McDATA Leverages Lean to Increase Revenue
“The challenges faced in planning and executing our high-tech SAN orders inside a two hour lead time were very complex. Lean expert, Bob Forshay, showed our team how to break down the process obstacles. We were able to increase revenue from our key account by $10 million to $15 million each quarter, while also reducing our costs.” – Tim Swette, OEM Account Director, McDATA
McDATA designs and produces Storage Area Network (SAN) hardware and software serving more than 8,000 data centers worldwide. A leader in the industry, McDATA leverages an outsourced global supply chain to supply 99.999% reliability network storage equipment to Fortune 1,000 organizations around the world.
With custom engineered components sourced across 4+ tiers, the ability to supply the highly complex configured products in a two hour order fulfillment cycle at the end of each quarter presented numerous challenges. Products, up to the size of refrigerators, incorporating dozens of feature sets, plus customized software, presented the supply chain team with significant challenges in meeting extremely demanding order fulfillment requirements.
No orders could ship incomplete and each was fully customized to end user configuration specifications. Production challenges included custom integrated circuits with 50+ week lead times, custom power supplies, and cabinet assemblies with dozens of options for 32 layer circuit board assemblies. McDATA completed the units with complex custom configuration and final testing after the orders arrived. The end product needed to be serialized, labeled, packaged, and delivered to the end customer of an OEM customer that placed the order with McDATA. One final hurdle was the need to merge in-transit shipments of other products that all needed to arrive together at the end customer location.
The biggest challenge faced by Bob and the McDATA supply chain team was meeting the peak demand with 40% of quarterly sales volume coming during the last five days of each quarter.
Bob provided leadership and education to the supply chain and production management teams for the development and implementation of improved processes that leveraged lean best practices. The improvements involved numerous departments, including order entry, product design, and IT. Customers and suppliers were also involved.
The McDATA team applied Kaizen Blitz events to conduct value stream mapping and improve material flow by addressing numerous opportunities. A supermarket pull process leveraged the new postponement capability from mass customization techniques and kanban based replenishment leveraged the reduced lead times and lower order quantities available through improved changeover capabilities.
By redesigning the supply planning, order management, assembly, and test processes, the integrated supermarket pull process was able to reduce order fulfillment cycle time from two weeks to two hours. The increased flexibility, with reduced lead times, dramatically improved revenues with increases from one key account reaching up to $15 million per quarter. There was also a significant reduction in costs as waiting for customer orders to arrive eliminated a prior need to “rebuild” completed products in the old make to stock model.
McDATA significantly improved their competitive advantage as their supply chain allowed them to flex volumes dramatically at the end of each quarter.
“We met all the goals. We reduced order fulfillment cycle time from four days to two hours, reduced rework, reduced inventory, improved revenue, and increase flexibility for meeting increased customer demands.” – Bob Forshay, Transformance Advisors
Contact the team at Transformance Advisors for information on how you can leverage the Certified Lean Master program to improve service and reduce costs.
Please send an email to CLM from Transformance Advisors.