When I was a rookie management consultant—many, many years ago—one of my first assignments was to help pharmaceutical companies benchmark their inventory turnover (a metric for the amount of time that finished product sits on a shelf before it's sold). At the time, American pharmaceutical manufacturers were facing sudden and dramatic cost pressures from disruptive "managed healthcare," essentially using buying power to negotiate lower drug prices.
The pharma industry was looking everywhere to shave costs, while still preserving their funding of innovative R&D. Traditionally, pharma didn't pay much attention to a financial ratio like inventory turnover, as their cost of goods sold was relatively low and most medications were not perishable goods. So, our consultancy looked to see what the financial impact might be for reducing their inventory on hand from six months down to a more reasonable three or four months on hand as reported by some of their consumer products divisions. This represented a meaningful, but not material, cost saving, so we continued to look for other best practices to apply.
The grandfather of inventory turnover
By chance, I had met one of our partners from one of our remote accounting businesses who was attending a knowledge management meeting in New York City. He said that he had a customer who was the grandfather of inventory turnover and asked if would we like his client to visit our practice and share his experience with our engagement team. Given that our new accounting colleague was from a practice far from any big industrial center, we accepted the offer mostly as a courtesy, given the setting of a knowledge sharing exercise.
So, needless to say, we were a bit taken aback when who showed up in our customer project war room, but the owner of a chicken processing plant. We had to know...so we asked: what does chicken processing have to do our inventory turnover dilemma? "Fellas," said this burly man in a twenty year old suit, "At my plant, I turn over my inventory twice a day, not twice a year. The chickens arrive from the farm in the morning, and the restaurants in town are serving them that day for lunch."
Solutions tailored to the individual user
In telecom, we're rethinking such breakthrough automation as a way to enable hyper personalization and unique consumption models. In our recently published white paper, Telecom IT for the Digital Economy, Ericsson envisions that customer value will one day be packaged into a unique offering at the time of consumption, enabled by the computing power of the cloud.
"The cloud enables IT suppliers to orchestrate and customize complex solutions tailored to the individual user by fundamentally rethinking how best to serve their customers. Operators must begin to think, act, and operate like cloud providers to serve users, with an offering that is dynamically configured around each individual or enterprise and their specific needs."
Today's cloudified revenue management start to build that platform for true market innovation, employing the predictive analytics, adaptive business logic, and instant time-to-market that foster easier digital service creation and offer experimentation through the eyes of the customer. The leaps we are taking are something to cluck about: from taking months to market a new idea to taking days to minutes.
Learn more about how the expanding digital economy has exposed a gap in the capabilities of telecom IT systems: