Changing Channels at Alcatel

For Alcatel, the big French maker of networking and telecommunications equipment, a revamping of sales channels opened the door to improvements in the greater supply chain. Alcatel’s e-business networking division wanted to stop selling direct to customers and rely entirely upon resellers. Yet it was no less interested than before in enhancing the customer experience. Alcatel’s reliance on multiple third-party logistics providers had resulted in high costs and low service levels. Change was in order.The direct-distribution model, accounting for nearly a third of Alcatel’s sales, had led to a plethora of staff and warehouses in every major country in which it did business. Now it wanted to eliminate all local stocks and centralize distribution to resellers — or “business partners,” as Dominique Rives, global account manager with UPS Supply Chain Solutions, prefers to call them. At the same time, Alcatel hired UPS as its lead logistics provider (LLP) — sole manager of the company’s logistics program for Europe, the Middle East and Africa.“We are the single party responsible for everything that happens in the [Alcatel] supply chain,” says Rives. “It was a joint decision to outsource the totality of it.”Simplicity, at least in the organizational sense, was the watchword. Some of Alcatel’s competitors continue to support multi-channel distribution, says Gabriel Weissenbacher, supply-chain director of the e-business division. But that strategy can lead to confusion in the minds of end customers. Even worse, it can foster resentment among resellers, who see the supplier as competing for the customer’s business.A similar philosophy extends to logistics. UPS Logistics manages all of Alcatel’s European warehousing and transportation, operating out of a distribution hub in Longueil Sainte Marie, north of Paris. The actual operator of that facility is an independent provider, FM Logistics, but everything is done under the supervision of UPS.The LLP oversees inbound and outbound transportation, packaging materials, and the assembly of a wide variety of product, which comes from plants in France, Spain and Mexico, among other places. It handles between 600 and 800 orders, involving more than 3,000 item references, each day. On the delivery side, UPS manages a collection of carriers and integrators, including Danzas/DHL and UPS’s own fleet of planes and trucks.The results have been dramatic. In the last three years, says Weissenbacher, Alcatel’s record of delivering to promise has risen from 60 percent to 95 percent. Before, he says, “customer satisfaction was ranked the number-one problem as seen by our business partners. Today, it’s no longer number one.” That’s highly significant, in an industry that has been hit hard by the global economic downturn, and is looking for every possible competitive advantage.Alcatel has benefited internally, too. Its total supply-chain expense has fallen from 6 percent of cost of sales three years ago, to its current level of between 3 and 3.5 percent. “We have brought value to our customers — and value to the company,” says Weissenbacher