Collaborate With Your Suppliers to Synchronize the Supply Chain: Featuring a Case Study on Cisco Systems

Adrienne Selko, Online Editor, IndustryWeek
Chalam Kalahasti, Senior Manager, Demand Management and Planning, Customer Value Chain Management, Cisco
Mithun Samani, Manager, PRTM
Kerry Zuber, Director, Solutions Consulting, Kinaxis

Good Afternoon and welcome to our presentation Collaborate With Your Suppliers to Synchronize the Supply Chain: Featuring a Case Study on Cisco Systems. My name is Adrienne Selko and I am the Online Editor for IndustryWeek which is producing this event. Today's webinar is sponsored by Kinaxis in association with PRTM. During today's webinar you will learn why collaborate planning with suppliers is a strategic best practice used by market leaders to align their end to end supply chains. In IndustryWeek our mission is to connect manufacturing decision makers to share ideas and tools and inspire action. We strive to provide information that helps you make better decisions to achieve your goals. Today's webinar brings together members of the manufacturing community to discuss strategic and operational issues. As part of this webinar we will have a live Q&A session. Our speakers today will address as many questions as they can during the last portion of the event, so please submit your questions throughout the webinar. To send in your questions, type it into the ask a question box at the bottom left of your screen then click the submit button. Wherever possible please direct your question to a specific speaker. This webinar is being recorded and will be available on demand for you to review. We encourage you to direct co-workers to the recorded presentation. You will receive an email with a link to the on demand version in a few days. The recording will also be available on the IndustryWeek.com website in our webinars area. We ask that you please disable your pop up blockers during this event. If you are using Internet Explorer you can disable the popup blocker by going into the tools menu, clicking internet options, then choosing the privacy tab at the top. If for some reason the presenters slides are not advancing or if you are having problems with audio try pressing the F5 button at the top of your keyboard. This will refresh the webinar console on your screen. To adjust the volume, look for the volume control slider in the lower right corner of your screen. You may also need to adjust the master volume of your computer system. Also in the lower right corner you should see several buttons. The launch survey button brings up a feedback form which we'd like you to complete at the conclusion of the presentation. We will also push this survey out to you as we approach the end of the event. Next, the full screen mode button lets you enlarge the webinar player. Below that you will see the download slide button. This is links a PDF of all the presenter's slides and you can save or print the presentation. And finally the help button brings up to a series of troubleshooting tips. I'd like to introduce today's speakers. We have Chalam Kalahasti who is Sr Manager, Demand Management and Planning for Customer Value Chain Management Cisco. Chalam has over 10 years of experience in the supply chain management at Cisco and the last four focused on supply chain planning. We also have with us, Mithun Samani who is Manager at PRTM and has more than 8 years experience in supply chain operations, supply chain strategy, project management and process improvement. And also Kerry Zuber who is director of Solutions Consulting for Kinaxis. Kerry is responsible for planning the company's pre-sales consulting services which specializes in establishing the value of the RapidResponse service for prospective clients. I'd like to turn the call over to Chalam.

Thank you Adrienne. Thank you very much. I appreciate everybody joining us today. The presentation is broken into three different segments and starting off Why do we need to do collaborative planning with suppliers? I'll give some context from the background on. Important stuff, that piece. Next we will go into the context of What is Collaborative Planning? What are the elements, what are the key aspects of collaborative planning; the planning that we are talking about here. And then we will go into a little bit more detail; How to Implement Collaborative Planning? If you think about the different elements, or the trends that are driving our strategy starting from the left to the right we will talk about customer excellence. This is pretty obvious and I think for most of the people that are on the call today. The customer continues to ask for more either in terms of reduced lead times, more flexibility, it is also a different strategy in the market place for any company so that' primarily is where you start. The second aspect is the demand volatility and most of us have gone through the recession; the downturn and the upturn and we have to recognize that demand volatility is here to stay. The planning capabilities and planning needs are all around how to manage demand volatility knowing that demand volatility is here to stay and how to understand the different demand paradigms and markets and then how to adjust the planning towards that. That is what drives the strategy. The next topic is the product portfolio. A lot of companies, just like Cisco are looking at a wide range of products; a high volume, a low volume, new market volatility; all of these are important characteristics in understanding and making sure we have the right strategy to drive the right planning processes and capabilities. The next aspect is the technology transformations and this is where we look at how do we manage through the different technology transitions driven by customers, or through the supply chain; innovation supply chain, innovation within the R&D and how do we manage the market segment transitions that are happening. So these are also important aspects in how make sure we have the right strategy and planning processes. And last but not least is the global footprint. So we innovation engine across the globe in different markets and also from a manufacturing and 6:22 perspective; the factories, the suppliers, they are all over the world. So how do we make sure we are all aligned in terms of what are the drivers; what are the drivers of demand, what are the drivers of supply and make sure we have an end to end strategy so we are able to connect what is the end customer we are looking at and be able to manage it all the way these complex networks of either demand patterns, our products and our suppliers and be able to maintain align across all these different factors. So these are all the different things we think about strategies have to understand an make sure from a strategy perspective that you have the right processes and tools to manage; to be able to achieve the end to end value chain excellence.

Talking from a Cisco high level strategy perspective; if you think about the value chain process and the value chain planning process; 7:23 demand management and planning has presented this is the last webinar; how do we optimize the end to end planning; it always starts with better demand planning. If you think about demand planning, from a Cisco perspective it is all about collaboration and making sure we have the right set of tools to manage and also we have the multiple perspective to be able to get to what we agreed upon is the best possible number for demand. And at the same time it is most important that the one specific topic that we really focus on is the one number alignment. It is possible that cross functional within different groups there is an agreement on one number that we should have in the entire supply chain to operate on. If we have a multiple numbers being shared with the supply chain it leads to confusion. That is why it is so important to make sure that the single number alignment is across the different functions. Let's manage through the different processes that span different departments within Cisco. So this basically sales and marketing alignment, finance alignment, and value chain alignment and making sure you have the right set of tools to manage these processes; it is a very complex process that is run by multiple business units and so it is important to make sure we have the right set of processes and tools to manage the demand planning process. If you think about what is next, the demand planning on its own does not really provide the value that is necessary to drive the alignment; the next step in the entire process is the better supply planning. The supply planning is basically how do we take the demand plan that is published to the 9:10 and make sure we supply the demand chain appropriately. This is the critical piece that helps us understand what sorts of supply do we have to support the demand plan. Once the supply chain is sized and how do we know if we have the right supply and and making sure we have visible critical supply commitment, but there is also more into having the visibility also making sure what is the accuracy of the supply commitment and that's basically that is where we will do a little 9:45 and talk about the collaborative planning process with the suppliers it depends what level, what node do we need to go to know exactly what is the supply volatility and the flexibility through the entire network. And then third part of the supply planning process is the "What-if" capabilities and this is where we can understand the changes and the impacts of demand volatility or supply disruptions, what does it mean to the business. Do we have the right set of supply demand balancing tools to be able to manage and understand the impacts of supply demand imbalances. Those are the first two pieces in the process and once you have these two and you go around the horn let's talk about the active supply/demand balancing and S&OP. This is primarily around making sure, if you think about Cisco they are a multiple business unit; a 40+ business unit to make sure every business unit is run around obviously there is the basic principles of what is demand and supply, P&L and understanding the margins, so making sure we bring all the data together to drive the right conversation with the project manager and the finance manager within the particular business unit to know what are the risks, what are the flexibilities, what are the key decisions that need to be made. So that is an important cog in the entire wheel to make sure we bring the whole story together and make right decision. Once you go past that, the critical is piece how do we connect it back on the commitment that we make to the customers making sure the audits match 11:23 supply and also the plan supply. The plan supply is a driven by better supply planning process to be able to understand what's the confidence in the supply and making sure we are making the right commit against the customer orders. And also within that, it is important to understand you've got to have capability for different tiers service; how do we segment, how do we treat the different customers based on the differentiated service level. So this is basically a high level strategy on how we accesss demand management planning at Cisco and how do we try to bring customer value through the entire collaborative process and make sure we have the right set of tools, the right set of processes, the right set of people to manage through the processs.

What are the things we are trying to understand to improve our consumers that have these processes. How do we enable better visibility deeper into the supply chain? What level is the right level and how do we actually plan and collaborate better? Who do we plan with, who are the right set of suppliers that we have to go for planning and what other things from a risk mitigation perspective to think about to minimize the bull-whip effect? Knowing that demand volatility is going to be there from an end perspective, how do we manage that through the supply chain . What is the strategy and once you have that gives you a way to become stronger and more responsive to be able meet the end customer and at the same time the entire ecosystem becomes strong and more responsive as an integrated ecosystem rather than individual pieces? So that is the important piece here is how do we as collective network, how do we continue to improve and become more responsive. That is some background on why the need for collaborative planning with suppiers. So what is collaborative planning? The traditional view in most of the outsourcing manufacturing processes in Cisco is what is the visibility to the Cisco docks or when you have to ship to the customer. What is the supplier volatility and the demand volatility around that and then be able to plan through a direct fulfilment factory where PCBA's are built. What we need to think about is we need to understand what are the real demand drivers and what are the real volatility supply drivers and then how do we connect them together so the idea is to enhance and get a better view of what is happening around distributers, the partners and the customers. This is extending the planning horizon, collaborative planning with distributers, collaborative planning with customers so partners can understand demand characteristics and makes 14:25. Once you have a set level of details it is important to make sure to connect them to understanding what is happening at the Supply Chain level so this is going beyond the PCBA factory so what are the strategic component suppliers. What level do we need to go to really understand and what are the decisions, the capacity, the flexibility and volatility; you have to go to where the constraints are to have a better view of that and through process and full systems you have to connect the demand drivers on one end to what the supply drivers are to make the right decision. So that's basically looking at how we extend this view of this supply chain that we have today and be able to connect both ends of the story and drive the right behaviour and the right behaviour and the right strategy, and when you talk about component planning there are different stages of maturity within that. When you talk about collaborative planning at the five stage maturity level there are multiple stages within that. First is the transactional where you are primarily looking where you put your placements and do we know exactly what is the supplier available against the disconnect. And the next stage of maturity is making sure that forecast is shared across the entire network through the suppliers so they really know what is the demand beyond the purchase order. And then the third is making sure we have visibility to the supply capability either through the purchase orders or through the forecast; through a responsive forecast process. Stage four is where you have a connect phase; where you have a seamless data flow between partners and you start measuring the reliability and the accuracy of the both demand side and the supply side. Stage five is where you look at collaborative planning, where you collectively sit down and look at these characteristics and the drive the right decision making. What is collaborative planning? Collaborative planning consists of three different blocks with emphasis on three supplier collaboration. Start on the left side to talk about Co-planning with key suppliers. This is primarily looking at long range collaborative planning so this is when you separate what is practical execution what is it that we need for today, tomorrow; for the next number of weeks, I'm thinking more long term; what are we looking at from a Q+1, Q+2, what are the technology transitions, what are the product submissions that are happening. What does the demand mix look like. What sort of ramp that is happening to take us beyond this point. What are the drivers for the demand chain and making sure you have an understanding about volatility from a capacity and flexibility perspective and making the right mitigation strategies before you start looking at one that becomes an execution window. This is all about primarily extending the horizon for planning having the strategic conversations with the key suppliers. And the next part is through process if you are mature enough to get to a stage four level you have the systems and the connections happening to be able to manage the supply/demand balancing so this give you a component part number to be able to map it all the way up to the product level. We are going to go a little bit more deep into from a capability perspective when you think about if you have a bottoms up 18:01 what is the demand that is at the component level and the supply and what does it mean at a product level to be able to make the customer level demand or their expectation. And also this helps you with the proactive constrained management; if windows that are constrained the sooner we know we can actually look and take action to be able to avoid that and be able to look inside the execution window becoming an issue. Then you are purely in a react mode. There we have to think about how we can manage and then the customer satisfaction will become an issue, factory visualization becomes an issue, the idea of the on demand supply balance seems to manage these before they actually become an issue inside the factory. And this third box is primarily on the order execution and delivery management. You know we have an issue, but how do we manage that issue so we need to have capabilities and processes to manage the allocation. How do we manage this constraint situation. Who do we distribute constraint supply between different nodes and different tiers and different supplier and different factories. So we have to make sure that systems are connected and have a process on making sure the priorities on the demand side are actually being used to drive the right allocation process, basically for revenue or for lead time or delivery management. These are the three elements of a collaborative planning process. And what are the key elements. Once you know exactly what are the things we need to solve. What are the key elements underneath that; one of the things we make sure that we are all clear on is the demand signal. What is the demand signal that we are all using for this conversation and the point that I made earlier about the one demand signal there needs to be an alignment. What is it that we are going to have a conversation about. The next set is the horizon so we need to clearly understand that there is a role because in an outsourced manufacturing process you have to understand what the role is of the contract manufacturer that is actually planning and building the products for your end customers and the relationship that your end customers are having with their component supplier. We need to understand the horizon;are we are talking about Q+1 or next weeks event and also is it for the next three quarters of for the next four quarters. That horizon needs to be really clear; the supply capabilities. This is where we need to make sure we do not come in the middle asking for for purchasing commit that tells us that they are providing to the manufacturing partner or EMS partner today primarily looking at what is the capability beyond lead time, what sort of planning that a supply is having, what sort of flexibility is allowable and capacity allowable beyond that lead time. And the next slide is a planning calender, so we need to have a cadence so we need to make sure that the collaborative planning happens at its 20:58 frequency and making sure at one of the data exchanges and the expectations on both sides. The last but one of the most critical part is the joint capacity planning. This is where we will look at what the risks and the flexibilities in making sure we have the right plan to manage and making the right investment decisions on the capacity side. Once you have all these elements together how does it all tie together; what does it mean to the business. If we go back to the original process where we started with is it better supply planning, is it better planning and commit back to the customer; if you can double click on the better supply planning most of the traditional focus is around the finished item and then the next thing you have is the sub assembly level. What are the other things that visibility looks like at that level and the collaborative planning supply is going down to that component level and what you have is the ability to bring that back into the needs of the S&OP process but we have and end to end visibility of supply and supply demand balance what is allowable what is flexibility to make sure it helps us drive the right conversation and the right decision making at the S&OP level. That is basically what we think about as the definition of component planning and how it fits with an end to end strategy from an overall demand management and planning. Now I will pass this on to Mr. Samini from PRTM and he will talk about how to implement the collaborative planning.

Thanks Chalam, and hopefully everybody got some good information on collaborative suppliers and what is collaborative planning. I would like to talk more about the some of the key aspects of implementing collaborative planning and before I actually get into the details implementation, there is one data reference I would like to bring about so earlier this year PRTM conducted a global supply chain trend's survey and we had over 350 participants across the globe, Europe, America and Asia, spanning the multiple industry sectors so as you all know 2008/2009 global economic crisis significantly disrupted the supply chains of companies across many industry sectors so the objective of this survey was trying to understand some critical insight on how to management recover from these recent financial crisis, what was the different strategies employed by them and also understand how companies are positioning supply chains as an enabler of revenue and margin growths. Those are the main objectives and we will not get into the details of the survey, one of the programs that is very relevant to this topic is what are the strategies these companies are employing to improve supply based stability. And as we can see the top strategy is employing joint planning with strategic suppliers and 78% of the participants said yes. This is another strong indication of the importance again, as I said this is across multiple industries and not just to the high tech and electronic industry. But one thing I would definitely try to cross reference is what Chalam mentioned earlier is on the different maturity stages of collaboration planning, so 78% say yes, it is important but they may definitely be at different stages of maturity, most are at stage 2 and you can call stage three at the point of inception then you actually start getting visibility to supply commits beyond lead time. Let's get back to the implementing collaborative planning, just try to show a simple this is a summary and then we can go into the details of each of the steps as we walk through the slides. First and foremost it is absolutely important to set up a dedicated organization, with the right skill sets and given the global supply base it is very critical to have a global organization in order to effectively we collaborate with the supplier teams and how to structure the organization you can either structure it based on commodity, based on geography, based on span, and based on suppliers so there are a lot of different combinations depending on the specific conditions applicable you can structure your teams. One thing that is important is you definitely want your collaborative planners to be located in close proximity to the suppliers because they are the ones who should be on the ground and talking to suppliers and trying to collaborate and ensure there is a strong alignment between the OEM and the supplier teams. Although I said it was a dedicated organization most of you people on the call would agree that everybody has a commodity management team internally. The commodity teams has an established relationship with the suppliers and they are responsible for managing the supplier splits, identifying all of the suppliers, doing qualifications; they have developed the relationship with the suppliers. Good practice it is always good to involve them in the planning discussions with the suppliers you are trying to collaborate with. That just gives more on the people side. The next step would be the process so you have your organization but it is important to define the planning cadence and what is the type of engagement you want to have with each supplier. It is not necessary you have a standard plain vanilla process with each supplier and I don't think you can afford to with just the complexities associated with each supplier and commodity. So just going back to some of the elements which Chalam mentioned earlier we need to decide what level in the bill of material do you want to do with your supply demand balancing; what is the demand horizon with each suppier. And those are basically the three agreement, the cadence of activities and the data exchange procedures. In addition to all this you also want to have a good joint agreement on what is the process for allocation in case of any constraints, and you want to know what is the flexibility for making any mixed adjustments; what is the frozen window. Each supplier has their own constraints. That is where your process has to be tailored depending on the commodity of the supplier and we usually 27:49 and and say this is the collaborative process planning playbook understanding that there are variations of commodity in our supply. Similar to the people and process it is important that you align the existing internal processes so you are collaborating with the suppliers but at the same time your commodity teams are working with he suppliers as well so it might not be a bad idea to distinguish the roles and responsibilities and clarify who is the internal point of contact is for the different activities given that there are two teams interacting with the suppliers. Last thing in the process, is you definitely want to have a good set of metrics for monitoring the ongoing process and seeing what are the needs for improvements, and we can get to some of the detailed metrics later on. We talked people process, defined capabilities from a systems standpoint; Chalam mentioned it briefly but it is absolutely necessary to have the right systems and tools to support these collaborative planning capabilities. And most important is the platform for doing the supply demand balancing at different levels development. And these levels will vary by commodity and so there is some need to have flexibility from a monitoring standpoint so you can address the needs of each commodity and you may have to really interfaces with the suppiers to have a regular exchange of data. Last but not least, the one that Chalam mentioned, is the what-if capabilities and tryng to do some allocation management and adjusting the mix and we can get into more details but this gives a starting framework and a summary in these three frames you will go after.

We will talk a little bit on the tailored approach by commodity so the first question is even if you want to structure your people, what would be some of the right levers to pull, which are the commodities you want to go after, which suppliers and all components, and again a strategic set of components. Here we are showing you two frame works and the one on the left is more thwarting the revenue impact versus the lead times. You obviously care for revenue so on the Y axis is the Revenue Support per Part so this could be just the first to start to prioritize commodities so any commodity with a high revenue impact and high lead time are ideal candidates for proactive management. The lead times are lower and and proactive but you still may want to focus on collaboration and suppliers. On the flip side there is the revenue support for those parts are much lower then at least when you start off with collaborative planning maybe those other commodities with the OEM's to manage it and probably once you become more mature in the process you may want to take on those commodities. But as a first start you definetly want to start out with the higher revenue impact. Say you have selected your commodities the next thing is what is the engagement model I need to have in each of these commodities or suppliers. The chart on the right gives you part of so the X axis is basically supply market competitiveness. You have a lot of suppliers for this commodity or do you have very few. The Y axis is the what my volume is a percentage of the total supplier volume. My volume is 80% of the total supply volume that means I am one of the biggest customers so I definitely want to have more of a high touch because I am probably more locked into the supplier I want to manage it more tightly. You see the top two coordinates are high touch you see that you have a high percentage of the supplier volume. If you look below the volume is low but I see that the market is pretty competitive so there are a lot of options I can go to and I don't I think I need a high touch or even a medium touch so you can use a low touch but if the market competitiveness is slightly lower which means you want to manage your risk a little bit even though the supply base is not huge you just go for an even touch model. This gives a frame work and it is not exhaustive, it is just a frame work and as we have listed some other considerations you can think of as is my commodity custom or is it somewhat general, if it is more custom then you want to be more careful at trying to collaborate closely with the suppliers. Volatility of demand, Chalam mentioned earlier that it is a huge driver in saying that if you know this commodity has wide fluctuations, that is the one you want to collaborate with your suppliers and try to be on top of the volatility and finally the depth of 32:30; each quantity has their own gross materials different levels, sub-tiers or you may have an OEM assembly so this adds more to the complexity of collaboration as to which nodes do you choose to do the balancing and again I think it is very specific to commodity so hopefully this gives a good representation of what the approach should be from tailoring by commodity. Let's move on to the process and data flow and some of these you may find it familiar with what you have already seen although they are in sections. The first element is obviously the demand forecast. The end needs to sent the demand forecasts to the supplier and he defined by the demand horizon; outside lead time so a year is not a bad idea Fifty two weeks data is a good demand forecast. However it is important to understand the suppliers will still continue to receive their normal PO's from the CM's, so the contract manufacturer nothing changes they still place their PO's and in some cases you may see that quantities when you compare to a weekly bucket and it is a little different and there is a reason for it because each CM has their own planning practices and there can be variations in safety stops and minimum order quantities; a lot of different variables so comparing it on a weekly bucket the PO's may not be exactly to what the full capacity forecast is and when you plan horizons it comes very close. So that is your first element, the second is once the supplier has the demand forecast responding is 34:09 and again this commit is for the the entire time horizon so if you set a schedule for 52 weeks you receive a commit for 52 weeks which is really beyond your lead time and at the same time the CM still continues to receive the requirements of the PO's from the supplier so there is real change in the process which is between the supplier and the CM. All the collaboration is trying to initiate a direct exchange between the supplier and the OEM. Once the OEM has their commits, they do their analysis, supply demand balancing and just prepare for the next milestone which is a collaboration meeting and some of the agenda items in the collaboration meeting can be to review the supply demand balancing do we have enough demand coverage and then if there are huge volatilities in demand you want to give them more insight on what is the reason the demand has been moving so much.

So some discussions on the demand trends. Then you would like to understand some of the key constraints what the suppliers are facing so you have a good idea of what are the key constraints is it the capacity is it labor, is it capacity is it the material, just trying to get more visibility into the constraints, and even to 35:23 that you don't have 100% coverage so you begin to discover what are my options to start closing those gaps, how do I get to 100% coverage, so is there something I need to invest in, is it something I need to buy in advance and these are some of the things that come out of this meeting and the one thing that the suppiers would like in these meetings, say you don't have 100% coverage, which components do I prioritize. It is agreed that a lot of components share capacity but is there a trade off that I should be doing. That is where the OEM gives guidance to the suppliers saying that of these ten 1, 2,3,5 and so you can just rank them and these are my top five. If you have 100% coverage for these five and then I get a lower priority for the remaining five. So that is a mutual discussion and then you also try to understand from the supplier what is my flexibility to make some adjustments within the mix. These are all collaborative discussions and then the final step is you come back and suppliers and if required there is some re-planning and suppliers may revise their commits based on the discussions you had in step three and then you go back and they try to see what they can do to adjust the balance and see if they can close the supply demand gap. And Step 5 you can see below the key enablers for the overall process you have to have the right teams in the OEMs and the suppliers and of course the systems and metrics to support the capabilities. Next step would be an agreement of cadence so a weekly cycle is what we have seen as a standard so it is pretty much most of the OEMs as a practice generally refresh their demand on a monthly basis. Again it is not what everybody does, but that is a general practice; maybe in some years when they do it more often but the review is a monthly cycle and then you want to make your step one is sending your monthly demand to the demand cycle. So this assumes that week 1 is when you refresh your demand and week 1 is when you want to send your demand over to your suppliers. So the suppliers receive it and week 2 they respond to prior commits and the OEM uses the time in week 2 to do a balancing and an analysis and see which 37:37. And week 3 could be the collaborative planning meeting where we go through all the things we just discussed on the previous slide and finally week 4 is making joint decisions and saying what things need to be moved and reduce the gap if there is one. So nicely fits into four weeks so you have a cadence a monthly cadence and that is a pretty good practice which most OEMs are trying to implement. So let's get to the last piece in the process which we talked about which is the metrics. As any process to keep improving it and optimizing it is important that you have a collaborative set of planning metrics so we try to bucket these into three categories; in the first column you have visibility, accuracy and success and there could be some level of accuracy and success and there could be some level of overlap across these metrics but overall it is saying what do I have visibility by doing overall collaboratively planning . First and foremost you have component level demand to the extended demand horizon. The supplier has a clear picture of the demand profile. The commit coverage; you usually have commit coverage only within lead time; now we have for an extended time horizon which gives me an extended lead time; pointers to make the right decisions if I foresee any demand upsides. And the last one under visibility is basically upside visibility. How much upside visibility can my supplier support. That is the thing very critical in metrics; a lot of the xx like to know is how much flexibility do I have in my supply chain. This gives the visibility based on the collaboration you have with suppliers as you try to understand all the constraints and all capacities, labour shortages or any other constraints they have. Moving to the second column you have more of the accuracy metrics, so demand accuracy is a pretty common element, I am sure all of you have heard but most 39:29 so part of collaborative planning it is very important to track at a component level and track the accuracy requests and that should be one of the metrics that should be reviewed as part of the collaborative planning meetings so it just gives the trends as to how is your accuracy working and what you have been giving to suppliers. The next is the lead time accuracy; you want to track this very closely, you want to make sure you are keeping close to the target lead times you have for the components so that is how you collaborate with suppliers and monitor the lead time accuracy.

The third one is an interesting one, the supply commit versus the ship accuracy so your suppliers do give you the supply commits for the extended time horizon but guess what if they don't ship according to those commits it is still not good. So that is one thing you want to hold the supplier accountable by saying are you shipping based on what you commit. That's another metric you want to track very closely and saying, I think you are shipping good, you are not off the chart, let's discuss; 40:28 that is another metric. And finally the last column, obviously the most important is success; how do you measure the success of collaborative planning. So you have three metrics, the first one, the obvious one is the supply demand coverage, how much coverage do I have for commodity, my component; do I have 100% coverage for the next four quarters. And you can have a global view across all suppliers 40:53 and say yes, and you can easily have a heat map saying I know I am short on these components or these commodities or I have constraints; I need to do something. This gives you the main supply demand coverage visibility. The next one is the revenue impact. An ideal scenario is if you have 100% demand coverage, your revenue impact should be 0 because you don't have any shortages, assume there is a constraint then you have a revenue impact then your objective is trying to minimize the revenue impact; what are the different things you are trying to employ together with the suppliers and trying to minimize the revenue impact. It could be allocations, it could be making some adjustments to the mix, trying to do additional investments. Overall your target should be to minimize the revenue impact. And the last last one which is the flexibility which we mentioned under visibility is how much can my supplier 41:45. What is the additional buffer capacity they can gather in order to respond to any demand upsides. So that's one of the metrics; to gain an understanding of how much flexibility my suppliers have. So that should give a good background on some of the metrics and how do you track the success from a collaborative planning standpoint. Let's get to the last element which we talked earlier is on the on system capabilities. We talked enough on this webinar on saying supply demand balancing is most critical. Some of the key things you want to be aware of is which level in the bill of material do I do the balancing on. Which nodes in the supply chain do you want to do the balancing on and what platform do I use for doing the balancing? If you look at the chart here and the slide you have the finished good, you have the board, you have the part numbers which in this case is being sourced from three different suppliers, and each of those suppliers is using sub tier suppliers, different quantity, different bill of materials. Decision 1 is do you stop at the supply level or do you go to the sub tier level. That is the question you want to answer depending on how critical that commodity is of the component. If there is a lot of revenue exposure then based on history you want to be closely monitoring you sub tier then you would have to do balancing at that level. And again, one thing to remember is a lot of them wouldn't have visibility to the bill of material at that level so it is important you actually have to set it up, and again it is a one time set up to extend the BOM all the way from top node to the bottom node. Then you propogate demand to the lowest node and that is what you exchange with your suppliers and have a collaborative discussion. As far as nodes, a lot of OEM's use value added hubs so you want to do balancing at the value added hub or you just ok balancing at the end suppliers 43:44. Those are some of the questions you would want to do but absolutely what is essential to support these is the platform, you need to have a simple platform which you can do the supply demand balancing at different levels and monitor for different commodities and most importantly you should be able to regenerate those views to demand supply balance view based on any changes you receive from supplier on the commits or see if there is any upside to the demand. So how does my supply and demand balance change. Those are some of the key capabilities you want understand and that is why this platform is like the backbone of these capabilities. Once you get your basic supply demand balancing then you obviously try to optimize when you go to the next level which is trying to do some what-if analysis so basically you want to have some capabilities in saying, what happens if demand goes 20%, 30%. What is the impact on my lead times. Am I able to model that and see simulation; this is what my coverage drops , and if there are any constraints, do I have a process to allocate my supply all the way from the component to the finished good. Start on the left, you have one part number which is going to two different boards which is which in turn is used in two different finished goods. Say you have a shortage of of the part number, what is your ideal allocation situation; the first one or the second, and each company has their own objectives. There are a lot of different rules for allocations and you want to prioritize your strategic customers, you want to save your revenues, you want to maximize revenue. Everybody would have their own rules but you need to have a process in place and a system that can support you to do that then you can allocate it right from the supplier to the CM's sides, then they know which boards to build and which finished goods to do. The one on the right is more on the mix adjustments, a very interesting feature because in this example I have two suppliers; the supplier one is A,B,C,D, E parts, two is A,B, C, F, and G and based on your discussions with your supplier you know that A,B, C,D, E for the supplier one share the same capacity and the same is true for supplier two A,B,C,,F and G and just as an example, say F and G are constrained but you know it has a high revenue support so you could prioritize F and G which means you may have to sacrifice A, B, and C from supplier two. That's when you can go to supplier one and say, can you take up whatever capacity you lost from A, B, C from supplier two. Can you get it from suppliers one. You need to understand what are those logical buckets of components where you can do a lot of mix adjustments and these can be easly modelled in a system and it will greatly enhance the planning capabilities of trying to optimize revenue and customer service. So hopefully that should give a good back ground on some of the capabilities on how do you implement as you walk through the people , process and the systems so just in conclusion I want to highlight by saying that collaborative planning, we talked more about OEM and supplier but it is beneficial to talk about OEM the CM and supplier. Collaborative planning is basically expanding the scope in the depth of the supplier attraction. The suppliers are directly positioned and aligned with your demand and they have the necessary visibility to provide the factory plans and when you are the done the OEMs are proactively able to influence the suppliers. The assurance on the continuity and predictability and able to optimize the labour and capacity then of course no reduction. So I hope that should give a good background on the overall implementation of collaborative planning and what the benefits are. With that I would like to pass it on to Kerry for the wrap up.

Yes, thank you very much. I get the privilege of having the opportunity to sort of summarize some of the key aspects of what you have heard today. So let's start off with the very basic question. Why collaborate with your suppliers? In the CISCO case the emphasis was primarily on customer service, excellence and that's first and foremost about making sure that your position is to be able to provide the products you customers need when they want it and the collaboration delivers the capability in the area of flexibility to make sure that you can do that, be more responsive, with less inventory, and ultimately less effort which translates to less cost. Secondly, obviously by better serving the market place you will be positioned to potentially capitalize on greater market share and revenue growth, and because unexpected events are going to occur whether it be demand shifts or whether it be supply disruptions and again they will occur the collaboration with suppliers will make sure that your response is both more timely and profitable, and last in the area of risk management it is clearly 48:45 situations are going to occur in our environment whether it be a change in the economy or a sudden shift in demand or a lower demand from the customer than you expected, you are going to be able to make sure you have been able to minimize your investments and inventory and other resources, but still able to respond as you need to. On the side of key capabilities the technology requirements to be able to support that. First of all a platform that provides a single consolidated version of the truth and that is as it was explained the need to identify where in the supply chain how deep you need to go, what are the critical components but that single version of the truth will allow you to be able to evaluate a change in the demand or that disruption in the supply and the implication across the entire supply chain. In addition, you need the capability to be able to identify risks to that supply chain, alerts that immediately when events do occur, whether it be a recommitment on supply or whether it is a shift in demand to be able to focus you energies using that system to identify the risks and optimize the opportunity.

In the area scenarios they should be something that could be created in seconds, allow you to be able to virtually change anything so that in fact you can analyze if that supply chain disruption occurs what in fact are your options, what are the possible consequences of various prioritization decisions and it would be great wouldn't it if the systems that allows you to do that was also capable of identifying exactly who in the organization across the extended supply chain was going to be affected by that event so that you could have a collaboration foundation that will let all those people able to engage in timely fashion to be able to make a decision on the course that you are going to take. And in that area of collaborating when you are evaluating more than one scenario as a possible solution is critical that you have the ability to be able to understand what the tradeoffs really are; what the net impact on the business is so that in fact when you make that decision you have confidence that the result will be best serve the business the way you choose to run it, and last but not least it is about flexibility. You need a system, and as it was described here, not every supplier is going to work the same priorities and various aspects or areas of supply chain are going to be different, therefore you are going to need the flexibility to be able to change views and change rules that govern how that collaboration process actually works. As Kinaxis is a provider of a solution that meets these requirements I thank you very much for having given me the opportunity and us the opportunity to present this. I am going to hand it off to Adrienne now and we can start discussing questions and answers.

OK, great thank you. Before we do this I am just going to ask the audience to please take a few moments to fill out our feedback form and we ask that you please disable your pop up blocker so you can receive this form. The first question will go to Chalam and the question is, When you are sending your component demand forecast is there any lead time offsets used in the demand forecast or any netting of inventory at the CM or the OEM? Thank you Adrienne. We spent a lot of time looking at this and we need to recognize exactly what we are sending that is what is most important. What we are sending to the suppliers right now is through component planning is the plan consumption at the CM side, so it basically kind of eliminates the different lead times and you are going to have a parts number or the supplier is shipping to a different region, they'll have different lead times; we could do the offset but right now we are trying to standardize the one common 52:50 if this is expected consumption at that side so that makes it easy and it keeps it to a common language. So that is what we are trying to standardize. Another question for you, Does the demand forecast constitute a liability for the OEM where the supplier produces to forecast not PO and then is the forecast overstated? This goes back to the how, the contract on how the agreements are set up. At CISCO we use an end to end demand process and basically the liability is through a purchase order coming from the CM side, and even to the OEM we have ROP that are 53:38 that they are building both at their fulfillment out of the 53:41 factory, so all the contracts and the agreements are termed around the demand 53:46 process. The forecast is primarily used for capacity planning and making sure that the materials planning aligns with that. The execution a lot of the times is around the ROPs and the 54:00 planning. And Adrienne, I would just like to add to it, it is a good question, but again I think planning or the model can be done but you go very close to what the CM's are trying to generate from a PO standpoint. From a modeling standpoint you can always try get very close to what the CM is sending as a PO and have the same numbers in your forecast. Chalam I'll start with you and Mithun you can certainly jump in. The question is, does this process have a profit margin expectation of products produced or could suppliers squeeze a sub suppliers margin and improve the supplier margin at the expense of the sub supplier? The idea around the collaboration of process is making sure there is the visibility to demand and availability of supply so this is not a cost discussion, or a profit margin discussion, it is more of about supply reliability. On the demand horizon we make sure there is an alignment, there is really not about squeezing anybody for profit margin. I think that is where I referenced earlier is you have your commodity management teams and this would be one of the things that would fall more under their groups so that's the distinction of roles and responsibilities as Chalam said collaborative planning is more focused on the planning and availability of supply; what is the supply available, at what cost? That is the responsibility of the supplier management teams. And Mithun, this question is for you. With the volatile demand profile with collaborative planning you end up changing your demand profile too often, what strategy do you suggest to take on in order to maintain good reliable relationship with the supplier? If you see in today's world, if you don't have collaboration and that is the same as 55:58 PO, that is where the supplier is not getting enough time to respond to, but from a collaborative plan standpoint you are trying to send the demand signal for a long horizon which is 52 weeks, which as well, I think you are able to discuss with the suppliers in the collaborative planning meeting then say these are the trends and this is why I see there is fluctuations in demand. As long as the metric of demand accuracy at the component level is very relevant in this conversation because you don't want to always blame the supplier saying you are not able to meet my demand. But I think by tracking these metrics then it becomes more of a collaboration and less of blaming so that is where I think the metric and the extended time horizon is very appropriate. There is another followup, a question specifically on metric, since you haven't really discussed metrics although your last answer did a little bit, what would you see as a top three metrics to measure success and collaboration? I will go back and defer to what I mentioned in the slides. I think the demand coverage is my priority; number one, second one is you want to make sure that you don't have any revenue impact associated with 57:12, and then the third most important is flexibility. How much flexibility do I have with my supply base, which basically tells me how much upside can I support. Chalam, a question for you, how do you get the supplier to collaborative, do you use a carrot or a stick? That is a good question. I think that as long as we continue to talk about the mutual benefits, with most of our supplier conversation within the first half hour we are able to understand the mutual benefit get through and agreement that this is the right thing to do for both parties. It follows the conversation of what is relevant and what is important and then how we benefit. And another questions for you. What type of data exchange does this Cisco use to exchange data with the suppliers? We are doing different standards today obviously with the OEM partners we have standards of the EDI and also we get a lot of supply chain data vis a vis coming back. Right now we have implemented a certain level of collaboration with only a small set of suppliers. We are working with our IT teams to at least come with a standard technology that we implement across an entire network so we are looking at both from a data exchange which is the standards and also we are looking into a collaborative platform where we can have suppliers and OEM partners have access to the supply demand data directly. So we are looking at both. But we are just not yet finalizing yet what that standard is and we will hopefully have that within the next month or a couple of months. Mithun, this one is for you. The CTP enhanced collaborative process and if so can you explain the definition of CTP. We are talking about the capability to promise, so at the end of the day you want to promise your customers by when can you deliver their order. Absolutely collaborative planning helps because say you have a huge demand upside coming in and then you want to give a promise date to your customers on what you can deliver. Previously without collaborative planning, you wouldn't know how much upside flexibility demand do my suppliers have if I drop in this order can they get it back in time. Now that you have all the key information you have the visibility to your supply and demand coverage and you also have a well defined prioritization process you know you can try to move some things back and forth with shared capacity so you are in a better position to give good CTP data to your customers. Chalam, feel free to jump in. Basically at Cisco it chooses the standard CTP with some additional dynamic scheduling logic built into that. It is a combination of dynamic scheduling which is Cisco's own logic on scheduling orders and the standard industry CTP. Thank you. Unfortunately we have run out of time. I want to thank Chalam and Mithun and Kerry for an excellent presentation today and I want to remind our audience that this webinar will be available on the IndustryWeek.com website in the next few days. Feel free to log in to view it again and encourage a collegue to view it, also look for the followup email which will direct you to this recording. We would like to ask you to join us for our next webinar on September 28th and we would like to thank our audience for their time today. Everyone have a good day.