Within the Microsoft Corporation the original equipment manufacturing (OEM) supply chain has gone largely unchanged for the past decade. Throughout the years, the supply chain architecture has been a good economic outsourced model. It has been effective in fulfilling Microsoft's fundamental needs through its security and efficiency. Though the supply chain model worked well for Microsoft and its customers, the company is always seeking ways to improve business for their customers. Microsoft took note of various changes within the market and saw opportunity for change. "As we observed the PC industry changing, due to increased competition and macroeconomics, we knew we had to take action. Microsoft OEM Operations needed to make big, customer impacting changes that would reduce costs and improve service," stated John Solheim, World Wide Supply Chain Director for Microsoft Licensing, GP (MSLI) in Reno, Nevada. The analysis of the present supply chain climate presented tremendously favorable circumstances to begin the OEM supply chain transformation project in 2008.

As part of the transformation, the OEM Operations team evaluated the supply chain architecture and focused on the question of how Microsoft Corporation could provide "Best in Class" service and help drive share gains by becoming the true software provider of choice. Microsoft's OEM supply chain leadership team decided to focus on three main areas: listening to customers, improving processes, and empowering the team to challenge the status quo.

"A journey of a thousand miles begins with a single step"- Lao-tzu

As the journey of transformation pushed forward, specific survey tools were produced and circulated amongst customers. The team used the surveyed customer's feedback to evaluate how to improve the availability of value added services, execution excellence, product launch planning and pricing. Through their partnership and collaboration with customers, the OEM Supply Chain team was able to achieve their goals! Using a scorecard methodology, the team implemented an optimization framework that focused on a proactive supplier management approach. These changes improved processes and model design and customers felt empowered and that they had a voice in the changes Microsoft was making.

By partnering more closely with customers, it became clear that a drastic model change would not only improve and streamline existing processes, but could result in huge cost savings for both the customer and the company. In 2008, there were 76 Authorized ipilot operator connect (AR) sites located around the globe. Yet, while they were near their customers, the distance between the source of the certificate of authentication (COA) and the physical AR locations, invited many potential hazards. Microsoft's OEM Operations targeted changing the existing model to improve specific issues including: theft or loss-in-transit, security burden and cost of on-shelf inventory. They applied the tenet of "the closer the better" and collaborated across multiple teams at Microsoft Corporation to change the existing restrictions that had required the AR locations to be in facilities separate from their customers. Robert Barrett, General Manager OEM Operations, MSLI, explained, "By changing the AR location model alone, we have enabled one of our customers to minimize its one week buffer stock to one day, reducing COA's from 80k to 10k, and has saved this customer $120 million in inventory carrying costs to date."