Strategic Supply Chain Management - Supply Chain Online

CHAPTER 2 Core Discipline 2: Develop an End-to-End Process Architecture 61
with logistics specialists covering such operations as kitting, storage,
inspection, final tests, picking and packing, and customer delivery. 5
Alcatel Enterprise created four standard processes to guide UPS and to
ensure integration with its manufacturing, sourcing, and sales departments.
Instead of producing to stock based on forecasts, Alcatel used demand frequency,
volume, and item value to design differentiated processes that minimized
inventory risks while meeting service requirements:
◆ Configure to order applies to telephones with documentation,
cables, accessories, etc.
◆ Build to customer order applies to complete systems (chassis and
boards) built and integrated per customer order and requirements.
◆ Pick to order applies to high-volume printed circuit boards (PCBs).
◆ Purchase to consumer order applies to high-value peripherals
procured from external suppliers.
As a result of these changes, customer delivery-to-commit-date performance
improved from 65 percent in 1999 to 95 percent in 2001, whereas
total supply chain costs declined from 5.8 to 5.1 percent of revenue. 6
Product and Service Proliferation
Another key driver of supply chain complexity is product and service proliferation.
There are two primary causes. The first is a failure to phase out
or retire certain products as they are replaced by newly introduced alternatives.
The other cause is related to the availability of technologies that
allow organizations to “mass customize” their product offerings. These
systems, combined with increasingly high customer expectations for
products tailored to specific requirements, can lead to an enormous number
of product and service offerings. Most companies, therefore, find that
they tend to carry an ever-increasing number of products and services.
This means more items to plan, source, make, and deliver—all of which
drive supply chain costs and inventory.
Motorola’s mobile phone division wrestled with product proliferation.
Mobile phones have hundreds of components—aerials, battery connectors,
PCBs, connectors, integrated circuits, keyboards, liquid-crystal
display (LCD) screens, lenses, microphones, phone housings, screws,
speakers, and more. Planning for and procuring these components is a challenge
in this fast-moving market. Because of this complexity and the growing
cost of high inventory levels, Motorola analyzed its component mix,
seeking ways to cut back. As it turned out, the company was using far too
many nonstandard and product-specific components, many of which could