Toyota Financial Services

Toyota Financial Services (TFS) recently undertook a major business transition programme to in-source its back-office functions. This required that a large number of Toyota and Lexus retail finance contracts, together with all their associated transaction data, be converted from an external IBM mainframe-based system to an in-house system. The new system was based on the Lynx "Portfolio" software package using Unix and Oracle technology. ATD consultants worked closely with TFS throughout the data conversion project in the following roles:

* contributing to a feasibility study into the risks and benefits of undertaking a data conversion from the outsourced external system, and presenting the findings of the study to the TFS management board, which approved the data conversion project

* managing the data conversion project from the start, through to its successful conclusion 18 months later

* acting as the principal contacts with both the existing external system supplier (Black Horse) and the suppliers of the new in-house system, for the resolution of technical and data-related issues

* support for the transition of the business to an in-house operation, particularly through the provision of management information from the source data

* data analysis, data mapping, design of the migration procedures and development of migration software

* unit and system testing of the data migration procedures and software, as well as support for user acceptance testing

* development of procedures for both the financial and non-financial reconciliation of the data conversion.

The director of the transition programme was Blair Pollock, TFS' General Manager, Business Development, who commented:

"When the ATD consultants joined TFS, the administration of our finance portfolio was outsourced to Black Horse, a subsidiary of Lloyds TSB Bank. We had decided to bring this part of our business in-house and were looking for someone to lead the effort to convert our retail customer data from the Black Horse systems to our own.

The ATD consultants came to us highly recommended for their extensive knowledge and experience of similar conversions within the motor finance industry. We therefore expected a high quality outcome, but were nevertheless surprised by the excellent job that they did.

During the two years that the ATD consultants were with us, they delivered outstanding results. Their structured approach and attention to detail ensured that the specification, development and testing of the conversion was meticulous. The conversion event, a "big bang", took place according to schedule, and 100% of nearly 80,000 contracts were successfully loaded into the contract management system. We have subsequently had very few issues with the quality of the converted data and have been able to cope well with the tremendous increase in business volumes.

It is a great testament to the quality of the work performed by the ATD consultants that in a recent review of our insourcing project, the Board of Management of TFS recognised the retail conversion as a major success."

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Columbia Project: Use of Software to Achieve Competitive Advantage

AUTOMOBILES: TOYOTA MOTOR CORPORATION

Gaining and Sustaining Long-term Advantage Through Information

Technology

Case Prepared By

William V. Rapp

Co-Principal Investigator

The College of International Relations

Ritsumeikan University

Kyoto, Japan

914-945-0630 (Fax: 914-923-1416; 011-81-75-466-1214)

E-mail: william.rapp@aya.yale.edu

April 2000

2

SOFTWARE AS A TOOL OF COMPETITIVE ADVANTAGE:

AUTOMOBILE INDUSTRY

1 Introduction: Objectives of this Benchmarking Study...................................3

2 Approach: Methodology and Questions....................................................9

3 Introduction to Case.........................................................................10

4 The Industry Context: The Japanese and Global Automobile Industries.............10

5 Toyota's Multi-faceted Global Strategy...................................................21

Smart Production (scheduling, buffer stocks, interactive controls)

Smart Design

IT and Management of Supplier Networks

Smart Marketing

Responding to Demand Changes Through Smart Production & Design

6 Smart Car........................................................................................42

Environmentally Smart Cars

Intelligent Transportation System (ITS)

7 Information Technology Infrastructure and Project Selection...........................60

8 Summary - Controlling the Future...........................................................68

Exhibit 1 - Promotion Plan for Intelligent Transportation System...........................78

Exhibit 2 - Toyota's ITS Businesses and R&D.................................................79

Exhibit 3 - ITS Evolutionary Development.....................................................80

Appendix I Summary Answers to Questions for Toyota - Auto Strategy & Operations..81

Appendix II - Some Industry and Firm Data....................................................88

Bibliography and References.....................................................................96