Pan-European Planning and Reporting at Toyota Motor Europe
Driving profitability analysis and planning transformation across 40 companies
Moving away from disparate, spreadsheet-based budgeting and forecasting processes, Toyota Motor Europe (TME) has used the Board decision-making platform to create a standardized approach across all 40 companies within the Group. Now, financial reporting and variance analysis, P&L generation, five-year CAPEX planning, and scenario modeling are conducted in one, unified solution with greater control, including the possibility to choose among different methodologies, such as zero-based budgeting or driver-based planning.
- Industry: Automotive
- Department: Finance
- Revenue: $29.28 billion
- Users: 750
- Group Companies: 40
- Cost Centers: 5,000
Headquartered in Brussels, Toyota Motor Europe (TME) is a division of the Japanese multinational automotive manufacturer Toyota Motor Corporation. TME consists of several branches; 20 logistics companies; five European Manufacturing Companies (EMCs) producing vehicles such as the Yaris, Corolla, and C-HR; and 14 National Marketing and Sales Companies (NMSCs) which work directly with car dealerships.
The Challenge: Inflexible, Excel-based budgeting and forecasting
In 2017, TME began a finance transformation project to create a unified budgeting, planning, forecasting, and reporting approach across its entire group of companies. Though the business already had an ERP system in place to manage master data, there was little standardization in how it was used. Complex, Excel-based budgets and forecasts were difficult to maintain and lacked the flexibility required to adapt to changing market environments.
The desired state was to have a unified approach to producing budgets and forecasts across for all 40 companies within the group, so that data could easily be fed back to the parent company in Japan for consolidation.
The Solution: A single platform for all budgeting, forecasting, and reporting activities
After an extensive Proof of Concept (PoC), that lasted for a week and involved numerous stakeholders from the finance and sales teams, TME selected the Board decision-making platform, which unifies business intelligence and planning in a single, user-friendly environment. During the PoC, Board was tested against numerous key elements of TME’s use case, which included standardization of P&L production, variance analysis, and other budgeting & forecasting activities. One of the key reasons for the selection of Board was its ability to allow end-users to easily perform data entry, which was crucial to the efficient running of the process.
Board sits on top of TME’s ERP and a data warehouse, pulling actual P&L data from 40 companies in near real-time, all while users are connected and undertaking planning activities, as Jordan Rowley, Project Manager at TME, explains:
“Our data warehouse picks the data up from the ERP on a live basis, so as soon as a posting is made it is picked up automatically. We make use of the concurrency feature of Board to pull the data through on a near-live basis from our data warehouse. At the moment, we’re reading the data warehouse every 30 minutes.”
With the Board platform in place, TME embarked on a multi-phase project over a three-year period, with several key milestones affecting different areas of the organization, as Jordan continues:
“We decided very early on that we didn’t want to just do one big implementation at the very end of the project. We broke it down, effectively based on an agile approach, where we took a portion of our development at a time and went live with that through the course of the three years. We wanted to gain benefit throughout and wanted to learn from Board along the way so we could make better, more-informed decisions about what we wanted to implement going forward. It also enabled us to gain extensive feedback from our customers – our end users. One of the key things in any implementation is listening to the customers and making sure we provide them with what they want.”
The Board project timeline at Toyota, presented at the Board Day 2020 conference.
As a customizable platform rather than a pre-defined solution, Board enabled TME to take this phased approach with ease, gradually delivering different elements of the overall solution to the various business units. The project began in 2017, as Jordan explains:
“Our first major milestone was the implementation of the budget and forecasting planning process for 21 of the companies. This included both planning and reporting elements and was really an important milestone for us. Following this, we implemented local P&L reporting and an allocation process in Board, ready for year end. The existing process was in Excel and was quite complex to maintain so we were keen on pulling that into Board as early as we could.”
The project continued with the expansion of local P&L reporting to the group P&L, in addition to variance analysis with a multi-currency approach. TME then tweaked and enhanced the various aspects of the solution, taking user feedback into account throughout to drive continuous improvement.
“In addition to working well internally within the different teams and companies, we have worked very closely with Board. We’ve learned a lot from the Board team, and they’ve learned from us too. It’s been a mutually beneficial relationship, and one that we’re continuing with moving forward,” comments Jordan.
The Benefits: Greater reporting and planning insight, reduced manual effort, and increased control
Now the system has 750 users, including group and local controllers as well as those outside the finance team. All of them input planning data and produce and review budgets and forecasts using one standardized approach in Board. These users are split equally between TME’s head offices, manufacturing companies, and marketing & sales companies. Jordan explains:
“We have many systems and many entities, so the standardized process we have implemented is an important solution for us. This standardization has enabled us to produce faster, more efficient planning and reporting cycles.”
Much of the process is now automatic, freeing up members to focus on decision-making rather than data collation and comparison.
“We now have a fully automated group reporting pack, which has enabled us to shift to analysis and away from data collection. Previously, we had many different Excel files and lots of data needed to be manually collected. Board has enabled us to remove all of that. We now have an automated collection process which means our Controllers can spend the majority of their time analyzing the data and reacting to situations, making better-informed business decisions,” continues Jordan.
In-depth reporting and variance analysis
Year-to-date group variance analysis and dynamic reporting can now be produced with ease in Board, using near real-time data. More than 40 KPIs such as mix impact and exchange rate impact make it easy to understand the numbers from 40 companies. Exchange rate simulation is also present, providing further insight throughout the process and the ability to simulate fluctuations in specific currencies.
“These features are used in collaboration with the P&L analysis, which is broken down into two component parts. We have what we call Profitability Analysis, which is looking at the profitability of the group overall in terms of vehicles and revenue streams. We also have more specific P&L reporting broken down to quite a low level of detail,” says Jordan.
Outside of P&Ls, Board provides much greater depth in reports, enabling users to examine the data from multiple perspectives, as Jordan explains:
“With reporting in general, we have many options and flexibilities within the system. We can look from a group viewpoint, so predominantly in our group Euro currency, but we can also view the reports from a local company perspective, at a micro level with a local currency. As mentioned previously, we also have quite an extensive allocation process within the system, and importantly here, end user reporting too; reports that the non-finance users refer to on a daily basis. Budget vs. actual is quite an important KPI for them, as well as their planning data for forecasting. Throughout Board, we give the users the option of filtering and adding additional parameters in each of their screens or reports, so if they do want to drill down into a lower level of detail, they can.”
Clear, transparent P&L generation
TME is now able to quickly see company and group-level results by various dimensions. This creates transparency and understanding over the real contribution of each product to the bottom line.
A five-year view of CAPEX
Gap analysis, which can be conducted between two chosen scenarios to understand where eventual forecast or budget corrections should happen, is predominantly used for the manufacturing companies within the group. In addition, a robust CAPEX process was implemented for these businesses, as Jordan explains:
“This was a process that includes a five-year plan. Obviously CAPEX spend is quite significant, so that is something that needs a lot of planning and so we needed a comprehensive process for CAPEX.”
Interactive planning and scenario modeling
In addition to reporting and analysis, Board facilitates the quick and agile collection of multiple scenarios and versions to help the business plan and react to various challenges effectively. Using Board, TME manages:
- Collection templates specific to different companies and processes
- A forecasting and zero-based budgeting process, which is driver-based for some cases
- Planning simulation through versioning
- Real-time integration with the ERP system, including cross-validation rules for data
- A four-step workflow to control the planning process
“The key feature we wanted was templates that facilitated quick and agile collection of data,” says Jordan. “We didn’t want an extensive, elaborate template that would be a burden to users. We’ve implemented collection templates specific to companies and process that are really easy for the users to see, which are based on their own feedback.”
Inbuilt workflow in the Board platform, combined with an easy-to-understand traffic light indicator for progress, has also enabled greater control throughout the planning process.
“When a user submits a template it does go through a basic workflow. We can track the submissions of all of the templates, which is important when we are talking about many of them. We also have a driver-based approach on some of the templates where the data is collected on a unit cost basis, and then within the Controlling team that is visualized and multiplied up by the production volume to give the total usage for the factory.”
The ability to create different versions of data in Board has increased the frequency of forecasting, which was especially useful during the COVID-19 pandemic.
“We have made extensive use of versioning in Board, which has been very important in recent times. We prepared an initial budget which, in ordinary circumstances, would have become the final budget. In the COVID-19 situation, Board enabled us to create multiple versions of that budget and multiple forecasts. Normally we would have only had quarterly forecasts,” says Jordan.
Scenario modeling can also be conducted with ease in Board, enabling users to make more-informed decisions based on the potential impact of different situations. There are currently 120 scenario versions in use, providing crucial financial insight:
“We have the ability throughout Board to compare as many different scenarios as we want. So, we can compare budget against actual, this year’s budget to last year, multiple versions of the budget, and so on,” Jordan continues.
Key Recommendations: Understand your requirements ensure your data quality is high
Having almost reached the end of the transformational project, Jordan has some key advice for those embarking on a similar journey:
“The key one for us was that we needed to fully understand and document the requirements before commencing the development. We needed to do some reworking at certain points in the process because we hadn’t fully understood the requirements before we commenced and implemented.”
Another lesson was learned through the implementation of a planning template that was initially too accounting focused:
“What we tried to do was copy what we had in Excel and reflect that directly in Board. Very quickly we learned that we needed to apply the best practices of Board – they have experience working with many companies and many customers, and we’ve benefited from that extensively."
The final point is on data quality:
"I think this goes without saying, but it’s something we learnt the hard way. Data quality is a key prerequisite to quality reporting. It’s one thing defining and creating reports within Board, but unless our data quality is of a sufficient standard, and standard across all companies, the reporting that we get out of Board cannot meet the required standard. So that’s something we’ve worked hard on and would, in hindsight, have done upfront before the implementation,” Jordan concludes.