Customer Need / Problem

A leading Japanese retailer and wholesaler who managed three distribution centres (DCs) located in Western Japan had encountered problem of communication and quality variation among their three DCs. Since their three DCs were managed by different logistics service providers (3PLs), it has become the biggest hurdle in setting up an efficient communication channel and standardized workflow. In addition, the company had to locate staff in each DC to manage the operations of their 3PLs, which resulted in high management effort and logistics cost.

Realizing that continuous communication inefficiency and quality variation would lead to adverse impacts and high costs, the company approached OOCL Logistics to reengineer their logistics operations.

Service Solution

• In order to optimize efficiency in operations, OOCL Logistics immediately carried out a detailed analysis in terms of distribution patterns, costs and operations requirements.  The analysis results together with OOCL’s (liner group) recommended solution were presented to the client. The client approved the analysis and recommendations and decided to integrate their three DCs into one centralized DC which would be set up in a strategic location in Western Japan which can serve the whole region efficiently.
• The logistics operational processes of the former three DCs were integrated, fine-tuned and standardized.  For example, before process reengineering, stocks were directly put away for storage without proper sorting. It created inefficiency in searching and allotting stock as they were all scattered. After fine-tuning, all stocks are sorted by brand and category before putting away for storage. At the same time, key performance index (KPI) for core operations processes were established to maintain high operations efficiency.
• Moreover, major logistics functions, including purchase order allocation and other logistics administration duties (which were originally handled by the client’s in-house logistics staff) were outsourced to OOCL Logistics so that the client can focus more of their resources on their core business.

Customer Benefits

• The overall logistics costs have been reduced by 20% as compared to before integration and process reengineering.
• Efficiency in operations has been greatly improved.  For instance, efficiency in tally procedure during cargo receiving is 38% enhanced while cargo allocation is 50% better.
• Communication inefficiency caused by operating multiple DCs by several 3PLs was eliminated.
• Client’s in-house logistics department was downsized by 85% due to outsourcing of logistics duties and less management effort is required for managing one centralized DC.