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Global Best Practices in Toshiba of Canada Limited&rsquo;s Supply Chain

Posted: 09/08/2010
John O’Reilly
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Background for a Supply Chain Improvement Project

In 1990, less than 40 percent of global GDP depended on trade. Today, that number is approaching 60 percent. As a trade dependent nation, Canada’s success is measured through management of the trade process.

"International trade is the key to successful and sustainable development of the world’s nations. An initiative that aims to secure this environment globally while promoting the flow of legitimate goods should receive maximum support and unconditional endorsement from all quarters."
Michel Danet, WCO Secretary General

The need to have visibility, reduce damages and the unit cost of the product, and have better security for our supply chain drove me to examine our current importing process from Asia. This DMAIC project revolved around the air cargo portion. The challenge was to leverage cost reduction, shorten our turn-around-time, and increase customer satisfaction.

The goal of the project was to eliminate break bulk points in transit so the product would arrive in the same pattern as was built up at origin. Not only would this virtually eliminate the possibility of theft, but would also reduce incidences of damage and shipping costs. Since acquiring constant rate reductions could jeopardize service levels, it was imperative that I find another way to lower costs. The answer was found in our own efficiencies.

I identified two of the critical-to-quality factors (CTQs) — improve operational efficiencies and cost control — from the corporate strategy map and my departmental strategy map to ensure the project was aligned with company objectives. An I-chart was used to determine the average per unit cost over a period of time, which gave me a starting point and an idea of how much improvement I wanted to achieve.



"Road Trip"

Drawing on my Six Sigma training, I drew a current process map starting from the END of the process. By doing this, your mindset changes and you are less likely to skip a step that could ultimately be the trigger point of your project. In order for this project to be successful, buy-in had to be obtained not only from our operation in Canada, but from all the stakeholders: the suppliers, airlines, forwarders, and export customs. Definitions of defects were plotted on a fishbone diagram.

In 2000, I took my project idea to our first supplier in Taiwan. The first stop was at the production level, where the product is assembled and packaged. They took me through the production process and were quite willing to try our new idea. The key here is that although decisions are made at management level, when involving the workers in the trenches, the cooperation level and willingness to please the customer (us) increases dramatically.

Next, the discussions went to the management level. Because the new process idea would decrease their workload and not add any cost to their operation, management supported it. Convincing the airlines to use their equipment was the final challenge. Armed with this information I returned to Canada to analyze the data.

Analysis and Implementation

As indicated above, the solution to the success of this project was found in our own efficiencies rather than rate reductions. The less physical handling of the product that was required would expedite the shipping process. Removing some of the excess dunnage and streamlining the packaging would not only reduce the weight of the shipment, thereby realizing transportation cost savings, but would also allow us to bundle more units, which also reduced the per unit cost.

Analysis of the critical X’s (CTQs) revealed that this new process would work with some modifications to one of our receiving doors and the purchase of specialized equipment. In order to mitigate these costs, while in Asia, I negotiated with the forwarder to help purchase the equipment, with the caveat that they could use it for other customers, thereby saving them time and money.

A paired Pareto helped confirm and validate the before and after process changes. Once we approved and closed the project, I followed the first shipment under this new process from production floor to the airport, where I supervised the loading onto a 747, then boarded the 747 with the product to final delivery in our facility here.

Results

Since the implementation of this new supply chain initiative, substantial savings in air freight costs have been realized each year. We have also expanded the program to all other business units within my company. Periodic validations with control processes have confirmed that the project is still just as viable now as it was 10 years ago. This project has helped make us more competitive in an extremely volatile market.

We are not a manufacturing company in Canada. But we have shown successfully how Six Sigma can be used effectively in logistics, sales and marketing to not only realize hard savings, soft savings and positive cash flow, but also improved customer service, Lean thinking among employees and a much more efficient operation.


Thank you, for your interest in Global Best Practices in Toshiba of Canada Limited’s Supply Chain.