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June 19, 20091
TDK Lambda Reducing Logistics Costs
– Lessons LearnedINTERLOG 2009JUNE 17, 2009
June 19, 20092
Point of View is Worth 50 IQ Pts
A former Boss
June 19, 20093
I think there is a world market for maybe five computers."
-- Thomas Watson, chairman of IBM, 1943
There is no reason anyone would want a computer in their home."
-- Ken Olson, president, chairman and founder of Digital EquipmentCorp., 1977
“640K ought to be enough for anybody." -- Bill Gates, 1981
$100 million dollars is way too much to pay for Microsoft."
-- IBM, 1982
Famous Points of View
June 19, 20094
TDK-Lambda OverviewWhere we startedIterations in the process of cost reductionLessons learned Results and future directions
Agenda
June 19, 20095
TDK at a Glance
$8.1 billion annual revenue
60,000+ employees
Customers in 100+ countries
60+ year heritage of invention and innovation in Power
June 19, 20096
IlfracombeUK
Achern, GmbH
KarmielIsrael
San DiegoCA, USA
Neptune NJ, USA
NagaokaTsukubaTokyo, Japan
A global footprint to service the requirements of the worldwide market9 Mfg. Sites: 6 in Asia, 1 in Middle East, 1 in North America, 1 in Europe,9 R&D Centers: 4 in Asia, 1 in Middle East, 3 in North America, 1 in Europe,Sales & Service 9 in Asia (Outside Japan), 1 in Middle East, 2 in North America, 5 in Europe,
ManufacturingR&DSales / Service
TDK- Lambda Locations
HauppaugeNY, USA
Global TDK-Lambda Network
Paris, FRMilan, IT
Pathumthani, THKuantan, MYSenai, MYSingapore
Wuxi, CNShanghai, CN
RichardsonTX, USA
June 19, 20097
Baseline – Where we started
2500 SKU’s
35000 Kilos/month
Freight 7% of GOGS
Reactive All air no oceanShipment visibility after the fact 4 week frozen time fences at factory
Customers want shorter lead times more flexibility
Management wants lower cost
June 19, 20098
Original Logistics Environment
Asian Factories
Japan DC
TDK-Lambda USSan Diego
CustomersAmericas
June 19, 20099
Progressive Point of View
#1 First steps - “We need lower rates”This is someone else’s problem
We can negotiate this issue away
#2 Iteration - “Our Activity Drives our Cost”We are the enemy
We can control our fate
#3 Approaching best practice - “We need to manage our material flow”We have a great opportunity
Lower cost – better service
June 19, 200910
First steps
Select a partner/contract phaseAny of the top 10 suppliers could meet our needs
Financial StabilityCorrect assets in correct locationsMatch strengths and weaknesses
Met with all local repsGlobal service depends on local support
Meet with all providers – even excluded ones
Network with local logistics groups
Built relationships outside the local office
June 19, 200911
First Steps
Objectivity is criticalDid our own data analysis
1 year contract
Lanes – Consider your logistics modelWho is succeeding with similar customers?
Similar does not equal competitor
Can you “piggyback” on a larger customer’s lanes?
Explore scenarios using different lane strategies
Do a route analysis
June 19, 200912
What we missed
Insure cost model includes all fees and servicesSpend time on your SOPNegotiate 90 day “rate checkup” to insure performing as expected
Establish clear success criteria
June 19, 200913
First Iteration Logistics Flow
Asian Factories:JapanChinaSingaporeMalaysiaThailandVietnam
Deconsolidation:3PL Warehouse USA
CustomersAmericas
June 19, 200914
First Iteration
All logistics services consolidated in one providerDirect Ship from Factory
No Japan DC
Deconsolidation and Pick/Pack operation done in SD
Pro Lower rates – small improvement in lead time – reduced staff in TDK Warehouse - Improved visibility
ConMore shipments = Higher fees/lower weight
Multiple uncontrolled shipments from the factoriesMissed ocean opportunitiesMissed consolidation opportunities
June 19, 200915
Lessons Learned
Needed an Asian HubManage process before costs are incurred
We needed PO shipment data from factories in advanceWe needed to enforce a consolidation schedule from factoriesWe needed to schedule line by line each shipment to optimize cost and lead time
Factories ship early as often as lateMany shipments can be switched from Air to Ocean
June 19, 200916
Hong Kong Hub Operation
June 19, 200917
Third Party Hub Lessons
Invest in developing your SOPDevelop process locally before going overseas.
SOP & Internal processes must be adjusted for Time zones/language/culture
Refine measurements with real dataMore effective cost estimates
Understand your needs for reports and analytic toolsPrior to specing with partner
June 19, 200918
Current Logistics Flow
Asian Factories:JapanChinaSingaporeMalaysiaThailandVietnam
Pick & Pack / Consolidation:
Hong Kong
Deconsolidation:Torrance CA USA
CustomersAmericas
June 19, 200919
Final Result
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
Cos
t/Kilo
Aug
Sep OctNov
Dec Jan
Feb Mar AprMay
ServicesFuel SchgDutyFreight
New Contract
Start Hub Ops Start PO Mgmnt
“We need better rates”“Activity drives cost”
“Manage flow”
June 19, 200920
More Lessons Learned
Delivery at the origin is tough to controlWe cannot control customer schedules
Therefore…….Build new Supply/Demand Management tools
(MRP doesn’t work )
Use the real logistics cost to force behavior changeFactory consolidation
Package size discipline
Labeling and docs refinement
June 19, 200921
Still More Lessons Learned
Manage your logistics providerWatch for hidden costs
Conduct detailed billing review at least monthlyAsk your provider how to improve
Meet with other logistics providers It’s not disloyal, it is educationalAsk them how to improve
Make processes and tools portable
Cultivate relationships on the highest level possible
June 19, 200922
Future directions
Push operations upstreamChange pick and pack to cross dock
Supplier provided PO management pools Investigating real costs
Scale upInvolve other regional DC’sEurope – Asia
The journey continues…..
Company Confidential June 19, 200923
Thank you
Questions?