If success in the electronics industry were defined as, say, market share in console games or in name recognition, you would likely find Sony at or near the top of the list. But what if you were to look beyond products at supply chain innovation and leadership? You might be surprised to learn that by almost any measure, Sony would earn a spot on that list as well. Sony—specifically, Sony Disc Manufacturing (SDM),the Optical Disc Division—has concentrated in recent years on building a reputation as a strong supply chain leader in the delivery of its products and services.
What has led to Sony Disc Manufacturing's success in managing its supply chain? We believe our success can be traced directly to our ability to drive standardization and automation through out all aspects of the supply chain—and then leverage it to produce a competitive advantage.
Sony Disc Manufacturing, which is now the world's largest manufacturer of CDs and DVDs, competes in the optical media industry against more than 200 optical media manufacturers worldwide. It's no secret that products in this industry have extremely short lifecycles and that the industry itself operates in a continuous state of flux (think of the way the DVD format is rapidly taking over as the industry standard versus the CD format, for example). That being the case, you might expect that SDM would be anxious to hand off as many tasks as possible to third-party providers—especially in the commodity area of CD production, where prices are always dropping. However, Sony Disc Manufacturing has strategically chosen to make optical media manufacturing and distribution our core competency with key products like DVD-Video, PlayStation, DVD-ROM, SACD, CD Audio and CD-ROM. In fact , SDM has become a third-party provider itself, marketing its distribution expertise to clients in other industries.
Up to standards
As product lifecycles become more and more compressed, we believe the best way for SDM to maintain our leadership position is to standardize, automate and continuously refine our core supply chain processes. One way is by striving to set the standards that will drive the industry as early as possible in the products' lifecycle and set up standardized processes with the goal of becoming the low-cost provider.
If we can find a way to standardize our equipment and leverage all of our media products, we can drive costs down further. SDM integrates the majority of its own manufacturing and distribution equipment. Sony's Disc Technology group manufactures the equipment for our optical disc molding machines and Sony engineers design and integrate our complex communication systems for SDM's core operating equipment, like our automated storage and retrieval systems. We strive to integrate our systems using proven components from known manufacturers and then create standardization within our process. In essence we have built core com petencies around manufacturing design that enable us to be both fast and flexible. This, in turn, allows us to be a just-in-time (JIT) producer on relatively complex processes, with inventories at minimal (or zero) levels.
At the same time, Sony Disc Manufacturing is also a firm believer in automation. In our experience, automation both reduces costs and improves quality. In addition, automation helps shorten cycle time and decrease process variability. Many of our high-volume long-lead time competitors operate in the Far East, where labor is notoriously cheap. We would not be able to compete with them if we depended heavily on direct labor.
For example, we have automated the final product pack-out of PlayStation games. When we entered the game market, there was no standardization with regard to case pack counts or sizes. Early on we pushed for retailers to set standards for master and inner pack carton sizes. Today, PlayStation games go to the retailers in master cartons of 12. Each master carton contains three inner packs of four games each. Each of the inner packs is labeled for direct distribution (as is the master carton). The entire pack-out and palletization process is fully automated by robots and then routed to distribution. This ensures that we never break an inner carton for distribution. This year, SDM will manufacture and distribute more than 150 million PlayStation software units with this process.
Getting some leverage
Some companies work hard to recover their assets; at Sony Disc Manufacturing, we concentrate on leveraging our assets—our physical assets, our systems infrastructure and our people. Here's what we've accomplished to date:
For Sony Disc Manufacturing, the keys to success are fourfold: standardize the market early; automate to lower costs; leverage all possible assets and volumes—even those of our suppliers and clients; and hire, retain and continuously improve our workforce. These may sound like simple—even unoriginal—steps. But it's hard to argue with the division's success in the cutthroat electronics optical media market. And harder still to dismiss a music and game business that is now setting the standard for the thirdparty distribution industry as well.