22BUILD OUT

Version 2
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Contents
1.
2.

* Appendix in excel attached

Build Out Activity Defined

Introducing Build Out Project Team Organization [JP Source Parts]

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3.

Introducing Build Out Project Team Organization [Non JP Source Parts]

4. 5. 6. 7. 8. 9.

Role of B/O Project Team (PJT) EIGHT Key Steps of Build Out Activity B/O Activity Outline Schedule Scope of Activities according to Business Type Concept Classify & Prioritize Important Parts Ordering Check Points

...6 7 to 10 11 12 13 to 14 15

1. Build Out Activity Defined

1. Definition of Build Out BUILD OUT (B/O) or RUNOUT refers to car model, grade or parts which may be discontinued. Build Out Activity is thus the activity to manage build out. 2. Purpose

To minimize dead stock & losses to TTC Group & its vendors. To improve supplier & TTC Group stock level.
3. Target ZERO dead stock = ZERO cost! * We do not yet have clear idea how to set realistic target for dead stock. Project team will continuously study it by accumulating experiences from future model change 4. Scope B/O Activity needs to be performed regardless the scale of the B/O. (ie has to be done even for a few parts) However the extend of activities differs depending on business type. For instance, stock control is not necessary for Firm Business. Please see Slide 12 for details 5. Request Please keep Build Out Project Leader (refer to organization in following pages) informed of any model change in your country
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2. Project Organization [JP Parts]

TMC

PJT
TTC PJ MANAGER/LEADER Advanced Operation G SUPPLIERS / CUSTOMERS SUPPLIERS / CUSTOMERS

TTC REGIONAL LEADER Sales G

TTC IMP CTRY LEADER

TTC SALES PIC Sales G

TTC IMP Sales G

*PJT : Project Team

3. PJT Organization [Non JP Parts]

TMC

PJT
TTC PJ MANAGER Advanced Operation G

TTSPL/TTTC PJ LEADER

WINDOW TO TMAP TTTC

TMAP EM

TTC EXP CTRY LEADER SUPPLIERS

TTC IMP CTRY LEADER CUSTOMERS

TTC EXP Sales G

TTSPL Sales G

TTC IMP Sales G

*PJT : Project Team

4. Role of B/O Project Team (PJT)

ROLE TASKS
1.Overall centralize management of overseas through PJ Leaders (ie schedule management, set up obeya for visualization, review and allocate tasks) 2. Rule making & global operation standardization with PJ Leaders 3. Irregular support to overseas Gemba (ie explanation to suppliers, attend manpower shortage, sales promotion for new models) 4. Evaluation and report of activity result to TMC, or TTC management 1. Centralize management of overseas (ie schedule management, set up obeya for visualization, review and allocate tasks) 2. Rule making & operation standardization. Yokoten to other countries 3. Irregular support to overseas Gemba (ie explanation to suppliers, attend manpower shortage, sales promotion for new models) 4. Evaluation and report of activity result to TMC, TMAP or TTC management

CO

PJ MANAGER

TTC
Advanced Operation G

TTC
Advanced Operation G

PJ LEADER

TTSPL/TTTC SALES G TTC TTTC

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REGION / CTRY LEADER WINDOW TO TMC WINDOW TO TMAP

1. Centralize management of own country / region's status. 2. Report to PJ Leader own country / regions status.

1. Reporting, receiving requests, gathering information, requesting support 1. Reporting, receiving requests, gathering information, requesting support 2. Observing TMAP EMs operation to Yokoten to other countries

* Yokoten : is a Japanese word that roughly translates to sharing best practice.

5. EIGHT Key Steps of B/O Activity 1/4

There are EIGHT key steps in which TTC Group need to perform to proceed with B/O management
N: Local TMCs Last Production Month *N: Last Production Month of 1st Country

ITEM
0. REVIEW THE DAILY OPERATION

TASK
0A. REVIEW THE DAILY OPERATIONS

PURPOSE & TASK DESCRIPTION

This is the most important activity of B/O. We need to constantly recheck our operation and in case we find any abnormalities, we need to seek necessary countermeasures BEFORE B/O

TIMING
UNTIL N-10

PIC
TTCEXP/ IMP MANAGER

APPENDIX
0A

Refer to [Operation Review Checklist] in Appendix 0A for a list of Important points to be reviewed. Complete and send to PJ Leader (Regional Leader for JP Parts)

1. B/O PREPARATION ACTIVITY

1A. COLLECT OVERALL SCHEDULE INFORMATION FROM TMC/TMAP OR TTCG

Send schedule of Last Production Month concerning ALL countries for each model to related countries. Please start following B/O activities timely based on this information.

UNTIL *N-12

PJT LEADER

1A

PJ Leader will also announce which model change will be handled as PJ based on volume, no of countries involved, sales amount etc. For model change that will not be controlled by PJT, please manage B/O activities within your own country using this manual at your own discretion.

SAMPLE

1B. APPOINT PIC TO BE IN CHARGE OF BUILD OUT

Submit name & contact information of Country Leader to PJ Leader

*N-10 W1

Manager s need to ensure that appointed B/O Leader is well versed in B/O tasks required in this manual. The performance of B/O Leader would affect countrys evaluation done at the end of each B/O project

TTCEXP/ IMP MANAGER

1B

PJ Leader will send B/O contact list to related countries

1C. SET UP OBEYA (PROJECT ROOM)

For visualization and accurate management of activity Refer to Appendix 1C for suggested materials to be used for obeya

N-10

TTCG

1C

5. EIGHT Key Steps of B/O Activity 2/4

ITEM
2. GRASP B/O OUTLINE

TASK
2A. GET B/O INFORMATION FROM LOCAL TMC

PURPOSE & TASK DESCRIPTION

TMCs first release of master schedule should be N-18. We should already have on hand this information from PP activity. Using this information, please confirm TMCs last production month and also the kind of model change (ie engine, body, interior etc)

TIMING
UNTIL N-10

PIC
TTCIMP

APPENDIX
2A

Often, the ability to get information depends on TTC IMPs relation with local TMC. Please strive to make a positive connection.

SAMPLE
N-10 TTCIMP COORDIN ATOR 3A

3. SET UP MASTER SCHEDULE

3A. MAKE TTC'S MASTER SCHEDULE FOR B/O

PDCA Plan, Do, Check, Action Make a Plan of required action steps & monitor actual progress against plan. Visualization of any delays and problems that may occur.

Indicate plan timing against each action step in Master Schedule. Send to PJT and related export countries once completed.

Update actual timing of completion, any revision in plan or reasons for delay in master schedule. Send updated form to PJT and related export countries on a MONTHLY basis

MONTHLY FROM N-10; By last working day of each month

4. SET UP RULE WITH VENDORS

4A. ATTEND LOCAL TMC`S SUPPLIER MEETING

Local TMC conducts periodical suppliers meeting for different purposes (ie ordering etc), but in some cases, they hold meetings specially to prepare all suppliers for build out of a particular model/grade. Please make use of such meetings to explain our B/O activity.

N-9 to N-6

TTCIMP MANAGER

4A

a. Present & market TTCG's value / role in B/O activity to all vendors b. Explain our requests & intentions to suppliers for B/O activity and get their important cooperation with the support of local TMC Follow the check points mentioned in Appendix 4A. Mark completion of each tasks on form to be send to PJ Leader

4B. ESTABLISH BUILD OUT RULES WITH VENDORS

Please review for cases where no proper rules exist for daily operation (after checking in step 0A)
Make

N-7 to N-6

TTCG

4B 5A-3

BO agreement with vendors so as to clarify required action, responsibility and even costs incur at a later stage. We recommend to have meeting with suppliers.
Using

same form in Appendix 4B, update with Final Rule Agreed with vendors and send completed form to PJ Leader

5. EIGHT Key Steps of B/O Activity 3/4

ITEM
5. CONFIRM B/O PARTS

TASK
5A. GET B/O PART LIST FROM CUSTOMER (VV PARTS)

PURPOSE & TASK DESCRIPTION

Identify the BO parts so as to correctly manage orders and stock for these items in order to avoid any dead stock

TIMING
N-9 TO N-6 MONTHLY UPDATE

PIC
TTCIMP

APPENDIX
5A-1 5A-2 5A-3

TMCs ECI freeze is usually at N-5 thus until that time, BO parts list may be constantly revise. Therefore we need to update any changes on a monthly basis until such timing

Send request letter and BO Parts List Format in Appendix 5A -1/2 to customers to request customers to input required information in Appendix 5A-2. TTCIMP & EXP are also required to input some information according to color cells mentioned in Appendix 5A-2. Please note order of input mentioned at top left corner of the form. TTCIMP to send completed version to PJ Leader and relating export countries

5B. REQUEST CUSTOMER TO CONFIRM & FINALIZE B/O PART LIST BY ISSUING LOI LETTER

LOI (Letter of Intent) is a official letter to suppliers indicating their intention to discontinue procurement of currently purchased parts.

N-5

TTCIMP

5B

Request customers to finalize BO parts list by issuing LOI (Appendix 5B) with the same BO Parts List (Appendix 5A-2) attached Send received information to PJ Leader and exporting countries

5C. CLASSIFY AND PRIORITZE IMPORTANT PARTS

Often there are many BO parts thus it is difficult to pay equal attention to manage all parts. It is more practical to select important parts to focus on to increase management accuracy based on the following criteria: a. Expensive parts Higher cost can be expected with occurrence of dead stock => Higher risk b. Parts with long lead-time - More difficult to provide accurate forecast / order to prevent dead stock => Higher risk c. Common use of parts between models or countries BO parts can be continuously use for another model / country. No dead stock => Less Risk d. Parts feature Large parts are more expensive for air shipment, consider to keep more stock (others like Hikiate, Color etc) e. Customer Feature Ability of customer to control, capacity etc

N-5

TTCIMP

PPT SLIDE NO 11 & 12

However it is still unclear how to set the criteria for important parts. Eg How much should the part be to be labeled as expensive part) It may be necessary to discuss with customers to decide important parts. PJT is still studying this issue thus it is not required as yet for any action. Please see materials for reference. If you have some good idea, please contact to PJT.

5C (same form as 5A-2)

5. EIGHT Key Steps of B/O Activity 4/4

ITEM TASK PURPOSE & TASK DESCRIPTION TIMING PIC APPENDIX

6. STOCK TAKING

6A. CREATE & UPDATE STOCK TAKING FORM

Purpose of stock taking form is to pay special attention during BO timing to monitor incoming and outgoing (usage) quantity so as to make the most accurate possible order / forecast to minimize the occurrence of dead stock

N-6 to N+1 MONTHLY UPDATE W2

TTCIMP

6A

It is recommendable to arrange for monthly meeting with some important /major customers to discuss monthly order and forecast quantity. The check points for ordering are mentioned in Appendix 6A

Using Stock Control Form in Appendix 6A, TTC Exp & Imp has to realize any abnormalities in stock and adjust to next order qty. Order qty should be discussed and agreed between exp and imp before order placement. Please refer PowerPoint slide no 14 for check points on ordering

Power Point Slide 14

Stock control form has to be checked by managers, taking care especially for priority parts

Stock Control Form should be updated and send to PJLeader and relating countries before order timing

7. SELF EVALUATION

7A. SELF EVALUATION OF OWN BUILD OUT ACTIVITY

Summarize the result of BO activity to understand own progress / ability and to report to management or Toyota
Report

N +1

TTCIMP

7A

problems or difficulties found which require PJTs attention or support

Develop countermeasures or level up plan for future BO management

Conduct self-evaluation using Appendix 7A. Send completed form to PJ Leader

8. FINAL EVALUATION

8A. PJT FINAL EVALUATION OF EACH COUNTRY AND WHOLE BUILD OUT PORJECT TO BE REPORTED TO TOP MANAGEMENT OR TMC/TMAP

Summarize the overall result of BO activity to report to management or Toyota, also to understand each countrys progress / activity

N+2

Resolve issues found which cannot be solve by each country programs to level up management of BO

PJ LEADER & MANAGER

7A

Devise

Final evaluation using Appendix 7A. It acts as basis of further reports that would be created.

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6. B/O Activity Schedule Outline

STEP 8 KEY STEPS CONTENT 0A. REVIEW THE DAILY OPERATION (WAREHOUSE & SALES) 1A. COLLECT ALL MODELS SCHEDULE INFORMATION FROM TMC/TMAP/TTCG TIMING UNTIL N-10 UNTIL N-12 N-10 W1 N-10 N-10 N-10 ~ N+1 N-9 ~ N-6 N-7 ~ N-6 N-9 ^ N-6 N-5 N-5 N-6 ~ N+1 W2 N+1 N+2 IMP->EXP->PJT IMP->EXP IMP->EXP->PJT IMP->EXP/PJT IMP/EXP->PJT IMP->EXP/PJT INFO. ROUTE IMP/EXP->PJT PJ->IMP/EXP IMP/EXP->PJT FORMAT/ATTACHED FILE

REVIEW THE DAILY OPERATION

0A 1A IB 1C 2A 3A 4A 4B 5A-1 5B 5A-2 6A 7A 7A 5A-3 5A-2 5A-3

PREPARATION ACTIVITY FOR B/O

1B. APPOINT COUNTRY LEADER FOR B/O ACTIVITY 1C. SET UP OBEYA ROOM

2 3

GRASP B/O OUTLINE SET UP MASTER SCHEDULE

2A.GET B/O INFORMATION FROM LOCAL TMC 3A. MAKE/UPDATE TTC'S MASTER SCHEDULE 4A. ATTEND LOCAL TMC'S SUPPLIER MTG

SET UP RULES WITH VENDORS 4B. SET UP B/O RULES WITH VENDORS 5A. COLLECT & UPDATE B/O PART LIST FROM CUST.

CONFIRM B/O PARTS

5B. REQUEST CUST. TO ISSUE LOI TO FINALIZE PARTLIST 5C. CLASSIFY & PRIORITISE IMPORTANT PARTS

6 7 8

STOCK TAKING SELF EVALUATION FINAL EVALUATION

6A. CREATE & UPDATE STOCK TAKING FORM 7A. SELF EVALUATION OF CTRY'S OWN B/O ACTIVITY 8A. PJT EVALUATION OF WHOLE PROJECT

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7. Scope of Activities according to Biz Type

The level of B/O activities required varies according to Business Type
TTCs responsibilities & RISKS increases from Firm Biz to Stock Biz thus a higher level of attention is required as we move down the chart
RESPONSIBILITY
*Cust = Customer

Business Type

Description
Customer has FULL responsibility and risks

Steps

TTC RESPONSIBILITY

Firm / Crossdock

Cust

Cust

Cust

0A 1A 1B 1C 2A 3A 4A 4B 5A 5B 5C 6A 7A 8A

Customer Inventory Firm Inventory

Stock is kept and managed at TTC warehouse however it is owned by customer Customer takes responsibility of ordering however TTC owns and manages the stock at TTC warehouse TTC has FULL responsibility and risks

Cust

Cust

TTC

Cust

TTC

TTC

0A 1A 1B 1C 2A 3A 4A 4B 5A 5B 5C 6A 7A 8A
TTC TTC TTC
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Stock / Inventory

8. STEP V. Confirm B/O Parts 1/2

CONCEPT 5C. Classify & Prioritize Important Parts (N-5)

BASIC IDEA
When there are MORE than 30 B/O parts per import country, PRIORITISATION is necessary !
HOW TO JUDGE PRIORITY OF PARTS
(How to score) POINT DDP Price/ USD 1 Below 0.5 2 Below 1 3 Below 5 4 Below 10 5 Higher than 10

ONLY

Before classification, please ensure you have collected below required Information mentioned on [22-9 BUILD OUT PARTLIST] DDP Price Estimated Monthly Amount Common / Unique (for country & model) Leadtime eg JP->TH->AR->VE Large / Heavy Parts (expensive for storage & air freight)

Monthly Amount /Below JPY 100,000 JPY 300,000 JPY 500,000 JPY 700,000 Above than JPY 700,000 Car model Import country Lead time / Below Order date -1st ETA Large/heavy parts Volatile fluctuation Stock Days /Below (Example) PARTS Price Monthly Amount Car model Import country Leadtime Large/heavy parts Volatile fluctuation Stock Days /Below TOTAL PRIORITY Part 1 2 3 1 5 1 5 1 1 19 Part 2 5 5 5 5 4 1 2 2 29 B Part 3 1 1 1 2 1 1 3 1 11 C PRIORITY A B C D POINT 0 -1 .0- .13-9 8- 0 20days Normal parts 20% 7days 40% 15 days 60% 30 days 80% 45days MULTI MULTI 30DAYS 45days 60DAYS EXCLUSIVE EXCLUSIVE More than 60 days Large/heavy parts 100% More than 45 days

Please use previous form for BUILD OUT PART LIST for scoring. See [22-9]

Price / Exclusive Monthly volume

Judgment of Priority

Lead Time Stock Days

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8. STEP V. Confirm B/O Parts 2/2

CONCEPT 5C. Classify & Prioritize Important Parts (N-5)

ONLY

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9. STEP VI. Ordering Check Points

ORDERS FROM N-6 LAST MONTHS PO LAST ADDITIONAL PO
1) TTC Imp has to do stock simulation based on latest monthly order quantity 2) TTC Imp has to check if the above simulated stock as of end of last production month is ok 3) TTC Imp has to give zero forecast in orders corresponding to after last production month 4) TTC Imp has to check if the fluctuation ratio is accepted by supplier

1) TTC Imp has to adjust the order quantity in system so that there is no late shipment due to Heijunka allocation. In case it's impossible to adjust by system, TTC Imp shall discuss with TTC Exp to issue manual order. (This is very important step. If there's any problem, please discuss with PJT) 2) TTC Imp has to place zero order quantity for all future months 3) TTC Imp has to check if the order is following order lot (if Exp country didn't accept special request) 4) For pair parts, TTC Imp has to check if the quantity of pair parts is same (if Exp country didn't accept special request).

TTC Imp will confirm with TTC Exp the last additional order timing, based on supplier's production lead time and shipping schedule 1) If TTC import needs to place the additional order, need to inform the clear dead line for last production.

2) If lead time is very short, TTC imp needs to send the Rundown to avoid the dead stock.
3) If there was additional order, TTC Imp must input the additional order qty to rundown sheet as well. 15