One high-tech manufacturer's quest to deliver near-perfect fill rates across its global service organization
Writer Tom Friedman has asserted that the world is flat, but for companies operating globally and facing unique challenges in each of the markets where they have suppliers or customers, the world is as round as ever. But rather than viewing regional differences as an obstacle to an effective supply chain, innovative companies are embracing the idea of centrally managing disparately structured operations that have been localized to take account of the particular environment in a given geography.
Case in point: Network Appliance (NetApp), the Sunnyvale, Calif.-based manufacturer of data storage solutions for large data centers. The 14-year-old company has more than 5,000 employees in 110 offices worldwide, and it generates about $2 billion in annual revenues.
Earlier this year, Bruce Shadmehri, director of global field operations for NetApp, spoke at the Interlog conference regarding his company's six-year-old field service initiative, which has helped NetApp deliver consistent 99.5 percent global fill rates across its service organization. One component of this initiative has involved establishing regionally specific infrastructures to support customers in different geographies, but running the operation with the help of a single planning system.
Due to the vital nature of its customers' data centers, NetApp offers two- and four-hour and next-business day delivery commitments on more than 1,500 parts to keep those centers up and running. Our products are used in mission-critical applications, and customers stand to lose hundreds of thousands of dollars if there is ever downtime, Shadmehri noted in his presentation. NetApp's field service operation includes one global distribution center serving five regions worldwide through four regional hubs (in Louisville, Ky., Miami, Amsterdam and Singapore) and 200 forward stocking locations (FSLs).
Naturally, beyond meeting its customer commitments, NetApp also has an interest in minimizing the inventory that it needs to hold in those stocking locations, and accomplishing this requires a tight linkage between the stocking model and customer entitlements, according to Shadmehri. That, in turn, requires detailed mapping of the company's installed based to its FSL; the ability to manage criticality and ranking settings by customer, part, product and location; accurate parts usage data; and, in Shadmehri's words, a robust spares planning system.
The Tools to Deliver
The planning solution that NetApp uses, from Baxter Planning Systems of Austin, Texas, can automatically map different response codes to different stocking locations, so the company can ensure that a replacement part comes from the most appropriate location — a nearby forward stocking location in the case of a four-hour response commitment, for example, or a country hub location in the case of a next business day commitment.
Importantly, the planning system is flexible enough that it allows NetApp to apply different fulfillment strategies appropriate for different regions. For instance, in Europe, with its unified market, NetApp is able to map demand across country borders, while in Asia, the system respects international borders and maps to in-country stocking locations within a given nation.
The flexibility of the system also has allowed NetApp to think strategically in terms of how it builds regional networks to support its field service operation. The company has adapted its multi-echelon network model — with the distribution center supporting regional hubs that support country hubs that support smaller country depots — to the specifics of different markets.
For China, for instance, it was cost-effective to position inventory in the Singapore regional hub, have Singapore feed Beijing, and then have Beijing take care of the country depots. But through modeling in the planning system, NetApp established that for Japan it made more sense to have inventory go directly from the company's global distribution center straight to the country hub, with no need to go through a regional hub.