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Making it There moving it Here

Dec. 8, 2003
TechnologyMaking it There moving it Here at a glance This article looks at how high-tech companies are relying on cost control, speed-to-market and offshore
Making it There moving it Here

at a glance
This article looks at how high-tech companies are
relying on cost control, speed-to-market and offshore manufacturing to compete in a global economy.

The ability to react quickly has breathed new life into Lucent Technologies, and not a moment too soon. Between 2000 and 2001, when the telecommunications market shrank precipitously, this $8 billion designer and deliverer of technology for the world’s largest service providers responded by changing the way it manufactures and totally reconfiguring its supply chain model.

“We had to determine how to best focus our resources, apply capital in the right areas, manage operating expenses with the variability in the market and respond to changing customer needs in a smarter and more effective way,” notes Joe Carson, Lucent’s vice president of supplier management.

Although Lucent had effectively done its own manufacturing as a company, the company’s supply chain champion — Jose Mejia, president, Lucent’s Supply Chain Networks — steered Lucent toward adopting a contract manufacturing model, which is the path the company now follows.

“We gave up almost every bit of manufacturing but some final assembly and testing pieces,” says Carson. “The things we thought of as relating to customer satisfaction, and some internal intellectual property, we weren’t quite ready to give away, so we’re holding on to those for right now. We’re still in a transition.”

Most of Lucent’s custom manufacturing is now done in China, with some in Mexico and Eastern Europe, as well. The company has outsourced many of its supply chain functions to third-party logistics providers (3PLs).

On the technology front, Lucent uses a solution from Optum Inc. for cross-enterprise process synchronization. The scaleable solution works in six major areas of operations: dynamic sourcing; dynamic replenishment; dynamic distribution; drop ship fulfillment; track and trace; and proactive alerts.

Much of Lucent’s consolidation and movement of components and product is handled through a trade management solution from Vastera Inc. The solution provides visibility to product in transit and can provide shipment notice in advance of it arriving at a border.

The company also uses the supply chain services of Ryder System Inc. With its high-tech/electronics focus, Ryder can manage warehouse operations, providing such capabilities as online item tracking.

Responsiveness to final customer needs is a critical part of the Lucent strategy. The company is focused on what it calls zero latency in responding to the customer.

“We have organized ourselves and our processes in order to get to market first with the best,” says Carson. “We have teams connected from our customers, through us, to our suppliers and our suppliers’ suppliers. We get different people from different organizations to talk about how we can get rid of the non-value-added time and data lags and make sure that if a customer needs a quote, we can pull a team together rapidly to respond.”

In the high-tech industry, as with many other discrete manufacturing industries, the supply node network can be very complex, depending on where the demand comes from, how it gets answered and how the solution gets back to the proper points. One benefit for Lucent in its new strategy is how well it has cleaned out the channel between it and its customer to ensure having a good view of the need and the customer having a good view of the company’s capabilities.

“That kind of market intelligence and transference happens very quickly in a zero latency environment,” explains Carson. “You need to have suppliers that act like they are on your board, and vice versa. Their success is our success, and our success is their success. That requires a different skill set in terms of how you manage your suppliers.”

Results to date from Lucent’s zero latency supply chain model include:

  • a reduction in North American warehouses from 200 to 15;
  • the logistics quote-to-cash cycle has been reduced by 49%;
  • overall logistics costs have been reduced by 20%.

Going through a dramatic downward change, then creating a supply chain model to enhance the company’s market position has not been easy.

“The message I’m giving my people and supply base is that as hard as it was to reinvent ourselves over the past three years, we are going to reinvent ourselves one more time as we go through this economic dip, stabilize and start to grow again,” Carson says.

With most of its manufacturing done offshore in six different locations, high-tech component supplier Bourns Inc. has found it best to have its logistics operations handled by a 3PL. About 60% of Bourns’ volume is sold by electronic parts distributors, according to Jerry Seinturier, the company’s worldwide logistics manager.

The company has two manufacturing facilities in Mexico and one each in Costa Rica, Ireland, Taiwan and China. About 1% of its manufacturing is handled stateside at a small facility in Utah. Bourns’ backbone product is potentiometers, although it has branched off into telecommunications equipment in the past six years.

To move product door-to-door, Bourns signed a contract with Menlo Worldwide Logistics at the beginning of the year. “They pick up product and clear it through Customs,” explains Seinturier. “Then Menlo delivers it to a warehouse. Years ago we warehoused everything here in Riverside, Calif., using a central warehouse. At that time, we put responsibility on the manufacturing facilities to warehouse the product, then pull and pack all customer orders. Now we use our 3PL for warehousing and distribution in certain locations.”

Bourns has customers throughout the world. Generally for domestic customers, product moves from San Diego, Los Angeles and Miami. The company’s main hub for European customers is in Cork, Ireland. For distribution abroad, Bourns’ manufacturing facilities consolidate and move product through Ireland into the European communities.

Bourns has a vendor assembly program with Menlo in which the 3PL consolidates shipments, sending the parts to the factories. Everything coming out of the factories is finished product, which is moved to distribution centers (DCs), which are also contracted with Menlo.

“The cross-dock program is vital to us,” says Seinturier. “When product reaches the DC, it’s finished and ready to go to the customer. With our cross-dock, there is limited handling and delay. Product arrives, clears Customs and goes right back out the door to our customers.”

Bourns has a core group of carriers. Seinturier breaks the group into the small package and heavyweight freight business, with the majority of its business being on the heavyweight side. Bourns consolidates all its shipments. While they are big cube, shipments don’t usually translate into full truckload size because the product is relatively small.

“A potentiometer is mounted on a printed circuit board,” explains Seinturier. “All the engineers want to drive the size down, so it makes for small product. In our business, smaller is better.”

Worldwide, Bourns runs on an enterprise resource planning (ERP) platform from SAP, so all of its plants have visibility into all shipments as they move, in real-time. The system is linked to Bourns’ customers as well.

Although Bourns relies on its ERP system to drive the entire business, the company links to Menlo for tracking purposes and is working on expanding the sharing of its information.

Most of Bourns’ product moves by air. “The majority of our customers follow a just-in-time philosophy,” notes Seinturier. “They don’t want to carry a lot of inventory and we, as a company, don’t want to carry a lot of inventory, either. We use a lean manufacturing philosophy. We drive our lead times down and try to keep them short.”

As with other high-tech producers sourcing offshore, Bourns wants to provide the fastest, most reliable service to its customers. “We’ve got to get it to the customer when we’re supposed to get it there,” Seinturier emphasizes. “We can’t afford any delays or any problems.”

Doing most of its manufacturing in China, Logitech uses a variety of solutions to handle its logistics needs, says Veronica Jowers, the company’s field & partner communications manager. Products cover a gamut of PC peripherals, from mice and trackballs to microphones and digital pens and paper.

A Swiss company, Logitech’s corporate headquarters are in Fremont, Calif., where it serves the American region. Jowers explains that in addition to a vigorous U.S. market, the company serves customers worldwide in Latin America, Europe, Asia, the Middle East and Oceania. Vision into its network comes from an Oracle system under which the company runs, notes Jowers.

She points to a variety of channels used to sell product. “We have a distribution channel and use resellers,” she explains. “We sell on-line and have an OEM channel as well.”

The underlying platform supporting Logitech’s channel and supply chain work is a forecasting solution from Click Commerce Inc. “Our sales people do a bottom-up forecast, so we can know how much they are selling, what is sold out and what is on backlog,” Jowers says.

Among other benefits, channel forecasting allows Logitech to tie its sales demand to supply chain activities in order to shrink inventory. LT


Bourns Inc.

Click Commerce Inc.


Lucent Technologise

Menlo Worldwide Logistics

Opturm Inc.

Oracle Corp.

Ryder System Inc.


Vastera Inc.

December, 2003

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