How Cisco got closer to its customers using BI

Network equipment maker Cisco has turned itself into one of the world's most respected logistics-based firms by using business intelligence to develop a closer relationship with its customers.

Network equipment maker Cisco has turned itself into one of the world's most respected logistics-based firms by using business intelligence (BI) to develop a closer relationship with its customers.

The $36bn firm makes almost every product it ships to order, Anne Robinson, Cisco's senior manager for information and data strategy, told a Teradata user conference in Berlin.

This includes the Flip consumer video camera, where customers can specify what colour casing they want, she said.

To achieve this, starting in 2007, Cisco revamped its already strong supply chain management (SCM) system to focus explicitly on what it calls the customer value chain, namely the experience of buying and owning Cisco products.

Since it started 25 years ago, Cisco has always outsourced manufacture of its products, which now include routers, switches, wireless modems, video systems and Flips. Robinson says 95% of manufacture is outsourced, with mainly new product development done in-house, but nearly every shipment is delivered pre-configured.

The company and its associates deal with some 1,000 suppliers of 35,000 components that are assembled into around 25,000 stock keeping units (skus). It has also had to integrate some 135 acquisitions to date, the latest being Norwegian video systems maker Tandberg.

According to Robinson, Cisco's old supply value chain tracked innovation and product development through planning, ordering, sourcing, making, quality control, delivery, field service and into customer relations.

The shift to a customer-oriented value chain required new key performance indicators (KPIs), she says. In particular, it meant adding "an emotional connection" to information in the SCM system.

To do so Cisco built the KPIs around customers' "moments of truth" - events when Cisco could win or lose the sale. These were purchase, order management, receipt of goods, installation, service and end-of-life disposal of goods.

To get the changed mindset that Cisco required, it adopted the old management adage, "What gets measured gets done." The Teradata datawarehouse that helps the company track the KPIs contains around 20Tbytes of data, including information from the former supply chain management system, she says.

Robinson was helped by having the new way sponsored by an executive vice-president who wanted the new metrics. She then spent time identifying the "influencers, sceptics and data geeks" essential to the project's success.

"We held a dedicated workshop to see who 'got' the new system," Robinson says. The "data geeks" were essential because they understood the numbers and how they affected processes in the value chain. Their knowledge added credibility to what the project was trying to achieve, she says.

Even though the impetus for the project came from the top, Robinson's first question to her audiences was: what is missing from present reports for you organisation? "There was absolutely no talk about metrics at the start," she says. That came later.

As it turned out, what mattered most to her peers was data on cost, quality, speed and delivery. Robinson put these into a Balanced Scorecard decision model. From this she extracted a subset of KPIs that then gave her achievable early milestones that added to the project's credibility.

"We could take the numbers [from the old SCM system] and match them against the customers' moments of truth to understand how they affected them," she says. "There is now a known trade-off between customer expectations and operational excellence."

Goal-setting was key to getting buy-in from business unit managers, says Robinson. "Measuring those goals against customer service and satisfaction allowed them to focus on achieving excellence."

As well as managers, more than 9,000 sales staff can access the datawarehouse. Robinson says it is in constant use. She plans new releases of the datawarehouse in May and October this year to cope with the growing demand.

Although the system works across the company, implementation allowances fine-tune it for local cultures. "There is a single common truth but one's view is segmented by region and by vertical market, with adjusted KPIs for each market," Robinson says.

Having a single set of KPIs, and keeping the data as "vanilla" for as long as possible helps to align the entire organisation, Robinson believes. The net result, she says, is that Cisco is more flexible and can scale faster, responding more effectively to market events.

In a recent survey of companies that compete on control of their supply chain, Cisco came from almost nowhere to fifth, behind Apple, Dell, Procter & Gamble, and IBM, beating Nokia and Wal-Mart, and in 2008 it won a supply chain innovation award.

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