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22BUILD OUT

Version 2

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Contents

1. Build Out Activity Defined 3

2. Introducing Build Out Project Team Organization 4

[JP Source Parts]

3. Introducing Build Out Project Team Organization 5

[Non JP Source Parts]

4. Role of B/O Project Team (PJT) ...6

5. EIGHT Key Steps of Build Out Activity 7 to 10

6. B/O Activity Outline Schedule 11

7. Scope of Activities according to Business Type 12

8. ConceptClassify & Prioritize Important Parts 13 to 14

9. Ordering Check Points 15

* Appendix in excel attached

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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

TTC PJ MANAGER/LEADERAdvanced Operation G

TTC REGIONAL LEADER

Sales GTTC IMP

CTRY LEADER

SUPPLIERS

/CUSTOMERS

SUPPLIERS

/C

USTOMERS

TTC SALES PIC

Sales GTTC IMP

Sales G

PJT

*PJT : Project Team

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3. PJT Organization [Non JP Parts]

*PJT : Project Team

PJT

TMC

TTC PJ MANAGER

Advanced Operation G

TTSPL

Sales G

TTC IMP

CTRY LEADER

SUPPLIERS

CUSTOMERS

TTC EXP

Sales G

TTC IMP

Sales G

TTSPL/TTTC PJ LEADER

TTC EXP

CTRY LEADER

WINDOW TO TMAP

TTTC TMAP EM

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

PJ

MANAGER

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. Evaluationand report of activity result to TMC, TMAP or TTC management

PJ

LEADER

REGION / CTRYLEADER

WINDOW TO TMC

WINDOW TO TMAP

TTCAdvanced

Operation G

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

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. Evaluationand report of activity result to TMC, or TTC management

TTCAdvanced

Operation G

TTSPL/TTTC

ROLE TASKS

SALES G

TTTC

TTC

CO

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

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5. EIGHT Key Steps of B/O Activity1/4

ITEM TASK PURPOSE & TASK DESCRIPTION TIMING PIC APPENDIX

0. REVIEW THEDAILYOPERATION

0A. REVIEW THE DAILYOPERATIONS

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

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

UNTIL

N-10

TTCEXP/

IMPMANAGER

0A

1.

B/O

PREPARATIONACTIVITY

1A. COLLECT OVERALLSCHEDULE INFORMATIONFROM TMC/TMAP OR TTCG

Send schedule of Last Production Month concerning ALL countries for eachmodel to related countries. Please start following B/O activities timely basedon this information.

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

UNTIL

*N-12

PJTLEADER

1A

1B. APPOINT PIC TO BE INCHARGE OF BUILD OUT

Submit name & contact information of Country Leader to PJ Leader

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

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

*N-10

W1

TTCEXP/

IMPMANAGER

1B

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

There are EIGHT key steps in which TTC Group need to perform to proceed with B/O management

SAMPLE

N: Local TMCs Last Production Month

*N: Last Production Month of 1st

Country

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5. EIGHT Key Steps of B/O Activity2/4ITEM TASK PURPOSE & TASK DESCRIPTION TIMING PIC APPENDIX

2. GRASP B/OOUTLINE

2A. GET B/OINFORMATION FROM

LOCAL TMC

TMCs first release of master schedule should be N-18. We should already haveon 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)

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

UNTIL N-10 TTCIMP 2A

3. SET UPMASTERSCHEDULE

3A. MAKE TTC'SMASTER SCHEDULEFOR 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 PJTand related export countries once completed.

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

N-10

MONTHLY

FROM N-10; Bylast working dayof each month

TTCIMP

COORDINATOR

3A

4. SET UPRULE WITHVENDORS

4A. ATTEND LOCALTMC`S SUPPLIERMEETING

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

a. Present & market TTCG's value / role in B/O act ivity 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 eachtasks on form to be send to PJ Leader

N-9 to N-6 TTCIMP

MANAGER

4A

4B. ESTABLISHBUILD OUT RULESWITH VENDORS

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

Make BO agreement with vendors so as to clarify required action, responsibilityand even costs incur at a later stage. We recommend to have meeting withsuppliers.

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

N-7 to N-6 TTCG 4B

5A-3

SAMPLE

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5. EIGHT Key Steps of B/O Activity3/4ITEM TASK PURPOSE & TASK DESCRIPTION TIMING PIC APPENDIX

5. CONFIRMB/O PARTS

5A. GET B/OPART LIST

FROMCUSTOMER

(VV PARTS)

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

TMCs ECI freeze is usually at N-5 thus until that time, BO parts list may be constantlyrevise. 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 torequest customers to input required information in Appendix 5A-2. TTCIMP & EXP arealso required to input some information according to color cells mentioned in Appendix5A-2. Please note order of input mentioned at top left corner of the form. TTCIMP tosend completed version to PJ Leader and relating export countries

N-9 TO N-6

MONTHLY

UPDATE

TTCIMP 5A-1

5A-2

5A-3

5B. REQUESTCUSTOMER TO

CONFIRM &FINALIZE B/OPART LIST BYISSUING LOILETTER

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

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

N-5 TTCIMP 5B

5C. CLASSIFYAND PRIORITZEIMPORTANTPARTS

Often there are many BO parts thus it is difficult to pay equal attention to manage allparts. It is more practical to select important parts to focus on to increase managementaccuracy 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

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

N-5 TTCIMP PPT SLIDE

NO 11 & 12

5C

(same form as 5A-2)

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5. EIGHT Key Steps of B/O Activity4/4ITEM 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 mostaccurate possible order / forecast to minimize the occurrence of dead stock

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

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

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

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

N-6 to N+1

MONTHLY

UPDATE

W2

TTCIMP 6A

Power Point Slide14

7. SELFEVALUATION

7A. SELF EVALUATIONOF OWN BUILD OUTACTIVITY

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

Report 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 PJLeader

N +1 TTCIMP 7A

8. FINALEVALUATION

8A. PJT FINALEVALUATION OF EACHCOUNTRY AND WHOLEBUILD OUT PORJECTTO BE REPORTED TOTOP MANAGEMENT ORTMC/TMAP

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

Resolve issues found which cannot be solve by each country

Devise programs to level up management of BO

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

would be created.

N + 2 PJ

LEADER

&

MANAGER

7A

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6. B/O Activity Schedule OutlineSTEP 8 KEY STEPS CONTENT INFO. ROUTE FORMAT/ATTACHED FILE

0 REVIEW THE DAILY OPERATION IMP/EXP->PJTPJ->IMP/EXP

IMP/EXP->PJT

2 GRASP B/O OUTLINE3 SET UP MASTER SCHEDULE IMP->EXP/PJT

IMP->EXP->PJT

IMP->EXP

IMP->EXP->PJT

6 STOCK TAKING IMP->EXP/PJT7 SELF EVALUATION IMP/EXP->PJT8 FINAL EVALUATION

7A. SELF EVALUATION OF CTRY'S OWN B/O ACTIVITY

8A. PJT EVALUATION OF WHOLE PROJECT

5A. COLLECT & UPDATE B/O PART LIST FROM CUST.

5B. REQUEST CUST. TO ISSUE LOI TO FINALIZE PARTLIST

5C. CLASSIFY & PRIORITISE IMPORTANT PARTS

6A. CREATE & UPDATE STOCK TAKING FORM

2A.GET B/O INFORMATION FROM LOCAL TMC

3A. MAKE/UPDATE TTC'S MASTER SCHEDULE

4A. ATTEND LOCAL TMC'S SUPPLIER MTG

4B. SET UP B/O RULES WITH VENDORS

0A. REVIEW THE DAILY OPERATION (WAREHOUSE & SALES)1A. COLLECT ALL MODELS SCHEDULE INFORMATION FROMTMC/TMAP/TTCG1B. APPOINT COUNTRY LEADER FOR B/O ACTIVITY

1C. SET UP OBEYA ROOM

N+2 7AN+1 7A

N-6 ~ N+1 W2 6AN-5 5A-2N-5 5B

4B 5A-3

5 CONFIRM B/O PARTSN-9 ^ N-6 5A-1 5A-2 5A-3

4 SET UP RULES WITH VENDORSN-9 ~ N-6 4AN-7 ~ N-6

N-10 ~ N+1 3AN-10 2AN-10 1C

N-10 W1 IB

0A

1 PREPARATION ACTIVITY FOR B/OUNTIL N-12 1A

TIMING

UNTIL N-10

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BusinessType

Description Steps

Firm /Crossdock

Customer has FULLresponsibility and risksCust Cust Cust

Customer

Inventory

Stock is kept and managedat TTC warehouse howeverit is owned by customer

Cust Cust TTC

FirmInventory

Customer takesresponsibility of orderinghowever TTC owns andmanages the stock at TTCwarehouse

Cust TTC TTC

Stock /

Inventory

TTC has FULLresponsibility and risks

TTC TTC TTC

TTCRES

PONSIBILITY

7. Scope of Activities according to Biz Type

RESPONSIBILITY

0A 1A 1B 1C 3A 4A

5A 5B 5C 6A4B

2A

7A 8A

0A 1A 1B 1C 3A 4A

5A 5B 5C 6A4B

2A

7A 8A

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

*Cust = Customer

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8. STEP V. Confirm B/O Parts1/2

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

BASIC IDEA When there are MORE than 30 B/O parts per import country,PRIORITISATION is necessary !

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)

Please use previous form for

BUILD OUT PART LIST

for scoring. See [22-9]

(How to score)

POINT 1 2 3 4 5

DDP Price/ USD Below 0.5 Below 1 Below 5 Below 10 Higher than 10

Monthly Amount /Below JPY 100,000 JPY 300,000 JPY 500,000 JPY 700,000 Above than JPY 700,000

Car model MULTI EXCLUSIVE

Import country MULTI EXCLUSIVE

Lead time / Below

Order date -1st ETA20days 30DAYS 45days 60DAYS More than 60 days

Large/heavy parts Normal parts Large/heavy parts

Volatile fluctuation 20% 40% 60% 80% 100%

Stock Days /Below 7days 15 days 30 days 45days More than 45 days

(Example)

PARTS Part 1 Part 2 Part 3 PRIORITY POINT

Price 2 5 1 A 0 -1Monthly Amount 3 5 1 B .0-

Car model 1 5 1 C .13-9

Import country 5 5 2 D 8- 0

Leadtime 1 4 1

Large/heavy parts 5 1 1

Volatile fluctuation 1 2 3

Stock Days /Below 1 2 1

TOTAL 19 29 11

PRIORITY B C

HOW TO JUDGE PRIORITY OF PARTS

Price /

Monthly volume

Lead TimeStock Days

Exclusive

Judgment

of Priority

CONCEPTONLY

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8. STEP V. Confirm B/O Parts2/2

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

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9. STEP VI. Ordering Check Points

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 ok3) 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.

LAST

ADDITIONAL

PO

LAST

MONTHSPO

ORDERS

FROMN-6