Executive Briefings

Always a First Time For Just-in-Time

It's hard to say no to IBM. So when the giant computer maker told all of its monitor suppliers to implement a just-in-time delivery model with a maximum response time of 48 hours, Lite-On Technologies Corp. didn't hesitate for a moment.

With headquarters in Taipei, Taiwan, Lite-On claims to be the fourth-largest monitor manufacturer in the world. It also produces CD-ROM drives for personal computers. Formed in 1989, the company had already achieved revenues of US$800m by 1995.

Yet Lite-On had no prior experience in supplying product globally on a JIT basis, said Jasmine Chan, logistics department manager. Nor had the third-party logistics (3PL) provider it hired to do the job, Golden, Co.-based GeoLogistics. For both companies, it was a matter of on-the-job training.

GeoLogistics was awarded a six-month contract - hardly a ringing endorsement by Lite-On, but indicative of the need to build trust.

Lite-On previously had worked with ocean carriers, and sometimes freight forwarders, to move product directly from its manufacturing plants to major customers such as IBM, Compaq, Hewlett-Packard and Dell Computer. Like many computer makers, however, IBM had become concerned about the cost and inefficiency of managing large parts inventories. In early 1997, it gave monitor suppliers an ultimatum: adopt a JIT model, vendor-managed inventory and 48-hour delivery from the receipt of pull instructions -or lose IBM's business.

Lite-On immediately began the search for a suitable freight forwarder or 3PL. The winner would have to be able to accomplish numerous tasks, including the placement of inventory near IBM's plants, JIT deliveries, a real-time tracking system, value-added distribution services, and electronic data interchange for conveying status information.

GeoLogistics had been acting as a freight forwarder for Lite-On in Taiwan under one of its previous incarnations, LEP International. That prior relationship was a key factor in Lite-On's choice of GeoLogistics over at least three other qualified vendors. But the fledgling 3PL, formed only last year out of three separate companies, had done nothing of the scope delineated by Lite-On in response to the challenge by IBM.

GeoLogistics initially was awarded a six-month contract - hardly a ringing endorsement by Lite-On, but indicative of the need to build trust within a supply-chain partnership. Despite the contract's brief term, the 3PL moved aggressively to implement the required services. A project team, consisting of representatives of all three companies, sat down to sketch out a brand new supply chain.

Today, GeoLogistics supports Lite-On's network of distribution centers in Glasgow, Scotland; Breda, the Netherlands; Dusseldorf, Germany; Sydney, Australia; Toronto, Canada and Singapore. Another logistics provider, DiMarco, manages a pair of U.S. facilities for Lite-On in Sacramento, Calif. and Raleigh, N.C., although GeoLogistics still carries out JIT services at those locations, according to George Faas, manager of logistics programs.

At the DCs outside the U.S., GeoLogistics has responsibility both for inbound and outbound transportation. It arranges for transportation between Lite-On's manufacturing sites and the DCs.

It also delivers components from JIT hub to the customer's assembly plant within four to 24 hours of a pull request. The vendor's information system, accessible via the Internet, provides global visibility of product that is in transit, in the warehouse, or delivered to IBM and other customers of Lite-On.

GeoLogistics performs a number of value-added services for the client, including quality control, testing, reworking product, printing barcoded labels, submitting daily inventory reports and weekly quality reports, and daily invoicing of Lite-On's customers for delivered product.

Faas admits to a steep learning curve for GeoLogistics in the early days of the relationship. "We didn't really know what we were getting into," he said. "It was a rough startup."

Operations have since smoothed out considerably. Chan said the arrangement has dramatically improved Lite-On's service and customer responsiveness. With greater visibility in the supply chain, Lite-On has shifted the basis of its planning model from actual orders to IBM's demand forecasts.

GeoLogistics has benefited as well. Its newfound experience in a wide range of value-added services can be parlayed into additional business, said Faas. IBM already has referred other suppliers to GeoLogistics to set up additional JIT facilities. And Lite-On awarded GeoLogistics a new, one-year contract, which seems likely to be renewed when it expires at the end of 1999.

The standard operating procedures developed by GeoLogistics are of mutual benefit. They give Lite-On a yardstick by which to monitor the vendor's performance. And they make it easier for GeoLogistics to take on additional value-added business at its distribution facilities around the world. "If Lite-On or any customer were to walk into any GeoLogistics facility, they would see the same thing," said Faas.

For Lite-On, the wakeup call from IBM may have been just what it needed to achieve its ambition of becoming the second-largest maker of monitors, and largest in CD-ROMs, by the year 2000. "This offers entry into a world market where they have no physical presence," said Faas. "They can be there tomorrow because they have inventory there."

It's hard to say no to IBM. So when the giant computer maker told all of its monitor suppliers to implement a just-in-time delivery model with a maximum response time of 48 hours, Lite-On Technologies Corp. didn't hesitate for a moment.

With headquarters in Taipei, Taiwan, Lite-On claims to be the fourth-largest monitor manufacturer in the world. It also produces CD-ROM drives for personal computers. Formed in 1989, the company had already achieved revenues of US$800m by 1995.

Yet Lite-On had no prior experience in supplying product globally on a JIT basis, said Jasmine Chan, logistics department manager. Nor had the third-party logistics (3PL) provider it hired to do the job, Golden, Co.-based GeoLogistics. For both companies, it was a matter of on-the-job training.

GeoLogistics was awarded a six-month contract - hardly a ringing endorsement by Lite-On, but indicative of the need to build trust.

Lite-On previously had worked with ocean carriers, and sometimes freight forwarders, to move product directly from its manufacturing plants to major customers such as IBM, Compaq, Hewlett-Packard and Dell Computer. Like many computer makers, however, IBM had become concerned about the cost and inefficiency of managing large parts inventories. In early 1997, it gave monitor suppliers an ultimatum: adopt a JIT model, vendor-managed inventory and 48-hour delivery from the receipt of pull instructions -or lose IBM's business.

Lite-On immediately began the search for a suitable freight forwarder or 3PL. The winner would have to be able to accomplish numerous tasks, including the placement of inventory near IBM's plants, JIT deliveries, a real-time tracking system, value-added distribution services, and electronic data interchange for conveying status information.

GeoLogistics had been acting as a freight forwarder for Lite-On in Taiwan under one of its previous incarnations, LEP International. That prior relationship was a key factor in Lite-On's choice of GeoLogistics over at least three other qualified vendors. But the fledgling 3PL, formed only last year out of three separate companies, had done nothing of the scope delineated by Lite-On in response to the challenge by IBM.

GeoLogistics initially was awarded a six-month contract - hardly a ringing endorsement by Lite-On, but indicative of the need to build trust within a supply-chain partnership. Despite the contract's brief term, the 3PL moved aggressively to implement the required services. A project team, consisting of representatives of all three companies, sat down to sketch out a brand new supply chain.

Today, GeoLogistics supports Lite-On's network of distribution centers in Glasgow, Scotland; Breda, the Netherlands; Dusseldorf, Germany; Sydney, Australia; Toronto, Canada and Singapore. Another logistics provider, DiMarco, manages a pair of U.S. facilities for Lite-On in Sacramento, Calif. and Raleigh, N.C., although GeoLogistics still carries out JIT services at those locations, according to George Faas, manager of logistics programs.

At the DCs outside the U.S., GeoLogistics has responsibility both for inbound and outbound transportation. It arranges for transportation between Lite-On's manufacturing sites and the DCs.

It also delivers components from JIT hub to the customer's assembly plant within four to 24 hours of a pull request. The vendor's information system, accessible via the Internet, provides global visibility of product that is in transit, in the warehouse, or delivered to IBM and other customers of Lite-On.

GeoLogistics performs a number of value-added services for the client, including quality control, testing, reworking product, printing barcoded labels, submitting daily inventory reports and weekly quality reports, and daily invoicing of Lite-On's customers for delivered product.

Faas admits to a steep learning curve for GeoLogistics in the early days of the relationship. "We didn't really know what we were getting into," he said. "It was a rough startup."

Operations have since smoothed out considerably. Chan said the arrangement has dramatically improved Lite-On's service and customer responsiveness. With greater visibility in the supply chain, Lite-On has shifted the basis of its planning model from actual orders to IBM's demand forecasts.

GeoLogistics has benefited as well. Its newfound experience in a wide range of value-added services can be parlayed into additional business, said Faas. IBM already has referred other suppliers to GeoLogistics to set up additional JIT facilities. And Lite-On awarded GeoLogistics a new, one-year contract, which seems likely to be renewed when it expires at the end of 1999.

The standard operating procedures developed by GeoLogistics are of mutual benefit. They give Lite-On a yardstick by which to monitor the vendor's performance. And they make it easier for GeoLogistics to take on additional value-added business at its distribution facilities around the world. "If Lite-On or any customer were to walk into any GeoLogistics facility, they would see the same thing," said Faas.

For Lite-On, the wakeup call from IBM may have been just what it needed to achieve its ambition of becoming the second-largest maker of monitors, and largest in CD-ROMs, by the year 2000. "This offers entry into a world market where they have no physical presence," said Faas. "They can be there tomorrow because they have inventory there."