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Enterasys Case Study
Plan. Perform. Profit.
What Does S&OP Maturity Look Like? At Enterasys: Three Years of Sequential Growth
Page 1 of 3 | © 2013 Steelwedge Software, Inc. All rights reserved. – [email protected] – 925.460.1700
Enterasys designs wired and wireless network infrastructure and security solutions to help enterprises stay in front of changing connectivity and security needs, but recognized in 2004 that it wasn’t as good at responding to constantly evolving global business change and the impacts on its supply chain. That year, the company embarked on a CEO-driven mission to transform itself into a lean, responsive and much more demand-driven business.
“We struggled at predicting demand, which resulted in signi�cant excess and obsolete inventory. In high-tech, there is no quick or effective outlet to of�oad excess inventory; you own it, reserve for it and deal with the �nancial consequences,” explains Jack Lyon, VP of Operations at Enterasys, who led the charge for change. His baseline assessment of the company’s supply chain challenges also included: order delays, sluggish market response, short product life cycles and organization silos of information. Exacerbating the problem was a completely outsourced supply chain with contract manufacturers building all of its products.
Year One ROI:$4 million savings
from decreased excess and obsolescence
S&OP: Year One Anticipating the Market
Within a year of Lyon’s assessment, the company improved its bottom line by applying new techniques and cloud-based technology to a proven process –Sales & Operations Planning (S&OP). Technology-enabled S&OP helped Enterasys connect its people and process to better understand operational tradeoffs, when changes in the business environment did not align with its business plan.
In 2005 the Enterasys S&OP process brought together a cross functional group of leaders from sales, marketing, product management, operations, �nance and supply chain. At the same time, Steelwedge integrated and normalized the data from each of those groups that resided in their respective systems such as SAP and Salesforce.com --and eventually added in Big Machines as well. From there, Enterasys drove pretty signi�cant and immediate changes in its business starting with better demand predictability, which in turn, directly affected its ability to respond to change.
For example, within a year, the company could determine in near real-time when a product was not selling as well as expected and drive demand shaping activities to stimulate sales. Alternatively, if products were selling better than forecast, Enterasys could look �rst at sales data to determine if the growth was sustainable, then reach out to its contract manufactur-ers to determine their capacity to boost production short and mid- term.
The bottom line was clear as well: decreased excess and obsolescence accounted for a whopping $3 to $4 million in savings per quarter initially.
Enterasys Case Study
Page 2 of 3 | © 2013 Steelwedge Software, Inc. All rights reserved. – [email protected] – 925.460.1700
Seven Years Later: Collaborating and Orchestrating
Enterasys has taken a purposeful, incremental “win” approach to driving advancement and ROI from its S&OP. Seven years later, the company has a global, collaborative and integrated S&OP process and methodology, powered with the Steelwedge S&OP Platform. Its demand and supply plans are aligned internally and externally with suppliers and customers. In turn, better balance is delivering better predictability, better cash spend and better customer success.
Among the returns that Enterasys counts from its mature use of S&OP:
Perhaps most telling of its accomplishments, in 2012, Enterasys marked its 3rd consecutive period of year-over-year growth. Critical to that business stability is Enterasys’ S&OP foundation.
Under Lyon's leadership, S&OP has become a key strategic lever for the company's continued market growth and competitive advantage.
But Lyon isn’t resting on his laurels. He maintains that the ever shifting marketplace requires constant vigilance on agile business planning to maintain great customer success.
“We traded up our problems, by transforming from a manually intensive supply chain into a lean and responsive organization,” says Lyon. “For us, success is all about strengthening the collaboration with customers, delivering on our promises and meeting their expecta-tions. Therefore, our optimization work is never done.”
As an early adopter of technology to power better global supply chain process, Enterasys captured the attention of other businesses with complex global supply chains. Its success story was even featured in the Harvard Business Review that year and showcased how a business could move from reacting to the market, to a position of better anticipating the market: a position that leading IT research and advisory �rm, Gartner, calls Stage 2 S&OP Maturity.
But better demand planning was just the beginning of the ongoing transformation that Enterasys continues to drive from technology-enabled S&OP. Armed with cross-company data and insights, the S&OP team moved its discussions from having enough supply to �ll a particular order, to strategizing on improving gross margins. It regularly uses S&OP to power “what if” scenario planning across many facets of its business to understand the impacts of potential changes on customer satisfaction, revenue, sales and production.
Long TermS&OP Value:
> 97% Customer ful�llment
11 consecutivequarters of growth
95% Customer satisfaction
21% Reduced inventory
< 5% revenue impactfrom materials excess
Timely and accurate information through automationCross functional alignment through a collaborative planning approachHigher customer satisfaction through better ful�llment
Sustained high global customer satisfaction: 95% Customer ful�llment: over 97%
Reduced inventory 21% year over yearForecast error (MAPE): averaging 24%Revenue impact less than 5% (of material overhead/excess inventory)
Enterasys Case Study
Page 3 of 3 | © 2013 Steelwedge Software, Inc. All rights reserved. – [email protected] – 925.460.1700
Steelwedge Software, Inc.
Steelwedge integrated sales, operations and �nance planning solutions provide the "shock absorbers" to recognize, recalibrate and respond in a volatile environment. Business agility starts with Steelwedge for a clear line of sight from plan to performance to pro�t. For additional information, please email us: [email protected].
Running with Scissors? The Promise and Perils of Optimizing Business in a Volatile World
“We’ve been successful with S&OP because we’ve taken an iterative, ‘Crawl, Walk, Run, Sprint’ approach to implementation, testing, measurement and advancement,” said Lyon. “It’s a non-stop journey. The only constant in business is change, whether its market disruptions, economic volatility, a natural disaster…or you name it: they all have varying degrees of impact on the process. Achieving a ‘Sprint’, may only happen for a matter of seconds before continuous improvement kicks in and you re-evaluate. But we have an agile foundation in place to help us deliver better, more consistently—regardless of the circumstance.”
”
Our robust process along with integrated
operational data in the Steelwedge S&OP
platform, allows us to synchronize supply and
demand. It’s the power behind the
process; it impacts our revenue, our cost, but most importantly our ability to service our
customers.
“
Jack Lyon
VP of Operations,Enterasys
S&OP Driven Transformation at Enterasys:
Stronger collaboration within the organization
A demand plan with one agreed set of numbers fosters alignment and a “we’re in it together” culture, eliminating �nger-pointing.
Better inventory balance
S&OP helps model the optimal inventory balance. Keeping the lowest possible inventory is not always the right solution: balance needs to be struck between revenue growth and high customer satisfaction while protecting the balance sheet.
Automation powers valuable analysis
Integrated data and executive level reports from the S&OP platform facilitate a collaborative, global S&OP process, freeing resource time for analysis vs. data gathering and manipulation. This, in turn, powers continuous improvement and faster process maturity.
Enabling “bluebird” opportunism
Insights from accurate S&OP data and timely “what if” scenario testing, supports “bluebird” demand opportunities that weren’t in the forecast at all. With tighter contract manufacturer collaboration, this provides reliable answers to questions like: Can we support it? If not now, when? What other options do we have for supply if we don’t have it?
