Supply Chain Transformation: Avaya’s Journey

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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

Transcript of Supply Chain Transformation: Avaya’s Journey

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

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BRYAN

BALL

Vice President

and Group

Director,

Supply Chain,

Retail and

Operations

Practices

Over 30 years experience in supply

chain, operations, and materials

management.

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)

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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

ABERDEEN RESEARCH

METHODOLOGY

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ABERDEEN MATURITY CLASS FRAMEWORK

DEFINING THE BEST-IN-CLASS

Selected Performance

Criteria (KPI)

Organizational Goals

Employee Performance

Bench Strength

Total

Respondents

- Top 20%

- Middle 50%

- Bottom 30%Respondents are scored

individually across KPI

Best-in-Class

Industry

Average

Laggard

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ABERDEEN’S RESEARCH METHODOLOGY

PACE: END-USER INVESTIGATION

PRESSURES ACTIONS CAPABILITIES ENABLERS

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.

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?

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CASE-IN-POINT: AVAYA'S SUPPLY

CHAIN TRANSFORMATION - ENABLED

BY A VISION FOR PEOPLE, PROCESS,

AND TECHNOLOGY

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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

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BUSINESS PRESSURES

DIFFERENT FOCUS FOR BEST-IN-CLASS VS. OTHERS

50%

36%

35%

36%

26%

32%

42%

61%

0% 10% 20% 30% 40% 50% 60% 70%

Improve top line revenue

Need for better integration between supply chainplanning and supply chain execution

Customer mandates for faster, more accurate, andmore unique fulfillment

Reduce supply chain operating costs

Percentage of Respondents n=167

Best-in-Class

All Other

Source: Aberdeen Group, December 2014

- 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?

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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

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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?

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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

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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.

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PLANNING STRATEGY

MAPPING MULTIPLE ERP’S TO “1” PLANNING TOOL

69%

31%

39%

61%

0%

10%

20%

30%

40%

50%

60%

70%

80%

All or partially - more than onetransaction planning system

(ERP/MRP etc.) mapped to a singlesupply chain planning system

None - planning is strictly drivenfrom within each transactionplanning system (ERP/MRP)

Per

cen

tage

of

Res

po

nd

ents

n=1

67

Best-in-Class

All Other

Source: Aberdeen Group, December 2014

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BEST-IN-CLASS METRICSAHEAD 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 44 65

Average forecast accuracy at the

Product Family level81.5% 63.0%

Gross Margin Improvement 2.70% 1.43%

Additional Metric

Average forecast accuracy at SKU level 73.5% 54.7%

Best-in-Class Performance demands attention to the capabilities and

technologies they are using to achieve their superior results.

Source: Aberdeen Group, December 2014

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VALUE PYRAMID

THE TRANSFORMATION VISION

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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

THE 5 PHASES

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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

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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

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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

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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

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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

RESULTS AND SUCCESS

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PROCESS CAPABILITIES

THE REAL STORY – WHERE THE

ADVANTAGES LIE

Source: Aberdeen Group, December 2014

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SUCCESS -

• Top Performer Attrition 2.6%

• Engagement Survey scores up 57%

92% Net Promoter Score Improvement

• On Time Ship at 94%

• Ave Past Due Rev down $42M to $10M

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SUCCESS -

Table 1: Avaya Transformation Metrics

Source: Avaya & Aberdeen Group, December 2014

Transformational Metrics Start of

2011

End of

2014

%

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 26 50 92%

Reduced EBITDA Risk $16M $1.5M 91%

Supply Chain Annual Expense $255M $177M 31%

GAAP Gross Margin 43.5% 57.1% 31%

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• Supply Chain Exp/Rev Ratio

Best-in-

ClassAVAYA

SUCCESS -

4.2% 4.0%

• On Time Ship 94% 94%

• Cash to Cash Cycle 44 26

• Inventory Turns 10 9.2

• Net Promoter Score 50 50

Pro

fit

• Ann Gross Margin Increase 2.7% 3.4%

CS

AT

CA

SH

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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

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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

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CONGRATULATIONS AVAYA!

QUESTIONS?