Who better than your customers to give a heads-up that something isn't working? Telecommunications provider Avaya Inc. got that message loud and clear in 2003 at its annual user conference. During the event, which catered to more than 400 customers and business partners, Avaya executives were handed an earful about the company's quality of service — specifically, customers' inability to get their hands on replacement parts in any kind of a timely fashion.
"The majority of questions were around the fact that customers were paying for maintenance, but weren't able to get the parts," recounts Fernando Boza, senior manager for global services planning at Avaya, which delivers telecommunications products, applications, and services. "It came down to a customer satisfaction issue — we arguably couldn't keep going in that direction. We had to make a change to keep customers and reduce our expenses as an internal measure."
The broad initiative to understand the problem and change its processes gained Avaya recognition as a High Achiever in Customer Mastery in Managing Automation's 2007 Progressive Manufacturing awards competition.
The problem of service parts inventory was somewhat of a catch-22: Avaya maintained huge inventories of parts — and consequently, incurred significant inventory overhead — yet it didn't have a proper handle on inventory planning and placement. At the time, the company's service supply chain had mushroomed to more than 2,500 physical service parts stocking locations (which included Avaya offices and trucks staffed by independent technicians) handling nearly 20 million part/pair combinations, which, in turn, were managed and tracked by more than 30 planners. Each location was planned autonomously and there was little visibility into inventory across the globe.
As a result, Avaya's high levels of service parts inventory didn't directly translate into an ability to meet customer demand and live up to its service-level agreement (SLA) contracts. "We planned inventory in the field with the technicians and it was largely driven by an incident that happened last month — say, we didn't have a particular part. Then, we'd go ahead and order three of them," Boza explains. "The result was we had a lot of inventory, but it was the wrong inventory in the wrong place."
People, Tools, and Process
In response to customer criticism, Avaya put together a Six Sigma planning team to understand the problem and measure existing service levels to get some sort of benchmark. Based on the team's findings, Avaya determined that the service parts problem was due to shortcomings in three areas: the makeup of its service organization, its existing set of inventory planning tools, and its inventory control processes, Boza says.
On the people front, Avaya's service organization came under the umbrella of a much larger group — the supply chain and logistics division — which was not necessarily focused on customer service. In addition, much of the inventory planning was done in the field by individual technicians who were justifiably inexperienced in demand planning. "We were relying on individuals to be supply chain people, who were technicians. They know about fixing systems," Boza says.
Most of the employees doing inventory planning in the field were using spreadsheets, and the data being captured was limited and exclusive of demand history. "The data input into the spreadsheets was not holistic and was largely driven by opinions, not by factual data," he explains.
Moreover, Avaya was using a tool, Xelus (now part of Click Commerce), at the central level, but the software lacked capabilities for planning inventory in the field for more than 2,500 locations, Boza added. "It may be we had enough of a particular part in our network, but if there was a major outage and a customer needed support in four hours, it didn't help if the part they needed was in Seattle if they were in Florida," he says. "We needed to not only understand we need part A, but that we need part A in location 1."
To help Avaya get a handle of that level of planning, the team decided on Servigistics' Strategic Service Management Solution. They opted for that package over functionality delivered in ERP systems because of usability features and, more important, because Servigistics solved the problem of planning for the field, Boza says. Along with the software deployment, Avaya standardized inventory control processes throughout its organization, for the first time making metrics a core part of its regimen.
The Servigistics rollout went live in the United States in January 2004, with the global deployment expected to be finished by October 2007. Avaya also revamped its service structure, boosting the number of strategic stocking locations to cover the footprint of the United States while reducing the number of individual field offices and trucks by nearly 50%.
Making such sweeping changes on all three fronts didn't come without obstacles, Boza admitted. To help employees embrace the cultural transformation required, Avaya management did a lot of work quantifying results and evangelizing the technology.
The results have been fairly dramatic. Avaya has bolstered its service levels for on-time delivery from a sub-standard 80% prior to the Servigistics rollout to a best-in-class level of 95%-plus in the United States. In addition, the company reduced its inventory by 35%, from $200 million to $130 million, while avoiding nearly $4 million in repair expenses.
The most telltale sign of the project's success is the feedback from customers — a totally different reaction than what Avaya was hearing four years ago. Recent customer focus groups and individual discussions with customers have shown positive improvements and satisfaction with Avaya's service levels. Moreover, at the annual user conference this year, there wasn't one question about parts availability. Says Boza: "Not that there isn't any room for improvement, but the message is loud and clear."