So Fast: challenging the majors on the basics; Logistics does not have to be complicated

Japan, Inc., Feb, 2005 by John Dodd

THINK OF LOGISTICS in Japan, and most people conjure up visions of huge automated warehouses and to-the-minute tracking systems.

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But the fact is that more than 80 percent of foreign firms selling products in Japan are small operators, selling less than JPY1bn ($10m) of product a year, and are unlikely to want to invest in a million-dollar logistics operation. Nevertheless, even a JPY100m operation requires some logistics infrastructure, and the investment to go with it. Or they can outsource ...

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The problem with logistics is the need for infrastructure and its associated costs. For this reason, many smaller foreign importers move the physical handling and storage of products to domestic transport firms, accepting that automation and service capabilities will be limited. However, what starts out as a cost-reduction exercise gets cancelled out as staff are hired to manage the operation and to devise ways to compensate for a makeshift system. The result is that while immediate logistical needs can be met, cost-creep, slow and inaccurate deliveries, and rising customer complaints can become major headaches.

This has created a gap in the logistics market: for a company which can keep systems simple and low cost, and yet at the same time is able to provide fast, accurate turn-around of goods and resolution of customer problems. So Fast Ltd. is one such company. The CEO, Keiichi Ito, started the company in November 2002 after 23 years with Yamato Transport. While at Yamato, Ito oversaw the company's now famed road transport system. He was there from the start, and probably knows more about Japan's transport and warehousing infrastructure than any one else alive. At 47, Ito decided that he had enough years left for one more turn around the track, and to cap his career, he wanted to start his own operation and prove that his ideas could be commercialized in a start-up, not just a major operation.

Simple Can Be Best

So Fast (the name comes from a client's comment on Ito's rapid customer response) was created to take advantage of a basic opportunity--logistics and support systems for small to medium-sized (SME) companies. Ito has learned that not every company requires a high-level of systemization and automation. Business volumes have to get to a certain size before such tools pay for themselves, and below that, work flow reorganization and intelligent use of staff and facilities can bring just as much efficiency. His approach is not to re-engineer a client's entire system, but instead to go in and study the major needs and weaknesses and tackle those first. Importantly, early on he sets up a pattern of continuous communication with the client, so that he and his team are informed and involved--to the point where they can anticipate customer needs and implement ideas without having to bog the customer down in time-consuming details. Then, as the client's business performance starts to improve, his staff continues the close contact, ready to move the client to the next stage of development when the time is right. In essence, So Fast acts like a long-term best practices consultant--albeit without the experts' fees.

This closely coupled and incremental approach differs from the many Western logistics specialist companies that have entered Japan and tried to re-engineer client processes from top to bottom. Frequently these efforts alienate the clients' often conservative and busy staff and result in partial or complete failure of the project. The Western specialists then walk away wondering why Japanese are difficult to please and reluctant to change. Basically, small Japanese clients, as well as the Japanese operations teams of newly arrived Western clients, have enough challenges on their plate and do not want to overcomplicate a fundamental business activity such as product logistics. They'd rather ramp up slowly, watching their budgets and retaining control. This is a simple point, but one easily overlooked in the rush to systemize a logistics operation.

Ito relates a specific example that highlights his approach. "Take one customer who needed to augment staff for fielding calls from customers late at night. The standard procedure would be to put in a dedicated late-night call center, an expensive proposition. However, we realized that we might be able to utilize our existing late-night resources, and have started training our night-shift warehouse staff to provide multiple services. Now they work in the picking and packing areas until about 22:00, then move to a call center at the same location until two am. Thereafter, they move back to the warehouse--continuing to prepare for shipments to start at six am."

Initial tests with multi-skilling show that the client's immediate needs can be solved and at a reasonable price. As a result of this and other simple but effective innovations, the client is opening up to So Fast and the trust level climbs. Indeed, both companies recently signed an agreement for the client to completely outsource their logistics to Ito's company.