Greg Stein is senior manager of global supply-chain logistics for Cisco Systems Inc., the San Jose, Calif.-based company perhaps best known for its internet routers and switches. Its focus has grown beyond just computer networking products to include telecommunications networking as well.
Q. If vendor-managed inventory is a collaborative tool used by Cisco Systems, how is it employed? Not infrequently, vendors claim that VMI is merely a mechanism for pushing costs on to them. Can it be a 'win' for all parties?
A. It can equally be argued that the goal of VMI is not to shift costs but to 'incent' efficiency. Issues only arise when those that practice this approach do so without sharing in the responsibility to manage the inventory and the costs. Our approach is to streamline the process and eliminate the need for inventory staging altogether. We have a history of partnering for mutual benefits, including investments in joint productivity improvement initiatives.
At Cisco, we start with the basic tenet that for our 'Supply-Chain Ecosystem' to achieve world-class results, each partner must be successful. That translates into collaboration to find ways to reduce overall costs while using the assets and competencies which each partner brings to the ecosystem most efficiently. Imagine building an infrastructure - physical and IT - for one's supplier-partners to leverage which is expandable, flexible, replicable, internet-enabled, with predictive, competitive pricing in the most 'logistically challenged' regions of the world. The whole ecosystem benefits, especially the end customer.
Q. Terms like ecosystem suggest interconnectedness and collaboration. Can you elaborate on the latter?
A. While we've had our fair share of success in connecting to and sharing demand with our EMS/contract manufacturers and suppliers, our Virtual Factory model is moving out to the next circle of partners - Cisco's suppliers' suppliers - in an initiative which integrates our supply-chain applications and visibility tools in unique ways. Collaborative planning is still the critical success factor of supply-chain management.
Q. And the greatest hurdle for supply-chain management? What will constitute the greatest challenge in the year ahead with respect to logistics and the supply chain?
A. I am disappointed with the rate of progress being made in the creation and adoption of trade standards like RosettaNet PIPs and XML which are sorely needed for B2B commerce.
Although great efforts are being expended, the effort is under-resourced.
Companies should be asking how we can accelerate these trade facilitation initiatives.
Q. Proponents of electronic marketplaces see them as trade facilitation initiatives, among other things. From the standpoint of logistics, what is Cisco's e-business strategy? Does it involve e-markets and logistics exchanges?
A. Looking at this from a marketplace perspective, the challenge is demonstrating a value proposition to both the suppliers and buyers. The objective makes perfect sense and there are many bright people working to make it a reality. In the future we intend to link our private collaborative planning exchange with industry exchanges such as e-HITEX to facilitate inter-company transactions. For a pure-play in the component and assembly supply space, check out iSuppli. Visibility tools that will help make these exchanges work include Sourceree and Manugistics, to name a couple. From the perspective of an internet company, what's not to admire!
Q. Concerning your global supply chain, how do you approach management of it, and what more needs to be done in this area?
A. Our focus has always been on customer satisfaction and providing value. The programs we offer provide flexible solutions to customer issues and to the challenges of globalization. Anyone following Cisco's spectacular growth knows that this would have to be on my list. I'm also concerned about the underinvestment in logistics infrastructure, especially the deployment of carrier capacity, which is not keeping up with global manufacturing trends.
Q. That infrastructure seems constantly to be in flux and, arguably, improving. So, that probably isn't the weakest part of the supply chain in your view, is it? If so, what is?
A. Our imagination because if we don't commit to the deployment of e-supply-chain strategies now, we will begin to throttle growth and lower our standards of excellence. Many companies still are reluctant to openly share information with their supply-chain partners and invest in or co-develop technology solutions to aid their relationship.
Q. Speaking of money, do you think supply-chain operations these days are seen as contributing to top-line enhancement?
A. If by top-line enhancement you mean competitive advantage and revenue growth, absolutely! We see our e-supply chain approach as a competitive advantage which has always been an investment versus a cost game. We logisticians have shown that, in addition to bottom-line improvement, we are playing a key role in building customer loyalty and brand differentiation.
For the present and future, opportunities abound in the area of supply-chain visibility and agility where we must continue to improve fulfillment execution.
Q. What has been the biggest or most important lesson you've learned in terms of supply-chain management?
A. Getting results through others in supply-chain management meant learning when and how to outsource non-core activities. I entered the logistics field at a time when we were transitioning from vertical/internal integration to a more outsourced methodology. The question was how to transition our TQM methodology that we learned from Dr. Deming and Tom Peters to an outsider-partner and trust that they could perform to the same stringent performance metrics while reducing costs. A strange thing happened: the 3PL industry was launched.
Today's logistics professionals - buyers and providers - must be astute in the areas of finance, industrial engineering, operations management, global trade, customs and export compliance, customer relationship management, partnering, and so on. Supply-chain practitioners must also become savvy in both supply-chain application technology and internet communications technology. The list of required skills and attributes is too long to cover in one article.
Q. What logistics activity are you involved in that has the greatest impact on your company?
A. Our CEO, John Chambers, is driving for innovation in internet business solutions in all functions, including our supply chain. As we accelerate our global virtual manufacturing strategy, network modeling/strategy tools will help us make more informed decisions to optimize our supply chain.
Q. How do you quantify the value of the supply chain for others?
A. I've been fortunate in that reporting to the senior vice president gives me an easy platform for communicating the logistics team's contribution to Cisco's customer satisfaction and profitability. Senior management is keenly aware of the value that a well orchestrated logistics function delivers. The tangible results which are socialized within the organization and cross-functionally do the convincing.
Q. But there must be some metrics you can use to meet the challenge of measuring performance. How do you select the right ones?
A. Every company is the same and different in terms of what metrics they choose as critical. By that I mean we all drive to margin improvement, customer satisfaction, shareholder value, etc. The right metrics is a function of each company's values and mission. The metrics under logistics should support the corporation's initiatives. A simple example would be, if your company maintains that it is 'customer focused', then on-time delivery, flexible options, and reliability should be key success factors. At Cisco, the customer is clearly the focus of our metrics and continuous improvement programs. We align our organization (and our partners' organizations) to 'do the right thing', meet customer commits, meet stretch goals - and then we reward accordingly.
Q. In terms of "must" achievements in the coming year in logistics and supply chain, what other issues do you see that must be grappled with?
A. The only issue I see that may develop next year is in the area of recruiting. Certainly there are many undergraduate and graduate programs producing gifted supply-chain practitioners, but will the demand for talent still exceed the supply? Will this year's staffing challenge continue into next year? There are no answers here - just questions.
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