Chain of Thought

Cisco Connects Logistics to Market Performance

When Cisco Systems bought Scientific Atlanta six years ago, one of the side benefits of that deal was getting Jack Allen. He's now Cisco's senior director of logistics and manufacturing solutions, and is dedicated to helping the company's CEO John Chambers sharpen its focus on two priorities: its customers and its core business. Cisco's core business is providing network-centric enterprise platforms to customers around the world. Forecasting in this fickle business is tough. But recent growth has made transportation strategy more challenging for Cisco, Allen told me recently in an interview for a feature to appear in MH&L's May issue.

He put the scope of that challenge in graphic terms.

“In the last fiscal year Cisco gave birth to an Ethernet board for every single baby born on the planet,” he said.

That's because the company is adding more of those boards to every box it ships, and that adds a lot of weight. To keep the company's customers happy the products are weighing more and more—but that also adds to shipping costs—which makes customers less happy.

To manage that fine balance between product functionality and freight charges, Allen and his team are paying more attention to the company's transport packaging. That's a fairly new focus for Cisco and it has changed its organizational structure. Packaging engineering now reports to Allen.

“A networking company really likes sexy technology, and is not so interested in the box,” he told me. “But logistics is very interested in the box because it means cost savings. We spent a lot of time trying to do packaging reductions, taking kits that might have been in five boxes and putting them into one box—and putting their documentation online. If the weight of the product is going up I want to try to get the weight of the package to come down if I can. So it's a best practice to have packaging report to logistics because they care about how efficient that package is. They care about damage, and that's wrapped into transport. Packaging is one of our biggest savings categories.”

While Allen deals behind the scenes with the minutiae of package design and its effects on Cisco's logistics costs, CEO John Chambers is taking care of big-picture costs. He told the Wall Street Journal recently that he's concerned about current U.S. tax policy and the potential chilling effect it could have on the company's future investments in the U.S.

“If U.S. laws continue in place that would tax that money at the standard 35% corporate rate, Cisco will keep investing that money abroad—rather than investing it in the U.S. and creating jobs here,” the WSJ article stated.

That would be a shame, because it was Cisco's Scientific Atlanta purchase six years ago that put Allen on its logistics team and got the company on course to make an important statement about the connection between logistics best practices and exemplary market performance. That's a connection Cisco and all American companies need to keep intact.

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