Shadow planning offers Zebra grip on contract manufacturers

How do you know if your contract manufacturers are prioritizing and producing the right devices at the right time? To get a better grip on this, Zebra Technologies – with support from e2open – plans to implement a shadow planning process. During Webinar Wednesday, Zebra’s Ty Walentosky explained the setup of the digital twin required for this, and the associated challenges: ‘We need to learn to look at our suppliers better.’

By Marcel te Lindert

Many supply chains make intensive use of Zebra’s devices such as scanners and printers. Their production is fully outsourced to less than a dozen contract manufacturers. To control this process, Zebra has been using e2open’s supply chain software for many years. ‘We started with their solution for supplier collaboration,’ says Ty Walentosky, Senior Director of Supply Planning & Transportation at Zebra. ‘That acts as a kind of pipeline between Zebra and the contract manufacturers. Every week, we use that pipeline to send the demand per end product to our contract manufacturers. And through that pipeline, they let us know what they can produce and when they can deliver it.’

Zebra subsequently deployed e2open’s software to get a better grip on Tier 2 suppliers: those who supply components to contract manufacturers. ‘The contract manufacturers can indicate any components for which delivery problems are imminent. We use that information to secure the supply of these components, for example by contacting the suppliers or looking elsewhere on the market,’ says Walentosky. ‘Next, together with e2open, we realized full visibility into the supply of components. That means asking each contract manufacturer what their components demand is, what they have in stock and what they have on order.’

Shadow planning

Zebra had already implemented these solutions when the pandemic broke out. ‘They certainly helped us to get through that turbulent time, but we also discovered some shortcomings,’ states Walentosky. ‘We knew which components were in short supply, but the software did not tell us in which end products those components were used, how best to use the limited stock of components, and what the impact would be on our turnover. So we started shadow planning. We wanted to understand how contract manufacturers determine what they can and cannot make. We wanted to be sure they were making the right decisions.’

Shadow planning helps Zebra set the right priorities in collaboration with contract manufacturers. ‘The existing sales orders have the highest priority. We want to be sure we can keep our promises to customers. In second place are the big deals that have not yet been converted into sales orders, but for which we already want to start producing. In third place are the fast movers, for which we apply the make-to-forecast principle. We want to have those fast movers in stock at all times. Then come the make-to-order products. The contract manufacturers do not have to start producing them yet, but we would like them to already source the components they need.’

Digital twin

For shadow planning, Zebra has set up a digital twin of the contract manufacturers’ planning processes. For this, the company uses all the information already available in e2open’s supply chain software: demand for finished goods, component inventory, expected delivery of components, contract manufacturers’ production capacity, and so on. ‘The biggest challenge was getting access to the Bill of Materials (BOM) for our end products,’ says Walentosky. ‘That’s because of our operational setup. We design some products in close cooperation with the contract manufacturers, which means that the BOM of those products is stored in their systems.’

Walentosky explains again what he wants to achieve with the digital twin. ‘First of all, we want to validate that our contract manufacturers make the allocation decisions that are best for Zebra. But in addition to that, we want to work on scenario planning ourselves. A sizable portion of demand comes from large deals that are difficult to forecast. Our sales teams want to know how long we need in order to deliver the equipment for those large deals. Until now, we always had to pass that question on to our contract manufacturers and often had to wait a long time for their answer. We want to be able to answer that question earlier. Lastly, we want to become more proactive in supply planning. What if demand suddenly increases by 20% or 50%? Where do the bottlenecks arise? We want to be able to respond to that better.’

Art as well as science

The implementation of shadow planning has run far from smoothly. ‘Indicating what they can produce and when they can deliver is a core competency for contract manufacturers. That’s an art as well as a science. You need a world-class team to perform that process at a world-class level. Within Zebra, we don’t have the knowledge and skills needed for that, because we have always relied on our contract manufacturers so far. The question now is how we can build that knowledge and those skills ourselves. For this, we need to learn to think differently and look at our suppliers better.’

In addition, Zebra has discovered that focus is important. ‘We cannot afford to look at every component of every end product. Part of the art is discovering which components can cause bottlenecks. Those are the components we need to focus on,’ Walentosky says. ‘During the implementation, we found that it is better to focus on one of our most mature contract manufacturers first. Let’s first make sure that shadow planning works well for that partner, and only then roll out the process further.’

Feedback loop

At the moment, Zebra is still busy implementing shadow planning. ‘We are now working with the first contract manufacturer. We have a team that looks at the outcomes of the shadow planning on a weekly basis and compares it against that contract manufacturer’s own planning. If something different comes out of our shadow planning, we discuss it with them. That weekly feedback loop is a crucial part of the process,’ states Walentosky. ‘Shadow planning helps us make better decisions, conduct better negotiations and build a more agile supply chain.’