DIRECTV Grows After Supply Chain Makeover

As the market for digital television became increasingly saturated and competition for customers intensified, DIRECTV decided to move to a new business model that required a more agile supply chain.

Partnering with CSC, DIRECTV reengineered its supply chain to meet growth objectives and satisfy consumer demand for an ever-greater variety of products and services. DIRECTV accomplished all this, and more. It boosted profits and reduced the cost of acquiring new subscribers by more than 9 percent.

"This is a major success for DIRECTV," says John Powers, DIRECTV chief information officer. "CSC is helping us establish a world-class supply chain management environment."

Streamlining the supply chain

DIRECTV, the world's leading satellite television service provider, embarked on a multi-year program to streamline and restructure its entire supply chain. The company needed a business and IT partner to help it get the most out of its new business plan and chose CSC, which had been its technology services provider since 1995. CSC helped DIRECTV with strategies to reduce the number of suppliers in the network, increase partner collaboration, and make coordination of demand and supply easier.

In partnership with DIRECTV, CSC used its supply chain maturity framework to develop a roadmap for the process, organization and technology changes required to transform the extended supply chain and drive closer interaction with business partners. DIRECTV then executed a strategic sourcing program, coupled with a network rationalization effort, to take immediate costs out of the supply chain, increase capacities, and gain tighter control of products throughout their lifecycle. Next, the DIRECTV-CSC team enhanced internal planning and fulfillment processes. DIRECTV gave its partners self-service tools for ordering, procurement, product tracking and returns. The team also reengineered and implemented an entire reverse logistics process for product returns, testing and refurbishment.

CSC worked closely with DIRECTV to define the organizational skills needed to sustain these new business processes. DIRECTV used many components of the SAP enterprise applications suite and a SeeBeyond-based, service-oriented architecture to technically enable this new business model.

Sustaining growth

As a result of its work with CSC, DIRECTV is now the channel master of its extended supply chain network, says Michael Bek, senior partner in CSC’s supply chain practice. DIRECTV migrated from a product fulfillment model, in which it controlled less than 25 percent of distribution, to one where it coordinates 100 percent.

DIRECTV now retains ownership of the equipment, leases it out and refurbishes it for redistribution to customers. This allows DIRECTV to plan or postpone purchases far in advance, and lets its partners do the same — significantly reducing the cost to procure and maintain inventory. This new business model also puts DIRECTV in more direct contact with customers, making it possible to gather better information, build stronger relationships, sell more services, and enhance customer retention.

Delivering results

According to Bek, DIRECTV's order fulfillment volume increased 300 percent with only a single-digit personnel increase. Recovery and repair costs dropped by more than 10 percent, and processing time for customer credits decreased by 85 percent. DIRECTV also began redeploying refurbished hardware back into distribution channels, saving millions of dollars in deferred purchases of new hardware.

"Every quarter, DIRECTV installs set top box equipment for nearly 1 million new subscribers, each of whom has specific equipment and household needs,” says John Schweisberger, a managing director for CSC’s Global Business Solutions. “That kind of complexity and volume would cripple many companies, but we’ve been able to bring to DIRECTV lessons learned from work that CSC has done with other high-volume supply organizations, enabling them to continue supporting incredible growth for years to come.”

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