A hub and spoke model is essentially a centralized distribution system where customer premise equipment (CPE) inventory is processed and then shipped to smaller nodes or directly to consumers. The smaller nodes may be smaller warehouses, office locations, local pickup and drop-off locations. Converting to a hub and spoke model has significant advantages for cable companies which include:
Advantages
- Reduced Capital for Inventory and Lowering Facilities Costs are the primary reasons to convert to a hub and spoke distribution system
- Reducing the number of warehouses significantly reduces rent and other building expenses such as utility and maintenance expenses. In addition, lower operational and administrative overhead is achieved as taxes, insurance, telephone and other facility overhead is eliminated.
- Reducing the number of warehouses and centralizing inventory dramatically decrease the the amount of inventory carried. Only the hub needs to carry a lengthy supply and nodes can switch to a more economic Just-in- Time inventory method.
- Moving equipment between the becomes easier as logistics becomes simpler to manipulate.
- Increased Efficiencies as specialization takes the place of generalist perfoming multiple tasks. Functions positively impacted by centralization are
- Testing
- Diagnostics
- Cleaning
- Repacking
- Box and Set up
- Speed of moving CPE between facilities and to the consumer increases.
- Economies of scale result in cost savings
in all aspects of operations.
- Mass shipping and receiving of larger quantities will lower inbound and outbound shipping costs
- Larger more efficient equipment i.e copiers, labeling equipment etc., replaces smaller less used equipement at remote locations lowering maintenance and repair expenses
- Centralized purchasing lowers per unit, shipping and administrative time as operating supplies can be purchased in larger quantities
- Inventory control is better by not having to reconcile as many locations
- Duplication or elimination of software packages and administrative tasks
- Lower CPE loss
- Ability to perform am accurate serialized inventory is enhanced. A serialized reconciliation provides detailed CPE information traceable by the serial number on each piece of equipment.A full reconciliation tells you what is missing by gathering all records for the specified location from the billing system and then comparing it to the scanned data. Fewer locations needing to be reconciled means better control and less CPE loss.
- Outside vendor repairs shops can be minimized as economies of scale are developed thus reducing missing CPE
Drawbacks: A hub and spoke system does have potential drawbacks and these should be recognized and planned for with contigency plans or adjustments.
- Bottlenecks: From an operational standpoint the central hub has the potential to become a non-functioning bottleneck especialy with regard to weather and other environmental problems. In addition to weather related issues, poor operations management can negate virtually all of the above listed advantages to the point where customers must wait extended periods of time to receive CPE thus impacting revenues.
- Reduced Flexibility: Other drawsbacks include flexibility that smaller operations have over larger operations. Problems and issues that may be of concern to a particular location are now lumped into a bigger pot and may not receive the attention they need. This is an operations management issue to be thought out before conversion.
- Not all tasks can be centralized: For example CPE resets have historically been performed by the location that the CPE originated from. Plans should be made to accommodate these types of issues.
Conversion to a hub and spoke model is a competitive necessity. Approximately 40% of cable operators operate on a hub and spoke model of some degree. The cost advantage to these operations is likely to be magnified as revenues flatten due to economic times or competitive forces.
A serialized reconciliation provides detailed Customer Premise Equipment (CPE) information traceable by the serial number on each piece of equipment. Tracking by serial number also eliminates guesswork of CPE repair by creating a history for each CPE. Typical reconciliation reports provide detailed CPE counts, matches against the billing system, lists of missing items, wrong location or status and unknown serial numbers.
Why do a Serialized Reconciliation?
The biggest reason serialized reconciliations are performed is
because of their impact on the cash flow of an organization. Good CPE counts impact cash flow by:
- Increasing operational and financial control
- Better forecasting and planning - accurate historical information is the premise for forecasting future needs. A solid forecast enables better planning especially budgeting. Nothing hurts an operations manager worse than coming in over budget.
- Better organized warehouses - knowing where everything is means less time spent looking for particular CPE and more efficient operations and a lowering of labor costs. Serialized reconciliations can be done with just a fraction of the manpower and far quicker.
- Increasing accuracy
- Flexibility for the unknown (large PPV events, new marketing campaigns) - Good counts allows for the storing of CPE for special events and promotions without the risk falling short of demand or committing supplies that are not available.
- Great purchasing with timely replenishment of inventory levels - carrying cost of inventory are lowered and more timely restocking will occur.
- Reduced CPE loss from technicians, contractors and repair vendors by knowing who is accountable for CPE.
- Better internal audit results - spot and regular audits will be quicker and can pinpoint where CPE is located.
- Identify work flow gaps where CPE loss occurs - by identifying missing and not on file CPE patterns will develop, enabling adjustments to work flow procedures to correct high variances.
- Reducing CPE Losses
- Reduction in lost CPE - elimination of opportunity theft and a reduction in missing/not on file CPE flows directly to the bottom line.
- Reduction in capital expenditures to replace missing CPE - lower theft means and a reduction of missing CPE means less capital expenditures are required to maintain supplies.
- Reduction in labor expenses replacing missing CPE - replacement of CPE costs more than just the physical unit. Less labor will be involved in ordering, restocking and investigating.
- Increases productivity by boosting morale - Reconciliations are no longer such a despised task. Faster more accurate reconciliations will reduce the stigma of a mundane task resulting in improved morale.
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Reconciliations, the word brings groans from warehouse and accounting staff. You can hear them cry out - "No Mas, No Mas". Monthly/Quarterly and Annually, morale dips and senior management braces for the latest CPE loss statistics. CPE reconciliation doesn't have to be a nightmare. Fortunately, there is a way to involve fewer people, perform an inventory reconciliation faster, and make senior management smile at the latest stats. The secret is a good Subscriber equipment Tracking System (SETS) integrated with handheld technology.
Old Versus New - The Process 
Back in the dark ages manual inventory reconciliations involved groups of people running around the warehouse trying locate and track down CPE. The result was usually a band-aid report showing only the number of boxes missing. Type of CPE and serial number were rarely detailed. Inventory reconciliations with SETS enables warehouses to perform a full physical inventory by scanning the serial numbers for a particular location. Locations normally include:
- A warehouse
- A contractors inventory
- Installers inventory
- Front office
- Vendor repair center
Reconciliations with SETS are performed with a handheld device, then uploaded to a PC and finally compared against the information in the billing system. The end result is a discrepancy report detailing the variance between the scanned data and data contained within the billing system.
Old Versus New - The Science
The use of technology (software and handheld devices) has enhanced the tracking of CPE and automated reports. More importantly the techology has impacted the bottom line of organizations. Bottom line impacts by:
- Increasing the accuracy of reconciliations. Reconciliation by serial number is significantly more accurate than a reconciliation by total. Counting the number of boxes does not tell you the serial numbers inside them. Handheld scanners virtually eliminate manual keying errors.
- Reducing labor costs. Few people are required to perform the reconciliation, Reconciliations are done in just a fraction of the time.
- Lowering theft Theft is lowered as inventory is more tightly and accurately controlled. Location inventory tightens down the theft opportunity.
- Lowering accidental losses. CPE is far less likely to fall through the cracks and go missing.
Reconciliation Options
Serializing your inventory allows for the tracking of CPE with far greater detail and flexibility. With SETS a full or cycle count reconciliation can be done. A full reconciliation tells you what is missing by gathering all records for the specified location from the billing system and then comparing it to the scanned data. From this comparison a discrepancy report shows the matched serial numbers and also the unmatched serial numbers. In addition, reports will show any CPE that were not scanned but the the billing system says they should be there and CPE scanned but not in the billing system.
In contrast, a cycle count reconciliation will only confirm (verify) what is at a particular location. Cycle count reconciliations are great for spot checking inventory count.
No longer do reconciliations need to be a nightmare. How do you do your reconciliations, are they accurate and fast?
Ahhh, The holiday season is here. So many of us look forward to seeing that new electronic device under the tree. Even better if the device is a flat screen HDTV or new computer. These are fantastic presents but their arrival brings about an opportunity for theft of CPE equipment used with the HDTVs and computers.
New TVs and computers bring a new need for internet and cable. Once the gift is unwrapped the next step is to hook it up to watch content. What if the new owner of the HDTV does not have cable? We would like to think that the consumer will soon become a subscriber and purchase all the premium channels. Watching premium content requires a CPE converter box and this is where the opportunity for theft begins. 
Some consumers choose the route of attempting to obtain free premium cable. This is called secondary theft and normally involves the purchase or use of illegal CPE and equipment designed to modify or unscramble premium services.
How you can reduce theft at this point:
- Stop opportunity theft of CPE at the warehouse by keeping tight track of CPE equipment using a warehouse management system in conjunction with a billing system. Unorganized warehouses provide unethical employees an unnecessary opportunity to grab CPE and sell it to potential subscribers or worse yet pirates for additional income.
- Track and audit all hotboxes. Hotboxes preset to receive all premium content make an excellent theft target for technicians. Make sure where the hotboxes are, confirm with clients if necessary.
- Examine all CPE returns and repairs for tampering. Although illegal, there are countless firms that manufacturer unscrambling devices. When tampering has identified, it would be a good idea to cross check with your billing system and see which technician delivered the CPE. Look for patterns that can be turned over to the tap audit department.
Employee theft is a question of opportunity. The tighter and more organized your controls are the less theft that is likely to occur. The holiday season is a prime time for employee theft to occur due to vacation schedules and higher consumer demands resulting in less supervision.
The first in a series of articles that addresses how to stop the bleeding from losses in Customer Premise Equipment (CPE) in the cable industry. CPE losses has always been a major problem within the industry. Fortunately, the introduction and use of bar code systems and handheld devices in warehouses has made a significant impact on these losses. If you have not already using mobile handheld technology you will be at a huge competitive disadvantage. Below are 3 great reasons to use bar codes and mobile handheld devices to reduce your CPE losses. 
- Serialize your inventory by using bar codes on all CPE. Bar Code and hand scan every incoming and outgoing shipment. The earlier you bar code your CPE the less stock is likely to go missing early. Serializing your inventory will also allow you to perform inventory and track the location of the CPE more accurately. A more accurate inventory can reduce CPE losses by correctly identifying the equipment inside larger boxes and its location in the warehouse. In addition, serialized inventory can also help identify subscriber equipment during service calls making sure the subscriber has legitimate equipment.
- Complete your inventory audits faster using handheld devices. There is also a significant labor cost reduction in conducting the audits as manual counting is eliminated and replaced by fewer personnel armed with handheld devices. CPE losses are reduced because inventory is completed more often and more accurately reducing theft and tightening the window for CPE to become lost.
- Eliminate reconciliation errors caused by handwriting serial numbers. Even if you can read what is printed, the likelihood of transposing a number while writing it down or keying into a system incorrectly can be devastating over time. Studies have shown manual key entry to cause at least one error per 300 characters versus 1 error in 3,000,000 scanned. Identifying missing stock early is crucial to reducing CPE losses.
With the economic hardships businesses are facing today it is no surprise that businesses are looking for every method possible to reduce expenses. While the cable industry seems to be somewhat resilient against the tough times, Multiple System Operators (MSOs) must take a hard look at the internal processes for managing their business to keep both their customers and their shareholders happy.
Most cable companies are taking a hard look at each budget line item, hoping to reduce expenses without impacting the customer experience. Although flat percentage cuts across each budget line item will save the company money, it is likely to have a negative impact on the customer experience if resources are thinned too much.
Let's be honest, the customer experience is the foundation of what makes a cable company successful. Unhappy customers switch services. A recent survey by JD Powers echoes the challenges cable companies face by highlighting how satellite and phone company TV services are receiving higher customer satisfaction marks than cable companies. Read more results from the JD Powers Survey.
The challenge MSOs face is how to look for ways to decrease costs without lowering consumer satisfaction levels. To address this concern, MSOs should first do a "Process Review". The process review takes a look at each department and examines them for inefficiencies. It is important that all departments be reviewed, as traditionally Warehouse and Supply Chain for CPE have received the least attention. The focus has usually been on getting new products to the customer as fast as possible. Unfortunately, when this occurs without considering the impact on effective supply chain management, the margins are reduced.
Why is this mission critical? CPE is one of the three largest capital expenditures for a cable MSO, and slight gains in efficiency mean significant reductions in capital expenditures. One possible solution to the increase efficiency is to incorporate of a Hub and Spoke distribution model. A hub and spoke distribution model works like a centralized yet integrated logistics system where multiple centers (Hubs) receive products from many various locations, consolidate shipment, and send them directly to destinations (Spoke)
Major supply chain businesses such as Fed-Ex, UPS, Lowes, Walmart all use this type of system. Using this system may impact your savings up to 45% by reducing inventory, increasing cycle times, and a reducing transportation costs. Read more about the impact of Hub and Spoke models from Scott Hudson at the Supply Chain Resource Cooperative at North Carolina State University.
The bottom line is reducing your capital expenditures will allow you maintain or improve your margins without slashing headcount and thus lowering your customer service capabilities.
Success in the cable industry is measured by the customer experience. The MSO that finds ways to maximize the customer experience with reduced outage time and hold times will be around for a long time. Happy customers continue to spend money, but more importantly they recommend your service to other potential customers.
Share your thoughts with us and be sure to comment below.
WinTrack® SETS is the only warehouse management system designed to talk with ICOMS, CSG, and AMDOCS. Developed by Mintek Mobile Data Solutions in the early 1990's, WinTrack® SETS has become the industry standard for cable automation by consistently exceeding our clients expectations and developing strong loyalties with our customers.
How did we do this? The answer is a great product that has less than a 1 year ROI thus saving our customers money which creates value and great customer servic
e. As one of our customers said "I would quit if management ever tried to remove SETS from my warehouse".
Building customer relationships requires a total team effort. At Mintek we pride ourselves on our ability to provide exceptional customer service. Some of the ways this is accomplished are:
The result is Mintek Mobile Data Solutions has a controllable client retention rate in excess of 95%.
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