Linking Inventory to Profits

— July 01, 2007

Make a phone call or send an email and chances are TellabsÃÆ'Â.Ã.Ã.‚¬Å¡Ã‚¬Ãƒ.Ã.‚¬Å¾Ã‚. equipment is at work behind the scenes. The company offers next-generation optical networking, managed access, voice-quality enhancement and cable telephony solutions to telecommunications companies such as MCI, SBC and Verizon.

Tellabs provides spare parts to its customers with the initial product sale and then sells additional parts from a central distribution center. If something breaks, quick access to spare parts is critical. But without knowing equipment failure rates or lead times, customers were often unsure of which parts were likely to be in quick demand. Consequently, Tellabs began offering offers its customers the option of having Tellabs manage and position their stocks for them. Supply chain planners used Tellabs' SAP system to manage parts with spreadsheets and basic algorithms, but demand was irregular, making it difficult to accurately forecast customers' needs. Inventory levels kept rising--as did the need to manage and plan accordingly.

Right Parts, Right TimeTellabs turned to MCA Solutions to optimize its service supply network for
parts delivery. Using MCA's browser-based Service Planning and Optimization software, planners can now better forecast which parts customers are most likely to need and where best to place them. The solution has cut inventory by 60 percent, which translates to a savings of $5 million less in spare parts that are just sitting on shelves.

"Tellabs needed to position inventory close to the product, because when something breaks, they have to replace it quickly," says Tim Andreae, senior VP of global marketing at MCA Solutions. Initially, Tellabs set up a network of 13 spare parts distribution centers. "These regional stocking centers and MCA's software has made Tellabs more competitive in the marketplace," says Lindsay Huber, a supply chain manager at Tellabs.

The solution was implemented within six months and fully integrated with Tellabs' SAP enterprise resource planning (ERP) solution and its third-party delivery company's ERP. Tellabs has since transitioned from its original delivery vendor to Communications Test Design Inc. (CTDI), which manages the company's reverse stocking locations and receives feeds from MCA showing current inventory status and demand.
Going Global
Since the implementation, Tellabs has merged with Advanced Fibre Communications (AFC), thereby doubling its product SKUs from 3,500 to 7,000 and doubling its customer base in the process. "...Integration with AFC went very smoothly," says Huber, "...and it was easy to upload additional parts within the tool." Tellabs is also adding its Finland-manufactured products using MCA tools and outsourcing the third-party logistics function.

Recently, the company expanded its service offerings to Asia, Australia, Ireland and Europe, increasing the number of its global stocking locations from 13 to 21. "In Europe, we offer a three-hour turnaround time. We also have four-, eight-, and 12-hour service level agreements," says Huber. "Our customers are very happy with the solution."
Kassandra Kania is a freelance writer in Charlotte, N.C.
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