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  • 1. Reprinted from edge Ryder’s business magazine Transportation and supply chain a Ryder System, Inc. publication solutions for the bottom line Lucent Technologies Supply Chain Solutions Brighten Telecommunications Giant’s Future
  • 2. T he s tr ength of a company’s supply ch ain is mea sur ed dur ing time-sensiti v e , high-dem and m ar k e t conditions a s hundr eds of produc ts a r e t r av e l i n g t h r o u g h t h e s u p p ly c h a i n At A Gl ance pipeline at br eakneck speed. Its o v er all succe s s is Ch all enge de t ermined by the s t ea dfas t dedication of the m an age- Rationalizing an oversized facility network, duplicate men t t eam t o cos t con trol , con tinuous improv ement inventory and declining and their a bilit y t o respond t o the ine vita ble – when market demand while maintaining high levels of the m ar k e t tak e s an une xpec t ed d o wn war d tur n and customer service. produc t dem and hea ds sou th al ongside it. Solu tion A strategic and outsourced Early in 2000, Lucent Technologies was faced with locations for finished goods reached an all-time high of warehouse and customer this exact scenario, the market was heading south – and 240. The results were increased distribution costs. service network for the fast – and product demand was slowing rapidly, its man- Lucent customer orders consist largely of thousands Americas that is tightly agement poised for the worst. of individual parts and components sourced from technology integrated to all service suppliers in several geographic locations, says Anthony delivery functions. Lucent Damelio, director of North American Region Logistics Headquartered in Murray Hill, N.J., Lucent (NYSE: for Lucent. Accordingly, these individual shipments must LU), designs and delivers the systems, services and software arrive at specific assembly points in a pre-determined Benefits that drive next-generation communications networks. The sequence, where they are prepped and then delivered – A supply chain that can flex company employs about 30,000 people worldwide and just-in-time – to installers working at a job site. And and grow to meet market reported revenues of approximately $9 billion in fiscal 2004. often times, specialized material handling equipment such demands while providing as cranes, and stair-climbers are utilized on an as-needed dynamic improvements in With Demand Soaring, Infrastructure Grew Rapidly. basis for specific project installations. warehouse productivity, Demand for Lucent’s technology products soared Efficiently managing all the material, as well as the cost-efficient inventory in the late 1990s. Given the tremendous competitive pressure specialized equipment requires an in-depth understanding of levels and unparalleled on customer service and demand for quick turn around, an efficient supply chain operation and of a comprehensive customer service. Lucent expanded its network of warehouses and customer and steady balance of time-sensitive components, says service locations by incorporating new facilities closer to Damelio. The people, equipment and components must all be customer locations. By 1998, the number of warehouse carefully coordinated to ensure an efficient deployment and
  • 3. planning or was this a purely reactive situation? And what were our customers looking for? Those were the issues we were working through initially.” The team that was formed, had a cross-functional representation from customer service and operations functions within each of Lucent’s business units as well as Synchronizing specialists from Lucent’s supply management group. The technical teams, often there is only a small window of opportunity. If a team started by performing a full evaluation and baselined ins tall ation equipmen t and shipment arrives too early, not only will it be in the way of Lucent’s current distribution model, with the focus on t echnology the installers, but it is susceptible to unnecessary damage and establishing a solid foundation for the supply chain strategy. components t o the threat of theft. If a shipment does not arrive on time at the A wide range of distribution functions such as order fill right job site or site, productive labor-hours are wasted, which negatively rates, order turn time, inventory turn time, frequency of telecommunications facility allows affects a project’s timeline and can raise the risk of labor duplicate inventory at neighboring facilities, the number f or a thous and overtime and cost overruns. Additionally, when cranes and and purpose of ground carriers use at each facility, and jus t-in-time other heavy equipment are usually rented, it’s imperative to the use of express freight delivery were identified and ins tall ations e v ery mon th. maximize the job site productivity of all the deployed measured. “It took several months to map out all of our resources, while minimizing the expense risk to Lucent. existing locations and how products and materials were “ We selected Ryder to be our lead logistics provider for the Americas because they had the right mix of core competencies: transportation man- agement, net work engineering, project management and execution, and the discipline to align these key functions.” Anthony Damelio Director of North American Region Logistics, Lucent Technologies Building an Infrastructure for the Next Century moving within that infrastructure,” says Damelio. Lucent assigned Damelio to head a task force to The team quickly realized a traditional approach evaluate the supply chain function and propose a new to a Lead Logistics Provider (LLP) selection – crafting a supply chain management strategy, including outsourcing specific operational plan and then issuing a Request for to a third party. Proposal (RFP) from select service providers – wouldn’t “At first, it wasn’t clear where we wanted to go, work for Lucent’s business needs. or how we were going to get there, but we knew that we “For us, the process became about finding the right needed to maintain a customer focus while we contained partner on the front end and to then develop the solution and reduced costs,” says Damelio. At the time, the telecom together,” recalls Damelio. Their challenge shifted to industry was in full swing, he recalls, and Lucent’s sales understanding the core competencies of all key Lead divisions were regularly meeting and often exceeding very Logistics Providers (LLP) in the marketplace. “Lucent lofty growth targets. “Was there really a need for any wanted one Lead Logistics Provider for the Americas,
  • 4. and we needed to identify the company that had the In mid-1999, after rigorous reviews with Ryder’s financial strength as well as the ability to be proactive in executive team, the task force selected Ryder based on a identifying problems and in engineering and implementing match between Lucent’s needs and Ryder’s core competencies cost-effective solutions.” and proven experience as a Lead Logistics Provider. “The Of particular concern to Lucent were the willingness Ryder solution was much more proactive and aggressive and availability the LLP had to take on risk. “We wanted than the other proposals we heard, and that was an element to know if they were going to stand up and say they were we were searching for,” says Damelio, adding, “we selected accountable for the proposal, or if they were going to give Ryder to be our Lead Logistics Provider for the Americas us advice, step away, and hope that it executed according to because they were non-asset based, unbiased in their plan,” says Damelio. “We wanted complete accountability. decision making and had the right mix of core competencies: We didn’t want to hear, ‘hey, we gave the order to this transportation management, network engineering, project provider; they’re responsible for that part of the overall management and execution, and the process discipline to performance.’ We wanted a true partner – a company align these key functions.” that was willing to take ownership of the challenge and Ryder’s project management prowess provides a one that was willing to be accountable for the results.” tremendous boost to the partnership, says Damelio. “We knew that Ryder’s greatest strength was around An thony Lucent Sought a Partner with Solutions transportation management, but their ability to coordinate the Damelio, direc- Lucent realized that the number of 3PL service merge-in-transit strategy and manage the heavy equipment t or of Nor th American Region providers that actually had the capacity to perform as requirements for each project has proven to be a great L ogis tics for a Lead Logistics Provider for a complex distribution benefit not only for us, but for our customers as well.” Lucent, leads the scheme such as Lucent’s, were few and far between. L ucen t t eams th at are sup- Ryder was among the companies that were invited to Network Rationalization Was First Step por t ed by propose ideas based on the conditions presented to them Ryder stepped in immediately to take on the Ryder’s supply by the Lucent team. challenge of consolidating Lucent’s burgeoning infrastructure ch ain solu tions.
  • 5. of warehouses and distribution points. Working with its monitor progress and guide the transition to a successful internal force of network design specialists and system conclusion and implementation of changes. engineers, Ryder was able to reduce the number of Ryder also established a network of strategically Lucent’s network of brick and mortar sites from 240 to located Logistics Service Centers (LSC) to feed parts, a few dozen by early 2000 and then again to its current components, telecommunications switching equipment count of 14 distribution sites. and other materials to both Lucent installers and customers. “Our major role in those first months was to help And at Ryder’s suggestion, Lucent’s two key suppliers, Lucent re-engineer its network and bring common Anixter and Graybar, maintained substantial amounts of practices to common processes across its different business inventory at several of Lucent’s LSCs. This co-location units, all with an eye toward reducing total network strategy facilitates smoother just-in-time deliveries to costs,” says Kam Smiley, Ryder’s director of customer installation sites while providing all three companies with logistics for the Lucent account. a more cost-effective supply chain model. A highly diverse group of talent from both Ryder At the time, Lucent had a tremendous amount of and Lucent participated in the design and implementation capital tied up in finished goods inventory, and Lucent’s of changes to Lucent’s processes and infrastructure. Smiley managers saw they could use the capital more effectively Con tinous impro v emen t is a core proce ss f or “Ryder used its logistics skill as well as its leverage in the marketplace to L ucen t and Ryder . help us contain our costs while providing continuous improvements in oper- Sho wn bel o w, (l eft t o righ t) ational efficiency and customer service. The success of our collaborative Ja son St efanide s, efforts in Lucent’s supply chain management played a vital role in the sur- Group L ogis tics vival during this period of time.” M an a ger; An thony Damelio, Anthony Damelio Director of North American Region Logistics, Lucent Technologies direc t or of Nor th American Region L ogistics for Lucent; and K am was able to tap into Ryder’s extensive pool of human in other aspects of Lucent’s long-term business plan. This Smiley, Ryder’s direc t or of cus- resources, bringing in teams of transportation and industrial effort took on greater urgency as market conditions in t omer l ogis tics engineering experts as well as network design and analysis the tech sector started to display the first signs of weak- f or the L ucen t specialists to assist with the Lucent challenge. Program ening. “As the business climate began to change late in a ccoun t. and project managers were also brought on board to 2000 and demand started to soften, we looked even more closely at Lucent’s inventory situation,” says Smiley. “We evaluated common processes, implemented technology to provide greater visibility to Lucent’s materials, and had our engineering team suggest a realignment of specific segments of the supply chain. Everything we did was to help Lucent engage in better decision-making processes upstream to help their overall supply chain operations.” The downward trend in market conditions added urgency to the Ryder assignment, says Damelio. “Given the softening of the market, it was critical for Lucent to reduce the expense of maintaining so many fixed assets.” Restructuring the network was huge for Lucent, and much of the credit goes to Ryder; they did all the mapping and planning for the re-engineered network. That con- solidation was a key milestone for us.”
  • 6. Market Downturn That ability, the ability to meet customer commitments, “Ryder’s performance as market conditions began gives Lucent a tremendous advantage in this highly com- to change for the telecommunications industry late in petitive market.” 2000 really drove home the value of the Lucent-Ryder partnership,” explains Damelio. Through the development Ryder Lucent Get the Best Carrier Rates and implementation of cost-cutting strategies, Ryder was Lucent’s next struggle centered on how to leverage one tool used by Lucent to manage through a devastating its transportation spending with a decline in its volume. business downturn that proved fatal to many of Lucent’s “Strategically, when you go from a $30 billion-plus company competitors in the telecommunications and technology in 1999 to something considerably smaller, you lose your industries. These strategies coupled with disciplined shipping leverage with your suppliers,” explains Damelio. management and Ryder’s use of its market power to lever- “Some suppliers asked us for rate increases and changes age advantageous cost and service commitments from the to the terms of active contracts, while others simply industry, helped Lucent during the dot com bust. cancelled our contracts outright.” “Over the last five years, we have dealt with dramatic Ryder stepped in and took charge of the situation. Ryder h andl e s changes in our business environment,” says Damelio. “By aggregating and combining Lucent’s spending with vir tually all “Ryder used its logistics skill as well as its leverage in the volumes Ryder already had with its carrier base, it was a spec ts of supply ch ain m an a gemen t marketplace to help us contain our costs while providing able to negotiate favorable contracts on our behalf, and f or L ucen t’s continuous improvements in operational efficiency and manage that process for us,” says Damelio. “We initially busine ss in the customer service. The success of our collaborative efforts had some doubts and trepidation because some of the America s, including ne t w ork de sign and in Lucent’s supply chain management helped us navigate carriers Ryder brought in were not familiar to the Lucent impl emen tation; through those difficult waters.” It is a source of pride for family, but Ryder stepped up and assured us they would nego ti ating, a dminis- both Ryder and Lucent as they continually pushed their be accountable for the end result.” t ering and m an a ging con tr a c ts and rel a- providers as well as themselves to satisfy Lucent customers Lucent eased off and let the scene play out. Its con- tionships with carri- at the highest level, says Damelio. “Together, we achieve cerns quickly evaporated as the efficiency of the newcomers ers; shipmen t pl an- higher levels of customer satisfaction every day. We have in the carrier network became apparent. “Ryder’s ability to ning and e x ecu tion; l and l ogis tics established a proven track record with our customers, leverage our transportation spending helped us stabilize the ser vice bill paymen t and they know we will do what we say we’re going to do. cost structure within our own product lines,” Damelio says. and a udit.
  • 7. Sophisticated KPIs Monitor Logistics Performance so, achieve continuous improvement by pushing through the In the initial phases of the Lucent-Ryder relationship, metrics, quarter over quarter.” managers at both companies evaluated progress by using basic scorecard metrics, such as the pace of warehouse The Logistics Management Role closings, operating costs and order intervals. However, once With the challenges of network rationalization and Ryder assumed the Lead Logistics Provider role, together rate stabilization under control, Ryder continued in its Lead the companies formulated a sophisticated scorecard of key Logistics Provider role, gradually adding new elements to performance indicators (KPI) to monitor the day-to-day the operational portfolio. Currently, Ryder handles virtually efficiency of the Lucent supply chain. all aspects of logistics in their supply chain management for “Initially, when the timing and targets for a particular Lucent’s business in the Americas, including network design project were agreed upon, we would evaluate Ryder’s ability and implementation; negotiating, administering and L ucen t and Ryder t eam members con tinue t o in t egr at e, resulting in a s ymbio tic rel a- tionship be t w een the companies, which in turn facilitat es great er coll a bo- r ati v e pl anning and e x ecu tion of supply ch ain func tions. to map out that plan,” explains Damelio. “However, as managing contracts and relationships with carriers and our relationship grew with Ryder in the Lead Logistics other third-party logistics service providers; shipment Provider role and as we had a better grasp on the data and planning and execution; and logistics service bill payment could formalize better metrics together we were able to and audit. collaborate more effectively on establishing metric targets. Lucent and Ryder team members continue to Ryder saw the goals we had, and they knew from their integrate, resulting in a symbiotic relationship between the own experience with other customers the types of problems companies, which in turn facilitates greater collaborative we were likely to experience. And with Ryder’s insight, planning and execution of supply chain functions. To do so, we were able to sidestep some of those problems while Ryder has helped connect customer operations with inte- agreeing on metric targets.” grated operations by situating key personnel at Lucent “Our collaboration in establishing a balanced scorecard facilities, such as Jason Stefanides, Group Logistics Manager, is an important aspect of the partnership,” Damelio adds. who works out of Lucent’s Murray Hill headquarters, just “It’s much better for our partnership if we can decide jointly a few office doors down from Damelio, as well as additional on our goals, rather than have us dictate the metrics to them. personnel in Lucent facilities in Columbus, Ohio; St. Louis, As we talk about targets, we start making proposals to each Mo. and Alpharetta, Ga. Ryder provides the management other regarding time frames and other factors, and in doing of Lucent’s supply chain operations from its Atlanta
  • 8. Solution Center (ASC), also located in Apharetta. job is to “keep challenging our people and to keep going “We’ve established a highly integrated network back to Lucent and trying to push the envelope of between the two companies,” says Mike Caruso, Ryder’s change,” says Caruso. “As an organization, we often end director of national accounts. “Anthony Damelio man- up – not only at Lucent but with other customers as well ages a core group of Lucent people who serve as liaisons – suggesting ideas that two years ago might have been and contact points for supply chain and logistics activities, shut down. but Lucent for the most part has outsourced the logistics If we think the concept has merit, we keep pushing. element of their North and Central American supply ‘Here’s an idea that will drive savings. How do we get this chain operations to us. We manage a cross-section of implemented? What can we do to convince you to get this third-party logistics providers on behalf of Lucent, and in a pilot?’ If we think the idea is beneficial for the customer, in all cases, the accountability stops with us.” it’s our responsibility to get that idea a fair hearing.” Lucent Relies on Ryder’s Continuous Improvement This ability to identify opportunities for improve- Initiatives ments, coupled with the persistence to get the concepts Lucent counts on Ryder’s success with continuous heard, evaluated and implemented, “adds to our value improvement programs to keep the lid on costs while for Lucent,” says Caruso. “It helps us keep our chair at bringing greater efficiencies to the Lucent supply chain. the table, and enables us to expand what we do for them.” It’s a role Ryder not only has grown comfortable with This talent is not lost on Lucent. “We know Ryder but also has embraced as a differentiating factor in the has a lot of experience implementing continuous supply chain marketplace, bringing bold new concepts improvement programs; it’s one of the things they bring such as the LSC co-location strategy and a product returns to the table, and it’s a key reason we chose them to be our operation to Lucent as well as more modest concepts that partner,” acknowledges Damelio. “Ryder brings in expe- yield progressive improvements in overall efficiency. rience from other customers too, so we know that we’re “Continuous improvement is a core process for the not dealing with a company that thinks they have the Ryder team,” says Caruso. “We’re constantly trying to know-how. With Ryder, we’re dealing with a company figure out ways to drive year-over-year improvement that has proven practical experience in making it happen with existing processes, but we’re also looking for ideas for us and at other customer locations. That credibility and solutions that might drive a better process. Ryder’s issue is a great advantage for us at Lucent.”
  • 9. YOU N A M E I T We’ll Customize A Supply Chain Solution For It Wherever you manufacture, however you store inventory and distribute products, Ryder designs and operates end-to-end supply chain solutions that deliver a competitive advantage for businesses like yours. Unmatched experience, flexibility and expertise make Ryder the company that other companies rely on around the globe. So, if you want to maximize efficiency, enhance visibility and improve customer satisfaction, just name it, and we'll get it done. Call 1-888-88-RYDER or visit www.ryder.com. S U P P LY C H A I N , WA R E H O U S I N G & T R A N S P O RTAT I O N SOLUTIONS ©2005 Ryder System, Inc. All rights reserved.
  • 10. Worldwide Headquarters ©2005 Ryder System, Inc. All rights reserved. 3/05 MCC-666 Miami, FL - USA Regional Headquarters Asia - Singapore Canada - Toronto Europe - London, U.K. Mexico - Mexico City South America - Buenos Aires, Argentina Ryder offers a complete array of leading-edge logistics, supply chain and transportation management solutions worldwide.. Supply Chain Solutions Lead Logistics Management Inbound Manufacturing Product Flow Network Design Professional Services Integrated Logistics Warehouse Solutions Warehouse Facilities Management Cross-docking Vendor-Managed Inventory Multi-client/Shared Facilities Facility Network Design and Planning Facility Design Professional Services Transportation Solutions Dedicated Contract Carriage Carrier Procurement Shipment Planning and Execution Freight Bill Audit and Pay Mode Optimization Freight Brokerage Transportation Management System (TMS) Global Trade Fleet Management Solutions Full Service Leasing Lease Financing Programmed Maintenance Ryder Customer Response Center Commercial Truck Rental Vehicle Sales 1-888-88-RYDER or 1-888-887-9337 www.ryder.com If outside the U.S. and Canada, call: 585. 264. 4330