Area of innovation: Networking
In the face of increasing competition from the likes of Dell, Hewlett-Packard and IBM, industrial giant Toshiba lost significant share in the US laptop market and fell to the fifth spot by late 2004.
Toshiba realised that for it to regain lost ground, one vital element it would have to provide was quicker repair service - a key criterion for laptop customers while making a purchase. Such customers are typically highly reliant on their laptops and cannot afford downtime. On analysing its entire supply chain, Toshiba realised that the challenge of notebook repairs was more about logistics than technical.
This made the company take a fresh look at its repair process and come up with a unique solution: it would expand the scope of its relationship with logistics firm UPS to significantly improve warranty service levels by drastically reducing the time taken for laptop repair.
UPS continues on a strong wicket with an eight per cent expansion of revenues in the latest quarter. Toshiba is back to the No. 5 spot in the US laptop market
As part of the new arrangement, UPS's traditional role in shipping and handling of Toshiba's 'for-service' laptops was expanded to include the entire laptop repair operation. While partnering with a logistics firm is probably not the most obvious of choices for providing machine repairs, the owners of Toshiba notebooks would benefit greatly from having the choice of dropping off their laptops at any one of 3,300 UPS stores around the US. The laptop would then make its way to a UPS Supply Chain Solutions facility in Louisville, Kentucky, for servicing as required. Because the parts are in-house now, UPS can fix the laptop and ship the product the same day - speeding up a process that took 14 to 21 days to four days or less.
Vineet Agarwal, Joint MD, TCI
Bravo, logistics firms
The fact that a third-party logistics provider can contribute deeply to the success of a business is personally very satisfying to observe. Such innovative solutions can significantly contribute towards business strategies, improve customer services, accelerate order cycle times, consolidate services to increase efficiencies, and reduce costs and time in transportation, inventory and order fulfilment.
Third-party logistics providers have been gaining importance and the trust of businesses to create operational excellence. With best practices in thirdparty logistics services, clients can address complex global supply chain management issues by better visibility of their worldwide inventory, lower costs for systems integration and management, and lower transportation expenses.
The philosophy of our company has been similar where we have opened offices in remote locations of the country such as Leh, Kargil, Port Blair, etc., to service our customers' needs. We have also sent teams to our customers' international operations to study and then implement best practices in the Indian context. For an auto company, our team assisted in actual production of the vehicle when the company was going through an industrial strike.
In India, innovation, especially in the area of logistics, is mainly driven in the guise of kaizen (continuous improvement) and process optimisation. True innovation in this sector is very difficult to define since the business of logistics is directly dependent on customer demands and available infrastructure, including physical, such as roads, warehouses, etc., and moveable infrastructure such as trucks, ships, etc.
For innovation to succeed, companies need to create special teams that work on specific areas in collaboration with clients. One such example in our company is the introduction of a three-deck twowheeler carrier that changed the paradigm of transportation to accommodate 35 per cent more vehicles in the same truck. This was possible with the assistance of the two-wheeler manufacturer who helped during the testing of designs. TCI currently holds the patent for this truck design.
The other way for innovation to succeed is to create a culture of continuous improvement. This would enable the teams to think out of the box and, perhaps, radically change operating models leading to innovation. For another automotive manufacturer, during the process of looking at areas of optimisation, we implemented a just-in-time warehouse where our teams would kit several components together and supply to the production line, leading to a new business model for both companies.
Innovation can only succeed when there is trust between the stakeholders. In order to build this trust, regular sharing of ideas and best practices in forums is critical. This should also be across industry verticals so that ideas/innovation from one industry can flow to the other.
As patent holders get a benefit of several years before they become generic, innovations that have significant impact on society could enjoy certain incentives in the form of 'innovation credit' - loans at cheaper rates - and lower taxes.
The new service model was enabled by a number of initiatives by both companies: UPS dedicated a 10,000 sq. ft. space at its Louisville facility for repair of Toshiba laptops, and hired a team of technicians with eight to 10 years of experience in notebook repairs. The technicians were then trained and certified by Toshiba. The facility itself is located adjacent to the UPS world air hub, and thus facilitates faster procurement of critical parts from Toshiba in Japan Toshiba can also use UPS's sophisticated transaction collating system that provides data about what parts are being replaced most often and can be improved on by the company for the next generation of its laptop models.
The UPS Supply Chain Solutions facility in Louisville
The arrangement has had a tremendous impact on Toshiba's service levels - turnaround times for laptop repair have reduced by over 50 per cent from an average of eight to 10 days to just two to four days under the new system. The partnership with UPS has played a key role as well in helping the company win back market share: by 2010, Toshiba had become the fourth largest player in the US laptop market with a 10 per cent share.
Besides the direct impact in terms of customer satisfaction and market share, the agreement has also yielded other benefits for both companies; UPS's sophisticated system for tracking transactions provides data on what parts are causing the most problems with Toshiba's laptops, enabling Toshiba to modify future hardware design to improve performance and minimise downtime. Toshiba also reaps the added benefit of smaller staff requirements for servicing. For its partner, UPS, the agreement has helped create a new revenue stream, and a means to differentiate its service offering and lock in valuable customers.