How TELUS Saved $100 Million in Supply Chain Costs
As one of the leading Canadian telecommunications providers, TELUS Communications saw that it was operating in an environment of intense competition, aggressive growth and increasing pressure to reduce operating costs. They recognized there was an opportunity to optimize the end-to-end supply chain in order to achieve significant benefits. To that end, TELUS engaged KPMG Consulting as its strategic partner and established a project with five critical streams designed to apply web technology to its supply chain.
The TELUS-KPMG Consulting team enabled over $100 million in supply chain savings in an eight-month period as a result of a successful execution strategy.
Why TELUS was Successful in Saving $100 Million
The key was to apply a pilot driven approach to the process. Together they crafted a strategy that employed the use of benefit driven pilots to prove concepts that could then be rolled out company-wide. Jan Bowland, the KPMG Consulting managing director responsible for the engagement, explains: “The pilots were selected based on their ability to deliver tangible benefits both as a pilot and as practice when rolled out across TELUS. This allowed the team to begin taking costs out of the Demand Chain immediately while building a strong foundation to continue driving down costs in a sustainable manner.”
The ambitious project had multiple pilots occurring simultaneously. According to Brett Holt, director of Web Process Transformation and the TELUS project manager: “There were critical management disciplines that led to success. We rewarded only execution and results. It was okay if mistakes occurred as long as measurable progress was being made. Lack of action was not tolerated. We ignored organizational noise such as, ‘it can’t be done’ or ‘we tried that before,’ and just stuck to our plans. We challenged the prevailing thinking within the organization and made strides to move the TELUS culture forward. We had a strong change management and communications program in place.”
Bob Reczka, vice president responsible for the TELUS Web Enabling Program, explains: “The greatest challenge has been to understand and drive cultural change. Understanding the culture and adopting a rapid deployment mindset has been a significant task. Once people were on-board and had overcome fear that the program may impact their job, support was strong. A second area of substantial challenge was navigating the waters related to collective agreements and the impacts of change to traditional processes and work. With the unions as partners, we continually worked to engage the bargaining units and minimize impacts to individuals.”
The support and endorsement from the executive level at TELUS gave credibility to the project. “One of the fundamental requirements for the project was support from the executive team,” says Bob Reczka. “To that end, the full executive team participates monthly to remove barriers to rapid execution. Further, two executive sponsors, as well as other vice presidents, participate on a biweekly basis to steer the project and provide immediate actions on issues.”
e.Business – Working with Logistics
This project combined traditional approaches to optimizing supply chains with a number of innovative concepts afforded by web technology. Bob Reczka and Donna O’Neill, vice president of Logistics operation for TELUS, saw the opportunities. They realized that by working together they could achieve significant savings for the company. According to Reczka, “the major driver for launching the e.Demand Chain project was twofold. Firstly, TELUS saw the opportunity to use web-based technologies to improve processes between TELUS and its major partners and suppliers. Given the large volume of business TELUS conducts with these organizations, substantial efficiencies were possible. Secondly, we saw significant opportunity to drive costs out of the supply chain to improve overall business performance.”
End-to-End Demand Chain and Cost Savings
Developing a business case to support this initiative, Reczka engaged KPMG Consulting to conduct an assessment of their supply chain. The results confirmed that there were significant savings to be achieved. From the assessment, the e.Demand Chain Optimization Project was born and with that the close partnership with KPMG Consulting. Stephen Spooner, managing director of KPMG Consulting responsible for the TELUS account says: “We were pleased to strengthen our partnership with TELUS by helping drive costs out of the TELUS end-to-end demand chain. TELUS and KPMG Consulting team members worked collaboratively to produce a highly successful result.”
The e.Demand Chain Optimization Project went beyond traditional supply chain operations to look at the process flow from suppliers through to customers. The approach focused on the rapid implementation of various pilot projects.
Implementing the Pilots and the Roll-Out
Working with five internal project managers, Brett Holt structured the project into work streams that focused on specific components of the demand chain:
• Collaborative Forecasting with Suppliers – The project focused on two innovative pilots involving collaboration between TELUS and its suppliers/retailers to provide more accurate product demand forecasts. The first pilot involved the Mobility Business unit. Suppliers and retailers worked with TELUS staff to agree on forecasts for cellular telephones. They used Prescient Solutions software to provide access to information for all parties via the Internet. The second pilot employed the same software to help engineers in the Technology and Operations business unit agree on demand for routers. Both pilots enabled TELUS to reduce inventory holdings for those products.
• Procurement to Payment – This stream looked at the process related to the purchase and payment of goods. There were two key initiatives in the stream. Firstly, there was a strategic sourcing initiative that focused on consolidating contracts and buying power. The second initiative automated the advance shipment notice and receiving process to enable early payment of invoices. This allowed TELUS to obtain early payment discounts in a reliable and sustainable manner.
• TELUS e.Buy – This project enabled the electronic procurement of goods. Using Ariba Buyer software and the Ariba commerce services network gave TELUS a business-to-business connection with its suppliers and consolidated its spend-to-specific vendors. This reduced maverick buying and enabled volume discounts. The software gave TELUS critical visibility into its supply chain and enabled the Service Express pilot (as described below) by allowing easy on-line ordering of materials.
• Inventory and Warehousing – This project examined both traditional and innovative ways to reduce the levels of inventory holdings. One component was to remove obsolete and slow moving inventory from TELUS’ largest warehouse. The team explored the use of enabled replenishment concepts. They put in place auto PO functionality using SAP, worked with the collaborative forecasting team to enable auto replenishment through Prescient, and initiated the use of vendor managed inventory processes with a key supplier. They also initiated the Service Express pilot which used the e.Buy solution to order minor materials on-line. The materials would be shipped overnight direct to craftsmen in the field.
• e.Fulfillment – This component focused on the customer-facing side of the organization. Its goal was to automate customer interfaces and ensure a direct flow in provisioning to the back end. The first pilot involved the use of EDI transfers to receive orders from a TELUS retailer. The second tackled the automation of the contracting process for business customers. Next came the automation of changes to residential services through the TELUS e.Store. And lastly, a study was conducted regarding the distribution of goods within TELUS. A recommendation was made to incorporate an optimal network for the movement of these goods.
Changing Process and Technology Through Pilots
Not only were $100 million in savings realized by the company, but the exercise itself proved invaluable to the members of the project team. They learned it was vital to ensure that the scope of the project, deliverables and accountabilities were clearly defined. They had to create a balance between crafting the larger corporate picture, and the actual execution of the plan in managed stages. “We learned that you must engage the business units early and often. Even though we had strong executive commitment, this commitment had to be communicated often and widely,” explains Brett Holt. “Even though we considered ourselves ruthless in this regard, we still found ourselves getting bogged down in process or protocol. We also learned that it helps to generate benefits early to gain momentum. Once the benefits started to hit the table, our teams just took off.”
While great progress has been made, the work is far from over. The e.Demand Chain Optimization team is currently planning the next phase of work. Their goal is to deliver the same measurable benefits achieved in the first phase while ensuring that the foundation for change remains strong.
Louise Wilson is a Senior Manager with KPMG Consulting.
She was the KPMG Consulting Project Manager for the TELUS e.Demand Chain Optimization Project.