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8/14/2019 jurnal international cpm

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Case Study:Sony Electronics Customer Focus and ChanneCollaboration Result in Wal-Mart Supplier of the Year Award

Gartner RAS Core Research Note G00208395, Matthew Davis, Allen Johnson, 8 November 2010, R3537 12212011

Faced with a bleak economic outlook and an unstable demand

signal, Sony Electronics took aim at improving its demand-

sensing and demand-shaping capabilities. Segmenting its retailer

and end-user customer requirements highlighted the need tobetter manage store-level demand patterns. By collaborating

with its partners, Sony Electronics improved demand visibility,

which resulted in a better customer experience, improved

in-stock inventory, faster inventory turns and an uptick in

revenue.

Key Findings

A focus on the sell-through requirements to end users will benefit both end-user and

retail channel customers.

For consumer electronics manufacturers selling through retail, joint value creation with

channel partners is essential to sense and shape short-term demand.

Manufacturers can increase revenue, shorten inventory turns and improve forecast

accuracy by sensing demand through point-of-sale (POS) data from the retail channel.

Demand sensing and shaping are best enabled when housed in a process that integrates

demand, supply and product decision making.

Recommendations

Reach more advanced stages of collaborative planning, forecasting and replenishment

(CPFR) by extending the process externally to include key supply chain partners.

Use POS data at the store level to sense short-term demand patterns and differences indemographic, regional and individual store performance factors.

Shape demand by optimizing price, offering product bundles, adjusting assortments and

tailoring promotions at the store level.

Align metrics with partners and measure new factors, such as marginal profitability, to

establish joint value creation key performance indicators (KPIs).


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WHAT YOU NEED TO KNOW

The recession resulted in cost pressures from customers and

changes in purchase patterns that clouded Sony Electronics view

of demand. The company knew that better visibility to consumer-

buying behavior would help it thrive in a difficult environment. In

this case study, Gartner speaks with Margaret Kairis, director

of customer supply chain operations, Theresa Hill, director ofglobal supply chain, and C.J. Wehlage, vice president of supply

chain solutions, about Sony Electronics efforts to develop a

sell-through culture that maximizes the companys offering for

each customer. We follow this team as it segments customer

requirements, creates an analytical model based on store-level,

POS data to guide decision making and collaborates internally and

externally to execute new processes.

CASE STUDY

Introduction

When we asked why the company started on its journey toward

improved demand sensing and shaping, Mr. Wehlage said, Sony

Electronics took a systematic approach to better understand ourcustomers. We felt our end users werent fully engaged in the Sony

experience, and that if we could better understand their needs, we

could better support them. We also knew we had to improve our

already good relationships with retailers. I wanted to be able to tell

them that if you carry X inventory and take Y actions, we can have

a Z desired level of profitability.

To enable this vision, Sony Electronics had to focus on

collaboration, short-term demand sensing and store-level demand

shaping. The company used daily and weekly POS data to sense

and shape demand during the desire and purchase phases of its

product life cycles, resulting in increased revenue, faster inventory

turns, continued demand growth and ultimately being named a

Wal-Mart Supplier of the Year in 2009.

The Challenge

The recession forced Sony Electronics to challenge its standard

ways of doing business, driving the company to better sense

demand from its retailer and end-user customers. Both sets of

customers became more cost focused, and Sony Electronics knew

it had to find ways to best showcase its quality brand in these

market conditions.

To accomplish this goal, the company set out to answer four

questions:

How do we best support each customer at every purchase?

How do we optimize shelf space in a highly cost-competitive

economy?

Can we improve satisfaction, reduce stock-outs and increase

revenue simultaneously?

Are our customers fully engaged in the Sony experience?

On top of these outside challenges, Sony Electronics also

had to solve some internal factors. On the back end of a largereorganization, the company was several years into enhancements

to its planning processes. Although it was learning to be more

collaborative across functions, there was still a gap between

product management and supply chain.

Approach

Once Sony Electronics established the scope of the challenge, it

went through a process, over the course of 14 months, to design

and implement a solution (see Figure 1).

Although some of these actions took place simultaneously, a

culmination of all the steps resulted in the companys current CPFR

process.

Deepen Customer Knowledge and Segment

Requirements

Sony Electronics has two customers to consider: the retailer and

the end user. These two groups have shared and conflicting

demands. They may demand low costs, certain feature sets,

in-stock availability and selection, but the retailer may also require

precision delivery, vendor-managed inventory (VMI), unique labeling

or other logistics services. To solve this issue, the company

focused on the two groups needs independently.

It segmented the different channel-partner needs and started to

design supply chain solutions based on the resulting portfolio of

requirements. To maximize the benefits of Sony Electronics andretailers objectives, the company decided it would have to find a

way to best highlight its brand that would also improve in-stock

inventory and increase forecast accuracy, inventory turns and

revenue.

Matching the channel needs was Step 1. Now it needed to

understand how to best support end users. As Ms. Kairis stated,

We wanted to move from a sell-in culture to a sell-through

culture. To do that, we had to not only understand what customers

valued, but also how we performed against those measures. Sony

Electronics believed store-level, POS analytics would provide the

insights to solve the needs of the channel and better sense the

current environment for end users.

2010 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not bereproduced or distributed in any form without Gartners prior written permission. The information contained in this publication has been obtained from sourcesbelieved to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors,omissions or inadequacies in such information. This publication consists of the opinions of Gartners research organization and should not be construed asstatements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legalissues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and itsshareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartners Board of Directors may include seniormanagers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds ortheir managers. For further information on the independence and integrity of Gartner research, see Guiding Principles on Independence and Objectivity on itswebsite, http://www.gartner.com/technology/about/ombudsman/omb_guide2.jsp


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Align Internally

Sony Electronics aligned its KPIs directly to the goals of the

retailers and end users; this updated KPI view became the base

of its CPFR process. Even in the early phases of these efforts, the

company recognized it needed to connect its demand, supply

and product groups as well as its processes and planning groups.

Demand and supply were fairly well connected, but product wasnt

equally represented. Sony Electronics recognized that CPFR was aunifying forum for the three groups and the process convergence

for demand-sensing and demand-shaping activities. It worked to

integrate product organizations and processes with corresponding

supply chain activities.

Create the Historical Model

Ms. Kairis said, We knew that store-level analytics would help us

better understand demand. We also knew that our retailers werent

just going to give us daily POS data without [us] proving our

hypothesis. We decided to build a model off of historical data that

could show the potential improvement for key metrics.

The company chose i2 Technologies (now JDA) as the software

and service provider to build a model that would aggregate andanalyze all this data. Sony Electronics set targets for revenue,

inventory turns, sell-through and in-stock inventory. i2 applied these

targets to the model to show how Sony Electronics could have

moved inventory, changed pricing and promotions and/or adjusted

forecasts to meet those targets.

Proof Through Pilot

With a strong business case in hand, Sony Electronics approached

a few select retailers with a proposal to pilot the actions it had

tested. Ms. Kairis and Ms. Hill both stressed the way the company

approached retailers was the key to success. Ms. Kairis said, We

didnt want our partners to feel like we were putting them in the

corner. When we approached them, we made sure that our pilothad clear requirements and benefits for both groups...as well as the

ability to walk away.

Sony Electronics asked its partners for a five-week pilot, which

would stop at any point if the process wasnt working. The

company further narrowed the pilot by using data from the original

model to target a specific subset of stores, rather than every

available location. This went over well and so did the pilot. Less

than halfway through, retailers requested expansion to other stores.

Store-Level Analytics and Execution

The pilot showed that to better execute demand-sensing and

demand-shaping capabilities, Sony Electronics had to analyze data

and trends at the store level. The company again chose i2 as an

analytics service provider, given the success of the model it built.

Electronic data interchange (EDI) feeds were sent daily with store-

level sales data for Sony products. With this level of visibility, the

company could cut the data to identify trends at several levels,including across the entire product portfolio, by model and region

(with multiple layers), and at the individual store level.

Because the data came through daily and was reviewed weekly,

Sony Electronics could sense shifts faster and anticipate upcoming

trends. The store-level trends also highlighted unique differences

by location. For example, the company found that demographics

played a role in demand at the store level. It identified specific

locations where gaming systems sold very well, and then created

bundles around those products. The Sony Electronics team would

also work with the retail channel to see how its product was being

showcased on shelves, what promotions were active at the time

and how customers were responding. Based on factors like these,

the team would adjust its demand plan to best support each storeand the end users who shopped there.

Closed-Loop CPFR

Sony Electronics CPFR process continued to evolve as it

developed new capabilities and further collaborated with partners.

As the pilot ended and the company moved to sustainment, the

weekly process flowed as shown in Figure 2.

Sony Electronics developed a multistep, weekly CPFR process in

which partners were highly integrated in data collection, exceptions

review and demand planning. The process was cyclical to closely

monitor the actions taken and their results.

The company continues to evolve this process as it learns. Itidentified key partnerships and looked for opportunities to integrate

them into the process. As Ms. Kairis said, Before this initiative,

we included supplier information in our CPFR process, but it

was not as broad. That said, we also recognize that not every

supplier needs to be in a weekly CPFR. We will continue to use

segmentation of requirements to identify the right balance of

support.

Figure 1. Workflow

Source: Gartner (November 2010)

Analyze

Customer

Needs

Segment

Customer

Requirements

Align

Internally

Create the

Historical

Model

Pilot at Select

Stores

Continually

Refine CPFR

Process

Expand for

Total Network

Orchestration

Sonys here


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Results

The most visible result of Sony Electronics efforts was being

named a Wal-Mart Supplier of the Year in 2009. The entire team

stated that its selection was a direct result of aligning Sony

Electronics objectives to Wal-Marts KPIs.

The following benefits were shared between Sony Electronics and

its partners:

Double-digit improvement to forecast accuracy

Improved in-stocks by 10% to 15% at the model level

Improved revenue attainment to plan

Optimized and reduced weeks of supply

As we discussed results, Mr. Wehlage quickly chimed in:

Collaboration in itself was a huge win for us. Its not the easiest

task to accomplish, especially when your core focus areas may

be conflicting. In this case, we were able to prove our hypothesis

through a pilot, and that helped build momentum.

Figure 2. Data and Process Flow

Source: Gartner (November 2010)

CPFR Process

Retail Channel

Data Collection and Analytics

KPI

Exceptions

Review

Updated

ForecastCreate CPFR Dashboard:

1. Clean and organize data

2. Overlay Sony plan of record3. Identify exceptions

4. Capture store-level differences

Store-Level Actions:

Shelf assortments

Promos/pricing

Bundling

Daily, Store-Level

POS Data

Store-Level

Actions

Channel Collaboration:

Identify key channel partners Store-level details:

Demographics

Regional differences

Assortment In-store displays

Week

ly

Participa

tion

Critical Success Factors

The team said that collaboration, the ability to walk away and

executive support were critical to Sony Electronics success.

Collaboration Collaboration with partners was clearly the

most influential factor in Sony Electronics success. When asked

about Wal-Mart specifically, Ms. Hill said, We had already had a

strong relationship, but it was not as integrated as it is today. Our

collaboration was heavily focused on supply chain capabilities

and not as much on the product side. The store-level analytics

highlighted that a better understanding of the products and

their consumption in specific locations would lead to better

planning and supportability. From Sony Electronics perspective,

collaboration helped everyone win in the process. As Ms. Hill

said, Sometimes I feel like were operating like one company.

We can walk away Both Ms. Kairis and Ms. Hill said they

repeated this phrase internally and externally before starting

the pilot and at several points during the journey. It seems like

a simple concept, but its more difficult to follow in practice.

This philosophy forced Sony Electronics to proactively identify

objectives and continue to show value toward those targets.

As the CPFR process matured, the show value or walk away

philosophy evolved into a continuous improvement mind-set.


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Executive support and communication Executive support

of this effort came in many forms. Ms. Kairis said, It felt like

our executives had a vested interest in our progress throughout

the journey. They provided resources, directly communicated

updates throughout Sony Electronics and helped formalize

the process by directly participating in our forums. In addition

to the strong messaging from executives, the team said that

communication at every level and across functions was alsocritical to success.

Lessons Learned

The team said the entire journey was a learning process, but as

Gartner reviewed its approach and the results, three key lessons

stood out:

Manage the brand, not just the products. Visibility to store-

level demand patterns puts a spotlight on the fact that end

users may not be fully engaged with Sony Electronics as a

brand. According to Mr. Wehlage, The demand patterns

were different enough at the store level that we realized end

users were viewing our brand on a product-by-product basis.We saw an opportunity to include Sony in a larger portion of

their purchase decisions by bundling products and cross-

merchandising. We also had to shift assortments based on

store-level demand. It was a big change for our supply chain

organization, which was used to managing each product

individually. We had to take a brand-level view as well.

Collaborative planning, forecasting and

replenishment (CPFR)

The business practice that combines the collaborative intelligence of multiple trading partners in the

planning and fulfillment of customer demand. CPFR links sales and marketing best practices, such as

category management, to supply chain planning and execution processes to increase availability, while

reducing inventory, transportation and logistics costs.

Demand management The use of data from market and channel sources to sense, forecast and shape demand as well as

translate demand requirements into actionable plans for supply. The flexibility to apply constraints

necessitated by supply constraints or managerial overrides to support business trade-offs is indicative of

the most effective demand management processes.

Demand forecasting An unconstrained view or best estimate of market demand, primarily based on enterprise-centric historical

sales, shipment and order information.

Demand shaping Using programs, including price, new product launch, trade and sales incentives, promotions, and

marketing programs, to impact what and how much customers buy.

Demand sensing Using customer and channel data to identify demand trends. Traditional sources have yielded structured

data, but unstructured sources, such as weather patterns and chatter on the social Web, are increasingly

important sources of insight.

Supply response The conversion of channel requirements into supply plans based on operational goals and constraints.

Acronym Key and Glossary Terms

Fix yourself first, and then tweak along the way. The

company focused on internal processes first, which helped align

the organization as it integrated partners. Internal and external

participants were consistently encouraged to bring new ideas

and ways to continuously improve the process. As Ms. Hill

stated, We stressed that nothing was final. We were truly in

a mode of continuous improvement. By keeping the process

flexible as it developed, the team was able to rapidly implementnew capabilities and integrate signals from the POS data. Ms.

Hill and Ms. Kairis both echoed that this openness led to better

collaboration with partners. We operate as a trusted chain,

internally and externally. Its a continued effort that we continue

to evolve to improve business overall, said Ms. Kairis.

Visibility can lead to orchestration. When asked whats next

for Sony Electronics, Mr. Wehlage answered without hesitation:

Expand. Where it will add value, we will continue to integrate

other suppliers and partners to create even more visibility

across our network. Collaboration internally and externally

is a big win for us, and now we will focus on orchestrating

our environment. Visibility is essential for that capability. Mr.Wehlage added that Sony Electronics is improving its ability to

maximize profitability, and that the companys new capabilities

and brand focus are steps in the right direction.

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