Uncovering the Mystery of the Dreaded Stock-Out at CES

Mark Payne, Vice President of Operations for Linksys, a Division of Cisco, will be uncovering the mystery of the dreaded stock-out at the Consumer Electronics Supply Chain Academy (CESCA), Jan 8, 2010 in Las Vegas.  Balancing inventory in a multi-tier infrastructure of retail stores, DCs and Manufacturer’s DC represents an optimization challenge for CE manufacturers and their customers, demanding visibility of inventory at all nodes of the supply chain and frequent sharing of point-of-sale data.

Payne is responsible for all of the company’s supply chain departments and their activities worldwide including manufacturing, logistics, procurement, forecasting and planning, information technology, engineering services, call centers and real estate. He has written the business book “Make the Numbers, Don’t Chase the Numbers” (2007), which outlines a process that is designed to allow a business to continuously plan, decide, and adjust future demand and supply activity in order to maximize profit potential.

How would you describe the supply chain management organization at Cisco Consumer Business Group?

It consists of Sales & Operations Planning, Worldwide Logistics, Supplier Management, Central Engineering Services and Master Data teams.  These teams manage an integrated master data process, planning process and transaction process that keeps SKU inventory flowing at a balanced rate between raw material suppliers and the end-user customer.

What have been some of the successes achieved by your organization through supply chain strategies?

Our group has won awards from Ventana, Managing Automation and APICs.  Cisco Consumer Business Group was recognized for significant improvements in multiple-operational metrics.  Metrics taken from a case study in 2008 state the following improvements: Inventory reduction of 35%.  Customer-service levels increased by 60%.  Expediting was reduced by 90%.  Reduction of excess and obsolete inventory was lowered by 40%.  Supplier fill rates increased from 65% to 95%.  These metrics were made possible by a supply chain strategy that has an integrated master data, planning and transactional processes that monitor, manage and balance the inventory flow of every SKU offered in the global product portfolio.

What current collaborative practices with retail have proved beneficial to the organization?

Co-planning inventory flow with our top retail customers is a standard practice that keeps the end-user customer in stock.  Knowing promotion schedules and in-stock requirements drive an optimal answer to keep the proper levels of inventory on the shelf.

How would you describe the risk in the supply chain and how are you mitigating them?

biggest risk in the supply chain for the consumer business is having too much or not enough inventory at any given time for every SKU that is offered to the marketplace.  We mitigate risk by monitoring the inventory flow for every SKU we offer the global marketplace every week.  If a SKU “over sells” or “under sells”, is “under produced” or “over produced”, has a “quality hol” or a “return” from the customer, an adjustment is made within our systems to put the SKU back in a balanced future state.

How different will the CE supply chain look in five years?

Over the next five years I believe collaboration technologies will allow unprecedented visibility into the entire CE supply chain.  From the end-user customer’s purchase at any store to the raw material supplier at the beginning of the supply chain, the entire flow of physical movement will be seen on a real-time basis.

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