On a day-to-day basis, Oracle’s VP Sales and Strategy, Guy Yehiav, interacts with his customers: CEOs and COOs within the supply chain and also VPs of Marketing, VPs of Sales, CFOs, and business unit Controllers.  He crosses the divide from supply chain to sales and marketing because he sees the value chain start at the customer’s shelf.  “It may be a retailer’s shelf, it may be a hospital’s shelf, it may be another high tech component, raw material type on shelf,” said Yehiav.  “But a shelf is a point of consumption for all industries.”

In his keynote at the Consumer Electronics Supply Chain Academy 2008’s special event on January 10, Yehiav will speak in conjunction with Oracle’s Linda Peel on the topic of “Managing Risk through the Value Chain.”

The idea for him is to go beyond the ‘four walls’ of manufacturers in order to understand the demand, variability, promotions, discounts, and attributes that shape demand on a customer’s shelf.  “That’s why I interact with the sales side,” said Yehiav.  “They actually fund the promotions and create the deals.  In different industries, there are different types of attributes which shape demand.  But it’s all being driven by the sales force and marketing teams.”

Managing the value chain all the way from a customer’s shelf through to the manufacturing facility reduces the overall uncertainty and risk in the value chain.  This includes engaging the contract manufacturer on the back end along with the internal collaboration by sales, marketing, operations, and finance.  “If you’re trying to understand your demand variability from supply chain without engaging sales, you’re in a reactive mode instead of understanding what they’re doing at the front office,” said Yehiav. “If you’re in a reactive mode, any sudden change in sales activities can negatively impact your overall value chain stability, creating an un-manageable bullwhip effect.”

In his presentation, Yehiav will discuss how to link the front office with the back office while focusing on the Consumer Electronics industry.  With so much competition in the consumer electronics industry due to its many players, Yehiav sees the power in the hands of the retailers today.  “Retailers are defining the promotions and the tactics,” he said.  “Companies like VTech, Kodak, and Plantronics are paying the retailer MDFs (market development funds) far in advance of the promotions, losing control of defining the tactics and sub-optimizing ROI on these promotions.”  Companies need to find ways to articulate to their retailer partners which tactics produce the best results, something they typically lack today.

Another consideration is the use of price protection funds, something that is not found in other industries.  This means that when the product is sold to the retailer, even if it is moved to the distribution center, the manufacturer owns the liability of this inventory until it is sold at the cash register to the consumer.  “In a very fast cycle and a fast moving industry like consumer electronics, that’s a huge risk,” said Yehiav.  “That’s where the VP Supply Chain, CFO and the Controller need to step up.”

Even though a manufacturer doesn’t have a consignment agreement, or a VMI agreement, and the retailer is generating its own orders, the manufacturer still owns that inventory liability.  “The retailer has price protection funds and is protected,” he said. “All the exposure is on the manufacturer side.”  For example, when the manufacturer reduces the price of a product, the manufacturer needs to pay the retailer cash for the difference in inventory valuation (i.e. amount of price reduction multiplied by the floor stock inventory quantity held by the retailer, typically at retail stores or in their distribution centers).

Leveraging downstream data is one way to neutralize these risks.  Yehiav will speak about solving the inventory challenge when a manufacturer doesn’t own the inventory held by the retailer but still owns the ‘inventory valuation risk.’  He will then hand it over to his consumer electronics customers to present how they see their industry absorbing those new challenges.

“With technology advancements, Oracle’s customers can get more detailed downstream data on a daily basis,” said Yehiav.  “Now that you have all of this data, you need to do something with it.  We help our customers turn this data into knowledgeable and actionable tasks, reducing their risk and increasing their profitable revenue growth.”

Yehiav sees the industry leveraging account-level data, feeding the value chain all the way back to the shop floor.  According to AMR Research, while 75 percent of CPG manufacturers have account teams and detailed information for Wal-Mart, only 46 percent have two retailers with a “diamond” type of cross-functional partnership.  “There are still a lot of account teams, but downstream data is feeding account teams the data they need,” said Yehiav.  “Now, rather than having just a seller and buyer in the discussion, leading companies have marketing, sales, supply chain, and operations involved in the discussion between the retailer and the manufacturer.  These retailer and manufacturer collaboration teams must be aligned with the same data and tactics to maximize performance and shareholder value.”