StorageTek Tackles VMI

Data storage specialist moving to order-triggered "pull" supply chain in bid to reduce inventory

Fremont, CA  August 27, 2002  Storage Technology Corp. (StorageTek) has deployed has deployed an inventory management system in a bid to achieve inventory reduction at all stages of production by moving from forecast-based "push" to order-triggered "pull" supply chain.

StorageTek, a $2 billion worldwide company with headquarters in Louisville, Colo., builds a range of data storage solutions. As part of its efforts to reduce inventory, the company has been moving toward vendor-managed inventory (VMI), where suppliers own raw material inventory until needed by StorageTek manufacturing.

The company is also looking to provide StorageTek, its suppliers and its third party service providers with immediate access to customer demand and the tools to manage factory replenishment with significantly less inventory than was previously possible.

To that end, StorageTek has implemented a solution from provider WorldChain, called Network Inventory and Order Management BizPak, across its network of internal and outsourced supply chain operations.

"Through our efforts with WorldChain, StorageTek is becoming one of the most lean and customer-focused companies in the storage business," said Roy Perry, StorageTek vice president of global supply chain, manufacturing, logistics and quality. "Within the past two quarters, we have reduced raw material and work-in-progress (WIP) inventory by 34 percent. We believe additional inventory reductions are possible. Additionally, WorldChain is assisting our suppliers in successfully meeting their fulfillment obligations under our new vendor-managed inventory program."

StorageTek set out to accelerate its vendor managed inventory program, institutionalizing it across most of their business units. One of the company's goals has been to improve its ability to synchronize execution around the customer order, providing real-time visibility and execution management as customer orders are fulfilled and component inventory is
replenished into factories and strategic holding areas.

Concurrently, the company wanted to provide its suppliers and resellers with a tool to help them manage their inventory levels more efficiently. In particular, Perry was looking to increase StorageTek's supply chain velocity. "I think the only way to achieve real velocity is through the transformation to a pure pull-based supply chain execution model," said Perry. "Getting everyone  suppliers, StorageTek and channel resellers  to execute off the same end customer order is what drives sustaining value."

Dave Allen, CEO of WorldChain, suggested that the pull-based replenishment model, where the entire supply chain executes on actual orders instead of inherently inaccurate plans, could give companies a significant competitive advantage, although such initiatives depend on commitment across the supply chain. "WorldChain cannot produce these business results alone  no software company can," Allen said. "But with committed leadership from our customers, we can help companies like StorageTek achieve these types of transformational changes."

StorageTek project leader Cindy Armenta, who has championed the solution, confirmed the importance of universal buy-in. "A project this important requires a focus on the user experience," Armenta said. "We have to make it clear how they benefit. The value already created is a direct result of our users and our suppliers leveraging the solution in their everyday tasks."

For his part, Rob McRae, StorageTek vice president of worldwide sourcing, pointed to WorldChain's pay-for-performance business model, through which most of the cost was deferred until after the solution was live and delivering tangible benefits. "Deployment began in January, went live on May 6, and we [now] are achieving the inventory and operating expenditure savings by having real-time visibility into inventory, shipments, and orders across our enterprise and with our extended supply chain."

WorldChain recently released version 3.0 of its network platform and supply chain application suite, which includes its Network Platform, Network Inventory and Order Management BizPak application and a Network Repair Logistics BizPak application. The new release includes an updated browser-based user interface, with monitoring and navigation capabilities for real-time metrics; an event manager to manage policy-based events and tracks those events through to resolution; and supply chain configurator, a
model-based representation of an entire supply chain, including where material is stored in the supply chain, how it moves through the supply chain, how orders are sourced and fulfilled, and which entity owns inventory at any point in the supply chain.