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S&OP Solution Brings Millions in Inventory Savings

A manufacturer of timekeeping technology learns all the efficiency tools in the world aren't enough without more precise demand planning and forecasting.

S&OP Solution Brings Millions in Inventory Savings

Over the years, manufacturing processes have gotten much more efficient. Techniques such as Six Sigma, Lean and Just in Time have enabled manufacturers to produce their goods with more speed and at a lower cost. Where manufacturers often fail to achieve efficiency, however, is in the processes that feed into manufacturing — namely demand planning and forecasting. This was the challenge facing Microsemi, which develops, manufactures and supplies timekeeping technology to worldwide customers that require extremely precise synchronization.

Microsemi Corporation, offers a comprehensive portfolio of semiconductor and system solutions for a wide array of verticals, including communications, defense and security, aerospace and industrial markets. Its product portfolio includes high-performance, radiation-hardened and analog mixed-signal integrated circuits, field-programmable gate arrays, systems on chips and application-specific integrated circuits; power management products; timing and voice processing devices; RF solutions; discrete components; security technologies and scalable anti-tamper products; power-over-ethernet ICs and midspans; as well as custom design capabilities and services.

Microsemi Corporation, formerly Symmetricom, is headquartered in Aliso Viejo, Calif., and has approximately 3,400 employees around the world.

In 2012, Microsemi consolidated its communication and government business units into one. Each had a different way of forecasting demand. One was a custom forecasting tool with poor user satisfaction, and the other employed manual methods, including spreadsheets. Compounding those failings, neither tool incorporated opportunity data from the sales team, so that information was integrated in an ad hoc manner.

“Our operations team was seriously challenged in building the right supply,” said Gerry Leo, vice president of operations and supply chain. “We had a broken process.”

That disconnect led to time-wasting inaccuracies. “If we were to use the existing forecasting tools as is, we would generate a top-line number that was wrong, and it would take hours to realize it was inaccurate. Our reporting process wasn’t granular enough and was very slow, unstable and inconsistent.”

Because of the shortfalls of the forecasting process, the operations team was driving almost double what it needed into production. It was no surprise then that inventory skyrocketed – some $76m was tied up in the inventory process – yet Microsemi still didn't hit its revenue target.

It became clear that a sales and operations solution was needed. So the Microsemi team embarked on a search for an S&OP solution to facilitate better collaboration and forecasting, and to reduce costly inventory.

Ultimately, it partnered with Steelwedge Software, whose North American headquarters are some 400 miles away, in Pleasanton, Calif. “We chose Steelwedge for its ease of use, because it had all of the functionality we needed, and it could scale up to our growth,” Leo said. Noting that information silos often defeat company initiatives, he said, “Steelwedge gave us a solution that both marketing and IT were comfortable with.”

The Steelwedge solution enhanced the Microsemi S&OP process and enabled it to do forecasting on a monthly basis. The company can now forecast on an exception basis, giving the team the ability to see the exceptions where products missed their forecasts and determine why. Microsemi also uses Steelwedge to forecast inventory and safety stock.

“I needed a good, sound tool that gave consistent reports to the marketing department,” Leo said. “Steelwedge is pulling in the sales funnel and legacy information from Oracle. For the first time, we can incorporate historical information into the forecast, as well as marketing intelligence beyond two to three  months. All of that data is on one screen for product life cycle management. We’ve reduced by a significant amount the work that finance had to do because the numbers are there, they are instant, and we know they are right.”

On a monthly basis, Steelwedge facilitates the roll-up and authorization process. The Microsemi forecasting team reviews reports by product family with senior management, and can pull data in real time during meetings.

“These meetings have become much more efficient,” said Leo. “The process is much smoother and more streamlined, and it’s easier for senior management to sign off on the forecast. It’s also facilitated a quarterly process on driving revenue and investments to match our customers’ needs. We couldn’t even ask ad hoc questions before.

“Now we can forecast how long it will be before we run out of certain parts, we can do road map planning, and any revenue planning activity. The advantages that we’ve gained from Steelwedge are immense,” Leo said.

Specifically, he said, Microsemi has increased on-time delivery to promise date by 20 percent; it's improved commitment to customers' request dates for shipment by more than 20 percent; it's slashed inventory by an impressive 37 percent; seen lead time improved by more than 20 percent across the board; and, of course, increased productivity significantly.

Summing up, Leo said, “Forecast accuracy has improved and the process takes half the time that it did previously. They brought consistency and accuracy to our S&OP process. It gave us a tool that allows us to make proper decisions. We’ve gained tremendous efficiency.”

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