Olympus Corporation was founded on October12, 1919 as Takachiho Manufacturing Co., Ltd. with the microscope business as the main pillar. The company name of “Olympus” comes from Mt. Olympus. It has been used as the trademark since the days of Takachiho Manufacturing Co., Ltd. Mt. Olympus is the place where gods live in Greek mythology. The company name of Olympus contains a passionate feeling of “creating world-class products”.

However, in recent years, the horizontal cooperation between divisions has become one of the critical issues due to their in-house company system. This activity began in 2006 with the establishment of Purchasing Planning Department after the “Innovation Activities for The Entire Manufacturing Function” in 2020.  We will introduce the activities that transcend the boundaries and deepen into the human resource development system.

Established “Purchasing Planning Department” in the headquarters with the view of procurement innovation that transcends the boundaries of the in-house company system

Oympus has established their brand as a camera manufacturer, starting with the domestic production of microscopes, based on the management philosophy of Social IN which proposes new values through business while merging with society as a living person and sharing values. They also developed the endoscopes, and manufacture and sell a variety of precision machinery and instruments through the fusion of the optical technology cultivated through the long experience and the state-of-the-art digital technology.

Around 2000, the project to innovate the entire manufacturing function started. Then, in 2006, the Manufacturing Strategy Committee at the time examined the measures related to the company-wide purchasing, and established “Purchasing Planning Department” in Monodzukuri Innovation Center at the headquarters.

Mr. Hayashi, Director and Managing Executive Officer, Monodzukuri Innovation Center, explains the history of the establishment of Purchasing Planning Department.

“In the course of innovation activities throughout manufacturing, we had mainly been working on the factory reforms and the production technology reforms, but we felt biased in our efforts. While we set the targets such as cost reduction and QCD improvement, the effect of the production line alone was limited because there were many purchasing items. Then, we decided to entirely reform and strengthen our purchasing activities. However, although we said “strengthening”, we had a weak connection next to each business unit because the purchasing department was independent for each unit.”

There was a barrier among the business units because of the in-house company system, and the various information on purchasing remained within each business unit. At the time of verifying the current situation, there was a lack of effective measures for procurement and sharing of information, and a number of issues were defined. Therefore, “Purchasing Planning Department” was newly established in the headquarters, and the system was established to collaborate with the business units, which had been in an independent state.

Mr. Hayashi says “At first, we started with the activities that the purchasing managers of each business unit got together on demand basis to learn about the best and better practices each other. When it got back on track, we started “Purchasing Managers’ Meeting” where the purchasing managers from each business unit gathered together once a month regularly. The monthly meeting was the place to formulate the strategy to strengthen the purchasing capability through the horizontal collaboration.” 

Consulting agreement with JMAC in hopes of practical support

In order to fully enhance our purchasing capability, Mr. Hayashi said “It is essential to have external professionals objectively analyze our current condition and propose the specific plans for strengthening our purchasing capability”, and as the result of evaluating the proposals from seven consulting companies, they decided to sign the contract with JMAC.

Mr. Nara, the general manager of Purchasing Planning Department of the Monodzukuri Innovation Center, explains why he ultimately decided on JMAC.

“Instead of ending with the logic on the desk, I wanted to ask a consulting firm that would provide practical and field-oriented guidance. The decision to sign the contract with JMAC was made due to Purchasing Capability Diagnostic Program, which diagnoses the actual situation of the purchasing department from various angles, and the education and business processes for obtaining CPP certification, which certifies those who have acquired the skills required as a professional in purchasing and procurement operations as certified procurement professionals (“Certified Procurement Professional: CPP”). By using these practical systems, we expected the tangible benefit of the business improvement. JMAC also has a track record of practical guidance outside of our procurement department in Olympus, and I was able to feel very reliable.”

Purchasing capability enhancement activities starting from Ina factory, which has a long history

The project started in tandem with JMAC to strengthen the purchasing capability. It was Ina factory (present Nagano Olympus) in Nagano prefecture where the history was the oldest in Olympus as the first site to leverage their resources concretely and practically. Why did they choose Ina factory?

Mr. Hayashi, who was the director of Ina factory at the time, says “The Ina factory started in 1944, a year before the end of the world war II. Because it has a long history and is the most traditional factory in our company, everything is conservative for better or worse, and there was a climate that was hard to fit into the new trend. Actually, when we had to change something in the past, it was true that the climate was the innovation block. That’s why we had a strong idea that we had to change from Ina factory first to fundamentally improve the internal structure to strengthen the purchasing capability,” 

Until then, Ina factory had been implementing the manufacturing reforms with the support of external consultants, however there was also a negative dilemma that the efforts would not last long. The purchasing group was working on cost reduction, zero defects, and zero late delivery, but the cost reductions remained at a low level. In order to consider the measures, the spend analysis (procurement history analysis) and the supplier evaluation were also insufficient.

Mr. Hayashi says “In a word, the various initiatives were not scientific and logical. The way we negotiated with suppliers was not a logical approach based on objective data but just asking as the mainstream. I thought we shouldn’t stay this way.”

In order to promote the purchasing capability enhancement activities in a more scientific and more logical way, JMAC conducted “Purchasing Capability Diagnosis” at Ina factory in line with the purchasing management system formulated over about three months at the Olympus headquarters. Based on the results of the diagnosis, the master plan for purchasing reform was set up as follows.

  1. Setting and promoting the supply chain strengthening strategies
  2. Promoting the improvement of quality, delivery, and cost for the existing products, and strengthening its foundation
  3. Systematization and countermeasures for purchasing risks
  4. Promoting the engineering purchasing and strengthening its foundations
  5. Promoting the training based on the human resource development plan
  6. Development of the purchasing information infrastructure

Among the above six themes, (1) and (2) were the most important issues, and their initiatives were promoted.

After formulating these master plans, the steering committee chaired by the factory manager was established to check the progress of each measure every month. JMAC supported with three consultants, and JMAC consultants went to Ina factory every week to have close meetings. Moreover, when we made the plan for the next year, we conducted the intensive study at the training camp.

CPP shakes buyers’ minds of friendly competition!

In a factory at the time had to work tirelessly on new initiatives to implement the cost reduction measures and strengthen the purchasing capability while doing the daily purchasing work. All members, including managers, had a hard time, but through these actions, the importance of improving the purchasing skills has been recognized throughout the purchasing group.

As we worked on the measures to strengthen the purchasing capability on a daily basis, the acquisition of CPP qualifications became the “license” for purchasing group members, and we were able to create the environment where our members worked hard together to study.

Mr. Nara, who was the purchasing group leader of Ina factory at the time, was just moved from another department, and despite being an “amateur” in the purchasing field, he continued to study hard every day and passed CPP_A class. Several other members also passed the exam, which inspired the members to improve their skill level as a procurement professional.

Mr. Nara says “I myself made a lot of effort to get the qualifications, and CPP program that JMAC developed was very systematic and easy to study. Above all, I think it was very good to get CPP_A qualification because I was able to have a third person evaluate my level as a procurement professional. I also learned how to reduce purchasing costs shifting from just asking so far to adopting VE/VA perspectives such as reviewing purchasing conditions, changing materials from a technical point of view, and reviewing processing methods, which are so-called approaching scientifically”. While approaching to the suppliers of the functional parts which could not be handled by the purchasing group alone, there was a difficulty in working together in consultation with the development and technology departments and the quality department. Mr. Nara says “Through the leader meeting, we were able to cooperate smoothly from each department under the top down of the factory managers. Closely working together with JMAC about how to prepare and negotiate with suppliers, the members also improved their individual skills and confidence by objectively looking back on how they negotiated so far and seeing improvements.”

As the result of reviewing our conventional purchasing activities, introducing JMAC’s “Purchasing Capability Diagnosis” and “CPP qualification system”, and implementing the innovations in purchasing activities throughout the entire factory, the purchasing cost reduction rate so far has improved significantly.

Mr. Hayashi recalls “At Ina factory, JMAC’s approach from various angles changed the framework of our activities. It was also a great harvest to recognize that reducing the cost of purchasing is not just a task for the purchasing department, but an issue that should be tackled together across the factory.”

Development into the activities to transcend the boundaries

In response to the results at Ina factory, Purchasing Planning Department led the development of “Purchasing Capability Diagnosis” through the entire Olympus. However, Mr. Nara says “At first, there were many divisions that responded negatively. In addition to the resistance to being judged by external people, the on-site diagnostic staff assigned in each division said, ‘I feel like reporting the diagnosis results to the leader above me.’ Based on these opinions, at the end, the group leaders (section chief class) made a system for diagnosing their own workplaces.”

The company-wide purchasing capability diagnosis is still being carried out, and it also helps to improve the motivation of purchasing members by reporting the results at the purchasing managers’ meetings, understanding the weak points of each business unit, and implementing the improvement measures with an eye toward the next fiscal year.

In addition, in the manufacturing innovation activities, the factory diagnostic specialist system has been established, and the certified specialists make the diagnosis for their in-house production lines and propose the solutions. Also, they have established the system for the specialist to go to their suppliers to provide the improvement guidance if requested. 

In addition, Purchasing Planning Department created the system to openly share what kind of suppliers each division is working with and what kind of results they are achieving by unifying the supplier evaluation indicators through the entire company.
Mr. Nara says “It was very difficult to define the level of the supplier metrics, but by opening the supplier evaluation company-wide, we can get the specific advice from other business units, and I think the strategy has come out in a wider range.”

Since its establishment in 2006, Purchasing Planning Department is now in its seventh year. The monthly “Purchasing Managers’ Meeting” has also exceeded 70 times, and the “horizontal and cross functional collaboration” deepened with each time. The development members of the camera business unit join the design review of the endoscopes and develop new products through exchanging their opinions from different angles. The discussions have also been held to go beyond the boundaries between business units, which was unthinkable before. It is truly a dramatic advance.

The purchasing human resource development system has also evolved.

In response to this trend, they are beginning to see an evolution in the idea of the purchasing human resource development.

The first is to recommend for the members involved in purchasing work to obtain CPP certification.

Mr. Nara says “In cooperation with Human Resources Department, we have incorporated CPP qualifications into our internal qualification system, and we are promoting the employees’ self-development with the system that rewards people if they pass. This initiative has also increased the examination pass rate.”

The second is the enhancement of Olympus College, the employee development system.

Mr. Nara says “Up until now, in the purchasing area, there were only two courses, for the beginners and the intermediates, and there were only lectures. However, there was a request from the employee who actually took the training saying that “I want to learn the content that is closer to my practice”, and now there are 13 courses in total with two stages; 9 lectures and 4 practical workshops. In the practical workshops, the participants themselves consider how to reduce the cost of the parts and suppliers in charge of practical work, and conduct it in the style of actually negotiating with suppliers under the advice of the lecturer, then consider the following countermeasures from the results.”

They also began working on creating the company-wide skill map. Mr. Nara says “From the CPP system, we’ve clarified ‘People who do this need these skills,’ and by showing them in five stages depending on the level of their skills, they can objectively understand their level. In addition, we’ve developed the system that allows us to understand at a glance which training to take in to develop each skill.”

Mr. Nara says “The development of training at the field level and the practical level has progressed considerably so for. For the next, I would like to consider what kind of training should be conducted in order to further increase the level of the manager class company-wide.”

Expansion of the horizontal and cross functional collaboration globally

The foundation for strengthening the domestic purchasing capability is being established. Then, they have set the overseas purchasing as one of their priority measures with a view to “global”.

Mr. Nara says “For the overseas purchasing, similar to the case in Japan as a function of Purchasing Planning Department, it is necessary to develop a “horizontal ruler” to measure, but of course it is difficult to judge on the same axis as in Japan. In the oversea purchasing departments, we need to create a global map that can tell which categories are strong in which regions, determine the level of cost, and use it as an indicator for supplier selection. The suppliers in Asia in particular are changing rapidly, and it is difficult to track. There are many issues. However, I would like to work on it in order to develop the efficient measures while clearing them one by one.”

Olympus has started a new step toward “global purchasing” in its original sense with the results from its company-wide strategy to strengthen the purchasing capability in Japan. Their future progress is promising.