The recent decade, the whole world witnessed an awe striking phenomenon when Canon – a leading name in the imaging industry topped the charts of growth and performance with a very significant boost in the Europe region. The facts mentioned in this study acts a reliable barometer to comprehend how theoretical knowledge is transformed to the real world implementation and attests Canon’s escalation in business.

1. A case study that reveals the Supply Chain strategy
adopted by Canon Inc. behind their prominent expansion
in the European region
Western New England
University
2012
EMGT 64540
Canon Inc.’s Progress to Pinnacle in Europe
Last decade, the whole world witnessed an awe striking
phenomenon when Canon – a leading name in the imaging
industry topped the charts of growth and performance with
a very significant boost in the Europe region. The facts
mentioned in this study acts a reliable barometer to
comprehend how theoretical knowledge is transformed to
the real world implementation and attests Canon’s
escalation in business.
Karthik Murali
Student ID 131629
3/17/2012

2. March 17, 2012
[CANON INC.’S PROGRESS TO PINNACLE IN EUROPE]
ABSTRACT
The last decade witnessed an epoch making incident in the imaging industry when Canon, the
A-Listed company topped the charts by showing very cardinal numbers in its growth and
performance pertaining to the European region of operations.
Canon – The organization that boasts of 25 warehouse locations, 2 production facilities in
Europe and manufacturing almost 30 million consumer products and accessories achieved a
milestone in its 2008 regional sales contributions when they discovered that 33% of the sales
came from Europe. The operations did not just involve delivering the value products to the
consumers but remaining efficient at the same time.
A company that manufactures products that holds a great market value would make sure that
the product will reach its consumers on time. For this, it is important that there is clear
agreement in the business, clear contribution to the overall strategy and the ability to measure
the actual effect by finding the right balance between engagement and direction.
This case study discusses the new strategy incorporated by the organization which helped
them achieve such a significant boost in sales numbers. Supply Chain Management – a new
supply chain model was setup by modifying the current then, to hit maximum sales.
Electronic products have always exhibited fluctuating demand, so how and what Canon did to
ascertain that they read their demand correct and serviced their customers the best, what was
the supply chain technique used by them and how effective it proved to be – the following
study will help us answer these questions.
As Fran Townsend has quoted, ‘Part of what you need to do in
the supply chain is to help your company anticipate events, and
understand the environment you operate in – physical, political,
economic – around the globe.’[Q1]
Supply Chain Strategy - Canon’s Expansion in Europe
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Table of Contents
Sr. No.
Topic
1.
Page No.
Introduction
1.1 Canon – A brief introduction
1.2 Growth in Europe
4
1.3 Change in the SCM of Canon Europe
2.
3
5
Old Supply Chain Model
2.1 Concerns in the Old Supply Chain
2.2 The Proposed Model (Seamless Supply Chain)
7
2.3 The Targeted Areas of Change
3.
6
8
The New Strategy
3.1 Leagility – Lean & Agile Manufacturing Paradigm Integration
9
3.2 Leveraging Standard Electronic Business Partnerships
11
4.
Conclusions
12
5.
References
13
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INTRODUCTION
1.1
Canon – A Brief Introduction
The corporate philosophy of Canon is kyosei. A concise definition of this word would be
‘Living and working together for the common good.’ The history of Canon dates back to
1933, when a young gynaecologist named Takeshi Mitarai worked with some technician
friends to develop cameras; to do so they founded Precision Optical Instruments Laboratory
in Roppongi, Minato-ku, Japan. Their first major invention had applications that ranged far
beyond the medical field.
By the early 1960s Canon had become the dominant Japanese producer of middle-priced
cameras, leaving the higher end of the market to Nikon. The company continued to grow,
more than tripling in size between 1959 and 1963. In 1964 it ventured into business machines.
Canon continued to introduce new products in the 1980s to compete effectively in mature
markets. Much of its success, however, came in new markets, such as integrated office
workstations and desktop publishing systems. Often that meant challenging large companies
that were well entrenched in their markets.
Canon experienced rapid sales and profit growth from its low-water mark in 1975 through the
end of the 1980s. Between 1975 and 1985, its annual sales grew sevenfold, to $3.3 billion,
and its profits showed a 20-fold increase, to $136 million; by 1989, sales had reached $8.18
billion and profits hit $232 million. Following an exceptional year in 1990, that saw a 27.9
percent increase in sales (to $12.73 billion) and a near doubling in profits (to $452 million),
the succeeding years showed slower growth and reduced profits. Profit margins ranged from
1.1 to 1.9 percent from 1992 to 1994 after having ranged from 2.8 to 3.6 percent from 1988 to
1991.
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Growth in Europe
Regional Sales Contribution 2008
Europe
Americas
Others
Japan
Graph Source：Canon’s Official Press Release 2008, Canon Inc. www.canon.com
The moment that caught utmost attention was when Canon hit the maximum sales figure
for Europe. The graph presented above shows the record for the year 2008; Europe gave
the max number of 33% of the total sales, followed by Americas at 28%, then Japan
constituting a 21% share and the rest of the world summed to be 18%.
This overarching boost in the sales was because of the introduction of a new supply chain
mechanism by the organization’s team whose focus was on improving the European
operations. Supply chain plays a very vital role when an organization starts showing up
impressive figures on the sales charts.
Canon not just identified the flaws in its previous supply chain model but also made sure
that there were modifications made at the correct points to attain a more robust model
which did not make the model more efficient in functioning but also gave results – Results
not just refers to the profit margin that the company enjoys but also the consumer
satisfaction of getting value for money products and services.
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Change in the SCM of Canon Europe
London, December 3rd, 2007 – Canon Europe, world leader in imaging solutions,
appointed Perry Buenen as Chief of Supply Chain Management, responsible for further
strengthening customer collaboration across the company’s Pan-European supply
chain infrastructure.
Perry Buenen replaced Stefano Zenti who was the chief of ICT & Supply Chain
Management, who was still the Chief of ICT Europe. As the chief of Supply Chain
Management, Perry enhanced the model with a focus on customer interaction and
contribution.
In one of the press conferences in the late 2009, Perry said that Canon supply chain
infrastructure in Europe followed a highly robust model with strategic hubs to support
the network and key growth markets. The creation of a new distribution hub in Dubai
helped them to radically decrease delivery times by up to 26 days, via direct shipment
from factories in Japan to Dubai. They leveraged Dubai’s supply scale within a lower
overall cost structure and supported future business growth and supply chain strategies
via trans-shipments to Europe and surrounding markets.
Canon’s Corporate Releases, 2007 | courtesy: www.canon-europe.com
Once the information about the new model is shared, it becomes an easier task to figure
out what was actually done and implemented which then became a prime reason for the
company’s ascent in the European sector.
Now, let’s take a look at what was the structure of the supply chain before it was
modified. Europe’s net sales was $14,741 million and it employs approximately 11000
people – so the model is extremely vast and a bit complex too because the resources not
just comprises of infrastructure management throughout the continent but also each
element involved in making it work like a charm.
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The OLD SUPPLY CHAIN Model
2.1
Concerns in the Old Supply Chain
Many Hand Overs
This leads to a
decrease in the
sales efficiency
which not only
reduces customer
count but also
affects the
performance of
the organization
Duplication of
Activities
Not Always
Predictable
There was a lot of
duplication of
activities
throughout the
supply chain as the
different DCs were
not linked properly
Since the supply
chain was effective
to just a
considerate extent
but not fully
optimized, it was
unpredictable
most of the times
SmartArt1
The diagram above shows the challenges that Canon faced in their old supply chain
mechanism which was modelled for Europe.
The old supply chain model had an overlay of primarily three main concerns – many
hand overs, duplication of activities and unpredictability. There were many hand overs
of the products and it not only decimated the sales efficiency but also depleted the
customer count. It also affected the organization’s growth and performance.
There were duplications of activities too. It results in the delay of the cycle and also
causes a hindrance in appropriate and timely communication amongst the elements
present in the supply chain. Since there were these anomalies affecting the functioning
of the model, it became a problem for predicting – understanding the market, customer
profile and to formulate strategies and then forecasting outcome using the real world
facts.
It was very clear that if the flaws would be left neglected, then the backwash would be
impenetrable. The team then understood the importance about eliminating these
discrepancies and hence, the modifications were implemented thereby securing the
market hold, the image of this citadel and stabilizing the growth of the company.
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The Proposed Model
2.2
Cost
Reliable &
Predictable
Process
Transparent
Visibility
Process Alignment
Seamless
Supply
Chain
Service & Efficiency
•Minimum interference between Supplier
Suppliers and Customer
Canon
•Eliminate process steps - company - cost
•Align required process steps
•Adoptable supply chain through shared
Customers resources
SmartArt2
The proposed model was that of a seamless supply chain where there would be minimum
interference between the supplier and the customer. This would be possible only if there
would be perfection in the process alignment. The visibility of the process alignment was a
concern to be dealt with here.
If the integration was at par with the expected level then the service and efficiency would
definitely show up a better graph. It would also help the predictability, reliability,
transparency, the process, the whole supply chain network, the inventory and also the cost to
a very commendable level.
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Targeted Areas of Change
Logistics Network
Consolidated
Inventory
Costs
Value
Added
Services
Shared
Business Principles
End to End Measurement
Standard
Premium
Clear SLAs
Legibility
Process & Organization
Single Ownership
Orders
Mgmt.
Function
Integration
Integration
System & Visibility
Transparency
Internal
Balance
End to End
External
SmartArt3
The main targeted areas of change were – the logistics network, organization and process,
the business principles which had clear service level agreements and finally the whole
system and its visibility.
In the next section, we will be looking at the actual theoretical concepts that have been used
to transform the supply chain into a more fine fettle version when compared it to its
predecessor.
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The New Strategy
3.1
Leagility – Lean & Agile Manufacturing Paradigm Integration
The two paradigms i.e. Lean Thinking and Agile Manufacturing maybe de distinctly
different but they have been combined here for a successful design and a totally operated
supply chain mechanism by Canon to stabilize their growth in the market.
Agility means utilizing the market knowledge and a virtual corporation to exploit profitable
opportunities in a volatile market place. Leanness means developing a value stream to
eliminate all waste including time, and to ensure a level schedule.
The problem that Canon was facing in the Europe sector was that it was not able to
understand the consumer profile and it lacked enough market knowledge. Perry Buenen,
who was the chief of the Supply Chain Management for Europe & Middle East – used the
lean and agile strategy to cut and dry the supply chain model. Theoretically, we know that
leanness and agility are both closely related to the total supply chain strategy and the
positioning of the decoupling point. The decoupling point separates the part of the
organization oriented towards customer orders from the part of the organization based on
planning.
The new model stressed on delivering with value,
Meeting Customer Requirements
Fitness for Use
Process Integrity
Elimination of Waste
Continuous Improvement
Design
Quality Assurance
Distribution & Administration
Inventory
Materials
X
X
Customer Support
Product Service
Product Support
Flexibility to meet Market Changes
Flexibility to meet Customer Demand
Time to Market
- Concept to Delivery
- Order Entry to Delivery
Response to Market Forces
Lead Time
SmartArt4
The above model can be expressed as,
Value = Quality x Service
Cost x Lead Time
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They key point in this whole strategy is the decoupling point. The Canon team not just
identified the problem of the fluctuating demand they needed to deal with, but they also
realized that if they would postpone the decoupling point until as late as possible and
ensuring that the product differentiation also occurred at that point, then it would act as
an added advantage for them.
Push
Plan
Material
Pull
Flow
Pull
Execution
The Decoupling Point
Stockholding
SmartArt5
Here, the lean paradigm is applied to the supply chain upstream of the decoupling point.
A number of value streams were used for the smooth flow of the standard products. The
agile paradigm was applied downstream from the decoupling point as the demand was
fluctuating and the product variety per value stream increased.
In the previous supply chain model, the stockholding point was at the distribution
centres with the market specific products, but here the stockholding point is set
according the aggregate forecast of demand and the idea was to move differentiation to
the distribution centres and pull out stockholding from them.
The afterthought of Perry Buenen was to model an efficient and robust supply chain
mechanism that would not help Canon Europe to just meet the fluctuating demands of
the consumers there, but also come up with instant solutions then and there if there
would be any obstacles in the functioning in the supply process. He did not stop by just
implementing the lean and agility paradigms together but also gave a thought which led
to another conception of leveraging standard electronic business interfaces to enable
adaptive supply chain partnerships.
The new brainchild of enabling an adaptive supply chain partnership did act as a
continuous parallel support system to the new supply chain model created back then. It
was an arduous task indeed, but it did pay off when Canon flaunted impressive figures
on the sales charts in the succeeding years.
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3.2
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Adaptive Supply Chain Partnerships
Perry had recognized that the market had become a hypercompetitive environment
which was influenced by dynamic customer preferences, shifting industry boundaries
and an emerging global competition. A specialized partnership for complementary
activities would then become an extended enterprise.
When the commitments to serve a market region is shared, the pressure on the supply
chain automatically reduces to a very noticeable extent and that’s exactly what Canon’s
supply chain management team was looking at. Perry aimed at placing the distribution
hubs strategically which were working together in order to meet the variability in the
demand of the products in the market.
Information
Exchange
•Quality of Info.
Exchange
•Privileged Info.
Exchange
Use of SEBIs
•Support System
•Parallel &
Simultaneous
Backup
•Control
Variables
•Mutual
Adaption
Cooperation &
Relationship
SmartArt6
The use of Standard Electronic Business Interfaces refined the old model so well that
this actually led the European distribution centres to meet their demand limits even at a
point when the distribution centres used to fall short of stock. With the use of the right
technology and digitally enabling the possibility of an extended enterprise in venturing
for the growth of the whole organization, by providing the needed support at the right
time to the right region; did give Canon the much awaited frog leap in the sales figures
during that year.
It is a herculean task to develop such a supply chain that faces an ambiguous demand
environment and also gives results – but the SCM Team of Canon proved that this
could be done by implementing and blending simple theoretical concepts into action for
the real world.
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4.
Conclusions
Canon focused on building a one E2E Supply Chain as an Enabler. It showed immense
concentration on the infrastructure involved in modelling the more flexible, efficient
and coordinated supply chain which when implemented acted as a great impetus in the
growth of the organization.
To summarize, the following points were given much attention,
•
Regional Structure
-
Limited number of hubs
-
Shared network for different channels
-
Limited port of entries
•
Pre-Installation combined in Distribution Centres
•
Management & Organization
•
Functional Inclusion
-
Order Management
-
Pre Delivery Installation
• Transparency of the whole system (visibility)
The two concepts of Leagility and Adaptive Supply Chain Partnership with SEBIs
helped the company to amplify the previous flaws that were present in their supply
chain and to boost their performance and business by delivering the products on time
with value of the product and services kept in mind.
Perry Buenen’s vision of seeing the European sector giving out the maximum business
and customer satisfaction came true when the company hit the charts with a thrilling 33%
share of the regional contribution in the year 2008.
The famous quote from the Father of Lean Manufacturing – W. Edwards Deming says,
“Change is required. There is a process of change, just as there is a process of
manufacturing, or for growing wheat. How to change is the problem!” [Q2]
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5.
References
Articles, Presentations & Press Releases
[1]
a
b
J. Ben Naylor , Mohamed M Naim, Danny Berry
(1999), ‘Leagility:
Integrating the lean and agile manufacturing paradigms in the total supply
chain’, International Journal of Production Economics 62 [107-118] Source
a
Logistics Systems Dynamics Group, Department of Maritime Studies &
International Transport, University of Wales Cardiff
b
Formerly Logistics Systems Dynamics Group, now Hewlett Packard, Filton Road,
Stoke Gifford, Bristol, UK
[2]
Arvind Malhotra, Sanjay Gosain, Omar. A. El Sawy (2007), ‘Leveraging
Standard Electronics Business Interfaces to Enable Adaptive Supply Chain
Partnerships’, Information Systems Research [Vol. 18, No. 3, September 2007, pp.
260-279]
[3]
Perry Buenen (2009), ‘One Canon – One Supply Chain’ Source
[4]
Margaret Baumann (Antec 2003), ‘Decision Tools for an Enhanced Supply
Chain Part I – Why Should I Optimize my Supply Chain?’ G. H. Associates,
Lebanon, NJ
[5]
Canon’s official press releases (2008, 2009) Source
[6]
History of Canon Source1, Source2
Images
[1]
[2]
[3]
Canon Official Logo on Cover Page – Google Images Link
Globe1 – Google Images Link
Globe2 – Google Images Link
SmartArt ™ Diagrams
Sr. No.
1
2
3
4
5
6
Type
Increasing Circle Process
Converging, Step Up & Vertical Chevron List
Table Hierarchy
Regular Text Box
Phased Process
Alternating Flow
Title
Concerns in the Old Supply Chain
Seamless Supply Chain
Targeted Areas of Change
New Model’s Representation
Decoupling Point
Adaptive Supply Chain & SEBI
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