In the beginning, the performance indicators which impact the area of collaboration, forecasting, supplier collaboration and supply chain agility will be measured. A few examples of such performance indicators are cash-to-cash cycle time, inventory turn, order fulfillment cycle time, upside supply chain adaptability, downside supply chain adaptability and flexibility, return on supply chain asset, supply chain cost etc. HCL’s proprietary tool PRIZM can help capture values of existing performance indicators in the organization. Once we get the values of existing performance indicators, these are compared against the benchmark performance indicator values. HCL has created a repository of benchmark performance indicators for best-in-class industry, average industry and laggards.

1. HiTech Supply Chain
Advisory Framework

2. 2
HiTech Supply Chain Advisory Framework
1. Introduction
1.1 Background and Objective
In this interlinked and globalized world economy, manufacturing
companies are constantly transforming themselves to quickly adapt to
market requirements to sustain their competitive advantage. Some of the
key factors effecting this transformation are –
? but varied demand
Huge
?Country-specific & changing risk, regulatory & compliance
requirements
?Complexity in global flows of information, goods & capital
?Challenges in global resource & talent acquisition and their
management
Many of these factors link how a manufacturing company operates their
business and has a big impact on their supply chain strategies. It is
therefore prudent to revisit the supply chain components, re-plan as
warranted and accurately execute to effect the desired transformation.
The objective is to lay a foundation for improved supply chain visibility to
respond appropriately to the changing global scenarios. In essence, this
will aid in reducing logistics costs & inventory levels, reducing cash-to-
cash cycles, yielding higher inventory turns, improving forecast accuracy
and other important performance indicators thus having more profitable
operations.
This white paper outlines a framework to revisit the supply chain of
HiTech manufacturing companies and identify the key transformation
areas as relevant to their business.
Complications for supply chain in HiTech Industries could be significant
as the supply chain is generally spread across multiple geographies and is
primarily forecast driven. The framework discussed in this white paper
addresses the key issues and suggests means to streamline the
irregularities.
1.2 Summary of the Framework
While the evolution of enterprise is advancing from a semi-functional
enterprise to an integrated and extended enterprise, the objective of the
supply chain should be to span the entire extended enterprise. The
framework, in this white paper, has been developed to identify all major
issues in the supply chain of HiTech companies including the extended
enterprise. Once these issues are addressed and streamlined, the HiTech
supply chain can achieve the desired state of an integrated and extended
enterprise.
The HiTech industry in our context comprises of the following sub-
segments: semiconductor, consumer electronics, electronic measuring
equipments & instruments, storage, desktops & server, networking and
peripheral devices manufacturers.
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3. 3
HiTech Supply Chain Advisory Framework
This advisory framework outlines a well-defined methodology to identify
and address the supply chain issues and recommend possible solutions.
Several tools and accelerators are also recommended for use at various
stages of the framework. An industry analysis has been done to
understand the key issues in HiTech supply chain through various sources.
Research reports from Aberdeen Research and RR Donnelly have been
referred to for industry analysis. Also, several key users in HiTech
industries have been interviewed to understand the key pain areas.
2. The Industry Analysis
The primary objective of industry analysis is to identify the areas of focus,
different key success factors in different segments and the logic of the
industry. This analysis is also called external analysis. Aberdeen research
reports have been used to identify the key areas of focus in the next 18-24
months.
Improving forecast accuracy 55%
Optimizing inventory routes, making better
52%
decisions on where and how
much inventory to store
Reducing lead times 48%
Inventory collaboration with suppliers/customers 38%
Implementing Lean and Just-in-Time principles 34%
Reducing lead time variability 31%
0% 10% 20% 30% 40% 50% 60%
Source: Aberdeen Research Webinar Oct, 2010 % of Respondents
Table 1: Key Supply Chain Strategies for HiTech Companies
Note from Table 1, that 55% respondents in HiTech industries have
mentioned that forecast accuracy is their key areas of focus while 52%
respondents have mentioned that inventory optimization is their key
focus. Lead time reduction and collaboration with suppliers and
customers (supply chain partners) are the next priority of supply chain
activities as per the respondents (key users of HiTech supply chain) of this
survey.
Now refer to the RR Donnelley Report for HiTech in Table 2. The focus
areas identified through this survey are almost similar to that of the
Aberdeen Research survey.
As per this report, improved forecasting, inventory reduction,
improvement of supply chain visibility and managing supply chain
complexities are the main areas of focus.
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4. 4
HiTech Supply Chain Advisory Framework
Areas in which Tools, Strategies or Technologies will be
Invested, in the Next 12 Months
Supply Chain Management
Visibility
Infrastructure Investment
Forecasting
Business Intelligence
Reporting/Analytics
Procurement
Staff Training
Order Systems
Collaboration
Warehouse Management
20 40 60 80
Source: Eyefortransport’s 2010 survey, RR Donnelley %
Table 2: Key Supply Chain Strategies for HiTech Companies
Besides analyzing Aberdeen and RR Donnelley reports, key users in
HiTech industries have also been interviewed. The areas of interest in the
supply chain as described by the key users are mentioned below:
? capability building with suppliers and partners to do
Joint
research and development work.
? saving through proper forecasting, timely replenishment,
Cost
operations and inventory optimization.
? adopters of concepts of integrated enterprise through B2B
Early
exchange.
? visibility is required in the distribution channel with close
High
collaboration with SCM partners.
?Reasonably good forecasting is required for launch of substitute
product. Postponement technique is adopted to come out with
new product quickly.
Considering the observations from above, there are four key areas of
focus in HiTech supply chain. The cause and effect of these four areas are
outlined below:
?Forecasting issue – HiTech industry runs on forecast-driven
supply chain. Semiconductor industry and consumer
electronics industry in particular, depends on forecasting for
their production planning, raw material planning and
distribution planning. If the forecast is not accurate a possible
bullwhip effect is expected in the supply chain. Small demand
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5. 5
HiTech Supply Chain Advisory Framework
variability becomes more and more distorted resulting in
unnecessary stock pile in different point of the supply chain.
There may be unexpected stock out situation also at different
point of supply chain.
?Collaboration Issue - HiTech Industry has a large vendor base
and their distribution channel is spread across multiple
geographies. Collaboration, therefore, is always an issue for
them. There is demand mismatch among SCM partners at any
point of the supply chain due to lack of information
sharing and collaboration approach.Due to lack of
collaboration, cost of procurement, cost of planning and cost of
distribution goes up. It also affects the timely delivery and
product quality.’
?Supplier Consolidation Issue - HiTech Industry has a large
supplier base because of variation in product range and technical
complexities. For most of the HiTech companies, supplier base is
spread across multiple geographies. Because of transactional
relationship with suppliers, cost of purchase goes up and proper
supplier selection cannot be done because of lack of
understanding of their capability.
?Supply Chain Agility Issue - Since the product life cycle is
short in HiTech industry, maximum sales should be achieved in a
short span of time. Sensitivity analysis is done very
frequently in marketing front and the supply chain does not
always respond to that sensitivity analysis quickly. Because of
less flexibility and adaptability in the supply chain there is
loss of sales opportunity.
3. The Methodology
A methodology has been conceptualized which comprises of six main
steps which can address the above mentioned issues step-by-step. These
are:
?Assessment of performance indicators
?VMOKRAPIS exercise
? – Impact- Action – Enablers exercise
Issues
?
?Conceptualization of new standard operating procedure
?Analytic hierarchy process
?SCOR metrics analysis
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6. 6
HiTech Supply Chain Advisory Framework
As - Is As - Is As - Is To - Be To - Be
Assessment of Issues- Impact – New Standard Analytic
VMOKRAPIS
Performance Action – Enablers Operating Hierarchy
Exercise
Indicators Exercise Procedure Process
Compute
? Revisit Strategy
? Identify issues
? ? of
Setting up Identification of
?
current against new in the area of New Standard Criteria
Relevant Pis benchmark Pls Collaboration, Operating
Forecasting, Procedure Identification of
?
? with
Compare ? the
Prioritize SCM Agility and Based on Sub Criteria
Benchmark Pis area of Supplier Issues –
advisory Consolidation Impact- Action – ?
Setting up
Enablers proportionate
Identify conflicts
? Assess Impact
? Exercise weight to each
and Actions element
required
? of
Calculation
Identify
? final score for
Enablers for IT product
As - Is
SCOR Metrics
Analysis
Prizm Benchmark Standard Path Measurement of
?
PI Repository Questionnaire Finder
Supply Chain
Metrics
SCOR
Measurement of
?
Process SCOR Metrics
Accelerators Repository before and after
IT system
Table 3: The Methodology
3.1 Assessment of Performance Indicator
In the beginning, the performance indicators which impact the area of
collaboration, forecasting, supplier collaboration and supply chain agility
will be measured. A few examples of such performance indicators are
cash-to-cash cycle time, inventory turn, order fulfillment cycle time,
upside supply chain adaptability, downside supply chain adaptability and
flexibility, return on supply chain asset, supply chain cost etc. HCL’s
proprietary tool PRIZM can help capture values of existing performance
indicators in the organization. Once we get the values of existing
performance indicators, these are compared against the benchmark
performance indicator values. HCL has created a repository of
benchmark performance indicators for best-in-class industry, average
industry and laggards.
This comparison will give a clear picture of the overall supply chain health
check up of the organization. Areas of improvement will be identified
clearly and the advisory work can be narrowed down to specific areas.
Specific performance indicators can be identified where improvement is
required. This step will set the directions for the rest of the steps in the
methodology.
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7. 7
HiTech Supply Chain Advisory Framework
Key Result Area (KRA)
Key Result Area (KRA) Performance Indicator (PI)
PerformanceIndicator (PI) PI Values ((Benchmark)
Values Benchmark)
Best- in-Class – 26 Days
Average - 55 Days
Laggard - 72 Days
Supply Chain Asset Mgt Cash to Cash Cycle Time
Best-in-Class – 97%
Average – 89%
Laggard – 82%
Supply Chain Reliability Perfect Order Fulfillment
Best-in-Class - 82%
Average – 68%
Laggard – 42%
Visibility Forecast Accuracy
Best-in-Class - 60%
Average – 40%
Laggard – 20%
Visibility Visibility Across Supply Chain
Best- in-Class – 50% (Approx)
Average - 30% (Approx)
Supply Chain Responsiveness Agility
Best- in-Class – 46
Inventory Turn Average - 30
Laggard - 15
The functional areas which will be covered are the followings:
? Management
Order
?Inventory Management
?Purchase Order System
?Material Requirement Planning
? in Process
Work
? OP Planning
S&
?Collaborative Planning
?Accounts Payable
?Accounts Receivable
3.2 VMOKRAPIS Exercise
The main objective of this exercise is to understand the strategic direction
of the company. ‘VMOKRAPIS’ stands for Vision, Mission, Objective,
Key Result Area, Performance Indicator and Strategy. This is called top-
down approach of strategy development. Strategic direction depends
upon values of performance indicators. When performance indicators are
identified for which enhancement is required, we need to validate whether
strategies are in the right direction against those performance indicators.
No new strategies will be developed for customers. Existing strategies will
be validated once. If there is any major conflict, it will be highlighted.
As an example, to improve the value of performance indicators like
Inventory Turn, Cash-to-Cash cycle time, Order fulfillment cycle time, it
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8. 8
HiTech Supply Chain Advisory Framework
may be required to go for strong collaboration with suppliers and
customers. The organization may need to share planning and operational
data with its supply chain partners. However, if the organization-wide
strategy prevents the company in doing so, this should be highlighted
during the advisory work.
3.3 Issues – Impact – Action – Enablers Exercise
In this step, all issues will be identified in relevant areas through standard
questionnaire. Issues for areas of focus should be considered only. The
area of focus is collaboration, forecasting, supplier consolidation and
supply chain agility. For all issues, the impact will be identified. For each
impact, proper actions should be conceptualized so that the impact can be
overcome. For each action, proper enablers should be identified so that
the actions can be implemented. Enablers will be the solution which can
resolve the issue. These enablers will later be implemented by
recommended IT solutions & recommended business process
modifications or additions.
Issues Impact
Impact Action
Action Enablers
Enablers
High Procurement Uncertainty in
? Activate Collaboration
? VMI Solution
?
Lead Time, Fluctuating
Procurement Lead Time Replenishment among Partners CPFR Solution
?
High Procurement ?
? Establishing Strategic Collaborative
?
Cost relationship with Vendors
? Transportation
Jointly do
Vendors not Aligned Delay in
? Visibility enhancement
? VMI Solution
?
with Forecast Trend, Replenishment through Collaboration ? Planning
Inventory
Lot Sizing Problem
? of
High Cost Solution
High Cost of Logistics ? of
High cost Establishing Strategic
? Collaborative
?
( 3PL / 4 PL) procurement relationship with Logistic Transportation
Service Provider Management
? Transportation
Jointly do
Table 5 – Issues – Impact – Action-Enablers Exercise
3.4 New Standard Operating Procedure
The new standard operating procedure should be conceptualized where
changes will be taking place through this advisory work. It is equivalent to
drafting new business processes in the concerned area. HCL’s tool
‘PATHFINDER’ has a huge repository of standard business processes
for different segment of HiTech industries. This repository can help in
conceptualizing standard business processes for the area of focus. From
‘Issues–Impact-Action-Enablers’ exercise ‘Impacts’ and ‘Actions’ are
important outcomes which will show the path of formulating new
standard operating procedure.
This step will make existing business process smarter and lean, and
performance indicator’s value gets improved. SCOR (Supply Chain
Operations Reference) metrics, which are conceptualized by Supply
Chain Council (SCC), should be analyzed at AS-IS state and at TO-BE
state. TO-BE state can only be reached through implementation of
proposed IT/ERP system. At AS-IS state SCOR metrics value should be
captured. These can be compared with TO-BE state value after
implementation of IT/ERP system.
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9. 9
HiTech Supply Chain Advisory Framework
3.5 Analytic Hierarchy Process (AHP)
Analytic Hierarchy Process is for structured decision making process.
Each and every enabler may have multiple IT Solutions. The AHP helps
decision makers find one that best suits the goal and the understanding of
the problem. Users of the AHP first decompose their decision problem
into a hierarchy of more easily comprehensible sub-problems, each of
which can be analyzed independently. Each and every sub-problem will be
given due weight and all options will be evaluated against these weighted
points. A definite score will come up for all possible IT solutions. The
option for which the score is highest will be recommended. For selection
of IT systems, generally the following criteria are considered.
?Assessment during product demo
?gap analysis
Fit
?Suggested approach and methodology
?Price
?IT product company reference
?Extent of support
This exercise is based on possible enablers.
?
Criteria, Sub Criteria and Proportionate weight is decided based on discussion with
?
key users.
p le
ple
Selection of IT System Exam
Goal Exam
0.25 0.25 0.25 0.25
Criteria Fit Gap Assessment Suggested IT Product
Analysis during CRP Approach Company
Sub 0.125 0.125 0.125 0.125
Criteria
Extent of
Price Methodology Reference Support
Alterna
tives
IT Systems, ERP systems
Table 6: Analytic Hierarchy Process
4. Conclusion
Today’s supply chain in the HiTech industry is characterized by high
complexity, change and new regulations. Add to this the high volatility of
demands and thereby prices. The global nature of operations brings in a
reliance on global partners and their operations. The value chain extends
across to all these partners which effect the overall operations of the
organization in discussion. Therefore, re-planning and execution agility
are vital for the HiTech companies of today.
The advisory framework discussed in this white paper attempts to address
these through a structured methodology.
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10. 10
HiTech Supply Chain Advisory Framework
The ultimate objective is the enhancement of the supply chain
performance. Enhancement of performance indicator value in the area
of collaboration, forecasting accuracy, supplier consolidation and supply
chain agility will help bring the supply chain to the level of extended
enterprise where the optimum level of supply chain efficiency can be
attained. This advisory framework exercise will result in
recommendations for solutions in various areas which when implemented
will help improve upon the supply chain efficiencies.
It is expected that this methodology will accrue benefits to help in:
?Lowering inventory levels
?Lowering logistics costs
?Perfect order fulfillment
?Increased agility for meeting forecast and demand driven
scenarios
This will overall impact in shorter cash-to-cash cycle and hence revenue
growth and cost reduction. In summary this will help in more profitable
operations.
References:-
1. Aberdeen Research Reports
?
Strategic Supply Chain Planning (2010) – Nari Vishwanath
?
Beyond Visibility - Diving Supply Chain Responsiveness
(2008) – Viktoriya Sadlovska
? management ( 2009) – Nari Vishwanath
Inventory
2. McKinsey Reports
?
The Challenges ahead for Supply Chain ( 2010) - Trish Gyorey,
Matt Jochim, Sabina Norton
3. Emerald Papers – Business Strategy Series
? Fitment of ERP and Conceptualization of its
Analysis of
Substitute for small segment – A Strategic Approach ( 2009) –
Arindam Sen and Ranjan Bhattacharya
4. RR Donnelley
?
Eyefortransport’s 2010 survey, RR Donnelley
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11. 11
HiTech Supply Chain Advisory Framework
Authors
Arindam Sen, General Manager,
HCL Technologies Ltd.
Arindam Sen is part of the Vertical Solution team at HCL Technologies
Ltd. Arindam’s primary role in HCL is to devise solutions, IPs &
frameworks to address business problems of customers in HiTech
vertical.
Arindam is a seasoned professional with 17 years of global experience of
which the last 13 years were in Information Technology and his initial 4
years were in Production Operations and Supply Chain Management. He
has extensive experience in ERP consulting including Business Strategy &
Planning, Product Selection, Solution Building, Competency
Development and Program Management.
Arindam holds a Master in Management (General Management) from
Asian Institute of Management (AIM), Manila. He is also a CSCP
(Certified Supply Chain Professional) from APICS, USA. He completed
his Master of Engineering (Production Management) from Jadavpur
University, Calcutta and Bachelor of Engineering (Mechanical) from
Bengal Engineering and Science University (BESU), Shibpur.
Thirthankar Banerjee, General Manager,
HCL Technologies Ltd.
Thirthankar is a seasoned professional with 25 years of experience in
Senior Management, Solution Development, Sales and Marketing and
Advisory Services. He is deft with strategy formulation and
implementation and adept in Industry Analysis, Internal Analysis, Market
Segmentation and Analysis of Competitors.
Thirthankar has extensive experience in ERP consulting including
Business Strategy / Planning, Product Selection, Solution Building,
Account Management, Client relationship management, Competency
Development and Program management. He is a graduate from IIT,
Kharagpur.
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12. 12
HiTech Supply Chain Advisory Framework
ABOUT HCL
HCL Technologies
HCL Technologies is a leading global IT services company, working with
clients in the areas that impact and redefine the core of their businesses.
Since its inception into the global landscape after its IPO in 1999, HCL
focuses on ‘transformational outsourcing’, underlined by innovation and
value creation, and offers integrated portfolio of services including
software-led IT solutions, remote infrastructure management,
engineering and R&D services and BPO. HCL leverages its extensive
global offshore infrastructure and network of offices in 29 countries to
provide holistic, multi-service delivery in key industry verticals including
Financial Services, Manufacturing, Consumer Services, Public Services
and Healthcare. HCL takes pride in its philosophy of ‘Employees First’
which empowers our 70,218 transformers to create a real value for the
customers. HCL Technologies, along with its subsidiaries, had
consolidated revenues of US$ 2.9 billion (Rs. 13,145 crores), as on 30th
September 2010 (on LTMbasis).
About HCL Enterprise
HCL is a $5.5 billion leading global technology and IT enterprise
comprising two companies listed in India - HCL Technologies and HCL
Infosystems. Founded in 1976, HCL is one of India's original IT garage
start-ups. A pioneer of modern computing, HCL is a global
transformational enterprise today. Its range of offerings includes product
engineering, custom & package applications, BPO, IT infrastructure
services, IT hardware, systems integration, and distribution of
information and communications technology (ICT) products across a
wide range of focused industry verticals. The HCL team consists of over
77,000 professionals of diverse nationalities, who operate from 29
countries including over 500 points of presence in India. HCL has
partnerships with several leading Global 1000 firms, including leading IT
and technology firms. For more information, please visit www.hcl.com.
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