Andrew Lewis - Electrocomponents

The Background…

Throughout a financially turbulent 2009, the Supply Chain at Electrocomponents plc needed to better integrate into the business and become more intelligent, agile and effective. Just two years into our long-term transformation journey, our key innovations have been to:

• Introduce formal forecasting.
• Embed leading Supply Chain thinking including demand planning and SIOP where many thought it couldn’t be done in an industry like ours.
• Integrate leading edge forecasting technology.
• Identify unsatisfied demand resulting in back orders, lost sales or substitutes.
• Transfer our Supply Chain from the UK to an international focus.

The Burning platform…

Our Electronics Division’s strategy to expand our global range by 120K products over the next 2 years required a step change in forecast accuracy and safety stock policies. This in turn would  support the high level of New Product Introductions (NPI) that would be involved. Our outdated processes had been designed to cope with circa. 5,000NPI/annum and had to be changed so  that they would be capable of coping with 5,000NPI/month.

A key challenge for the Supply Chain in most organizations is aligning the business behind a single set of numbers. We chose a SIOP process rather than S&OP process to manage this because we do not consider inventory to be waste, unwanted or an accident in our business. Inventory  is fundamental to our business model as a distributor.

Above all else, it has been real innovations like positioning our Supply Chain within a Demand Driven Value Network , SIOP, and the development of true lost demand that have started to shape a truly agile and intelligent global Supply Chain at RS Components. In the future we hope to integrate trend software drawing from our eCommerce site to further strengthen our demand signals.

The payback…

Our Supply Chain performance has improved with:

• Increased service to our customers whilst adding nearly 60,000 products per year.
• Process 40,000 parcels per day (1 every 2 seconds), and deliver 99.8% on time in full.
• Maintain stock turn and increase cash flow during the difficult transition period.
• We have gone from 5,000 New Product Introductions (NPI)/year to 5,000 NPI/month!
• Stock Availability greater than 97.5%.
• Reduced Supply Chain cost by 9.5%.

We have learned a lot of lessons, some of them the hard way, as we have taken this journey and I look forward to sharing our experiences with you at IBF’s Demand Planning & Forecasting: Best Practices Conference in Dallas, Texas.

Andrew Lewis
Head of Global Supply Chain Planning
Electrocomponents plc

Hear Andrew Speak At:

Constance Korol

As we ease out of crisis mode and plan for more stable waters, we find ourselves asking  how  can we take advantage of the upturn, and what will it take to do so? Going back to my undergraduate days of pursuing my degree in Education makes me think of the structure of a lesson plan.  The lesson plan clearly identifies the mission statement, goals and objectives, for both the long and short-term. This brings to the forefront the questions of where to obtain the resources, the drive, and best practices to implement this plan. Lastly, of course, would be to determine a way to track and measure the results in order to evaluate the successes or shortcomings of this lesson plan. Common questions that professionals find themselves asking at this stage usually include:  Where do I start? What should be my primary focus? What areas need the most work, and how do I communicate this to others?  Let’s start with something that health care professionals refer to as a SOAP note or:

Subjective

Objective

Assessment

Plan.

The “S” stands for subjective and is defined by Wikipedia as, “The patient’s current condition in narrative form. The history or state of experienced symptoms are recorded in the patient’s own words. It will include all pertinent and negative symptoms under review of body systems.” If we translate this to business conditions, we must describe the state of affairs using our own words. For example, “Our team that produces the forecast continues to struggle, especially with today’s greater variation in demand.  This contributes to our company’s cash flow troubles and as a result, we  continue to lose customers for some products due to out of stocks.   For other products, much of our money is tied up into inventory that is slow to sell?”

Going back to our Healthcare example, the next letter in our acronym is “O” or objective. The objective component includes:

• Vital signs
• Findings from physical examinations, such as posture, bruising, and abnormalities
• Results from laboratory tests
• Measurements, such as age and weight of the patient.

This is where you stick to the facts, and only the facts. In business terms you may ask, “What is the company’s current forecast accuracy on an aggregate and SKU level by location, inventory levels, customer fulfillment rates, orders, shipments, and other important data and metrics. Also, is there a consensus process or silo based forecasting process?   If there is a consensus forecast, is it being used or overridden?”  First you need to jot all the facts down, no matter how nasty and terrible they may look.

Then there is “A” which stands for assessment. This is a quick summary of the patient’s main symptoms and diagnosis including a differential diagnosis, a list of other possible diagnoses, usually in order of most to least likely. Translating this back to our business example would lead to answers such as,  “Our forecast error is high because there is no input from sales and marketing.”  “There are no incentives in place to improve the forecast and no reward structure.” Or, “upper management does not use the baseline forecasts, where instead they create an unvalidated goal as the forecast.” Furthermore, those with forecasting responsibilities are not certified and properly trained for the task at hand.” Think of this area as the broken rib that is causing internal bleeding throughout the body. Once addressed, the body as a whole will start to heal and run at a normal pace. Find the broken rib at your company.

So now we have reached the “P” or the point of laying out your  plan. The lesson plan, with goals and objectives which will empower team members by sharpening the tools needed for achievement. This is not the easy part in health care or business. It takes time, research, and patience.  There may be a need for many revisions in addition to utilizing networks such as the IBF Membership Network for advice.  The lesson plan is not only for you, but for your team as well. What will you teach your team in your weekly meetings?  What will they be teaching you? At the end of this journey, you should be able to teach a whole community the lessons that you have learned and developed as best practices. Collectively we’re living through a very tough economic time, and together, we can still document our rough patches, lessons learned, as well as accomplishments, all for a greater good for the company and our professional careers.

Therefore, starting with a pen and napkin, then moving over to the computer and opening up a blank word document, you can develop a lesson plan for yourself and team that can ensure no opportunity is lost as the market comes back to life.  Then, perhaps by New Years, we will not have a hangover experience, but an experience of celebration.

Constance Korol
Senior Marketing Manager
Institute of Business Forecasting & Planning

Mark Lawless

At a time where recessionary forces are at work, many questions are being asked about how businesses have evolved their management practices and how this has affected their many stakeholders. The extent and depth of the recession has surprised many, and expansion of the ranks of the unemployed has hampered demand, seriously affecting patterns of demand and the economic performance of businesses in all industries around the globe. For the U.S. with its consumption dominated gross domestic product, this has had a devastating effect on economic conditions.

The competition for lower cost, higher profit margins, and supply chain efficiency has resulted in a continuous shifting of production and service resources from geographic region to geographic region throughout the globe. The economic theory is that as these jobs and resources move, the existing regional resources are moved to their next highest and best use. And in this context, the global economic welfare and economic performance is maximized. But the emerging evidence is that while this may be true, it does not necessarily imply that everyone benefits long-term from such an approach. There are regional winners as losers as the global economic dance continues. Building global economic and business growth may have many winners and losers at different moments in time. Structural and frictional unemployment, reductions in household income as workers and resources move to lower compensated jobs and industries, reduction in availability of healthcare as a result of the relative cost of health insurance, and reduced retirement program availability are all factors that are challenging workers and whole economies and their long-term goals.

One has to ask the extent to which the supply chain strategies that have been adopted to optimize the performance of companies that have evolved from regional and national companies to global companies – outsourcing production and services, continuously pursuing more efficient and lower cost locations – may have contributed to a pattern of shift of economic wellbeing across geopolitical boundaries. Do companies have any obligation to the welfare of the communities and geopolitical entities upon whose resources they draw, or is it a relationship solely of a “transactional” nature? Is unbridled pursuit of efficient supply chain development in the long-term economic interest of the countries affected, or does it simply pass the economic baton from one region of the world to another?

These are challenging issues in these challenging times. The long-term prospects for the many regions of the world, the economic welfare of their populations, the sharing of economic wealth, and the interests of the companies operating within these regions are all mixed in the evolving and ever-changing economic brew. And a key driver of these forces is the supply chain and how it is managed and developed by the companies serving their investors and stakeholders.

What do you think?