Customer Issues & Objectives
Parts inventory at overseas manufacturing plants occasionally diverged from actual requirements due to changes in demand, placing a greater management burden on the factory's procurement staff. Sudden jumps in requirements increased the supplier's production load, and fear of shortage by the factory lead to surplus inventory. Increases in inventory and an excessive rise in the price of parts resulted in additional borrowing to finance factory operations, and the burden of costs due to interest.
Reduce the burden of inventory control on overseas factories by switching parts procurement from the current PULL type management used in the overseas factories to the PUSH type management run by Japan headquarters.
Balance sheet will improve as inventory reaches proper levels.
Cash flow will improve as borrowed amount decreases.
Supplier production load will lighten as procurement quantities level out.
We have achieved streamlined procurement logistics and financing through the fusion of "Logistics Efficiency Service" and "Procurement Representative Function," in which the Nippon Express Group acts as a trading house, holding procured parts on behalf of the local factories.
Solution: Key Points
- Create visibility in global inventories, including inventory in-transit, centralize procurement management on the Japan-side.
- Introduce Logistics Finance Service to level out customer-side inventories.
- Reduce borrowing and lower interest costs by achieving proper inventory levels.
- Lower the burden on suppliers and level out procurement costs by establishing level quantities of procured parts and shortened payment agreements.
Effects & Merits
- Greatly lighten the burden on procurement managers in overseas factories, establish ability to offer centralized resources of essential monozukuri (manufacturing).
- Customers hold safe inventory levels, ensuring suitable inventory at factories.
- Reduce procurement funds and lower financing costs by purchasing only required quantities and holding safe levels of inventory.
- Smaller fluctuations in procurement quantities means stable production for suppliers, added to the financial support of shorter payment schedule
- Logistics improvements as well as enhancements to the supply chain from the management perspective.
- With Nittsu Capital, a financial subsidiary of the Group, Nippon Express provides integrated logistics and purchasing agency services.
- Nippon Express operates on established logistics and IT infrastructures that provide comprehensive visualization of not only domestic inventory, but in-transit and overseas inventory as well.
Introducing the Nippon Express "Logistics Finance Service" enabled us to establish a pseudo VMI scheme without a huge initial cost to the customer. This improved the financial standing of overseas factories (and by extension the entire group) while reducing administrative duties, allowing more opportunity to concentrate on actual operations. As the solution lessened the burden on supplier manufacturing and cash management, assembly manufacturers and suppliers build a Win-Win situation, further strengthening partnerships.