2005 Supply & Demand Chain 100 Case Study  Hitachi Data Systems / Choice Logistics

Profiles in Supply Chain Enablement: A technology company automates its spare parts service logistics process

Profiles in Supply Chain Enablement: A technology company automates its spare parts service logistics process

Company: Hitachi Data Systems (Santa Clara, CA)
Company Size: Large
Company Sector: Computer/Electronic
Area(s) of Enablement: Fulfillment/Logistics
Enabler: Choice Logistics (New York)

SDCE 100 2005Case Study: Hitachi Data Systems (HDS), based in Santa Clara, Calif., produces and services mainframe computers, storage systems, open systems hardware and software. The company was looking to implement a fully automated spare parts service logistics process as a way of reducing costs, increasing inventory accuracy and improving on-time delivery.

HDS needed a solution that could manage 58 unique stocking locations and more than 36,000 SKU's for thousands of customers in the U.S. market alone. Lacking the support of a consistent spare parts service logistics provider, the company went looking for a management group that could implement a closed-loop spares process and automate the company's outdated and time-consuming manual processes.

The chosen third-party logistics (3PL) partner would need to understand the criticality of effective service parts logistics management and manage the business accordingly. The provider also would have to be able to meet HDS' stringent customer support requirements, with a minimum 98.5 percent on-time performance and inventory accuracy of 99.9 percent. In addition, HDS needed the provider to have the ability to quickly adapt to changing business requirements and to eventually scale globally.

HDS spent 14 months reviewing, studying, and inspecting several 3PLs. They were specifically interested in the 3PL's internal processes, information technology (IT) infrastructure, global capabilities, performance metrics and management teams. As the company met with each 3PL vendor and visited their facilities, each candidate was graded based upon HDS' understanding of the operation.

After extensive meetings, visits and customer references HDS selected Choice Logistics as its primary 3PL for service parts. A project plan was formulated that targeted a three month preparation period with a complete cut over to take place over one weekend (three days).

Choice responded with an integrated service part logistics solution that rapidly exceeded HDS' expectations. HDS was able to move over 50,000 parts in the 58 field stocking warehouses in two days without affecting any customers. First pass yielded 98.7 percent inventory accuracy and the second count (five days later) yielded 100 percent inventory accuracy. As a result of selecting and working with Choice Logistics, HDS' customer experience is one of the highest in the industry, with consistent 99 percent on-time performance and 99.9 percent inventory accuracy level.

Since the implementation, HDS has continued to study how it can work with Choice to improve efficiency and lower cost. There have been several improvements to the service parts process that have benefited both HDS and Choice Logistics. In addition, as a result of the success of the solution, HDS decided to implement the Choice Network throughout Canada five months after the U.S. implementation and has since also expanded into Latin America.

For more stories of successful supply chain implementations, read the "2005 Supply & Demand Chain Executive 100" article in the June/July 2005 issue of the magazine. Also watch the Today's Headlines section of SDCExec.com every Tuesday and Thursday for more in depth best practices drawn from this year's Supply & Demand Chain Executive 100.