Oct 28, 2013

Brother Industries studying creation of logistics hub

Katsuhiko Takeda, director of Brother International

The Nagoya-based printer/complex machine manufacturing giant Brother Industries is stepping up the reinforcement of its international logistics system in conjunction with the expansion of its production scale and sales in emerging economies. It has put up new factories in Vietnam, the Philippines and other countries in Asia in a bid to decentralize its production bases, but it is boosting sales not only in Asia, but also in the emerging markets of the Middle East, Africa and South America. Amid the increasingly complex structure of international logistics, it has becoming a pressing matter for Brother to build a logistics system that possesses cost competitiveness and quality that can support the expansion of its businesses in the future. Katsuhiko Takeda, director and head of the logistics division at Brother International (BIC), which is in charge of the company's logistics strategies and operations, claimed that, "We also want to consider a cross-dock type of hub base in the future corresponding to the volume trend, costs and management burdens."

BIC controls the interests of Brother Industries in the Asia Pacific region, as well as handles the planning and formulation of logistics strategies for the entire world. Under the CS B2015, the medium-range management plan of the Brother Group that has fiscal 2015 as its final year, the Group aims to boost its consolidated sales to Y750 billion, from the Y516.1 billion recorded in fiscal 2012, and is projecting increased transport volume as a result. "It is our mission to realize quality and cost competitiveness in logistics that can support such growth," said Takeda.

The company currently handles a total of about 25,000 FEUs per annum. Its usage of high-cube containers is high, accounting for more than 90% of the cargoes that are moved to North America. Cargoes to/from Japan account for around 10% of the total volume, comprising approximately 500 FEUs of export and around 2,000 FEUs of import. Majority of the cargoes are directly transported to various destinations in the world from the overseas bases of Brother, centering on those in Asia. About 20,000 FEUs of the cargoes (including shipped cargoes by suppliers), except for those bound to Europe and Latin America, are consolidated by BIC, who then selects the operator partners to undertake the transport job through bidding on an annual basis.

Cargoes are hauled in more than 600 routes, but the company chooses the operators to whom the cargoes will be entrusted after reviewing not only their marine freight rates, but also the bunker adjustment factor (BAF) and the local charges at the loading and unloading ports. At the tender, bids from 21 companies are received. The company presently utilizes 15 companies, centering on operators, but also including some forwarders. With regard to the commissioning of operators, Takeda had this to say: "The service quality and freight rates vary depending on the operators. Japanese operators offer quality service, but their rates are high. On the other hand, if we manage to boost the level at the loading and unloading ports, we will be able to make use of operators that offer lower rates than their Japanese counterparts, but have a certain level of service quality."

At present, Brother is dealing with the issue of coping with cross-country logistics that is increasingly getting complex. Under its midterm management plan, it has positioned Asia as a region for growth as not only is the sales market there expanding, but also the number of production bases. With regard to the production bases, in particular, Brother kicked off operations at new plants in Vietnam and the Philippines one after another in a bid to avert the concentration of its business in China. But on the other side of such decentralization of factories, there lie not only the shrinking volume of cargoes during the timeframe right after the start of operation of the new factories and inefficient direct transport to the destinations, but also rise in management load. In this regard, Takeda commented that, "We are still in the stage of review, but we are thinking of consolidating the cargoes in Hong Kong, which is close to South China where our main factories are located, and then shipping them out from there. In the future, we hope to collaborate with logistics partners, although this will depend on the transport costs, management load and volume trend."

Following the decentralization of its production bases, Brother intends to more proactively engage in parts logistics, too. There has been a rise in the number of cases of parts being supplied from China/Hong Kong for the newly built production bases, and it is projected that the shipment of parts to Vietnam and the Philippines from China/Hong Kong will also swell in the future. How best to manage the logistics of the parts has then become an issue then. BIC used to mainly handle the arrangement of the transport of goods related to product logistics. In the future, however, Brother hopes to delve deeper in determining the means in sending out its products.

Aside from the above, another matter that must be dealt with henceforth is the enhancement of the efficiency of bids that are being studied. There are numerous transport routes and matters for verification, so the burden of the work would tend to be concentrated for BIC and the bidding operators at the onset of the tender. "There are matters that do not need to be completely worked out from the beginning. The burdens of both parties are big, so we want to study how we can enhance efficiency in the future," said Takeda.

One of the fields that Brother does not touch is procurement logistics from suppliers. Even in the same region, the logistics system may become inefficient as the warehouses are decentralized and the loading standards diverse in each business area. With this, Brother plans to integrate the warehouses and standardize such operations as vanning toward better efficiency.

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