As an illustration of how a firm can move successfully into level 3 and beyond,
consider what happened at a venerable organization called General Motors, after
chief information officer Ralph Szygenda was brought in to help GM regain
some of its preeminence in engineering and car styling by �better applying and
integrating information technology.� As reported in Supply Chain Management
Review, the first phase of the effort was launched in 1997, to improve the
vehicle development process. There were two subparts to the initiative: reengineer
design processes and implement time- and effort-saving IT. As progress was
made, GM further realized that it really needed to embark on a supply-chain
wide effort, extending much of the effort to suppliers willing to collaborate
electronically. The results have been dramatic: a 70% reduction in product
development cycle time and more than $1 billion in savings. As Szygenda
reported, �Broadening the vehicle development initiative to include our external
partners was always in the back of our minds� (Gutmann, 2003, p. 35).
When GM began its work on the vehicle development process, it formed
teams to look at key design processes, to find how it could make them better
and leaner. Concurrently, the teams looked at what IT could do to enable the
improvements. This is a very typical step in the maturity process, as collaboration
and technology are used to reach the higher levels of progress. The
company started by asking tier one and further upstream suppliers to identify
the problems with the existing design process. When this step is taken, most
firms find there is a lot more that could be accomplished with existing processes
than normally believed. GM used these conversations to identify three main
areas of concern: batch processes that needed to be more interactive, a balance
between security and accessibility, and improvements to the integration of suppliers
and the transmission of data in a way that would not disrupt business
processes.
Design files were synchronized with suppliers, ensuring that all parties were
working from the same information. Instead of exchanging design tapes back
and forth, an electronic solution was introduced to do direct computer-aided.
design (CAD) and computer-aided-manufacturing (CAM) exchanges. A common
technology backbone was used to integrate disparate technology solutions
and systems, �while providing one common source of up-to-date information
related to a product� (Gutmann, 2003, p. 38). This move led to the adoption
of one common CAD/CAM system at all GM locations and joint ventures
across the world. A product data management system was also installed at that
time.
In 1999, GM began connecting its suppliers to the common technology
backbone through its virtual private network and its supplier portal, Supply
Power. Through this technique, GM increased its suppliers� �access to business
and technical systems such as project schedules, engineering change requests,
technical specifications, test requirements, and quality controls. Tier one suppliers
focused on keeping the design changes lean, passing on needed process
improvements to their suppliers. Today, GM is able to integrate and update [its]
bigger suppliers� CAD creations on a daily basis. For smaller suppliers, that
information is updated weekly.� Security and access to information are balanced
by providing �different layers of visibility to different suppliers� (Gutmann,
2003, p. 36). At the end of 2002, GM had 1,000 suppliers in North America
and 1,000 suppliers in Europe integrated into this new system.
In 2001, the scope was expanded to include external suppliers for such
downstream processes as tooling, manufacturing engineering, and manufacturing.
A tooling supplier can now download design files right after the design/
styling phase, allowing it to begin its work earlier in the process. This assistance
is offered through GM�s product development portal, eliminating a previously
heavily manually intensive set of processes. This feature allows GM to share
facility and process design with its �most trusted suppliers,� which in turn
�accelerates the assembly design process� (Gutmann, 2003, p. 38). The result
has been a reduction in product development process time from 60 months in
1996 to 18 months in 2003, a dramatic example of how collaboration will work,
especially when enabled with the correct technology.
Monday, May 3, 2010
MAKING THE TRANSITION TO LEVEL 3:THE BUSINESS LEVEL
Given the willingness of the senior management of the company to embark on
the level 3 stage of the journey and a firm foundation of level 2 in place, the
next step is to open the discussion with key suppliers and customers. We say
key suppliers and customers because the discussions and effort needed to make
real progress are not insignificant. Therefore, choose the partners that also have
a willingness to explore the possibilities for finding greater value together, and
limit the discussion to those where you believe the biggest value proposition
lies.
The conversations with the chosen partners should include the examination
of all aspects of the customer/supplier relationship, including technical, transactional,
procurement, and logistics, along with product, information, and cash
flows. Based on this type of analysis, begin looking for the hidden values across
the full supply chain network that connects the customer and its supplier to the
final consumers.
The real breakthrough comes when you can create win-win solutions that
make more money for both firms. By defining specific opportunities for action,
chartering improvement teams, defining success for them, and developing performance
measures to track team performance, the value between the enterprises
can be unlocked.
THE PROCESS LEVEL
By capturing and analyzing the inter-company processes, to identify those with
the greatest strategic importance for both companies, the most profitable areas
for investments can be isolated and prepared for improvement. It is clearly not
possible to work on all processes; a degree of prioritization is vital. Typically,
the processes we see being put at the top of the list are procurement based:
auctions, catalogue-based inquiries, transaction automation, and, increasingly,
checking schedules to ensure that an order can be fulfilled on time, in full.
More advanced tools for BPM, such as Intalio�s tool set, will become an
essential part of the level 3 company�s tool kit. If processes on both sides of
the inter-company gap are automated and made to comply with the same process
protocols, then making them talk to each other will be relatively simple.
ORGANIZATION
The organization of a process-based company will start to reflect the process
priorities adopted. Departmental boundaries will move, and managers� roles and
responsibilities will change, to minimize the disruption to the efficient and
effective execution of the company�s strategic processes. The authors are already
seeing the impact of this in the early adopters.
For the level 3 company, the inter-company processes will be seen as having
increasing importance. Organization will change to make the interfacing processes
as effective as possible. There will be a few critical points of contact,
well-defined data structures, effective problem resolution routines, and, above
all, a clear view of the value added by making these arrangements.
As Gartner recently said: �Enterprises should begin to take advantage of
explicitly defined processes. By 2005 at least 90% of large enterprises will have
BPM in their enterprise nervous systems (0.9 probability). Enterprises that
continue to hard-code all flow control, or insist on manual process steps and
do not incorporate BPM�s benefits, will lose out to competitors that adopt BPM�
APPLICATIONS, DATA, AND TECHNOLOGY
It is a curious condition that this trio is left to the last in the list. For many years,
applications have been the starting point for investment and business improvement
efforts. Latest trends, supported by our recent supply chain survey, show
that this is no longer the case. Fewer companies are investing in applications.
Rather, they are investing in making those they already have work properly and
filling in the gaps � driven increasingly by the need to make processes work
more effectively. So it is that the processes that drive the improvements and the
role of applications become one of supporting the processes. In the authors�
experience, up to 85% of any company�s portfolio of IT projects are canceled
or redirected once the correct process focus can be identified.
THE BENEFIT CASE
With many companies striving to reach level 3, there must be a benefit case.
As we have seen, some companies still do not believe in this principle. The
authors firmly believe in, and have seen, the benefits of collaboration �across
the enterprise boundary,� from business unit to business unit or company to
company. Technology has removed many of the barriers, for example, to true
collaborative planning, forecasting, and replenishment (CPFR). The benefits
come in many guises:
_ Revenue improvement (+5 to 15%)
_ Resulting from reduced out-of-stocks and improved category
management
_ Cost reduction (15 to 30%)
_ For example, automotive manufacturers cut the cost per car by
$5,000 through better collaboration between consumers, suppliers,
and other partners (CSC automotive industry survey, 2001)
the level 3 stage of the journey and a firm foundation of level 2 in place, the
next step is to open the discussion with key suppliers and customers. We say
key suppliers and customers because the discussions and effort needed to make
real progress are not insignificant. Therefore, choose the partners that also have
a willingness to explore the possibilities for finding greater value together, and
limit the discussion to those where you believe the biggest value proposition
lies.
The conversations with the chosen partners should include the examination
of all aspects of the customer/supplier relationship, including technical, transactional,
procurement, and logistics, along with product, information, and cash
flows. Based on this type of analysis, begin looking for the hidden values across
the full supply chain network that connects the customer and its supplier to the
final consumers.
The real breakthrough comes when you can create win-win solutions that
make more money for both firms. By defining specific opportunities for action,
chartering improvement teams, defining success for them, and developing performance
measures to track team performance, the value between the enterprises
can be unlocked.
THE PROCESS LEVEL
By capturing and analyzing the inter-company processes, to identify those with
the greatest strategic importance for both companies, the most profitable areas
for investments can be isolated and prepared for improvement. It is clearly not
possible to work on all processes; a degree of prioritization is vital. Typically,
the processes we see being put at the top of the list are procurement based:
auctions, catalogue-based inquiries, transaction automation, and, increasingly,
checking schedules to ensure that an order can be fulfilled on time, in full.
More advanced tools for BPM, such as Intalio�s tool set, will become an
essential part of the level 3 company�s tool kit. If processes on both sides of
the inter-company gap are automated and made to comply with the same process
protocols, then making them talk to each other will be relatively simple.
ORGANIZATION
The organization of a process-based company will start to reflect the process
priorities adopted. Departmental boundaries will move, and managers� roles and
responsibilities will change, to minimize the disruption to the efficient and
effective execution of the company�s strategic processes. The authors are already
seeing the impact of this in the early adopters.
For the level 3 company, the inter-company processes will be seen as having
increasing importance. Organization will change to make the interfacing processes
as effective as possible. There will be a few critical points of contact,
well-defined data structures, effective problem resolution routines, and, above
all, a clear view of the value added by making these arrangements.
As Gartner recently said: �Enterprises should begin to take advantage of
explicitly defined processes. By 2005 at least 90% of large enterprises will have
BPM in their enterprise nervous systems (0.9 probability). Enterprises that
continue to hard-code all flow control, or insist on manual process steps and
do not incorporate BPM�s benefits, will lose out to competitors that adopt BPM�
APPLICATIONS, DATA, AND TECHNOLOGY
It is a curious condition that this trio is left to the last in the list. For many years,
applications have been the starting point for investment and business improvement
efforts. Latest trends, supported by our recent supply chain survey, show
that this is no longer the case. Fewer companies are investing in applications.
Rather, they are investing in making those they already have work properly and
filling in the gaps � driven increasingly by the need to make processes work
more effectively. So it is that the processes that drive the improvements and the
role of applications become one of supporting the processes. In the authors�
experience, up to 85% of any company�s portfolio of IT projects are canceled
or redirected once the correct process focus can be identified.
THE BENEFIT CASE
With many companies striving to reach level 3, there must be a benefit case.
As we have seen, some companies still do not believe in this principle. The
authors firmly believe in, and have seen, the benefits of collaboration �across
the enterprise boundary,� from business unit to business unit or company to
company. Technology has removed many of the barriers, for example, to true
collaborative planning, forecasting, and replenishment (CPFR). The benefits
come in many guises:
_ Revenue improvement (+5 to 15%)
_ Resulting from reduced out-of-stocks and improved category
management
_ Cost reduction (15 to 30%)
_ For example, automotive manufacturers cut the cost per car by
$5,000 through better collaboration between consumers, suppliers,
and other partners (CSC automotive industry survey, 2001)
. RESULTS PROPEL A FIRM AND ITS BUSINESS
In what becomes a co-managed value chain, the overarching focus is brought
to value propositions for the business customer and end consumers that cannot
be matched by competitors. Seamless electronic linkages are pervasive, carrying
the kind of data and knowledge that cannot be garnered from any other business
network. Business process management (BPM) initiatives are present here, as
they become a high-priority item for those companies that desire to use BPM
to share vital business information, particularly from their enterprise resource
planning (ERP) systems, and find the next level of improvement. The dual
purposes are to increase operational performance and maximize the return on
the total assets employed in the extended enterprise. Businesses that have learned
the value of trust between a few carefully selected business allies use BPM tools
here, to evaluate and optimize their joint business processes and to eventually
create and nurture their competitive advantage against slower and less able
networks.
An example of the kind of progress that can be made is given by beer and
alcohol manufacturer Diageo plc. In a move aimed at increasing revenues, this
firm determined that North American network partners should not run out of
its popular Guinness beer. The firm decided to go through a supply chain
improvement effort that would include sharing of �real-time sales and replenishment
data with distributors.� The motive was to encourage these distributors
to work harder at sales and less at generating redundant analyses and worrying
over missing inventories. With the help of Manugistics Group, Inc. and that
company�s collaborative planning, forecasting, and replenishment software, the
firm linked its distributors into manufacturing sites in Ireland, the Caribbean,
and Africa. The system helps Diageo �combine weekly data from sales, on-hand
inventory, and distributors� receipts with promotional information to generate
detailed forecasts that are automatically sent via a Web application to 120
distributors, which represent 80% of Guinness� business.� (Bacheldor, 2003, p.
57).
With this information delivered on a timely basis, a real form of collaboration
can take place. Differences resulting from interpretation of the forecasts
can be resolved electronically, and when agreement is reached, the accepted
numbers can be loaded into a replenishment system that creates inventory levels
and sales. Diageo �expects to save up to $1.1 million in inventory reduction,
and reap some $600,000 in logistics benefits, with sales being boosted by 1%�
(Bacheldor, 2003, p. 57).
The ultimate objective of BPM and business process management systems
(BPMS) in this level becomes the capability to connect business firms and
important functions within those firms in order to gain a distinctive advantage
in the eyes of the most important customers and consumers. From sourcing to
customer care, BPM is used by multiple organizations to transfer crucial business
knowledge and enhance those processes of greatest importance first to the
supply chain constituents involved and then to the intended customer base.
Better coordination, shorter cycle times, errorless transactions, and optimized
process conditions become the metrics of importance in this level of progress.
Ultimately, the business allies find the means to increase operational performance
and further develop their competitive advantage
to value propositions for the business customer and end consumers that cannot
be matched by competitors. Seamless electronic linkages are pervasive, carrying
the kind of data and knowledge that cannot be garnered from any other business
network. Business process management (BPM) initiatives are present here, as
they become a high-priority item for those companies that desire to use BPM
to share vital business information, particularly from their enterprise resource
planning (ERP) systems, and find the next level of improvement. The dual
purposes are to increase operational performance and maximize the return on
the total assets employed in the extended enterprise. Businesses that have learned
the value of trust between a few carefully selected business allies use BPM tools
here, to evaluate and optimize their joint business processes and to eventually
create and nurture their competitive advantage against slower and less able
networks.
An example of the kind of progress that can be made is given by beer and
alcohol manufacturer Diageo plc. In a move aimed at increasing revenues, this
firm determined that North American network partners should not run out of
its popular Guinness beer. The firm decided to go through a supply chain
improvement effort that would include sharing of �real-time sales and replenishment
data with distributors.� The motive was to encourage these distributors
to work harder at sales and less at generating redundant analyses and worrying
over missing inventories. With the help of Manugistics Group, Inc. and that
company�s collaborative planning, forecasting, and replenishment software, the
firm linked its distributors into manufacturing sites in Ireland, the Caribbean,
and Africa. The system helps Diageo �combine weekly data from sales, on-hand
inventory, and distributors� receipts with promotional information to generate
detailed forecasts that are automatically sent via a Web application to 120
distributors, which represent 80% of Guinness� business.� (Bacheldor, 2003, p.
57).
With this information delivered on a timely basis, a real form of collaboration
can take place. Differences resulting from interpretation of the forecasts
can be resolved electronically, and when agreement is reached, the accepted
numbers can be loaded into a replenishment system that creates inventory levels
and sales. Diageo �expects to save up to $1.1 million in inventory reduction,
and reap some $600,000 in logistics benefits, with sales being boosted by 1%�
(Bacheldor, 2003, p. 57).
The ultimate objective of BPM and business process management systems
(BPMS) in this level becomes the capability to connect business firms and
important functions within those firms in order to gain a distinctive advantage
in the eyes of the most important customers and consumers. From sourcing to
customer care, BPM is used by multiple organizations to transfer crucial business
knowledge and enhance those processes of greatest importance first to the
supply chain constituents involved and then to the intended customer base.
Better coordination, shorter cycle times, errorless transactions, and optimized
process conditions become the metrics of importance in this level of progress.
Ultimately, the business allies find the means to increase operational performance
and further develop their competitive advantage
HARLEY-DAVIDSON�S EFFORT PAYS OFF
Some firms draw on knowledge and make it available electronically, as part of
an effort to bring enterprise efficiencies to their business allies. Harley-Davidson
took three years to develop and introduce its H-D Supplier Network. Companies
making everything from valves and gears to pedals and clamps can enter this
site and see production forecasts, account status, and two-dimensional drawings
of parts. Suppliers can also submit shipment notices and receive inventory
replenishment alerts, much faster and at less cost than previously. This portal
eliminates the expense of an electronic data interchange system and reduces the
time spent on such interactions from the typical 45 minutes to less than 15
minutes. �Nearly 300 of Harley�s 695 parts suppliers now log on to applications
through this supplier portal� (Sullivan, 2004, p. 47).
Known for its leading-edge practices, Harley has worked hard with its key
suppliers to develop systems and methods that benefit both parties. Through the
portal, which is provided to large and small firms, suppliers can manage payables
and receivables so closely that a company can get paid within seven days of
submitting an electronic invoice. On the other side, using a single material
resource planning system, Harley provides its suppliers with the kind of information
that leads to better handling of schedule changes, improved responsiveness
to the unexpected, better planned capacity, and improved delivery performance.
The parts centers, known inside Harley as Materials Velocity Centers,
are a key component of this portal access. Requirements for the several manufacturing
sites and the headquarters operation are coordinated so that a single
reliable message is relayed to those needing to know what is actually happening,
a key in any advanced-state supply chain communication network
an effort to bring enterprise efficiencies to their business allies. Harley-Davidson
took three years to develop and introduce its H-D Supplier Network. Companies
making everything from valves and gears to pedals and clamps can enter this
site and see production forecasts, account status, and two-dimensional drawings
of parts. Suppliers can also submit shipment notices and receive inventory
replenishment alerts, much faster and at less cost than previously. This portal
eliminates the expense of an electronic data interchange system and reduces the
time spent on such interactions from the typical 45 minutes to less than 15
minutes. �Nearly 300 of Harley�s 695 parts suppliers now log on to applications
through this supplier portal� (Sullivan, 2004, p. 47).
Known for its leading-edge practices, Harley has worked hard with its key
suppliers to develop systems and methods that benefit both parties. Through the
portal, which is provided to large and small firms, suppliers can manage payables
and receivables so closely that a company can get paid within seven days of
submitting an electronic invoice. On the other side, using a single material
resource planning system, Harley provides its suppliers with the kind of information
that leads to better handling of schedule changes, improved responsiveness
to the unexpected, better planned capacity, and improved delivery performance.
The parts centers, known inside Harley as Materials Velocity Centers,
are a key component of this portal access. Requirements for the several manufacturing
sites and the headquarters operation are coordinated so that a single
reliable message is relayed to those needing to know what is actually happening,
a key in any advanced-state supply chain communication network
. ADVANCED SUPPLY CHAIN MANAGEMENT REQUIRES
As a firm and its most trusted and closest business allies prepare to enter this
fourth level of the maturity model, they realize that a solid plan of attack is
necessary for success. It is not enough just to link firms that have completed
their internal homework and begun to work with external partners. There must
be a coordinated effort aimed at optimized conditions across the extended
enterprise and a willingness to share the vital knowledge that leads to differentiating
processes. Advanced supply chain management, therefore, cannot be
accomplished without a clear roadmap that identifies where the network is
headed and how the participants can measure the progress made and show the
results on the financial statements.
A series of obstacles will be encountered as this planning begins. First, there
will be the natural resistance to sharing valuable data over any electronic system.
This problem is dealt with by an early agreement on what can and will
be shared, what will be kept protected and proprietary within the various businesses
systems, and what security features will protect the data that are not to
be shared at all. Second, some of the participants will view the sharing of
knowledge as valuable, but will balk at the work necessary to bring BPMS to
their existing methodology as they lack the understanding of the values or
perceive the application as too difficult to accomplish.
Since all of the key players must be involved in network connectivity, time
should be spent to train, if necessary, and to develop the capability of all
constituents to participate in the data sharing. Key to this is the identification
and, if necessary, simplification of the interfacing processes. We strongly advise
the establishment of diagnostic labs or demonstration labs to discuss, explain,
and show the potential values to be added from such data sharing. These labs
serve the dual purpose of explaining what activities the participants will be
pursuing, while allowing them to test their hypotheses and get a feel for the end
results. In Chapter 9, we will explain how the participants can go further and
simulate the changed processes that result from the knowledge sharing, before
investing too heavily in execution.
Third, initially there will be poor understanding of how to deploy the tools
and methods, resulting in poor definition of what the early gains might be and
delays in execution. Once again, time spent on clarifying the roadmap and
establishing a set of driving metrics will aid immensely in getting the necessary
buy-in and provision of key resources to move forward. Fourth, there will be
some confusion regarding the central purposes, especially as some participants
view BPM as a means to drive automation and eliminate personnel, rather than
the route to process optimization and the best possible customer satisfaction.
Each of these complications can be defeated through an adequate plan for
BPM deployment and a roadmap that defines the resolution of fundamental
business issues plaguing each of the network members. While most of the
solutions will derive from interactive discussions and planning between the
participants, as will be described shortly, several software suppliers can add
value in this part of the effort and could play a role in development of the plan.
As mentioned, Manugistics was very helpful to Diageo.
Fuego, Inc. offers another example. This firm provides �templates for more
than 60 sets of processes across the financial-services, insurance, manufacturing,
and telecommunications industries.� Pegasystems, Inc. has �rolled out a
series of process templates that accelerate deployment by automating common
back-office processes while letting companies manage exceptions� (Greenfield
et al., 2004, p. 68).
For our purposes, we have selected Yantra as a service provider to follow,
as we use its experiences and cases studies to document what can be done across
enterprises and to establish the kinds of improvements that can be deployed and
the type of savings to be found after the effort is completed. Yantra has headquarters
in Tewksbury, Massachusetts and has a proven track record with such
firms as Best Buy, Allders Department Store, Rockport, Target, and US Transcom.
Its extensive suite of applications runs the gamut of supply chain needs, from
distributed order management and flow through provisioning to synchronized
fulfillment and reverse logistics. As we develop our deeper analysis into the
final levels of the maturity model and the best use of the SCOR� model, we
will use Yantra as an example to bring a sense of reality to what can and does
happen.
fourth level of the maturity model, they realize that a solid plan of attack is
necessary for success. It is not enough just to link firms that have completed
their internal homework and begun to work with external partners. There must
be a coordinated effort aimed at optimized conditions across the extended
enterprise and a willingness to share the vital knowledge that leads to differentiating
processes. Advanced supply chain management, therefore, cannot be
accomplished without a clear roadmap that identifies where the network is
headed and how the participants can measure the progress made and show the
results on the financial statements.
A series of obstacles will be encountered as this planning begins. First, there
will be the natural resistance to sharing valuable data over any electronic system.
This problem is dealt with by an early agreement on what can and will
be shared, what will be kept protected and proprietary within the various businesses
systems, and what security features will protect the data that are not to
be shared at all. Second, some of the participants will view the sharing of
knowledge as valuable, but will balk at the work necessary to bring BPMS to
their existing methodology as they lack the understanding of the values or
perceive the application as too difficult to accomplish.
Since all of the key players must be involved in network connectivity, time
should be spent to train, if necessary, and to develop the capability of all
constituents to participate in the data sharing. Key to this is the identification
and, if necessary, simplification of the interfacing processes. We strongly advise
the establishment of diagnostic labs or demonstration labs to discuss, explain,
and show the potential values to be added from such data sharing. These labs
serve the dual purpose of explaining what activities the participants will be
pursuing, while allowing them to test their hypotheses and get a feel for the end
results. In Chapter 9, we will explain how the participants can go further and
simulate the changed processes that result from the knowledge sharing, before
investing too heavily in execution.
Third, initially there will be poor understanding of how to deploy the tools
and methods, resulting in poor definition of what the early gains might be and
delays in execution. Once again, time spent on clarifying the roadmap and
establishing a set of driving metrics will aid immensely in getting the necessary
buy-in and provision of key resources to move forward. Fourth, there will be
some confusion regarding the central purposes, especially as some participants
view BPM as a means to drive automation and eliminate personnel, rather than
the route to process optimization and the best possible customer satisfaction.
Each of these complications can be defeated through an adequate plan for
BPM deployment and a roadmap that defines the resolution of fundamental
business issues plaguing each of the network members. While most of the
solutions will derive from interactive discussions and planning between the
participants, as will be described shortly, several software suppliers can add
value in this part of the effort and could play a role in development of the plan.
As mentioned, Manugistics was very helpful to Diageo.
Fuego, Inc. offers another example. This firm provides �templates for more
than 60 sets of processes across the financial-services, insurance, manufacturing,
and telecommunications industries.� Pegasystems, Inc. has �rolled out a
series of process templates that accelerate deployment by automating common
back-office processes while letting companies manage exceptions� (Greenfield
et al., 2004, p. 68).
For our purposes, we have selected Yantra as a service provider to follow,
as we use its experiences and cases studies to document what can be done across
enterprises and to establish the kinds of improvements that can be deployed and
the type of savings to be found after the effort is completed. Yantra has headquarters
in Tewksbury, Massachusetts and has a proven track record with such
firms as Best Buy, Allders Department Store, Rockport, Target, and US Transcom.
Its extensive suite of applications runs the gamut of supply chain needs, from
distributed order management and flow through provisioning to synchronized
fulfillment and reverse logistics. As we develop our deeper analysis into the
final levels of the maturity model and the best use of the SCOR� model, we
will use Yantra as an example to bring a sense of reality to what can and does
happen.
Achieving Dominance at Higher Levels of Progress
It became a joint sales opportunity for CellStar and its selected business ally,
Yantra. CellStar was to provide the seamless end-to-end delivery system with
the necessary process improvements, including fail-safe electronic linkage. Yantra
would introduce mechanisms that would improve the capability of the ERP
system and link it with suppliers and customers. The software and systems
company would also provide a business-rules-driven fulfillment and returns
engine, with rapid integration into CellStar�s business processes and systems.
Together, they would introduce the necessary visibility into the key threads in
the new system, as well as provide event monitoring and early notification of
any systemic problems.
Through the partnering that was to occur, CellStar believed it could provide
an unmatched value proposition for the potential business customers and eventual
consumers. The potential increase to CellStar revenue was estimated to be
$33 million by 2004. The business allies began by drawing process maps of the
end-to-end system that was to be enhanced and preparing a business case foundation
for the eventual actions.
The new processes
would be aimed at wireless carriers and meet their need for complex
logistics services, while introducing a �converting pipeline� that included capability
to handle all fulfillment services and reverse logistics (a key element
in the offering). Among the operational impacts, the system would control onhand
inventory and reduce selling, general, and administrative (SG&A) costs.
Particular attention was given to the proposed reverse logistics pipeline,
described by one of the process maps, depicted in Figure 6.4. Bringing special
capabilities in this important process step helped distinguish the final offering
in the eyes of the wireless customers. Through the Gatekeeper program, Yantra
provided a total call center and equipment fulfillment solution, with the ability
to link into suppliers and customers for necessary information. One unexpected
benefit of this solution was that the refurbished units in the replacements mix
increased from 20% to 38%, which helped to meet the large demand backlog.
The overall intention was to create a distinctive advantage for CellStar, using
technology as a strategic asset, which was accomplished and helped the firm
expand its sales effort into other business areas.
The partnering that took place has been a success, as the new capabilities
met or exceeded the intended objectives. CellStar introduced its new offering
under the banner name �Omnigistics.� It was presented as a set of solutions that
provided depth and breadth to a customer�s logistics strategy, turning the supply
chain into a competitive advantage. The suite included forward logistics, with
procurement and inventory management, order processing and reporting, fulfill-
Yantra. CellStar was to provide the seamless end-to-end delivery system with
the necessary process improvements, including fail-safe electronic linkage. Yantra
would introduce mechanisms that would improve the capability of the ERP
system and link it with suppliers and customers. The software and systems
company would also provide a business-rules-driven fulfillment and returns
engine, with rapid integration into CellStar�s business processes and systems.
Together, they would introduce the necessary visibility into the key threads in
the new system, as well as provide event monitoring and early notification of
any systemic problems.
Through the partnering that was to occur, CellStar believed it could provide
an unmatched value proposition for the potential business customers and eventual
consumers. The potential increase to CellStar revenue was estimated to be
$33 million by 2004. The business allies began by drawing process maps of the
end-to-end system that was to be enhanced and preparing a business case foundation
for the eventual actions.
The new processes
would be aimed at wireless carriers and meet their need for complex
logistics services, while introducing a �converting pipeline� that included capability
to handle all fulfillment services and reverse logistics (a key element
in the offering). Among the operational impacts, the system would control onhand
inventory and reduce selling, general, and administrative (SG&A) costs.
Particular attention was given to the proposed reverse logistics pipeline,
described by one of the process maps, depicted in Figure 6.4. Bringing special
capabilities in this important process step helped distinguish the final offering
in the eyes of the wireless customers. Through the Gatekeeper program, Yantra
provided a total call center and equipment fulfillment solution, with the ability
to link into suppliers and customers for necessary information. One unexpected
benefit of this solution was that the refurbished units in the replacements mix
increased from 20% to 38%, which helped to meet the large demand backlog.
The overall intention was to create a distinctive advantage for CellStar, using
technology as a strategic asset, which was accomplished and helped the firm
expand its sales effort into other business areas.
The partnering that took place has been a success, as the new capabilities
met or exceeded the intended objectives. CellStar introduced its new offering
under the banner name �Omnigistics.� It was presented as a set of solutions that
provided depth and breadth to a customer�s logistics strategy, turning the supply
chain into a competitive advantage. The suite included forward logistics, with
procurement and inventory management, order processing and reporting, fulfill-
PROVIDING ADDED VALUE FOR CELLSTAR
We begin with a case involving Yantra, as a provider of software for systems
integration, and CellStar, a provider of value-adding logistics and distribution
services for the wireless communication industry, headquartered in Dallas, Texas.
CellStar was once a part of Motorola, responsible for the packaging and delivery
of handheld telephones to a wide variety of industrial and consumer markets.
At the time of this case, the firm was independent and competing for business
in the U.S. wireless market. This market was typified by a leveling of the
handset growth curve and had become an industry increasingly viewed as offering
a commoditized set of products.
CellStar, as a major provider of packaging and distribution services for such
products, found itself in a situation in 2002 where it was competing to be a highvalue
strategic partner in a business environment characterized as a race for
competitive advantage. CellStar�s financial position was not robust, and the firm
was finding it very difficult to generate cash in this business environment, where
it was competing with other distributors such as Ingram Micro and Avnet;
contract manufacturers like Flextronics and Solectron; with transportation service
providers UPS, FedEx, and USPS; and third-party logistics providers Menlo
and Innotrac.
The company had an ERP system, but it had an inherent problem that limited
CellStar in its market ambitions, which included expansion of its customer base.
The problem revolved around its ERP system having been designed as a �system
of record� for a single enterprise process. As such, the firm was unable to
compete for business where real-time order, inventory, and shipment visibility
across the logistics service network was a requirement. XML messaging could
be used to extend its ERP reach, but only for one-to-one processes between
customer and provider. This condition created a reconciliation nightmare for
inventory tracking and offered no support for processes that extended beyond
arm�s reach. As a result, the company had a high cost structure to support any
many-to-many processes. Coordination of orders for product, service, installation,
provisioning, and delivery was a serious challenge. The firm was simply
not able to meet core requirements of new opportunities or respond adequately
to new business opportunities beyond wireless applications.
The business situation, which brought these conditions to a point needing
resolution and led to the resultant improvement, occurred when CellStar faced
an opportunity to provide Alltel, Cingular, and Sprint PCS with outsourced call
center, fulfillment and returns services. The initial offering was to cover upgrade
and replacement fulfillment of all equipment requests. Typical of today�s
complex delivery environment, the basic requirement was to support a virtual
and extended enterprise business model, from carrier stores and individual
customers through call centers, fulfillment sites, repair sites, and final product
disposition. The chosen provider, CellStar was told, would need to deal with
complex process rules, based on customer preferences and product availability
in multiple inventories. Time to market was a key metric that had to be reduced
or the company would lose the opportunity.
integration, and CellStar, a provider of value-adding logistics and distribution
services for the wireless communication industry, headquartered in Dallas, Texas.
CellStar was once a part of Motorola, responsible for the packaging and delivery
of handheld telephones to a wide variety of industrial and consumer markets.
At the time of this case, the firm was independent and competing for business
in the U.S. wireless market. This market was typified by a leveling of the
handset growth curve and had become an industry increasingly viewed as offering
a commoditized set of products.
CellStar, as a major provider of packaging and distribution services for such
products, found itself in a situation in 2002 where it was competing to be a highvalue
strategic partner in a business environment characterized as a race for
competitive advantage. CellStar�s financial position was not robust, and the firm
was finding it very difficult to generate cash in this business environment, where
it was competing with other distributors such as Ingram Micro and Avnet;
contract manufacturers like Flextronics and Solectron; with transportation service
providers UPS, FedEx, and USPS; and third-party logistics providers Menlo
and Innotrac.
The company had an ERP system, but it had an inherent problem that limited
CellStar in its market ambitions, which included expansion of its customer base.
The problem revolved around its ERP system having been designed as a �system
of record� for a single enterprise process. As such, the firm was unable to
compete for business where real-time order, inventory, and shipment visibility
across the logistics service network was a requirement. XML messaging could
be used to extend its ERP reach, but only for one-to-one processes between
customer and provider. This condition created a reconciliation nightmare for
inventory tracking and offered no support for processes that extended beyond
arm�s reach. As a result, the company had a high cost structure to support any
many-to-many processes. Coordination of orders for product, service, installation,
provisioning, and delivery was a serious challenge. The firm was simply
not able to meet core requirements of new opportunities or respond adequately
to new business opportunities beyond wireless applications.
The business situation, which brought these conditions to a point needing
resolution and led to the resultant improvement, occurred when CellStar faced
an opportunity to provide Alltel, Cingular, and Sprint PCS with outsourced call
center, fulfillment and returns services. The initial offering was to cover upgrade
and replacement fulfillment of all equipment requests. Typical of today�s
complex delivery environment, the basic requirement was to support a virtual
and extended enterprise business model, from carrier stores and individual
customers through call centers, fulfillment sites, repair sites, and final product
disposition. The chosen provider, CellStar was told, would need to deal with
complex process rules, based on customer preferences and product availability
in multiple inventories. Time to market was a key metric that had to be reduced
or the company would lose the opportunity.
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