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Chapter 6 Supply chain management
This option was considered carefully, says Mr Bain. The company, however, decided to keep its existing
technology. This allowed it to focus its resources on improving connections between the supply chain sys‑
tems in North America, Europe and Asia, and critically, improving business processes.
This freed resources for investment in e‑commerce and front‑ office systems, including a three‑ year pro‑
ject to install a Siebel‑ based customer relationship management system.
Forty per cent of European orders are now online and Mr Bain expects this to rise to 50%. In the US, all
orders, save those placed by new customers, are handled without manual intervention.
‘We did a review of our order processes, looking at the level of interconnectivity between our systems and
our ability to transfer data,’ says Mr Bain.
‘We looked at the processes end to end. We used quality techniques to identify the gaps that created the
greatest opportunity for error. It was not just about the cycle time [the time from taking an order to shipment]
but the quality of the orders.’
As a result, Premier Farnell decided to maintain its existing supply chain management system, but
improve the links between its parts, as well as its capacity.
‘We looked at our supply chains holistically and identified the areas where we needed the systems to
interface and talk to each other,’ explains Mr Bain. ‘Our supply chain group specified the enhancements
needed to interface the systems and ensure data completeness.’
The task of updating the system fell to Premier Farnell’s 200‑ strong in‑house IT team. The project had
to be managed in a way that ensured the supply chain targets were met, but without drawing too many
resources away from the company’s Siebel deployment or its expanding e‑commerce operations.
‘We have a fairly strong governance designed to ensure business strategy translates into IT priorities,’
Mr Bain points out. ‘We have an IT leadership group that meets quarterly to assess the evolution of that strat‑
egy and a global IT leadership group that signs off IT projects.’
This way, Premier Farnell has ensured customers can see orders placed across all channels, including the
web, phone or, in the US, a branch, when they log in to their online accounts.
‘We have to be able to capture all transactions,’ says Mr Bain. ‘You have to take the customer with you.
For us, all roads lead to IT: we are a high‑ volume, high‑ service distributor dealing in massive numbers of
transactions on a daily basis.
‘The traffic on our website is growing strongly and we rely on IT to manage these transactions effectively
and on a real‑ time basis.’
Premier Farnell also likes to differentiate itself by its speed in bringing new products to market.
The company recently added 55,000 products to its catalogue. These need to appear simultaneously in
its ordering and back‑ office systems, as well as in the supply chain system so orders reach suppliers on time.
Other material, such as specifications and product data sheets, also have to be loaded before a new
product is sold.
As well as the flexibility to handle new products, Premier Farnell relies on its supply chain management
system to monitor key aspects of performance. ‘In terms of the supply chain, the key metric is our distribution
performance,’ says Mr Bain.
‘We compare it, and have targets, for each facility. We look at the cost of processing an order, the effi‑
ciency of goods in and out, and service measures.’ Head office collates the data monthly, but operations
managers in each distribution facility monitor the figures daily.
The result has been a tough set of targets for engineers tasked with updating a supply chain management
system that many less prudent – or less confident – companies might have replaced.
But for Premier Farnell, the combination of clear objectives, a capable in‑house team of developers and
the lower risks of updating rather than replacing made it the most effective choice.
‘Our overall services were good but not as good as they are now. We were confident we could enhance
our systems and improve our processes,’ says Mr Bain.
‘We were comfortable we had the capacity. We had to invest, but it cost a lot less than replacing the
back‑ office system, and that allowed us to prioritise our investments in CRM and our web channels.’
Source: Did IT work? Service was paramount when enhancing supply chain. Stephen Pritchard, The Financial Times, 30 January 2008.
Reprinted with permission.
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Part 2 Strategy and applications
Much of the excitement generated by the digital business concept concerns the benefits
that companies can achieve through increasing the efficiency of the whole supply chain.
Companies such as Argos (Case Study 6.2), which have enthusiastically embraced technol‑
ogy to manage the supply chain, have been reaping the benefits for many years.
Digital business also potentially makes it easier to set up supply chains, as Mini case
study 6.2 on the Pebble watch launch shows.
Mini- case study 6.2
The Pebble watch gives an example both of the power of what has been called crowdfunding and the
challenges of creating a new product and setting up the supply chain. Pebble is a ‘smartwatch’ that uses
Bluetooth to communicate with a mobile phone, enabling calls, messages and notifications from apps to
be displayed on its high‑ resolution e‑ink display. Two‑ way communication is also possible, so for example,
music played on the phone can be started and stopped. This watch was developed by just five engineers for
five years and financed by crowdfunding.
Figure 6.1 shows how Pebble appealed to its backers through Kickstarter. Each paid between $99 and
$150 to receive the watch when shipping started; 68,000 backers raised over $10 million in a period of a
Pebble watch launched without existing supply chain
Figure 6.1
The initial funding of the Pebble watch on Kickstarter
Source: www.kickstarter.com, Kickstarter, Inc. and Pebble 2014.
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