• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • SCB YouTube
  • Login
  • Subscribe
  • Logout
  • My Profile
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Supply Chains in Crisis
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • THINK TANK
  • WEBINARS
    • On-Demand Webinars
    • Upcoming Webinars
    • Webinar Library
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Motorola Mobility Gets a Grip on Supplier Management (copy 1)

Motorola Mobility Gets a Grip on Supplier Management (copy 1)

December 16, 2011
SupplyChainBrain

There was a time, not very long ago, when Motorola ruled the world of mobile phones. The company pioneered the first commercial portable cellular phone in 1983. Over the years it parlayed that expertise into a series of successful models, culminating with release of the ultra-thin RAZR phone in 2004.

The company's fortunes took a dip shortly thereafter. In the period from 2006 to 2008, revenues from the Mobile Devices business unit slipped from $28bn to $12bn, while the number of units sold plunged from 217 million to 100 million. Other brands, including Apple's iPhone, came to dominate an increasingly competitive marketplace.

Motorola plotted its comeback with the release of a series of new phones built on Google's Android operating system. The company's determination to focus on smartphones and tablet devices eventually led to the splitting of Motorola Inc. into two publicly traded companies, one of which was Motorola Mobility Inc., in January 2011. Before that, though, it needed to take a close look at its supply chain.

The strategy consisted of more than just a slate of new products and a corporation reorganization. Motorola's Mobile Devices unit was facing serious shortages of key electronics components.

The recession of 2008 had made many suppliers gun-shy about taking on large quantities of parts. At the same time, the manufacturer was being forced to take big write-offs on excess and obsolete (E&O) inventory.

"We had too many parts we didn't need," says director of business operations Grant Hoffman, "and not enough of what we did." There was a pressing requirement to improve the link between supply and demand.

The key lay in applying the precepts of sales and operations planning to Motorola's supplier relationships. By its very nature, S&OP is about integrating disparate links of the supply chain in order to create a consensus around sales forecasts. Motorola decided to embrace supplier S&OP as part of a three-pronged strategy to ensure a successful launch of the Android smartphones, in combination with supply-chain simplification and a significant reduction in manufacturing and order lead times.

Applying Range Forecasting

There were two major elements of the plan. One was "range forecasting," an internal effort to ensure the steady supply of parts and products. The other was "component postponement," a practice whereby generic devices are customized for particular markets at the last possible moment.

Motorola Mobile Devices was accustomed to providing its suppliers with forecasts that consisted of just one number. Not surprisingly, suppliers wouldn't always trust the figure and would alter it in line with their own expectations. They were worried about the impact of ever-shifting demand, seasonality, carrier issues and the extremely short lifecycle of electronic devices. The result was a serious lack of harmony between partners.

For about 50 of its most critical suppliers, Motorola replaced the single number with a variable forecast consisting of high, medium and low ranges. The actual quantity could then be adjusted in line with any number of late developments, such as a promotion that was likely to boost sales. Motorola's supply-chain team kept in regular contact with suppliers to set the right milestones. At some point, late in the process, the number would be locked in. The chief target was expensive items with long lead times, which tended to account for the greatest portion of excess and obsolete inventory. They were also frequently found on shortage lists.

According to Hoffman, the practice of range forecasting gave rise to several challenges, including the question of how and when to disseminate information, the difficulties of building solid relationships with suppliers, and the need to stay away from short-term supply issues that could skew the forecast. Nevertheless, the changes led quickly to an improvement in suppliers' inventory levels.

The other piece of the puzzle, external component postponement, wasn't a new idea in the world of high-tech. It had been practiced for years by companies such as Hewlett-Packard, which had implemented a plan for customizing its line of printers to meet the needs of various geographic markets. Again, the idea was to minimize overages and shortages of critical parts, while adjusting to unanticipated changes in demand.

Mapping the Process

Motorola needed to dive deeply into the procurement and manufacturing processes, especially for those products involving long lead times. It drew on Six Sigma methodologies to devise a series of "value stream maps." They uncovered the various points in the process at which key decisions are made about committing to a specific customer or product type. One supplier "moment of truth" occurred when it had to decide whether to process a generic component to meet the unique needs of Motorola Mobile Devices, or release it to another original equipment manufacturer. On Motorola's end of the chain, it had to determine when a basic product would become one model or another.

Up until that crucial decision point, the materials involved were characterized by low cost and a high degree of commonality. Afterwards, the opposite - high cost and low commonality - became true. By identifying the precise inflection points at which the dynamics of a given product shifted, Motorola and its suppliers could devise a successful postponement strategy. The Mobile Devices team could provide suppliers with a forecast well in advance of the inflection points, then supply updates as the deadlines drew near.

With the new program proving a success, Motorola began adding suppliers. It targeted those who frequently showed up on shortage lists, received multiple signals, required long lead times and suffered from capacity constraints. Cross-functional teams met weekly with suppliers to explain the new strategy and help make decisions on the fate of the most expensive components.

Two years after implementation of supplier S&OP, Motorola has realized dramatic results. It saw a 74-percent improvement in inventory turns between the second quarter of 2008 and fourth quarter of 2010, a 75-percent reduction in E&O costs between 2009 and 2010, an additional $34m of gross margin in the first quarter of 2010, and the avoidance of $27m in E&O expense in the third quarter of 2010.

Long-term, the biggest benefit for Motorola might be in the area of improved relationships up the supply chain. "Build supplier trust slowly," says Hoffman, "and business results will follow."

Resource Link:
Motorola Mobility

RELATED CONTENT

RELATED VIDEOS

Transportation & Distribution Product Lifecycle Management Sales & Operations Planning Forecasting & Demand Planning Supply Chain Finance & Revenue Management Sourcing/Procurement/SRM Supply Chain Planning & Optimization Supply Chain Visibility Business Strategy Alignment Order Fulfillment High-Tech/Electronics
KEYWORDS Business Strategy Alignment EDI Communication (XML/EDI) Forecasting & Demand Planning High-Tech/Electronics order fulfillment Product Lifecycle Management RFID & Barcode Sales & Operations Planning SC Finance & Revenue Management SC Planning & Optimization Sourcing/Procurement/SCM Supply Chain Visibility Transportation & Distribution
  • Related Articles

    How to Improve ROI on Product Returns (copy 1)

    Dow Chemical Co. Adopts a New Model for Supply-Chain Resilience (copy 1)

    CPG Giant Unilever Gets a Handle on Demand

SupplyChainBrain

Berkshire Grey and Locus Robotics Join Forces to Offer Cross-Platform Robotic Automation

More from this author

Subscribe to our Daily Newsletter!

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • A MAN IN A SUIT SHAKES HANDS WITH A WOMAN IN A HARD HAT, NEXT TO A STACK OF CONTAINERS

    Three Procurement Technology Evolutions for 2023

    Sourcing/Procurement/SRM
  • DOCUMENTS BEARING THE INSIGNIA OF US CUSTOMS AND BORDER PROTECTION LIE ON A TABLE

    New CBP Regs Call for Greater Diligence by Brokers in Reporting Security Breaches

    Freight Forwarding/Customs Brokerage
  • The blank stare of a child's eye who is standing behind what appears to be a wooden frame

    The Alarming Continued Rise of Modern Slavery in Supply Chains: How Procurement Can Help Reverse the Trend

    Sourcing/Procurement/SRM
  • A WORKER IN A WAREHOUSE, SUPERIMPOSED WITH GRAPHICS SHOWING SUPPLY NETWORK

    Enabling Intelligent Visibility With Supply Chain Analytics

    Data Management (Big Data/IoT/Blockchain)
  • A GROUP OF WORKERS RANGED IN AN OFFICE, OF DIVERSE RACE, GENDER, AGE AND PHYSICAL ABILITY

    Podcast | The Supply Chain Workforce of the Future Is Already Here

    HR & Labor Management

Digital Edition

Scb nov 2022 sm

2022 Supply Chain Innovator of the Year

VIEW THE LATEST ISSUE

Case Studies

  • New Revenue for Cloud-Based TMS that Embeds Orderful’s Modern EDI Platform

  • Convenience Store Client Maximizes Profit and Improves Customer Service

  • A Digitally Native Footwear Brand Finds Rapid Fulfillment

  • Expanding Apparel Brand Scales Seamlessly with E-Commerce Technology

  • How a Global LSP Scaled its Security Program and Won More Business

Visit Our Sponsors

Orderful Yang Ming Alithya
Barcoding Blue Yonder BNSF Logistics
CoEnterprise Data Capture Deposco
E2open GAINSystems Generix
Geodis GEP GreyOrange
Here Honeywell Intelligrated IFM
Infor Inmar Keelvar
Kinaxis Korber Lean Solutions Group 2H
Liberty SBF Locus Robotics Logility
LogistiVIEW Lucas Systems MCA Connect
MPO Nvidia Old Dominion
OpenText ORTEC Overhaul
Parsyl PMMI QIMA
Redwood Logistics Ryder E-commerce by Whiplash Saddle Creek Logistics
Schneider Dedicated Setlog Holding AG Ship4WD
Shipwell Tecsys TGW Systems
Thomson Reuters Tive Trailer Bridge
Vecna Robotics Verity
Verusen
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • On-Demand Webinars
    • Upcoming Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2023 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing