IMPROVING EFFICIENCY IN THE TELECOMMUNICATIONS SUPPLY CHAIN
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1 Industry Solution Brief IMPROVING EFFICIENCY IN THE TELECOMMUNICATIONS SUPPLY CHAIN Achieving profitability within the telecommunications industry is more difficult than ever. Voice revenues continue to fall, but proceeds from data and other value-added services have been unable to make up the difference. Operators have little choice but to cut costs and improve operational efficiency. The supply chain, and in particular the management of mobile handsets by operators, is an area that has received little attention and therefore offers the potential for significant improvement. Indeed, it has been E2open s experience that by implementing improved supply chain control systems, operators can cut inventory costs and improve product availability simultaneously. e2open.com Industry Solution Brief
2 The Telecommunications Challenge: Accurate Forecasting, Adequate Stock With volatility comes risk, and I would argue that one of the key ways to mitigate supply chain risk in today s environment is through better use of shared information and greater use of collaborative platforms. We have the technology to do this; the question is, do we have the mindset in place to enable this sort of collaborative working? Martin Christopher, Emeritus Professor, Cranfield University The mobile industry is experiencing another fundamental shift in focus. The early focus was on building the network, which soon shifted to gaining new subscribers. As the markets matured and became saturated, the focus shifted to customer centricity, improved customer service, and developing new services that would reduce churn. Due to increasing pressure on revenue, the focus is now shifting towards operational efficiency and taking costs out of the organisation. However, most operators are simply not focusing sufficient resources on managing the physical aspects of handsets within their supply chains. Driven by innovation and fashion, handsets are often viewed simply as devices for increasing average revenue per user (ARPU) through long-term contracts and adding innovative features that drive data usage. Yet most operators lock up tens of millions of Euros in handset over stocks, obsolescence, shrinkage, poor allocations, mistimed purchases, and poor stock holding decisions all of which ultimately lead to stock outs and lost sales. There are many difficulties associated with managing the handset supply chain, the most significant of which is the inherently erratic, unpredictable demand. Handsets are hugely influenced by technology changes and fashion statements, and as a result product life cycles are becoming increasingly short. Products are introduced, mature, compete, and die within months. Additionally, product proliferation often leads to cannibalisation of sales and competitive promotional responses cause frequent spikes in demand. Because most telecommunications companies currently lack sophisticated organisational and technological skills, accurate forecasting and timely responses to demand changes are nearly impossible. The results are often product shortages and poor availability, forcing companies to develop allocation processes to share the pain. Of course, such allocation processes only exacerbate demand uncertainty, creating false demand signals across the extended supply chain. While these supply chain challenges are complex and multi-dimensional, the experiences of many best-in-class operators suggest that a structured approach to improving information sharing between handset providers and operators is a sensible start. When information sharing is reliable and timely, decision making improves significantly because data is more accurate and partners are able to collaborate to solve real-time issues. It effectively becomes a virtuous circle: collaborative, timely information is used to analyse trends more quickly; speedier responses are enabled, fuelling a more accurate forecasting process; and product availability is ultimately improved, boosting profits and building symbiotic partnerships. Figure 1, below, illustrates how information from all supply chain parties needs to be centralised. Figure 1: Telecom service provider/operator supply chain ecosystem. Page 2
3 The supply chain can be split into two major process areas: demand side and supply side. The demand side covers the fulfilment and distribution of goods as a result of customer orders. The requirement here is to create collaborative information sharing between retailers, distributors, and operators. The supply side covers the distribution of goods and information as a result of operator requests. These requests typically come from internal systems, terminals, or network equipment. The extended supply chain that supports these requests can be broken into five main areas: Inventories In even the simplest supply chain there are multiple inventories within the network. The challenge, then, is to find ways to minimise the amount of stock held in each inventory, while ensuring that customer demand is being consistently met. Vendor managed replenishment (VMR), collaborative forecasting (CPFR), and vendor managed inventory (VMI) are all techniques that when used correctly can successfully drive down costs and improve customer service levels. Original Equipment Manufacturers (OEMs) Traditionally, the telecommunications industry has been dominated by a fairly small number of OEMs (or NEMs, network equipment manufacturers). However, as global competition has increased and OEMs have sought out new ways to improve efficiency, the construction and choice of even simple components have become considerably more complex. Original Design Manufacturers (ODMs) As with most industries that focus on high-value, complex items, the skills required to design and build components are often best handled by specialist companies. As a result, network element and terminal providers are engaging more and more with ODMs to produce their high-volume, specialist components and devices. Logistics Because today s supply chains are more outsourced and complex than ever before, companies are relying more heavily on third-party logistics providers (3PLs) to cut costs and reduce time to market. The result is that the need for companies to gain visibility to in-transit goods and distribution options has increased dramatically. Upstream Suppliers Finally, nearly all telecommunications equipment has components produced by specialist suppliers. A shortage of even a single critical component can therefore have a significant impact on the operator s ability to meet demand, improve cash flow, and maintain customer satisfaction. The E2open Solution: Collaborative, Automated Business Processes At E2open, our technology links retail stores, distributors, operators, OEMs, NEMs, ODMs, handset providers, and accessory suppliers into a common information-based supply chain. Our technology is designed to operate between companies and to facilitate all the information and process integration necessary to create a true collaborative and responsive environment. In order to effectively manage the various players and processes within the telecommunications supply chain, integration and collaboration via a centralised information technology hub is imperative. E2open s services are delivered via an on-demand, software-as-a-service (SaaS) model, and orchestrate the complex business processes, data mapping, and transaction flows between Page 3
4 all relevant parties. All business processes are completely automated, function collaboratively in real time, and are able to leverage the existing ERP systems of both operators and trading parties. Even the simplest operator supply chains contain hundreds of trading parties and a multitude of complex business processes. E2open s proven implementation method, supported by industryexperienced consultants, ensures that all projects are delivered quickly and deliver a rapid return on investment (ROI). Our community of existing trading partners is the largest in the industry, and includes many industry-leading telecommunications providers. Immediate access to this preexisting partner community significantly reduces the time, money, and potential risk associated with the project. Implementing Best Practices to Drive Process Improvement and Profitability In approaching these complex strategic and operational challenges, E2open recommends a phased approach delivering incremental improvements across a predefined time line and manageable budget. By tackling simple but high impact problems first, projects with rapid ROI can be defined and executed. Based on our extensive supply chain experience working with both operators and suppliers across the telecommunications industry, E2open recommends the following set of steps: 1. Order Management E2open enhances the existing purchase order process by automating the order-to-invoice cycle across multiple tiers of trading partners. The complete cycle is electronic, enabling 100 percent process automation to ensure cost savings and increased speed and reliability. 2. Collaborative Forecasting E2open also enables collaborative-forecasting processes both within and between companies. Our model enables all parties to share sales in, sales out, call off, consumption, inventory, and forecast data, and fits with other industry initiatives such as CPFR. The E2open solution also enables user-defined parameters, invoking exception management and automated alerts when programmed events or activities are missed. Figure 2: A collaborative platform manages forecast collaboration with real-time visibility to business process exceptions. Page 4
5 3. Process Control Our technology also enables different processes for sub-sets of your trading partner community. For example, you may wish to transact on a simple order-to-invoice cycle with some partners, collaborate on more sophisticated VMI processes with others, and cooperate on forecast processes with the remainder of partners. 4. Continuous Improvement Finally, E2open solutions are overlaid with a sophisticated business intelligence engine, allowing users to interrogate the data and script individual reports on spend, delivery accuracy, stock levels, supplier conformance, and other related metrics. The Solution at Work: Real Business Benefits By leveraging the E2open solution, we have been able to synchronize supply with point-of-sale consumption, significantly cutting our operating costs and improving customer satisfaction. VP and CPO, leading global telecom service provider Leading Telecommunications Service Provider Reduces Days in Inventory by 30 Percent A leading telecommunications service provider grew rapidly through a series of mergers and acquisitions, resulting in the familiar challenges associated with swift expansion. The company suddenly found itself with a highly complex operating environment, compounded by varying levels of organizational and process maturity. With over 20 operating companies around the globe each operating with different processes across different lines of business the service provider struggled to manage hundreds of disjointed, one-to-one supplier relationships. Unable to collaborate or exchange time-sensitive information across trading partners, the company s multiple business enterprises suffered from high inventory levels, high operating costs, and poor customer service levels. Taking a phased approach to transforming its supply chain, the service provider first invested in the technology needed to scale partner connectivity and enable visibility. Once real-time visibility was established, the company was able to share demand information with customers and suppliers in order to more closely match supply with demand. Next, the company focused on establishing strong relationships with its trading partners, encouraging system adoption in order to scale collaborative inventory programs. By leveraging these collaborative tools, the company was able to implement flexible consignment programs, and to drive inventory management automation. Finally, the company s executives recognized the need to gain more control over their planning and execution processes, investing in automated monitoring and advanced analytics to promote continuous process improvement. By arming its executives with performance-based metrics, the company was able to improve overall supply chain efficiency and reduce inventory and operational costs. Since partnering with E2open, this telecommunications service provider has experienced the following benefits: 30 percent reduction in days of inventory Improved supplier performance, increasing supply assurance Greater than 20 percent increase in productivity across buying and planning functions Continued savings through volume pricing and tax advantage Across industries, E2open solutions are currently being used by Vodafone, Motorola, Boeing, Dell, Hitachi, Lenovo, IBM, and Seagate, among others. Page 5
6 For More Information For further information on the ways in which E2open software and services can be leveraged across the telecommunications industry, visit or E2open Europe Merlin House Brunel Road Theale Berkshire RG7 4AB P: F: Offices E2open U.S.A. Corporate Headquarters Foster City, CA Dallas, TX Austin, TX E2open Europe Reading, UK E2open Malaysia Kuala Lumpur, Malaysia E2open Taiwan Taipei, Taiwan E2open maintains locations in Malaysia, Taiwan, the United Kingdom and the United States. MMVIII E2open, Inc. E2open and the E2open logo are registered trademarks of E2open, Inc. All other marks are trademarks, service marks or registered trademarks of their respective owners. All rights reserved. Page 6
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