Delivering value
October 1st 2005 As effective supply chain management becomes an ever more vital tool in achieving a competitive edge, logistics suppliers are taking on increasingly sophisticated value-added operations. NYK Logistics is one company in this sector that has the expertise to deliver
The ability to deliver cost effective supply chain solutions is a vital part of the sales and marketing process for major manufacturers looking for a competitive edge. However, most companies are now looking for much more than the traditional services of warehousing and distribution from their logistics suppliers.
To stay in line with the needs of the market place many manufacturers are now insisting on a just-in-time (JIT) collection and delivery service, tracking facilities for full operational transparency and a comprehensive range of value added services. All this whilst controlling costs.
NYK Logistics (UK) is a leading supply chain company that offers its customers a completely tailored range of logistics services - from importation, bonded storage and full customs clearance through to final delivery to the end user and beyond with the collection of returns.
The UK operation is centred on technically advanced, high security distribution facilities in Milton Keynes, Bedfordshire and Northamptonshire, with additional sites nationwide. NYK Logistics distributes for a wide variety of blue chip companies, including electronics manufacturer Sanyo, a long-term customer that has recently renewed its supply chain contract with the company for a further five years.
Shared-user environment
To ensure all customers receive the right product at the right time and meet orders for stock items as well as specific order requirements is a prerequisite for a successful operation. NYK Logistics operates Sanyo as a dedicated contract within a shared-user warehousing environment. This allows Sanyo to minimise their operational costs whilst enjoying the benefits of a flexible walls environment - enabling them to grow and manage seasonal fluctuations as necessary.
"The nature of the market is constantly changing," comments Rohan Morris, operations director of NYK Logistics.
"Retailers are looking to run with minimal inventory but at the same time must be able to supply products on a rapid turnaround time or lose out if their customers decide to go elsewhere rather than wait for stock to arrive."
NYK Logistics has a range of flexible services, which include next day distribution, supply chain management and storage within high security premises.
An extensive range of value added options are an important element of the NYK Logistics operation. These extend far beyond simple pick and pack to include services developed specifically for electronics companies, including customer equipment modifications and system building and kitting.
The breadth of services and facilities available enables Sanyo to provide ready to despatch products to meet their customers’ requirements. For example, NYK Logistics carry out a range of packaging activities for Sanyo. These include overcartoning and shrink-wrapping, which are carried out prior to despatch in order to satisfy the requirements of customers and end users.
Where retailers have specific days and set times for deliveries these are accommodated within the distribution schedule along with special order instructions. Pallet layer requirements are also configured to fit a customer’s storage racking height set-up.
Similarly, NYK Logistics provides a range of warehousing options to enable Sanyo to provide products to customers’ specifications. These range from insertion of point of sale material and customer labelling to more complex tasks such as technical configuration. This includes storing generic CCTV systems and installing hard drives ranging from 160 to 800GB as specified by the end user.
As well as CCTV systems, products stored and distributed range from LCD televisions and projectors for the commercial market to hi-fis, DVD players and recorders, widescreen televisions, microwave ovens and vacuum cleaners in the consumer sector.
Alongside mainline orders, NYK Logistics is also responsible for managing the inbound logistics of Sanyo products from production sites in the Far East. An international logistics team provides customs clearance services and a strategic plan is in place to ensure products arrive, either by sea and air freight depending on size and value, without problems.
A flexible philosophy to meet changes required by legislation, such as the EU Waste of Electrical and Electronic (WEEE) directive and the Restriction of Hazardous Substances (RoHS) regulations, is paramount to maintaining a successful operation.
Michael Joyce, general manager supply chain at Sanyo, believes a partnership approach to the supply chain is vital to controlling costs and delivering products accurately to a wide market.
"A supply chain only really performs to its maximum efficiency if you work together with a collaborative approach that is open, adaptable and geared for change," he says.
"Joint project teams from Sanyo and NYK Logistics work on new developments and review changes in the market, for instance the WEEE and RoHS legislation to ensure we both can manage the impact on the supply chain and costs in a positive way.
"We work with NYK Logistics on every aspect of the business in this respect. Our IT systems are integrated and we receive real time management information about order and delivery status."
An Opus warehouse management system directly linked to Sanyo’s SAP system allows NYK Logistics to facilitate highly accurate, fast order picking. Full satellite tracking is provided and a digital pen system scans delivery notes.
Value added
Logistics operations of this size require significant investment in machinery, trained personnel and secure facilities.
"We are undertaking increasingly sophisticated value added warehousing operations, which require a high level of expertise and advanced equipment," says Morris.
"Investment is essential with any logistics operation but is of particular importance in today’s trading environment to ensure it continues to be efficient and successful."
This is particularly true in an industry where new legislation will have a direct impact on the supply chain, such as the WEEE directive. While the main focus may be on complying with the WEEE directive due to come into force in June 2006, manufacturers must take into account the RoHS regulations.
Whereas WEEE deals with collection and recycling of waste, RoHS is aimed at restricting the use of certain hazardous substances in products.
Both pieces of legislation obviously have supply chain and cost implications that must be managed to ensure they have the minimum impact on a company’s profitability and its customer base.
The costs of collecting, re-using, recycling and disposing of electrical and electronic equipment under the WEE directive and the adherence to the RoHS regulations are firmly the responsibility of the producers and manufacturers.
Cost increases
The EU estimates an average cost increase of between 1% - 2% for most WEEE products and 3% - 4% on larger more complex products. It is expected this will manifest itself as increased prices for consumers as manufacturers already operate on tight margins in a fiercely competitive market.
Therefore urgent attention now will help to minimise exposure and protect product margins. The increases are likely to be in labour and transport costs. Innovative product design by the producer can reduce recycling costs and minimise impact on prices, presuming that products are collected separately at the waste stage.
Dealing with WEEE as a combined force in collaboration will help to take advantage of economies of scale and the pooling of resource and experience.
It is difficult to be exact at the moment, but the Government estimates that the costs to the UK economy of WEE and RoHS are expected to be:
WEEE - £217 - £455 million per annum to comply with the directive.
RoHS - £120 million per annum annualised over 10 years for capital costs and research and development.
RoHS - £55 - £96 million per annum in increase operating costs of using alternative substances post 2006.
Product categories affected are:
Large household appliances Small household appliances IT and telecommunications equipment Consumer equipment Lighting equipment Electrical and electronic tools (with the exception of large-scale stationary industrial tools) Toys, leisure and sports equipment Medical devices (with the exception of all implanted and infected products) Monitoring and control instruments Automatic dispensers
All products and components falling into the 10 main categories and criterion must meet the regulatory targets and standards with regard to both WEEE and RoHS.
Joyce comments: "Sanyo embraced recycling over two years ago and consequently is in a good position to manage the WEEE legislation. However, until the regulations are passed by Parliament it is difficult to plan in too much detail".
Effectively if any of the regulations/targets are not met fines may be levied on the manufacturer or the product will not be allowed for sale in the market.
There are serious implications for producers not planning for this regulation and companies must act quickly to assume competitive advantage and manage the additional cost implications on their business.
Clearly NYK Logistics, as a leading logistics provider to the high value consumer electronics industry, works with many blue chip clients that will be affected by the legislation in a number of different categories. Manufacturers need a supply chain organisation that not only offers a range of comprehensive value added services but that can tailor logistics solutions to assist electrical producers with the forth-coming regulations.
These services will include product modification, component removal, rework services, refurbishment and repair services, serial number capture, volume and weight data capture and of course returns management.
Morris concludes: "At NYK Logistics we offer solutions in the form of take back operations, reverse logistics expertise and are already developing bespoke WEEE and RoHS related value added services.
"However, there is still some way to go before the full impact of the regulations becomes clear. Electrical manufacturers need to liaise closely with their service providers to ensure they are kept fully abreast of developments." More articles from NYK Logistics: | 
