A Challenging Planning Environment
For consumers, the world of electronics is full of exciting new gadgets. For the companies involved in designing, manufacturing, and bringing these products to market, it is a very challenging environment. Driven by technological advances, increased global competition, retail pressures, and high consumer expectations, the pace of innovation keeps on accelerating for most electronics companies, leading to both an explosion in the number of variants and shorter product lifecycles.
Breaking Old Habits
The biggest challenge for one of E2open’s consumer electronics customers was being able to have the right product at the right time at the right location. Through a total of 20 national sales organizations, the company serves the European market with over 34,000 stores, fulfilling several million order lines a year. This represents many decisions that have to be made in a very uncertain and complex environment.
Unfortunately, the company struggled with retail orders not being fulfilled and customer sales missed – while, in other stores or regions, excess stock was left unsold. When the company investigated the root causes, it found a number of business practices that were contributing to the problem. First, the business was still very much driven by inaccurate forecasts and, in a market as dynamic as consumer electronics, demand changes far too rapidly to drive a supply chain with outdated and inaccurate forecasts. As a result, the sales organizations were fighting to fulfill their orders and, quite often, it did not matter how good a region had been at forecasting its demand, it was whoever was first or shouted the loudest who received products. Even worse, products that were actually reserved and committed to a certain retailer could still be taken away by an order that just came in – leading to major escalations as the retailer faced empty shelves of a product during a catalogue promotion and therefore was losing sales. Not only was this impacting the company’s sales in the short term, but its image in the industry was being hurt by its unreliability – and this was clearly having a long-term impact on its market share, as retailers started to move their business to more reliable suppliers.
As a consequence, the planning and fulfillment process was facing a general lack of trust, both internally but also with customers. Not to mention that this constant state of escalations was very time-consuming and kept planners and sales teams away from other more strategic activities.
Recognizing the need to break itself from this old way of doing things, the company started a major transformation project with the goal of implementing an organization, a planning solution, and processes with an end-to-end logic to maximize sales and customer satisfaction. It recognized that becoming a demand-driven organization would require changes throughout all functions and therefore ensured that this journey had the full support of the executive team. The company made two important changes:
- First, to support the end-to-end visibility and break down the silos in their own organization, the supply and demand planners were put together – ensuring that everyone worked in sync to serve the customers.
- The second step was to further align the company around one set of numbers and objective decisions. Rather than the multiple local systems of the past, the company invested in one application that became the central repository of the demand and supply picture, always up-to-date, and that supported the key function of order promising by allocating products to the market in the most transparent and objective way.
The key idea was to replace the heavily manual, unreliable, and ultimately unfair process by which orders used to be promised by a transparent, tool-supported process that would fulfill orders based on the company’s business rules. That meant that orders that have been properly forecasted now have higher priority over random, last-minute purchase orders, and also that orders that have been previously committed cannot be de-committed without a very serious reason. The E2open solution that was put in place can even adapt to changing business rules. For example, towards the end of the month or the quarter, the company releases allocated products that have not been called off yet – thereby maximizing revenues.
A Win-Win for the Company and Its Customers
This transformation towards a customer-driven organization has been a complete success. The key objective, reversing the company’s image as a not-so-reliable business partner, has been achieved: both the delivery performance and the number of changes to the promised date KPIs have improved significantly. Internally, the company is now a much more aligned organization, with less mistrust and ineffective second-guessing. As a result, the workload has shifted from escalation to more value-added activities. But also other key metrics such as inventory levels or inter-warehouse movements have improved, as better business decisions lead to better stock utilization. Last but not least, by having regained its customers’ trust, the company is starting to regain market share. And this is the ultimate measure of success!