Toyota Motor Sales (TMS), the US division of Toyota Worldwide that handles marketing, sales, distribution, production and customer service for the auto maker, decided it was time to upgrade what was now becoming an outdated IT system. The company wanted to streamline operations, improve business relationships, and ensure continued growth in 2000.
So it began an aggressive IT update initiative that quickly became more than it could handle internally. The project involved simultaneous development of six major IT and data software initiatives. And TMS soon discovered it needed all its IT personnel for this task. But how could it also manage the day-to-day projects that keep the car maker competitive? There was simply more work than people to do it.
“We needed our best people on these new projects but couldn’t abandon our day-to-day projects,” says Brian Mason, national manager of Application Management Services for TMS, which oversees operations of more than 1400 Toyota and Lexus dealerships in the US and employs 8500. “In the car business, production is king and we have to maintain vehicle and parts flow. That’s our revenue stream. It is critical to customer service, especially in a soft economy. We have to balance customer requirements against economies of scale,” he adds.
It was clear that TMS needed to outsource; the priority was to make certain the outsourcer could provide good, competent, daily support to keep the company’s technology – which was both diverse and unique to the industry — running smoothly. The service provider also had to incorporate changes developed by TMS’ IT staff in manufacturing, management, and warehouse processing. This led them (again) to Keane.
Keane Rides to the Rescue
TMS looked at three different firms but had done business with Keane previously to support its financial services side.
“They knew how we did things,” says Mason. “This placed them on the short list when we were exploring outsourcing. But that didn’t guarantee they would get the business. A lot of the processes we were outsourcing are proprietary, with little resemblance to the standards used in finance. But by being familiar with our culture, they proved they fit our needs.”
Keane is now in the third year of managing software applications and IT processes for TMS’ vehicle, parts, service/warranty, and enterprise systems.
Keane provides end-cycle data support for key systems (maintenance, warranty, etc). Support staff comes from its Halifax, Nova Scotia service center, a local project management office at TMS, and other Keane locations, assuring that TMS’ systems run 24/7. This solution replaces Toyota’s internal systems management core so employees can focus on developmental initiatives. Plus, outsourcing to more affordable geographic areas such as Nova Scotia has a positive impact on Toyota’s bottom line.
“We overlay our program management processes and backup redundancies over Toyota’s and supply the talent to run their daily management systems,” says Jim Brewer, vice president of Global Services for Keane. “Our staff is able to connect from remote areas if necessary.”
Brewer notes that these redundancies allow Keane’s on-site employees at Toyota to get up and running if there’s an IT problem and points out that multiple backup points utilizing onshore, nearshore, and offshore provide “peace of mind” for TMS.
Keane’s Support Impacts TMS’ Bottom Line
Toyota has realized some cost savings as a result of the outsourcing relationship. “But the big advantage for us is the greater efficiencies because we are using our existing (expensive) talent base more effectively,” points out Mason.
Mason also reports TMS has experienced 20 percent fewer negative operational events since it outsourced. If any system goes down, TMS’ costs would mount astronomically due to the ripple effect on other aspects of its operations. The loss of a single facility can result in “as much as a $150,000 cumulative loss each unproductive hour,” the TMS executive notes.
TMS also wanted better control of fixed operational support costs. It’s located in the Los Angeles area, which is a very expensive place to do business in the IT and software industries. So outsourcing to more affordable geographic areas positively impacts that expense.
The enterprise has also produced quantitative benefits such as 24/7 availability of TMS’ online system to its dealers (better than the previous availability), a more dedicated focus on projects that directly deliver business value, and continuous quality improvements that positively impact future projects.
“From the beginning,” says Keane’s Brewer, “we understood how big an investment Toyota was making in us. If a spirit of partnership isn’t there, then the client doesn’t get the full benefit. We’re involved in planning and establishing best practices within their environment and it has become a collaborative process since we began working with them on developmental projects that help them operate more efficiently.”
But the real advantage is in the cooperative enterprise, according to Christine Ferrusi Ross, an analyst for Cambridge, Massachusetts’ Forrester Research. “It appears the two companies have found a way to develop best practices in the way they work together. Outsourcer Keane makes adjustments to operations and then communicates those solutions to client TMS’ development people so they’re aware of the adjustments needed to incorporate into their new processes. This cuts down on many remedial problems.”
Lessons from the Outsourcing Journal:
- The big advantage of Toyota’s outsourcing relationship with Keane is greater efficiencies because the automaker is using its existing (and more expensive) talent base more effectively while Keane maintains high-quality vigilance over its operational systems.
- Keane and Toyota are developing best practices that enhance how Keane manages and improves its operational support processes to coordinate with Toyota’s approach to development of new processes.