance.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 34 ‐ Aligning is one side of the KPI reporting, what is as important is how the reports are being used by the management itself. The question is whether the management sees it as true management tool or more as an administrative tool. 4.1.1 Next steps Since Toyota’s philosophy is based on Nemawashi (slowly building consensus) and harmonising the KPIs have many different stakeholders, the aim is to implement this idea step by step. This process will probably take until July 2007. Of the four categories, the Cost KPI is the only KPI, which exists in a more or less harmonised way within the three organisations.
The focus will be on rolling out a common way of measuring the Project KPIs on Time and Quality, since this regards project management and a very valuable part of making an organisation successful. Next steps would be to put the focus on improving (Kaizen) the existing RDMC KPIs not only on definition but also on operational level. These KPIs are already divided into the four categories in the two areas as discussed in Chapter 3. Secondly, a gradual implementation of Project KPIs on Time and Quality will be rolled out. After the harmonisation of the entire IT organisation on April 1st, slow but steady steps will be taken to also implement those KPIs for the TMME application and technologies as well.
The responsibility on implementing these steps lies at IS Business Planning and I will take into my portfolio of responsibilities the largest part of the preparation of implementing the KPI process and training the ones involved into the use of the templates and reports. 4.2 RDMC 4.2.1 Currently As said before, within RDMC the KPIs are aligned according to the ideas of Toyota headquarters in Japan since two years. In other words, seven KPIs are identified, divided into the four categories and two areas. Only one is missing, which is the Project KPI on Productivity. To measure the productivity within a project is not a very easy KPI to define.
It already starts with the definition of Productivity: productivity of the team members involved in the project (time spent versus time planned at start of the project) or the end result of a (new) application or technology (counting of functionality points, i.e. the number of functionalities available before the start of the project versus the number at the end of a project)?
The first option of productivity of team members within a project will need a target that is clear. It might be useful to track the productivity through predefined guidelines of how much time a member or contractor should spent on either portfolio or project activities. On the Hoshin for fiscal year 2007 an item exists that investigates first the roles and responsibilities of a member versus a contractor. And secondly based on that how the time allocation on the different activities should be ideally distributed. The results coming out of this investigation can be used as clear targets to plan for fiscal year 2008.
When “planning” is finalised and “doing” is in progress, “checking” can be done through tracking the actual spent time against the targets.
Toyota IS Business Planning All about Plan‐Do‐Check‐Act ‐ 35 ‐ Time Quality Cost Productivity Project Delay tracking in the three project phases: 1. User Requirements 2. Development 3. Implementation Quality during the three project phases, based on 1. Resource, 2. Process and 3. Product. Cost tracking (plan versus actual) on investments and labour expenses. (not yet generally defined) Exists Exists Exists Not available Support Meeting the requirements agreed in Service Level Agreements (SLAs). The number of batch failures on network and mainframe against set targets. Cost tracking (plan versus actual) on data processing items, labour expenses and member expenses.
Number of transactions on network per Full Time Equivalent. Exists Exists Exists Exists All information is available in Excel sheets. The KPI report is created in Excel as well. See Appendix 6.8 for an impression of such a KPI report.
Of the seven KPIs, two KPIs are updated on weekly basis (see the colored cells) and the other five are updated on monthly basis. The weekly KPIs are the Project KPIs on Time and Quality. This should visualise and enable the management to implement countermeasures timely. The monthly KPIs will be discussed during so called M3 meetings (these are meetings with Senior Managers and above). Senior Managers should explain the issues raised, which are shown on the KPI reports. Next to the high‐level overview (RDMC IS total overview), two pages (divided into the two areas: Project and Support) exist with detailed information per Senior Manager and another page with detailed information about the delays that occur during that week per project phase.
This information should include what the issue is and what will be the countermeasure to solve this issue.
Currently RDMC IS Business Planning sends out the KPI reports. The information gathered for creating the KPI reports come from different locations and are manually filled into the KPI reports to create the graphs. This is a time consuming activity: it takes almost two days to gather and update all the data. Next to this, manual input does not give 100% guarantee of showing the real data. An input error is soon made, especially when in a hurry. The objective is to automate the input of the updated data as much as possible.
Right after the User Requirements phase a review should occur of the expected benefits versus the investment costs that have to be made during that project.
This review should ensure that all stakeholders agree on the schedule, costs and benefits of that specific project. This review is called a Ringi review and should be preceeded by a Story