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Improved conversion rates from 51% to 60% and brought inventory costs down by a third ‘With my training and experience, I can add value to the company wherever I go. These subjects of strategic planning and decision making have been extremely useful to me and have enabled me to give a different kind of value-add to the company.’
Michael Tan ACMA Supply Chain Operations Director Agilent Technologies, Malaysia Through his ‘War on Waste’ initiative, Michael Tan, Supply Chain Operations Director at measurement equipment manufacturing company Agilent, delivered significant enhancements to his employer’s inventory management, manufacturing cycles, delivery times and overall return on investment capital. Between 2006 and 2009, Tan helped to improve efficiency in Agilent’s supply chain which resulted in a 43% reduction in the manufacturing cycle and a reduction in inventory of $44 million. The percentage of Agilent products delivered to customers within three weeks rose from 57% to 70%. Formerly part of Hewlett-Packard, Agilent’s electronic measurement devices are bought by international names such as Samsung, Nokia, GlaxoSmithKline, Cisco, Hitachi and Motorola. Its diverse product portfolio serves market sectors including communications, pharmaceuticals, life sciences and electronics. The ‘WoW’ initiative was a response to increasing competitive and internal pressures, says Tan. Agilent’s customers required shorter lead times and keener pricing, and the company wanted a more streamlined operation poised for growth.
Having established that for the last quarter of 2006, order fulfilment lead times stood at 19 days, inventory was $123 million and the order to shipment delivery rate was 51%, Tan delved into processes at Agilent and also up and down the supply chain to drive out inefficiencies. Key strategies included implementing a Lean Six Sigma culture throughout the workforce, re-engineering process flows, improving yields and collaborating with suppliers and customers on planning, forecasting and replenishment. The measures led to greater responsiveness: a decrease in order fulfilment lead times from 19 days to eight. The $123 million inventory fell to $79 million over the three year period and the order to shipment conversion rate rose from 51% to 60%, significantly improving return on investment capital. ‘WoW’ has also garnered industry recognition including an award for Supply Chain Operational Excellence from the US Supply Chain Council.
CIMA value: Agilent Manufacturing cycle: down by 43% Percentage of products delivered in three weeks: 70% (up from 57%) Inventory cost: down by a third ($44million) T. +44 (0)20 8849 2251 E. cima.contact@cimaglobal.com www.cimaglobal.com