Executive Briefings

A Complex Supply Chain Doesn't Require Multiple Applications

When it comes to the deployment of systems that control a global high-tech manufacturing operation, Molex's motto is: Keep it simple.

Molex Inc. approaches the issue of complexity with simplicity.

The maker of high-tech components can't cut down on the number of partners in its supply chain, or the processes required to run it. But it can avoid the use of multiple information systems at various locations worldwide. It's a lesson that many companies have yet to learn.

Based in Lisle, Ill., Molex is the world's second-largest manufacturer of electronic and electrical connectors and switches. (Only Tyco International is larger.) Its products can be found in computers, cell phones, home appliances, automobiles, telecommunications devices and industrial machines. Sales in fiscal 2004, ending June 30, were nearly $2.5bn.
There's nothing simple about the Molex supply chain. It involves more than 100,000 distinct products. In a typical quarter, Molex will ship around 48,000 part numbers to 16,000 customer sites in 70 countries. It operates 55 manufacturing plants in 18 countries, with a 28-year presence in China. And it maintains 27 developer groups in 15 countries.

The nature, origin and value of parts differ widely. More than half of all product moves from one company site to another, making Molex its own biggest supplier. Components pass through several processes, including plastic molding, metal stamping, electroplating of metal contacts, and assembly. Molex also makes larger "value-added" units composed of multiple parts, including boards and harnesses.

Any plant might be a supplier to another. Items produced in Japan are sold in Europe; those made in North America can end up in Japan. "If you linked all our plants, it would look like an airline route map," says Dave Hubert, who manages the SAP systems at Molex.
It's not unusual for multiple information systems to grow up within such a complex operation. But Molex has wielded iron discipline over its IT program from the start. In February 1996, it implemented the enterprise resource planning system of SAP AG in Singapore. From there, the technology was extended to more than 45 Molex plants and 17 active sales companies in 16 countries. The same software links all global locations, avoiding the snags that arise when companies run incompatible ERP systems.

"That's turning out to be a best practice in the industry," says Don Phillips, director of high-tech business strategy with Walldorf, Germany-based SAP.

Support From the Top
"We're very stubborn people," explains Gary Matula, Molex's vice president of systems. Corporate IT staff had backing from top management from the start, he adds, so that individual locations weren't given the latitude to adopt their own systems.

The final ERP installation, capping what Matula calls "a sizeable challenge," took place in Japan in August 1999. Then Molex went searching for applications to link manufacturing with other parts of the supply chain.

Once again, it stuck with SAP. Among the first add-ons was the vendor's business warehouse (BW) tool, creating a central repository for data contained in the various SAP modules. "BW allows you to accumulate data and map it into a structure that reflects the elements you want to report on," Matula says. Molex also acquired SAP modules to manage customer relationship management (CRM) and advanced planning and optimization (APO).

"If you linked all our plants, it would look like an airline route map."
- Dave Hubert of Molex

On the manufacturing side, Molex focused on improving order fulfillment and delivery to the customer. In a rare departure from SAP, it fashioned a homegrown tool called Delivery Performance. The software monitors key performance indicators and metrics for every plant running SAP, and rolls the data into the BW reporting platform. From there, managers can view their performance at any phase of the order-to-cash cycle.

Most companies do a good job of measuring the front end of their businesses-bookings, billings and shipping, says Joe Lawniczak, Molex's corporate director of manufacturing. But they often stumble on crucial steps in between. Molex can identify the barriers that prevent the flow of an order to downstream operations, including on the plant floor. It can see how the company is working with outside suppliers to adhere to tightly scheduled production plans.

Molex places a great deal of emphasis on collaboration, says Eamon McAleazey, director of supply-chain management. Frequently, it will enter information directly into its partners' portals about when it's ready to ship, and whether it can commit to promised delivery dates.
On the supplier side, Molex is looking at supplier-relationship modules of SAP to achieve a higher degree of interaction. The company's supplier base ranges from big producers of resins, metals and other raw materials, to small vendors of select components. Electronic data interchange (EDI) is a primary means of communicating with suppliers, many of whom still maintain legacy information systems, although Molex is migrating toward the internet for data transmission and collaboration.

More to Be Done
True collaboration with partners is still a dream. Up to 60 percent of customers still lack up-to-date forecasting tools, according to McAleazey. Complicating matters is the high variability of shipments to end-users. A customer might order 100 pieces of a given part one week, and 50,000 the next. "It's very difficult to understand what is the real demand of final customers," McAleazey says.

By insisting on corporate-wide systems, Molex has achieved a level of global visibility that wouldn't have been possible otherwise, Matula says. Given that 70 percent of the company lies outside the U.S., that's a crucial consideration. SAP's systems also provided the framework for creation of the Delivery Performance tool, giving Molex a high level of consistency in fulfilling customer orders.

In recent months, Molex has seen "a very definite increase" in on-time deliveries, McAleazey says. While SAP's systems are not the entire reason for the change, they have given the company a more accurate view of operations.

"When half the company wasn't on SAP," he says, "we had inconsistent information and performance measures." Molex now has a better idea of where to focus its future efforts.

The high-tech manufacturing landscape is constantly changing. Companies like Molex find themselves doing more business with contract manufacturers instead of original equipment manufacturers, says Phillips. And Molex is increasingly required to maintain complex vendor-managed inventory (VMI) programs on behalf of its downstream customers.

"We've seen an explosion of requests for VMI," says McAleazey. The shift requires even better systems for inventory visibility throughout the pipeline, and faster order turnaround times. Molex expects to make greater use of product lifecycle management (PLM) software, to improve the management of engineering changes on a global scale.

The company will continue to take a high-level view of its IT spend, scrutinizing each component to gauge its contribution to efficiency and profitability. But any new system will have to work throughout the supply chain. "For any functionality we roll out," says Matula, "one of the major benefits is that we're able to globalize it from day one."

Molex Inc. approaches the issue of complexity with simplicity.

The maker of high-tech components can't cut down on the number of partners in its supply chain, or the processes required to run it. But it can avoid the use of multiple information systems at various locations worldwide. It's a lesson that many companies have yet to learn.

Based in Lisle, Ill., Molex is the world's second-largest manufacturer of electronic and electrical connectors and switches. (Only Tyco International is larger.) Its products can be found in computers, cell phones, home appliances, automobiles, telecommunications devices and industrial machines. Sales in fiscal 2004, ending June 30, were nearly $2.5bn.
There's nothing simple about the Molex supply chain. It involves more than 100,000 distinct products. In a typical quarter, Molex will ship around 48,000 part numbers to 16,000 customer sites in 70 countries. It operates 55 manufacturing plants in 18 countries, with a 28-year presence in China. And it maintains 27 developer groups in 15 countries.

The nature, origin and value of parts differ widely. More than half of all product moves from one company site to another, making Molex its own biggest supplier. Components pass through several processes, including plastic molding, metal stamping, electroplating of metal contacts, and assembly. Molex also makes larger "value-added" units composed of multiple parts, including boards and harnesses.

Any plant might be a supplier to another. Items produced in Japan are sold in Europe; those made in North America can end up in Japan. "If you linked all our plants, it would look like an airline route map," says Dave Hubert, who manages the SAP systems at Molex.
It's not unusual for multiple information systems to grow up within such a complex operation. But Molex has wielded iron discipline over its IT program from the start. In February 1996, it implemented the enterprise resource planning system of SAP AG in Singapore. From there, the technology was extended to more than 45 Molex plants and 17 active sales companies in 16 countries. The same software links all global locations, avoiding the snags that arise when companies run incompatible ERP systems.

"That's turning out to be a best practice in the industry," says Don Phillips, director of high-tech business strategy with Walldorf, Germany-based SAP.

Support From the Top
"We're very stubborn people," explains Gary Matula, Molex's vice president of systems. Corporate IT staff had backing from top management from the start, he adds, so that individual locations weren't given the latitude to adopt their own systems.

The final ERP installation, capping what Matula calls "a sizeable challenge," took place in Japan in August 1999. Then Molex went searching for applications to link manufacturing with other parts of the supply chain.

Once again, it stuck with SAP. Among the first add-ons was the vendor's business warehouse (BW) tool, creating a central repository for data contained in the various SAP modules. "BW allows you to accumulate data and map it into a structure that reflects the elements you want to report on," Matula says. Molex also acquired SAP modules to manage customer relationship management (CRM) and advanced planning and optimization (APO).

"If you linked all our plants, it would look like an airline route map."
- Dave Hubert of Molex

On the manufacturing side, Molex focused on improving order fulfillment and delivery to the customer. In a rare departure from SAP, it fashioned a homegrown tool called Delivery Performance. The software monitors key performance indicators and metrics for every plant running SAP, and rolls the data into the BW reporting platform. From there, managers can view their performance at any phase of the order-to-cash cycle.

Most companies do a good job of measuring the front end of their businesses-bookings, billings and shipping, says Joe Lawniczak, Molex's corporate director of manufacturing. But they often stumble on crucial steps in between. Molex can identify the barriers that prevent the flow of an order to downstream operations, including on the plant floor. It can see how the company is working with outside suppliers to adhere to tightly scheduled production plans.

Molex places a great deal of emphasis on collaboration, says Eamon McAleazey, director of supply-chain management. Frequently, it will enter information directly into its partners' portals about when it's ready to ship, and whether it can commit to promised delivery dates.
On the supplier side, Molex is looking at supplier-relationship modules of SAP to achieve a higher degree of interaction. The company's supplier base ranges from big producers of resins, metals and other raw materials, to small vendors of select components. Electronic data interchange (EDI) is a primary means of communicating with suppliers, many of whom still maintain legacy information systems, although Molex is migrating toward the internet for data transmission and collaboration.

More to Be Done
True collaboration with partners is still a dream. Up to 60 percent of customers still lack up-to-date forecasting tools, according to McAleazey. Complicating matters is the high variability of shipments to end-users. A customer might order 100 pieces of a given part one week, and 50,000 the next. "It's very difficult to understand what is the real demand of final customers," McAleazey says.

By insisting on corporate-wide systems, Molex has achieved a level of global visibility that wouldn't have been possible otherwise, Matula says. Given that 70 percent of the company lies outside the U.S., that's a crucial consideration. SAP's systems also provided the framework for creation of the Delivery Performance tool, giving Molex a high level of consistency in fulfilling customer orders.

In recent months, Molex has seen "a very definite increase" in on-time deliveries, McAleazey says. While SAP's systems are not the entire reason for the change, they have given the company a more accurate view of operations.

"When half the company wasn't on SAP," he says, "we had inconsistent information and performance measures." Molex now has a better idea of where to focus its future efforts.

The high-tech manufacturing landscape is constantly changing. Companies like Molex find themselves doing more business with contract manufacturers instead of original equipment manufacturers, says Phillips. And Molex is increasingly required to maintain complex vendor-managed inventory (VMI) programs on behalf of its downstream customers.

"We've seen an explosion of requests for VMI," says McAleazey. The shift requires even better systems for inventory visibility throughout the pipeline, and faster order turnaround times. Molex expects to make greater use of product lifecycle management (PLM) software, to improve the management of engineering changes on a global scale.

The company will continue to take a high-level view of its IT spend, scrutinizing each component to gauge its contribution to efficiency and profitability. But any new system will have to work throughout the supply chain. "For any functionality we roll out," says Matula, "one of the major benefits is that we're able to globalize it from day one."