President and CEO Yoshinori Yamashita claims that the company’s “Restart” theme for its mid-term management plan has been moving along quite smoothly.
In July 28, 2017, Yoshinori Yamashita, president and CEO of Ricoh Company, Ltd., stated that the company’s “RICOH RESTART” theme for the mid-term management plan from FY2017 through FY2019 has been moving along quite smoothly.
Ricoh’s Q1 financial statement, announced that same day, showed revenue of 495.5 billion yen (1% increase from Q1 FY2016), operating profit of 18.9 billion yen (74.1% increase), net profit before tax of 16.8 billion yen (61.7% increase), and quarterly net profit of $12.2 billion yen (91.3% increase). While the revenue experienced a modest increase, profit improved significantly. This uptick indicates Ricoh’s performance is recovering well in the wake of the profit-oriented policy implemented by Mr. Yamashita.
As detailed by Yamashita’s presentation, the following outlines the key highlights resulting from the restructuring related to North America.
Sales and Service Structure Reform in North America
In North America, Ricoh’s direct sales operation had some MIF with low profitability, particularly among SMB customers. As a result, Ricoh has been focusing on establishing a remote sales structure by enhancing its inside sales and increasing indirect sales locations (reps). Due to the switch from door-to-door sales to insides sales, sales expense efficiency has increased by 20% to 30% for 50% to 60% of the MIF for SMB customers. This has had the greatest impact for customers in remote or rural areas.
Further, the company is trying to improve profitability by transferring the MIF for its direct operation to some of its leading dealers that can provide enhanced service and support. The profit from selling the direct MIF to those dealers was 6.3 billion yen in Q1 2017.
For major accounts, Ricoh has hired experts for each category of service and industry, and is strengthening the company’s ability to make sales proposals by becoming more knowledgeable about customer workflows in those accounts.
Restructuring Production Locations
Production facilities for REI (Ricoh Electronics, Inc.), a production subsidiary in North America, have been divided between locations in California and Georgia with the intent of optimizing the production function. The company will consolidate the entire MFP production function by moving it to Japan from California by next spring. The completion of the transition of the headquarters’ function to the Georgia factory is expected by the company’s second fiscal quarter.
The California factory will continue to maintain its warehouses and be responsible for the customization and recycling of some products, remaining as a location to receive the products manufactured in Asia. However, the overall size of the factory will become much smaller.
Additional Measures for Further Restructuring
Mr. Yamashita is not only focusing on cost restructuring, but also is keen on creating a solid profit structure through operational process transformation. To accomplish this, he revealed the company would implement the following additional measures not in the original plan.
1. Optimization of function and operations between Ricoh headquarters and regional ales headquarters;
2. Enhancement of the supply chain management (SCM) function at the global level;
3. Business process transformation for headquarters and indirect divisions utilizing RPA (robotics process automation) and AI (artificial intelligence); and
4. Optimum location arrangement based on the streamlined operation
By following this restructuring, Ricoh expects to achieve a reduction in costs of 100 billion yen in FY2019 compared to FY2016, all while continuing to examine how to achieve this goal ahead of schedule.