E-Channel: Online Supply Chain Cuts Costs, Enhances Customer Care

Posted: 02/2001

Online Supply Chain Cuts Costs, Enhances Customer Care
By Becky Bracken

In the highly competitive world of telecommunications, there is little more important than quality customer service and reduction in capital spending. Xelus Inc. (www.xelus.com), a services optimization company that provides online supply chain management solutions for telecommunications firms, may have something that can help companies improve customer care and reduce operating costs.

Gentry Politte, director of business development, Xelus Inc.

The Xelus online real-time supply chain management solution helps telecom firms reduce inventory and more effectively deploy parts to the right place at the right time, which allows for quicker response to customer problems as well as a reduction in costly inventory storage and deployment.

A large ILEC using the Xelus solution reported a savings in capital spending of approximately $30 million per year, or between 2 and 5 percent of overall capital spending, according to Arthur Andersen (www.arthurandersen.com). The particular "large ILEC" was not named.

Laddie Suk, partner of the global network solutions group, Arthur Andersen

Arthur Andersen and Xelus recently announced a strategic partnership to bring Xelus' solutions to Arthur Andersen's telecommunications consulting clients. Arthur Andersen also will work with Xelus' customers on integration and implementation of the solution with existing systems.

"Really the partnership started out from [Xelus'] excellence in the spare parts tracking and management side of the business," says Laddie Suk, partner of the global network solutions group for Arthur Andersen. "They have some software tools that really enable telephone companies to save significant amounts of capital dollars."

While supply chain management is understood and accepted for manufacturing businesses, Gentry Politte, director of business development for Xelus, says that service supply chain management often is overlooked and is one of the most efficient ways to cut operating costs.

Real-time access to information about the need and location of parts allows a carrier to add efficiency to network repair and procurement. The result is a more agile and prepared carrier that is better able to meet customer demand.

A white paper titled "The Value Impact of Service Optimization" released by Xelus and available on its website as of Jan. 1, explains the value of service supply chain management.

"There are a number of ways that service supply chain management reduces sourcing and acquisition costs for service inventory," the white paper says. "First, an accurate forecast of the inventory that will be needed allows a company to negotiate pricing for realistic quantities and delivery schedules. It dramatically reduces the need for emergency requisitions and the premium price paid on these rush orders. Second, a good service inventory planning system will allow the planner or purchasing agent to consider less expensive alternatives to buying new parts. These include repaired or remanufactured parts, substitution of an older or newer equivalent part [supercession], and cannibalization of obsolete systems. The cost of a repaired part is typically 35 percent of a new one. One company in the study increased their use of repairable parts by 15 percent."

The XelusPlan inventory planning and forecasting tool has proven successful for large telecommunications firms. Verizon Communications (www.verizon.com) is one company that, according to Xelus, has used the tool and has seen a reduction in inventories "to the tune of 50 percent," Politte says. And by having service parts readily available where they are needed most, telecommunications firms can expect to decrease the time necessary to respond to customer issues by anywhere from 30 to 40 percent, he adds.

"We [Arthur Andersen] get asked to identify ways to reduce capital expenditures or help improve the bottom line of different carriers, and our financial heritage is such that we like to follow the money," Suk says. "So helping on the capital dollars, helping improve getting cheaper parts as a result of trading opportunities, and auctioning and helping create some revenue, that's where we see the Xelus trade stuff working very nicely."

An added solution that Xelus provides is XelusTrade, which provides customers with the ability to build and participate in online exchanges that allow providers and suppliers to come together to buy and sell new and excess inventories, reducing the cost of storage as well as recovering the costs associated with depreciating and out-of-date inventory. One unnamed Xelus customer has saved approximately $70 million and 700,000 transactions annually with the XelusTrade tool, Politte added.

"Everybody is wanting to e-bond with trading partners, and a typical carrier has dozens of suppliers as well as dozens of people that want to buy the old stuff," Suk says. "This reverse auction approach is what occurs when older equipment is being taken off the ILEC's books and being taken out of the network. There is certain scrap value that is, in effect, the subject of a reverse auctioning."

Clearly, the ability to quickly transmit requirements to suppliers and have them immediately respond is part of customer satisfaction and improves the carrier's ability to respond to customers.

Most carriers want to have supply in stock or in warehouses, but where online supply chain management for carriers comes into play very specifically is getting the lowest price on supplies and taking delivery at the committed times to fulfill customer need. Because this is all happening electronically, all of the specific location, delivery and procurement information is exchanged electronically, speeding up customer service and increasing a carrier's bottom line.