CASE-IN-POINT: AVAYA'S SUPPLY CHAIN TRANSFORMATION - ENABLED BY A VISION FOR PEOPLE, PROCESS, AND TECHNOLOGY

Transcription

1 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

2 Over 30 years experience in supply chain, operations, and materials management. BRYAN BALL Vice President and Group Director, Supply Chain, Retail and Operations Practices 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) 2

3 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 3

4 ABERDEEN RESEARCH METHODOLOGY

5 ABERDEEN MATURITY CLASS FRAMEWORK DEFINING THE BEST-IN-CLASS Selected Performance Criteria (KPI) Best-in-Class - Top 20% Organizational Goals Employee Performance Total Respondents Industry Average - Middle 50% Bench Strength Respondents are scored individually across KPI Laggard - Bottom 30% 5

6 ABERDEEN S RESEARCH METHODOLOGY PACE: END-USER INVESTIGATION PRESSURES ACTIONS CAPABILITIES ENABLERS! 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? 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. 6

7 CASE-IN-POINT: AVAYA'S SUPPLY CHAIN TRANSFORMATION - ENABLED BY A VISION FOR PEOPLE, PROCESS, AND TECHNOLOGY

8 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 8

9 BUSINESS PRESSURES DIFFERENT FOCUS FOR BEST-IN-CLASS VS. OTHERS Reduce supply chain operating costs 36% 61% Customer mandates for faster, more accurate, and more unique fulfillment 35% 42% Need for better integration between supply chain planning and supply chain execution 32% 36% Best-in-Class All Other Improve top line revenue 26% 50% 0% 10% 20% 30% 40% 50% 60% 70% Percentage of Respondents n=167 Source: Aberdeen Group, December 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? 9

10 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 10

11 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? 11

12 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 12

13 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. 13

14 Percentage of Respondents n=167 PLANNING STRATEGY MAPPING MULTIPLE ERP S TO 1 PLANNING TOOL 80% 70% 60% 69% Best-in-Class All Other 61% 50% 40% 30% 20% 10% 0% 39% All or partially - more than one transaction planning system (ERP/MRP etc.) mapped to a single supply chain planning system 31% None - planning is strictly driven from within each transaction planning system (ERP/MRP) Source: Aberdeen Group, December

15 BEST-IN-CLASS METRICS AHEAD 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 Average forecast accuracy at the Product Family level 81.5% 63.0% Gross Margin Improvement 2.70% 1.43% Additional Metric Average forecast accuracy at SKU level 73.5% 54.7% Source: Aberdeen Group, December 2014 Best-in-Class Performance demands attention to the capabilities and technologies they are using to achieve their superior results. 15

16 VALUE PYRAMID THE TRANSFORMATION VISION 16

17 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 17

18 THE 5 PHASES

19 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 19

20 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 20

21 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 21

22 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 22

23 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 23

24 RESULTS AND SUCCESS

25 PROCESS CAPABILITIES THE REAL STORY WHERE THE ADVANTAGES LIE Source: Aberdeen Group, December

26 SUCCESS - On Time Ship at 94% Ave Past Due Rev down $42M to $10M Top Performer Attrition 2.6% Engagement Survey scores up 57% 92% Net Promoter Score Improvement 26

27 SUCCESS - Table 1: Avaya Transformation Metrics Transformational Metrics Start of End of % 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 % Reduced EBITDA Risk $16M $1.5M 91% Supply Chain Annual Expense $255M $177M 31% GAAP Gross Margin 43.5% 57.1% 31% Source: Avaya & Aberdeen Group, December

28 CASH CSAT Profit SUCCESS - Best-in- Class AVAYA Supply Chain Exp/Rev Ratio 4.2% 4.0% Ann Gross Margin Increase 2.7% 3.4% On Time Ship 94% 94% Net Promoter Score Cash to Cash Cycle Inventory Turns

29 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 29

30 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 30

31 CONGRATULATIONS AVAYA! QUESTIONS? 31