TDK Lambda

Reducing Logistics Costs

– Lessons Learned
INTERLOG 2009
JUNE 17, 2009

June 19, 2009

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 Point of View is Worth 50 IQ Pts
A former Boss

June 19, 2009

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Famous Points of View
‹ I think there is a world market for maybe five
computers."
z -- Thomas Watson, chairman of IBM, 1943
‹ There is no reason anyone would want a computer in
their home."
‹ -- Ken Olson, president, chairman and founder of Digital Equipment
Corp., 1977

‹ “640K ought to be enough for anybody."

z -- Bill Gates, 1981
‹ $100 million dollars is way too much to pay for
Microsoft."
z -- IBM, 1982

June 19, 2009

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Agenda

‹ TDK-Lambda Overview
‹ Where we started
‹ Iterations in the process of cost reduction
‹ Lessons learned
‹ Results and future directions

June 19, 2009

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TDK at a Glance

$8.1 billion annual revenue

60,000+ employees

Customers in 100+ countries

60+ year heritage of

invention and innovation in Power

June 19, 2009

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Global TDK-Lambda Network

Hauppauge Ilfracombe Achern, GmbH

NY, USA UK Paris, FR
Neptune NJ, Milan, IT Nagaoka
San Diego USA
Wuxi, CN Tsukuba
CA, USA Shanghai, CN Tokyo, Japan
Karmiel
Richardson
Israel
TX, USA

Pathumthani, TH
Kuantan, MY
Senai, MY
TDK- Lambda Locations Singapore
Manufacturing
R&D
Sales / Service

A global footprint to service the requirements of the worldwide market

9 Mfg. Sites: 6 in Asia, 1 in Middle East, 1 in North America, 1 in Europe,
9 R&D Centers: 4 in Asia, 1 in Middle East, 3 in North America, 1 in Europe,
Sales & Service 9 in Asia (Outside Japan), 1 in Middle East, 2 in North America, 5 in Europe,

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Baseline – Where we started

z 2500 SKU’s
z 35000 Kilos/month
z Freight 7% of GOGS
z Reactive
‹ All air no ocean
‹ Shipment visibility after the fact
‹4 week frozen time fences at factory

z Customers want shorter lead times more flexibility

z Management wants lower cost

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 Original Logistics Environment

Japan DC

Customers
Americas
Asian Factories TDK-Lambda US
San Diego
June 19, 2009
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Progressive Point of View
‹ #1 First steps - “We need lower rates”
z This is someone else’s problem
z We can negotiate this issue away

‹ #2 Iteration - “Our Activity Drives our Cost”

z We are the enemy
z We can control our fate

‹ #3 Approaching best practice - “We need to manage our material flow”

z We have a great opportunity
z Lower cost – better service

June 19, 2009

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First steps
‹ Select a partner/contract phase
z Any of the top 10 suppliers could meet our needs
‹ Financial Stability
‹ Correct assets in correct locations
‹ Match strengths and weaknesses

‹ Met with all local reps

z Global service depends on local support
z Meet with all providers – even excluded ones
z Network with local logistics groups
z Built relationships outside the local office
June 19, 2009
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First Steps

‹ Objectivity is critical
z Did our own data analysis
z 1 year contract
‹ Lanes – Consider your logistics model
z Who is succeeding with similar customers?
z Similar does not equal competitor
z Can you “piggyback” on a larger customer’s lanes?
z Explore scenarios using different lane strategies

‹ Do a route analysis

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What we missed

‹ Insure cost model includes all fees and services

z Spend time on your SOP
z Negotiate 90 day “rate checkup” to insure performing as expected

‹ Establish clear success criteria

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 First Iteration Logistics Flow

Customers
Americas
Asian Factories:
Japan
China
Singapore Deconsolidation:
Malaysia
Thailand 3PL Warehouse USA
Vietnam
June 19, 2009
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First Iteration
‹ All logistics services consolidated in one provider
‹ Direct Ship from Factory
z No Japan DC
z Deconsolidation and Pick/Pack operation done in SD
‹ Pro
z Lower rates – small improvement in lead time – reduced staff in TDK
Warehouse - Improved visibility
‹ Con
z More shipments = Higher fees/lower weight
z Multiple uncontrolled shipments from the factories
‹ Missed ocean opportunities
‹ Missed consolidation opportunities
June 19, 2009
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Lessons Learned

‹ Needed an Asian Hub

z Manage process before costs are incurred
‹ We needed PO shipment data from factories in
advance
‹ We needed to enforce a consolidation schedule from
factories
‹ We needed to schedule line by line each shipment to
optimize cost and lead time
z Factories ship early as often as late
‹ Many shipments can be switched from Air to Ocean

June 19, 2009

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Hong Kong Hub Operation

June 19, 2009

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Third Party Hub Lessons

‹ Invest in developing your SOP

z Develop process locally before going overseas.
z SOP & Internal processes must be adjusted for
‹ Time zones/language/culture

‹ Refine measurements with real data

z More effective cost estimates
‹ Understand your needs for reports and analytic tools
z Prior to specing with partner

June 19, 2009

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 Current Logistics Flow
Pick & Pack / Consolidation:
Hong Kong

Customers
Americas
Asian Factories:
Japan
China
Singapore Deconsolidation:
Malaysia
Thailand Torrance CA USA
Vietnam
June 19, 2009
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Final Result
“We need better rates”
New Contract “Activity drives cost”
$7.00 “Manage flow”
Start Hub Ops Start PO Mgmnt
$6.00

$5.00
Cost/Kilo

$4.00

$3.00 Services
Fuel Schg
$2.00 Duty
Freight
$1.00

$0.00

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June 19, 2009

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More Lessons Learned

‹ Delivery at the origin is tough to control

‹ We cannot control customer schedules

‹ Therefore…….
‹ Build new Supply/Demand Management tools
z (MRP doesn’t work )

‹ Use the real logistics cost to force behavior change

z Factory consolidation
z Package size discipline
z Labeling and docs refinement

June 19, 2009

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Still More Lessons Learned

‹ Manage your logistics provider

z Watch for hidden costs
‹ Conduct detailed billing review at least monthly
‹ Ask your provider how to improve

z Meet with other logistics providers

‹ It’s not disloyal, it is educational
‹ Ask them how to improve

z Make processes and tools portable

z Cultivate relationships on the highest level possible

June 19, 2009

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Future directions

‹ Push operations upstream

z Change pick and pack to cross dock
‹ Supplier provided PO management pools
z Investigating real costs
‹ Scale up
z Involve other regional DC’s
z Europe – Asia

‹ The journey continues…..

June 19, 2009

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Thank you

Questions?

Company Confidential 23 June 19, 2009