Leading Japanese computer and chipmaker Fujitsu has detailed plans to reduce its spending on components and materials by approximately $3.85 billion over the two years. Fujitsu currently spends about $21.5 billion annually on components and materials.

The target is part of its "Procurement Innovation 21" strategy that has already resulted in restructuring of its purchasing operations. Most sourcing operations were centralized in April 2000. The centralized procurement group is staffed by about 550 purchasing personnel and includes a Procurement Strategy Office and a Procurement Engineering Division.

The company also plans to continue to reduce its number of suppliers. The company had 1,500 suppliers in March 2000, but reduced that number to 1,000 in March 2001. By March 2002 the company plans to have 700 suppliers.

Suppliers will ink long-term agreements, which Fujitsu says will enable them to devote more resources to "optimizing price and delivery." In return, Fujitsu will guarantee increase orders in the future and more open information disclosure.

Fujitsu also plans to use more standard parts where possible to reduce the types of parts it purchases.

Fujitsu has also targeted March 2003 as the date by which 100% of standard components will be delivered on a just in time basis. Fujitsu will be achieve this primarily through standardization of procurement procedures, weekly indication of part requirements by to its suppliers, and daily acquisition of delivery records.

Fujitsu will also expand use of its Procure MART Internet-based system for ordering standard components from electronic catalog component resellers. Fujitsu implemented the system in May 2001 to enhance the efficiency of ordering small lots of standard components. It enables procurement of as few as a single component from a list of 40,000 parts. Use of the system will be expanded to include overseas suppliers.

In further restructuring, Fujitsu and group company PFU Limited will consolidate server and storage system production operations at a new company, Fujitsu IT Products Limited (FJIT) as of April 2002 at Kasashima, Japan. Positioning FJIT as a central manufacturing base for the Fujitsu Group's computer products, the move will increase efficiency as well as integrate mass production technology with supply chain management (SCM), thereby strengthening manufacturing capabilities in these core products, according to the company.

Fujitsu hopes that its efforts will result in an operating profit of $3.1 billion by fiscal 2003, with inventories reduced by half to $3.85 billion and return on equity increased to 10%.