Metrics help Palm deliver results in just four months
William Atkinson -- Purchasing, 12/11/2003 2:00:00 AM
When Palm Inc., Milpitas Calif., elected to completely reengineer its supply chain in early 2002, it realized that metrics would be a key to success. "We reengineered all of the supply chain systems and processes, including demand planning, master production scheduling, and customer order management," explains Karl L. Braitberg, senior director, supply chain planning and fulfillment. With the help of PRTM, a supply chain consulting firm, Palm was able to go live with project results in four months (September, 2002).
The project involved four key groups:
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Manufacturing partners—external outsourcing partners, including manufacturing centers and distribution centers,
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Key internal stakeholders, which included planners, master schedulers, buyers and others in Braitberg's group,
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Indirect stakeholders, in-cluding members of finance and the executive staff, and
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External sales channel partners, which included retailers and distributors.
Response rates
The first group to be addressed was the outsourcing partners. For them, Palm introduced two types of metrics. One measured schedule attainment and supply chain rhythm. "An example would be our ability to publish master production schedules on time, then measure the response times and rhythm accuracies of our partners," explains Braitberg. It also involved the duration of outsource partner response times. "For instance, we send on Tuesday, the partner responds on Wednesday, we publish back to customers on Thursday," he continues. The second type involved the more traditional metrics based on manufacturing variables, such as factory on-time percentages, inventory turns, yield data, etc.
For the most part, supply chain partners responded well. In fact, it turned out that many of them, especially Asian partners, were just waiting for some direction from Palm on what it wanted and how it was going to measure them. "Once we told them what we wanted, how we wanted it, and when we wanted it, they nailed it right away," he reports. The Asian manufacturers also liked the consistency that was being built into the system. For example, they would get a forecast on a certain day of the week, and every Sunday night at 9 p.m. they would get a phone call to discuss collaboration. "Before that, they would hear from us haphazardly, and that drove them crazy," he admits.
Some supply chain partners who had been weak in the past offered some pushback to the idea of metrics. This strained the relationships, because prior to this, the relationships had been casual for years. Over time, though, most of these partners improved. "In some cases, we assigned some of our people to their factories and distribution centers for weeks or even months to help them make the improvements that we needed," adds Braitberg.
Keep it simple
If there is one word that describes the key to success of Palm's supply chain reengineering project, it is simplicity. Excess complexity could have caused project participants to revolt, claiming that things were getting too difficult. Simplicity allowed the project to progress in record time. "If you lose momentum, you lose people," Braitberg explains. "We were able to complete this project in four months because we kept everything simple."
The team created a set of metrics for each group at the beginning of the project. The stakeholders themselves created the measures and everyone agreed on them. "First, we made sure the metrics were simple to understand and manage," says Braitberg. Second, the team made sure that everyone agreed on the definitions of the metrics. This prevented the possibility of people arguing later about what a certain metric, like on-time delivery percentage, might mean. As a result, there were no naysayers turning up at the last minute claiming that things were being measured incorrectly.
Third, the team marched to the metrics. It published them and talked about them openly every week of the project. By keeping the metrics on everyone's minds, it helped reduce complaints related to the costs of the project, headcount being taken up by the project, etc. "We were constantly telling everyone: 'This is where we started. These were the costs at the time. Here are the incremental improvements we're getting with the metrics. Here are the cost savings so far,'" reports Braitberg. Keeping the metrics in front of everyone helped make sure that no one forgot the purpose of what the team was doing.
Results
While the team created a number of key metrics, the two most important were on-time performance/fill rates to retailers and inventory turns. "The former is huge for us," Braitberg emphasizes. To date, this has improved from 50-60% to 80-90%. "We're working toward 100%," he adds. In terms of the second metric, over the last year, the company has been able to reduce inventory by 50-70% and improve turns by the same rates.
The most important group in the project turned out to present the greatest challenge, according to Braitberg. These were the retail partners. "We wanted to begin doing collaborative planning with these partners," he explains. However, some of the retailers didn't want to get into discussions of sophisticated planning until Palm could prove that it could deliver on time consistently. As such, the company had to take steps to improve its own performance first. "To be honest, we did not make the progress we wanted to in this area initially, but we have made progress since then," Braitberg adds.
After having worked on making improvements in its own performance as well as performance of its outsource partners, Palm is now in a position to focus on improving its performance with retail partners. "This will involve things like vendor-managed inventory and real-time point-of-sale data, etc.," he says.
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