Toyota Motor Sales are discussing a change—more authority and responsibility to TMS – cost center to profit center Pro: including finance, marketing, human resources, operations and dealer-support functions. Opp: focus on short-term profit and sacrifice TMS’s goal of growth in US and long-term commitment to customers; lack of experience to fill a profit center manager’s role.
Function of TMS: providing vehicles, parts, and service and sales support to Toyota and Lexus dealers by nine regional offices and three distributorships.
Regional manager role All dealer related activities; supervising, training and evaluating employees; achieve sales penetration, customer satisfaction and operating budget objectives. Dealer related activities took most of their time. Cash flow is the biggest problem in bad economic times.
Sales forecasts and plans 1 Five or longer strategic plan; annual sales and profit plan. Began with managers in TMS’s planning department making predictions of future automobile market segments; Selected segments TMS wanted to participate; worked with TMC in Japan. 2 Annual planning process: TMS managers set a target for sales and market share. TMS sales Dep. developed a sales plan to achieve sales target( like sales projections by car line, region) 3 Regional managers are not effectively involved in this process: TMS more efficient because of better knowledge of macroeconomic factors; the accuracy of managers’ plans were found inconsistent. 4 expense budget by regional personnel and sales projections were reviewed in meetings
Constant production rate policy TMC maintained a steady production rates—greater and more efficient utilization of fixed assets and labor and eased the suppler scheduling prob. Stick labors costs; JIT system relied heavily on suppler network.
Allocation of automobiles to regions 4 month order lead time; TMC system didn’t allow for redistribution of unites among the regions after the order is placed. Ports: responsible for maintaining facilities and shipment to dealers. Cost centers TMS: wants the plants to allow a changed of shifting time; reducing lead time to 3 months.
Dealer incentives Tiered incentive programs; fast start incentives (?); over the incentive budget. Regional general managers liked having some authority over dealer incentives (put main incentive on products based on their knowledge)
Evaluation of regional general managers Made by AL Wagner, subjective observations! Evaluated GMs from 4 aspects: sales, market penetration, customer satisfaction, and dealer profit Compared with history rather than regions. Performance bonus: paid in advance; no big difference between highest and lowest bonus, varied slightly from normal; weak link between performance and bonuses.
CAT: has its own finance, marketing, information systems, human resource and port processing; profit plan; given the title of subsidiary president.
The proposal of change: Make Regional general managers from cost centers to profit centers. Opponents: focus on short-term profit and sacrifice TMS’s goal of growth in US and long-term commitment to customers; lack of experience to fill a profit center manager’s role; operating and accounting issues, such as port operations are rarely one to one. Pro: respond more quickly and more reliable to local market conditions; managers feel GM could affect profit; GMs was capable of balancing priorities.