Zeroing In on a Moving Target - Balancing Demand and Supply at NEC

As head of supply chain operations at NEC-Computers International, Jérémie Bréchet is responsible for balancing demand and supply in a way that minimizes costly residual inventory, optimises revenue, and reduces obsolescence. Much like “squaring a circle”, the task requires a give-and-take between the Sales and Marketing Department, which considers it impossible to accurately predict demand in this highly dynamic industry, and the Procurement and Operations departments, which need accurate demand updates in order to have just enough, but never too much, inventory. In this case, Kumar Neeraj and Luk N. Van Wassenhove explore how Bréchet manages this delicate balancing act by using a time-honoured process: the meeting.

by Luk Van Wassenhove, Neeraj Kumar

When American PC-maker Packard Bell joined with Japanese computer giant NEC Corporation in 1998, cultural differences were just one of the many problems facing the newlyweds. This marriage of convenience allowed Packard Bell to expand into the European PC market, while NEC saw it as an opportunity to extend its operations outside of Japan. For those on the operations side, the merger created a complex labyrinth of product and inventory cycles.

At the time, the industry was going undergoing significant changes. Demand for personal PCs was rising at a rate of 33% a year, causing shortages of key parts, retailers were becoming impatient with PC vendors with high response times, and the average selling price of PCs was dropping at a rate of 15% per year. On the home front, the company – today known as NEC-Computers International (NEC-CI) – was offering 10 different PC configurations in some 25 countries, bringing the number of configurations to roughly 300, while at the same time the value of a PC sitting in inventory was eroding by 1% per week. For Jérémie Bréchet, head of supply chain operations at NEC-CI, the only answer was a streamlined demand and supply balancing process.

In this recent case study, Kumar Neeraj, Research Associate and Luk N. Van Wassenhove, The Henry Ford Chaired Professor of Manufacturing, take us into this process, outlining the systems put into place to manage the complex demand and supply activities. Boiled down to its core, the process answers three basic questions: 1) what are the customer requirements or what items/parts are required, 2) when are they needed, and 3) how many are needed.

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