Toyota New Zealand – a case study in excellence
All over New Zealand, restaurants, bars and cafés are haemorrhaging money through their cost of goods.
The haemorrhage is happening for only a few reasons:
- It’s not a sexy area of focus (unless you believe actual results are sexy)
- Turn-over may be great – especially in terms of beverage which partially masks shocking food costs and …
- the erroneous belief that the bleed can be out-traded … or sustained until food costs miraculously plummet.
None of this is difficult to get over – especially if the owner is brave enough to face the numbers.
Fortunately, we have one of the greatest examples of cost-control in the world right here in New Zealand … it’s just not in our industry so we’ve forgotten to look.
Toyota, one of the greatest business success stories, is also one of the most admired and studied and for good reason.
It doesn’t matter what industry you are in, Toyota has something to teach you, and Toyota New Zealand is up there with the best and most innovative.
One visit to the Toyota Thames plant will rock your approach to COGs management so profoundly that only perfection will satisfy forevermore.
Admittedly the opportunity to view is limited, so let me explain how this artsy and 100% car-phobic female was floored by the beauty of Toyota’s Signature Class process.
A short backstory is appropriate.
The now-famous business philosophy The Toyota Way includes the principle of kaizen. Kaizen can be broken down to mean ‘change’ and ‘good’ – but its full meaning is about the continuous building of lean business practice through innovation and shared best practice.
Kaizen is about a constant unsettled dissatisfaction with the status quo and a relentless eye for efficiency, eliminating waste, cutting costs and continuously improving the product. Toyota, at its establishment, was made possible by the kaizen expressed by its founding patriarchs.
Let’s remember that Toyota New Zealand is also New Zealand’s most trusted brand.
So, what floored me? I saw decades of kaizen wisdom in one large spotlessly clean and quiet mega-warehouse driving out hundreds of Signature Class Kiwi-new (used-imported) cars in a process that was breathtakingly lean, breathtakingly self-aware, breathtakingly efficient and run by the happiest and healthiest team I’ve seen in a long time.
They exude the kind of gentle pride and authority that only comes with the confidence of impressive achievement. They are simply the real deal.
Let me try and describe what they have achieved.
The Signature Class process was Toyota New Zealand’s response to the government reduction (and eventual eradication) of imported-car tariffs back in the 1990s which made the ‘kiwi-assemble’ null and void. Rather than suck a lemon on the obvious impact the government reduction would have on new-car sales, Toyota embraced the Kiwi love affair with used-cars and transformed the Thames plant into … well, a day spa for used-imported cars (mainly ex-fleet/rentals).
In other words, TNZ created an entirely new business by creating the Signature Class process which cleans, checks in minute detail, fixes, reassembles (inside and out), buffs, repaints, buffs and essentially transforms used-imports into Kiwi-new.
The detail to attention is incredible.
However, what is super impressive is that the whole process is calculated by the margin of required profit every step of the way. The cost of the process at every station and for every car is minutely measured.
Every team member has the cost of everything they use considered – everything even masking tape and adhesive. Large billboard-sized signs face the technical teams with the monthly costs of everything.
At every station, the increasing cost of goods is added digitally, so if/when a profit-margin is in danger a team captain is called in to decide, and sometimes, although rarely because they are so good, a car is booted from Signature Class. I could tell you the average spend on each car to make it new and to an incredible and thorough standard, but that’s a secret you’ll have to try and get out of Toyota themselves. I’m an absolute cheap-skate and I couldn’t believe how low they managed to keep their costs – I know executive chefs who spend more on napkins.
Toyota New Zealand can offer an outstanding product, make a profit, and keep it all lean.
As if this wasn’t amazing enough, they don’t even employ cleaners; that’s right – their own process includes all cleaning.
My point is this, Toyota Signature Class have built their entire business on the quality they can achieve through their efficiency and management of cost of goods – without the efficiency and management of costs they have no business; they have solid and shiny cars but no profit.
It’s hard to find a more relevant business lesson. Winning Hospitality Industry awards for food and even accolades for turn-over should make you justifiably proud, but if you’re not making any money – Toyota knows where you should turn – turn to kaizen.
Author – Alexis O’Connell
The Hospitality Company