M+E Daily

The synchronization of videogame hardware and software supply chains has become a unique operational challenge, considering the high costs and long lead times of game development, along with increasingly shorter product life cycles and shifting retail marketing strategies.

Owen Roberts oversees North American Operations of Microsoft’s Entertainment and Devices Division as General Manager. During his 11-year tenure with Mircosoft, Roberts has spearheaded the European launch of the Xbox console, and bridged gaps between the company’s various business units and worldwide retail teams as head of the Redmond-based “WW Retail Go to Market” initiative.

Roberts will address entertainment supply chain issues in greater detail as a speaker at the GameSupply conference in San Jose, CA Feb. 10. For more information, visit www.gamesupplyacademy.com.

MESA: How did the economic crisis impact supply chains in 2009, and how did you meet these challenges?

Roberts: The number one challenge was inventory management, as retailers shrank their open to buy and managed inventory down. Clearly we did not want to lose sales, so we had to engage with the retailers to ensure we had sufficient inventory on shelves. Intense collaboration between the supply chain team, sales and category marketing, and the retail buyers themselves resulted in high in stock percentages while turns increased.

Obviously this could have had a negative impact on our fulfillment costs, as we were essentially doing smaller deliveries more frequently. However by planning with our warehouses and logistics each week we were able to adjust picking patterns that ensured no cost increases.

How do you synchronize the supply chains of the consoles with games from product development to delivery to retail?

We have a function within our Supply Chain team called Launch Management. This team has a critical role for all our significant launches as they act as the one central point where all of our various functional teams — Manufacturing, Planning, Sales, Retail Ops, Distribution, Trade, etc. — come together as frequently as necessary to ensure the flawless launch of both software and hardware across the channel.

The key is frequent good communication and the ability of our launch team to have a 360-degree view of having the right product on shelf at the appointed date. Some of the volumes we are moving are staggering at times, thus tight coordination is critical across all elements of our supply chain.

We of course also avail of Microsoft Project a great deal, as there is no better tool to ensure we have identified the correct critical path of every launch.

How do you integrate retail distribution with online and digital delivery of videogames?

Right now I would say we are at the beginning of this journey. Clearly the conundrum we all face is how to optimize for our customers in such a way that enables all channels to be effective and efficient. Microsoft’s stated objective is to be the leader in connected entertainment – another way of thinking about this is three screens connected in the cloud. With that as our guiding star we need to collectively figure out how we deliver content, services and subscriptions wherever and however the consumer would like to consume it.

We need to be able to offer choice to our customers – where they buy and how they buy. My biggest focus right now is ensuring we have the correct infrastructure to identify and recognize a customer no matter what channel they elect to buy through. At the end of the day they are a Microsoft customer and we need to ensure their buying and consumption experience is best in class, thus ensuring a loyal and valuable long-term relationship.

Tell us a real-life story from your own enterprise about how the supply chain performed well (or poorly) and what lessons you learned.

This year we made some significant adjustments to our supply chain supporting the Americas. At the same time, we had some very large launches including Windows 7 and the opening of our own Microsoft Stores. The ’09 calendar year saw us migrate our entire Distribution and Logistics network to a new partner, CEVA Logistics. As part of this we brought up a green-field site in California that coincided with the Windows 7 launch, the peak sell in month for our Xbox business, and the MSFT stores opening on October 22nd. With perfect hindsight, it was not the smartest decision I ever made as the potential for something going wrong was probably pretty high!

That said I was blown away with how well the team performed. The key to our success was great planning and great collaboration across our supply chain teams and our IT team. We have of course planned before and collaborated before, but this time it went a level deeper.

For the first time, I saw a complete blurring of the lines between our outsource partners and MSFT. I have long strived for getting the entire supply chain team to act as one. This is hard when you outsource every aspect of the business, but I was happy to see with the right partners, the right leaders on both sides, and a common customer view just what we were able to achieve. Was it easy? No. Was it perfect? No. Was it transparent to our customers? YES, and that was really all that mattered.

We certainly over-communicated throughout the process and our senior management team worked hard to lead the huge amount of change that was necessary to ensure the successful launches.