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  • Supply Chain Management Gains Popularity Among Japanese Firms
  • September 8, 1998 (TOKYO) -- Supply chain management (SCM) is gaining popularity in Japan as a new corporate management method for the information age.
    Hitachi Ltd. and Toshiba Corp. as well as Asahi Breweries Ltd. and Heiwado Co., Ltd., a supermarket operator, jumped on the bandwagon and started constructing the management systems (See table).

    Also, various new packages of supply chain planning (SCP) software to support SCM with reinforced functions have recently been released.

    However, the actual implementation of the management system is not so simple. In reality, many companies have done no more than introduce one of the parts of SCM.

    Hitachi Shortens Delivery Time

    Hitachi's personal computer division launched SUPER PROJECT-1 in August 1996 to improve its production processes and the information system. The project aims to reduce inventories of finished goods, shorten the lead time from receipt of an order to delivery, and strictly meet delivery schedules.

    In October 1997, the firm started operating under the new system. As a result, Hitachi's PC division cut inventories of finished goods to zero and reduced delivery times to about five days, according to Tateo Shimizu, a department manager of the PC division's Information System Center.

    Out of the five days, three days are required for production lead time and two days are for delivery, according to Hitachi. The delivery time is much shorter than the prior period of about a month. It is about the same or even shorter than that of Dell Computer Corp. of the United States, which implemented SCM earlier than other PC companies.

    The keys to Hitachi's success lie in its shift from a market production system to a build-to-order system and its reduction in the cycle for production and other planning. Hitachi now makes products on a weekly basis or even a daily basis, if necessary.

    For production planning, the company uses MRP-PAL, its proprietary high-speed Material Requirements Planning software. Unlike conventional MRP software, MRP-PAL is capable of speeding up production planning, and it considers the facility capacity and other constraints.

    Toshiba Cuts Supply-Demand Adjustment Period

    Toshiba's semiconductor division started working in 1996 on a project called World Wide Seamless 96 (WWS), to construct a supply chain for its sales and manufacturing sectors. The company aimed to boost its customer satisfaction by offering customers more accurate delivery schedules. Also, it sought to slash costs.

    Hitachi shortened its supply-demand adjustment period required to check sales forecasts against production plans to nine days, or a third of the conventional period. In addition, under the new system, the company can now change results of supply-demand adjustments at any time, in response to orders received.

    The reform followed its successful integration of supply-demand-related businesses and a system using RHYTHM, an SCP software package developed by i2 Technologies Inc. of the United States. Toshiba named this system MELODY, after RHYTHM.

    New SCP Software Packages Released

    As corporate interest in SCM grows, more SCP software packages with enhanced functions are available.

    The major SCP software developer i2 Technologies of the United States set up a Japanese subsidiary in 1996, and it merged with software vendors with products to help predict demand and logistics planning to strengthen functions of its SCP software called RHYTHM.

    Manugistics Inc. of the United States, which established a Japan subsidiary in 1997, purchased software vendors that are strong in the high-technology and semiconductor fields, to reinforce Manugistics5.

    Another U.S. company, Paragon Management Systems Inc., which specializes in SCP, has recently set up a Japanese subsidiary to sell Paragon Applications.

    Chesapeake Decision Sciences Inc. and Logility Inc., also both of the United States, are selling MIMI and Logility Value Chain Solutions (LVCS), respectively, via their Japanese sales agents. Neither of them has established a Japanese subsidiary.

    Vendors of Enterprise Resource Planning (ERP) packages are enhancing their products with SCP as their mainstay function. PeopleSoft Japan K.K. provided a planning capability to its PeopleSoft 7.5, which was shipped in June.

    SAP AG of Germany has developed its SCP capability called APO and will ship an English version of the product by the end of the year. Its Japanese version will be shipped in 1999.

    Baan Co. of the Netherlands has strengthened its SCP functions by internal development as well as by purchasing other companies.

    Leading domestic computer manufacturers also started focusing on SCP functions. IBM Japan Ltd. sells PRM developed by IBM Corp. NEC Corp. and Fujitsu Ltd. market Manugistics software as sales partners. And Hitachi plans to integrate MRP-PAL and other software packages to commercialize a new integrated package of SCP software.

    Long Road Remains to SCM Optimization

    Even though a variety of SCP software packages are available on the market and Japanese companies appear ready to introduce SCM, the system will not be completely implemented simply by installing such software.

    Dell Computer keeps no inventory through its collaboration with parts makers. Meanwhile, Hitachi still has inventory. In Hitachi's case, the number of parts kept has dropped only slightly. The company's delivery time of five days is excellent. However, Hitachi's profit decreases if it keeps any inventory. In that sense, the SCM program at its PC division is not yet complete.

    Toshiba also faces some problems. The company has not disclosed details of the problems, but it has likely spent more time and money to develop MELODY than initially estimated. Toshiba still has a long way to go to optimize the entire system, including making an optimized supply plan at more than one factory and reducing time required for transportation.

    Among companies listed in the Table, none has yet realized SCM to an ideal level. More time is needed before effects of the introduction of the system begin to show.

    Table: Major domestic companies that have introduced SCM

    Company name

    Contents or effects of SCM

    Asahi Breweries

    An integrated system for sales, logistics, production and

    procurement has come on stream in phases since January 1997.

    Planning data are shared and redundant inputs are prevented from being made.

    Sony

    The company has been meeting its delivery schedules 100 percent since 1997. It has already started improving SCM in order to reduce its inventory to zero and shorten its lead time with a plan to introduce SCP software.

    Daiei

    The company will commercialize in the autumn of 1998 a WEB-EDI-based system to electronically exchange business discussions with other manufacturers to reduce burdens on its buyers and staff dealing with such makers.

    Toshiba

    The company's semiconductor division has been improving its system since 1997 to adjust demand-supply better and provide customers with more accurate delivery schedules. It has already integrated all demand-supply businesses and shortened the time required

    Hitachi

    The company has been working on a reform of SCM at its PC

    division since August 1996. As a result, it reduced the cycle for sales and shipment planning to a weekly basis from

    a monthly one. The firm also adopted a build-to-order system.

    Fujitsu

    The company improved its production planning function at its hard disk division, slashing the time required for the process to around two weeks from two months. In July 1998 it

    introduced SCP software developed by i2 Technologies, Inc.

    Heiwado

    The company has been disclosing its inventory data at its

    logistics center to processed food makers and others since April 1997. Makers automatically refill their products. It reduced inventory, and results in fresher products sold at shops.

    Matsushita Electric Works

    The company has been integrating its businesses from order-taking to production planning with a plan to implement

    the first system under its new system development project called Production New Arrow Project in the first quarter of 1999.


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    (Nikkei Computer)


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    Updated: Fri Sep 4 20:17:10 1998 PDT