How Lixil transformed its global supply chain operations
No company has been immune to the supply chain disruptions that have rocked the business world over the past two and a half years. This is the story of how one company—water and housing product manufacturer Lixil—responded to this upheaval by transforming its supply chain to be more agile and efficient while still maintaining its focus on the customer and sustainability.
Whether triggered by pandemic-fueled shutdowns, geopolitical conflicts, or extreme weather events, global supply chain disruptions have had a profound impact on businesses around the world. According to research conducted by The Economist in 2021, supply chain disruptions have produced “substantial financial costs (averaging 6–10% of annual revenues), as well as reputational costs—in terms of customer complaints and damage to brand reputation—as companies have struggled to maintain supplies of their goods. Indeed, firms were as likely to report damage to brand reputation as a consequence of supply chain disruption as increased costs of operations.”1
As businesses work to repair fractured supply chains, some are struggling to accommodate increasing stakeholder demands for sustainability, flexibility, and customization. Oftentimes they also lack the talent they need to do so, making them increasingly vulnerable to future disruptions. While these challenges are certainly formidable, they also invite tremendous opportunity to design and implement global supply chain models that are more agile, sustainable, and technologically enabled.
At Lixil, we have not been immune to these disruptions. As a water and housing product manufacturer, we faced a general shortage of many critical materials at the start of the pandemic, the main example being lumber. We use lumber for packaging and pallets, and when its supply dropped, the cost was driven up exponentially and lead times extended dramatically. Another example is when a heavy winter storm in Texas in 2021 shut down some of the refineries and impacted the material availability of plastics and other components. Further, ocean shipping delays over the last few years have impacted the availability of finished products and assembly parts being imported from Asia to North America and Europe. (For more information about Lixil and its supply chain, please see the sidebar “About Lixil.”)
Even prior to the pandemic, however, we understood the importance of designing a supply chain operating model that could withstand global economic and political shocks, while mitigating systemic shutdowns to our operations. We sought to standardize, integrate, and scale supply chain operations across our business, and we’ve made good progress; but, like every other business on a road to transformation, we still have work to do.
To start, we provided our geographic regions more flexibility to account for differences in supply and demand and customer needs. In response to increasing consumer demand for sustainable practices and social and ecological accountability, we also placed sustainability front and center in consideration of how we source materials to manufacture toilets, faucets, and showers, and in the processes we use to drive greater energy efficiency. Additionally, we’re enhancing customer collaboration and improving our capabilities in forecasting supply and demand—all of which are putting us in a stronger position to achieve long-term, sustainable growth.
Using the key learnings and insights gleaned during our ongoing supply chain transformation, we outline below our main tips and takeaways for other supply chain leaders navigating economic, geopolitical, and climate dynamics.
1. Prioritize agility and efficiency
Every business is different, but global manufacturers that operate across a variety of markets will certainly benefit from increasing their operational agility and efficiency. Disruptions wrought by extreme weather events, geopolitical volatility, and inflationary pressures underscore the need for multiple sourcing and distribution centers (DCs). Should operations within a specific region falter, having various touch points will minimize risk of delays. They also help cut down lead times, as customers can rely on quicker, local shipments, rather than depending on one central distribution center.
We have built our supply chain to be agile and have added multiple DCs, sourcing centers, and manufacturing facilities across regions such as the Americas, Europe, and Asia that together create a truly global network we can rely on. For example, in the past, there were certain finished goods that we used to only be able to source in Asia from suppliers. But now, by expanding our manufacturing and sourcing capabilities, we are able to make those same products in Mexico, providing multiple sourcing options and shorter lead times.
We have also improved our supply chain agility by improving visibility across our end-to-end supply chain, particularly for our ocean freight. For example, in the last few years, we have implemented origin and destination cargo management for better end-to-end ocean freight visibility from the time the container is picked up at origin to the time it gets delivered to the DC at the destination. This includes visibility into value-added services like selecting the ocean carrier with the best rate for that route, tracking service metrics by ocean carrier, consolidating freight at origin, and transloading at destination, to name just a few.
2. Improve planning
At Lixil, we use the Supply Chain Operations Reference (SCOR) model as a way to help us think about and optimize our supply chain. The SCOR model defines the four key processes making up supply chain management as “plan, source, make, and deliver.” In this model, planning is the most critical element, serving as the anchor for all other phases of the process. If we do not plan properly and with careful consideration, the model will fail. We dedicate significant time and resources to the planning phase, considering product demand first and foremost, and adjusting subsequent operations accordingly.
Recently, we have taken several steps to improve our planning process by increasing the amount of collaboration between the sales and operations sides of our business. We have found that by doing this, we enhance our strategic planning and provide better value to customers and suppliers, while advancing company growth and profitability.
One way we have accomplished this is by revamping our sales and operations planning (S&OP) process to ensure that participants are actively engaged and contributing to the decision-making process. To create this active engagement, we have reduced the number of participants, making sure they are the decision-makers for their function and are investing the quality time needed to make those informed decisions. These efforts have improved collaboration and communication across sales and operations. Because of our collaborative work, we have been able to better identify any supply constraints and adjust product mix and supply sources to avoid customer disruption.
We also redesigned demand planning to be a commercial sales/merchandising-driven function. In the past, the supply chain team had full responsibility for demand planning, which was giving us less than desirable results. We realized that we needed to better bridge the commercial and operations sides of our business and improve information gaps in demand planning. To accomplish this, we formed a Commercial Demand Planning organization within our merchandising division. We structured our commercial demand planning organization so that it was aligned with our sales and merchandising channel structure and with our key accounts.
Our demand planning process is multilayered, as follows: (1) begin with a review by customers, (2) then review by channel, (3) then review by business unit. This approach begins at the earliest stage, when the sales team has the closest connection with the customers. In this way, we are enabling our sales team, who work with customers daily, to increase collaborative demand planning. We are focusing more on getting customers to share point-of-sale data with us, which will enable us to collaboratively plan with the customers. This reorganization helped to improve collaboration with customers, key account planning, and demand forecasting accuracy.
As a result of these efforts, we are now able to provide even higher quality service with lower inventory levels. However, our work does not end here. We are always striving to continuously improve our planning process with the objective of optimizing service levels, cost, and working capital.
3. Implement and scale sustainable practices
Another way that Lixil is transforming its global supply chain operations is by increasing its focus on sustainability. Social responsibility and environmental stewardship have a positive impact on our communities and the planet and are consistent with the desires and expectations of our customers, employees, and investors. Moreover, environmental, social, and corporate governance (ESG) initiatives have become commonplace at many companies, with some organizations seeing negative legal, financial, and regulatory consequences if their ESG standards are inconsistent with stakeholder expectations. Thus, by meeting ESG standards (and ensuring that their suppliers do so as well), companies reduce their exposure to disruption from these negative consequences.
It is important that an organization’s commitment to its sustainability practices is all-encompassing and embedded in the fabric of its supply chain operations. As such, our purpose—to make better lives a reality for everyone, everywhere—is enabled by our unwavering commitment to a sustainable business, extending beyond Lixil to our suppliers and partners, including architects, designers, general contractors, and building owners. They, too, want partners that prioritize and demonstrate a commitment to sustainability, making these relationships mutually beneficial for our businesses, the environment, and the communities we operate in. We believe that the way a company addresses sustainability will determine how effectively it differentiates itself in the market, increases value for investors, and appeals to employees and prospective employees.
For these reasons, Lixil promotes responsible procurement across our supply chain. We base our procurement processes on the Ten Principles of the United Nations Global Compact in the four areas of human rights, labor, environment, and anti-corruption as well as our own Procurement Principles and Procurement Compliance Policy.
Our Lixil Code of Conduct also specifies the ethical behavior that is expected of all of our staff, and it includes the prohibition of bribery. Meanwhile, our Supplier Code of Conduct, compiled in 2018, requires that suppliers respect human rights, observe international labor standards, conserve the global environment, and ensure fair business conduct. At the same time, we request that suppliers demand equivalent standards from their own suppliers.
Additionally, in January 2020, we created Green Procurement Guidelines outlining our policy and standards for procuring parts and materials that exert the least impact on the environment. In collaboration with our environmental management department, we ask suppliers to understand and support our environmental initiatives and procurement activities based on these guidelines.
Agility and sustainability
The past few years have taught us that risks to business continuity and supply chain disruptions will not abate anytime soon. Therefore, it is critical for supply chain leaders to design, standardize, and integrate supply chain operating models that are rooted in agility and sustainability, while adding in multiple distribution centers closer to customers. We are on a journey of continuous learning and adaptability, as are our colleagues in the manufacturing and supply chain space. By embracing these lessons and applying them in the transformation of global supply chains, businesses will become far more resilient, and gain a competitive advantage in the marketplace.
About Lixil
For more than 150 years, LIXIL Corporation has engineered water and housing products, such as faucets, toilets, and showers. Our brands include American Standard, GROHE, DXV, and INAX. Our customers not only encompass individual homeowners but also businesses and corporations seeking to upgrade their water technology and housing fixtures.
Our supply chain aims to deliver consistent lead times and the lowest landed costs. To achieve this goal, we take advantage of our manufacturing facilities in North America, which represent over 80% of LIXIL’s supply. We distribute to our customers from four distribution centers (DCs) in the U.S., two DCs in Mexico, and one DC in Canada. Currently, our manufacturing teams are also creating capability in our North America plants for greater nearshoring.
A move by federal regulators to reinforce requirements for broker transparency in freight transactions is stirring debate among transportation groups, after the Federal Motor Carrier Safety Administration (FMCSA) published a “notice of proposed rulemaking” this week.
According to FMCSA, its draft rule would strive to make broker transparency more common, requiring greater sharing of the material information necessary for transportation industry parties to make informed business decisions and to support the efficient resolution of disputes.
The proposed rule titled “Transparency in Property Broker Transactions” would address what FMCSA calls the lack of access to information among shippers and motor carriers that can impact the fairness and efficiency of the transportation system, and would reframe broker transparency as a regulatory duty imposed on brokers, with the goal of deterring non-compliance. Specifically, the move would require brokers to keep electronic records, and require brokers to provide transaction records to motor carriers and shippers upon request and within 48 hours of that request.
Under federal regulatory processes, public comments on the move are due by January 21, 2025. However, transportation groups are not waiting on the sidelines to voice their opinions.
According to the Transportation Intermediaries Association (TIA), an industry group representing the third-party logistics (3PL) industry, the potential rule is “misguided overreach” that fails to address the more pressing issue of freight fraud. In TIA’s view, broker transparency regulation is “obsolete and un-American,” and has no place in today’s “highly transparent” marketplace. “This proposal represents a misguided focus on outdated and unnecessary regulations rather than tackling issues that genuinely threaten the safety and efficiency of our nation’s supply chains,” TIA said.
But trucker trade group the Owner-Operator Independent Drivers Association (OOIDA) welcomed the proposed rule, which it said would ensure that brokers finally play by the rules. “We appreciate that FMCSA incorporated input from our petition, including a requirement to make records available electronically and emphasizing that brokers have a duty to comply with regulations. As FMCSA noted, broker transparency is necessary for a fair, efficient transportation system, and is especially important to help carriers defend themselves against alleged claims on a shipment,” OOIDA President Todd Spencer said in a statement.
Additional pushback came from the Small Business in Transportation Coalition (SBTC), a network of transportation professionals in small business, which said the potential rule didn’t go far enough. “This is too little too late and is disappointing. It preserves the status quo, which caters to Big Broker & TIA. There is no question now that FMCSA has been captured by Big Broker. Truckers and carriers must now come out in droves and file comments in full force against this starting tomorrow,” SBTC executive director James Lamb said in a LinkedIn post.
The “series B” funding round was financed by an unnamed “strategic customer” as well as Teradyne Robotics Ventures, Toyota Ventures, Ranpak, Third Kind Venture Capital, One Madison Group, Hyperplane, Catapult Ventures, and others.
The fresh backing comes as Massachusetts-based Pickle reported a spate of third quarter orders, saying that six customers placed orders for over 30 production robots to deploy in the first half of 2025. The new orders include pilot conversions, existing customer expansions, and new customer adoption.
“Pickle is hitting its strides delivering innovation, development, commercial traction, and customer satisfaction. The company is building groundbreaking technology while executing on essential recurring parts of a successful business like field service and manufacturing management,” Omar Asali, Pickle board member and CEO of investor Ranpak, said in a release.
According to Pickle, its truck-unloading robot applies “Physical AI” technology to one of the most labor-intensive, physically demanding, and highest turnover work areas in logistics operations. The platform combines a powerful vision system with generative AI foundation models trained on millions of data points from real logistics and warehouse operations that enable Pickle’s robotic hardware platform to perform physical work at human-scale or better, the company says.
Bloomington, Indiana-based FTR said its Trucking Conditions Index declined in September to -2.47 from -1.39 in August as weakness in the principal freight dynamics – freight rates, utilization, and volume – offset lower fuel costs and slightly less unfavorable financing costs.
Those negative numbers are nothing new—the TCI has been positive only twice – in May and June of this year – since April 2022, but the group’s current forecast still envisions consistently positive readings through at least a two-year forecast horizon.
“Aside from a near-term boost mostly related to falling diesel prices, we have not changed our Trucking Conditions Index forecast significantly in the wake of the election,” Avery Vise, FTR’s vice president of trucking, said in a release. “The outlook continues to be more favorable for carriers than what they have experienced for well over two years. Our analysis indicates gradual but steadily rising capacity utilization leading to stronger freight rates in 2025.”
But FTR said its forecast remains unchanged. “Just like everyone else, we’ll be watching closely to see exactly what trade and other economic policies are implemented and over what time frame. Some freight disruptions are likely due to tariffs and other factors, but it is not yet clear that those actions will do more than shift the timing of activity,” Vise said.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index indicating the industry’s overall health, a positive score represents good, optimistic conditions while a negative score shows the inverse.
Specifically, the new global average robot density has reached a record 162 units per 10,000 employees in 2023, which is more than double the mark of 74 units measured seven years ago.
Broken into geographical regions, the European Union has a robot density of 219 units per 10,000 employees, an increase of 5.2%, with Germany, Sweden, Denmark and Slovenia in the global top ten. Next, North America’s robot density is 197 units per 10,000 employees – up 4.2%. And Asia has a robot density of 182 units per 10,000 persons employed in manufacturing - an increase of 7.6%. The economies of Korea, Singapore, mainland China and Japan are among the top ten most automated countries.
Broken into individual countries, the U.S. ranked in 10th place in 2023, with a robot density of 295 units. Higher up on the list, the top five are:
The Republic of Korea, with 1,012 robot units, showing a 5% increase on average each year since 2018 thanks to its strong electronics and automotive industries.
Singapore had 770 robot units, in part because it is a small country with a very low number of employees in the manufacturing industry, so it can reach a high robot density with a relatively small operational stock.
China took third place in 2023, surpassing Germany and Japan with a mark of 470 robot units as the nation has managed to double its robot density within four years.
Germany ranks fourth with 429 robot units for a 5% CAGR since 2018.
Japan is in fifth place with 419 robot units, showing growth of 7% on average each year from 2018 to 2023.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."