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Case 1 Xerox

Xerox implemented a just-in-time production and delivery system at its photocopier plant in Holland to address issues with finished product inventory levels. It surveyed customers and found that photocopiers were needed within 5 days for most orders. Xerox developed a new supply chain strategy to push inventory upstream and build products closer to customer delivery dates based on actual orders rather than forecasts. This flattened the inventory profile and improved responsiveness by reducing stock of incorrect or unneeded products and speeding delivery of products in demand. The new strategy was termed "deliver JIT" for commodity products from stock, "finish JIT" for building semi-finished mid-range products that could be completed within 5 days, and "build

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79 views2 pages

Case 1 Xerox

Xerox implemented a just-in-time production and delivery system at its photocopier plant in Holland to address issues with finished product inventory levels. It surveyed customers and found that photocopiers were needed within 5 days for most orders. Xerox developed a new supply chain strategy to push inventory upstream and build products closer to customer delivery dates based on actual orders rather than forecasts. This flattened the inventory profile and improved responsiveness by reducing stock of incorrect or unneeded products and speeding delivery of products in demand. The new strategy was termed "deliver JIT" for commodity products from stock, "finish JIT" for building semi-finished mid-range products that could be completed within 5 days, and "build

Uploaded by

Evelyn Alessandra Mayo Lisboa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Case 1: Xerox

Once the problems of introducing ‘just-in-time’ production systems (internal logistics) had been
solved at the Xerox plant making photocopiers at Venray in Holland, attention shifted towards
the finished product inventory (outbound logistics). Historically, stocks of finished products had
been ‘managed’ by trying to turn the sales ‘tap’ on or off as stocks developed. This was
characterised by the familiar ‘feast or famine’ situations.

The objective of the next move for Xerox became clear: making only what you need when you
need it, then shipping direct to the customer. But the key question had to be answered: just-in-
time for what? The answer is – the end-customer. And customer surveys showed that three
types of delivery were needed:

• Commodity products should be delivered ‘off the shelf’.


• Middle-range products were required in five days.
• Larger products that had to be integrated into existing customer processes and systems
had to be planned months ahead, but the quoted delivery date had to be met 100 per
cent.

It was envisaged that this would lead to a radically different inventory ‘profile’ in the supply
chain. Figure 1.6 shows a traditional inventory profile on the left. Most of the stock was held in
local depots waiting for customer orders. If the mix had been incorrectly forecast, too many of
the wrong products were in plentiful supply, whilst needed products were unavailable. Further, a
batch of replacement products would take a long time to fight their way through the pipeline. A
new ‘just-in-time’ strategy was conceived to make the supply chain much more responsive. This
strategy had a profound effect on the inventory profile, pushing much of the inventory upstream.

The closer that inventory is located towards the end-customer, the higher the value added – and
the more that it is committed to a given finished product specification. Instead, inventory was
held mostly further upstream. This was a more flexible solution, where product could be
assembled finally to known orders, and where it had lower value. Of course, it has since been
possible to remove several stages of the distribution process, thereby eliminating some of the
sources of inventory altogether.

For commodity products, Xerox coined the term deliver JIT: that is, the product had to be
delivered out of stock. Where sales forecasts are traditionally poor, the challenge was one of
flexibility, simplicity and speed of manufacture. For mid-range products, it was unrealistic to hold
‘just-in-case’ inventories of products that are too complex to be assembled quickly. Instead,
finish JIT was the term coined to describe the new policy of building semi-finished products with
the minimum of added value, consistent with being able to complete and deliver the product in
the five-day target. Finally, build JIT was the term used to describe the new philosophy of
building larger products quickly within a defined lead time.

The impact of the new build philosophies on the downstream supply chain processes can be
judged from Figure 1. Whilst the traditional inventory profile shows a maximum number of days
of stock (shown in the shaded area) at finished product level, this is risky. It always seems that
demand is greatest for the very items that are not available! Postponing the decision on exact
specification until as late as possible in the process, when we are more likely to know precisely
what the end-customer wants, helps to create the much flattened inventory profile to the right of
the diagram. (Source: After Eggleton, 1990)



Figure 1. Xerox: The impact on inventories



Question:

1. Could you represent the supply chain structure, suppliers, customers, inventory flow and
information in this case?
2. How did inventory reduction in the supply chain lead to improved competitiveness at Xerox?
3. How you could applied the just-in-case or just-in-case method in your supply chain company
elected?

Adapted from: Hoek, A. H., & Harrison, A. (2008). Logistics Management and Strategy Competing
through the supply chain.

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