Minebea Co., Ltd.
Introducing EVA Management System
In April 2002, Minebea Co., Ltd., headed by Tsugio Yamamoto, launched a project to study the benefits of bringing Economic Value Added (EVA) concepts into our management system. Together with the Tokyo-based consulting firm Stern Stewart, we assigned a working group consisting of manufacturing, sales and administration members, and had them study the feasibility of introducing the EVA management system. As a result of examining their final report, we have decided to introduce the EVA management system and to adopt EVA as the management index for the Minebea Group.
The Background and Purpose of the Decision
In April 1997, we created a specialized organization encompassing an inventory reduction section and a debt repayment section to focus on capital efficiency enhancement. Since then, we have been making efforts to reduce inventories and debt and have been able to achieve significant progress to date. In addition, as a result of having thoroughly controlled income plans and performance for many years by breaking down Group businesses into small income control units, we now see a profit concept penetrating throughout the Minebea Group.
To sustain this progress and to ensure further efficiency in the use of capital resources, we have decided to set up the EVA management system in cooperation with Stern Stewart. The system, using cost of capital including not only borrowing cost but also equity cost, will enable us to measure on a monthly basis EVA by product and EVA by functional business unit in the Sales and the Manufacturing divisions.
As our basic business policy, we have been advocating five principles focusing on making contributions to employees, customers, shareholders, local communities and global society. Under the EVA management system, we aim to give satisfying returns to all of our stakeholders and to make strategic decisions on such issues as selective focusing of business resources and appropriate allocation of management resources from the EVA-creating viewpoint. By so doing, we are committed to enhancing our corporate values.
Outlines of Units for EVA Measurement
EVA by Functional Business Unit in the Sales and the Manufacturing Divisions
EVA will be measured by functional unit such as the Manufacturing and the Sales Headquarters' divisions, all of which are performance control units. EVA by functional business unit will be an effective tool for raising awareness of capital employed among managers of each business unit and thereby enable them to make more effective use of their capital.
EVA by Product
EVA will be also measured by product. Under the current system, the Sales and the Manufacturing divisions each control performance by product separately. However, EVA by product will assess overall product performance, not product performance as controlled separately under the Sales and the Manufacturing divisions. The objective of measuring EVA by product is to clearly show how much each product contributes to business performance. EVA by product will, therefore, be a useful tool for management members when making decisions such as selective focusing of business resources and appropriate allocation of management resources.
Future Schedule for the Introduction
Following the introduction lead time from October 2002 to March 2003, we will implement the EVA management system from April 2003 according to the following phases:
|1)||Measuring EVA for assessment of management on a consolidated basis - to begin in April 2003|
|2)||Assessing capital investment plans based on EVA - to start in April 2003|
|3)||Measuring EVA by functional business unit - to begin in October 2003 after a test implementation due to start in April 2003|
|4)||Measuring EVA by product to apply to assessment - to begin in April 2004 after a test implementation due to start in October 2003|
|5)||Utilizing EVA in making decisions for "selection and focus of operational resources" and "appropriate allocation of management resources" - to begin in April 2004|
|6)||Introduction of an EVA-based bonus program - to start from the winter bonus payment in 2003 (The members whom this program will be applied to, amounts to be allocated, and ratios of allocation will be decided after due deliberation during the introduction lead time.)|
|7)||EVA-related training for managerial members - to begin in October 2002|
Related Personnel Assignment
Supervisor of the Working Group for the EVA Management System Introduction Project: Mr. Ryusuke Mizukami, Senior Managing Director
Assistant Supervisor of the Working Group for the EVA Management System Introduction Project: Mr. Tamio Uchibori, Deputy General Manager of the Business Administration Department
Full-time member of the Working Group for the EVA Management System Introduction Project: Mr. Yukihiro Fujiwara, Manager of the Business Administration Department
In addition to the above-mentioned 3 members, 14 working group members including 3 directors and 3 members in charge of this project at the Sales and the Manufacturing Headquarters, totaling 20 members, will make up the Working Group for the EVA Management System Introduction Project.
Note: EVA is the registered trademark of Stern Stewart. EVA is basically calculated as follows:
EVA=Business profit after tax - Capital charge
|·Business profit after tax =||Business profit after tax = Pre-tax profit + Interest expense -Taxes|
|·Capital charge =||Capital employed × Cost of capital|
|·Capital employed =||Total assets (such as accounts receivable, inventory, and fixed assets)- Non-interest-bearing liabilities (such as accounts payable and accrued expenses)|
For further information and inquiries, please contact:
Minebea Co., Ltd.
Product information, contact and other context are subject to change without prior notice.