Supply Chain Management Award - One Size Does Not Fit All
Supply Chain Management Award 2013 for ADVA Optical Networking
does not ﬁt all
ADVANCE YOUR NETWORK
ADVA Optical Networking is a global provider of
intelligent telecommunications infrastructure solutions. With software-automated Optical+Ethernet
transmission technology, we build the foundation
for high-speed, next-generation networks. Our FSP
product family adds scalability and intelligence to
customers’ networks while removing complexity
and cost. With a ﬂexible and fast-moving organization, we forge close partnerships with
our customers to meet the growing
demand for data, storage, voice
and video services. Thanks to
reliable performance for
20 years, we have become a trusted partner
for more than 250
carriers and 10,000
Scalable Optical Transport
Intelligent Ethernet Access
• Highest Availability
• Lowest Latency
• Maximum Security
• Advanced Mobile Backhaul for LTE
• Performance Assured Cloud Access
• Intelligent Business Ethernet
Learning from mediumsized businesses
Since 2006, the presentation of the Supply Chain Management
(SCM) Award has been an annual highlight for its initiators – consulting firm PwC and industry trade journal LOGISTIK HEUTE. That’s
because in the twelve-month period preceding the presentation,
both the consultants and journalists have the opportunity to discover dozens of interesting SCM projects. However, even though many
of these projects are very good, only a few companies have an outstanding solution for end-to-end optimization of the supply chain.
Large, publicly traded corporations, including Infineon, BASF, and
BMW Motorrad have done their homework when it comes to such
things – and have already received the recognition of the 14-person
SCM Award jury.
This year’s winner is a triumph for medium-sized businesses. ADVA
Optical Networking beat out big-name competitors, such as Bayer
HealthCare and Intel. In my view, this is a good sign, especially in
Germany, where SCM experts can learn from more than just the big corporations.
From the North Sea to the Alps, this land is rich with “hidden champions” that have
much to teach the heavyweights.
About this publication
80807 Munich, Germany
Phone: +49 (0)89/32391-0 , Fax: -416
LOGISTIK HEUTE reported on the project – and the presentation of the results during
the EXCHAiNGE conference on June 19 in Frankfurt – in an in-depth cover story featured in the July 2013 issue. The editors are pleased to report in even greater detail
on the approach taken by the ADVA Optical Networking supply chain team in this
special issue (p. 10). The company’s three-year project involved no less than 300
employees. We also introduce the jury (p. 4) and discuss the purpose of the award
(p. 6). Be sure to read about ADVA Optical Networking’s fascinating journey from a
four-man startup to a global player (p. 8). Finally, we offer an outlook on the future
(p. 17). Supply chain optimization is a continuous journey and it’s critical that we
continue to explore new techniques and methodologies. As they say in sports: it
ain’t over ’til it’s over.
I hope you enjoy!
ᮣ HEUTE ᮤ
This is a special issue of LOGISTIK
HEUTE devoted to ADVA Optical
Networking, winner of the Supply Chain
Management Award 2013.
Dr. Petra Seebauer
Director of Publishing:
Bert Brandenburg, Dr. Petra Seebauer
Thilo Jörgl (editor-in-chief), Dr. Petra
Seebauer, Martina Bodemann (assistants)
Graphics and layout:
Ingemar Statnik, Sabine Barck
Bavaria Druck GmbH
All rights reserved. No part of this publication may be reproduced, edited, and/
or distributed without the prior written
consent of the publisher. Specifically, no
content may be reprinted, added or copied
to online services or databases or copied
onto any type of data media. All the information contained herein has been carefully compiled and checked. Nevertheless,
we cannot assume liability for the accuracy and completeness of the content.
LOGISTIK ▶HEUTE◀ 2013
Fourteen jurors, including industry experts, journalists, researchers and
consultants, choose the winner of the SCM Award.
LOGISTIK HEUTE publisher Dr. Petra Seebauer and PwC Partner
Harald Geimer explain the mission of the SCM Award.
ADVA Optical Networking company history
A four-man startup in 1994
grows into a global player.
10 CM specialist
ADVA Optical Networking understands that long-term
uccess depends on a top-notch supply chain strategy.
More than 200 industry professionals, researchers, and
ournalists honor ADVA Optical Networking at the SCM Award Night.
Challenges of tomorrow
Read about the technology that ADVA Optical
etworking is planning for the telecommunications networks of tomorrow.
ach year, the Supply Chain Management (SCM) Award honors the best
value chain in the manufacturing industry. Presented by PwC and the
trade journal LOGISTIK HEUTE in partnership with the Institute for Supply Chain Management (ISCM) and the House of Logistics Mobility (HOLM),
the Award honors innovative solutions in SCM that have made significant
contributions to competitiveness and offer a model for other companies to
follow. Candidates must exhibit powerful end-to-end supply chain solutions
or outstanding implementations within individual links in the value chain. An
independent jury of 14 prominent industry experts, researchers, journalists,
and consultants chooses the winner. For more information, please visit www.
Dr. Andreas Backhaus
Senior Vice President of Global Supply
Chain Process Innovation, BASF SE
Director of Supply Chain Management
for Europe, Rudolf Wild GmbH Co. KG
Dr. Michael Henke
Director of Corporate Logistics,
Würth Beteiligungs GmbH Co. KG
Director, Institute for Supply Chain
Dr. Claus Jessen
Managing Director of Commercial Logistics,
Chair of Product Supply,
Festo AG Co. KG
PwC Management Consulting
Head of Integrated OEM Digital Supply,
Nokia Siemens Networks GmbH Co. KG
Dr. Kurt Gruber
Corporate Vice President for the Corporate
Supply Chain, Infineon Technologies AG
Vice President, E T Procurement,
Energy Sector, Siemens AG
(representing the 2012 winner)
LOGISTIK ▶HEUTE◀ 2013
2013 ADVA Optical Networking
ADVA Optical Networking built on its global
supply chain strategy to standardize its
processes and systems around the world,
improving customer focus and establishing
a strong competitive stance.
2012 Infineon Technologies
The Munich-based semiconductor specialist
was honored for an end-to-end supply chain
solution with which it gained strategic advantages in the highly complex logistics of the
The Ludwigshafen-based chemical company
received the Supply Chain Management Award
2011 for its cross-division, cross-function
global transformation project.
2010 BMW Motorrad
CSCMP Roundtable Germany
The Bavarian motorcycle manufacturer was
distinguished for establishing supplier risk
management as part of an integrated and fully
collaborative supplier management system.
Dr. Petra Seebauer
Publisher, LOGISTIK HEUTE and Director of
Publishing / Proxy, HUSS-VERLAG GmbH
Dr. Stefan Walter
Managing Director, House of Logistics
and Mobility e.V. (HOLM)
Dr. Johannes Walther
Supply Chain Management
Editor in charge of “Production”
LOGISTIK ▶HEUTE◀ 2013
Henkel, Laundry and Home Care
The Henkel division was honored for successfully restructuring its global supply chain on its
way to achieving ambitious profitability- and
Uncoated Fine Paper,
Mondi Europe International
The company won for implementing an integrated, transparent, end-to-end supply chain
2007 Gerätewerk Erlangen,
Siemens AG Industry Sector
The jury honored the company for its comprehensive and powerful yet very customeroriented supply chain.
Electronic Assembly Systems
ivision, Siemens AG
The division was honored for fundamentally
transforming its global processes, organizational structures, and worktime models while
ensuring high quality and on-time performance.
“The award is a
beacon in the industry”
The Supply Chain Management Award, presented this year for the eighth time,
has grown in prominence over the years. Initiators Harald Geimer of PwC
anagement Consulting and LOGISTIK HEUTE publisher Dr. Petra Seebauer
talk about the idea and what they look for in a winner.
Dr. Petra Seebauer: Innovative SCM is a key discipline for successful businesses in today’s globalized economy. Our award recognizes SCM innovations – whether powerful end-to-end supply
chain solutions or outstanding implementations of individual
links in the value chain – that have significantly enhanced competitiveness and can serve as a model for other companies.
Images: LOGISTIK HEUTE
LOGISTIK HEUTE: What are the hallmarks of innovative supply
chain management? And what does it take to win the Supply
Chain Management Award?
Harald Geimer: In recent years we’ve seen supply chain management (SCM) assume an increasingly prominent role as a critical competitive discipline. The result has been a series of highquality solutions benefiting from a willingness to cross-pollinate
across company and industry frontiers. This was precisely our
motivation when we joined LOGISTIK HEUTE in 2006 to create a
new award that shines a light on these breakthroughs and gives
them the acclaim they deserve.
Supply Chain Management Award
nitiators and jurors Dr. Petra Seebauer, publisher of LOGISTIK HEUTE,
and Harald Geimer, Partner at PwC
Management Consulting, celebrate
with the 2013 winner.
LOGISTIK ▶HEUTE◀ 2013
ADVA Optical Networking,
winner of the Supply Chain
anagement Award 2013,
had the chance to present
the strategy at the
EXCHAiNGE conference in
Frankfurt/Main on June 19th.
we know that the award is instrumental in bringing greater recHow exactly does the selection process unfold? Who gets into
ognition and status to the supply chain organization in the comthe final round, and what distinguishes the winners of this
pany by shining a light on the developments it has spearheaded.
Seebauer: Our past winners – and finalists as well – believe in
Geimer: The SCM Award relies on a two-part selection prothe SCM Award and have given us a lot of positive feedback. We
cess. In the initial application phase, companies submit written
often hear that winning the award greatly enhanced the comdocumentation of their supply chain solutions. We select the best
pany’s reputation in the marketplace. Our winners also get a lot
candidates from these applications and conduct an on-site visit
of positive feedback from their customers. The award confirms
with our supply chain experts in the second phase. Candidates
a position of prominence in the global competitive landscape.
are then invited to a workshop to present their achievements in
The process of submitting an application
Seebauer: The strongest candidates from
is not without cost. Does a company derive
this second round become the finalists. Our
benefits simply by applying for the SCM
independent jury of experts – composed of inAward?
dustry professionals, researchers, consultants,
Seebauer: A successful application proand journalists – conducts in-depth deliberaa tremendous
vides a tremendous motivational boost for
tions on the finalists. And they’re not always
everyone involved and can initiate a positive
of one mind. Every year we receive applications
dialog with customers and suppliers. But even
from a very impressive slate of candidates, so
involved and can
if an applicant does not win the big prize, the
the jury’s decision is never easy. But in the end
nitiate a positive
feedback from the jury and the learning effect
we’ve always reached a consensus and pooled
from taking part in the competition should
all available information and experiences to
dialog with customcompensate for the expense of the applicachoose the year’s winner.
ers and suppliers.”
Dr. Petra Seebauer
Geimer: Every applicant does indeed reWhat does the jury weigh most heavily?
ceive individual feedback after the jury meets.
Geimer: The jury considers the five core disFrom our conversations we know that the application process
ciplines of SCM strategy, processes, organization, performance
yields important insights on how the applicant can improve its
management, and collaboration. The dimensions of employee
own supply chain. Even if only one company takes home the
orientation, sustainability, and service orientation are also taken
prize, all the applicants can benefit from taking part.
into account. This reflects how highly a broadened supply chain
perspective is now regarded in securing a competitive edge.
You host a gala evening to honor the winner. This year, the
Seebauer: The jury looks primarily at the innovative incentive
finalists also had the opportunity to talk about their solutions.
that a solution offers and on documented gains it has helped
bring about. The solutions of the past years covered a broad specGeimer: We’ve had a lot of feedback from our network indicattrum, but they all had one thing in common: They contributed
ing a high level of interest in the solutions of other applicants. Our
to significant competitive gains and serve as a model for other
response this year was to expand the spotlight beyond the winner
companies – even in other industries.
alone. For the first time, we gave the other finalists a platform at
the inaugural “EXCHAiNGE” conference.
How does the SCM Award benefit the winning company?
Seebauer: This is yet another fantastic incentive to take an
Geimer: The winner benefits from a great deal of attention
interest in our award. Where else can you have such an intense
among industry peers. There are also many positive side effects
opportunity to swap stories with operations and supply chain
– within the company itself, among customers and suppliers, and
managers from every industry and discuss the winning ideas
last but not least, in the winner’s reputation as an attractive emand their potential? And by the way: it’s already time to begin
ployer. The award is regarded as more than just an appreciation
preparing your application for next year’s award!
of past achievements. From our conversations with past winners,
LOGISTIK ▶HEUTE◀ 2013
etworking in the
US: Atlanta site
Everyone is talking about the “bubble.” Like other startups from this era, ADVA Optical Networking has visions of becoming the dominant equipment provider in the telecommunications industry. But management realizes that the small sales
team will not have a global reach. So the company decides to
work with partners and signs an OEM partnership with Alcatel.
ADVA Optical Networking also goes public this year. After about
three loops and some falls, it climbs to the top of the roller coaster
with the rest of the industry. It is the heyday of optical networking, and the company is valued higher than Lufthansa.
ADVA Optical Networking acquires Storage Area Networks Ltd. (Cambridge, UK), Cellware Breitband Technologie
GmbH (Berlin, Germany), FirstFibre Ltd. (York, UK), and the Siemens Norway Telecom RD team (Oslo, Norway). Many employees from these early acquisitions are still with the company
The company completes construction of its state-ofthe-art RD, production, and administration facility in Meiningen, Germany. The company also expands the WDM product line
and launches FSP 1000 and FSP 2000.
Through the eyes of CEO
and co-founder Brian Protiva
To survive hard times, employees put their
shoulders to the wind and focus on their vision. The company
actually gains market share during these hard years. ADVA Optical Networking goes from 0.2 percent to 2 percent of the market
just by holding its own.
To build market share in North America and Asia, the company
signs OEM agreements with Fujitsu Network Communications
and Hitachi Ltd.
Recognizing the increasing importance of Ethernet to
future networks, ADVA Optical Networking invests in and then
later fully acquires Metro Packet Systems, Inc. (California).
The management board sees a few companies
dominating the fields of Ethernet OAM, optical control plane, and
ADVA Optical Networking is founded in Meiningen in
the former East Germany. At the time, the company cannot afford
to hire engineers in Munich due to cash restrictions and the inability to get subsidies, so it launches in Meiningen with four people
and a vision … to ADd VAlue. ADVA Optical Networking is born.
ADVA Optical Networking launches its first product.
A data center manager at the former Westfälische Landesbank
needs more dark fiber but cannot get them from Deutsche Bundespost. They convince ADVA Optical Networking to build the
first ESCON multiplexer right around the same time that IBM
begins developing a competing product.
ADVA Optical Networking is proud of its successes and
begins to eye other markets. From its entrepreneurial roots, the
company finally sells products to its first carrier customer (COLT),
for whom it builds media converters.
Networking in Germany: open and transparent site in Meiningen
LOGISTIK ▶HEUTE◀ 2013
Images: ADVA Optical Networking
ADVA Optical Networking is led by an experienced international team. Three executive officers guide and manage
the company’s growth: Brian Protiva, Chief Executive
Officer; Christoph Glingener, Chief Technology Officer; and
Jaswir Singh, Chief Financial Officer Chief Operating
ROADM. The company finalizes the acquisitions of both Covaro
Networks (Richardson, Texas) and Movaz Networks (Norcross,
2007-2012 ADVA Optical Networking continues to grow
as an organization – in size and complexity. Management adds
new executives to guide the company through the next phase of
its development. The company grows to more than 1,200 employees on five continents.
Today, the company has two common hardware architectures
(FSP 3000 and FSP 150) and remains an innovative leader with
some of the most talented people in the industry working on
solutions for its customers.
ADVA Optical Networking wins the Supply Chain Management Award 2013 for its excellent end-to-end supply chain.
CFO/COO Jaswir Singh and the supply chain team receive the
prestigious award at the EXCHAiNGE conference in Frankfurt/
Main (Germany) on June 18, 2013.
Facts and figures
Brian Protiva (CEO)
Brian Protiva, Chief Executive Officer,
Bachelor of Science in Electrical
ngineering, Stanford University,
Christoph Glingener (CTO)
Christoph Glingener, Chief Technology
Officer, Ph.D. in Electrical Engineering,
University of Dortmund, Germany
Jaswir Singh (CFO and COO)
Jaswir Singh, Chief Financial Officer
Chief Operating Officer
Master of Advanced Business Practice,
University of South Australia, Australia
Master of Accountancy with Distinction,
Charles Stuart University, Australia
More than 250 carriers and service providers
Including AMS-IX, British Telecom, Cable Wireless,
COLT, DE-CIX, Cox Communications, Deutsche Telekom,
Global Crossing, KDDI, and Level(3) Communications
etworking in China:
More than 10,000 enterprises
Including Fortune 1000 companies, financial institutions,
automobile manufacturers, insurance companies, high-tech
companies, government agencies, and universities
Worldwide exclusive and non-exclusive distribution
Including dacoso, Fujitsu Network Communications,
Hewlett-Packard, Hitachi Data Systems, IBM, NEC, Sagem
Télécommunications, and Walker Associates
Strategic marketing partnerships
Including Brocade, Corning, IBM, Infovista, JDS Uniphase, and Juniper Networks
As of December 31, 2012, ADVA Optical Networking had
1,378 employees (up 6% from the end of the previous year).
Revenues and income
2012 revenues: €330.1 million (up 6 % from the previous year)
2012 IFRS pro forma operating income: €21.8 million
(6.6% of revenues)
2012 IFRS net income: €16.7 million (5.1% of revenues)
LOGISTIK ▶HEUTE◀ 2013
not a one-size-ﬁts-all solution
oday, when we want to know the answer to a question
– at home or in the office – we go online. Google and
such sites typically serve up a few hits on even the most
obscure questions – delivered right to our smartphone or tablet.
Whether the information is accurate or not is beside the point.
Twenty years ago, when the Internet was still in its infancy, this
would have been unthinkable. Today, the Web opens the door to
a vast world of knowledge.
But all of that depends on a good connection to the global
network. We can’t surf the Web, download music, or send large
volumes of data without powerful networks using the right transmission technology.
ADVA Optical Networking SE, headquartered in Meiningen in
the heart of Germany, understands this. The company’s crowning achievement has been – in layman’s terms – combining fiber-optic transmission technology and the Ethernet protocol, a
technology that allows for quick transfer of data packets. Smart
software automates the data interchange.
The more Web 2.0 and Industry 4.0 evolve, the better it is for
ADVA Optical Networking. Audio and video applications and virtualization technologies require new platforms, which in turn
require more bandwidth and high transmission speeds. Good
old-fashioned copper wire has taken us almost as far as it can,
and experts agree on the urgent need to expand our fiber-optic
From small things
ADVA Optical Networking couldn’t agree more. For nearly two
decades, the company’s focus has been on wavelength division
multiplexing (WDM), a process for optimizing fiber-optic network
capacity that achieves lightning-fast data rates and broad transmission ranges. The company began as a lean startup in Meiningen and Martinsried (near Munich) in 1994. Now, its products
are known throughout the world. CEO Brian Protiva confirmed
that ADVA Optical Networking solutions are now used by over
10,000 companies and 250 network operators around the globe.
Thanks to this success, the company was listed on the FrankLOGISTIK ▶HEUTE◀ 2013
Images: ADVA Optical Networking; Jörgl; Baschlakow/LOGISTIK HEUTE
ADVA Optical Networking, a medium-sized telecommunications vendor, emerged
from a prestigious field of competitors to win the “Supply Chain Management
Award 2013” for its trailblazing end-to-end supply chain solution.
furt Stock Exchange on March 29,
1999. Today, ADVA Optical Networking employs over 1,500 people and is
listed on the TecDAX. The company
even had the ready cash to acquire
several other companies. Big-name
players turn to ADVA Optical Networking’s products and for good reason. “To begin with, we put
a strong focus on research and development. Moreover, our customers appreciate the fine-tuned solutions,” says Chief Technology Officer Christopher Glingener. “Sometimes a developer
tweaks a feature 30 or 40 times until it’s just right.”
But serious competitors such as Alcatel-Lucent have also
jumped on the bandwagon for custom solutions. That’s why in
recent years, order lead time is increasingly the deal-maker for
landing a contract. “When it comes to securing contracts, lightning-fast order lead time can separate the best from the rest,”
assures Jaswir Singh, ADVA Optical Networking’s Chief Financial
“When it comes
the best from
Officer and Chief Operating Officer.
About three years ago, the company
launched a series of supply chain
management projects. One of the
goals was to slash the 40-day order
Jaswir Singh ADVA Optilead time in half.
cal Networking CFO/COO
This was about more than just
standalone solutions. Without the help of outside consultants,
the supply chain team studied the supply chain in its entirety.
It was this end-to-end approach that made such a lasting impression on the 14-member jury of the Supply Chain Management Award in 2013 when ADVA Optical Networking beat out big
names like Bayer, Intel, and Symrise in the final round.
Singh and 15 company representatives joined 200 international industry representatives, scientists, and journalists on June 18,
2013, during the inaugural EXCHAiNGE Supply Chainers’ Convention, for an Award Night honoring both ADVA Optical Networking
and the other finalists.
The coming years will present a variety of
challenges for the supply chain organization of telecommunications equipment
providers like ADVA Optical Networking.
The right solutions are urgently needed.
The challenges stem from the unrelenting progress of technology, the
increasing integration of system providers
in on-site operations, and the growing
expectations of customers when it comes
to ethics and the environment. The
growing power of individual suppliers in
the marketplace also poses a major challenge to the industry. These considerations can be summarized as follows:
Social, ethical, and environmental concerns: These issues are increasingly front
and center for our customers, especially
the larger grid operators. Compliance
with ISO 14001 environmental standards, corporate responsibility in accordance with the EICC Code of Conduct,
analysis of settlement risks, and the risk
mitigation plan are all necessary components of our quotation process. It’s
important to keep these challenges in
mind right from the development phase
– for example, when determining the
energy budget for systems and components – by selecting new suppliers based
on their social profile or simultaneously
qualifying multiple suppliers for systemcritical components and production
LOGISTIK ▶HEUTE◀ 2013
ADVA Optical Networking meets these
challenges by embedding these requirements within the larger processes. This
underscores the need for marketing,
development, purchasing, and production teams to work more closely together
than ever before.
Growing complexity through custom
services: As software, programmable
features, and freely tunable optics
are deployed more widely, hardware is
becoming simpler and components (circuit boards, function blocks, network
elements) more standardized. But at
the same time, systems are increasingly
customized downstream at the installation site, resulting in much greater complexity. This type of customization has
many forms: loading customer-specific
software, applying labels or inscriptions for branding purposes, conducting
system tests with specific optical cable
lengths in the simulated network environment of the customer, or registering
and administering system parameters
(including IP addresses) in the customer
ADVA Optical Networking already provides this type of high-quality service to
selected customers. Accelerating and
streamlining these processes means
having employees include these custom
requirements in the quotation process,
processing them in the variant configu-
rator, and passing them seamlessly to
production. Our company has met these
challenges by investing in IT systems
with the objective of more closely integrating CRM, PDM, and ERP systems.
Power of suppliers in the marketplace:
Differentiating your product portfolio not
only yields important quality attributes
such as range and functionality, but also
results in the development of customerspecific electro-optical components
and gives some suppliers a monopoly.
Standardized components (commodities)
are beneficial from a supply chain perspective, since they can be quickly and
readily procured at competitive prices
from a broad base of suppliers.
That’s why it is important for marketers
and developers to carefully decide on a
case-by-case basis whether differentiation and customized components make
sense for the business. This means
better organizing the commodity teams
and giving them more authority. The
commodity teams – composed of development, production, quality, and purchasing experts – are where procurement
strategies for each material group are
jointly developed and implemented.
Author: Dr. Paulus Bucher, Senior Vice
President for Global Operations at ADVA
“It was a true team effort –
all voices were heard”
Dr. Paulus Bucher, Senior Vice President
for Global Operations, and Philipp Lutzny,
Senior Director for Global Order Fulfillment Supply Chain Management, discuss how ADVA Optical Networking transformed its supply chain management.
LOGISTIK HEUTE: A company that grows
largely through acquisitions often has
trouble defining standards. How difficult
was that for ADVA Optical Networking?
Dr. Paulus Bucher: About three years ago,
all the different products that were tailored
to the local markets of the companies
we had acquired were replaced by a new
global platform. This made it possible to
create global production and distribution
structures for the first time in order to
leverage key potential synergies. That presented major organizational and conceptual challenges for our supply chain.
How is your supply chain organized today?
Dr. Bucher: Some 300 employees around
the world work in the Operations division,
which encompasses strategic purchasing,
operational purchasing, production, order
management, and distribution logistics
consolidated within a global matrix. We
supply custom systems from our own
configuration and distribution centers in
Europe, North America, and China. We
operate in our customers’ local markets,
so we understand their needs and can
respond accordingly. All the products
we ship pass through our hands and are
subject to rigorous quality controls on an
For cost reasons, we outsource module
production to a small number of subcontractors in Eastern Europe and Asia. This
outsourcing is managed centrally. We manufacture only about 20 percent in-house
and consistently focus our own resources
on complex and newly introduced products.
What impact does good supply chain management have on the company’s success?
Dr. Bucher: About three years ago, our
supply chain consisted of three standalone
supply chain solutions in three different
countries with very little interaction. But
we quickly noticed that our performance
was sub-optimal. We sometimes lost
customer contracts because we couldn’t
fulfil the order by the requested deadline.
We realized that if we wanted to prevail
against our competitors, most of whom are
much larger, we had to invest in our supply
chain. The quickest one wins the contract:
that’s the way it works around here. At the
same time, the markets are demanding
much lower production and distribution
Do managers in your industry look too
much to their engineers?
Philipp Lutzny: Obviously, our innovation
and the engineers that make it possible
are highly valued. But at ADVA Optical
Networking, speed and trust are also vital.
By now, everyone realizes that we can
meet this challenge only if the underlying
value chain is efficient. The reputation of
our Operations team has risen considerably in recent years.
Who are your major competitors?
Lutzny: Huawei, ZTE, Ciena, AlcatelLucent – to name a few. Our customers tell
us that these companies can barely compete with an order lead time of ten days,
which we deliver to our top customers as a
What challenges did you face three years
Dr. Bucher: We had an order lead time of
40 days for complete systems – far too
long. The costs for freight services came
to about three percent of revenues at the
time. And our scrapping costs were high.
Our Sales and Operations Planning (SOP)
process faced the tremendous challenge
of accurately forecasting such a large
number of customer-specific products with
a time horizon of up to four months. Our
inventory turnover rate was three cycles
annually. Almost all purchases were based
on the forecast without any segmentation.
After we got all our information together,
we knew we needed an end-to-end,
customer-oriented operations concept. The
idea of the “commoditized supply chain”
How did ADVA Optical Networking plan
Dr. Bucher: We launched a whole series of
projects along the chain that only in retrospect seem to coalesce into a coherent
strategy. It started with our so-called
postponement factory – where variants
are implemented only at the very end of
the production process. We also worked
on the long lead times with our strategic
suppliers. Then we greatly reduced the
number of production subcontractors for
electronic modules and realigned our
in-house production by reorganizing the
production steps and focus. Meanwhile,
we took a more systematic approach to
our price negotiations with suppliers and
About the interviewees
Dr. Paulus Bucher, 47, studied mechanical engineering in Germany and the
United States. At Princeton University he received a Ph.D. in Aerospace Technology. Bucher has worked for ADVA Optical Networking since 2010 as Senior
Vice President for Global Operations, where he is responsible for strategic
purchasing, SCM, production, and logistics. Over the past 15 years, he has
acquired experience through positions at CommScope, Ericsson, and Bosch in
“transforming value chains” amid the challenging environment of an increasingly globalized industry for telecommunications equipment.
Philipp Lutzny, 32, Senior Director of Global Order Fulfillment Supply Chain
Management, has worked for ADVA Optical Networking since 2006, where his
responsibilities have included global planning, operational purchasing, and
oversight of both the regional and global supply chain. Lutzny has more than
a dozen years of experience in supply chain management and strategic purchasing. He previously held positions at Siemens AG and BenQ mobile.
LOGISTIK ▶HEUTE◀ 2013
Dr. Paulus Bucher, Senior Vice President
for Global Operations (left), and Philipp
Lutzny, Senior Director for Global Order
Fulfillment Supply Chain Management,
explaining the SCM strategy of ADVA
steadily improved our Sales and Operations Planning (SOP) processes.
tion to new sites and dramatically reduced
our production costs.
Which performance indicators were you
able to optimize the most?
Lutzny: Our order lead time used to be
more than 40 days. Today it stands at
approximately 21 days. We also brought
on-time performance up from 85 percent
to over 95 percent. We raised our inventory turnover rate from three to six cycles
annually. Thanks to centralized negotiations and new freight consolidation points,
our freight costs today are just above one
percent of revenues. By concentrating our
production in Eastern Europe and Asia, we
were able to lower the standard costs of
our products by double-digit percentages
Why did you give preference to the purchase-to-order model?
Lutzny: Some suppliers, such as the
manufacturers of electro-optical modules,
need windows of twelve to fourteen weeks
to produce semiconductors. It simply
made no sense to place orders with these
companies on the basis of questionable
forecasts. Our response was to establish
a kanban system for certain components
from our major suppliers. The supplier
guarantees the availability of the components and supplies them on demand in
just two weeks. So we shifted the responsibility a bit more to the supplier, where it
How radical were these changes to your
Lutzny: We decided to consolidate the production of modules at our global subcontractors and configure the devices regionally, where our customers are located.
This meant reconfiguring our value chain
so that variants are configured at the very
end. The key was separating hardware
from software. Today, our process for configuring software variants is designed for
agility. Specifically, this means that we
now store only one-third of the data in our
ERP system that we used to.
How did you communicate the SCM
strategy to your employees?
Dr. Bucher: The revised approach was
not a top-down order from management,
but a true team effort. All voices mattered. We conducted an extensive dialog
and explained the concept to the relevant
employees. Our experience shows that
this is the best way to put good ideas into
You called one of your projects an outsourcing model. Can you tell us about
Dr. Bucher: At the time, we were using
ten different subcontractors, including
some in Western Europe and the United
States. Now we’ve reduced that number to
just three – two in China, one in Eastern
Europe. We also strategically realigned
our own production sites. The number of
personnel remained the same, but we relocated our in-house production to where the
orders are coming in, shortened our development cycles, and became much more
agile in the process. Over the past three
years, we transferred most of our produc-
LOGISTIK ▶HEUTE◀ 2013
Corporate social responsibility is a broad
topic. What has ADVA Optical Networking
Dr. Bucher: Our primary concern was
energy efficiency and treating our
employees around the world fairly. On
the energy efficiency front, we conducted
a thorough analysis to determine where
carbon dioxide is generated in the manufacturing and operation of our products.
The objectives included using less electric
energy in our manufacturing process and
reducing the amount of packaging. Our
new planning model also allowed us to
shift a variety of standardized products
from air freight to ocean freight.
What have you done in the field of ethics?
Dr. Bucher: Here our concerns included
ascertaining that employees living in com-
pany-sponsored housing in other countries
had decent living conditions and that they
enjoyed adequate safeguards against workplace injuries. We conduct regular audits
of our suppliers in China, for example, to
check for adherence to our standards. We
welcome the trend that more and more
customers want to know whether we monitor that sort of thing. We have been very
active on these issues.
How did you see your chances for the SCM
Lutzny: First we asked PwC whether we
should perhaps wait another year. But the
consultants encouraged us to apply, and
within five days we had completed our
30-page application. The primary objective was to gain feedback. We didn’t see
ourselves as the favorite.
You shut out companies like Bayer and
Intel. How surprised were you when you
learned of your victory?
Dr. Bucher: We were ecstatic. I believe
large enterprises have more muscle to
push through major projects with greater
speed and consistency. This award carries
a very special prestige. Our customers in
particular will see this as a validation of
our worth. Just as importantly, the award is
recognition for the entire team.
Will you rest on your laurels now?
Lutzny: Of course not! We intend to push
forward with our end-to-end segmentation. Currently, we are checking our data
quarterly. Eventually, we will make this a
monthly process. We also plan to further
integrate our suppliers.
Dr. Bucher: And we want to approach more
customers about logistics solutions to offer
them added value. Progress in commodity
management is also on the agenda. The
next generation of products may require
that we adapt our processes once again.
Interview by Thilo Jörgl,
editor-in-chief of LOGISTIK HEUTE
Discussing the coming challenges:
Members of ADVA
Excerpt of the laudation
Pavel Krych, Director of Technical
Purchasing at Deutsche Telekom AG:
Being successful requires innovative
approaches, solutions, and implementations that are good enough to
serve as models for other companies.
This certainly describes the supply
chain segmentation so excellently
implemented by ADVA Optical
Networking – an innovation in the
industry. Segmentation means
defining and differentiating segments on the basis of the product
portfolio and the existing demand
structures. This makes it possible to effectively and efficiently serve distinct portfolios.
ADVA Optical Networking achieved an end-to-end, crossenterprise implementation from the supplier to the customer. Production and planning have also been decoupled.
This two-stage approach enables late-stage customization
– customer-specific product configuration and adaptation
in the regional final assembly centers – enabling a quick
response to changing customer demands.
This end-to-end segmentation of the supply chain in
conjunction with decoupled production and planning is
the key to customer-specific product configuration in the
regions and a good example of the kind of innovation that
I referred to. I feel certain that many here will appreciate
the elegance of such an approach, and I can also imagine
that only few here can claim to have achieved this – much
less so seamlessly.
ADVA Optical Networking is a beacon to other industries as
well through its supply chain solution, which is in a class
of its own in planning and the translation of planning into
production. ADVA Optical Networking also demonstrated
an elegant realization of supply chain segmentation tailored to the specific needs of the industry.
this way: “The jury was impressed by the systematic integration
of the business model with the supply chain model. A development-driven company managed to create an agile supply chain
organization based on the needs of its customers. The result
is that ADVA Optical Networking can now serve its customers
faster, with better on-time performance, and at lower cost than
What ADVA Optical Networking achieved in three years cannot be summarized in just a few words. The jury emphasized
that the company standardized its global systems and processes
along a global supply chain strategy, which improved its customer focus. End-to-end supply chain optimization that extended
beyond development, quality, production, and sales to include
suppliers, made it possible to “establish a powerful and comprehensive supply chain.” The pull-based solution put into place
features of unprecedented availability and flexibility that boasted
measurable results and a wide array of best-practices.
Lead time reduced by over 50 percent
The jurors were also impressed by how the numbers improved: ADVA Optical Networking reduced its supplier lead time
by over 50 percent, increased on-time performance from 85 to
97 percent, and raised its inventory turnover rate from three to
six cycles annually. The jury acknowledged that these improvements ushered in a “profound transformation at all levels of the
supply chain.” The implementation time frame of just two and a
half years was “very fast.”
Today, it’s clear in the eyes of the jury that the flexibility this
yielded has been key to the success of ADVA Optical Networking
in keeping both its customers and its suppliers happy. “While the
customers have the products delivered at relatively short lead
times of 15 days on average, the suppliers have long lead times
of 4 to 12 weeks,” noted the SCM experts on the jury.
The end-to-end and cross-enterprise segmentation of the supply chain – from the supplier’s supplier to the customer’s customer – is a unique innovation in the industry. Segmentation means
defining and differentiating segments on the basis of the product
portfolio and the existing demand structures. This makes it possible to effectively and efficiently serve distinct portfolios.
Production and planning have also been decoupled. This twostage approach enables late-stage customization – customer-specific product configuration and adaptation in the regional final
assembly centers – enabling a quick response to changing customer demands. Collaboration between developers and suppliers
makes end-to-end optimization possible.
LOGISTIK ▶HEUTE◀ 2013
Image: Baschlakow / LOGISTIK HEUTE
ADVA Optical Networking received praise from many circles
for its SCM approach. Pavel Krych, Director of Technical Purchasing at Deutsche Telekom AG, praised ADVA Optical Networking’s
supply chain solution in his remarks as being “in a class of its
own when it comes to planning and translating planning into
Dr. Petra Seebauer, Director of Publishing at HUSS-VERLAG
in Munich and publisher of LOGISTIK HEUTE, had praise of her
own: “ADVA Optical Networking has succeeded in striking an
efficient balance between the varying demands of suppliers and
customers, establishing a critical competitive edge that allows
this medium-sized enterprise to thrive among the big players.”
Juror Harald Geimer, a partner at PwC, summarized the vote
Something to smile about: Dr. Petra Seebauer,
juror and publisher of LOGISTIK HEUTE, and Harald Geimer, juror and partner
at PwC, congratulate Philipp Lutzny, Senior Director of Global Order Fulfillment Supply Chain
Management, Dr. Paulus Pucher, SVP of Global Operations, and Jaswir Singh CFO/COO from
ADVA Optical Networking. Alongside ADVA Optical Networking representatives are Prof. Dr. Michael
Henke from ISCM and Pavel Krych from Deutsche Telekom (left to right).
ADVA Optical Networking, winner of the Supply Chain
Management Award 2013, was honored together with the
other finalists in a ceremony held in Frankfurt on June 18
Images: Baschlakow/LOGISTIK HEUTE
ine food and drink with praise all around: A gala Award
Night ceremony on June 18 in Frankfurt honored the winner of the prestigious Supply Chain Management (SCM)
Award 2013. More than 200 industry professionals, researchers,
and journalists converged on the HOLM Forum at Frankfurt Airport to celebrate with representatives from ADVA Optical Networking.
The event was part of the inaugural “EXCHAiNGE” conference
held on June 18 and 19 in the Hilton Frankfurt Airport and HOLM
Forum. This year for the first time, the finalists were also honored: the HealthCare Business Area of Bayer AG (Leverkusen),
Intel Mobile Communications (Neubiberg), and Symrise AG (Holzminden), a global provider of fragrances and flavors. The following day, both the winner and finalists presented their solutions
before a large audience at the EXCHAiNGE conference.
Harald Geimer, a partner at PwC, and Dr. Petra Seebauer, publisher of LOGISTIK HEUTE and Director of Publishing at HUSSVERLAG, began the Award Night by presenting the finalists and
their projects before devoting the rest of the evening to the SCM
successes of ADVA Optical Networking. Jaswir Singh, ADVA Opti-
LOGISTIK ▶HEUTE◀ 2013
cal Networking’s Chief Financial Officer
and Chief Operations Officer, was very
pleased to accept the award, emphasizing
that the results had been the “shared success”
of a great number of colleagues.
As soon as drinks had been served, guest speaker
Dr. David Bosshart took the podium. Bosshart is an author and Director of the Gottlieb Duttweiler Institute in Rüschlikon, Switzerland. “The good times are over,” was his provocative message as he painted a picture of business and logistics in
Thomas Macyszyn, the celebrated Chef de Cuisine of
“Navette” in Rüsselsheim’s Columbia Hotel, delighted the
guests after the award presentation with a menu of his culinary
specialties. After the meal, many guests took the opportunity to
chat with representatives from ADVA Optical Networking and
share tips on how other companies or industries might learn
from their example. Other guests speculated on who might be
next to complete a major SCM project and be in the running for
the 2014 award.
All ears: An international
audience listens attentively as SVP Dr. Paulus
Bucher from ADVA Optical
Networking talks about his
supply chain team.
and cocktails at
the HOLM Forum
in Frankfurt to toast
the winners of the
All that jazz: A combo
accompanies the Award
Night with a program of
popular jazz standards.
Light-hearted evening: Listeners smile as
guest speaker Dr. David Bosshart shares
anecdotes from the world of logistics.
Images: Baschlakow / LOGISTIK HEUTE
Thankful words: Philipp Lutzny, Dr. Paulus Bucher
and Jaswir Singh (from left) say thank you to the jury
and ADVA Optical Networking’s supply chain team.
LOGISTIK ▶HEUTE◀ 2013
Communication in mega-cities:
ADVA Optical Networking is well
prepared for future challenges.
The Daily Heartbeat
The company’s early return index shows that less than 0.4 percent of its products
are returned in the first 90 days. Behind this achievement is an intelligent strategy.
Customers who forecast and order in dependable patterns alDVA Optical Networking is a partner customers can trust.
ways enjoy sub-four week lead times. ADVA Optical Networking’s
That statement applies to all aspects of customer engageOperations team tailors the system to know customer patterns
ment, but it’s tested most often when it comes to actually
and plans for spikes. Upside in short bursts exceeding forecast
getting the product, when it’s required, at the expected quality
can typically be handled. This commitment is visible straight
level. That’s where ADVA Optical Networking really shines.
through in the results. Across ADVA Optical Networking’s cusThe company’s operations team is directly connected to sales
tomer base, lead time on Ethernet gear averages three weeks.
in the same system and that benefits the customer. If a formal
On complex WDM systems, its four weeks. The
lead time check is desired, ADVA Optical Networkcompany’s biggest customer enjoys three day lead
ing can have a ship date back within 24 hours.
times on Ethernet and ten days on WDM at 98 perEven better, while entering an order, the sales repNetworking´s
cent demonstrated first ship commit accuracy.
resentative sees a lead time traffic light in realbiggest customer Across all customers, those numbers remain besttime that indicates whether a part is currently at
enjoys three day in-class. Overall first commit accuracy is always
green status (4 week lead time), yellow (8 week
lead times on
above 95 percent, while ship to first customer relead time), or red (12 week lead time). Operations
quest is consistently above 85 percent. If lead time
calls this portfolio management. It allows ADVA
is a customer’s focus, ADVA Optical Networking
Optical Networking to work with customers from
will work with them to develop a lead time and buffering program
the outset to tailor a request to hit a desired date, even before a
specific to their needs.
formal ship commit request. The company’s order management
Strong performance is made possible by cross-functional ‘Cussystem is constantly updated with orders, forecasts, and historitomer Focus Teams’ made up of order specialists, account liaison
cal trends that drive the buffering of high-runner, green items in
managers, and demand planners sitting in the sales region, workthe delivery regions, yellow items near their source, and launches
ing with supply planners in the manufacturing region. There’s
the manufacture of red items as required.
LOGISTIK ▶HEUTE◀ 2013
The demand for
you are and on any
device is driving our
a daily heartbeat flowing from customer to manufacturer that
allows ADVA Optical Networking to respond to changes quickly.
Collaborative planning and regular performance reviews between operations and customers drives cycle times down.
Customers can select the staging level
ADVA Optical Networking’s manufacturing model is simple;
a few best-in-class partners feed the company’s customization
and distribution centers worldwide, while the company maintains some smaller, flexible in-house production. ADVA Optical Networking and its partners build generic, then customize
software and do customer-specific staging in the sales regions.
Customers can select the staging level that fits their appetite to
do work in the field. Those who desire ultra-fast turn-up buy fully
loaded, fibered and configured systems. And those with more
time may take delivery unassembled. The point is, ADVA Optical Networking can bear much of the customer burden on the
road to turn-up. There is also a redundant, balanced approach
in assigning production. Builds are spread evenly between two
tier-one manufacturers situated close to ADVA Optical Networking’s distribution centers. This allows ADVA Optical Networking
to maintain a competitive price atmosphere and two manufacturers familiar with all of its technologies. This directly benefits
customers on cost and supply redundancy.
What does it take to become an ADVA Optical Networking
supplier? When you dig deeper, you’ll find that the company surrounds itself with partners who live to the same high standards.
ADVA Optical Networking realizes that in its supply chain every
element counts – that everyone is connected and that the behavior of one can speak for all. Therefore, corporate ethics, social
responsibility, and sustainability are foundation principles for
ADVA Optical Networking, and the company regularly audits to
maintain that confidence. At ADVA Optical Networking, operations is not seen as a simple back-office production unit. It is an
additional service to the customer – one that delivers the company’s brand promise of innovation, speed and trust.
A word from the CEO
The networking industry has always been
a catalyst for change. Change in the
way we communicate and collaborate.
Change in the way we develop and share
knowledge. Change in the very way we
build communities. Over the years we
have helped to drive this industry. We
pushed the boundaries of technology,
Brian L Protiva,
CEO of ADVA
we entered new market verticals and we
helped our customers develop their own
new revenue opportunities. What’s more,
we did all of this while remaining true
to our core values: innovation – speed –
The management of our supply chain is
an intrinsic part of our core values. It’s a
key fabric of who we are as a company. In
2010, we made a decision to completely
redesign our supply chain processes.
We were responding to a change in our
customers’ needs, in how they were operating. They wanted greater speed, more
flexibility and faster response. Three
years later, I find myself writing this message.
I am incredibly proud of what our teams
have achieved and the Supply Chain
Management Award 2013 is a clear recognition of their success. ADVA Optical
Networking is not only a fast-moving
innovator. We also value our most important asset – our people. Our personal
touch makes us stand out against our
competition. Ultimately, we always put
the customer first. A few examples:
We introduced a de-centralized supply
chain that set-up local distribution
centers close to our customers
“In region” Customer Focus Teams
(CFTs) perform regular performance
reviews making sure we are 100 percent
aligned with our customers’ needs
We offer our customers portfolio
management sessions and lead-time
programs, allowing us to create the best
delivery performance possible
We perform “in region” staging services that make sure our customers
receive exactly what they need, when
they need it – ready to go into operation
We conduct collaborative planning
sessions between our customers and
operations teams to synchronize run-rate
business in real time
As we continue to strive towards market
leadership we fully recognize the competitive importance of our operational processes. In fact, we even take it one step
further: we look at the end-to-end supply
chain, starting with the component
manufacturers and reaching all the way
to our customers’ customers. As a result,
the lines between suppliers and users
are beginning to blur – and our commitment to operational excellence goes way
beyond our corporate boundaries.
LOGISTIK ▶HEUTE◀ 2013
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