Mod Us Media Intuit

and

Joint submission for

The Supply Chain Council Awards for Excellence in Supply Operations and Management

Table of Contents Section 1: General Information and Project Complexity...............3 1.1 Name of Submitting Organizations ................................................................ 3 1.2 Name of Organizational Unit.......................................................................... 3 1.3 Mission statement of the Organization ........................................................... 3 The goal of the companies was to develop a supply chain management project that would have a significant and quantifiable impact on both the operational capabilities and execution as well as leverage performance measurements as a change agent to drive operational excellence ....................................................................................... 3 1.4 Award Category of Submission ...................................................................... 4 1.5 Brief Description of supply chain and the processes the submission spans ... 4 1.6 Names and number of people involved from each supply chain partner organization in the project (External) ............................................................. 4 1.7 Names and number of people involved from each functional organization and category of each organization (Internal) .................................................. 5 1.8 Point of contact for each supply chain partner................................................ 5

Section 2: Implementation ...............................................................6 2.1.1 Reason supply chain project was undertaken and how it was selected ...... 6 2.2 Duration of project.......................................................................................... 6 2.3 Process used to complete the project .............................................................. 7 2.4 Significant challenges encountered, process of resolution, and solutions. (Identify best practices)................................................................................... 8 2.5 Measures used to measure a) progress and b) success.................................... 9 2.6 Documented and quantified cost and performance improvement benefits... 11 2.7 How the success of this effort supports organizational objectives described in Section 1, Item 3 ........................................................................................... 12

Section 3: Knowledge Transfer......................................................13 3.1 3.2

Efforts to share lessons from this effort with other internal organizations... 13 How the results can be transferred to other organizations and the likely candidates for transference ........................................................................... 13

Section 1: General Information and Project Complexity 1.1

Name of Submitting Organizations

Modus Media International 690 Canton St Westwood, Mass 02090 781-407-2000

1.2

Name of Organizational Unit

Modus Media International Client Services Organization

1.3

Intuit Corporation PO Box 7850 Mountain View, CA 94039

Intuit Corporation Small Business & Personal Financial Software

Mission statement of the Organization

Modus Media International’s mission is to be the global supply chain management infrastructure for technology-enable commerce, connecting supply to demand for both traditional and e-commerce business models. Leading technology and e-commerce companies such as AT&T, Dell, Intuit, Microsoft, Network Associates, Palm, Sony and Sun Microsystems outsource their supply chain management processes to MMI, including customer care services, content and materials management, product assembly and fulfillment. Intuit’s mission is to revolutionize how people manage their financial lives, and how small businesses and accounting professionals manage their businesses. They are the leading provider of small business, tax preparation and personal finance software products and Web-based services that simplify complex financial tasks for consumers, small businesses and accounting professionals. Principal products and services include Quicken®, QuickBooks®, Quicken TurboTax®, ProSeries®, Lacerte® and Quicken Loans™. Intuit’s business strategy is to build and maintain a sustainable competitive advantage in each business they are in. In 1999 the companies teamed up with the joint mission to achieve operational excellence for Intuit’s supply chain. Intuit took a big step by sole sourcing its manufacturing and other primary supply chain management activities to Modus Media International (MMI). The goal of the companies was to develop a supply chain management project that would have a significant and quantifiable impact on both the operational capabilities and

execution as well as leverage performance measurements as a change agent to drive operational excellence

1.4

Award Category of Submission

Award for Supply Chain Operational Excellence

1.5

Brief Description of the supply chain and the processes the submission spans

At the beginning of the project the Intuit supply chain consisted Intuit, three manufacturers and various channel reseller partners for Intuit product. In addition, Intuit managed many of the Supply Chain management functions like SOURCE and MAKE in house. PLAN Product Configuration

Forecasting

Intuit

DELIVER

Inventory ProducMgmt tion

Intuit 3 Supp.

Order Entry/ Mgmt

Intuit

Distribution

Credit authorization 3 Supp.

Trans Mgmt

Fin. Mgmt/ Customer Invoicing

Intuit

Intuit

MMI

Intuit

MMI

Intuit

Metrics Mgmt

Returns

Intuit

MMI

Intuit

Phase 1

Intuit

Procure - ment/ Vendor Mgmt/ MRP

MAKE

Start

Intuit

SOURCE

Web Based

MMI

Invoicing and A/R Mgmt

Intuit

Intuit

MMI

Intuit

MMI

MMI

MMI

MMI MMI

MMI

-

-

MMI MMI

IML

Phase 2

Intuit Intuit

Areas of significant change.

1.6

Names and number of people involved from each supply chain partner organization in the project (External)

Brian Fitzgerald (Intuit) David Foster (Intuit) Brett Aumack (Intuit) Anne Fajardo (Intuit) Leslie Mitchell (Intuit) G. Lowe (Intuit) Judith Weiss (Eclipse Group Consulting) David Watkins (Eclipse Group Consulting) Steve Cook (Eclipse Group Consulting)

VP of Operations Director of Operations Director of Business Systems Director of Demand Planning Product Configuration Manager Director of Retail Sales Project Manager IT Consultant Consultant

Lachlan Kane (Eclipse Group Consulting) Bruce Kusch (Eclipse Group Consulting) Lisa Bass (Eclipse Group Consulting)

1.7

Names and number of people involved from each functional organization and category of each organization (Internal)

Kate Vitasek Dan Beck Fred Laskey Kenyon Blackhurst Mark Kelly Mike Millet Ozzy Henriquez Dave Grostic Gus Summers Tom Cusack Kelly Allen Robert Higley

1.8

Consultant Consultant Consultant

Vice President of Operations Services Sr. Vice President Operations VP and GM of MMI Utah Solution Center Director of Ops, Business Mgr Utah GM of MMI Raleigh Solution Center Business Systems Consultant Business Management Operations Acct Management Distribution Manager Business Manager, Raleigh Logistics Manager Planning Manager

Point of contact for each supply chain partner

Kate Vitasek VP of Global Accounts Modus Media International 227 Bellevue Way NE PMB #193 Bellevue WA 98004 425-985-6396 [email protected]

Brett Aumack Director of Supply Chain Strategy Intuit Corporation 2650 Casey Ave Mountain View, CA 94043 650-944-2819 [email protected]

Section 2: Implementation 2.1.1 Reason supply chain project was undertaken and how it was selected In 1999 Intuit was at the top of its market space with over 85% market share in the personal finance software sector with leading products such as Quicken and Turbo Tax. Intuit was just starting to feel pressure from both competitors and customers to improve their supply chain performance. Companies like Microsoft and H&R Block were beginning to enter the market with products like Microsoft Money and TaxCut. Intuit and MMI set out with the vision to help Intuit become a world-class software industry leader through supply chain excellence. The objectives of the project were twofold: 1) to have a significant and quantifiable impact on both the operational capabilities and execution 2) to leverage performance measurements as a change agent to drive operational excellence The teams viewed this not as a simple supply chain improvement project, but a true joint reengineering of how the supply chain worked to provide significant improvements to both service levels and supply chain costs. As such, the companies entered into a partnership to take Intuit’s supply chain to the next level by adding performance management tools and capabilities to help achieve operational excellence and high service levels to Intuit’s customers.

2.2

Duration of project

The Project consisted of three phases, of which the first two phases have already been completed. The quantifiable results of the first two phases are included in this awards submission proposal. Phase 1 – Supply Chain Consolidation and Capabilities Enhancements (1999-2000) Phase 2 – Supply Chain Measurements and Operational Excellence (2000-2001) Phase 3 – Supply Chain Optimization (2002 – in process) The main objective to dividing the project into these phases was to first make the supply chain more manageable and consistent before moving on to optimization. A second objective for not moving straight to the optimization phase was that the existing supply chain process and participants were not capturing the needed data and metrics to help Intuit and MMI make the key optimization decisions. Lastly, Intuit wanted to add

several new capabilities to their supply chain in the near term and felt that having new capabilities to improve service to their customers was a higher priority. There are several key reasons why this project was designed to span over such a long period of time. The primary reason was that Intuit and MMI wanted to have the key employees from both companies who ran the day-to-day business play major roles in the project. This forced the project to overlap with their current workload. It was decided that this approach, although somewhat slower, would help incorporate a better overall understanding of Intuit’s supply chain knowledge into the project. In addition, the Intuit culture by nature was resistant to change and both Intuit and MMI agreed that the best way to overcome this hurdle was to have the maximum amount of employees participate in the project.

2.3

Process used to complete the project

Intuit and MMI approached the project from a SCOR approach by setting up cross functional teams to meet individual sub-project objectives while having functional SCOR-based areas. Using this approach allowed the project to optimize functional SCOR areas while also having a cross supply chain view for things like Metrics and Partnership.

Cross Functional areas SCOR based areas

Key Key Project Project Sponsors Sponsors

Strategic Strategic Project Project Leads Leads

Core Core Project Project Team Team SOURCE SOURCE

Suppliers

Information Information Systems Systems and and Tech. Tech. FY00 FY00 Deployment Deployment

MAKE MAKE

DELIVER DELIVER

Craig Aufenkamp

Mike Millet

Dave Watkins

Supply Supply Chain Chain Measurement Measurement and and Business Business Case Case Mgmt Mgmt..

Leslie Mitchell

Ozzy Henriques

Steve Cook

Life Life Cycle Cycle Management Management

Anne Fajardo

Paul Braverman

Bruce Kusch

Collaborative Collaborative Planning Planning and and Forecasting Forecasting

Anne Fajardo

Paul Braverman

Bruce Kusch

G. Lowe

Gus Summers

Lachlann Kane

K. McDaniel

Mike Millet

Lisa Bass

Rapid Rapid Replenishment Replenishment Order Order Fulfillment Fulfillment Process Process Improvement Improvement

Legend: Orange – Intuit representatives Red –MMI representatives Blue - Eclipse Consulting Group representatives

Customers

PLAN PLAN

In addition to the development of the project itself, each Project Phase was designed to adopt a 4-step approach to help turn vision into action. Each phase included mobilization, planning, implementation and measurement/ tune steps (see figure below). By breaking down each phase into smaller tasks the team was better able to take on the larger and more complex problems of changing the entire supply chain.

Vision

“How To”

Action

Mobilize • Envision End State • Identify Champions Plan • Build Team • Gain Commitment • Plan in Detail • ROI/Investment Implement • Communicate • Determine Metrics/ • Measure • Execute Project • Celebrate and Reward Targets Measure Tasks • Anticipate & (C & R) & Tune Remove Roadblocks• Manage Timelines • Manage • Measure vs Targets • Measure Expectations • Tweak as Required • Communicate • Measure • Communicate •C&R • Communicate •C&R •C&R

S U C C E S S

TIME

2.4

Significant challenges encountered, process of resolution, and solutions. (Identify best practices)

As with any large multi-company project the team experienced several challenges. These are outlined below as lessons learned: •

Success requires collaborative team versus arms length “vendor” relationship: When the project first started there were many people at Intuit whose jobs would change based on the outcome of the project. For example, as MMI began to take over the Sourcing activities, several positions at Intuit would need to be eliminated or changed considerably. As a result the first few months of the project were a struggle as Intuit learned to adopt more of a “partnership” approach to working with MMI. Likewise, several MMI employees were often not as assertive as they should have been in coming up with proactive solutions because they did not want to go against “the customer is always right” philosophy. As the two teams progressed, these barriers began coming down and the two companies

•

began working as one team. One of the key success factors to knocking down the barriers was that both companies had top-level executive support. The project team and the Sr. Mgmt teams from both companies attended regular project reviews. Consideration of change management and the company cultures involved: Intuit had successfully built a billion dollar company using methods and practices their employees had become used to using. This success made many Intuit employees feel skeptical that there could be a better way of managing their supply chain. One could make the argument; “why change when the company has been so successful?” As such, it was often a challenge for Intuit employees to have an open mind about alternative options to how their business could be improved. To overcome this mindset, MMI and Intuit engaged in the following activities: o Reviewed case studies and best practices from other customers that did business with MMI to demonstrate successful alternatives. o Brought in outside consultants to work with both companies to bring in fresh ideas and help analyze the benefits of potential solutions. • Hired a professional Project Manager to run the project and document the progress of the project. This added structure and stability, which helped keep the various sub-teams on track against their deliverables. o Created processes and the organizational structure to support the needed changes. One example of the resistance to change was in the adoption of SCORcard. When the initial SCORcard of 107 metrics was first introduced everyone thought it was great. Each person had provided input into the SCORcard and wanted to include the metrics associated with their functional area. However, very few managers actually used the SCORcard after it was launched due to the complexity and size. As a result, the team developed a process to help individuals use the SCORcard more effectively. The team was able to ultimately get a good balance in the metrics and the process that made it easy for people to use. Another learning was that participation in change management practices (such as classes taught by Michael Hammer) or the reading of related materials (such as Who Moved My Cheese would have helped prime everyone to be receptive to the potential benefits of change.

2.5 Measures used to measure a) progress and b) success When the project started Intuit did not have any metrics in place to measure its supply chain performance. One of the main objectives of the project was to leverage measurements as a change agent to drive quantifiable improvements. The teams believed that measuring the performance of the supply chain would help them better understand and refine their business processes to get to the desired quantifiable results.

In early 2000 the team began to develop a comprehensive list of metrics they would use to measure the progress of the changes and success of the overall project. The team created a five-part metrics scorecard based on the SCOR metrics. The SCORcard included an Executive Summary and a section each for Plan, Source, Make and Deliver metrics. D e liv e r S o u rce Make P lan E x e c u tiv e S u m m a r y V o l u m e & A c tiv ity C o st & A s s e ts • T o t a l U n its S h i p p e d • A v erage O rders/day • # S h ip -t o A d d r e s s e s

Q u a lity & S e r v i c e • % Shipped on Time • % O rders A ccurate • Forecast Accuracy

C y c le T i m e s

• • • • • • • • •

DSO C h a n n e l In v e n t o r y $ C h a n n e l In v e n t o r y W e e k s Channel Returns T o tal Inventory at M M I T o tal Inventory T u r n s Cash to Cash T o tal Transportation C o s t M a t e r ial C o s t I n d e x

• T o tal O r d e r L e a d T i m e

The original SCORcard design was highly comprehensive and included 107 metrics. Both Modus Media and Intuit were responsible for collecting metrics that went into the SCORcard. Overall it took 4 months for the two organizations to implement the SCORcard. Once implemented both MMI and Intuit found using the SCORcard to be cumbersome. In addition, as Intuit began to use the SCORcard it found that deployment didn’t produce a holistic and easy to use approach. As a result, the project team went back to the drawing board and identified a simpler version, which included a total of 17 key metrics controllable by MMI and 13 key metrics controllable by Intuit. The team also wanted to make the process for using and understanding the metrics easier and implemented a monthly metrics review process and a more formalized Quarterly Business Review (QBR) process with participation from the management of both companies. The result was the Monthly Metrics SCORcard to measure and quantify the overall outsourcing relationship effectiveness of MMI. MMI and Intuit assigned values to each of the metrics that rolled up to a monthly total score. Each of the individual metrics was assigned a weight based on its importance and impact to the overall supply chain. Lastly, each metric was assigned “goals” with a score from 0 to 4. A perfect score of 4 for an individual metric meant that MMI exceeded Intuit’s goal for that metric. The result was a SCORcard that yielded an overall score to simplify the management review of the supply chain.

To ensure the proper focus and constant improvement to the SCORcard, MMI and Intuit coupled the Metrics Review Process with a “pay for performance” approach. This is the keystone to the success of the program. Both MMI and Intuit acknowledged that by improving their performance, MMI was able to help Intuit improve upon its financial performance. The model creates a win-win scenario in which both organizations profit. The process enables MMI to be eligible for a financial incentive payout if certain overall scoring objectives are met. The scores are rolled up quarterly and reviewed as part of the QBR process. The amount of the MMI payout is based on the quarterly SCORcard performance and the amount of quarterly sales. Beginning in November 2000, the companies had fully implemented the pay for performance SCORcard that was reviewed monthly by the business owners and was rolled up quarterly in a more formal QBR process. In addition, baseline metrics and targets were set for the pay for performance and gainsharing bonuses. In reviewing the individual monthly metrics, MMI and Intuit determined that a method of sharing relevant Score Card data needed to be established. This was critical to eliminating any confusion and would allow for more timely corrective action if an issue was identified. Through the use of QuickBase, a web-based database tool that Intuit owns, MMI and Intuit began sharing relevant SCORcard data. This tool has expanded to where all but a few of the metrics are maintained real-time on QuickBase. This has allowed for more people to have access to the underlying data that drives the model and helps foster a better understanding of the state of the supply chain.

2.6

Documented and quantified cost and performance improvement benefits

The official Score Card launched in Nov 2000 and the first QBR was in Jan 2001. MMI and Intuit have been able to improve on key metrics considerably, increasing the QBR SCORcard grade from 42 in November 2000 to 89 in December 2001.

SCORcard Grade (Scale of 0 to 100 with 100 Exceeding all Targets) 100 90 80 70 Score

60 50 40 Dec-01

Nov-01

Oct-01

Sep-01

Aug-01

Jul-01

Jun-01

May-01

Apr-01

Mar-01

Feb-01

Jan-01

Dec-00

Nov-00

30

Overall, Phase 2 of the project focused on Supply Chain Measurements and Operational Excellence. In addition to the improvement of the overall SCORcard results, the individual metrics numbers have also consistently improved. For example, some key SCOR metrics which showed improvement were: Plan – Forecast Accuracy from 45% to 60% Source – Product Acquisition Cost with more than a 10% reduction in costs Source – % Defective from 800 DPPM to less than 500 DPPM Enable Make – Inventory Cycle Count Accuracy from 98% to over 99% The most dramatic impact was shown on Scrap Expense metrics (Make and Deliver), with component scrap expense reduced from 24% to 4%. Under the pay for performance incentives, Intuit paid out a total of over $1.5m in bonus/incentive pay to MMI between January 2001 and February 2002.

2.7

How the success of this effort supports organizational objectives described in Section 1, Item 3

For MMI, this project was a clear success, which showed the financial and operational benefits that can be realized by clients who are willing to work in a truly collaborative approach to supply chain management. By sharing information and agreeing on metrics tied to performance and incentives, MMI was able to move from a typical vendor/supplier relationship to a true strategic partner relationship with Intuit. For Intuit, the success of this effort helped lower overall cost and improve service delivery to more customers. Intuit now has a retail supply chain model foundation that is partnered with retail sales and provides offensive leverage in the marketplace.

Section 3: Knowledge Transfer 3.1

Efforts to share lessons from this effort with other internal organizations

MMI has made a significant effort to share this success story across the organization. We have created a case study, which has become part of the Business Management training that all MMI client-facing employees participate in on a regular basis. Intuit has also made great progress in sharing with other internal organizations. The Intuit and MMI relationship is a model within Intuit on how relationships should be managed and how success is achieved more effectively in a ‘partnership’ relationship then a ‘customer/vendor’ relationship.

3.2

How the results can be transferred to other organizations and the likely candidates for transference

Both MMI and Intuit are strong believers in sharing best practices. Intuit and MMI have teamed up to speak at the 2000 Supply Chain World on Phase 1 and at the Council of Logistics Management Annual Conference in 2001 for Phase 2. In addition, the companies have shared their experiences at the Stanford Supply Chain Forum and as classroom lecturerers for Stanford University and the University of Tennessee. Most recently, Intuit and MMI were featured in an article about successfully using metrics in the October 2001 issue of Logistics Management. Both companies are willing to share experiences in future Supply Chain Council activities and have submitted suggested metrics additions to the Supply Chain Council as posted on the Supply Chain Council website under the metrics section for members. Most recently Intuit and MMI have begun discussions to benchmark the success of the model with the Microsoft Corporation. MMI and Intuit believe that almost all companies can benefit from their learnings. The key to the success does not stand alone in the actual supply chain improvements that were done – but in the use of the SCOR approach to the project design and use of the SCOR based metrics to drive quantifiable improvements against key objectives. Regardless of the industry or what part of the supply chain a company participates, linking up their objectives to the SCOR philosophies and using SCOR metrics to will drive improvements.