Executive Thought Leadership

Building on Experience

Manufacturing leaders have the opportunity to optimize collaboration to maximize value throughout the supply chain.

By Angel Mendez, Senior Vice President, Cisco

Collaboration is naturally inherent in any supply chain—people and organizations commonly work together to achieve common goals. Without the other links of the supply chain, everyone misses out on the shared value.

But just because collaboration happens naturally within the supply chain doesn’t mean that it’s successful or effective. Increasingly, manufacturing and supply-chain organizations need to proactively optimize collaboration in order to remain competitive. Fortunately, many supply-chain organizations have gotten a head start when it comes to managing complex business relationships across organizational boundaries. That often puts supply-chain organizations in a strong position to accelerate collaboration and maximize the resultant competitiveness.

Collaborating for a Competitive Edge

We already see this optimization happening across global industries. The most successful companies are using supply-chain collaboration to drive innovation, reduce costs, strengthen customer relationships, and increase revenue and market share. In the first wave of the Internet, companies expanded their ability to share objectives, business processes, and performance metrics with their supply-chain colleagues, partners, and customers. Today, empowered by a more capable network platform, they are increasingly collaborating in real time to share information, make decisions, and execute customer requirements.

Let me offer a few examples. BMW creates a global sensation with its MINI Cooper, collaborating with suppliers and customers to offer a different kind of customizable car with millions of possible configurations. Apple brings together industrial designers, marketing gurus, music companies, and recording artists to create the iPod and a zero-inventory product—iTunes—with $2 billion in annual revenue. Procter & Gamble connects a network of more than 60,000 people focused on improving the sourcing of raw materials and distributing its hundreds of popular products to retail partners and consumers.

These success stories are not going unnoticed: 92% of Fortune 500 manufacturers and retailers said that enhancing collaboration would help to address their supply-chain issues, according to a recent Supply Chain Directions Summit survey. And nearly 80% of companies have planned IT investments in supply-chain visibility and collaboration technologies over the next 24 months, according to the 2006 Aberdeen Benchmark report.

Areas of Consideration

At Cisco, network-enabled collaboration is an integral part of our global supply-chain organization’s constant evolution and an essential contributor to our goal of defining excellence in supply-chain management. Our strategy involves using the network for deeper and more effective collaboration with our customers, suppliers, and contract manufacturers in every part of the supply chain, as well as within Cisco. Based on our experience in implementing network-enabled systems, here are some areas of consideration:

• Demand Management and Planning: Work together with strategic customers and manufacturing partners to put systems in place to that enhance your ability to anticipate, analyze, manage, and shape market demand. Engage with customers earlier in the demand cycle in order to proactively prepare the supply lines and ensure higher service levels. The use of emerging collaboration tools becomes increasingly important as you scale these processes over multiple market segments, hundreds of customers, and multiple geographies.
• Product Quality Improvement: Work with your suppliers and contract manufacturers to ensure optimal product quality. Employ closed-loop processes to effectively identify, report, and resolve quality issues—before they escalate into customer dissatisfaction. By transparently sharing data with multiple stakeholders, in real time, you speed up both the prevention and resolution of quality concerns. Providing instruments that supply-chain constituents can use to ensure this closed-loop system is especially critical to organizations like Cisco that utilize a broad network of outsourced partners.
• Lean Manufacturing: This relies on collaboration with component suppliers and contract manufacturers to optimize inventory levels throughout the supply chain. Collaboration is the key to implementing this “pull” model in which the inventory is not built until the product is ordered by the customer. Having cut costs and improved delivery with lean processes, many organizations are now applying similar concepts to manage the flow of inventory in their distributor and reseller channels as well.
• Collaboration Tools: The network provides an ideal platform for an increasing array of collaboration tools such as Unified Communications, Telepresence, and Webex virtual meetings. These tools can help build stronger, tighter relationships among supply-chain partners, while also reducing travel-related expenses and contributing to environmental goals.

Positive Results

The results of Cisco’s efforts based on these concepts, so far, are very encouraging. Better supply-chain collaboration at Cisco has led to improved time to market, record on-time delivery and lead times, significant improvements in quality metrics, reduced costs, and faster compliance with environmental regulations. The sum and ultimate purpose of all these improvements in productivity, efficiency, and quality is customer satisfaction and success.

In today’s global marketplace, with more companies outsourcing manufacturing and entering emerging markets, these benefits of supply-chain collaboration are becoming more pronounced. Traditional boundaries of organization, technology, and geography are falling away, with companies making supply-chain management part of their global growth strategies. The opportunities are vast, but experience with network-based collaboration is definitely required.

[bio] In his role as senior vice president of Global Supply Chain Management, Angel Mendez is responsible for maximizing Cisco’s supply-chain excellence by leading the company’s manufacturing technology, new product introduction, supplier management, product manufacturing, and distribution activities. A 23-year management veteran, Mendez joined Cisco in 2005.