XEROX - The Benchmarking Story

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Supplier Management System

Xerox found that all the Japanese copier companies put together had only 1,000 suppliers, while Xerox alone had 5,000. To keep the number of suppliers low, Japanese companies standardized many parts. Often, half the components of similar machines were identical. To ensure part standardization, Japanese companies worked closely with their suppliers. They frequently trained vendor's employees in quality control, manufacturing automation and other key areas. Cooperation between the company and the vendor extended to just-in-time production scheduling, i.e. delivery in small quantities, as per the customer's production schedule. In line with the best practices, Xerox reduced the number of vendors for the copier business from 5,000 to just 400. Xerox also created a vendor certification process in which suppliers were either offered training or explicitly told where they needed to improve in order to continue as a Xerox vendor. Vendors were consulted for ideas on better designs and improved customer service also.

Inventory Management

Xerox's efforts to improve inventory management practices drew inspiration from the innovative spare parts management practices of its European operations. Traditionally, technical representatives decided the level of spare parts inventory to be carried; little information was available on the actual usage pattern of the spare parts. Xerox's European operations developed a sophisticated information system to get around this problem. Actual usage, rather than mere withdrawal from the stocking point, was used to determine inventory levels. In the late 1980s, Xerox replicated the system in the US and saved tens of millions of dollars in the process.

The stocking policy followed by Xerox branch managers was to hold fully finished, fully configured products near to the customer. Because of this policy, they carried vast amounts of inventory, some of which was not even sold during a given period. The company changed the above setup by asking branch managers to match the stocking policy to the customer's installation orders, which considerably reduced the inventory holding time. As a result, working capital cycle time was cut by 70% leading to savings of about $200 million.

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