Jan 22, 2014

TOTO to cut logis costs by Y2.2 billion, improve transport/delivery system


Masayuki Kato, senior executive officer and general manager of the logistics division

The Kitakyushu-based TOTO Ltd., a major manufacturer of sanitary ware, projects that its logistics costs in fiscal 2013 will shrink by about Y2.2 billion compared to fiscal 2009 thanks to the innovations it has been implementing in this segment in line with its long-term management plan. The significant reduction in logistics costs will be attributable to such factors as the reform in its domestic transport system to one in which the goods are delivered to the logistics center without going through the relay terminal, as has been done thus far, from the production factory, and the reform of the domestic logistics center operations that will shorten the unloading/shipping operation to 0.5 days from the hitherto 1.5 days. Under its management plan, the company is targeting a 30% drop in total lead time (L/T) in procurement, production and logistics by fiscal 2017, but it has already managed to halve the domestic L/T in the logistics segment thanks to its various rationalization moves. Now TOTO will deploy the measures it has implemented at its domestic bases to its overseas offices in the future. Further, it will promote improvements in international logistics, such as the introduction of sheet pallets that will help boost loading efficiency and the direct delivery of goods to the domestic logistics centers from the overseas production facilities.

The TOTO Group has 22 manufacturing bases in Japan, centering on the Kyushu region. It is engaged in the production and sale of a wide variety of household equipment such as sanitary ware, bathroom, faucet, integrated kitchen systems and bathroom vanity systems. It has operations in four regions of the world, comprising the U.S., China, Asia/Oceania and Europe, with marketing/sales bases in each region. Some of the products manufactured overseas are imported to Japan, while some of the products from Japan are also exported in a bid to supplement local sales.

TOTO's global container export/import volume, which combines part/component/material import and product export, has been evolving at about 10,000 units of 40-foot containers per annum in recent years. The volume for fiscal 2013 is expected to be on a par with that. Of the exports/imports worldwide, imports to Japan total about 3,000 containers, while exports from Japan come to about 800 containers. The rest are diverted to offshore trade. Following the opening of new overseas production bases in Fujian, China and India, the company projects that its production volume of sanitary ware will expand this year. However, Masayuki Kato, senior executive officer and general manager of the logistics division, said that, "The new factory is basically targeting local production for local consumption, so even if the sales volume grows, it is projected that the volume of exports/imports will not significantly increase."

TOTO has four distribution centers (DC) in Japan, comprising the ones in Kokura in Kitakyushu city, Koka city in Shiga Pref., Yachiyo city in Chiba Pref. and Ebetsu city in Hokkaido. Products imported from overseas factors are delivered to the four DCs and then distributed to the four blocks of Kyushu/Chugoku/Shikoku, Kansai/Chubu, Kanto/Tohoku and Hokkaido.

TOTO drew up its long-term management plan TOTO V 2017, which will be in effect until 2017, when it celebrates its 100th anniversary. One of the major moves under the plan is the "innovation of the supply chain," with the company promoting measures to enhance efficiency in various logistics fields inside and outside Japan since fiscal 2010.

The first step toward such goal was the reform of the company's domestic transport system. Products to be delivered to the customers in all of Japan from the domestic factories via the DCs used to go through complex transport routes, such as going through the terminals of trunk line providers prior to delivery into the DCs and going through the hub terminals of distributors even after shipping from the DCs. Now TOTO has built the so-called single-pass logistics system that will abolish the relay terminals by consolidating the products and then transporting them directly to the DCs from the factories.

The second step would be to promote reforms in operations at the domestic DCs. Thus far, products go to the DCs two days prior to shipping and leave the warehouse after 1.5 days from the afternoon of the following day. TOTO has now established a system that will have the products sent to the DC within the morning of the day of shipping (leaving warehouse) and then shipped out in the afternoon of the same day after 0.5 days of operation time. With these reforms, the logistics L/T from the time of shipping at the domestic factory up to the time of shipping at the DC has been virtually halved to two days from the hitherto 3.9 days that was clocked prior to the "V Plan 2017" in terms of average at all bases.

TOTO will promote new activities under its third step in the future. Specifically, with regard to its joint distribution scheme with Cleanup Logistics that began in fiscal 2012, it aims to expand the scope of the scheme to a nationwide scale within fiscal 2013. Aside from the above, it will embark on the reform of packaging through enhanced packing styles, enhancement of distribution efficiency through IT and other measures. With the series of logistics reforms, it projects a reduction in logistics costs in fiscal 2013 by Y2.2 billion compared to fiscal 2009.

As a measure toward the improvement of international logistics, TOTO has introduced sheet pallets at its factories in Vietnam and Thailand. By shifting to sheet pallets that can take in three layers of squat toilets, from the plastic pallets with only two layers, in fiscal 2012, the company has improved the loading efficiency by about 50%.

TOTO has been expanding direct deliveries by delivering products to the domestic DCs from its overseas factories. Thus far, after products are brought into the domestic factories and external warehouses from the overseas factories, depending on the products, they were distributed to the DCs in order to conduct quality checks en masse. Now the company is switching to a route where some of the products that have been adjudged to possess stable quality are directly delivered to the DCs.

All measures above are aimed at further expanding their scope of applicable products, according to Kato. As for international logistics, TOTO is also engaged in the reduction of L/Ts and inventories at each oversea factory. However, Kato said that, "We want to deploy the reforms we have domestically implemented to our bases overseas in the future."

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