One of the highlights of our SCRC meeting was a presentation by John Zapko, VP of Global Procurement at Lenovo. In his presentation to the group, John discussed some of the critical enablers that have led to Lenovo’s incredible success, and current position as the number 3 top PC manufacturer in the world.
Lenovo has a Business Management System which emphasizes monthly progress to key stakeholders, which includes customers, investors, and of course, suppliers. During the Thailand flood, this communication has been escalated to provide daily delivery of progress to stakeholders. The thinking here is that because Lenovo’s supply chain is embedded and critical for execution it is critical that daily communications occur with customers, investor relations, and of course suppliers.
John emphasized that the impact of the Thailand flood on Lenovo’s supply chain is different then the Japanese tsunami this year, and has been the biggest test of Lenovo’s Busienss Management System for communications. The reason is that first of all, it is a major impact to a specific piece of business – hard disk drives – which is in EVERY machine that Lenovo builds (as well as those of its competitors)! Almost 50% of the world’s supply of hard drives is in a flood zone.
John noted that “We first had to work through the realization of the impact and had to convince customers and ourselves it was a major issue. As you go to mobilize quickly we had to first of all convince ourselves and then convince others that this situation was WORSE than the Japanese tsunami in terms of impact to our business. People challenged us – how could it be worse? Floods happen all the time! We got through Japan so well – we can do the same here….”
“The realization that it was worse than Japan required us to mobilize and assess and get on the ground and send people there. We shifted immediately to a crisis management role and leadership got involved with key supplier relationships. We had to go in and establish an understanding of the details of the situation, and establish close communication with suppliers to truly understand the impact, bring it to credibility, and describe it to the business and to customers. This played out in weeks (getting a handle on what is happening) and our suppliers were also trying to figure out how to answer our questions and competitors questions!”
“Getting a handle on the facts and getting the business re-set was the second phase of our response. Once you understand supply impact, cost impact, and competitive response, we had to figure out our response, and that is still in process for us. The driver for all of this was focused on our key supplier relationships, which we have cultivated through our actions. Lenovo’s supplier relationships are a core part of our strategy, and we establish very close relationships with suppliers that are most often NOT about commercial terms, but are truly focused on a long-term relationship. We communicated with our suppliers to really, really understand what was happening, and what we could count on. They were willing to tell us, because they trust us based on our actions in the past.
We also had to navigate as well what other parties in the ecosystem were doing. First, Seagate said they would raise prices – and then Dell informed the market there would be a huge impact – and this caused even more complexity for us. Once we understood this we began creating a plan focused on optimizing the business.”
From an agility driver perspective, the Business Management Systems at Lenovo that focuses on transparency and communications is central to being agile in this environment. The second core element is the ability to execute to the plan! It is one thing to communicate –but another to drive major alterations and do it daily. We have an ability to re-set and unify decisions based on the most recent changes to the plan. This crisis has not only tested Lenovo’s agility in a formal manner, but is real proof to investors that Lenovo is able to deal with adversity and land on its feet.
Stay tuned for more news on Lenovo’s agility test!