Supply chain efficiencies remain a focus at this wireless operator, as it applies the most advanced technologies to solving the riddle of getting the right product to the right customer at the right time.
Michael Hahn is the vice president of Product
Operations at Sprint, the third-largest wireless operator
in the United States (revenue, $41 billion). Hahn is
responsible for inventory management, demand planning,
procurement, transportation and warehouse logistics for
all products purchased and sold in Sprint's distribution
channels. Before joining Sprint in 2004, he had a similar
role with AT&T Wireless for nine years, where he was
vice president of Consumer Equipment, responsible for
logistics, inventory management, supplier management
and product portfolio. Prior to entering the telecommunications
industry, Hahn had experience working for
major U.S. retailers, such as Circuit City and Macy's.
In this interview, conducted by Supply Chain Leader
editor Victoria Cooper at Sprint's headquarters in Overland
Park, Kansas, in late January, Hahn discusses the results
of a wide-ranging supply chain initiative at the company.
What is the scope of the products your team supports at Sprint?
The products include our core wireless devices, including our standard handsets, and our data devices, such as PDAs (personal digital assistants), wireless modem cards, smart phones, and the accessories to support all of these devices. The distribution channels include the independent dealer/ agents, our national retail partners - such as Best Buy and RadioShack - and more than 1,300 Sprint-owned retail locations. In addition, Sprint has an extensive direct fulfillment effort utilizing the Web (Sprint.com), telesales, and the Sprint Business Direct sales team, across small, medium and large businesses, plus public sector accounts.
Are there any other supply chain organizations within the company?
Yes. There is a corporate supply chain organization, with responsibility for the supply chain activities with our network equipment, capital purchases, contract management and cost negotiations. My team has an outstanding working relationship with this organization, which also provides us with our performance metrics and handles supplier disputes. Product Operations is the customer-focused organization, and serves as the last line of defense before the products leave our warehouse and reach the customers' hands or the distribution channel.
How closely do you work with Marketing?
My team reports into the product development organization, and we are closely aligned with both the sales and marketing organizations.We're an integral component of the planning cycle for understanding what our product needs are for the future. Sprint has always been known for creating unique and innovative products - for instance, Sprint offered the first GPS-enabled phone in 2001, and we are leaders in navigation and location-based services for mobile phones.We work closely with the marketing and sales organization to understand the demand for our products and then work with our suppliers to ensure that we have adequate supply available at the right time and location throughout all of our distribution channels.
How have customer demands changed over the past few years, and what has this change meant at Sprint?
Simply put, customers have become more demanding,
calling for greater diversity in the types of devices offered.
Quarter after quarter, we have seen that our customers
enjoy doing more with data services on their phones, such
as email,Web surfing and access to entertainment. They
want "smart" phones, whether they're on a Windows,
BlackBerry, or Palm operating device, with full access to
their e-mail and the Internet.
Currently, Sprint has some of the hottest products on the market, ranging from devices that allow you to text message easier via a cell phone with a slide-out qwerty keyboard to many of the most innovative data devices in the marketplace. The devices are getting more cuttingedge, offering a wide variety of different applications. To meet the growing needs of our consumer and business customers, we must be able to offer a diverse collection of feature-rich devices.
The traditional use for a basic wireless phone - making calls back and forth - is still a substantial share of the business. But, that said, the number of customers utilizing data capabilities over the Sprint network continues to grow, quarter over quarter. And Sprint's new "Simply Everything" unlimited voice and data pricing plan for $99.99 opens the door for even more customers to fully explore data services on their wireless phones and truly appreciate what wireless mobile data services can offer.
Is the product mix going to get greater?
Yes, and fortunately, Sprint has a long history of being ahead of the curve when it comes to products. The needs of the customer are forever changing, and there is more of a need for segmentation in our channels.We have a great deal of diversity in our customer base, from the small business owner to the Fortune 100 corporate customer; from the individual consumer to the government client. We have to make sure that we have the diversity in our product assortment to meet their needs, whether it's a desire for data, music, video, text messaging or Direct Connect (push-to-talk), or a combination of such features. And yes, we still offer voice products.
What is your product volume?
Across all of our products in our distribution network, Sprint "touches" more than 4 million units a month, from a forward and reverse perspective. But the types of orders that Sprint fulfills range from tens of thousands of units shipped in bulk to a national retailer to a single phone with customized software shipped to a satellite business location. So the range of "where and who" we ship to is quite diverse.
What is the nature of the competitive environment?
The global telecom market is forecasted to manufacture over 1 billion devices in 2008. It's a very competitive environment, with more than 80 percent saturation in the United States. The companies who succeed will be the ones who plan, forecast and procure accurately and in a timely manner with their suppliers.
The global telecom market is forecasted to manufacture over 1 billion devices in 2008. It's a very competitive environment with over 80 percent saturation in the United States.
What was your first challenge when you came to Sprint almost four years ago?
When I joined Sprint, we needed to improve in our inventory forecasting and distribution.We experienced challenges with supply during product launches as well as with forecasts for procurement and replenishment. In addition, we faced long vendor lead times and delivery inconsistencies.
When we merged with Nextel, our distribution network became even more complex, with legacy systems that did not "speak" to each other and were mostly manual rather than automated fulfillment processes.We determined that to achieve world-class demand and supply management we would need to change our organizational structure, our processes and our systems technology.
What role did i2 play in your initiative?
When I arrived at Sprint, the company had just inked an agreement with i2. I guess you could say I inherited it, but I then became its champion.We liked i2's history and background working with similar-sized corporations that manage inventory across multiple distribution channels. We chose i2 for its ability to help us manage the flow in inventory through our points of distribution and, in turn, monitor the demand that we have planned with our suppliers to ensure that they manufacture and deliver the goods when we need them.What we needed was more accuracy and more agility in our demand and supply modeling.
What we don't want to have is our suppliers manufacturing the wrong quantities - too few or too many.We didn't want them manufacturing the wrong models or the wrong colors, having too much of one model or too little of another.We need for them to focus on building to what our true demand needs are.With the i2 forecasting and replenishment tools and capabilities, we were able to create the solution.
The applications and systems that we worked with i2 to develop have allowed us to better forecast our inventory needs, more accurately distribute our products to the right places across our distribution channels, and better replenish our warehouses and locations.
Sprint had the vision years ago to recognize that the portfolio was going to expand, to get more diverse, with a fashion component.We realized we would not be able to enlarge our inventory, but rather would have to manage it in a more disciplined way across multiple models. We could not do this on our own, without some of the advanced technology offered by a company like i2.
Did you need to change your organizational structure?
By automating many of our processes and achieving more accurate demand planning and replenishment management, we have been able to structure our organization more efficiently. Instead of having people structured by channel, working at very detailed levels for lack of automated tools, we have now organized our management processes across the following competencies: warehouse logistics, demand planning and procurement, and replenishment and distribution. And I've instituted a fourth function: program management across these three groups.
What about your warehouse logistics network?
To further simplify our business we went from 19 warehouses (after the merger) to 2 central warehouse facilities. Our main point of distribution is centralized in one of the largest distribution hubs in North America: Louisville, Ky.We have a great partnership with UPS, whom we work with on our transportation and warehouse needs. UPS provides the "brick and mortar" as our outsourced, third-party logistics partner, but Sprint manages the processes and requirements. The partnership between UPS and Sprint is excellent and involves executives at the most senior level of each company's management team.
Sprint also uses Brightpoint in Indianapolis to support the logistics management in our dealer/agent distribution network. Brightpoint is the most capable supply chain provider focused in the wireless space, and has a long history of partnership with Sprint.
By consolidating and centralizing our logistics needs, we can leverage tremendous savings and maximize efficiencies. And we are now "next day" to anywhere in the country, regardless of order size.
What are some of the improvements you've realized?
In addition to cost savings, we've reduced inventory levels across all of our distribution channels.We've improved our in-stock levels, despite the fact that our product portfolio is more diverse than ever. This is a substantial improvement for any industry, not just the wireless space.
We've seen significant improvements in forecast accuracy. The purchase forecast accuracy (3 months out) has doubled to around 70 percent, while the replenishment forecast accuracy (1 week out) has improved by 60 percent.We've automated more than 90 percent of our replenishment orders.
Doesn't Sprint have a large retail presence?
Yes.What we often don't get credit for - and I think this applies to all telecom operators - is that we are a large retailer, in addition to our other distribution channels.We have more than 1,300 retail locations. How many retailers have that many locations? So retail is very important to us.
What is your next challenge?
How can we reduce the inventory levels even further? How do we reduce the timeframe between when an item is manufactured in Asia to when it is delivered to the Sprint warehouse?
What I'd like to see is a true "just-in-time" scenario. This will require collaboration with all of our partners, involving third-party logistics operators, our IT partners, transportation providers, and our device suppliers.
Clearly, the device suppliers are our partners in this endeavor.We cannot insist on something that is a surprise to them, so we have to engage them in our processes from the earliest moment. They have to understand what we're working on, and what our customers demand.We work continuously with them to make improvements in quality, availability and efficiency.
Our role in the food chain works like this: we work with the manufacturer on the requirements and capabilities needed to support the customer and their needs. All of our potential devices are then tested thoroughly on our network, before they are launched and approved for sale on the Sprint network.
We are working on the development of a device from 12-to-24 months before it's launched. It's up to Sprint to understand what the content should be, what the software needs are, and what services the customer requires access to.We do not manufacture the devices, although we need to forecast and plan the quantities correctly so our supplier partners can meet our inventory needs.
We're developing devices today that will ship in the second half of 2009. The ironic part is that because the life cycles of our devices are as short as they are, it's even more important than ever to "buy and plan it right, from the start," and our partnership with i2 has helped Sprint make this happen.
by Victoria Cooper
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Victoria Cooper is the principal of Cooper Communications (www.coopercomms.com), based in Sausalito, Calif. For more information, contact supply_chain_leader@i2.com. |
