Nippon Express USA Global VMI Program Provides the Image of Success for Office Equipment Company

Challenge:
Sales success in the highly competitive office imaging products business means having the right product or replacement part available when customers need it. Financial success often rests on tightly controlling inventories and costs. One of the world’s foremost office equipment manufacturers faced just this balancing challenge for product lines it sold in U.S. and Europe.The global office products company needed to dramatically lower inventory carrying costs and improve order cycle times, so it sought solution proposals from the ten leading logistics management companies. Specifically, the company wanted to know whether a vendor-managed inventory (VMI) program or a Foreign Trade Zone (FTZ) option would be the most efficient on a cost and services basis, and how the most efficient strategy could be designed and executed.

Solution:
Nippon Express Group assembled a cross-functional team of supply chain professionals from Japan, Europe and the USA to collect and analyze operational data, focusing first on the VMI vs. FTZ dilemma. Concluding that the savings from Customs brokerage fees would be offset by administrative time delays and the cost of management reports required to satisfy FTZ regulated operations, the project team began designing an efficient VMI program to meet stringent customer service requirements in the two global regions. Ultimately, the team determined that a two-distribution center model - one in Los Angeles, the other in Columbus, OH - for the U.S. and a single facility in the Netherlands would yield optimal cost and service efficiencies. The office products company and their joint venture partner in Asia determined and created a subsidiary to be responsible for the VMI program. This subsidiary in turn outsourced the management, technology and execution duties to Nippon Express USA.

Results:
Orders received at all three VMI locations are pulled and staged for outbound delivery in less than two hours. Nippon Express USA is responsible to monitor inbound transportation of the machines and parts from manufacturing locations and OEM suppliers in the Asia Pacific to the VMI sites; so sales personnel use the full visibility of both real and virtual (in-transit) inventory to optimize sales. Having shared lean manufacturing best practices with the OEMs, Nippon Express USA enables the subsidiary responsible for VMI and their parent companies to accommodate spikes in demand while defending against product obsolescence. And should a faulty component in particular machines be identified by Nippon Express USA’s returns managers, Nippon Express USA has the capability to air freight replacement components to the VMI locations, where Nippon Express USA personnel swap out the faulty part, validate and inspect the repair, and repackage the machines. Buoyed by its first year success, the office products company plans to expand the VMI program to several additional product lines in 2005.