Global Logistics and Supply Chain Strategies - September 2008 - (Page 34)

boards,” presenting an aggregated view of forecast, inventory and production data for each SKU. Underlying the process was a software application known as FS&OP Manager (the “F” standing for financial) from Palo Alto, Calif.-based Symphony Metreo Inc. No purchase order could be cut unless it was based on information from the gameboard. The destruction of silos allowed everyone in the organization to work together, drawing on the common well of data. The forecast was supplemented by a new focus on inventory management and production planning. For the first time, planners could see how their decisions affected inventory weeks on hand (WOH). They were less likely to make independent adjustments based on a mistrust of the forecast. At the same time, WOH was allowed to fluctuate within certain limits to account for changes in demand. One key to making the project work was harmonizing employee incentives. Before, notes Payne, the sales force was rewarded for pushing product into the channel, even if inventory was already high. The factories, too, were encouraged to keep turning out product regardless of the level of existing stocks. Once inventory, sales forecasts and productions were managed centrally, build plans became more rationale and false backlogs were eliminated. Results of the reorganization were fast and impressive. In the first year, Linksys saw reductions of 35 percent in inventory, 60 percent in backlogs and 40 percent in excess and obsolete inventory. Expedited shipments were reduced to just 3 percent and supplier fill rate went from 65 percent to 95 percent. Forecast accuracy at the SKU level, still not perfect, rose to 70 percent. What’s more, Linksys was able to bring every one of its global SKUs into the S&OP process. The next step is to eliminate a major external silo—the supplier base. “We want to get suppliers on the gameboard so that everybody will be in balance all the time,” says Payne. “So they can remain in a steadystate flow and avoid whiplash.” A Bigger Challenge In terms of scale, Linksys’s exercise in silobusting pales beside that of IBM. The global high-tech giant launched a massive reorganization effort back in 2002, under the leadership of Bob Moffat. The former head of IBM’s Personal Systems Group was put in charge of a new Integrated Supply Chain (ISC) organization, which encompassed all customer-facing processes as well as procurement, manufacturing and logistics. The idea was to create what IBM termed “the world’s first on-demand supply chain.” At the same time, the company was out to save billions of dollars by streamlining redundant processes. But neither goal could be reached without devising an organization that cut across traditional job descriptions. “The whole concept was to look at the process from end to end, from the order desk to procurement, manufacturing, global logistics, invoicing and cash collections,” says Dave Eagle, distinguished engineer within the ISC. No longer could a manager within one discipline complete one task, then “throw it over the wall” to the next stage in the chain. The initial challenge, says Eagle, was largely cultural in nature. It required aligning departmental goals so that all participants worked under a dominant metric – in IBM’s case, delivering to the customer exactly what The winds of change are blowing. 34 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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