Motorola

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OPPORTUNITY

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INTEGRATION

This article is reproduced with the permission of
Supply Chain Management Review (www.scmr.com)

How Motorola Put
CPFR into Action
By Jerold P Cederlund, Rajiv Kohli, Susan A. Sherer, and Yuliang Yao
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ike most leading makers of mobile phone handsets, Motorola, Inc. understands customer segmentation very well. Managers in
Motorola’s Mobile Devices business know that the technology-savvy consumer will not buy the same handset as the fashionista or the everyday communicator, so the company offers over 120 models globally.
The difficulty comes in knowing how many of which models to make and sell. Accurate replenishment to retailers’ shelves is critical. If a retailer is out of stock of the blue candy bar-style handset that a consumer has her heart set on, she will more likely purchase a competitor’s product rather than Motorola’s black flip-top phone. In such circumstances, there is a real risk that Motorola loses that consumer for life, not just for the length of the next service contract.
Accurate forecasting is further complicated because one phone model can have multiple SKUs (GSM, color, dual mode, etc.). On top of that, rapid new product introduction adds complexity: Cell phones have life cycles averaging little more than a year, with some as low as six months.
Industry statistics indicate that 50 percent of stock-outs in the consumer goods industry are due to poor retail ordering and replenishment/forecasting processes, 25 percent are caused by overall demand planning and upstream shortages, and 25 percent by inadequacies of in-store processes such as shelving and replenishment.1 While these statistics are similar for the mobile handset industry, the out-of-stock rate for mobile handsets can be many times larger than for typical consumer packaged goods. Accurate forecasting is critical in this industry because the cost of stock-outs can have a