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.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”