Strategic Supply Chain Management - Supply Chain Online

112 Strategic Supply Chain Management
Agere management expected its planners to accept most of the system’s recommendations.
Instead, they were overriding the system more than 90 percent
of the time. 4
Why Agere’s product-focused business units were responsible for
acknowledging orders. Planners within these decentralized business units
changed order due dates constantly—in response, they explained, to changing
customer needs. In other words, the planners’information was more current
than that of the planning system, and overrides were necessary to meet
the performance goals for order delivery.
Agere also had a centralized planning group responsible for allocating
production capacity to the various product groups. Not surprisingly, this
group had a hard time responding to the constant stream of changes in order
priority. This turmoil spilled into manufacturing, where production managers
had to reshuffle their production schedules constantly to respond to
the newest set of priorities—an inefficient approach, to say the least.
When he investigated the root cause of this inefficiency, Peter Kelly,
executive vice president, global operations group, found that while some
reschedules were indeed due to actual changes in customer requirements,
in most cases planners were deliberately “gaming” the system to secure a
higher priority for the orders they were managing.
Kelly wanted a planning process that was optimized at the highest
level of the supply chain, not one geared to the needs of the various business
units. He felt that effective supply chain planning would never occur
as long as localized business-unit pressures and incentives drove the planners.
To solve the problem, Kelly created a new supply chain planning
organization that centralized planning activities and the responsibility for
order management.
Within six months, plan overrides had declined from more than 90
percent to less than 50 percent. And as the number of overrides decreased,
the time spent by planners on manual calculations and reprioritization was
reduced greatly. The planning group became much more focused on
ensuring data accuracy within both the planning system and customer
orders, dramatically improving shipping performance from 75 to 95 percent
and inventory turns by two turns during the next 12 months.
Agere had a clear catalyst for undertaking a major organizational
restructuring: a failure to leverage its technology investment and a processdriven
operational improvement plan with clear ownership. But you don’t
have to wait for an adverse event to prod you into refitting the organization
to your supply chain processes. Where should you start First, put aside
any organizational charts and focus instead on the activities within your