CFO, GN Netcom Anders Boyer
In June, GN Netcom introduced a comprehensive restructuring program in an effort to turn around the Mobile division’s unsatisfactory earnings and to strengthen profitability in CC&O Headsets.
The initiatives are expected to enable the Mobile division to reach a run-rate breakeven in terms of EBITA by the end of 2009, and they are also expected to strengthen the profitability of CC&O Headsets.
“The program involves a significant simplification of the entire organization, including of the supply chain, a stronger focus on selected core markets, key accounts and product segments and a further simplification of the organization,” says CFO, GN Netcom Anders Boyer, who is in charge of implementing the FAST (FAST = Focused And Simplifying Turnaround) program throughout the organization.
Under the FAST program, up to 250 positions will be cut globally. Out of this number, approximately 140 positions have already been cut.
Focused Customer Approach in the Mobile Division
Today, GN Netcom markets some 60 different products in all price segments. This number is intended to be reduced considerably. Going forward, the Mobile division will market a more focused portfolio of headsets with fewer products directly to selected major customers in around 10 core markets, while other markets and customers will be served through distributors. This will produce substantial cost savings and more effective utilization of product development, sales and marketing resources.
The FAST program entails that the Mobile Headset business will work with a limited number of large customers with products based on configurable platforms.
“A pilot project in APAC confirms that it’s actually possible to at least maintain revenue even though we have reduced the number of Mobile customers by around 80%. We now focus fully on the 20% of the customers that can generate the most volume, such as large telecoms operators, retail chains and large distributors,” says Anders Boyer.
Focused and Simplified Supply Chain
GN Netcom is continuing the work initiated in 2007 to simplify the global supply chain structure. As previously announced, GN Netcom will move from a diverse and very complex supply chain set up with outsourced production and 13 EMS partners to production and procurement outsourced to only 3-4 EMS partners.
“The new supply chain set-up for the mobile business will be based on the configure-to-order principle. We will only produce mobile headsets when we have a specific order from a customer. When the headsets have been produced by one of our EMS partners they will be sent to a fulfillment center in APAC which will also work as a consolidation/Cross Docking point for shipments to EMEA and North America. At the fulfillment center, the products will be finalized, packed and shipped directly to the customer. With that set-up in place we expect to be able to deliver headsets to our customers within two weeks after the order is placed. That set-up will increase scalability and flexibility in the cost base in relation to fluctuating demand and also improve quality throughout the value chain,” says Anders Boyer.
The proposed future CC&O supply chain will also be based on the configure-to-order principle. However, it is expected that the CC&O business will operate with regional fulfillment and postponement centers in EMEA and North America in order to be able to ensure a fast response to regional requirements for the products.
Fully Implemented in 2009
The FAST program is scheduled to be fully implemented in the second quarter of 2009 and is expected to reduce GN Netcom’s overheads by approximately DKK 125 million in 2009 and by a further DKK 25 million in 2010, when the cost savings will have had full effect on development, sales and distribution costs as well as on general and administrative costs.