Hub-Model Utilisation in Inbound Logistics – A Case Study from the Finnish Electronics Industry

In today’s electronics industry, outsourcing is a common way for companies to improve their competitiveness and concentrate on their core business. Companies are moving their manufacturing to smaller partner manufacturers or subcontractors, which form new nodes on the inbound logistics chain. This complicates the management of material flows. This paper presents a case study of an inbound logistics development project initiated by a Finnish, globallyoperating electronics manufacturer. The outsourced inbound logistics hub is the project’s main development focus. The hub is operated by a logistics service company and all materials from suppliers to subcontractors are delivered through the logistics hub. Deliveries from subcontractors to the principal for final assembly are also done through the logistics hub. Small and medium-sized subcontractors (SMEs) have difficulties in purchasing materials, because materials and components are expensive for them. One option could be for the principal to take full responsibility for materials and buy them for the subcontractors. Acting in this way moves risk from subcontractors to the principal, lowers the material exposure that subcontractors normally assume and also lowers the overall cost of the supply chain. These choices will be analysed during the development project by using activity-based cost modelling, but also using methods outlined in the literature. Changes in material flows also create challenges for information flow management. For SMEs it is not useful and wise to invest in and implement information and communication technology (ICT) solutions. For example, in many cases the information given from the principal’s extranet could be enough to guarantee effective information sharing in the inbound logistics chain. In this project, the principal’s ICT will be utilised for managing the whole inbound logistics chain, and the aim is to make the same information available to all players in the chain and to ensure visibility throughout the networked companies. The last phase of the project focuses on the initiation of a new operations model with a new hub model and the utilisation of ICT. This paper presents the case study, its challenges, research methodology and solutions to managing inbound logistics using an outsourced logistics hub.