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Vanderlande, a market leader in logistics process automation, helps move luggage, inventory and parcels for a wide array of customers. To make this happen, the company designs, manufactures and installs automated logistics handling systems worldwide.

With growth in the U.S. and continuing gains in the warehousing segment across all regions, Vanderlande had to ask: How much can it absorb with existing capacity? What would happen if growth exceeded expectations? How much of the resulting impact can the company mitigate via increased factory efficiency?

It was time to re-imagine its supply chain network to serve new growth opportunities.

Business Needs

Vanderland designs systems for three primary customer channels — automated baggage handling for airports; storage, picking and packing systems for warehouse applications; and smart sorting technology for parcel shippers. As a project-focused (instead of product-focused) organization, projects are tailor-made and engineered or configured specifically for the demands of a single customer. This leads to the management of an extremely large number of SKUs.

The three customer segments also have their own specific requirements. Airport projects typically come with long lead times, require high customization, are highly sensitive to travel and geopolitical disruptions, and most often involve government agencies and local manufacturing considerations. Warehousing and parcel have shorter lead times and are better adapted to standardized solutions. Ecommerce is driving growth and competition in both segments, so the company worked with NTT DATA’s supply chain design experts to address these challenges.

Outcomes

10% reduction in landed costs
6-9 week reduction in lead times
  • Increases local sourcing and focuses production on high value-add items
  • Creates a highly accurate model to deliver high-confidence, investment-grade results
  • Helps strike a balance between in-house manufacturing and outsourcing production

Solution

Vanderlande serves customers in three regions: the U.S., Europe and Asia. Among these, Europe currently generates the greatest revenue, and the U.S. is the largest source of growth. In Asia, China represents the largest potential for future growth. The supply delivery model is predominantly region-for-region in Europe, while the U.S. and Asia have a combination of regional and global sourcing. It’s common to outsource a significant portion of production to subcontractors, especially in the U.S. and Asia.

Global vs. local sourcing

Global sourcing leads to more cost-effective production, less inventory uncertainty and lower stock levels due to demand pooling effects. Local sourcing can lower lead times (if one also secures raw materials locally) and increase resilience in the face of higher ocean transport rates or other disruptions.

Customers also often appreciate the opportunity to support local production. It’s also worth considering the advantages of locally sourcing all U.S. or Asia demand, comparing global sourcing from China or from Eastern Europe and determining how local or global sourcing affects each Vanderlande product group.

Manufacturing in-house vs subcontracting

Does it make sense for Vanderlande to concentrate on their own manufacturing capabilities or increase their level of subcontracting? What is the effect of a segmented manufacturing strategy where their own production focuses on high value-add items and while outsourcing other items?

Custom-made solutions have always been a key differentiator for Vanderlande. However, maintaining this level of complexity would be difficult as they continue to grow, and not all complexity adds value for customers. Is there enough scope to reduce lead times, costs and complexity by keeping some items in stock? If yes, which items are most suitable?

The evaluation approach

What would be the effect of a 50% increase in ocean transportation pricing? How about if labour costs in China increased by 25%? Before running any scenarios, Vanderlande built a baseline supply chain model to enable the evaluation. Data collection and validation was a painstaking, time-consuming process, but it was worth the effort. The quality of the inputs resulted in a highly accurate model and a tool that provides high-confidence, investment-grade findings.

From the beginning, stakeholder management was essential. In Vanderlande’s case, the U.S. team’s involvement was fundamental. The team brought innovative ideas and identified attractive opportunities to improve the supply chain network, reducing landed costs by up to 10%.

Getting the right balance between global and local sourcing

The study concluded that it makes sense to increase local sourcing from the perspective of both cost and service. This means using the global network for certain product groups to benefit from low-cost country sourcing (specifically from Eastern Europe and China). European factories will also supply specific product groups to the global market and function as backup sourcing for other groups.

There’s an ideal balance between in-house manufacturing and outsourcing production to a third party. The continued growth of the business requires making intelligent trade-offs for each product group instead of increasing in-house production capacity. Vanderlande could confirm that its manufacturing strategy — which focuses production capacity on value-add and tactical load items instead of volume — is valid.

Reducing customer lead times by keeping fast-moving and high-commonality items in stock

In the short term, fast-moving and high-commonality items (which make up about 32% of spend) will be made-to-stock. This will reduce lead times by 6-9 weeks with a low risk of obsolescence. Vanderlande can increase the portion of fast-moving and high-commonality items in the medium term by motivating customers to choose standard items through their inherent faster lead times and lower costs.

Impacts of the new network strategy

Vanderlande will see the most profound effects of the new network strategy in the U.S. and Asia. In both cases, local sourcing will increase, and own production will focus on high value-add items. Transformation will increase as Vanderlande devotes more manufacturing capacity to configure-to-order (CTO) and the share of engineer-to-order (ETO) diminishes. The new paradigm will redefine how Vanderlande delivers their custom solutions to its customers — with shorter lead times, lower costs and increased profitability.

About Vanderlande

Vanderlande is a global market leader for value-added logistic process automation at airports and in the parcel market, and a leading supplier of process automation solutions for warehouses.

Vanderlande logo
Industry

Manufacturing

Headquarters

The Netherlands

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