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Faced with an out-of-control inventory situation and growing delays in product delivery, Fujitsu PC found salvation for its start-up notebook computer business by outsourcing a large chunk of supply-chain management responsibility to FDX Corp., parent company of Federal Express.
|"Since we were bringing a total solution, it required a cross-section of functional areas of our company, such as information technology, billing and legal." - Brent Meyers of FedEx|
|FDX Launches New Supply-chain Unit|
With comprehensive supply-chain management projects like Fujitsu PC already in the Federal Express portfolio and with others coming down the chute, parent company FDX Corp. this summer launched a new operation, e-Supply Chain Services, to support this growing business segment.
"We were created for the purpose of designing total supply-chain solutions," explains Tom Schmitt, corporate vice president of e-SCS. "This includes analyzing the supply-chain processes of FDX customers and identifying and implementing streamlined solutions that will reduce costs, improve cycle times and increase revenue."
Over the last two years, the type of questions FedEx hears from its customers has changed, says Schmitt. "Two years ago customers were asking if we could move their products from Asia to America and vice versa. Now, we hear companies telling us that they want to focus on their core competencies and have a partner to come in and manage all or part of their supply chain."
The challenges can be daunting. "In Fujitsu's case, they came to us with the goals of increasing customer choice and trying to get from a 25-day customer response time from first call to product delivery to an average of four days," says Brent Meyers, director of consulting services for e-SCS. "When you get a challenge like that - to reduce a response time by a factor of five or six, you have to go through the entire physical layout of their worldwide network, including interfacing with customers, including technology that ensures that partial shipments get delivered at the same door on the same day and at the same time."
This often involves working across an organization that may well have different operating companies as well as functional areas, a painstakingly detailed task for e-SCS and the customer, adds Meyers. Typically for projects that result in taking over supply-chain management, it's six months to a year from the first problem-solving or workshop discussion of the issue and improvement potential to having a program in place for actively managing all or part of a supply chain.
The demand for this type of service has continued to grow and intensify, and the growth of this business segment is linked to an ongoing transition - from a cost to a value perspective - in the way many customers view their supply-chain management strategy, says Schmitt.
For example, where customers previously compared the basic cost of providing supply-chain services in-house with the cost and benefits offered by a third party, now they can look at options offered by sophisticated information technology to broaden those considerations. For example, they might consider the impact of tightening internal processes in order to reduce work-in-progress inventory. IT can quantify these savings as well as project sales lost due to lengthy turnaround times or an unsatisfying initial encounter with the company.
"We can quantify those lost sales and project which of those sales losses could have been avoided with a much tighter, response-based cycle," says Schmitt. "And if you do the math, it's amazing how much value you can unleash." Schmitt says that for large companies, there can be as much as a 3 percent to 10 percent difference in total revenue between supply-chain costs of the average performer in the industry versus the best performer. "And companies are starting to make investments into unleashing those value potentials," he adds.
The creation of e-SCS enables FDX to marshal appropriate resources and focus on a market that is shifting from transactional transportation decisions to more enduring relationships with a supply-chain partner that can manage, either through its direct holdings or alliances, everything that is non-core to that customer, adds Meyers. "Often, this includes everything but research and development, manufacturing and marketing."
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