Sony Canada launches new high velocity supply chain
Information replaces inventory
Sony’s consumer electronics marketing, sales and distribution division in Canada had a clear mission: improve its supply chain management capabilities to reduce inventory and increase product velocity, in a cost-effective way.
It also had a vision of how to achieve this: use its existing SAP software system, data and processes to bring in a new and sophisticated supply chain management approach. What it needed was help to make it happen quickly and successfully.
So Sony turned to Deloitte’s experienced consulting practice for technical expertise in supply chain management, SAP software and its skill in managing complex projects. The team was led by consulting partners Ron Factor and Marcus Hill.
Excess inventory is a significant issue for Sony, explains Stephen Brown, a Toronto-based senior manager, because inventory is so expensive in consumer electronics. “Inventory ties up a lot of working capital, if that inventory is older it tends to move more slowly and block the introduction of newer, hotter items. Just-in-time inventory “Sony wanted to replace inventory with information,” says Brown. The traditional approach is to load inventory into the retail channel to minimize the chance of lost sales. In the new model, information and statistics are leveraged to accurately forecast demand prior to placing the inventory into the retail channel. By scientifically forecasting what products are going to sell in what locations at what point in time, a company like Sony can move to more of a just-in-time inventory approach instead of a just-in-case inventory one. It means less inventory overall and higher velocity inventory throughout the supply chain.
Technical, business and practical support Sony required comprehensive support to implement this project. Deloitte provided its technical know-how to configure the SAP APO system, integrate it, test it, and roll it out. From a business perspective, the Deloitte team provided process design, training, change management and communication support to Sony. And it worked with staff at Sony and its retailers to answer practical questions about the business process:
Throughout the project the Deloitte team leveraged the combined capabilities of the firm to bring services and expertise to Sony in a number of areas, including enterprise risk services, EDI technology, vendor managed inventory strategy and executive alignment. Better forecasts, less inventory, major savings Sony conducted a manual pilot test of the new concepts while helping to implement the project. The test results exceeded expectations in all areas including inventory levels and turns, revenue and margin improvements and customer service level improvements.
Sony is now implementing the new system throughout Canada and expects the pilot results to be replicated across the country. Said Brown: “It was a leading edge project for a leading edge company using leading edge technology.”