Microsoft Corporation

Significantly Reducing Shortages and Surpluses

Fast and Significant Supply Chain Improvements


Everyone knows that Microsoft is one of the world’s largest software companies.  It also has a very significant consumer electronics arm especially following the acquisition of Nokia’s mobile phones division.  It manufactures over 290 million units per year with over 31,000 active SKUs in 13 manufacturing locations and 52 distribution centres.  Serving 191 countries and with over 3.5m deliveries in 2016 and over 3m sales orders it is big.  Add to that over $11 billion annual spend in this division with over 600 suppliers it has a complex supply chain!


The Issue:

Following the acquisition of the mobile phone business of Nokia there was a pressing need to combine the supply chain of the new division with that of Microsoft’s legacy Supply Chain.  A review of the Supply Chain showed increasing complexity and a number of major challenges such as a very high % of Cost of Goods Sold to Revenue, high inventory obsolescence, high and growing shortages and in spite of major efforts to ‘forecast better’ and allocate effectively based on the forecast there were no measurable results and shortages and surpluses continued to grow.

We were asked to attempt to solve these problems while also developing the rules and methods that could be implemented within their existing SAP solution.  Oh and this had to be done within 3 months.  The race was on!



Our Approach:

Drawing on our extensive knowledge of how to improve Supply Chains we developed the Enterprise Digital Twin for Microsoft to show how some key decision errors in planning and execution were causing shortages and surpluses and higher costs.  We built out the solution in the Enterprise Digital Twin and using the insights gained we designed and Microsoft built the solution out into their SAP system


Results:

  1. Service Level increase leading to less lost sales
  2. Inventory Reduction of over $250m
  3. Markdowns and obsolescence reduced by over 10%
  4. Fully automated the new rules into the SAP system creating a ‘touch free’ supply chain