To survive and thrive in today’s hypercompetitive consumer electronics industry, manufacturers must be able to cope with tremendous supply chain complexity and unpredictable, consumer-driven market dynamics. The key to success is the ability to adapt to the constant changes in market conditions brought about by rapid technological evolution, fluctuating material and production costs, and high demand volatility.
This is the case for Vestel, one of Europe’s manufacturing giants, which specializes in producing consumer electronics, mobile technologies, displays and LED lighting, and household and professional appliances.
Founded in 1984 in Turkey, Vestel has grown to become a world-renowned technology conglomerate consisting of 24 companies with over 19,000 employees, an annual turnover of US$4 billion, and an export network spanning 158 countries.
Vestel City – which comprises nine production plants established over an area of 1.3 million sqm in Manisa, Turkey with an annual production capacity of 35 million devices, 18 million television sets, and 10.9 million home appliances – is one of the largest industrial complexes in the world. Vestel also has R&D facilities located in Manisa, Istanbul, the UK, and China, where the manufacturer’s team of world-class engineers develop cutting-edge hardware and software solutions for its products.
To successfully operate such a massive production and distribution network and continuously deliver high-quality, cutting-edge products to an ever-expanding base of discerning customers around the world, Vestel must be able to optimize its supply chain planning, decision making, and operations.
To achieve supply chain optimization, Vestel has worked extensively with ICRON, a leading provider of Optimized Decision Making and Supply Chain Optimization solutions. The two companies have a business relationship that stretches back to 1999, when Vestel first implemented ICRON’s Detailed Scheduling solution at its production plants.
Vestel continued to use ICRON Detailed Scheduling for many years, but over time the manufacturer’s supply chain simply became too complex – involving too many products, components, constraints, and constantly changing demand signals – to handle using only that solution, along with SAP and Excel. Vestel decided that it needed an integrated sales and operations planning (S&OP) solution, and for this the electronics manufacturing giant turned to ICRON.
Like many other major manufacturing companies, Vestel was facing a significant S&OP challenge due to the complexities of its supply chain.
Here are some of the key elements of Vestel’s unique planning predicament:
– Vestel possesses a wide and diverse product portfolio that changes continually along with the latest technological advancements and market trends. Furthermore, the company offers a wide range of customization options to cater to customer demands in terms of order quantity, due date, and product specifications. Given the difficulty in generating a long-term operations plan in such a dynamic operating environment, Vestel needed to implement a robust S&OP solution that enabled ongoing responsiveness and seamless collaboration between its Sales & Marketing, Procurement, Manufacturing, and R&D departments.
– Although Vestel is strategically located in close proximity to the bulk of its customers in Europe, it is far away from its network of suppliers, which are primarily based in Asia. To balance supply and demand and reduce costs in this globalized business landscape, Vestel must manage long lead times in material procurement and engender greater integration and flexibility in its S&OP process.
– Vestel’s planning experts were manually executing the S&OP process utilizing numerous interlinked Excel spreadsheets and data extracted from, SAP, the company’s enterprise resource planning (ERP) system. This old-fashioned method of planning was time-consuming and prone to errors. The overwhelming amount of data involved made it nearly impossible for planners to have the visibility necessary to resolve inconsistencies and identify the most efficient and profitable operations plan.
Vahdet Belada – a Supply Chain Manager at Vestel, who worked on the ICRON project along with Filiz Gökten Yılmaz, Vestel’s Demand Planning and Order Fulfillment Manager – explained: “We were trying to manage all our constraints and decision variables using Excel files. It was taking one to two weeks to create a feasible plan manually and update SAP, our ERP system, and we were sometimes making human mistakes. Even after identifying mistakes, it would take us at more than one day to fully correct them. So, practically speaking, we were only able to update our S&OP plan every two weeks or even once a month. We were also having issues reconciling our sales forecasts with fresh data on new customer orders – this could only be done once a week. These planning problems were limiting our agility and our ability to make decisions and take actions.”
Facing these challenges, Vestel was looking for an automated planning system that would enable the company to gain greater visibility and flexibility across its supply chain, foster increased integration and collaboration throughout its operations, and boost its overall productivity and profitability. And to provide the solution to its S&OP problems, Vestel engaged ICRON.
Solution & Results
To help Vestel attain a highly flexible, integrated, and automated S&OP process, ICRON’s S&OP solution was implemented with some customer-specific modeling. ICRON’s solution – which was developed, tested, integrated with Vestel’s existing ERP system – was implemented over the course of six months and became immediately fully operational.
The new ICRON system revolutionized and optimized Vestel’s S&OP process and empowered its planners by equipping them with enhanced supply chain visibility and the capability to:
– Rapidly generate optimal plans that satisfy sales forecasts and customer demands, minimize production and procurement costs, and meet operational constraints.
– Determine inconsistencies between sales forecasts, realized customer orders, supply constraints, R&D plans, and managerial goals.
– Choose among alternative plans that can satisfy given goals and constraints to increase operational efficiency and reduce costs.
– Perform scenario analysis on forecasts, procurement capability, and production capacity.
– Revise plans automatically to align with realized customer orders and resolve supply and demand imbalances.
– Archive and compare previous plans to facilitate the analysis of discrepancies between forecasts and realized customer orders.
– Develop enhanced data models that enable integration with Vestel’s ERP and other data sources.
Ender Yüksel, Vestel Deputy General Manager, Supply Chain “ICRON serves as the single source of truth in our organization. Now, planners from different departments are using ICRON to manage their daily operations. When they open ICRON, they gain visibility over their operations and are able to access plans, data, and insights that they can rely on.”
Vestel has continued to use ICRON’s S&OP solution ever since it went live in 2011, and the system has yielded tremendous, tangible benefits for the consumer electronics manufacturer.
Ender Yüksel, Deputy General Manager, Supply Chain at Vestel, remarked: “Before ICRON, it used to take us weeks to make a plan, but now we can generate a plan in a matter of hours or even minutes. ICRON is a powerful and agile planning platform that is capable of handling the complexity and constraints of our supply chain” he added, “ICRON serves as the single source of truth in our organization. Now, planners from different departments are using ICRON to manage their daily operations. When they open ICRON, they gain visibility over their operations and are able to access plans, data, and insights that they can rely on.”
ICRON’s Chief Technology Officer Z. Caner Taşkın commented: “ICRON S&OP helps companies keep demand and supply in balance and achieve synchronization among different functions in their organization by rapidly generating high-quality plans and enabling ad-hoc scenario analysis.”
ICRON’s S&OP solution has enabled Vestel to optimize its end-to-end supply chain operations and achieve significant operational and financial improvements including:
– Increased efficiency in the S&OP process: ICRON reduced the synchronization time between Vestel’s sales and operations from two weeks to one day. By serving as the “single source of truth” regarding the S&OP process for all stakeholders (including Executive Management, Sales & Marketing, Manufacturing, Procurement, and R&D), ICRON’s S&OP platform provided a collaborative decision-making framework within Vestel, driving greater efficiency, communication, and synergy throughout the organization.
– Greater visibility and control across the supply chain: With ICRON, it became possible for Vestel’s planning experts to present up-to-date and accurate data to all stakeholders in a unified and consistent format. This increased data visibility, combined with improvements in data accuracy obtained by automated validation algorithms, allows guidance of sales efforts, identifies procurement problems before they become apparent, and facilitates ad-hoc analysis of deviations between sales forecasts and realized customer orders.
– Improvement in planning accuracy: With ICRON, Vestel’s plans are 20% more accurate. By replacing manual planning processes previously used by Vestel planners with a high-powered optimization model that consistently generates the optimal solution, ICRON’s S&OP system was able to deliver significant improvements in planning accuracy. The discrepancy between initial planning materials assignments and actual production has decreased by 20% since the ICRON system was deployed. The ICRON S&OP system has enabled Vestel to more effectively keep supply and demand in balance and achieve greater synchronization along its entire supply chain.
– Reduction in planning time: With ICRON, Vestel has been able to cut its planning time by more than 50%. Before the implementation of ICRON’s S&OP platform, planners had to manually create and revise plans, a painstaking process that could take days to complete. With the new ICRON system, optimal plans can be automatically generated and revised to align automatically with realized customer orders and production operations in a matter of hours, thus dramatically decreasing planning time.
– Reduction in inventory levels: ICRON has enabled Vestel to decrease its inventory levels – for the materials controlled by the ICRON platform – by 5%. By automatically adjusting plans in real-time based on up-to-date information on realized orders and sales forecasts, ICRON’s S&OP solution has reduced the synchronization time between Vestel’s sales and operations from two weeks to one day, resulting in an approximately 5% decrease in the inventory levels of components that have long lead times – and ultimately leading to reduced costs and increased profits.
ICRON’s S&OP solution has proved to be a powerful tool for Vestel Electronics, enabling the television manufacturing giant to overcome its S&OP challenges, visualize and optimize its supply chain operations, and achieve increased flexibility, efficiency, and profitability.