Global Logistics and Supply Chain Strategies - September 2008 - (Page 32)

Free The Enterprise! Bust the Silos in the Supply Chain! BY ROBERT J. BOWMAN Companies collaborate successfully with external partners all the time. But the real challenge lies in getting employees within an organization to share data and forecasts, and work together toward a common goal. N obody expects a demand forecast to be perfect. But a record of 20-percent accuracy for an entire product portfolio crosses the line of acceptability. Nevertheless, that was the situation at Linksys, the division of Cisco Systems Inc. that makes routers and other networking hardware. Not only was the company unable to forecast sales with reasonable accuracy, it could only manage supply and demand for its top 200 SKUs. The rest of its products weren’t even covered by a formal sales and operations planning (S&OP) process. Some companies try to fix the problem by acquiring expensive new software. At Linksys, the true culprit was elsewhere. “It all starts with business process,” says Mark Payne, vice president of operations. The company was hindered by a series of functional silos, each with its own set of assumptions about demand, and little com- munication between them. That wasn’t a problem in the early days, when the SKU count was low and the supply chain relatively straightforward. But success brought complexity, as Linksys found itself grappling with a more diverse product portfolio and a much larger community of suppliers. Under the old system, S&OP was the responsibility of the demand forecasting and product management teams. Other departments rarely joined in the exercise. Demand signals were generated on a monthly basis, with a heavy reliance on spreadsheets. And the focus was entirely on the company’s top-selling SKUs. The result was a huge gap between inventory levels and actual demand. No one trusted the demand forecast; sales would inflate its numbers to ensure the availability of product, and forecasts would be repeatedly altered. A flurry of last- minute production changes would lead to heavy reliance on expedited transportation. The company was resorting to airfreight for nearly 40 percent of its product line. Payne was determined to revamp business processes to allow for the simultaneous management of inventory, production and sales forecasts. First, though, he would have to tear down the silos within the organization. All of the links within the supply chain had to operate from a common set of terms and business rules. Payne created a formal S&OP organization which would serve as a clearinghouse for data as well as the source of a companywide demand forecast. The former global forecasting team was given the lead role in the new S&OP process, which incorporated input from all aspects of the supply chain, including finance, sales, marketing, purchasing, forecasting and supplier management. Payne devised what he calls “game- 32 SEPTEMBER 2008

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Global Logistics and Supply Chain Strategies - August 2008 Contents Editorial GL&SCS Exclusive Fast Forward Up Front Cover Story: Free The Enterprise: Busting Silos in the Supply Chain Business Process Management Merits New Look fromCorporate Strategists Ships and Ports Explore Many Ways to Go Green The Right Information Should Help Avoid Any Kind of Risk Industry Voices

Global Logistics and Supply Chain Strategies - September 2008

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