Spares support

Mitsubishi Motor is striving to handle an increasingly large inventory in its Jafza facility but without raising the cost of its distribution and warehousing.

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By  Neil Denslow Published  June 30, 2005

|~|Koyanagi,-Yasunoriforweb1.jpg|~||~|Mitsubishi Motor Parts Sales Gulf faces a challenge familiar to many companies in the Middle East, namely trying to handle an increasingly large amount of inventory but without spending more on warehousing and distribution. The company is tackling this by aiming to make as much use as possible of its existing assets, while also keeping a close eye on its transportation costs. The heart of the company’s operations is a 13,000 m² self-run warehouse in the Jebel Ali Free Zone, which opened in January 1997. The facility holds stock worth around US $16.5 million, which comprises 56,000 SKUs manufactured by either Mitsubishi Motor, the automobile division, or Mitsubishi Fuso Truck & Bus Corporation. The parts are distributed across a total of 20 countries including the GCC, where goods are trucked by TNT, as well as to the Levant, eastern Africa and South Africa, which are all served by air or sea. “One of the reasons [for forming the company] was to reduce the inventory at the distributors’ sites, as their lead times are now much shorter,” says Yasunori Koyanagi, manager, Mitsubishi Motor Parts Sales Gulf. “Previously, the items came to the distributors directly from Japan, so it would take a long time for them to get here... For example, for the UAE distributor, it would take goods 21 days to get from Japan to the UAE, but in the current situation it now takes only one day [for parts to reach them], so the distributor can reduce their inventory,” he explains. Mitsubishi Motor Parts Sales Gulf receives goods in its warehouse from the parent company’s different factories around the world. The majority are shipped from Japan, where there are three Mitsubishi factories, while others come from Australia or Thailand directly to Jebel Ali. A further source of parts is Mitsubishi’s plants in Europe and the US, but products from these facilities are routed through Japan rather than being sent directly to the Gulf. “The volume [from the US and Europe] is much lower, and as Mitsubishi Motors Japan does inventory control as a generic export market for all markets around the world, except for the USA, it makes more sense for the goods to come to us from Tokyo rather than from the factories,” explains Koyanagi. Around 90% of the parts received by the spares company are transported to Jebel Ali by sea. The remaining 10% come by airfreight, which is only used for emergency deliveries. The shipping process is organised by Mitsubishi Motors Japan and the weekly consignments are getting bigger in size. “We receive almost 25 40-foot containers every week, and it is increasing,” says Koyanagi. “The actual transportation time is almost three weeks, but the time from placing our order to the parts’ arrival at the warehouse is around two months.” This long lead time is necessary because of the need to process the order in Japan, as well as to pick and pack the items. However, this lengthy timeframe means that much forward planning is needed so that the company does not run out of a part in the Jebel Ali warehouse. This planning process is run from Japan using an inhouse developed system that predicts future requirements based on historic patterns. “We do not touch the inventory control [in Jebel Ali],” says Koyanagi. The goods are transported to the facility in stackable metal pallets inside the containers. These units can be piled up four high, which makes the best use of the space available, while also ensuring that the loads are stable and that fragile parts are not crushed. The pallets do, however, have to be returned to Japan, which adds some cost and complication to the operation. However, to ease the management of these units they are painted blue, while the centre uses green ones for its local operations. This then ensures that they facility maintains the right number of pallets without sending too many or too few back to Japan. The goods are trucked to the warehouse in containers from the Jebel Ali port. When the parts arrive, they are unloaded and quality checked by the warehouse staff. “We have three docks for incoming and five for outgoing,” says Koyanagi. “The container arrives at the dock, and our machinery staff unloads it. Our warehouse staff then checks the quantities, does damage inspections, and sorts the parts for storing.” In the docking area, the parts are also labelled with a barcoded ticket that is printed within the facility. The goods arrive from Mitsubishi Japan with a barcode on their package, but this is not used to track them inside the Jebel Ali warehouse. Instead, the local ticket is used, which records the location, along with the part number, product description and country of origin. “Mitsubishi Motors Japan prints [a barcode] with the part number label on the package, but we do not use that barcode. Instead, we use a different ticket for storing and picking,” says Koyanagi. Storing the goods is perhaps the most difficult challenge Mitsubishi faces in the Jebel Ali warehouse, as the facility is full to capacity. Business grew 10% last year and a further 10% growth is expected this year, which will create yet more demand for storage. The company also needs to deal with bureaucratic customs procedures in some of the countries supported from the facility, which puts further pressure on the warehouse. Parts being shipped to Egypt and Kenya, for instance, need to be inspected before they can leave the building, which often takes two or three weeks to arrange, thereby increasing the amount of time that the goods need to be held for. The company does have 4000 m² available for expanding the facility, but it has not yet decided to utilise this option. As such, every square inch of the current warehouse needs to be used as efficiently as possible in order to hold the huge amount of inventory required. “The warehouse is already overflowing,” says Koyanagi.||**|||~||~||~|This need for better space utilisation at the Jebel Ali centre, and at other facilities around the world, has seen Mitsubishi make a number of small changes that allow it to more effectively use its storage space. For instance, the company recently changed how it packaged many of its bumper kits so that they took up less storage space. “Previously our bumpers were packed in cardboard boxes individually, which meant that they took up a huge amount of space,” says Koyanagi. “However, from around May, the cardboard box was removed from some part numbers, and the bumpers are now covered with a protective seal and a plastic bag, which greatly reduced the [storage] space,” he explains. The company also constantly examines where goods are stored in the warehouse to make sure that they are in the optimal location. The racking system is fixed with six shelves, and there is also a mezzanine area for smaller parts, but the large bulk stacking area allows for a lot of flexibility and the ability to store fast moving items in different locations, as the need arises. “We change the locations of the goods in the warehouse a lot,” says Koyanagi. Within the racking area, the goods are generally stored according to their sizes, with the inventory split between large items, medium, heavy and small. This then allows for easier picking and storage, as the 44 warehouse staff can tell whereabouts within the warehouse a part will be stored just by looking at it. The positions in the racking are also numbered for ease of reference and tracking purposes, although they are yet to be labelled with barcodes. Fast moving goods are generally kept on the lower levels of the racking, or in the bulk stacking area, with the upper levels reserved for items that are less in demand. Parts can be kept in the warehouse for as long as two years without being needed, but the company also regularly throws out old inventory to free up space for newer items. “Twice a year, we have a scrapping process,” says Johnson Rajan, export coordinator, Mitsubishi Motor Parts Sales Gulf. “Depending on the history and shipping quantity of the parts, we select items and quantities for scrapping… Sometime, we also have a part number change, because of an improvement or upgrade, so the old part number can be scrapped as well,” he adds. Naturally though, most parts leave the warehouse to be transported to one of the company’s national distributors. Generally, there is one distributor for each of the 20 countries supported by the Jebel Ali facility, although in some markets there are different distributors for the car and bus & truck operations. Although some distributors place their orders by fax or e-mail, the majority use EDI messaging, which means the request can be fed straight into Mitsubishi’s system. The distributors’ orders are divided into three types — emergency vehicle off road (VOR) orders, daily orders and stock orders — and there are different processes for each type. The VOR orders are the most important, as these parts are needed as soon as possible to get a customer’s vehicle back on the road. Distributors are able to place VOR orders until 10:00, and using TNT’s courier services, Mitsubishi can deliver goods the next day within the GCC or within two days elsewhere in the region. “Some distributors place 100 VOR items a day, while others have very low frequencies of orders… In all cases though, we pick the items within the day, and we distribute them the same day,” says Koyanagi. Mitsubishi opted to work with TNT for the courier and trucking services, because it offered the best rates and also day-definite delivery services within the GCC. “Being on schedule is very important,” says Koyanagi. The daily orders, which are emergency stock requests, and the general stock orders are also delivered door-to-door through the TNT network, although these are less time sensitive than the VOR orders. The stock orders are shipped out of the warehouse on alternate days, with distributors able to place requests until 16:00 the day before. “We can process the orders during the night batch, then, the next morning, we can issue the picking tickets and pick the items that day,” says Koyanagi. “The [paper] picking ticket mentions the part number, the description, the quantity and the distributor’s code and the order number,” he adds. Because of the size and frequency of the shipments out of the Mitsubishi warehouse, it is able to use TNT’s less than truckload (LTL) services. A 3PL vehicle visits the facility everyday at 16:00 to collect the VOR deliveries, while a trailer comes every other day at 14:00 for the daily and stock orders. This is arranged with standing instructions, and TNT provides a daily update on shipment movements in an Exel sheet, which is also used for measuring the service level agreement (SLA) agreed between the two companies. The relationship so far, however, has successfully allowed Mitsubishi to support its distributors in the region, who have, in turn, been able to provide a higher level of service to their customers. As such, the warehouse and the logistics operations have been a key factor in the growth of Mitsubishi’s sales and business in the local market.||**||

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