Parallax View : New Lines of Insight

Roy Perry
Corporate Vice President of Global Supply Chain Management
StorageTek

By Bill McBeath

Roy Perry is a miner. He quickly spots improvement opportunities and knows how to mine for gold. He has a knack for unearthing the gems—those employees within the organization who have the knowledge and the conviction to rapidly transform their company, even if they are working at different levels of the company. Since taking over StorageTek's operations two years ago, Roy has overseen some impressive improvements in performance: cutting inventory levels in half, increasing turns from 2.8 to 7.3, and releasing cash in excess of 120 million dollars. (See last month's case study on StorageTek for more details).

I had the privilege of visiting with Roy recently and was struck by his unique blend of warmth and humanity combined with an intense, uncompromising approach to improving performance. He always puts people first and sees the value of relationships, yet he doesn’t accept mediocrity or complacency. We can learn a lot from Roy's humility, his ability to soak in the lessons of life, and his determination to apply them at each stage of the journey to improve himself and those around him.

ChainLink – What in your career and in your life enabled you to accomplish the things you did when you came to StorageTek?

Roy Perry – Growing up as an African-American in the 60's, society expected very little of me. But my mother, father, people in the church, my teachers and other people I respected said I could do anything I wanted, and more. Their encouragement and words stuck with me.

As I progressed through my career, I learned some valuable lessons. At IBM, I learned from people like Dick Garino, Bob Corrigan, Abe Clay and Thomas Thigpen. I was taught to hire the best people, give them the best training, the best opportunities, and get out of their way. At Allied Signal when I was VP of the Commercial Avionics Systems Operations Group, Larry Bossidy, Dan Burnham and Chuck Miller would ask me each quarter "Did you meet your numbers?" If you made your numbers, your review with Larry was kept short. I learned from them that you keep your commitments and make your numbers.

At Dell, I worked with the Dell Senior Leadership team often. They taught me that it was all about velocity, not only for the process of moving parts and equipment, but speed to make a decision. ‘Get enough data, make a decision, get it done,’ was Dell’s trademark. I am able to do that. I remember that I was asked to develop a plan in a few days to open a new plant in Nashville the next quarter. We worked night and day, presented our plan, and more importantly, we executed the plan and brought that plant up in 62 days.

ChainLink – Great story. Our CEO, Ann Grackin, coined the phrase "Return on Decision." The time spent analyzing a decision to death delays benefits. Velocity in decision-making and execution—you lived it when you brought up that plant in Nashville.

Roy Perry – A core team of twenty-four people opened the plant in record time. Facilities and real estate worked 24 hours a day. HR hired and trained around the clock. That factory was built and was shipping products 62 days from the start of construction. The lines were up before the construction was completed; therefore everyone had to wear hard hats. That was a great experience; it is still a record at Dell. If I had to do that again, I would look for the same skills and qualities found in those 24 people. It's all about the people.

ChainLink - When you came to StorageTek, what did you find and what did you do with it?

Roy Perry – I saw an excess of parts, idle machines, more employees outside the building than inside. I saw lots of opportunity. StorageTek had transformed quality in the disk drive business a few years back, but former senior leadership let that slip away. The employees below middle management never lost those skills. They were extremely intelligent, well read, and they knew all the new techniques and processes. Once I realized I had all this talent, it was relatively easy to fix. Get the barriers out of their way and they will make it happen.

Let me tell you a story about Jeff Begalle. He was reading books on lean [manufacturing] and getting excited about it, even though the company wasn't practicing lean. I started asking him tough questions. He would do some research and come back with the answers. I knew, ‘he was going to be my lean leader’.

ChainLink – What was your overall strategy for transforming StorageTek to realize the opportunity that you saw?

Roy Perry – Eliminate waste. We had waste in capacity, low yields, too much rework, and waste in inventory. We had finished goods everywhere, and we had a lot more capacity than we needed.

I outsourced card manufacturing to a supplier who had the volume and scale to provide a lower price and higher quality than our existing card shop in Puerto Rico. Then we transferred the Colorado manufacturing operation to Puerto Rico, since we now had extra space in Puerto Rico.

The employees in Louisville were excited. They knew this needed to be done. They developed a plan and executed it. The barrier was really the comfort level of middle management, accepting things the way they were. Reducing inventory on critical products…that took a bit more courage than the managers at the time were willing to put on the table.

ChainLink – Why did you decide to move to VMI?

Roy Perry – To make the largest impact on the use of cash, we first had to attack gross inventory levels. Jeff Begalle’s lean team was challenged to get WIP levels down. They were actually putting parts back into the warehouse just to get space on the plant floor. We needed to manage the in-flows and get controls on the parts coming into the business before we could do much about WIP, finished goods stock, and field stock.

ChainLink – I hear StorageTek talk about win-win VMI. I did a large research project on VMI in high tech and almost every supplier told me they hated VMI. I've never heard a supplier call it win-win.

Roy Perry – We're not that large that we can force a supplier to "take it or leave it." I have to show my suppliers what the advantages are to them. Our "hockey stick" demand curve [50% of StorageTek's orders are shipped in the last two weeks of the quarter] without visibility was really tough on our suppliers. In the past, we would purchase six months of parts at a time and never talk to them again until we'd have one day of parts left. Then we'd say, "quick, quick, you have to give me four weeks worth of parts." The supplier is thinking, "Where have you been for the last six months?"

So, the visibility we provide to our suppliers makes their lives a lot easier. For them being able to see our pull rates is the best thing that could have happened. At our recent supplier conference, Volex and others stood up and said how well this worked for them.

ChainLink –You’re right, traditionally VMI has been all about power. If you're a Dell or an HP, you just tell your suppliers, "You're going to do this. If you don't, we'll get someone else." Manufacturers who don't have that power position need to make it palatable for the supplier. Even Dell and HP have to take cost out of the supply chain or it is going to come back to them one way or another. There is no free ride here.

Roy Perry – Exactly. Sure, you can always go to the next supplier, but we want that win-win relationship. At the end of the day, the one making the decision to run their line two extra hours to get you the extra parts is another person. It's real easy for them to say, "It's not in our contract. We've met your forecast. We're going home." But if they know you, they say, "Bill's a good guy. He needs 50 more parts. Can you work two more hours today folks? Lets do it for Bill." It's all about the people and the relationships.

ChainLink – What major benefits have you seen from freeing up cash?

Roy Perry – We just hand all that extra cash over to Bobby Kocol, our CFO [laughs]. Our improved cash position gives us the flexibility to consider acquisitions and other opportunities to grow revenue.

In this area, what drives us is improving working capital. That's our challenge. We're closing the gap. We want to go beyond the storage industry numbers and set new benchmarks.

ChainLink – Where do you see things going next for StorageTek?

Roy Perry – How can we service customers faster? How can every order ship in two days or less? How low can we get the inventory? How high can our turns get? How can we deliver to customers the same way everywhere in the world? These are the things that the Global Supply Chain is reviewing.

I asked Randy Schneider, Senior Director of World Wide Logistics, how can we get products to Eastern Europe two days from receipt of the order. Randy responds to me and says, "it takes three days to get it out of Amsterdam." I responded, " but that’s not the question." So, we started working on it. We looked at the pipeline, the salesperson's conversion rate, and the customer's buying history. If we've done the site survey, responded to the RFP and now are negotiating price, we can make a calculated decision to build the order and put it in our Toulouse, France facility. When the order closes, we do final configuration and ship it.

We hosted our first e-auction recently and saw significant savings. We'll move quickly on more e-auctions for some of our commodity parts. Beyond that, we're talking about in-transit merge or cross-dock merge. Other parts of our team are reviewing ways to increase our customers’ leverage of their IT resources and data center management. We have a few more challenges. We are not done.

ChainLink – Storage hardware is becoming more and more of a commodity. You mentioned StorageTek managing data centers. That is a transformation of StorageTek from hardware to total solution provider. It seems that part of your job is putting in place the supply chain capabilities to support that transformation.

Roy Perry – Exactly. If we're going to manage cross vendor gear in the customer's data center, I need access to cross vendor service network or need to stock those parts myself. For my logistics team, that's the big challenge. We view management as managing cross platforms, cross vendors, performing remote based management by utilizing intelligent tools. This management capability is designed to provide customers with increased up time in a cost effective manner.

My black belts and green belts are taking their lessons learned from operations out to the other parts of the business—finance, legal, and HR—and out to our supplier base. We map all the processes and discuss potential improvements with the process owners. Projects on the top of the list get black belts and IT resources. We're constantly looking for ways to make the processes better, get to market faster than the next guy, and continue to make StorageTek the best in the industry.

ChainLink – Thank you so much for your time.

Roy Perry – Glad to do it. I've learned a lot from the people I've had a chance to work with throughout my career. I have a great team here at StorageTek—people who understand what we are trying to do and are committed to getting the job done.