For all the communications technology in the world, there's no substitute for face-to-face contact. Or so goes conventional wisdom. Polycom Inc. is banking its fortunes on the opposite belief.

In fact, the Pleasanton, Calif.-based maker of video "tele-presence" systems enjoyed "a stellar year" in 2011, according to Robert Velten, director of Polycom Global Services for North, Central and South America. The company saw revenue growth of 26 percent, and solidified its market position with the acquisition of Halo, the videoconferencing unit of Hewlett-Packard. Earnings were up 50 percent in the fourth quarter.

Polycom can set up a teleconference with rooms that accommodate up to 20 people, joined by a link that is instantaneous, Velten says. The company also has an audio division which makes phones for conference calls and equipment for communicating over the internet.

Polycom began life as an audio company in the late 1980s, venturing into video with the acquisition of PictureTel Corp. in 2001. The move greatly expanded its market presence, while complicating the global supply chain.

With the growth in business came additional pressure to maintain high levels of customer service in its maintenance and repair operation. In the early 2000s, Polycom was experiencing inconsistent performance on the part of a prior logistics service provider in North and South America. The company depends heavily on an outsourcing partner to maintain its returns distribution chain and ensure on-time shipments, complete with accurate documentation.

In 2007, Polycom made a change, selecting Pine Brook, N.J.-based Flash Global Logistics Inc. as its new LSP and operator of parts depots. Velten says the company was impressed by the consistency of Flash's processes and systems at its various locations.

Each of Polycom's vendors must conform to the Flash setup. As a result, says Velten, "we get a continuity that we were unable to have before." Additional depots can be opened quickly because they share the same underlying systems across the network. Recently, a new Polycom location in Calgary, Alberta, was up and running in about a week, to support a hospital-services customer that was located far from the existing distribution center in Toronto, Ont. The process was expedited because Flash already had a facility in Calgary.

"They've got sites all over the place, and we're able to take advantage of that," says Velten. In another instance, Flash opened a depot for Polycom in Helsinki, Finland, just in time to receive product from the Halo acquisition.

Tracking the Tracker

Polycom manages the depots directly, but leaves hands-on operations to Flash, which retrieves product from end users, sorts it and ships it to repair vendors. Polycom tracks Flash's performance through scorecards that measure every aspect of fulfillment. "We dictate how and what they move," says Velten.

The vendor supplies Polycom with weekly summaries based on a set of key performance indicators, notes Flash chief information officer Dennis Moniz. It also performs quarterly quality checks that cover such elements as on-time performance, inventory accuracy and "dock-to-stock" time. Many incoming parts need to be shipped out the next day, making fast turnaround a critical concern, Moniz says.

Service requirements vary according to the customer. Polycom's network includes small depots that promise four-hour service, distribution centers that service an entire country, and hubs that support a region. The depots range in size from 200 square feet in Singapore to the largest, in New Jersey, at 2,500 square feet. A given Flash facility can stock anywhere from 100 to 50,000 parts on behalf of Polycom, according to Moniz. 

Polycom's system of record for inventory is an enterprise resource planning system from PeopleSoft (now part of Oracle Corp.). That application is tightly integrated with Flash's proprietary IT system, known as Flashtrac. Each movement or transaction within the depots triggers a message, so that the receiving dock knows what's coming and can quickly check the physical shipment for accuracy upon arrival. Incoming defective parts are moved to a designated warehouse, then sorted for shipping to the appropriate repair vendor. Similar alerts are initiated with all outgoing orders, which are tied to specific warranty and customer requirements.

Flash provides Polycom with tracking information linked to the serial numbers of every part. Moniz calls the Flashtrac system "a key element in the process of getting product available and back into the inventory stock."

Staying in the Loop

Polycom maintains a direct relationship with its repair vendors, negotiating pricing, monitoring pricing and doing quality checks against strict tolerances. "We're rather specific about the vendors that we put into the business," says Velten.

That attitude might be changing, however. Recently Polycom asked Flash to access the parts-screening operation of one repair vendor, Celestica. The goal is to identify which units are rated as "no problem found," a determination that occurs up to 40 percent of the time.

"We're trying to put that screening operation right in our forward locations," says Velten. Because suspect parts are usually swapped out in the field and diagnosed later, Polycom strives to get non-defective units back into the pipeline as quickly as possible. A pilot program, launched in New Jersey, will be expanded to Amsterdam, Singapore and possibly Brazil.

For Polycom, the biggest challenge lies in managing the reverse logistics chain. Velten says customers have little incentive to return defective parts on a timely basis, if at all. Polycom is addressing the problem by working with Flash and another vendor, OnProcess Technology, to increase the velocity of returns.

Polycom is in the process of consolidating its depot vendors worldwide. In Europe, it just opened a large location in the Netherlands, and is moving into a new facility in China. Both are being managed by Flash. The vendor will soon be responsible for the customer's entire network of depots, says Velten.

The company plans aggressive growth through additional acquisitions and a wave of new products. Currently it is introducing video conferencing via the cloud, eliminating the need for customers to purchase expensive networking technology. Geographic targets for expansion include the BRIC countries - Brazil, Russia, India and China. The last is experiencing sales growth of between 50 and 100 percent each year, Velten says.

In Brazil, Polycom is taking advantage of a new rule that allows it to ship defective parts out of the country, then re-import them at vastly reduced duty rates. The initiative is being carried out in partnership with Flash. Says Velten: "They are in the loop."

Resource Links:
Polycom
Flash Global Logistics


Keywords: supply chain management, 3PL, third party logistics, logistics management, logistics & supply chain, global logistics, warehouse management, warehouse management systems, Flashtrac