January 2006 | Case Studies | I.T. Toolkit

Injecting Zoom Into Distribution

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Kawasaki shifts to a 'multi-enterprise' SCM system to rev up product flow and keep dealers and customers humming.

Say a customer at a Kawasaki showroom is shopping for a green Ninja ZX10R sport bike. He tells the salesperson exactly what he wants; the dealer checks the computer and learns the motorcycle is due to arrive on Feb. 10. Give or take a few days or weeks, that is.

"It might turn up two weeks early; it might not get to the dealer until March," says Barry Beehler, vice president, planning and marketing, Kawasaki, Irvine, Calif. The customer might take his chances and agree to wait, or he might take his business elsewhere.

This scenario is a problem for the approximately 1,500 dealerships that sell Kawasaki Motors Corp. USA's motorcycles, all-terrain vehicles, utility vehicles, and personal watercraft.

"We don't have visibility across the supply chain to know exactly what merchandise is in transit, or when it will be delivered. We need forward-looking capability to be able to promise a given vehicle to a given dealer at a given time," Beehler explains.

Help is on the Way

Kawasaki executives expect the situation will improve in March 2006, when the company starts using SCM Live from Mitrix, also of Irvine, to manage its supply chain.

SCM Live is a web-based, hosted service that offers supply chain planning, sourcing, inventory management, fulfillment, and logistics functions. Mitsui & Co. USA, a subsidiary of Mitsui & Co. of Japan, developed SCM Live four years ago to handle its own supply chain management needs. Twelve Mitsui business units in the United States and Japan use the system to manage extended supply chains.

After using the system internally, Mitsui formed Mitrix to market SCM Live to companies that resemble Mitsui's own business units.

"Our target customers are $75-million to $750-million companies," says Mitrix CEO Ed Lewis. "They have unique supply chain requirements, and they compete with big companies that have larger solutions and more precise supply chains."

Boost Retail Sales

Kawasaki Motors Corp. USA builds products at three plants in Japan, Thailand, and Lincoln, Neb. Finished products feed into a primary vehicle distribution warehouse in Ontario, Calif., then move to seven warehouses located across the United States. Those facilities, in turn, send products to the dealerships.

Kawasaki has been looking for ways to improve its supply chain during the last two years. Its primary goal is to boost retail sales by making sure dealers can give customers the vehicles they want, when they want them.

From that initial goal followed another: "to reduce the amount of inventory that isn't moving because it is in the wrong place due to our inability to fine-tune product flow on the fly," Beehler says.

The company then moved to focus on enhancing visibility and automating the various systems and spreadsheets it uses to manage the distribution process.

Kawasaki has been using a proprietary "vehicle system" for many years, but it is limited, Beehler says. One problem is that it performs functions in batch mode instead of real time; another is that it doesn't exchange data effectively with other Kawasaki systems, except for its import system.

The import system tracks goods coming into the United States, "but is narrowly defined on functionality to help clear products through customs," Beehler says. For forecasting, Kawasaki relied on spreadsheet-based processes, but it has replaced those with a forecasting engine.

"We were looking for a system to combine all these pieces and give us real-time information we could adjust in a semi-automated fashion," says Beehler. Such a system would boost productivity, efficiency, precision, and cost savings.

Kawasaki chose the Mitrix system from among eight possible solution providers. Mitrix stood out because of four main factors:

"First, it gave us the best combination of functionality, particularly for a company our size. Second, the application fit the way we wanted to conduct our business," Beehler explains. Third, employees liked the user interface."

And finally, "while we weren't initially looking for a hosted solution, it became evident that it would save time and reduce total cost of ownership in the future."

Mitrix doesn't merely host SCM Live for its customers; it offers "multi-enterprise hosting," Lewis explains. Instead of running a separate copy of the software on its premises for each customer, Mitrix maintains one single instance of the application.

"Each customer lives in that application, but they have their own private trading community," he explains, with security measures to wall off each customer's transactions and data from others.

Because Mitrix manages and maintains only one copy of SCM Live, it can spread the cost among all its customers, who pay only for the service they use.

SCM Live integrates its various modules so a change in one area automatically triggers adjustments wherever they are needed. "We take data from the forecast, and manage the supply chain to that forecast," Lewis says. "We manage the sourcing, inventory, fulfillment, and logistics processes."

If one company wants its enterprise resource planning (ERP) system to continue to handle some of those functions, Mitrix links the ERP system to SCM Live so they pass data back and forth in real time.

Four Ways to Exchange

Mitrix offers companies several ways to exchange information with trading partners. It can develop interfaces to management systems operated by suppliers, customers, carriers, and other partners.

Partners that don't want that level of integration can interact with the system by accessing an online application console. Mitrix also provides software that allows partners to extract and send data from Excel spreadsheets. Finally, the system can present transactions to partners via e-mail.

"Users can accept or reject a purchase order, for example, directly from that e-mail," Lewis says. "The PO comes back into the system, and the record is updated. We communicate directly with suppliers, even though they've never logged on to the system."

Customers implementing SCM Live pay an activation fee, then a monthly charge based on the number of users in their offices and warehouses. Mitrix also charges for the up-front task of integrating trading partners into the community. But the monthly fee stays constant whether customers communicate with many trading partners, only a few, or none at all.

As part of its implementation, Kawasaki will create live interfaces with its transportation service providers. It will also create a link between SCM Live and a proprietary, web-based information system that dealers now use to communicate with the company. Currently, that system gets information only from Kawasaki's vehicle system.

"We want to expand dealers' capability to manage inventory and make order adjustments which we, in turn, pass back through to production adjustments in real-time," Beehler says.

SCM Live will not replace Kawasaki's internal management systems; instead, they will exchange data with the new solution.

When Kawasaki is up and running on SCM Live, it will benefit from gaining increased visibility. "We will be able to assign inventory to dealers when it leaves the manufacturing plant, which we don't do now," Beehler says. Kawasaki will also have the capability to schedule shipments, pre-assign credit, and pre-allocate product.

By contrast, before product currently reaches a warehouse, "it is largely invisible, except as a gross number of units. And a lot of our distribution activity happens at the last minute, which is inefficient and doesn't allow us to plan," Beehler explains.

Right-Sizing Inventory

Kawasaki expects the system to allow it to tell dealers when specific products will arrive within a day or two. "This will help dealers run their retail businesses more efficiently. We, in turn, can improve product availability by putting more inventory where dealers need it," he says, instead of just responding to dealers' orders, whether or not the models are actually selling.

Ultimately, Kawasaki hopes to "right-size" its inventory.

"We want to reduce costs, particularly for transportation. And, to the degree possible, we want to reduce the amount of inventory we have to carry while it's in the pipeline," Beehler says. "But our main goal is to increase retail sales by having more inventory where it is needed, so customers can drive products away from our dealers faster."

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