avaya's supply chain transformation
Transcript of avaya's supply chain transformation
CASE-IN-POINT: AVAYA'S SUPPLY
CHAIN TRANSFORMATION -
ENABLED BY A VISION FOR PEOPLE,
PROCESS, AND TECHNOLOGY April, 2015
Bryan Ball, Vice President and Group Director,
Supply Chain, Retail and Operations Practices
Benji Green, Director Global Ops, Sales, Supply, & Inventory
Planning, Avaya
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BRYAN
BALL
Vice President
and Group
Director,
Supply Chain,
Retail and
Operations
Practices
Over 30 years experience in supply
chain, operations, and materials
management.
Industry Experience:
• VP of Supply Chain for FuelCell Energy, Inc
• VP of Global Supply Chain for Fluidmaster, Inc
• Director of Supply Chain for Dover Industries Unified Brands
• Leadership roles at Stanley Mechanics Tools, i2 Technologies
and Dover Corp. – Unified Brands
Education and Certifications:
• Bachelors in Industrial Engineering and Masters in Industrial
Engineering from Auburn University
• American Production and Inventory Control Society Certified
(APICS)
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BENJI
GREEN
Director,
Global Ops,
Sales, Supply,
& Inventory
Planning,
Avaya
15 years Supply Chain & Operations
experience in Integrated Business
Planning; Demand, Supply, Inventory,
Product, & Financial Risk
Industry Experience:
• Director of Global Supply Chain Operations; Avaya
• Sr. Manager of Americas Supply Planning; Lenovo
• Manager of Global Peripherals Demand Planning; IBM
• Supply Chain Strategy Analysts; Accenture
Education and Certifications:
• Masters in Industrial Engineering; Georgia Tech
• Bachelors Degree; University of North Carolina
• Certified Supply Chain Professional, APICS
ABERDEEN RESEARCH
METHODOLOGY
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ABERDEEN MATURITY CLASS FRAMEWORK
DEFINING THE BEST-IN-CLASS
Selected Performance
Criteria (KPI)
Organizational Goals
Employee Performance
Bench Strength
Total
Respondents
- Top 20%
- Middle 50%
- Bottom 30%Respondents are scored
individually across KPI
Best-in-Class
Industry
Average
Laggard
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ABERDEEN’S RESEARCH METHODOLOGY
PACE: END-USER INVESTIGATION
PRESSURES ACTIONS CAPABILITIES ENABLERS
External and internal
forces that impact an
organization’s market
position,
competitiveness, or
business operations.
The strategic
approaches that an
organization takes in
response to industry
pressures.
The business capabilities
(organizational, process,
knowledge management
etc.) required to execute
corporate strategy.
The key technology
solutions required to
support the
organization’s business
practices.
What is causing
organizations to think
differently?
What strategies are
they using to respond
to pressures?
Why are they achieving
greater success?
What technologies and
services are enabling
them to succeed?
!
CASE-IN-POINT: AVAYA'S SUPPLY
CHAIN TRANSFORMATION - ENABLED
BY A VISION FOR PEOPLE, PROCESS,
AND TECHNOLOGY
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INTRODUCTION
THE AVAYA CASE STUDY
• Welcome
• Why this case study? Seldom does a case study involve a complete transformation
• For our community -a real world story - a picture is worth 1000 words!
• The Avaya story could be described as the critical intersection of basic needs and a vision, into a complete transformation. All the elements.
• The Webinar will cover:– The circumstances and challenges that Avaya faced on their journey
– The catalysts for transformational change, their approach and evolution
– The dramatic results that they were able to achieve
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BUSINESS PRESSURES
DIFFERENT FOCUS FOR BEST-IN-CLASS VS. OTHERS
50%
36%
35%
36%
26%
32%
42%
61%
0% 10% 20% 30% 40% 50% 60% 70%
Improve top line revenue
Need for better integration between supply chainplanning and supply chain execution
Customer mandates for faster, more accurate, andmore unique fulfillment
Reduce supply chain operating costs
Percentage of Respondents n=167
Best-in-Class
All Other
Source: Aberdeen Group, December 2014
- Where is your organization? Reacting to events that shape your schedule?
- More proactive - pulling together the story to make critical decisions?
- Or - Top of the value pyramid – ability to monitor and make decisions predictively
- Questions Avaya asked themselves – Where are we? Where do we want to be?
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THE START: AVAYA’S SITUATION –
ABOUT AVAYA
• A leading global provider of business collaboration and communication with over $4B Annual Revenue
• Headquarters in Santa Clara, Singapore, Basking Ridge, Galway, & RTP
• Unified communications . . .• Voice & Telephony Infrastructure• Real-time Video Collaboration• Contact Center Solutions• Data Networking• Implementation and Integration Services
• Long legacy of Open-Source innovation from AT&T to Lucent to Avaya
• Over 15 corporate acquisitions & strategic partnerships since 2001…• Nortel Enterprise Solutions Purchase• Radvision Acquisition• Strategic Partnership Hewlett Packard
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THE START: AVAYA’S SITUATION
• Recent Nortel acquisition;
– More than doubled MRP's
– New Organization
– New People
– Disparate processes
– Primary issue after the Nortel acquisition was the lack of visibility across
multiple instances of the existing ERP system for the Nortel side of the
business.
• Supply Chain Headquarters moved from Colorado to North
Carolina
– New Leadership
– New Organization
– New People
• No consolidated planning tool
• Everything was ‘hard work’ and ‘low value’
• We had a tool, but was it the right one and how do we leverage it?
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TRANSFORMATION
PLAN AND APPROACH
• Approach
– Technology decision
– Key organizational changes provided a catalyst for the
transformation
– Hired domain experts for key positions including
Logistics, Procurement, Planning, Maintenance, and
Strategy
– Leadership not only had a vision of what needed to
happen, but what it would look like when successful.
– Firefighting mode at first by design to drive hands on and
high accountability
• Divided into 5 phases
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AVAYA’S PLANNING STRATEGY –
SOLUTION DECISION
• Requirements– One common view for the business
• Issues - process—decision– Blending process of the two cultures, the dilemma of which tool as the enabler
– Prior where some success had already occurred or new for all
– Chose Kinaxis – good partner – criteria
• Criteria– Flexibility – user controlled versus solutions that were not configurable. They were able
to create a new workbook in an hour with the established Avaya approach.
– Price – important, but not the sole criteria. Avaya was already invested, which made it an easier choice.
– Connectivity – across multiple boxes and speed of connectivity. This was a must have criteria to create visibility in order to get their arms around the business.
– Real-time adaptability – which created flexibility in the analysis to plan and foresee.
– Configurable and user friendly – allowing for user design.
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PLANNING STRATEGY
MAPPING MULTIPLE ERP’S TO “1” PLANNING TOOL
69%
31%
39%
61%
0%
10%
20%
30%
40%
50%
60%
70%
80%
All or partially - more than onetransaction planning system
(ERP/MRP etc.) mapped to a singlesupply chain planning system
None - planning is strictly drivenfrom within each transactionplanning system (ERP/MRP)
Per
cen
tage
of
Res
po
nd
ents
n=1
67
Best-in-Class
All Other
Source: Aberdeen Group, December 2014
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BEST-IN-CLASS METRICSAHEAD IN EVERY CATEGORY – BUSINESS AND
PROCESS
Performance Metric Best-in-Class All Others
Average customer service level % 93.7% 85.3%
Average cash conversion cycle - Days 44 65
Average forecast accuracy at the
Product Family level81.5% 63.0%
Gross Margin Improvement 2.70% 1.43%
Additional Metric
Average forecast accuracy at SKU level 73.5% 54.7%
Best-in-Class Performance demands attention to the capabilities and
technologies they are using to achieve their superior results.
Source: Aberdeen Group, December 2014
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VALUE PYRAMID
THE TRANSFORMATION VISION
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VALUE PYRAMID
DISCUSSION POINTS – CRITICAL TO VISION
• What is ‘Value’– “External Value” = Customer Value
– “Internal Value” = Revenue & Profit, Employee Satisfaction
• Why is the Value Pyramid so important
• Employees and Management need a realistic view of where they are within the Pyramid
• Spectrum, a Journey, consistently from Low Value to High Value
• What is the result of Value Pyramid– Foresight
– Predictability
– Balance
– Action
THE 5 PHASES
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HOW WE GOT THERE: PHASE I
• Basic Rapid Response Implementation:
Connected Outsourced Contract Manufacturers
• Response to Change in Sourcing Strategy
• Not accompanied by comprehensive Strategy
• No Business or Process Integration
• Minimal Benefits
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HOW WE GOT THERE: PHASE II
• 3 years after initial implementation
• New leadership had Vision of an advanced Planning
Environment based on previous experience
• Selection and Re-Commitment to Rapid Response
• Addressed most critical issue first: Supply
Forecasting & Supply Visibility
• With Supply visibility comes basic Inventory visibility
and Transportation planning
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HOW WE GOT THERE: PHASE III
• Sales & Operations Planning Phase I
• Focused on Demand Planning process
standardization, integration, & automation
• ‘Flattened’ plannable part numbers
• Automated SAP forecast load & validation
• Integrated Distributor sales out & inventory data
• Concurrent with Vendor Managed Inventory
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HOW WE GOT THERE: PHASE IV
• Sales & Operations Planning Phase II
• ‘Flattened’ Distributor data to align planning data
• Standardized Lifecycle Management, Transition Keys, Announce & End of Sale process, SKU paired analytics
• Integrated Sales Funnel Data
• ‘What If’ Scenario Modeling
• Alerts to standardize process & focus value-add
• Dashboards to present data & speed analysis
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HOW WE GOT THERE: PHASE V
• Product Costs Reductions; driving procurement
focus on volume/spend & integrating projections
• Integrated BOM data into Rapid Response
• Transportation ‘sandbox’ enabled supply
planners to model changes in freight method
• Created Distributor Predictive Model, quantifying
Distributor over and under stocking of by SKU
• Dashboards extended
RESULTS AND SUCCESS
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PROCESS CAPABILITIES
THE REAL STORY – WHERE THE
ADVANTAGES LIE
Source: Aberdeen Group, December 2014
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SUCCESS -
• Top Performer Attrition 2.6%
• Engagement Survey scores up 57%
92% Net Promoter Score Improvement
• On Time Ship at 94%
• Ave Past Due Rev down $42M to $10M
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SUCCESS -
Table 1: Avaya Transformation Metrics
Source: Avaya & Aberdeen Group, December 2014
Transformational Metrics Start of
2011
End of
2014
%
Improvement Gross Inventory Reduction $286M $116M 60%
Improved Inventory Turns 5.8 turns 9.2 turns 59%
Cash-to-Cash Cycle 44 days 26 days 41%
Average Past Due Shipment $42M $10M 76%
Net Promoter Score Improvement 26 50 92%
Reduced EBITDA Risk $16M $1.5M 91%
Supply Chain Annual Expense $255M $177M 31%
GAAP Gross Margin 43.5% 57.1% 31%
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• Supply Chain Exp/Rev Ratio
Best-in-
ClassAVAYA
SUCCESS -
4.2% 4.0%
• On Time Ship 94% 94%
• Cash to Cash Cycle 44 26
• Inventory Turns 10 9.2
• Net Promoter Score 50 50
Pro
fit
• Ann Gross Margin Increase 2.7% 3.4%
CS
AT
CA
SH
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SUCCESS
TRANSFORMATION IMPACT
• Transformative levels of improvement and not just incremental
• Also exceeded their goal of employee turnover
• One of the most heavily touted outcomes of the entire
transformation - employee empowerment and engagement
• Passion about the level of engagement and employee satisfaction
that came out of the transformation
• Moved largely to the “High Value” pyramid
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KEY TAKEAWAYS
HIGHLY SUCCESSFUL TRANSFORMATION
• Success due to the leadership and the vision that encompassed all areas of the business relative to people, process, and technology
• People - The move from the low value pyramid to the high value pyramid - enabled by the technology, but it took the vision and leadership of the team to leverage their capabilities to fullest extent.
• Process – Avaya initially utilized their solution more for lower value pyramid types of incremental improvements. The vision to span all ERP instances and to view the supply chain in one end-to-end model, is what dramatically changed their process from reactive to proactive.
• Technology - Having the right technology to provide a holistic end-to-end view was essential to Avaya's success. Without the solution as the enabler, it would have been very difficult to move to the high value pyramid.
• Leadership and Vision - having a vision and the experience to know what it should look like when you get there was a tremendous catalyst and driver behind the supply chain transformation
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CONGRATULATIONS AVAYA!
QUESTIONS?