Getting fit for growth - streamlining supply chains

Getting fit for growth with a supply chain partnership

A world leader in innovative technology, Toshiba outsourced its UK distribution infrastructure to Arvato in 2010 for its business and consumer laptop business. The partnership has streamlined Toshiba’s logistics operation, contributing to the expansion of the business and successfully shipping more than four million laptops to its UK customers.

Open Outsourcing spoke with Richard Taylor, Head of Supply Chain at Toshiba UK to find out more about the impact of the partnership on the company’s growth strategy.

Interview

Open Outsourcing: Outsourcing is often viewed as a cost cutting strategy, was this the driver behind your decision to outsource to Arvato?

Richard Taylor: We’d outgrown our own directly leased warehouse and distribution facility and were faced with the decision to re-invest or outsource. Cost was a factor – we were looking for efficiencies – but our primary motivation was to support our growth plans in the UK.

The distribution centre is the engine room in a fast-paced market like computing. We launch new laptop models as frequently as every three months and getting them out to our customers is key, in order to achieve our sales targets. We needed a scalable infrastructure that would allow us to expand storage, handling and throughput as we grew.

Outsourcing also offered flexibility, which is always a crucial factor in growth but is all the more important for us as our customers are changing the way they operate. Procurement lead times have shortened dramatically. Few buyers are currently ordering full requirements months in advance; instead they opt for smaller initial volumes which can be topped up later. For Toshiba, this meant we had to adapt to fulfil short-term customer demand – getting orders to the shop floor very quickly.

What have been the main benefits from the way that Toshiba and Arvato have worked together?

Our partnership with Arvato means we can easily ramp-up or decrease the amount of stock in storage, without worrying about having too little or too much capacity – something we couldn’t achieve with our own facility. By introducing new technology and processes into the warehouse we’re able to deal with peaks in demand up to 500% of average throughput and to deliver to most customers within three hours. As a result we’ve become known for our flexibility.

The tangible benefit is we’re able to sell more products more quickly and our customers achieve savings as they have to store less stock.

The Windows 8 launch was a good example. There was an incredibly tight timescale between Microsoft releasing the final software and the public launch. Every manufacturer wanted products equipped with the new software available on launch day.

Some failed, but we shipped all of our planned volumes to major retailers in advance.

Has the decision to outsource impacted on the way you plan for growth?

I’m a firm believer that new ideas come from exposure to a wider range of challenges. When we operated our own facility we worked in isolation, whereas Arvato has a wide range of clients, meaning we not only benefit from economies of scale but also by drawing on their broad experience.

When an outsourcing partnership is functioning well, it enables you to focus on the bigger picture knowing that the more operational issues are being taken care of. It was important that we had a partner with a real ‘can do’ culture. Arvato happily takes on last minute demands or ad hoc projects such as unique labeling or special retail cartons for a client’s sales campaign. When planning for growth we know that the supply chain won’t be a concern.