Mastering demand puts Motorola on top of North American cell phone market

In Q4 2002, Schaumburg, Ill.-based Motorola took back from archrival Nokia of Finland the title of North America's leading supplier of mobile phones.

Donna Warton, VP of North America business operations for Motorola's Personal Communications Sector, says it's no coincidence that her division continues to gain market share while also reducing the inventory it keeps on hand. She attributes these accomplishments to the demand-driven business model the division adopted roughly one year before recapturing market leadership.

Warton shared Motorola's story at a supply chain management conference sponsored by Boston-based AMR Research, June 2-4 in Scottsdale, Ariz., Mastering Demand for Profitable Growth.

Tony Friscia, AMR's president and CEO, kicked off the event saying the key to mastering demand is developing what AMR calls a demand-driven supply network, or DDSN. In essence, it's a supply chain geared toward satisfying customers while keeping operating costs under control.

David Caruso, director of research, said AMR initiated the DDSN concept after a 2000 survey of manufacturers revealed a "dramatic" relationship between a company's ability to pinpoint true demand and its overall financial performance. The ultimate goal for a DDSN, Caruso said, should be delivering the perfect order: the exact product the customer wants at the requested time.

The only way to do this, Caruso added, is to first get a true picture of customer demand. Once that's done, a company incorporates lean production and supply chain management to ensure production costs remain as low as possible.

Laura Preslan, an AMR research director, cautioned that getting a true picture of demand does not mean a one-number forecast. "Forget about that one number, because it's only right for about two hours," she said. "Instead, you have to work with ranges, and try to manage the variability of demand."

Warton said Motorola defends against demand variability by communicating with customers about anything that might make actual orders differ from the latest forecast. Motorola also collects and analyzes point-of-sale data to spot trends that even the customer may not have picked up on yet.

These practices help Motorola shift its product mixes at the appropriate times, leaving the company with more of the items its customers want at any given time, even though its overall inventories are down.