The "STB" Supply Chain

Set-top boxes (STBs)—standalone devices that process digital entertainment information— represent a growing market, but their current supply chain model is too simplistic. Savvy companies in this market have a tremendous opportunity to create a new operating model that will help enable high performance and gains competitive advantage.

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Set-top boxes are increasing in popularity, but their supply chains are still fairly basic.

With some analysts predicting that as many as 200 million STBs could ship in 2011, and new players such as telecommunications providers entering the market, supply chains will have to get more sophisticated. In addition, the technology is becoming more complex, so life cycles are shrinking, failure rates are rising and, as a result, supply chains are lengthening.

The current supply chain strategy—basically "don't run out of stock"—must give way to a new operating model.

A new operating model focused on the efficient retrieval, refurbishment and reconnection of STBs could help savvy communications companies on their journey toward high performance.

Before making executional changes to the supply chain, companies must refine their service and logistics strategies. Devising a service strategy begins with a deep understanding of the three service options (technical dispatch, retail presence and exchange by mail) and their impact on cost, service and time.

When it comes to a logistics strategy, the most important driver is that the costs for reverse logistics (service and repair) are typically twice those of forward costs. Most logistics network designs should, therefore, focus first on finding the best location for repair and refurbishment centers.

Once these strategies are in place, the focus becomes execution. The key challenge in this area is the wide variety of forward and reverse logistics competencies at which STB suppliers must excel.

The efficiency with which a company exchanges, retrieves, refurbishes and redeploys set-top boxes can make a significant impact on its bottom line.

Mastery of the STB supply chain follows many of the tenets Accenture has identified as key to high performance in supply chain management. Accordingly, leaders in this industry:

• Incorporate supply chains into their business strategies. Virtually all winning business strategies have competitively advantaged supply chain management at their core.
  
  
• Think and operate end-to-end. This will require integrated "value chain" models that encompass design and new product- introduction strategies, reverse logistics and proactive obsolescence approaches, and everything in between.
  
  
• Make sage investments in supply chain technology. Pay particular attention to those that improve data visibility and align supplies with demand.
  
  
• Recognize that supply chain mastery is a powerful tool for increasing cash flow.

Terry W. Steger is a partner in the Accenture Supply Chain Management service line. He works with communications, high-tech, and media and entertainment companies to design and implement major change initiatives in procurement, supply chain management and service management operations. Based in Dallas, Texas, he can be reached at terry.w.steger@accenture.com.

Pierre J. Mawet is a senior manager in the Accenture Supply Chain Management service line. He focuses on helping companies design and implement supply chain strategies in inventory management, asset management, fulfillment, logistics security, distribution and reverse logistics. Based in Dallas, Texas, he can be reached at pierre.j.mawet@accenture.com.

Kyle W. Hawke is a consultant in the Accenture Supply Chain Management service line. His focus is on helping communications providers with distribution network design, reverse logistics, service management and order-to-bill systems implementation. Based in Richmond, Virginia, he can be reached at kyle.w.hawke@accenture.com.