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by Jeff Moad, MA Editorial Staff   Soon after acquiring home- and small-office networking equipment provider Linksys in 2003, executives at Cisco Systems had a bright idea: Wouldn't it be great, they thought, to transform Linksys from a company focused exclusively on North American markets into a global supplier of wireless and wired communication products? Make it so, they said.
There was just one small problem: Although Linksys relied on offshore contractors for most of its production, the company and its people had little, if any, experience operating a global supply network. They had no experience tailoring Linksys' products for markets outside North America. They had no experience working with distribution partners to generate demand for Linksys products. And they had no experience generating production plans that accurately responded to worldwide demand for and supply of Linksys' products.
"So when they got the order from Cisco to go global, they suddenly got a pretty glossy-eyed look," says Linksys Vice President for Worldwide Operations Mark Payne, who was one of the managers brought in to turn Linksys into a global operation.
Though Linksys was able to tap into some of Cisco's existing infrastructure for executing global transactions and physically getting product to market, the business immediately ran into big problems attempting to track global demand while balancing inventory and production schedules. Historically, Payne says, demand planning at Linksys was largely a manual process involving pencil, paper, e-mails, and phone calls. Though not the most efficient approach, it worked when the bulk of the business was flowing through a few large retailers, such as Staples and Wal-Mart.
That all changed when Linksys went global, however. Now the company was dealing with many more distributors and dealers spread across the globe. Quickly, Linksys discovered that the manual approach it had been taking to demand, inventory, and production planning didn't scale. The company was able to track only its higher-volume SKUs in each country, and it was attempting to forecast demand based on history rather than information coming from the sales force and distribution partners.
"No one gave input from the market," Payne says. "You had people in the market saying, 'Those people in corporate don't get it.' And you had people in corporate saying, 'Those people in the market don't get it.' But, guess what? They both didn't get it, because they weren't operating in a global context."
With no consistent demand planning process in place, there was no individual accountability. And the problem was exacerbated by the fact that, because many of Linksys' global sales regions were new with relatively small volumes, demand variability could be great, leading to frequent supply problems.
The result, Payne says, was that "demand planning was horrific." Plan accuracy was about 20%, and the company had record-high inventories and backlogs. Between 35% and 40% of Linksys' shipments had to be expedited by airfreight.
The company tried tweaking its planning processes. When that didn't work, Linksys brought in Payne, who had previously been involved in sales and operations planning at pre-Hewlett-Packard Compaq Computer and candy maker Mars Inc. Eighteen months ago, Payne introduced a new planning process and technology that stresses accountability and hands-on planning of each and every SKU by a small group of individuals.
Payne's system, which he calls "Make the Numbers, Don't Change the Numbers," requires individual planners to take responsibility for balancing three variables — a sales forecast, production plan, and inventory plan — on a weekly basis. Each planner has responsibility for balancing these variables on up to 500 SKUs.
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