TDC Tackles Supply Chain Management
An optimized supply chain = millions in profits for Denmark's leading telco
Leading Danish telecommunications provider TDC is looking to supply chain management (SCM) to propel the company to even greater heights. To TDC’s customers, a more efficient supply chain will mean faster deliveries and better service; for the company, it will translate into profits in the hundreds of millions (in Danish kroner).
Market leadership, top performance and a "customer culture" are the goals; in concrete terms, this means achieving two-day lead time, 1 million broadband customers and zero customer failure, all by 2008.
TDC is already a big player in the market with unlimited potential for growth, but the organization is large, its products are complicated, and the pace of development is brisk. The result is that not all of the company's value chains are equally optimized -- and optimization of the supply chain will be the decisive factor in realizing company goals.
Profit in the hundreds of millions
In today's market, the supply chain is one of the final frontiers for finding untapped profits, and there is increasing pressure to trim and optimize via SCM.
TDC has a broad definition of supply chain, viewing the supply chain as the "engine" of the entire system, not simply a discipline for warehouse workers and purchasing. As such, the company is looking at the total delivery process.
In practice, 11 SCM experts at TDC Supply Nordic "sell" services to internal customers within the company. Supply chain management is firmly embedded in upper management as a strategic and cross-disciplinary practice that requires cooperation between the individual business units and TDC Supply Nordic. TDC's business climate emphasizes that SCM is about creating a profitable business.
The company's goal is to be able to track the costs associated with its supply chain management efforts. More than 100 managers and staff participate in supply chain management projects that the company estimates will yield an annual profit in the hundreds of millions. These profits will begin posting in 2009.
TDC aims to halve inventory
"We have three goals for the company as a whole," says Dan Kronholm, VP of Supply Nordic at TDC Group Staff. "We aim to halve inventory; we want to cut annual logistics expenditures by 15 percent; and we want to ensure that we can phase out certain products so that we aren't losing money by holding on to large amounts of old product. This should all coincide with an increase in delivery precision and enhanced customer and employee satisfaction. In addition, the business units will always be in charge of the projects: It needs to be sound business, and not just SCM for SCM's sake."
Kronholm wants to dispel various myths when it comes to logistics. For instance, it is indeed possible both to halve inventory and to improve lead times. It is also possible to increase the number of broadband customers, even while reducing inventory size. The key, says Kronholm, is to make TDC more order-driven and also to work intensively on streamlining all delivery processes.
SCM from top-down and bottom-up
The SCM effort relies a great deal on timely and accurate information. TDC centralizes IT support for these processes so that many transactions can be automated. TDC attains better integration with suppliers through standardized IT systems, thus optimizing the entire supply chain.
"It is entirely appropriate to speak of supply chain intelligence," says Supply Chain Manager Steen Mørch of TDC Supply Chain Development. "The information gathered by IT is used in evaluating and following key performance indicators [KPIs], for instance, for stock tie-up, product flow and much more. We have also begun an array of automated reports, which has freed up around 80 percent of our time for analysis, with the remaining 20 percent still spent on data acquisition. In addition, we perform serious statistical analysis as a central step in our delivery process optimization efforts. We have a good partnership with SAS in all of these areas."
The supply chain management effort at TDC is both broad and deep. The SCM experts at TDC Supply Nordic are confident that their efforts will be successful because, although SCM is anchored in upper management as a top-down structure, it is also characterized by a bottom-up structure in projects at the business unit level.
The SCM experts spend a lot of time communicating at ground level in order to promote the process of change and to keep the SCM efforts rooted in reality. They often stress that SCM is not just aimed at the bottom line. Several of the SCM projects, for example, have employee satisfaction incorporated as a KPI. The idea is that workplace satisfaction is a good indicator of whether, as a TDC employee, you are delivering the customer's desired solution on time, every time. This may be the real reason that supply chain management is so convincingly underway at TDC.
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