Each and every person must eliminate waste in their daily actions, said the firm's president ©Toyota PLC
Each and every person must eliminate waste in their daily actions, said the firm's president ©Toyota PLC

Cost reduction 'part of Toyota's true values'

Will Green is news editor of Supply Management
9 May 2018

Cost reduction efforts have boosted Toyota’s operating income by 165bn yen ($1.5bn).

In the company’s financial results for the 12 months to 31 March 2018, Toyota said operating income was up 20.3% to Y2.4tn ($21.9bn) on revenues of Y29.4tn ($268bn), which were up Y1.8tn ($16.3bn) on the same period last year.

Akio Toyoda, president of Toyota, said: “The reality is that the notion of high operational costs have emerged as an issue to tackle, and I believe that if we repeatedly ask, ‘Why, why?’, pursue the root cause, take the right actions and continuously improve, we will without a doubt be able to move forward.”

Toyoda said cost reduction was one of the company’s “true values”. He said it was a Toyota principle to “reduce costs rather than operate on a cost basis”, which means “rather than setting prices by adding reasonable profit to cost, the only thing we can do is lower costs, based on the key premise that sales prices are determined by the market”.

“Keeping an eye on costs means keeping an eye on what we do,” said Toyoda. “Each and every person, armed with an awareness of costs and a grasp of current market levels, must thoroughly eliminate waste in their daily actions.”

Toyota sold 8.96m vehicles in the year to 31 March 2018, down on the 8.97m sold in the same period last year. It expects to sell 8.95m vehicles in the coming 12 months.

“We have begun steady cost-reduction efforts in which each and every cost, whether it relates to daily tasks or large events or projects, is being scrutinised, with everyone thinking about what elements actually represent waste,” said Toyoda.

“In addition to ascertaining the specifications and performance that match the needs of our customers in each region and to thoroughly addressing costs, we have introduced the TPS [Toyota Production System] principles of standardised work on the development side as part of our efforts of determining the necessary time and cost per unit of output to shorten development lead times.”

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