1. TDK Lambda
Reducing Logistics Costs
– Lessons Learned
INTERLOG 2009
JUNE 17, 2009
June 19, 2009
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2. Point of View is Worth 50 IQ Pts
A former Boss
June 19, 2009
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3. Famous Points of View
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 Equipment
Corp., 1977
“640K ought to be enough for anybody."
-- Bill Gates, 1981
$100 million dollars is way too much to pay for
Microsoft."
-- IBM, 1982
June 19, 2009
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4. Agenda
TDK-Lambda Overview
Where we started
Iterations in the process of cost reduction
Lessons learned
Results and future directions
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5. 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, 2009
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6. Global TDK-Lambda Network
Hauppauge Ilfracombe Achern, GmbH
NY, USA UK Paris, FR
Neptune NJ, Milan, IT Nagaoka
San Diego USA
Wuxi, CN Tsukuba
CA, USA Shanghai, CN Tokyo, Japan
Karmiel
Richardson
Israel
TX, USA
Pathumthani, TH
Kuantan, MY
Senai, MY
TDK- Lambda Locations Singapore
Manufacturing
R&D
Sales / Service
A global footprint to service the requirements of the worldwide market
9 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,
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7. Baseline – Where we started
2500 SKU’s
35000 Kilos/month
Freight 7% of GOGS
Reactive
All air no ocean
Shipment visibility after the fact
4 week frozen time fences at factory
Customers want shorter lead times more flexibility
Management wants lower cost
June 19, 2009
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9. 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, 2009
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10. First steps
Select a partner/contract phase
Any of the top 10 suppliers could meet our needs
Financial Stability
Correct assets in correct locations
Match strengths and weaknesses
Met with all local reps
Global service depends on local support
Meet with all providers – even excluded ones
Network with local logistics groups
Built relationships outside the local office
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11. First Steps
Objectivity is critical
Did our own data analysis
1 year contract
Lanes – Consider your logistics model
Who 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
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12. What we missed
Insure cost model includes all fees and services
Spend time on your SOP
Negotiate 90 day “rate checkup” to insure performing as expected
Establish clear success criteria
June 19, 2009
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13. First Iteration Logistics Flow
Customers
Americas
Asian Factories:
Japan
China
Singapore Deconsolidation:
Malaysia
Thailand 3PL Warehouse USA
Vietnam
June 19, 2009
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14. First Iteration
All logistics services consolidated in one provider
Direct 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
Con
More shipments = Higher fees/lower weight
Multiple uncontrolled shipments from the factories
Missed ocean opportunities
Missed consolidation opportunities
June 19, 2009
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15. Lessons Learned
Needed an Asian Hub
Manage process before costs are incurred
We needed PO shipment data from factories in
advance
We needed to enforce a consolidation schedule from
factories
We needed to schedule line by line each shipment to
optimize cost and lead time
Factories ship early as often as late
Many shipments can be switched from Air to Ocean
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17. Third Party Hub Lessons
Invest in developing your SOP
Develop process locally before going overseas.
SOP & Internal processes must be adjusted for
Time zones/language/culture
Refine measurements with real data
More effective cost estimates
Understand your needs for reports and analytic tools
Prior to specing with partner
June 19, 2009
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18. Current Logistics Flow
Pick & Pack / Consolidation:
Hong Kong
Customers
Americas
Asian Factories:
Japan
China
Singapore Deconsolidation:
Malaysia
Thailand Torrance CA USA
Vietnam
June 19, 2009
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19. Final Result
“We need better rates”
New Contract “Activity drives cost”
$7.00 “Manage flow”
Start Hub Ops Start PO Mgmnt
$6.00
$5.00
Cost/Kilo
$4.00
$3.00 Services
Fuel Schg
$2.00 Duty
Freight
$1.00
$0.00
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20. More Lessons Learned
Delivery at the origin is tough to control
We cannot control customer schedules
Therefore…….
Build new Supply/Demand Management tools
(MRP doesn’t work )
Use the real logistics cost to force behavior change
Factory consolidation
Package size discipline
Labeling and docs refinement
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21. Still More Lessons Learned
Manage your logistics provider
Watch for hidden costs
Conduct detailed billing review at least monthly
Ask your provider how to improve
Meet with other logistics providers
It’s not disloyal, it is educational
Ask them how to improve
Make processes and tools portable
Cultivate relationships on the highest level possible
June 19, 2009
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22. Future directions
Push operations upstream
Change pick and pack to cross dock
Supplier provided PO management pools
Investigating real costs
Scale up
Involve other regional DC’s
Europe – Asia
The journey continues…..
June 19, 2009
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