The 3Pe’s in Action:

A Case Study on net.com’s implementation of Valdero

Supply Chain managers in the past have focused mostly on grappling with feeding the manufacturing process and pushing inventories out the door. But today’s Virtual supply chains call for another kind of approach, broadening the responsibilities of supply chain managers to not only manage the dynamics of extended processes across a broad set of trading partners, but also to become more proactive business partners with executive management and sales.

And in today’s economy, this broader perspective is also exacerbated by the challenges of managing a business grappling with significant torturous changes in the market. net.com is a great example of such an environment. And it is exciting to see how supply chain projects (implementing and transforming the supply chain processes and technology) can help enable significant improvements in business performance. And deft process transformation is not just for the Fortune 100 super rich enterprises.

ChainLink met with net.com to discuss their recent Valdero^[1] implementation and process transformation. We spoke with Jeff Range, Vice President of Operations at net.com about the changes to their supply chain organization and the implementation of a network supply chain solution from Valdero. This project exemplifies the 3Pe^[2] balance. You have to deal with all the issues in order to have a successful outcome!

Background
net.com is a publicly traded Telco equipment manufacturer founded in 1983 as Network Equipment Technologies. They were founded to, and rapidly became, as Jeff told us, the darling of Wall Street. The company rapidly established its leadership in multi-service networking. net.com’s leading-edge technologies enable its customers to build secure, private T1 networks for the transport of voice, video, and data traffic^[3]. In the 1980’s, equipment was sold directly to the Fortune 1,000 IT managers. In the nineties, there were significant changes in the telecom industry, with the carriers (the so-called baby bells) providing services to these same companies. net.com had to change their focus (markets and equipment) to appeal to the carriers, finding themselves competing with the likes of Cisco. Talk about a challenge! They had to support two fundamental product lines—for end-users and for the carriers.
Then the .com market collapsed, sending the whole industry into a tailspin. net.com brought in a new CEO, Burt White, to manage the turnaround. net.com and their brethren have had to do significant right sizing just to stay in the game. Then came 9/11. Turns out, net.com had products needed by the government, and they have experienced a significant upturn in demand. $ Revenue 2002 was under $200M. Product lines now have more complexity and the challenges of a highly demanding customer. net.com has a base of more than 1,750 customers in more than 75 countries. That’s a lot of supply chain complexity for one mid-size firm to handle! Into this environment, Jeff Range arrived from the Virginia facility of Newbridge Networks, where he acquired a British accent, and is now Vice President of Operations for net.com.

ChainLink: So, Jeff, tell us about the challenges you are facing and the business changes.

Jeff: “The challenge for net.com is to manage the upswing! Compounding product lines and products, customers with special requirements, multi-channel needs and supply stretched across a trading network, including contract manufacturing. Doing business with the DoD can be a balancing act. Once a firm accepts an order from the government, their orders take precedence over other orders in the queue. But of course, net.com wants to meet all customer demand—maximizing revenue and margins—if possible. net.com brought in Valdero to help.”

ChainLink: Sounds like a great opportunity for a Project.

Jeff: “Our goal was to maximize our potential. We had to focus on process change and get more involved in sales.”

net.com’s policy, process and performance-transformation includes:

• Collaboration with sales on demand signals to understand and rationalize sales. Engage with sales in understanding the customer, and the network that the customer will rollout in their markets.
• Baseline the business over the short and medium turn and understand upside (and downside) potential to understand how to maximize upside and mitigate downside.
• Determine the kind of rules to support customer allocations based on complete sets of business requirements, priorities etc.
• Jeff commented that MRP type logic is not fit for these kinds of environments, “allocating backlog based on our rules, managing upside opportunities to maximize revenue and value and to migrate risks”.
  In order to implement Valdero’s solution, we had to engage the sales and forecasting team to understand process, data etc. We had very senior involvement right from the beginning to set goals and objectives, seeing an outcome that would truly let us manage the business. So, first understand the process, then build and automate it!

ChainLink: So, Jeff tells us about Valdero’s role at net.com:

Jeff: “The technologies had to support the process. Valdero products translated well to our needs.

We did not care for a long-winded project. After three months, the new system was good to go. Results have been excellent with significant improvements in customer service. The Valdero team more than met our expectations bringing a team with deep business experience.”

“In the past, we managed commits based on a twenty day lead time. Now we can create a rapid promise, which is based on allocation rules for each customer as well as best approaches to managing the whole business, in order to maximize revenues and margins.

We have made significant process changes with this technology:

• We now have weekly meetings with sales, to understand and deal with demand variability and to support sales opportunist.
• We can review and revise our allocations as needed—as demands and supply fluctuate.
• Reengineer our process with contract manufacturing to share our demand with our contract manufacturers.
• Now we can see the whole supply chain.

ChainLink: What about integration. We hear so much about the difficulties of integrating?

Jeff: “Integration is critical, but the difficulty is overrated. This project actually served as a catalyst to clean up the data that we had in Oracle that is required to drive the extended supply chain.”

ChainLink: So, Jeff, what’s next?

Jeff: “A phase II is planned with Valdero to use their multi-tier supply visibility to provide a view into the contract manufacturer so that net.com can execute, knowing WIP, procurement, and inventory exposure. Valdero has already implemented these capabilities with other telecom manufacturers, so net.com should be able to build on the expertise and successes they have had with others.”

ChainLink: Jeff, can you share some Wisdom for our readers?

	Jeff Range on Supply Chain Project Success:
	Understand the big picture. You must have a vision. Must have the ‘rules’ to managing the mid and shorter priorities of the whole business. All employees must understand what it takes to support the customer. And they need content and information to do that. Training is key—both on the systems and the process. Any contract manufacturer is only as good as the people you have in their plant supporting you. So you need to manage the process links, regardless of the outsourcing relationship and contract. Most contract manufacturing processes are designed for the larger manufacturer—but managing complex configurable product lines are a different kettle of fish. You need new processes and technologies to manage in this environment and protect your interests [4]. Don’t be a slave to the MRP calculator! You have to run a business. There are new approaches that are entering in the business world that need to be explored and employed. [4]  This is a big issue ChainLink has observed over and over with OEM’s who outsource.

Contact: Jeff Range, VP of Operations at net.com, at 510-574-3600
or at .

[1] Valdero, Palo Alto, CA

[2] 3Pe - Policy, Process, Performance and Enablers

[3] Its technology assets include numerous U.S. patents in voice, ATM, and IP developments, plus currently exclusive rights to Cisco IOS source code.

©2003 ChainLink Research, Inc.