The Search for Savings

One Toyota has helped take the company’s Value Engineering and Value Analysis efforts to a higher level 

April 17, 2018

Undercover Work -- Stephen Provost (right), senior program manager in Vehicle Performance Development, chats with Truck Trend magazine writer Tim Esterdahl in the Toyota Collaborative Benchmarking Center in York Township, Michigan.

The devil, it’s often said, is in the details. But when your business is producing and selling complex vehicles comprised of thousands of parts, that’s also where — more often than not — the difference between profit and loss can be found.
 
If you know where and how to look, that is.
 
Hundreds of team members dispersed across Toyota’s North American manufacturing plants as well as engineering, design, sales and supplier teams do just that on a daily basis. Their mission: to find ways to add value to Toyota’s vehicles without adding cost.
 
This work has long been standard operating procedure at Toyota, in keeping with its core principle of kaizen, or continuous improvement. But the move to One Toyota has taken it to a higher level — helping to make the entire organization more competitive.


The Long Haul -- Engineers at the Toyota Collaborative Benchmarking Center disected this remarkable Tundra, driven over one million miles by owner Victor Sheppard. For more on this story, click here.
 
One Roof Initiative
 
“With One Toyota, management saw an opportunity to bring these various groups together in ways that couldn’t be done before,” says Dave Girvan, group manager of Cost Planning. “That led to the creation of the One Roof Initiative, where cross-disciplinary teams meet both in real time and virtually to find and implement changes.
 
Their intensified efforts take two forms. One is Value Engineering (VE) that focuses on how to make a new vehicle more cost-effective during the design and development phases. The other is Value Analysis (VA) which continues to look for savings after a vehicle goes into production.
 
On both fronts, such scrutiny usually ends up at the level of individual parts, many of which customers never see or interact with. The key question: Are there parts that can be replaced with others that will do the job as well if not better, but cost less?
 
Take, for example, anti-chip tape that’s applied to a vehicle’s lower body panels to prevent gravel from chipping the paint. In routine VA evaluations, it was discovered that a 0.36 mm tape was being applied on Tacoma while a thinner 0.27 mm tape was being used on Tundra. Thicker tape is more difficult to apply and costs more.
 
Bryce Wassa in TMNA R&D Design investigated further and determined that Tacoma could use the same tape as Tundra yet still provide sufficient protection, saving over $500,000 annually in the process. That change led to a similar one on Sienna, cutting costs by an additional $50,000 per year.

Tech Talk -- Esterdahl (right) learns more about the core components of Toyota trucks from Kevin Gilleo, executive program manager in the Product Development Office.

Toyota Collaborative Benchmarking Center
 
The One Roof Initiative isn’t the only way in which Toyota’s cost-cutting efforts have shifted into a higher gear. Perhaps even more tangible is the establishment of the Toyota Collaborative Benchmarking Center at the new TMNA R&D facility in York Township, Michigan. That’s where both Toyota and competitor vehicle tear downs are displayed.  Experts with different perspectives — from manufacturing to engineering to purchasing to suppliers — spend time onsite examining the puzzle pieces, in search of opportunities for improvement.
 
“We used to do this in the basement of our E3 facility, but it was much more limited in scope,” says Andrew Lund, chief engineer at TMNA R&D and member of the One Toyota Competitiveness team. “Now we have the space to display the parts, so there’s more time to collaborate. And it’s right next to the Prototype Development center. The process is much more efficient and effective.”
 
Small Changes, Big Savings
 
What’s been the impact of this work? Individually, each product tweak might not seem like much. But collectively, the net effect can be enormous. Lund estimates that VA-inspired modifications (implemented after a vehicle is already in production) contributed more than $100 million to the company’s bottom line in the just completed fiscal year. VE changes made during product development are also making a difference, but are much harder to quantify.
 
“Often with a new vehicle you introduce new features that add cost,” says Lund. “VE can lead to changes in other areas that can help offset that cost. You may not see it directly in the bottom line. But you will see it in a higher-value vehicle that might attract more buyers.”
 
“We’re constantly looking for ways to add value to our vehicles without charging our customers more,” says Girvan. “That’s not something most people notice. But it would definitely become apparent if we were to stop doing this work. We’d either have to raise the vehicle’s price. Or we’d have to try to get by without the improvements. Over time, we’d lose ground to our competitors.
 
“When you look at it that way, it’s not an exaggeration to say that VA/VE is fundamental to our existence as a company.”
 
By Dan Miller

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