One size does not fit all

Supply Chain Management Award 2013 for ADVA Optical Networking

FSP 3000Scalable Optical Transport

• Highest Availability• Lowest Latency• Maximum Security

ADVANCE YOUR NETWORK

www.advaoptical.com

FSP 150Intelligent Ethernet Access

• Advanced Mobile Backhaul for LTE• Performance Assured Cloud Access• Intelligent Business Ethernet

ADVA Optical Networking is a global provider of intelligent telecommunications infrastructure solu-tions. With software-automated Optical+Ethernet transmission technology, we build the foundationfor high-speed, next-generation networks. Our FSPproduct family adds scalability and intelligence tocustomers’ networks while removing complexity and cost. With a fl exible and fast-moving organi-zation, we forge close partnerships with our customers to meet the growing demand for data, storage, voice and video services. Thanks to reliable performance for 20 years, we have be-come a trusted partner for more than 250 carriers and 10,000 enterprises across the globe.

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EditOrial

Since 2006, the presentation of the Supply Chain Management (SCM) Award has been an annual highlight for its initiators – consul-ting firm PwC and industry trade journal LOGISTIK HEUTE. That’s because in the twelve-month period preceding the presentation, both the consultants and journalists have the opportunity to disco-ver dozens of interesting SCM projects. However, even though many of these projects are very good, only a few companies have an out-standing solution for end-to-end optimization of the supply chain. Large, publicly traded corporations, including Infineon, BASF, and BMW Motorrad have done their homework when it comes to such things – and have already received the recognition of the 14-person SCM Award jury.

This year’s winner is a triumph for medium-sized businesses. ADVA Optical Networking beat out big-name competitors, such as Bayer HealthCare and Intel. In my view, this is a good sign, especially in

Germany, where SCM experts can learn from more than just the big corporations. From the North Sea to the Alps, this land is rich with “hidden champions” that have much to teach the heavyweights.

LOGISTIK HEUTE reported on the project – and the presentation of the results during the EXCHAiNGE conference on June 19 in Frankfurt – in an in-depth cover story fea-tured in the July 2013 issue. The editors are pleased to report in even greater detail on the approach taken by the ADVA Optical Networking supply chain team in this special issue (p. 10). The company’s three-year project involved no less than 300 employees. We also introduce the jury (p. 4) and discuss the purpose of the award (p. 6). Be sure to read about ADVA Optical Networking’s fascinating journey from a four-man startup to a global player (p. 8). Finally, we offer an outlook on the future (p. 17). Supply chain optimization is a continuous journey and it’s critical that we continue to explore new techniques and methodologies. As they say in sports: it ain’t over ’til it’s over.

I hope you enjoy!

Contents4 Jury Fourteen jurors, including industry experts, journalists, researchers and

consultants, choose the winner of the SCM Award.

6 Initiators LOGISTIK HEUTE publisher Dr. Petra Seebauer and PwC Partner Harald Geimer explain the mission of the SCM Award.

8 ADVA Optical Networking company history A four-man startup in 1994 grows into a global player.

10 SCM specialist ADVA Optical Networking understands that long-term success depends on a top-notch supply chain strategy.

15 Award night More than 200 industry professionals, researchers, and journalists honor ADVA Optical Networking at the SCM Award Night.

17 Challenges of tomorrow Read about the strategic importance of ADVA Optical Networking’s supply chain in an increasingly competitive market.

thilo Jörgl, editor-in-chief,

lOGiStiK HEUtE

learning from medium- sized businesses

HUSS-VERLAG GmbH Joseph-Dollinger-Bogen 5 80807 Munich, Germany Phone: +49 (0)89/32391-0 , Fax: -416 www.huss-verlag.de

This is a special issue of LOGISTIK HEUTE devoted to ADVA Optical Networking, winner of the Supply Chain Management Award 2013.

Publisher: Dr. Petra SeebauerDirector of Publishing: Bert Brandenburg, Dr. Petra SeebauerEditorial team: Thilo Jörgl (editor-in-chief), Dr. Petra Seebauer, Martina Bodemann (assistant)E-mail: redaktion@logistik-heute.deGraphics and layout: Ingemar Statnik, Sabine BarckCirculation: 5,000Print: Bavaria Druck GmbH Joseph-Dollinger-Bogen 5 80807 München

All rights reserved. No part of this publi-cation may be reproduced, edited, and/or distributed without the prior written consent of the publisher. Specifically, no content may be reprinted, added or copied to online services or databases or copied onto any type of data media. All the infor-mation contained herein has been care-fully compiled and checked. Nevertheless, we cannot assume liability for the accu-racy and completeness of the content.

about this publication

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LOGISTIK ▶HEUTE◀ 2013

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award

Supply Chain Management award

Each year, the Supply Chain Management (SCM) Award honors the best value chain in the manufacturing industry. Presented by PwC and the trade journal LOGISTIK HEUTE in partnership with the Institute for Sup-

ply Chain Management (ISCM) and the House of Logistics & Mobility (HOLM), the Award honors innovative solutions in SCM that have made significant contributions to competitiveness and offer a model for other companies to follow. Candidates must exhibit powerful end-to-end supply chain solutions or outstanding implementations within individual links in the value chain. An independent jury of 14 prominent industry experts, researchers, journalists, and consultants chooses the winner. For more information, please visit www.beste-supply-chain.de.

2013 JuryDr. Andreas Backhaus

Senior Vice President of Global Supply Chain & Process Innovation, BASF SE

Armin Breitner

Director of Corporate Logistics, Würth Beteiligungs GmbH & Co. KG

Cornelia Creischer

Managing Director of Commercial Logistics, Colgate-Palmolive GmbH

Harald Geimer

Partner, PwC Management Consulting

Dr. Kurt Gruber

Corporate Vice President for the Corporate Supply Chain, Infineon Technologies AG

(representing the 2012 winner)

Kerstin Gliniorz

Director of Supply Chain Management for Europe, Rudolf Wild GmbH & Co. KG

Dr. Michael Henke

Director, Institute for Supply Chain Management (ISCM)

Dr. Claus Jessen

Chair of Product Supply, Festo AG & Co. KG

Karl Kirschenhofer

Head of Integrated OEM & Digital Supply, Nokia Siemens Networks GmbH & Co. KG

Bernd Maron

Vice President, E T Procurement, Energy Sector, Siemens AG

LOGISTIK ▶HEUTE◀ 2013

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Georg Odenthal

President, CSCMP Roundtable Germany

Dr. Petra Seebauer

Publisher, LOGISTIK HEUTE and Director of Publishing / Proxy, HUSS-VERLAG GmbH

Dr. Stefan Walter

Managing Director, House of Logistics and Mobility e.V. (HOLM)

Dr. Johannes Walther

Editor-in-Chief, Supply Chain Management

Claus Wilk

Editor in charge of “Production”

2013 ADVA Optical Networking ADVA Optical Networking built on its global

supply chain strategy to standardize its processes and systems around the world, improving customer focus and establishing a strong competitive stance.

2012 Infineon Technologies The Munich-based semiconductor specialist

was honored for an end-to-end supply chain solution with which it gained strategic advan-tages in the highly complex logistics of the semiconductor industry.

2011 BASF The Ludwigshafen-based chemical company

received the Supply Chain Management Award 2011 for its cross-division, cross-function global transformation project.

2010 BMW Motorrad The Bavarian motorcycle manufacturer was

distinguished for establishing supplier risk management as part of an integrated and fully collaborative supplier management system.

2009 Henkel, Laundry and Home Care Division

The Henkel division was honored for success-fully restructuring its global supply chain on its way to achieving ambitious profitability- and growth-driven targets.

2008 Uncoated Fine Paper, Mondi Europe & International

The company won for implementing an inte-grated, transparent, end-to-end supply chain architecture.

2007 Gerätewerk Erlangen, Siemens AG Industry Sector

The jury honored the company for its com-prehensive and powerful yet very customer-oriented supply chain.

2006 Electronic Assembly Systems Division, Siemens AG

The division was honored for fundamentally transforming its global processes, organiza-tional structures, and worktime models while ensuring high quality and on-time perfor-mance.

Past winners

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award

“the award is a beacon in the industry”The Supply Chain Management Award, presented this year for the eighth time, has grown in prominence over the years. Initiators Harald Geimer of PwC Management Consulting and LOGISTIK HEUTE publisher Dr. Petra Seebauer talk about the idea and what they look for in a winner.

LOGISTIK HEUTE: What are the hallmarks of innovative supply chain management? And what does it take to win the Supply Chain Management Award?

Harald Geimer: In recent years we’ve seen supply chain man-agement (SCM) assume an increasingly prominent role as a criti-cal competitive discipline. The result has been a series of high-quality solutions benefiting from a willingness to cross-pollinate across company and industry frontiers. This was precisely our motivation when we joined LOGISTIK HEUTE in 2006 to create a new award that shines a light on these breakthroughs and gives them the acclaim they deserve.

Dr. Petra Seebauer: Innovative SCM is a key discipline for suc-cessful businesses in today’s globalized economy. Our award rec-ognizes SCM innovations – whether powerful end-to-end supply chain solutions or outstanding implementations of individual links in the value chain – that have significantly enhanced com-petitiveness and can serve as a model for other companies.

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Supply Chain Management Award initiators and jurors Dr. Petra See-bauer, publisher of LOGISTIK HEUTE, and Harald Geimer, Partner at PwC Management Consulting, celebrate with the 2013 winner.

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How exactly does the selection process unfold? Who gets into the final round, and what distinguishes the winners of this coveted award?

Geimer: The SCM Award relies on a two-part selection pro-cess. In the initial application phase, companies submit written documentation of their supply chain solutions. We select the best candidates from these applications and conduct an on-site visit with our supply chain experts in the second phase. Candidates are then invited to a workshop to present their achievements in detail.

Seebauer: The strongest candidates from this second round become the finalists. Our independent jury of experts – composed of in-dustry professionals, researchers, consultants, and journalists – conducts in-depth delibera-tions on the finalists. And they’re not always of one mind. Every year we receive applications from a very impressive slate of candidates, so the jury’s decision is never easy. But in the end we’ve always reached a consensus and pooled all available information and experiences to choose the year’s winner.

What does the jury weigh most heavily?Geimer: The jury considers the five core dis-

ciplines of SCM strategy, processes, organization, performance management, and collaboration. The dimensions of employee orientation, sustainability, and service orientation are also taken into account. This reflects how highly a broadened supply chain perspective is now regarded in securing a competitive edge.

Seebauer: The jury looks primarily at the innovative incentive that a solution offers and on documented gains it has helped bring about. The solutions of the past years covered a broad spec-trum, but they all had one thing in common: They contributed to significant competitive gains and serve as a model for other companies – even in other industries.

How does the SCM Award benefit the winning company?Geimer: The winner benefits from a great deal of attention

among industry peers. There are also many positive side effects – within the company itself, among customers and suppliers, and last but not least, in the winner’s reputation as an attractive em-ployer. The award is regarded as more than just an appreciation of past achievements. From our conversations with past winners,

we know that the award is instrumental in bringing greater rec-ognition and status to the supply chain organization in the com-pany by shining a light on the developments it has spearheaded.

Seebauer: Our past winners – and finalists as well – believe in the SCM Award and have given us a lot of positive feedback. We often hear that winning the award greatly enhanced the com-pany’s reputation in the marketplace. Our winners also get a lot of positive feedback from their customers. The award confirms a position of prominence in the global competitive landscape.

The process of submitting an application is not without cost. Does a company derive benefits simply by applying for the SCM Award?

Seebauer: A successful application pro-vides a tremendous motivational boost for everyone involved and can initiate a positive dialog with customers and suppliers. But even if an applicant does not win the big prize, the feedback from the jury and the learning effect from taking part in the competition should compensate for the expense of the applica-tion process.

Geimer: Every applicant does indeed re-ceive individual feedback after the jury meets.

From our conversations we know that the application process yields important insights on how the applicant can improve its own supply chain. Even if only one company takes home the prize, all the applicants can benefit from taking part.

You host a gala evening to honor the winner. This year, the finalists also had the opportunity to talk about their solutions. Why?

Geimer: We’ve had a lot of feedback from our network indicat-ing a high level of interest in the solutions of other applicants. Our response this year was to expand the spotlight beyond the winner alone. For the first time, we gave the other finalists a platform at the inaugural “EXCHAiNGE” conference.

Seebauer: This is yet another fantastic incentive to take an interest in our award. Where else can you have such an intense opportunity to swap stories with operations and supply chain managers from every industry and discuss the winning ideas and their potential? And by the way: it’s already time to begin preparing your application for next year’s award!

“a successful application provides

a tremendous motivational boost

for everyone involved and can initiate a positive

dialog with custom-ers and suppliers.”

Dr. Petra Seebauer

ADVA Optical Networking, winner of the Supply Chain Management Award 2013, had the chance to present

the strategy at the EXCHAiNGE conference in

Frankfurt/Main on June 19th.

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COMPany

HistoryThrough the eyes of CEO and co-founder Brian Protiva

1994 ADVA Optical Networking is founded in Meiningen in the former East Germany. At the time, the company cannot afford to hire engineers in Munich due to cash restrictions and the inabi-lity to get subsidies, so it launches in Meiningen with four people and a vision … to ADd VAlue. ADVA Optical Networking is born.

1995 ADVA Optical Networking launches its first product. A data center manager at the former Westfälische Landesbank needs more dark fiber but cannot get them from Deutsche Bun-despost. They convince ADVA Optical Networking to build the first ESCON multiplexer right around the same time that IBM begins developing a competing product.

1997 ADVA Optical Networking is proud of its successes and begins to eye other markets. From its entrepreneurial roots, the company finally sells products to its first carrier customer (COLT), for whom it builds media converters.

1999 Everyone is talking about the “bubble.” Like other star-tups from this era, ADVA Optical Networking has visions of be-coming the dominant equipment provider in the telecommuni-cations industry. But management realizes that the small sales team will not have a global reach. So the company decides to work with partners and signs an OEM partnership with Alcatel.ADVA Optical Networking also goes public this year. After about three loops and some falls, it climbs to the top of the roller coaster with the rest of the industry. It is the heyday of optical networ-king, and the company is valued higher than Lufthansa.

2000 ADVA Optical Networking acquires Storage Area Net-works Ltd. (Cambridge, UK), Cellware Breitband Technologie GmbH (Berlin, Germany), FirstFibre Ltd. (York, UK), and the Sie-mens Norway Telecom R&D team (Oslo, Norway). Many emplo-yees from these early acquisitions are still with the company today.

2001 The company completes construction of its state-of-the-art R&D, production, and administration facility in Meinin-gen, Germany. The company also expands the WDM product line and launches FSP 1000 and FSP 2000.

2001-2003 To survive hard times, employees put their shoulders to the wind and focus on their vision. The company actually gains market share during these hard years. ADVA Op-tical Networking goes from 0.2 percent to 2 percent of the market just by holding its own.To build market share in North America and Asia, the company signs OEM agreements with Fujitsu Network Communications and Hitachi Ltd.

2004 Recognizing the increasing importance of Ethernet to future networks, ADVA Optical Networking invests in and then later fully acquires Metro Packet Systems, Inc. (California).

2005-2006 The management board sees a few companies dominating the fields of Ethernet OAM, optical control plane, and Im

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ADVA Optical Networking in Germany: open and transparent site in Meiningen

ADVA Optical Networking in the US: Atlanta site

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End customersMore than 250 carriers and service providers Including AMS-IX, British Telecom, Cable & Wireless,

COLT, DE-CIX, Cox Communications, Deutsche Telekom, Global Crossing, KDDI, and Level(3) Communications

More than 10,000 enterprises Including Fortune 1000 companies, financial institutions,

automobile manufacturers, insurance companies, high-tech companies, government agencies, and universities

PartnersWorldwide exclusive and non-exclusive distribution partnerships Including dacoso, Fujitsu Network Communications,

Hewlett-Packard, Hitachi Data Systems, IBM, NEC, Sagem Télécommunications, and Walker & Associates

Strategic marketing partnerships Including Brocade, Corning, IBM, Infovista, JDS Uni-

phase, and Juniper Networks

EmployeesAs of December 31, 2012, ADVA Optical Networking had 1,378 employees (up 6% from the end of the previous year).

revenues and income2012 revenues: €330.1 million (up 6 % from the previous year)

2012 IFRS pro forma operating income: €21.8 million (6.6% of revenues)

2012 IFRS net income: €16.7 million (5.1% of revenues)

Facts and figures

ROADM. The company finalizes the acquisitions of both Covaro Networks (Richardson, Texas) and Movaz Networks (Norcross, Georgia).

2007-2012 ADVA Optical Networking continues to grow as an organization – in size and complexity. Management adds new executives to guide the company through the next phase of its development. The company grows to more than 1,200 emplo-yees on five continents.Today, the company has two common hardware architectures (FSP 3000 and FSP 150) and remains an innovative leader with some of the most talented people in the industry working on solutions for its customers.

2013 ADVA Optical Networking wins the Supply Chain Ma-nagement Award 2013 for its excellent end-to-end supply chain. CFO/COO Jaswir Singh and the supply chain team receive the prestigious award at the EXCHAiNGE conference in Frankfurt/Main (Germany) on June 18, 2013.

ADVA Optical Networking is led by an experienced inter-national team. Three executive officers guide and manage the company’s growth: Brian Protiva, Chief Executive Officer; Christoph Glingener, Chief Technology Officer; and Jaswir Singh, Chief Financial Officer & Chief Operating Officer

Brian Protiva (CEO)

Brian Protiva, Chief Executive Officer, Bachelor of Science in Electrical Engineering, Stanford University, United States

Christoph Glingener (CTO)

Christoph Glingener, Chief Technology Officer, Ph.D. in Electrical Engineering, University of Dortmund, Germany

Jaswir Singh (CFO and COO)

Jaswir Singh, Chief Financial Officer & Chief Operating OfficerMaster of Advanced Business Practice, University of South Australia, AustraliaMaster of Accountancy with Distinction, Charles Stuart University, Australia

Management board

ADVA Optical Networking in China: Shenzhen site

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StratEGy

not a one-size-fits-all solutionADVA Optical Networking, a medium-sized telecommunications vendor, emerged from a prestigious field of competitors to win the “Supply Chain Management Award 2013” for its trailblazing end-to-end supply chain solution.

Today, when we want to know the answer to a question – at home or in the office – we go online. Google and such sites typically serve up a few hits on even the most

obscure questions – delivered right to our smartphone or tablet. Whether the information is accurate or not is beside the point. Twenty years ago, when the Internet was still in its infancy, this would have been unthinkable. Today, the Web opens the door to a vast world of knowledge.

But all of that depends on a good connection to the global network. We can’t surf the Web, download music, or send large volumes of data without powerful networks using the right trans-mission technology.

ADVA Optical Networking SE, headquartered in Meiningen in the heart of Germany, understands this. The company’s crown-ing achievement has been – in layman’s terms – combining fib-er-optic transmission technology and the Ethernet protocol, a technology that allows for quick transfer of data packets. Smart software automates the data interchange.

The more Web 2.0 and Industry 4.0 evolve, the better it is for

ADVA Optical Networking. Audio and video applications and vir-tualization technologies require new platforms, which in turn require more bandwidth and high transmission speeds. Good old-fashioned copper wire has taken us almost as far as it can, and experts agree on the urgent need to expand our fiber-optic infrastructure.

From small things

ADVA Optical Networking couldn’t agree more. For nearly two decades, the company’s focus has been on wavelength division multiplexing (WDM), a process for optimizing fiber-optic network capacity that achieves lightning-fast data rates and broad trans-mission ranges. The company began as a lean startup in Mein-ingen and Martinsried (near Munich) in 1994. Now, its products are known throughout the world. CEO Brian Protiva confirmed that ADVA Optical Networking solutions are now used by over 10,000 companies and 250 network operators around the globe.

Thanks to this success, the company was listed on the Frank-

Winner of Supply Chain Management Award 2013: ADVA Optical Networking in Meiningen

11LOGISTIK ▶HEUTE◀ 2013

furt Stock Exchange on March 29, 1999. Today, ADVA Optical Network-ing employs over 1,500 people and is listed on the TecDAX. The company even had the ready cash to acquire several other companies. Big-name players turn to ADVA Optical Net-working’s products and for good reason. “To begin with, we put a strong focus on research and development. Moreover, our cus-tomers appreciate the fine-tuned solutions,” says Chief Tech-nology Officer Christopher Glingener. “Sometimes a developer tweaks a feature 30 or 40 times until it’s just right.”

But serious competitors such as Alcatel-Lucent have also jumped on the bandwagon for custom solutions. That’s why in recent years, order lead time is increasingly the deal-maker for landing a contract. “When it comes to securing contracts, light-ning-fast order lead time can separate the best from the rest,” assures Jaswir Singh, ADVA Optical Networking’s Chief Financial

Officer and Chief Operating Officer. About three years ago, the company launched a series of supply chain management projects. One of the goals was to slash the 40-day order lead time in half.

This was about more than just standalone solutions. Without the help of outside consultants, the supply chain team studied the supply chain in its entirety. It was this end-to-end approach that made such a lasting im-pression on the 14-member jury of the Supply Chain Manage-ment Award in 2013 when ADVA Optical Networking beat out big names like Bayer, Intel, and Symrise in the final round.

Singh and 15 company representatives joined 200 internation-al industry representatives, scientists, and journalists on June 18, 2013, during the inaugural EXCHAiNGE Supply Chainers’ Conven-tion, for an Award Night honoring both ADVA Optical Networking and the other finalists.

The coming years will present a variety of challenges for the supply chain organiza-tion of telecommunications equipment providers like ADVA Optical Networking. The right solutions are urgently needed. The challenges stem from the unre-lenting progress of technology, the increasing integration of system providers in on-site operations, and the growing expectations of customers when it comes to ethics and the environment. The growing power of individual suppliers in the marketplace also poses a major chal-lenge to the industry. These considera-tions can be summarized as follows:

Social, ethical, and environmental con-cerns: These issues are increasingly front and center for our customers, especially the larger grid operators. Compliance with ISO 14001 environmental stand-ards, corporate responsibility in accord-ance with the EICC Code of Conduct, analysis of settlement risks, and the risk mitigation plan are all necessary com-ponents of our quotation process. It’s important to keep these challenges in mind right from the development phase – for example, when determining the energy budget for systems and compo-nents – by selecting new suppliers based on their social profile or simultaneously qualifying multiple suppliers for system-critical components and production steps.

ADVA Optical Networking meets these challenges by embedding these require-ments within the larger processes. This underscores the need for marketing, development, purchasing, and produc-tion teams to work more closely together than ever before.

Growing complexity through custom services: As software, programmable features, and freely tunable optics are deployed more widely, hardware is becoming simpler and components (cir-cuit boards, function blocks, network elements) more standardized. But at the same time, systems are increasingly customized downstream at the installa-tion site, resulting in much greater com-plexity. This type of customization has many forms: loading customer-specific software, applying labels or inscrip-tions for branding purposes, conducting system tests with specific optical cable lengths in the simulated network envi-ronment of the customer, or registering and administering system parameters (including IP addresses) in the customer network.

ADVA Optical Networking already pro-vides this type of high-quality service to selected customers. Accelerating and streamlining these processes means having employees include these custom requirements in the quotation process, processing them in the variant configu-

rator, and passing them seamlessly to production. Our company has met these challenges by investing in IT systems with the objective of more closely inte-grating CRM, PDM, and ERP systems.

Power of suppliers in the marketplace: Differentiating your product portfolio not only yields important quality attributes such as range and functionality, but also results in the development of customer-specific electro-optical components and gives some suppliers a monopoly. Standardized components (commodities) are beneficial from a supply chain per-spective, since they can be quickly and readily procured at competitive prices from a broad base of suppliers.

That’s why it is important for marketers and developers to carefully decide on a case-by-case basis whether differentia-tion and customized components make sense for the business. This means better organizing the commodity teams and giving them more authority. The commodity teams – composed of devel-opment, production, quality, and pur-chasing experts – are where procurement strategies for each material group are jointly developed and implemented.

Author: Dr. Paulus Bucher, Senior Vice President for Global Operations at ADVA Optical Networking

Challenges ahead

“when it comes to securing contracts,

lightning-fast delivery times can separate the best from

the rest.”Jaswir Singh ADVA Opti-cal Networking CFO/COO

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“it was a true team effort – all voices were heard”Dr. Paulus Bucher, Senior Vice President for Global Operations, and Philipp Lutzny, Senior Director for Global Order Fulfill-ment & Supply Chain Management, dis-cuss how ADVA Optical Networking trans-formed its supply chain management.

LOGISTIK HEUTE: A company that grows largely through acquisitions often has trouble defining standards. How difficult was that for ADVA Optical Networking?Dr. Paulus Bucher: About three years ago, all the different products that were tailored to the local markets of the companies we had acquired were replaced by a new global platform. This made it possible to create global production and distribution structures for the first time in order to leverage key potential synergies. That pre-sented major organizational and concep-tual challenges for our supply chain.

How is your supply chain organized today?Dr. Bucher: Some 300 employees around the world work in the Operations division, which encompasses strategic purchasing, operational purchasing, production, order management, and distribution logistics consolidated within a global matrix. We supply custom systems from our own configuration and distribution centers in Europe, North America, and China. We operate in our customers’ local markets, so we understand their needs and can respond accordingly. All the products we ship pass through our hands and are subject to rigorous quality controls on an ongoing basis.For cost reasons, we outsource module production to a small number of subcon-tractors in Eastern Europe and Asia. This outsourcing is managed centrally. We man-ufacture only about 20 percent in-house and consistently focus our own resources on complex and newly introduced prod-ucts.

What impact does good supply chain man-agement have on the company’s success?Dr. Bucher: About three years ago, our supply chain consisted of three standalone supply chain solutions in three different countries with very little interaction. But we quickly noticed that our performance

was sub-optimal. We sometimes lost customer contracts because we couldn’t fulfil the order by the requested deadline. We realized that if we wanted to prevail against our competitors, most of whom are much larger, we had to invest in our supply chain. The quickest one wins the contract: that’s the way it works around here. At the same time, the markets are demanding much lower production and distribution costs.

Do managers in your industry look too much to their engineers?Philipp Lutzny: Obviously, our innovation and the engineers that make it possible are highly valued. But at ADVA Optical Networking, speed and trust are also vital. By now, everyone realizes that we can meet this challenge only if the underlying value chain is efficient. The reputation of our Operations team has risen consider-ably in recent years.

Who are your major competitors?Lutzny: Huawei, ZTE, Ciena, Alcatel-Lucent – to name a few. Our customers tell us that these companies can barely com-pete with an order lead time of ten days, which we deliver to our top customers as a premium service.

What challenges did you face three years ago?Dr. Bucher: We had an order lead time of

40 days for complete systems – far too long. The costs for freight services came to about three percent of revenues at the time. And our scrapping costs were high. Our Sales and Operations Planning (S&OP) process faced the tremendous challenge of accurately forecasting such a large number of customer-specific products with a time horizon of up to four months. Our inventory turnover rate was three cycles annually. Almost all purchases were based on the forecast without any segmentation. After we got all our information together, we knew we needed an end-to-end, customer-oriented operations concept. The idea of the “commoditized supply chain” was born.

How did ADVA Optical Networking plan this project?Dr. Bucher: We launched a whole series of projects along the chain that only in ret-rospect seem to coalesce into a coherent strategy. It started with our so-called postponement factory – where variants are implemented only at the very end of the production process. We also worked on the long lead times with our strategic suppliers. Then we greatly reduced the number of production subcontractors for electronic modules and realigned our in-house production by reorganizing the production steps and focus. Meanwhile, we took a more systematic approach to our price negotiations with suppliers and

in conversation

about the interviewees

Dr. Paulus Bucher, 47, studied mechanical engineering in Germany and the United States. At Princeton University he received a Ph.D. in Aerospace Tech-nology. Bucher has worked for ADVA Optical Networking since 2010 as Senior Vice President for Global Operations, where he is responsible for strategic purchasing, SCM, production, and logistics. Over the past 15 years, he has acquired experience through positions at CommScope, Ericsson, and Bosch in “transforming value chains” amid the challenging environment of an increas-ingly globalized industry for telecommunications equipment.

Philipp Lutzny, 32, Senior Director of Global Order Fulfillment & Supply Chain Management, has worked for ADVA Optical Networking since 2006, where his responsibilities have included global planning, operational purchasing, and oversight of both the regional and global supply chain. Lutzny has more than a dozen years of experience in supply chain management and strategic pur-chasing. He previously held positions at Siemens AG and BenQ mobile.

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in conversation

steadily improved our Sales and Opera-tions Planning (S&OP) processes.

Which performance indicators were you able to optimize the most?Lutzny: Our order lead time used to be more than 40 days. Today it stands at approximately 21 days. We also brought on-time performance up from 85 percent to over 95 percent. We raised our inven-tory turnover rate from three to six cycles annually. Thanks to centralized negotia-tions and new freight consolidation points, our freight costs today are just above one percent of revenues. By concentrating our production in Eastern Europe and Asia, we were able to lower the standard costs of our products by double-digit percentages each year.

How radical were these changes to your production processes?Lutzny: We decided to consolidate the pro-duction of modules at our global subcon-tractors and configure the devices region-ally, where our customers are located. This meant reconfiguring our value chain so that variants are configured at the very end. The key was separating hardware from software. Today, our process for con-figuring software variants is designed for agility. Specifically, this means that we now store only one-third of the data in our ERP system that we used to.

You called one of your projects an out-sourcing model. Can you tell us about this?Dr. Bucher: At the time, we were using ten different subcontractors, including some in Western Europe and the United States. Now we’ve reduced that number to just three – two in China, one in Eastern Europe. We also strategically realigned our own production sites. The number of personnel remained the same, but we relo-cated our in-house production to where the orders are coming in, shortened our devel-opment cycles, and became much more agile in the process. Over the past three years, we transferred most of our produc-

tion to new sites and dramatically reduced our production costs.

Why did you give preference to the pur-chase-to-order model?Lutzny: Some suppliers, such as the manufacturers of electro-optical modules, need windows of twelve to fourteen weeks to produce semiconductors. It simply made no sense to place orders with these companies on the basis of questionable forecasts. Our response was to establish a kanban system for certain components from our major suppliers. The supplier guarantees the availability of the compo-nents and supplies them on demand in just two weeks. So we shifted the respon-sibility a bit more to the supplier, where it belongs.

How did you communicate the SCM strategy to your employees?Dr. Bucher: The revised approach was not a top-down order from management, but a true team effort. All voices mat-tered. We conducted an extensive dialog and explained the concept to the relevant employees. Our experience shows that this is the best way to put good ideas into practice.

Corporate social responsibility is a broad topic. What has ADVA Optical Networking done there?Dr. Bucher: Our primary concern was energy efficiency and treating our employees around the world fairly. On the energy efficiency front, we conducted a thorough analysis to determine where carbon dioxide is generated in the manu-facturing and operation of our products. The objectives included using less electric energy in our manufacturing process and reducing the amount of packaging. Our new planning model also allowed us to shift a variety of standardized products from air freight to ocean freight.

What have you done in the field of ethics?Dr. Bucher: Here our concerns included ascertaining that employees living in com-

pany-sponsored housing in other countries had decent living conditions and that they enjoyed adequate safeguards against work-place injuries. We conduct regular audits of our suppliers in China, for example, to check for adherence to our standards. We welcome the trend that more and more customers want to know whether we mon-itor that sort of thing. We have been very active on these issues.

How did you see your chances for the SCM Award 2013?Lutzny: First we asked PwC whether we should perhaps wait another year. But the consultants encouraged us to apply, and within five days we had completed our 30-page application. The primary objec-tive was to gain feedback. We didn’t see ourselves as the favorite.

You shut out companies like Bayer and Intel. How surprised were you when you learned of your victory?Dr. Bucher: We were ecstatic. I believe large enterprises have more muscle to push through major projects with greater speed and consistency. This award carries a very special prestige. Our customers in particular will see this as a validation of our worth. Just as importantly, the award is recognition for the entire team.

Will you rest on your laurels now?Lutzny: Of course not! We intend to push forward with our end-to-end segmenta-tion. Currently, we are checking our data quarterly. Eventually, we will make this a monthly process. We also plan to further integrate our suppliers.Dr. Bucher: And we want to approach more customers about logistics solutions to offer them added value. Progress in commodity management is also on the agenda. The next generation of products may require that we adapt our processes once again.

Interview by Thilo Jörgl, editor-in-chief of LOGISTIK HEUTE

Dr. Paulus Bucher, Senior Vice President for Global Operations (left), and Philipp Lutzny, Senior Director for Global Order Fulfillment & Supply Chain Management, explaining the SCM strategy of ADVA Optical Networking.

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ADVA Optical Networking received praise from many circles for its SCM approach. Pavel Krych, Director of Technical Purchas-ing at Deutsche Telekom AG, praised ADVA Optical Networking’s supply chain solution in his remarks as being “in a class of its own when it comes to planning and translating planning into production.”

Dr. Petra Seebauer, Director of Publishing at HUSS-VERLAG in Munich and publisher of LOGISTIK HEUTE, had praise of her own: “ADVA Optical Networking has succeeded in striking an efficient balance between the varying demands of suppliers and customers, establishing a critical competitive edge that allows this medium-sized enterprise to thrive among the big players.”

Juror Harald Geimer, a partner at PwC, summarized the vote

this way: “The jury was impressed by the systematic integration of the business model with the supply chain model. A develop-ment-driven company managed to create an agile supply chain organization based on the needs of its customers. The result is that ADVA Optical Networking can now serve its customers faster, with better on-time performance, and at lower cost than its competitors.”

What ADVA Optical Networking achieved in three years can-not be summarized in just a few words. The jury emphasized that the company standardized its global systems and processes along a global supply chain strategy, which improved its custom-er focus. End-to-end supply chain optimization that extended beyond development, quality, production, and sales to include suppliers, made it possible to “establish a powerful and compre-hensive supply chain.” The pull-based solution put into place features of unprecedented availability and flexibility that boasted measurable results and a wide array of best-practices.

lead time reduced by over 50 percent

The jurors were also impressed by how the numbers im-proved: ADVA Optical Networking reduced its supplier lead time by over 50 percent, increased on-time performance from 85 to 97 percent, and raised its inventory turnover rate from three to six cycles annually. The jury acknowledged that these improve-ments ushered in a “profound transformation at all levels of the supply chain.” The implementation time frame of just two and a half years was “very fast.”

Today, it’s clear in the eyes of the jury that the flexibility this yielded has been key to the success of ADVA Optical Networking in keeping both its customers and its suppliers happy. “While the customers have the products delivered at relatively short lead times of 15 days on average, the suppliers have long lead times of 4 to 12 weeks,” noted the SCM experts on the jury.

The end-to-end and cross-enterprise segmentation of the sup-ply chain – from the supplier’s supplier to the customer’s custom-er – is a unique innovation in the industry. Segmentation means defining and differentiating segments on the basis of the product portfolio and the existing demand structures. This makes it pos-sible to effectively and efficiently serve distinct portfolios.

Production and planning have also been decoupled. This two-stage approach enables late-stage customization – customer-spe-cific product configuration and adaptation in the regional final assembly centers – enabling a quick response to changing cus-tomer demands. Collaboration between developers and suppliers makes end-to-end optimization possible. Thilo Jörgl

Pavel Krych, Director of Technical Purchasing at Deutsche Telekom AG:

Being successful requires innovative approaches, solutions, and imple-mentations that are good enough to serve as models for other companies.

This certainly describes the supply chain segmentation so excellently implemented by ADVA Optical Networking – an innovation in the industry. Segmentation means defining and differentiating seg-ments on the basis of the product portfolio and the existing demand

structures. This makes it possible to effectively and effi-ciently serve distinct portfolios.

ADVA Optical Networking achieved an end-to-end, cross-enterprise implementation from the supplier to the cus-tomer. Production and planning have also been decoupled. This two-stage approach enables late-stage customization – customer-specific product configuration and adaptation in the regional final assembly centers – enabling a quick response to changing customer demands.

This end-to-end segmentation of the supply chain in conjunction with decoupled production and planning is the key to customer-specific product configuration in the regions and a good example of the kind of innovation that I referred to. I feel certain that many here will appreciate the elegance of such an approach, and I can also imagine that only few here can claim to have achieved this – much less so seamlessly.

ADVA Optical Networking is a beacon to other industries as well through its supply chain solution, which is in a class of its own in planning and the translation of planning into production. ADVA Optical Networking also demonstrated an elegant realization of supply chain segmentation tai-lored to the specific needs of the industry.

Excerpt of the laudation

Discussing the com-ing challenges:

Members of ADVA Optical Networking’s

Meiningen team

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Festive occasionADVA Optical Networking, winner of the Supply Chain Management Award 2013, was honored together with the other finalists in a ceremony held in Frankfurt on June 18

Fine food and drink with praise all around: A gala Award Night ceremony on June 18 in Frankfurt honored the win-ner of the prestigious Supply Chain Management (SCM)

Award 2013. More than 200 industry professionals, researchers, and journalists converged on the HOLM Forum at Frankfurt Air-port to celebrate with representatives from ADVA Optical Net-working.

The event was part of the inaugural “EXCHAiNGE” conference held on June 18 and 19 in the Hilton Frankfurt Airport and HOLM Forum. This year for the first time, the finalists were also hon-ored: the HealthCare Business Area of Bayer AG (Leverkusen), Intel Mobile Communications (Neubiberg), and Symrise AG (Holz-minden), a global provider of fragrances and flavors. The follow-ing day, both the winner and finalists presented their solutions before a large audience at the EXCHAiNGE conference.

Harald Geimer, a partner at PwC, and Dr. Petra Seebauer, pub-lisher of LOGISTIK HEUTE and Director of Publishing at HUSS-VERLAG, began the Award Night by presenting the finalists and their projects before devoting the rest of the evening to the SCM successes of ADVA Optical Networking. Jaswir Singh, ADVA Opti-

cal Networking’s Chief Financial Officer and Chief Operations Officer, was very pleased to accept the award, emphasizing that the results had been the “shared success” of a great number of colleagues.

As soon as drinks had been served, guest speaker Dr. David Bosshart took the podium. Bosshart is an au-thor and Director of the Gottlieb Duttweiler Institute in Rüsch-likon, Switzerland. “The good times are over,” was his provoca-tive message as he painted a picture of business and logistics in the future.

Thomas Macyszyn, the celebrated Chef de Cuisine of “Navette” in Rüsselsheim’s Columbia Hotel, delighted the guests after the award presentation with a menu of his culinary specialties. After the meal, many guests took the opportunity to chat with representatives from ADVA Optical Networking and share tips on how other companies or industries might learn from their example. Other guests speculated on who might be next to complete a major SCM project and be in the running for the 2014 award. Thilo Jörgl

Something to smile about: Dr. Petra Seebauer, juror and publisher of LOGISTIK HEUTE, and Harald Geimer, juror and partner

at PwC, congratulate Philipp Lutzny, Senior Director of Global Order Fulfillment & Supply Chain Management, Dr. Paulus Pucher, SVP of Global Operations, and Jaswir Singh CFO/COO from

ADVA Optical Networking. Alongside ADVA Optical Networking representatives are Prof. Dr. Michael Henke from ISCM and Pavel Krych from Deutsche Telekom (left to right).

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All ears: An international audience listens atten-tively as SVP Dr. Paulus Bucher from ADVA Optical Networking talks about his supply chain team.

Light-hearted evening: Listeners smile as guest speaker Dr. David Bosshart shares anecdotes from the world of logistics.

Thankful words: Philipp Lutzny, Dr. Paulus Bucher and Jaswir Singh (from left) say thank you to the jury and ADVA Optical Networking’s supply chain team.

Cheers: A bartender

serves wine, champagne,

and cocktails at the HOLM Forum

in Frankfurt to toast the winners of the

SCM Award.

All that jazz: A combo accompanies the Award

Night with a program of popular jazz standards.

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the daily heartbeatThe company’s early return index shows that less than 0.4 percent of its products are returned in the first 90 days. Behind this achievement is an intelligent strategy.

ADVA Optical Networking is a partner customers can trust. That statement applies to all aspects of customer engage-ment, but it’s tested most often when it comes to actually

getting the product, when it’s required, at the expected quality level. That’s where ADVA Optical Networking really shines.

The company’s operations team is directly connected to sales in the same system and that benefits the customer. If a formal lead time check is desired, ADVA Optical Network-ing can have a ship date back within 24 hours. Even better, while entering an order, the sales rep-resentative sees a lead time traffic light in real-time that indicates whether a part is currently at green status (<4 week lead time), yellow (<8 week lead time), or red (<12 week lead time). Operations calls this portfolio management. It allows ADVA Optical Networking to work with customers from the outset to tailor a request to hit a desired date, even before a formal ship commit request. The company’s order management system is constantly updated with orders, forecasts, and histori-cal trends that drive the buffering of high-runner, green items in the delivery regions, yellow items near their source, and launches the manufacture of red items as required.

Customers who forecast and order in dependable patterns al-ways enjoy sub-four week lead times. ADVA Optical Networking’s Operations team tailors the system to know customer patterns and plans for spikes. Upside in short bursts exceeding forecast can typically be handled. This commitment is visible straight through in the results. Across ADVA Optical Networking’s cus-tomer base, lead time on Ethernet gear averages three weeks.

On complex WDM systems, its four weeks. The company’s biggest customer enjoys three day lead times on Ethernet and ten days on WDM at 98 per-cent demonstrated first ship commit accuracy. Across all customers, those numbers remain best-in-class. Overall first commit accuracy is always above 95 percent, while ship to first customer re-quest is consistently above 85 percent. If lead time is a customer’s focus, ADVA Optical Networking

will work with them to develop a lead time and buffering program specific to their needs.

Strong performance is made possible by cross-functional ‘Cus-tomer Focus Teams’ made up of order specialists, account liaison managers, and demand planners sitting in the sales region, work-ing with supply planners in the manufacturing region. There’s

adVa Optical networking´s

biggest customer enjoys three day

lead times on Ethernet.

Communication in mega-cities: ADVA Optical Networking is well

prepared for future challenges.

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a daily heartbeat flowing from customer to manufacturer that allows ADVA Optical Networking to respond to changes quickly. Collaborative planning and regular performance reviews be-tween operations and customers drives cycle times down.

Customers can select the staging level

ADVA Optical Networking’s manufacturing model is simple; a few best-in-class partners feed the company’s customization and distribution centers worldwide, while the company main-tains some smaller, flexible in-house production. ADVA Opti-cal Networking and its partners build generic, then customize software and do customer-specific staging in the sales regions. Customers can select the staging level that fits their appetite to do work in the field. Those who desire ultra-fast turn-up buy fully loaded, fibered and configured systems. And those with more time may take delivery unassembled. The point is, ADVA Opti-cal Networking can bear much of the customer burden on the road to turn-up. There is also a redundant, balanced approach in assigning production. Builds are spread evenly between two tier-one manufacturers situated close to ADVA Optical Network-ing’s distribution centers. This allows ADVA Optical Networking

to maintain a competitive price atmosphere and two manufac-turers familiar with all of its technologies. This directly benefits customers on cost and supply redundancy.

What does it take to become an ADVA Optical Networking supplier? When you dig deeper, you’ll find that the company sur-rounds itself with partners who live to the same high standards. ADVA Optical Networking realizes that in its supply chain every element counts – that everyone is connected and that the behav-ior of one can speak for all. Therefore, corporate ethics, social responsibility, and sustainability are foundation principles for ADVA Optical Networking, and the company regularly audits to maintain that confidence. At ADVA Optical Networking, opera-tions is not seen as a simple back-office production unit. It is an additional service to the customer – one that delivers the com-pany’s brand promise of innovation, speed and trust.

The networking industry has always been a catalyst for change. Change in the way we communicate and collaborate. Change in the way we develop and share knowledge. Change in the very way we build communities. Over the years we have helped to drive this industry. We pushed the boundaries of technology,

we entered new market verticals and we helped our customers develop their own new revenue opportunities. What’s more, we did all of this while remaining true to our core values: innovation – speed – trust.

The management of our supply chain is an intrinsic part of our core values. It’s a key fabric of who we are as a company. In 2010, we made a decision to completely redesign our supply chain processes. We were responding to a change in our customers’ needs, in how they were oper-ating. They wanted greater speed, more flexibility and faster response. Three years later, I find myself writing this mes-sage.

I am incredibly proud of what our teams have achieved and the Supply Chain Management Award 2013 is a clear rec-ognition of their success. ADVA Optical Networking is not only a fast-moving innovator. We also value our most impor-tant asset – our people. Our personal touch makes us stand out against our competition. Ultimately, we always put the customer first. A few examples:

We introduced a de-centralized supply chain that set-up local distribution

centers close to our customers

“In region” Customer Focus Teams (CFTs) perform regular performance reviews making sure we are 100 percent aligned with our customers’ needs

We offer our customers portfolio management sessions and lead-time programs, allowing us to create the best delivery performance possible

We perform “in region” staging ser-vices that make sure our customers receive exactly what they need, when they need it – ready to go into operation

We conduct collaborative planning sessions between our customers and operations teams to synchronize run-rate business in real time

As we continue to strive towards market leadership we fully recognize the compet-itive importance of our operational pro-cesses. In fact, we even take it one step further: we look at the end-to-end supply chain, starting with the component manufacturers and reaching all the way to our customers’ customers. As a result, the lines between suppliers and users are beginning to blur – and our commit-ment to operational excellence goes way beyond our corporate boundaries.

a word from the CEO

Brian L Protiva, CEO of ADVA

Optical Networking

The demand for bandwidth wherever you are and on any device is driving our industry.

LOGISTIK ▶HEUTE◀ 2013

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