The first stage of GN’s future headset strategy is the reengineering of the headset business into a simpler and more scalable business model. A core element of this reengineering is the restructuring of GN’s global supply chain, which simplifies the business processes, increases the flexibility of the cost structure and improves customer satisfaction.

Under the leadership of Senior Vice President Mats Erik Lindskog, Global Supply Chain, GN has come a long way in this crucial transformation: "We are now in the initial implementation phase with our new main partner, bringing the IT development in place and preparing for the changes in the physical distribution set-up," said Lindskog.

Previously, GN had close to 30 different manufacturing suppliers, providing various manufacturing services, along with GN’s own headset manufacturing in Xiamen in China. This setup required extremely complex planning in a competitive environment that calls for rapid inventory turnaround and ever shorter distance from product ideas to market.

From 30 to below 10 Manufacturing Suppliers

“The major part of our manufacturing activities will now be handled by our new main electronic manufacturing services (EMS) partner, while the remainder of the manufacturing will be carried out with two or three other key manufacturing suppliers. In total we expect to reduce the group of suppliers to one-third of the previous number and that will significantly reduce the complexity of our planning processes and increase our scale economies with higher volumes handled by fewer suppliers," said Lindskog.

In September GN signed a supply chain agreement with a major global EMS provider, with which GN has already started up postponement operations in the EMS provider’s facility in the Czech Republic (the parties have agreed not to disclose the identity of the EMS provider until later this year). Another postponement centre will be set up with the same EMS partner in the US, and the parties are presently in final negotiations on the location for a third centre in Asia.

“For EMEA we target a full implementation and cut-over date in Q2 2008. That will make our North American postponement centre and our Asian centre operational by the end of Q3 2008. So the three new regional postponement centres will be in place for the next high season and for the Christmas sale," said Mats Erik Lindskog.

Competitive: Increasing speed to market

"This setup provides GN with a key competitive advantage that we have lacked up to now. With today’s need for speed to market it has been a severe disadvantage that we needed to fully assemble our products at the sites in China. We had to configure products to customers’ orders in China, and then ship to warehouses in Europe and North America, where we risked late changes in customer orders resulting in GN sitting with the wrong inventory in the regions. With our new distribution setup we can ship the parts from China and wait with the final configuration of the products until they reach the postponement centres close to the consumer markets in Europe, North America and obviously also Asia," said Lindskog.

Further to reducing the planning complexity and improving scale of economy, the new global supply chain will also greatly improve GN’s visibility into the supply chain. All data on materials, parts, availability, etc. through the supply chain will be managed in a single data structure with the new EMS partner, and data from GN’s other manufacturing suppliers will become integrated into this data structure. This will provide better manufacturing, logistical and inventory controls, thus giving GN an essential quick response tool.

“We should be able to double the flow through our inventory, which obviously will help us reduce cost and improve cash flow. We will be able to move faster on big volumes," said Lindskog.